Adopted by the State Duma on 30 June 2015
Approved by the Council of the Federation on 8 July 2015
Chapter 1. General provisions
Article 1 Scope of the Law
1. This Federal Law establishes the legal framework for credit rating agencies to assess the ability of legal entities and public law entities to meet their financial obligations, carry out credit risk assessment of their financial obligations and financial instruments, as well as the powers of the Central Bank of the Russian Federation (hereinafter, the Bank of Russia) in implementation of regulation and supervision of activities of credit rating agencies.
2. This Federal Law is aimed at ensuring protection of the rights and lawful interests of rated entities and users of credit ratings, including lenders and investors, as well as at ensuring transparency and independence of the activities of credit rating agencies.
Article 2. Key definitions used in this Federal Law
For the purposes of this Federal Law, the following key definitions shall apply:
1) Credit rating agency means a legal entity established with the legal form of a company in accordance with the legislation of the Russian Federation, entered by the Bank of Russia in the Register of Credit Rating Agencies in accordance with the requirements of this Federal Law, and performing rating activites;
2) Rating activities mean professional activities, performed on an ongoing basis, in aggregate consisting of the preparation, assignment, affirmation, review, withdrawal of credit ratings, and credit rating outlooks (hereinafter, Rating Actions), based on the analysis of information in accordance with the methodology and accompanied by the distribution of information on assigned credit ratings and credit rating outlooks in any way, that ensures access to this information by general public;
3) Credit rating means an opinion on the ability of a rated entity to meet its financial obligations (creditworthiness, financial reliability, financial stability) and(or) on the credit risk of its individual financial obligations or financial instruments, expressed using a rating category;
4) Rated entity means a legal entity or a public law entity whose ability to meet its financial obligations (creditworthiness, financial reliability, financial stability) is directly or indirectly assessed in a credit rating;
5) Object of credit rating means a rated entity and(or) its financial obligations (creditworthiness, financial reliability, financial stability), or financial instruments;
6) Rating category means an element of the rating scale expressed as a letter, numeric, and(or) other special symbol(s);
7) Rating scale means a system of rating categories used by a credit rating agency to classify levels of credit rating;
8) International rating scale means a rating scale which makes it possible to compare credit ratings assigned by a credit rating agency on the international basis;
9) National rating scale means a rating scale which makes it possible to compare credit ratings assigned by a credit rating agency only within nationstate;
10) Sovereign credit rating means a credit rating, where the object is the Russian Federation or a foreign state, a constituent of the Russian Federation or an administrative territorial unit of a foreign state, a government body of the Russian Federation or of a foreign state, a government body of a constituent of the Russian Federation or an administrative territorial unit of a foreign state, or a local government of the Russian Federation or a foreign state, a union of states, an international financial institution and(or) their individual financial obligations or financial instruments;
11) Unsolicited credit rating means a credit rating assigned by the credit rating agency without signing of agreement with the rated entity;
12) Credit rating outlook means an opinion on a probable change of a credit rating;
13) Rating analyst means an individual who performs analytical functions needed for performing rating actions and who is an employee of the credit rating agency;
14) Lead rating analyst mean a rating analyst whose main responsibilities include interaction with the rated entity in respect of a specific credit rating, preparation of documents and recommendations for a rating committee regarding such a credit rating;
15) Methodology means a document of a credit rating agency which determines the principles and forms of analysis of quantitative and qualitative factors and application of models and key rating assumptions based on which a decision on the rating actions is taken.
Chapter 2. Conditions for credit rating agencies operations
Article 3. Rating activities in the Russian Federation and the use of the national rating scale
1. Legal entities established with the legal form of a company have the right to perform rating activities in the territory of the Russian Federation after entering information on such entities in the Bank of Russia Register of Credit Rating Agencies in accordance with the procedures defined by this Federal Law and regulations of the Bank of Russia. Other legal entities have no right to perform rating activities.
2. The minimum size of the own funds (capital) for a credit rating agency is set as 50 million roubles. The methodology for determining the size of equity (capital) of a credit rating agency is defined by the Bank of Russia.
