More ratings, good and different – Newspaper Kommersant No. 200 (7401) of 10/27/2022

The Ministry of Finance is discussing changing the rules for selecting banks that work with federal treasury funds. If now this requires ratings from ACRA and Expert RA, then in the future banks may be required to have ratings from three agencies out of four operating in the Russian market. At the same time, the minimum rating barrier will remain at the same level. This innovation will expand the client base of younger and smaller organizations in terms of market share – NKR and NRA.

From the beginning of 2023, the criteria for banks that allow access to public money, in particular, give the right to attract funds from the treasury, may change. This was told to Kommersant by a source in one of the major banks. Two sources of “Kommersant” in the financial market confirmed the plans for the upcoming changes. As one of Kommersant’s interlocutors clarifies, within the framework of the document being worked out by the Ministry of Finance, an option is being discussed when banks will need to have ratings from three Russian agencies, and not below a certain level for each agency. At the same time, banks will have time (at least six months) to manage to get the third rating.

The Ministry of Finance noted that “in order to develop the market for credit rating services”, work is underway to use credit ratings, including from the NRA and the NKR, “as a criterion for the financial stability of banks”, while lowering the current requirements for the credit rating level “seems inappropriate “.

In the liabilities of credit institutions, federal treasury funds account for a significant, although not the largest, share. According to the latest available data from the Central Bank, at the beginning of February 2022, state funds (which include treasury funds) accounted for 6% (6.5 trillion rubles) in bank liabilities.

According to the Deputy General Director of the Expert RA agency Alexander Saraev, based on the already established requirements, the most stable credit organizations have access to work with federal budget funds. However, according to him, the world’s best practices speak of an additional reduction in risks if an organization has several credit ratings at once, while the cut-off for admission should be set precisely at the lowest credit value in order to avoid rating arbitrage. Previously, all major banks had more than two ratings, including those from international credit rating agencies (which have already left Russia, see Kommersant of May 16). According to Mr. Saraev, the cost of such ratings was significantly higher than the current costs of maintaining them.

For the ratings market, this innovation will play into the hands of young agencies with a smaller client base. A Kommersant source in one of the banks notes that such an innovation could lead to a flow of the client base to the NKR and the NRA. In particular, NRA ratings are currently assigned to 12 banks, NCR ratings to 23 banks, while Expert RA ratings 135 credit institutions, and ACRA ratings 116. “For the market, the regulator and investors, the volume of real statistics is extremely important, which allows assess the competence of rating agencies. The new rating agencies do not have such statistics, but the expansion of their client base in the future for several years will allow to fully validate the quality of their models on historical data,” Mr. Saraev believes.

ACRA, NKR, NRA declined to comment. The Central Bank did not respond to Kommersant’s request.

Olga Sherunkova