Criteria for recognising foreign credit rating agencies performing rating activities in accordance with their governing law for the Bank of Russia to use credit ratings assigned by them in exercising its powers

1. The country of registration of a foreign credit rating agency shall have a legal framework regulating the operation of credit rating agencies that is in line with international approaches and principles and stipulate the powers of the authority responsible for regulation and supervision of credit rating agencies.
2. Credit ratings assigned by a foreign credit rating agency shall be used in the regulation and/or other activities of a central/national bank and/or other government authorities of the country of registration of the foreign credit rating agency.
3. The minimum equity of a foreign credit rating agency shall correspond to the amount established by the national legislation of the country of its registration and shall be no less than the equivalent of ₽50 million.
4. The methodology applied by a foreign credit rating agency shall:
• describe all key quantitative and qualitative factors determining the ability of a rated entity to fulfil its financial obligations and the impact of these factors on credit ratings and rating outlooks;
• enable the comparison of credit ratings by different types of subjects of credit ratings;
• stipulate the grounds for the revision of the methodology to ensure its relevance; and
• enable the verification of credit ratings, including based on historical data, by identifying deviations between the assumptions used in the methodology and the facts of a rated entity’s defaults on payments or actual repayment rates.
5. A foreign credit rating agency shall prevent, identify, manage, and disclose conflicts of interest pursuant to the procedure stipulated in its internal documents in accordance with the national legislation of the country of its registration.
6. A foreign credit rating agency shall not provide consulting services.
7. A foreign credit rating agency’s fees for its services shall not depend on the credit rating or rating outlook assigned or the rated entity’s opinion about its rating or rating outlook.
8. At least one third but no less than two members of a foreign credit rating agency’s board of directors/supervisory board (if established) shall be independent members.
9. A foreign credit rating agency shall organise and ensure the operation of internal control bodies pursuant to the procedure stipulated in its internal documents in accordance with the national legislation of the country of its registration in order to control its and its employees’ compliance with the national legislation and its internal documents.
10. Rating actions shall be performed by a group of rating analysts making a decision on rating actions (hereinafter, the rating committee), which shall consist of at least five rating analysts, including the leading rating analyst for a given rating subject, the chair of the rating committee, and one rating analyst specialising in the type of rating subjects other than the type of the rating subject reviewed by the rating committee (if a foreign credit rating agency assigns credit ratings to various types of rating subjects).
11. Rating analysts shall have at least two years of experience in analysing entities’ financial performance and/or making/preparing decisions related to credit risk management in an organisation engaged in rating activities, an analytical agency, a research centre, a financial institution operating in the financial market, or an audit firm.
12. A foreign credit rating agency shall ensure the rotation of leading rating analysts involved in preparing a credit rating and/or a rating outlook at least every four years for one and the same rating subject and at least every five years for sovereign ratings.
13. A foreign credit rating agency’s employees who are in charge of advertising, client acquisition, and concluding rating services agreements and have access to contractual documentation related to the rating subject shall not take part in the rating committee’s meetings.
14. A foreign credit rating agency shall organise and ensure the operation of a group of its employees, which shall consist of at least three members (hereinafter, the methodological committee) and be in charge of approving and revising the methodology.
15. Members of the management bodies of a foreign credit rating agency, rating analysts, or employees of divisions responsible for advertising, client acquisition, and concluding rating services agreements may not be members of its methodological committee.
16. A foreign credit rating agency shall perform rating activities on a regular basis for at least five years. Specifically, the number of rated entities that are direct subjects of ratings and in relation to whom the foreign credit rating agency monitors credit ratings shall be no less than 30, including no less than 20 over the last three years.
17. A foreign credit rating agency shall constantly monitor the credit ratings it assigned and revise these ratings and its methodology no later than a year from the date of the assignment or the last revision of the credit rating or the applied methodology.
18. A foreign credit rating agency shall disclose the assigned credit ratings and rating outlooks on its website.
19. In addition, a foreign credit rating agency shall disclose:
• the list of credit ratings assigned over the past calendar year, indicating the share of unsolicited credit ratings in the total number of the assigned credit ratings;
• the list of existing or potential conflicts of interest;
• the list of additional services offered;
• methodologies it uses in assigning credit ratings;
• historical data on default rates across the rating categories of the rating scales it applies for each calendar year of the foreign credit rating agency’s operation;
• the credit rating transition matrix; and
• the list of rated entities and other entities who accounted for 5% or more of the annual revenues of the foreign credit rating agency as of the end of the past calendar year.

Please note that credit ratings assigned by the recognised foreign credit rating agencies will be subsequently used in the Bank of Russia’s regulation by making relevant amendments to Bank of Russia regulations and/or the Bank of Russia Board of Directors’ decisions only with regard to foreign subjects of credit ratings in accordance with the international scale.