Development of credit rating agencies: Bank of Russia discussion
Members of the Bank of Russia Expert Board for the Activities of Credit Rating Agencies (CRAs) generally supported the initiatives to introduce minimum standards for the methodologies for assigning credit ratings and to create a rating repository to be maintained by the regulator.
‘The quality of methodologies is crucial for credit ratings to be reliable, therefore the process of evaluating the effectiveness of the models used by rating agencies gains particular importance’, said Vladimir Chistyukhin, Deputy Governor of the Bank of Russia. CRAs are supposed to validate their methodologies independently, prepare a report in the prescribed form and submit it to the Bank of Russia.
Expert Board members agreed that information about the assigned credit ratings should be available to a wide range of issuers and investors, as well as government agencies, and accumulated in the repository. A unified information database on all rating actions performed by CRAs can be established on the basis of the Bank of Russia.
A possibility to assign ratings (rankings) to structured products was also discussed. However, experts did not reach common ground since such products have a specific nature and a complex mixture of market and credit risks. The discussion on this issue will continue.
In addition, it was noted at the meeting that the Bank of Russia welcomes the appearance of new CRAs to promote competition. ‘However, in order for new CRAs to be useful in the regulation of credit ratings, it is necessary for them to accumulate sufficient experience. The Bank of Russia should also be confident in the quality of their methodologies,’ said Mr Chistyukhin.