Russian companies turning to internal credit ratings, says Deloitte executive

June 14, 2019

MOSCOW (Reuters) – Russian companies are developing their own internal ratings processes because there is insufficient coverage from domestic and global agencies that assess the credit risk posed by businesses, a former head of Russia’s ACRA rating agency said.

Ekaterina Trofimova, who oversaw the creation of ACRA after western sanctions had resulted in Russia being downgraded by the top three international credit rating agencies, joined global accountancy firm Deloitte’s Moscow office in April to lead development of internal ratings processes at domestic companies and banks, among other tasks.

“Modeling of credit risk components helps to build a fast decision system, allowing evaluation of borrowers who have no rating from the agencies,” the ex-S&P director and former Gazprombank executive told Reuters.

Trofimova said that internal ratings make for speedier decision-making on loans and credit lines by banks and companies, thereby improving competitiveness.

“This (internal rating system) is a question of survival,” she added.

Credit ratings became a hot topic in Russia after the sanctions over Moscow’s annexation of Crimea from Ukraine, with Russian companies immediately affected by the downgrading of Russia’s creditworthiness by the world’s leading rating agencies.

ACRA has been promoted by the Russian government and central bank, with domestic companies requiring ACRA ratings to access most state funds. Since mid-2017 Russia has relied on its own rating agencies to manage its domestic debt market.

For the past couple of years the Russian central bank has required lenders to comply with tougher bank capital rules to protect against possible shocks, which makes effective risk assessment essential.

So far Sberbank and the Russian unit of Raiffeisenbank have gained central bank approval to use their own ratings systems to meet the regulatory requirements.

(Reporting by Katya Golubkova; Editing by David Goodman)

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