New Russian credit ratings laws prompts Moody’s to shut up shop

Moody's Russia JVMoscow’s decision to introduce new Russian credit ratings laws prompted Moody’s to announce yesterday that it is to stop issuing domestic credit ratings through its joint venture because of “legislative changes and other potential restrictions”. The decision – which will lead to the closure of its Russian JV – marks the most drastic reaction so far to the new regulation and highlights the risk that the country’s financial markets may become more isolated from global markets as Moscow continues to retaliate against western sanctions imposed after its annexation of Crimea and subsequent events in Ukraine. 
Under legal amendments approved last year that take effect in 2017, Moscow will allow agencies to issue local ratings only through a subsidiary in the country that agrees to certain conditions, including a guarantee not to withdraw ratings under external political pressure. The legislation also requires central bank approval of the assignment and withdrawal of local ratings.
The new rules could leave global rating agencies in violation of either western law or Russian law if applied to Russian issuers under US or EU sanctions.
Moody’s is the only one of the big three global rating agencies with a joint venture in Russia. Fitch said late last month that it was considering a withdrawal of local ratings because of the new regulations. The agency issues national-scale ratings for Russian companies through a branch office, but that option will no longer be possible under the new rules. Standard & Poor’s said it was still considering its options.

Source: FT