NRA Reports Renaming of Certain Ratings

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National Rating Agency LLC (hereinafter – 'the Agency') officially notifies all the interested parties that, in order to comply with the requirements of the Federal Law №222-FZ dated July 13, 2015, 'On the activities of credit rating agencies in the Russian Federation, on the amendment of Article 76.1 of the Federal Law 'On the Central Bank of the Russian Federation (Bank of Russia)' and invalidating of certain parts of legislative acts of the Russian Federation', names of some ratings and their relations to basic categories are changed.

According to the rules of the Federal Law №222, rating activity is defined as 'a professional activity carried out on a regular basis, consisting in the aggregate of preparation, assignment, verification, review, withdrawal of credit ratings and credit rating outlooks'. The law stipulates that a rating agency may provide additional services, including the assignment of ratings other than credit ratings. Thus, the assignment of credit ratings is subject to the regulation, whereas the assignment of other ratings is not regulated by law.

In order to comply with the legislation the Agency determines that the following types of its ratings are credit ratings:

- Credit rating is the Agency's opinion on the ability of a rated entity to meet its financial obligations on time and in full;

- Financial strength rating is the Agency's opinion on the ability of a rated entity to fulfill its financial obligations to clients, counterparties, and creditors. Financial strength ratings are assigned to the companies that rarely use loans and credits (liabilities of credit nature) in the course of their regular activities, and this is the difference from credit ratings.

In order to comply with the legislation the Agency determines that the following types of its ratings are derivative ratings:

- Reliability rating is the Agency's opinion on the stability of the business model and market position of a company within the industry, the level of service quality of a company, as well as the current system of risk management. These ratings are not comparable with both credit ratings (financial strength ratings) and various objects ratings;

- Risk management quality rating is the Agency's opinion on the level of development of the risk management system in a company, its adequacy to the nature and scale of the company's business, and the ability to identify, track and control all risks related to operating activities;

- Service quality rating is the Agency's opinion on the quality of services offered to customers, the presence of internal and external quality standards, and compliance with them;

- Corporate management quality rating is the Agency's opinion on the quality and effectiveness of corporate governance procedures in a company. Rating methodology is built on the basis of OECD Principles of Corporate Governance, Russian Corporate Governance Code, IFC's Corporate Governance Methodology;

- Rating of pension savings management quality is the Agency's opinion on the performance quality of asset management companies within the allocated investment strategies (portfolios) for the management of citizens' pension savings in the framework of compulsory pension insurance system;

- Sharia compliance rating;

- State forest management quality rating;

- Environmental responsibility rating of oil and gas companies;

- Investment attractiveness rating;

- Rating of football development in Russian regions.

In accordance with the Law №222-FZ, the assignment of derivative ratings is not a rating activity. The Agency may provide additional services of assigning ratings other than credit. The Agency coordinates the list of assigned derivative ratings with the Bank of Russia and places it in the 'Information Disclosure' segment.

Background information:

Basic types of ratings in compliance with the legislation:

- Credit rating is the view on the ability of a rated entity to fulfill its financial liabilities (solvency, financial reliability, financial stability) and (or) on the credit risk of its individual financial obligations or financial instruments, which is expressed with the use of a rating category.

- The level of credit ratings is determined through the assessment of the probability of default and reflects the ability of a rated entity to maintain its obligations throughout the term to maturity. The higher the credit rating is, the lower the probability of default, and the higher an entity's ability to meet its obligations.

- Derivative rating is the rating that is not associated with the assessment of the probability of default on credit obligations. Historical data on the probability of default on derivative ratings is not published.