Our progress / Hot Topics

Financial markets megaregulator

Back to Media

Four Trumps Three

14.11.2013 00:00 / Kommersant

The top 4 Russian rating agencies have pleaded with the Central Bank to ‘clamp down on the oligopoly of Western S&P, Moody`s and Fitch Ratings’. This comes as a surprise for the Russian branches of foreign agencies: today, Russian companies rate more players than their international counterparts.

Expert RA, Rusrating, National Rating Agency (NRA) and AK&M sent a ratings market development memorandum to Head of the Central Bank Financial Markets Service Sergey Shvetsov. It features 20 points, each assigned a value of 1-10 points. Eight key points are dedicated to saving the market from ‘the Big 3 oligopoly’ — S&P, Moody`s and Fitch Ratings.

Russian agencies refuse to be pigeonholed as international/national in federal laws and regulations, as well as internal state-owned company procedures. Some forty documents impose this division today, estimates NRA. National players call for the regulator to make it obligatory for all companies with a Big 3 rating to be rated at least one by a Russian agency, bringing their share among all rated to a 75% by 2017. Agencies also demand a mandatory rating for all financial instruments, including share investment funds, shares and bonds.

None of the 20 points of the memorandum appeals for tougher rating agencies regulation. “We do not object to strict regulation, however, we are yet to hear back from the Minfin and the CB”, explains NRA General Director Victor Chetverikov. “We have decided to leave these points out not to the burden the megaregulator”. A similar comment was given by Expert RA General Director Dmitry Grishankov.

Up until this Autumn, rating agencies have been supervised and accredited by Minfin. Simple steps must be followed to qualify for accreditation: employ staff for two years and rate some 20 companies. Rating agencies regulation has been delegated to the new Bank of Russia FMS, however, no steps have been taken so far. FMS declined comment on the rating agencies’ memorandum. “The memo is pretty fatuous”, says a Minfin source. “Only because FMS has no clout to make companies get rated”.

Russian rating agencies claim they are keeping up with the G20 trend. The need to lower financial institutions’ dependency on rating agencies was debated at the August G20 summit. Deputy Finance Minister Sergey Storchak stated that Russia will adhere to the same policy. “Curbing the Big 3 oligopoly is a priority for the European regulator, and we expect the Russian regulator to follow suit”, says Grishankov.

“What is oligopoly, domination? Then our company’s Russian portfolio is lower than other agencies’”, said Dmitry Surkov, Head of Fitch Ratings Russia, adding that his company fully supports the plea to curb excessive use of ratings in regulation. According to agencies’ websites, Fitch Ratings covers 200 Russian issuers, Expert RA — 580, NRA — 320. Moody`s was unavailable for comment yesterday. S&P Russia & CIS MD Sergey Nazarov refused to comment the actions of other agencies.

Ksenia Leonova

Financial markets megaregulatorProject Group №1