Russia to determine its own credit rating

The Russian rating agency ACRA will be the first of the national agencies to start publishing Russia’s sovereign rating, an informed source told Interfax. The information was later confirmed by ACRA’s press service.

At present, the agency is consulting with officials and discussing issues that have arisen with experts in the rating process, the source told Interfax.

Another source said that the decision would be made in autumn, probably before the end of September.

The credit rating, which reflects the Russian government’s solvency as a borrow of national or foreign currency will be the first sovereign rating awarded by ACRA in the four years of its existence.

ACRA was founded in 2015 after the Big Three rating agencies simultaneously lowered Russia’s rating in the wake of sanctions and the decline in oil prices, and two of them – Moody’s and S&P – even put Russia in the “junk” category. Russian officials said that the agencies were politicized and not objective, and gave the green light to ACRA, which was founded by 27 major Russian companies and banks, including Sberbank, VTB, Gazprombank and Promsvyazbank, as well as Severstal, TMK and AFK Sistema.

The Bank of Russia has included ACRA and Expert RA, another national rating agency, on its registry, which means that it can now use their ratings for regulatory purposes.

Major businesses want to take it a step further and use the national ratings to calculate the risk coefficient on corporate loans. The assessments from ACRA and Expert RA are expected to simply match the equivalent ratings from the international agencies.

This was proposed to President Vladimir Putin in a letter from the wealthiest person in Russia, Novatek CEO Leonid Mikhelson (worth $24 billion according to Forbes), Severstal co-owner Alexey Mordashov (4th on the Forbes list with $20.5 billion), and Gazprom CEO Alexey Miller.

If the Russian AAA rating is equated to the same rating from the Big Three, then banks could significantly increase their lending to corporations, even for “strategic, large scale investment projects”, which would lead to less use of foreign currency in the economy, they argued.

Mordashov, Mikhelson and Miller believe that the international agencies “significantly overstate the risk of default”, citing sanctions and geopolitics.

  ACRA, Russia