Russia is creating its own rating company to withstand “geopolitical risks” after two of the three biggest credit assessors downgraded the country to junk status this year.
Ekaterina Trofimova, AO Gazprombank’s first vice-president and a former banking analyst for Russia and former Soviet states at Standard & Poor’s in Paris, will head the company, which plans to start operations next quarter. It will have 3 billion rubles ($51.4 million) in capital and will be funded by banks, insurance companies and asset managers, the central bank said Friday on its website. Shares will be distributed on a pro-rata basis and no investor will hold a stake exceeding 5 percent.
“Rating agencies are one of the most important elements of financial-market infrastructure and their activity should be resilient to geopolitical risks,” it said. Participants in a meeting held by the central bank agreed that the country needs a “strong” credit evaluator “with a high level of corporate governance,” authoritative enough for Russian and foreign investors, according to the statement.
The announcement caps years of criticism by officials over the rankings given to Russia, which President Vladimir Putin in 2011 called “an outrage” that increased borrowing costs for both domestic companies and the government. Tensions came to a head this year, when S&P and Moody’s Investors Service cut Russia below investment grade following a slump in oil prices and sanctions imposed over Ukraine.
Finance Minister Anton Siluanov blamed “political factors” for Russia’s downgrades. Fitch Ratings, the last major assessor that ranks the country above junk, left the sovereign at BBB- this month.
Rating companies have faced increased regulation after a U.S. Senate panel found they provided inflated grades for risky mortgage bonds, helping cause the credit crisis in 2007 and 2008 that tipped the global economy into a recession. Leaders from Brazil, Russia, India, China and South Africa discussed creating their own credit assessor at a summit in Ufa, Russia, this month.
The Bank of Russia initiated the creation of the new rating company, the Moscow-based business daily Vedomosti reported on Thursday, citing people it didn’t identify. While Russia already has four domestic credit assessors, none of them met the central bank’s requirements, according to Vedomosti.
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The new company will focus first on Russia and then on the Eurasian Economic Union, a bloc of former Soviet states, Trofimova told Rossiya 24 television in an interview. Bids from potential shareholders will be accepted starting next week and until Aug. 28, with foreign investors invited to participate, she said.
“In order to minimize a possible conflict of interests, investors will be offered a very diffuse ownership structure,” Trofimova said. “That will allow for greater control of the processes of corporate governance.”