Central Bank to Tighten Control Over Rating Agencies

Credit rating agencies in Russia will now have to report to the Central Bank of all its actions on an almost daily basis, according to the order published on the regulator's website. Agencies will provide information on credit rating and its outlook, rating's object, rating's analyst, rating committee that affirms a rating action, and even on the publication of a press release. It is necessary to provide this data maximum within the day after the publication of a release.

At the moment rating agencies provide such information to the Central Bank only on request, but not in an automatic mode, says the Head of Analytical Department at ‘Rus-Rating’ Elena Nikolaenko.

‘A similar system begins to operate in Europe. First of all, it is necessary for control, so that there were no attempts to retroactively change wording or dates of rating actions. Without such requirements regulation is impossible,’ said CEO of ‘Expert RA’ Dmitry Grishankov.

Subsequently, the information that the Central Bank will receive from the market participants would be public – in December the regulator announced the creation of a rating repository, where information on all rating actions will be available.

‘Central Bank will receive a high-quality and constantly updated database of rating events. All the internal mechanisms of forming these financial statements within the Agency are ready and are fully automated, and in terms of daily labor they are minimal,’ said Deputy CEO of National Rating Agency Alexey Venchakov.

The Central Bank also asked the agencies to provide data on all rating actions since January 2000, three months after an agency is entered in the register of credit rating agencies, according to the order.

‘This may be difficult, since not all data had been preserved, and, when the industry was in its infancy, agencies did not have uniform standards for records management,’ says Nikolaenko.

Yesterday the Central Bank also issued an order on the requirements for education and experience of rating analysts. In particular, an analyst must have a university degree in economics, finance, or mathematical methods of economic analysis, as well as to know Russian civil and tax laws, stock market and Russian laws on bankruptcy, the basics of Russian and international accounting. Also, an analyst must have a minimum of a year work experience in a rating agency, credit institution, or analytical center.

‘In this case, an analyst is a person who is involved in the assignment of ratings and votes in a committee. It does not mean that a student with no work experience cannot come to an agency. For example, in the Big Three these people are hired as assistants, who would later become junior analysts,’ says a person close to one of the Big Three agencies. ‘As for the education of analysts, it is often that legal knowledges are very important, and an alternative to Mechanics and Mathematics faculty may be Physics and Technology faculty,’ adds Grishankov.

‘In the formation of the Analytical Credit Rating Agency (ACRA) staff, employees without proper experience are not allowed to participate in the rating process (preparation of rating opinions and voting in the committee). We actively recruit employees for starting position in the analysis department, but only to assist the analysts. Over time, they are allowed to gain the necessary experience,’ says CEO of ACRA Ekaterina Trofimova. The Central Bank's requirements will come into force in March and May.

Vedomosti, 19/01/2015