Foreign rating agencies could leave the Russian market in 2016-2017

On June 13, 2015 Federal Law No.222-FZ “On activities of credit rating agencies in the Russian Federation (…)” dated 13.07.2015 entered into effect; however, the actual impact for rating agencies will occur in 2016-2017. 

This law on rating agencies stipulates that the Bank of Russia is entitled to regulate and control activities of credit rating agencies. Besides keeping registers on credit rating agencies and branches of foreign credit rating agencies, the Bank’s powers include, in particular, a capability to dispute through court the decisions of the general meeting of an agency’s shareholders, to request replacing persons exercising duties of members of the Board of Directors and to approve candidates for the position of sole executive body of the agency. 

Moreover, the law provides the Bank of Russia a possibility to issue a regulatory act specifying peculiarities of using credit ratings given by foreign credit rating agencies. 

Russian legal entities engaged in rating activity must bring their activity into compliance with the law within 1.5 years from the date this law became effective, that is, by December 2016. Foreign legal entities with branch offices in Russia are provided a longer period of 2 years – until June 2017. 

Restrictions provided by the law and the Bank of Russia’s capability to directly control various internal processes in rating agencies most likely will not suit foreign rating agencies, leading to a risk that foreign rating agencies will leave the Russian market before long.

Pavel Karpunin   Partner   St. Petersburg    pkarpunin@cls.ru    Tel.: +7 (812) 346 79 90

Rimma Tolmacheva  Principal Associate    St. Petersburg    rtolmacheva@cls.ru    Tel.: +7 (812) 346 79 90

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Pavel Karpunin or Rimma Tolmacheva, St. Petersburg Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.