SAINT PETERSBURG, Russia — Yekaterina Trofimova spent more than a decade working for the Paris office of international credit rating agency Standard & Poor’s. Now she is heading Russia’s drive to create its own rating agency — a drive that the sector's global giants say is hounding them out of the local market.
The Analytical Credit Rating Agency is the only body to have applied to the Russian Central Bank for a license to issue ratings under legislation passed last year.
“Twenty years ago, Russia made the choice to completely give the market to the global agencies, but, unfortunately, structurally, their work is not up to Russia’s expectations or needs,” Trofimova said in an interview at the Saint Petersburg International Economic Forum, where she was trying to drum up interest in ACRA before it begins issuing ratings in the coming months.
The founding of the agency comes amid resurgent nationalism in Russia and a broader drive to reduce what Moscow’s sees as dependency on U.S. and European institutions. There has been a dramatic deterioration in ties between Russia and the West following the Kremlin’s 2014 annexation of Crimea and support for separatist rebels in eastern Ukraine.
Russian officials have long criticized the world’s three dominant rating agencies: S&P, Moody's Investors Service and Fitch Ratings. And the Kremlin lashed out last year following decisions from Moody’s and S&P to downgrade Russia’s sovereign credit rating to junk status, describing the moves as “political meddling.”
The project was also given momentum by Western sanctions on Russia that led international credit rating agencies to withdraw coverage from sanctioned Russian companies, according to Trofimova. “It was a big surprise and disappointment for Russia because Russia honestly built up its financial system based on these ratings. … This put under question the continuity of the good functioning of the financial system in Russia,” she told International Business Times.
But there are high levels of skepticism about the project and many foreign investors are dismissive. Even Aleksei Moiseev, the deputy finance mininster, appeared doubtful about ACRA’s appeal. “When I meet with foreign investors, they all tell me we have done the right thing, but I don’t know how much they will use the ratings,” he told journalists Thursday.
The founding of ACRA was officially announced by the Central Bank in July last year — and a new regulation package for the credit rating industry, approved by President Vladimir Putin in 2015, appears to have cleared the way for ACRA to be the dominant domestic player.
International credit rating agencies cite the new legislation as a reason for cutting back their Russian operations. Moody’s announced in March it will withdraw 150 ratings from Russian companies and shut down its joint venture in Russia that issued them because of the new rules. Fitch and Standard & Poor’s are reviewing their Russian operations.
ACRA has no plans to issue to ratings outside Russia and will instead focus on second- and third-tier Russian companies, many of which have never been rated before. Trofimova rejects allegations that ACRA has a political agenda and described the venture as “the creation of a new market.”
A source at ACRA, who declined to be identified because he was not allowed to speak publicly, said international credit rating agencies have no interest in issuing local Russian ratings because there's no profit in it. “It’s all about money,” he said of their decision to leave the market.
ACRA has 27 shareholders, each with a 3.7 percent stake, and its board of directors includes U.S. citizen and former Moody’s employee Vincent Truglia and Austrian Thomas Missong.
While ACRA has yet to receive its official accreditation from the Central Bank, this is expected before the end of August. The agency does not have any paying clients at the moment and will not issue ratings before it receives an official license, according to Trofimova.
Russia is not the first country to try to create its own domestic rating agency in a bid to challenge the privileged positions of Standard & Poor’s, Moody’s and Fitch.
ACRA is a similar project to China’s Dagong Global Credit Rating, which was set up in the 1990s, but they are both unlikely ever to threaten the position of the international giants, according to Nicholas Spiro, managing director at Spiro Sovereign Strategy in London.
“They are deemed to be backward-looking and out of touch with sentiment,” said Spiro. “At the end of the day this is an oligopoly. … There are only three credit rating agencies that matter in the mind of investors.”