Russia creating national rating agency

The Russian Central Bank has supported the establishment of a national rating agency following a meeting with financial market participants.

The participants of the meeting expressed the view that the Russian market needs a strong credit rating agency with a high level of corporate governance and professional competence, which will meet the interests of the economy and have a good reputation for both Russian and foreign investors.

The Russian rating agency is expected to start work in the fourth quarter of 2015, and its initial capital would be about $3 billion rubles.

The agency will be headed by the vice president of major Russian state-owned bank Gazprombank, Ekaterina Trofimova. The deputy chairman of the State Duma Committee on Financial Markets, Anatoly Aksakov, believes that she is professional and a person who knows this sphere.

According to the head of the Duma Committee, the biggest problem that may arise in the activities of the agency is a lack of professionalism and political engagement.

Now in Russia there are several local rating agencies – Rus-Rating, Expert RA, the National Rating Agency, AK&M and others.

The associate professor of stock markets and financial engineering of RANEPA, Vasiliy Yakimkin, told Vestnik Kavkaza that Russia needs its own rating agency. "We still rely on the US rating agencies, but they can provide such ratings, which are beneficial to the Americans, and since we now have a strained relationship with the US, it is clear that the agencies give us ratings worse than they actually are," the expert noted.

According to him, the benefits for the Russian economy are obvious. "Firstly, there will be more objectivity in the estimates, and objective ratings will attract investments. As soon as the rating drops to junk, funds are required to extract money from these organizations. As soon as the rating agency will give a rating above junk, it will attract investments, including Asia and the Pacific region," Yakimkin said.

The expert warned that firstly the agency will have to compete with the international ones. "As a result, our agency will be able to give ratings opposed to the ratings of the famous S&P, Moody's, Fitch, our agency will be listened to. And that's very good," Vasily Yakimkin concluded.

A leading researcher at the Institute of Applied Economic Research of the Russian Presidential Academy of National Economics and Public Administration, Alexander Abramov, in his turn, drew attention to the need of Russian issuers to obtain ratings. "Even in conditions of limited foreign borrowings we are actively developing the domestic bond market. And we should strive to ensure that each issue of bonds, which is carried out now, had a national rating. In the next step, our national ratings will be probably recognized by external actors," Abramov said.

"In general, the national rating agency would make the domestic stock market more transparent, because all issuers of debts will have credit ratings. The next solved problem is the assignment of ratings to our external obligations: corporations and sovereign bonds," the expert said.

Alexander Abramov, warned that they "cannot escape from these three agencies today. Therefore, at the initial stage the Russian national rating agency will be of little use abroad. The main thing is to start and move in this direction," Abramov noted.