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​Russian Central Bank proposes regulating foreign rating agencies

Published time: August 26, 2014 12:54
Reuters

Reuters

Foreign rating agencies may need to set up subsidiaries in Russia instead of branches or representative offices, so their operations could be subject to Russian legislation. It is seen as another attempt by Russia to better control its domestic finances.

The Central Bank of Russia has proposed a bill that would regulate operations of rating agencies in Russia, Kommersant reports.

Moody`s, S&P and Fitch acknowledged the receipt of the draft law but declined to comment.

If the bill becomes law it would be the first regulation of the sort in Russia.

Central to the bill is that the international rating agencies will have to create Russian subsidiaries, which will be Russian legal entities.

Currently the so–called “Big Three” rating agencies, Moody`s, S&P and Fitch, only have representative offices and branches in Russia, which means they are controlled by European and US regulators.

"This requirement comes with the need to implement supervision on rating agencies, regardless of the origin of their capital. In the case when we are dealing with a branch of a foreign company, the supervision is carried out with difficulties," Kommersant quotes Vladimir Chistyuhin, the Deputy Chairman of the Bank of Russia.

Sanctions and the suspension of rating activity on some Russian firms by the international agencies made it clear that it was crucial to better regulate the activity of western financial entities in Russia, market players agreed. The law is expected to come into force on January 1, 2015.

To become more financially independent, Russia is now working to create its own payment system and is seeking to set up a domestic rating agency that would become a counter to the international companies.

Russia is also looking for alternatives to replace US–regulated firms.

Most recently, China Union Pay said it was planning to have two million cards in Russia in the next three years.

READ MORE: Russia launches China UnionPay credit card