3. It is prohibited to combine rating activities with other activities, except for those specified in Section 9 of Article 9 of this Federal law.
4. If the legislation of the Russian Federation provides for the use of credit ratings of a Russian object of credit ratings by government bodies of the Russian Federation, government bodies of constituents of the Russian Federation, local self-governance bodies, the Bank of Russia, for Russian rating objects credit ratings assigned on the national rating scale for the Russian Federation shall be used.
5. A regulation of the Bank of Russia can establish specific characteristics for the use of credit ratings assigned to Russian objects of credit ratings by a foreign credit rating agency carrying out its rating activities in accordance with its lex societatis (hereinafter, a foreign credit rating agency), taking into account the provisions of documents adopted by international organizations and international associations.
(as amended by Federal Law dated April 1, 2020 N 97-FZ)
6. Credit rating agencies shall have the right to refuse legal entities and public law entities the service of a credit rating action on the national rating scale for the Russian Federation on the grounds agreed upon with the Bank of Russia and communicated to rated entities prior to signing the agreement on the performing rating actions.
7. The withdrawal of credit ratings assigned on the national rating scale for the Russian Federation is permitted only on the grounds specified by the agreement for performing rating actions and in case stipulated in Section 5 of Article 12 of this Federal Law.
8. Credit rating agencies have no right to withdraw credit ratings assigned on the national rating scale for the Russian Federation on the ground of a decision and/or in connection with a decision of authorities of foreign countries, of subjects of international law, and of other entities whose decision is a result of the decisions of the said entities, if such decisions do not directly affect the ability of the rated entity to perform its financial obligations or the credit risk of a financial obligation or a financial instrument.
9. Credit rating agencies must ensure the following:
1) Independence of rating activities inter alia that from any political and/or economic influence;
2) Prevention and identification of conflicts of interest, managing conflicts of interest and disclosing information on them;
3) Compliance with the requirements of this Federal Law.
10. Unless otherwise provided for by federal laws, a representative office of a foreign credit rating agency located in the Russian Federation may represent interests of a foreign credit rating agency and to protect them in the Russian Federation from the date such representative office of a foreign credit rating agency is entered by the Bank of Russia into the Register of Representative Offices of Foreign Credit Rating Agencies, in accordance with the procedures laid down by the Bank of Russia.
(as amended by Federal Law dated April 1, 2020 N 97-FZ)
11. A branch of a foreign credit rating agency located in the Russian Federation shall have the right to perform certain elements of rating activities within the Russian Federation starting from the date when this branch of a foreign credit rating agency is entered by the Bank of Russia into the Register of Branches of Foreign Credit Rating Agencies, in accordance with the procedures laid down by the Bank of Russia. In such a case, credit ratings and outlooks shall be assigned, affirmed, reviewed, and withdrawn on behalf of the foreign credit rating agency.
Article 4. Entering information in the Register of Credit Rating Agencies
1. The Bank of Russia takes a decision on entering information about a company (hereinafter – the applicant) into the Register of Credit Rating Agencies on the basis of an application submitted in due course in accordance with the procedures laid down by the Bank of Russia.
2. The application specified in Section 1 of this Article shall be accompanied by documents the list of which is laid down by a regulation of the Bank of Russia.
3. The Bank of Russia makes a decision on entering information about the applicant into the register of credit rating agencies or on the refusal to enter information on the applicant into the Register of Credit Rating Agencies within six months from the date of receiving the application and the documents specified in Section 2 of this Article.
4. The Bank of Russia shall enter information on the applicant into the Register of Credit Rating Agencies not later than one business day following the day of taking a decision by the Bank of Russia on entering information on the applicant into the Register of Credit Rating Agencies.
5. For the purposes of fulfilling its supervisory functions, the Bank of Russia shall keep a Register of Credit Rating Agencies according to procedures laid down by a regulation of the Bank of Russia. The information in the Register of Credit Rating Agencies is open, accessible to the general public, and is subject to publication on the official website of the Bank of Russia.
