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Russia’s ACRA to aim at breaking monopoly as Moody’s exits

The BRICS Post | March 19, 2016

Russia’s new national Analytical Credit Rating Agency (ACRA), seen as a domestic competitor to global ratings agencies, plans to issue its first ratings this year, according to CEO, Ekaterina Trofimova.

ACRA applied for a license to operate in Russia on February 29.

On Friday, one of the “BIG Three” international ratings agencies, Moody’s, announced it has officially stopped issuing local credit ratings for Russian companies. This was widely expected after Russia said new regulations will force international rating agencies working in the country to issue local data through a Russia-regulated subsidiary and guarantee they won’t withdraw local credit ratings under outside political pressure.

“This decision was taken in light of legislative changes and other potential restrictions applicable to the business of providing national scale ratings (NSRs) in Russia,” a Moody’s statement said.

Earlier in February, Fitch Ratings also said they plan to stop issuing local ratings in Russia.

The new Russian regulations take effect in 2017.

The five BRICS heads of state during their annual summits in Brazil and Russia in the past two years have discussed the idea of establishing an independent ratings agency.

The “Big Three” global credit rating agencies, all based in the US – Standard and Poor’s, Moody’s, and Fitch Ratings have been criticized for their favorable pre-crisis ratings of insolvent financial institutions like Lehman Brothers.

DR Dogra, Managing Director and CEO of Indian credit ratings agency CARE, said Moscow’s homegrown credit-ratings firm is a positive step forward.

“The development in the credit rating space in Russia is interesting as it brings in local knowledge and experience while evaluating credit rating. The existence of such agencies does add value to the system and while the international rating agencies will have to take their own decision relating to the regulatory systems that have to be adhered to, the creation of ACRA in Russia is a good step,” Dogra told The BRICS Post.

“As Russia is part of the fast growing BRICS nations, we would see this very positively as we need to have more competition in the market which should also logically extend to the global space,” he added.

Russia’s ACRA, however, is not the first attempt to break the monopoly of the ratings market.

Rating agencies from China, Russia and the United States officially launched a new credit rating company in Hong Kong in 2013 to challenge the current industry leaders.

Brazil’s SR Rating, CARE Rating of India and GCR of South Africa also tied up with CPR of Portugal and MARC of Malaysia to form a new ratings agency in 2013.

Lia Baker Valls Pereira, senior researcher at Brazil’s premier, Getulio Vargas Foundation, warns that the criteria used by any new BRICS ratings agency must be well documented and transparent.

“A ratings agency must be independent to be reliable. A ratings agency controlled by the BRICS governments will face difficulties in proving its independence,” says Pereira.

March 19, 2016 Posted by | Corruption, Deception, Economics | , , , , , , , | Leave a comment