Expert word

More ratings, good and different!

On the basis of an RBC Capital program interview with Pavel Samiev, Expert RA, a head of a department of ratings of financial institutions.

If the world is left without ratings, it would be a strong blow to all financial markets, since no one would be able to assess risks related to bonds, instruments and companies. Companies would keep on working, but neither investors, nor counter-agents would be able to get objective and independent information of their credit status as a financial instrument.

Sooner or later even small banks enter the market of capital and securities to obtain necessary resources. And they would require rating to assess their risks and present real situation to possible investors. And rating agencies or a system of risk ratings constitutes a system of assessing economic risks, which makes the basis for expansion of domestic capital.

Our first and second echelon banks have been rated by international and Russian agencies, third echelon banks — only by Russian agencies. Other banks, after the third hundred, do not enter the debt foreign market or do it from time to time therefore rating is not too important for them. But it would be untrue to say that domestic ratings are of lower status or less adequate than foreign ones. Russian ratings are simply less popular, since the rating industry in Russia has been in existence for 10-15 years (same age as stock markets), and American agencies have been around for over a century. But despite their extensive experience, you should not take the opinion of American agencies for granted.

Recently Russian banks or insurance companies have been showing disagreement with the opinion of rating agencies and — after an expert assessment has been completed — refused to accept ratings which have not corresponded to their expectations. To avoid such situations you need proper regulating procedures in the rating business — currently rating agencies operate outside legal frames, since our legislation contains no basic notions related to their activity. There is no need to go to extremes! Soft regulation, recognition of experienced, reputed and methodologically equipped rating agencies by the state — that is what is necessary. But there is no point to introduce licensing. Rating agencies all over the world have been attached to a regulator.

Agencies, in their turn, are responsible for adequate use of information at their disposal, based on proper procedures and calculation methods. A rating agency is not an auditor and should not check on accounting books. Agencies in general are not interested in awarding inadequate marks — they may easily lose their business if the market does not take their ratings seriously.

In the beginning of the 90-ies an American journalist said: “After disintegration of the Soviet Union only two superpowers left — USA and Moody's”. There are more superpowers next to Moody's: Fitch, Standard & Poor's etc. Another journalist said: “In the past you needed to bring in tanks, now it is enough to bring down ratings”. Rating agencies play a very important role in the world’s financial flows therefore the industry of ratings has to be developed to have diversity of opinions.