Moody's withdraws national scale ratings in Russia

 Moody's withdraws national scale ratings in Russia

Moody's Interfax Rating Agency has today withdrawn its Russia national scale ratings.

"This decision was taken in light of legislative changes and other potential restrictions applicable to the business of providing NSRs in Russia and notably the expected requirements regarding structural and operational independence which would limit MIRA's ability to make use of Moody's global resources," the official press release says.

Recall that from 2017 the international rating agencies will have to create subsidiaries in Russia to issue ratings on the national scale.

It should be noted that Moody's global scale ratings (GSRs) are unaffected by the decision to close MIRA's NSR business, Interfax reports.

A professor of the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, said in an interview with a correspondent of Vestnik Kavkaza that we shouldn't over-dramatize the situation, because such a decision "will not seriously interfere with the cooperation with foreign partners, because we are talking about the internal ratings and external currency ratings of these agencies being saved." "But we must still keep in mind that the currency ratings are more important for investors," he said.

"But in general, of course, it can affect the growth in the cost of borrowing, the increase in yield spreads on bonds, that is, it may lead to a markdown of Russian bonds in the balance of Russian companies," the expert added.

Abramov also recalled that "the National Rating Agency was created in Russia with the participation of the largest structures, which will assign the ratings". 'The Big Three' will continue to assign these ratings. And the National Rating Agency will be operating as well. It still remains unknown who will replace Moody's in the domestic segment. I think this is also a real area for activity and there is still much room for the activities of Russian agencies," he said.

"But I do not see any great activity on the part of Russian rating agencies. Still, I think that it will slow down the internal rating system. But we don't need to worry about the external ratings," Alexander Abramov concluded.

The head of the finance, monetary circulation and credit department at RANEPA, Alexander Khandruev, also believes that it will not cause any catastrophic consequences for Russian business. "The thing is that now we can take the vacant niche with our National Agency, because there is a corresponding law on credit rating agencies. So I think that Russian business will find a common language with our foreign partners. There are only a few public companies in Russia and those who have international ratings (large oil and gas companies and banks) will not be affected by such a decision of the agencies. I think that the Bank of Russia and the government will be looking for a solution to the problem. This is more of a technical problem, rather than economic or related to sanctions," he said.

According to the expert, the National Rating Agency can replace Moody's, "if the Central Bank will take the national rating into account while assessing the market risk". "The issue is that these estimates must be credible, objective and reflect the current financial situation in companies. After all, no rating agency can guess the change in the market situation, the environment and so on," Alexander Khandruev summed up.