Research: Rating Action: Moody’s Places Ratings of 16 Russian Financial Institutions on Watch for Possible Downgrade

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London, 01 March 2022 — Moody’s Investors Service (“Moody’s”) today placed the ratings and assessments of 16 Russian financial institutions under review for possible downgrade, following the initiation of a review in view of a downgrade of Russia’s Baa3 sovereign rating (please see https://www.moodys.com/research/–PR_461633). The review for a downgrade reflects downside credit risks stemming from recent sanctions and the possibility of additional harsher sanctions affecting the Russian economy and its financial institutions.

The announcement by the United States, the European Union and others of their intention to block the largest Russian banks from using the SWIFT payment messaging system will complicate cross-border funds transfers and payments. In addition, sanctions against the Russian central bank will hamper the use of foreign exchange reserves to defend the ruble. Although the extent and details are not yet known, this increases the likelihood of more serious credit outcomes for foreign holders of Russian debt as well as further negative financial impact on the domestic economy and financial sector. , and therefore increases the likelihood of further negative rating actions. in the days and weeks to come in the absence of clear workarounds to avoid missed debt service payments.

Specifically, the following ratings and assessments were affected by today’s rating action:

(1) Basic Credit Ratings (BCA) and Adjusted BCA of Sberbank, Gazprombank, Russian Agricultural Bank, JSC DOM.RF, Alfa-Bank, Commercial Bank AK BARS, PJSC, Credit Bank of Moscow, Russian Regional Development Bank, Tinkoff Bank, Absolut Bank (PAO), Bank ZENIT PJSC, Bank Solidarnost and National Reserve Bank.

(2) Long-term bank deposit ratings, counterparty risk ratings (CRR), counterparty risk ratings (CR ratings) and debt ratings (if any) of Sberbank, Gazprombank, Russian Agricultural Bank, Alfa- Bank, Commercial Bank AK BARS, PJSC, Credit Bank of Moscow, Russian Regional Development Bank, Tinkoff Bank, Absolut Bank (PAO), Bank ZENIT PJSC, Bank Solidarnost and National Reserve Bank.

(3) Rating of short-term bank deposits of Sberbank.

(4) Long-term and short-term issuer ratings, CRR, CR ratings and debt ratings of JSC DOM.RF.

(5) Short-term CRR and CR ratings of Sberbank, Gazprombank and Alfa-Bank.

(6) Long-term family ratings of State Transport Leasing Company (JSC GTLK) and ratings of senior unsecured debt backed by its subsidiaries, GTLK Europe DAC and GTLK Europe Capital DAC.

Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL463415 for the list of affected credit ratings. This list forms an integral part of this press release and identifies each issuer concerned.

RATIONALE FOR RATINGS / FACTORS THAT MAY LEAD TO IMPROVED OR DEGRADED RATINGS

The ratings and assessments downgrade notices of the 16 financial institutions primarily reflect Moody’s expectations that their ratings are likely to be downgraded in the event of a sovereign rating downgrade. Currently, the ratings of these institutions benefit from an increase in government support ranging from one to five notches relative to their adjusted MCRs.

In addition to the impact of a possible sovereign rating downgrade on financial institutions’ ratings, the review also captures the credit implications for the standalone credit ratings of Russian banks from the recent and potentially tougher economic and financial sanctions. On February 24, the United States imposed sanctions on Sberbank relating to correspondents and accounts payable, which will come into full effect within 30 days. The United States also imposed blocking sanctions on four other systemically important banks.

The sanctioning of Russian state-owned banks is intended to effectively prevent the institutions from participating in the global financial system and to make it exceptionally difficult to conduct international transactions, especially in US dollars. There remains some uncertainty as to the effectiveness of any workaround in such a scenario. Russian banks may also struggle to find counterparties to facilitate cross-border transactions given the risk of non-compliance associated with transactions with a sanctioned entity.

The potential imposition of additional sanctions – for example, impeding Russian banks’ access to international payment systems such as SWIFT – would likely lead to further significant economic and financial disruption. Although Moody’s believes that the ability of authorities and banks to operate under sanctions has strengthened, there are nonetheless significant risks to the operating environment and banks’ credit profiles from sanctions that could disrupt the economy, banking and/or public finances for an extended period. period of time.

THE OBJECTIVE OF THE EXAM

The review for a downgrade of financial institutions’ ratings will focus on an assessment of the impact of any sanctions that may be imposed on Russia or its financial institutions.

Positive rating action on financial institution ratings is currently unlikely, given consideration of a possible downgrade.

However, in the unlikely event that Moody’s concludes that further significant economic and financial sanctions would have only a very limited impact on the Russian economy and financial system, the rating agency may confirm the ratings of financial institutions.

Ratings could be downgraded in the event of a downgrade of Russian sovereign debt. Ratings and BCAs could also be downgraded if the review concluded that a material deterioration in the banks’ operating environment or credit fundamentals was likely.

MAIN METHODS

The main methodology used in rating Gazprombank, JSC DOM.RF, Russian Agricultural Bank, National Reserve Bank, Sberbank, Alfa-Bank, Commercial Bank AK BARS, PJSC, Credit Bank of Moscow, Russian Regional Development Bank, Absolut Bank (PAO) , Bank ZENIT PJSC, Bank Solidarnost and Tinkoff Bank was the methodology of the banks published in July 2021 and available on https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. The main methodologies used for the rating of State Transport Leasing Company (JSC GTLK), GTLK Europe Capital DAC and GTLK Europe DAC were Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207and Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099. You can also visit the rating methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY INFORMATION

The list of affected credit scores announced here is a mix of solicited and unsolicited credit scores. For more information, please refer to Moody’s Policy on the Designation and Assignment of Unsolicited Credit Ratings available on its website www.moodys.com. Additionally, the list of affected credit ratings includes additional information that varies depending on some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL463415 for the list of affected credit ratings. This list forms an integral part of this press release and provides, for each of the credit ratings covered, the information provided by Moody’s on the following elements:

• EU approval status

• UK approval status

• Rating solicitation

• Participation of the issuer

• Participation: access to management

• Participation: access to internal documents

• Release office

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Rating symbols and definitions from Moody’s are available at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the ratings tab on the respective issuer’s issuer/entity page on www.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

The contact details below are provided for information purposes only. Please see the ratings tab of the issuer page on www.moodys.com, for each of the ratings covered, the information provided by Moody’s on the lead rating analyst and the Moody’s legal entity that issued the ratings .

Please check www.moodys.com for updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory information for each credit rating.

Release Office:
Moody’s Investors Service Ltd.
A square of Canada
Canary Wharf
London E14 5FA
UK
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454

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