Russia pushes BRICS nations to establish their own rating agency

April 29, 2014 
Alexei Lossan
Source: Russia Beyond the Headlines 


Standard & Poor's has downgraded Russia’s long-term foreign currency sovereign credit rating from BBB to BBB-. According to the Russian authorities, the major rating agencies are influenced by the United States, and an alternative BRICS-based rating agency should be established. China has already expressed its interest in the project.

Assistance from China

Russia is to propose to its BRICS partners the establishment of a single common credit rating agency that will compete with the Big Three – Standard & Poor's, Moody's and Fitch. 

That was the conclusion reached by participants of a meeting chaired by Russia’s First Deputy Prime Minister Igor Shuvalov, after Standard & Poor's downgraded Russia’s long-term foreign currency sovereign credit rating from BBB to BBB-.

"First of all, the case in question is the involvement of our traditional partners, such as the BRICS nations and the Eurasian Economic Union,” Konstantin Korishchenko, Head of the Department of Stock Markets and Financial Engineering at the Russian Academy of the National Economy and Public Administration, who attended the meeting, told RBTH. 

“All the BRICS nations already have national rating structures, so it is primarily a matter of mutual recognition. Our foreign partners can help each other in terms of setting standards and oversight mechanisms, but most importantly in the mutual recognition of their ratings," said Korishchenko.
  
In particular, according to sources from the RBC-Daily newspaper, a new agency could be established based on a partnership between the Russian rating agency RusRating and the Chinese agency Dagong Global. 

The U.S. agency Egan-Jones Ratings, which has long dreamed of pushing back the Big Three, could help facilitate the process. Furthermore, Dagong Global has already held talks with RusRating in Beijing at a BRICS meeting: The company has proposed to start negotiations to establish a new international credit rating agency to be based in the BRICS nations.

According to Mikhail Kuzmin, an analyst at Investcafé, Dagong Global is represented today mainly domestically, although the agency does assign sovereign ratings to various countries. In turn, the U.S.’s Egan-Jones Ratings mainly assigns ratings to debt instruments including bond issues, bank loans, etc.
As noted by Vadim Vedernikov, Deputy Director of the Research and Risk Management Department at UFS IC, both agencies are known for their long-term activities on assigning ratings to corporate and sovereign issuers, as they operate in "hot" credit markets such as China and the United States. 

The project to set up a single common agency has already been called the Universal Credit Rating Group. 

"The ratings which the Universal Credit Rating Group could start assigning to Russian companies could gain a degree of recognition in foreign investment circles approaching that of the ratings which have been assigned by the American Three,” says Vedernikov.

Alternative solutions
The other solution is to cooperate with ARC Ratings, the international consortium of agencies from Portugal, India, South Africa, Malaysia and Brazil.
Source: Russia Beyond the Headlines - http://rbth.com/business/2014/04/29/russia_pushes_brics_nations_to_establish_their_own_rating_agency_36307.html?code=878965eda68282ffc73407b5665fdc42)