Moody’s has decided to withdraw national ratings in Russia


Moody’s Investors Service (Moody’s) has decided to withdraw the ratings on the national scale, which assigns a joint venture Agency in Russia — the rating Agency “Moody’s Interfax” (RAMI), indicated in the message Moody’s. The Agency will be completed after withdrawal of ratings on the national scale.

The solution, according to the report of Moody’s, made in connection with legislative changes and other potential constraints that affect the assignment of national scale ratings in Russia. “In particular, it concerns requirements regarding organizational and operational independence that would limit the ability of RAMI to use global resources Moody’s”, — stated in the release of the international Agency. The national scale rating assigned to RAMI (currently about 150) will be revoked within 2016.

By law, entering into force in 2017, foreign rating agencies can operate in Russia through branches and assign international rankings or to create in Russia “daughter” that will meet the new requirements of the Russian legislation and to assign ratings on a national scale.

“The withdrawal of ratings on the national scale will not affect the ratings Moody’s global scale”, — underlined in the message of rating Agency.

For 12 years, and Moody’s Interfax cooperated in assigning ratings to customers in Russia in a joint venture. Since 2004, Moody’s holds a 51 percent stake RAMI, the remaining 49% belongs to Agency “Interfax”. Services, “Moody’s Interfax” use Russian financial institutions, enterprises non-financial sector, and regional and municipal administration, for the Agency.

National credit rating reflects the Agency’s view of the relative creditworthiness of issuers and their debt obligations in the national market. Ratings on the national scale are the national risk assessment of issuers and their debt obligations in a given country. National rating scale describing the level of Issuer risk and the probability of execution of its debt obligations compared with other issuers in the country concerned. The ratings assigned by national rating scales of different countries are not comparable. One if the Issuer receives, say, a maximum credit rating on the domestic scale of one country, the Issuer and the second — highest credit rating on an internal scale of another state, the levels of credit risk on them, most likely, will not coincide.

International scale ratings as one is designed for accurate comparisons of issuers from different countries, takes into account the impact of direct and indirect country risks and allows you to compare any of the company among themselves.

“Moody’s Interfax”, as stated on the website of the Agency apart from its core business also publishes its opinion about the creditworthiness of issuers, analysis and comments.

Earlier, the international Agency Fitch Ratings has not ruled out that it will stop to assign to Russia national scale rating, wrote Bloomberg, citing the head of the analytical service of the international rating Agency Linnell yen. This means that Fitch likely will not create a subsidiary company (now in Russia a branch of the Agency) and be accredited under the Central Bank, as required by the adopted last year act on rating agencies.

Thus national ratings Fitch will lose power in Russia, the Agency will continue to assign the international ratings of the Russian companies. The creation of the Russian “daughter” means that the rating Committee for the adoption of decisions to ratings should be in Russia and not abroad as it is now.

“We do not expect that it [the refusal of the national rankings] will entail significant consequences for our presence in Russia, — said the head of the press service of Fitch Rebecca O’neal. — Most Russian companies seek to obtain both national and international rankings. We expect that the demand for international ratings remain”.

From accreditation and, as a consequence, assigning national ratings are also likely to refuse in Russia and the international Agency S&P. this was told by a source close to the Central Bank. A source close to S&P, confirmed that the Agency is inclined to abandon the creation of “daughter” in Russia.

The law on rating agencies enters into force in 2017. It requires all international agencies to establish subsidiaries in Russia, if they want to put ratings on the national scale are those that are used inside the country, such as the accommodation of public funds or lending by the Central Bank.

The law also prohibits the agencies to withdraw the credit ratings assigned at the national scale, in connection with the decisions of the authorities of foreign States. This requirement of the law leads to conflict: international agencies are forced to choose between the execution of the Russian legislation and legislation of the countries where their headquarters (US and UK). “We, as a global company that should abide by the laws of the United States, in the situation when in the case of sanctions against Russian customers violate either the Russian or international legislation,” said Linnell in an interview with Bloomberg.