Article 5. Grounds for refusal to enter Information on the applicant in the Register of Credit Rating Agencies
The grounds for refusal to enter information on the applicant in the register of credit rating agencies are:
1) non-submission or submission of an incomplete set of documents and intelligence to the Bank of Russia, as provided for by this Federal Law and regulations of the Bank of Russia adopted in accordance with this Federal Law, submission of documents (including methodology), that do not meet the requirements of this Federal Law and regulations of the Bank of Russia, adopted in accordance with this Federal law;
2) submission of documents and intelligence containing knowingly materially false or misleading information;
3) non-compliance of the applicant and its founders (shareholders, participants), persons on the management bodies, internal control officers, and rating analysts with the requirements laid down by this Federal Law and regulations of the Bank of Russia adopted in accordance with this Federal Law.
Article 6. Requirements to founders (shareholders, participants) of a credit rating agency
1. The following persons have no right to dispose, directly or indirectly (through controlled persons), individually or collectively with other persons, bound therewith by property trust management agreements, and/or partnership agreements, and/or agency agreement, and/or shareholder agreement, and/or any other agreement, the subject matter of which is the exercise of rights certified by shares (stakes) of the credit rating agency, of 10 or more per cent of votes as per voting shares (stakes) that constitute the charter capital of the credit rating agency:
1) a person who controlled or exercised significant influence over credit organisations or non-credit financial organisations (hereinafter – financial organisations) the licence of which for a relevant type of activity was withdrawn (cancelled) or which was excluded from a relevant register (list);
2) a person not meeting the business reputation requirements laid down in Section 1 of Article 7 of this Federal Law;
3) a person who is a founder of another credit rating agency.
2. For the purposes of this Federal Law, control and significant influence shall be determined in accordance with the International Financial Reporting Standards recognised in the Russian Federation.
3. A credit rating agency shall notify the Bank of Russia about persons who control more than 10 per cent of the votes as per voting shares (stakes) in the charter capital of the credit rating agency.
4. In the event of violation of the requirements specified in Section 1 of this Article the Bank of Russia shall in accordance with the procedures laid down by it send to these persons prescriptions demanding to remedy the identified violations. In the event of failure of these persons to follow the prescriptions the Bank of Russia has the right to claim in court the reduction of their participation in the charter capital of the credit rating agency to a size not exceeding 10 per cent of the votes as per voting shares (stakes), termination of their right to control, directly or indirectly, more than 10 per cent of the votes as per voting shares (stakes) in the charter capital of the credit rating agency, or the cessation of participation in the charter capital of the credit rating agency.
5. In the event of failure of a person who directly or indirectly controls more than 10 per cent of the votes as per voting shares (stakes) in the charter capital of the credit rating agency to meet the requirements laid down in Section 1 of this Article, the said person shall be entitled to control the number of votes not exceeding 10 per cent of the votes as per voting shares (stakes) in the charter capital of the credit rating agency. The remaining shares owned by the said person shall not be taken into account when determining the quorum of a general meeting of shareholders (participants) of the credit rating agency and when voting on items on an agenda of the general meeting of shareholders (participants) of the credit rating agency.
6. The share of a credit organisation, participants of a bank group, a bank holding, a non-credit financial organisation or of an insurance group member in the charter capital of a credit rating agency may not exceed 20 per cent.
7. In the event of violation of any of the requirements specified in Section 6 of this Article the Bank of Russia shall, in accordance with the procedures laid down by it, send to the said persons a prescription to remedy identified violations. In the event of a failure of the said persons to comply with this prescription, the Bank of Russia has the right to claim in court reduction of their participation in the charter capital of the credit rating agency to not more than 20 per cent.
8. In the event of violation of any of the requirements specified in Section 6 of this Article, a credit organisation, a participant of a bank group, a participant of a bank holding company, a non-credit financial organisation or a participant of an insurance group shall be entitled to control the number of votes not exceeding 20 per cent of the votes as per voting shares (stakes) in the charter capital of a credit rating agency. The remaining shares owned by the said persons shall not be taken into account when determining the quorum of the general meeting of shareholders (participants) of the credit rating agency and when voting on items on an agenda of the general meeting of shareholders (participants) of the credit rating agency.
9. The Bank of Russia has the right to appeal in court a decision of a general meeting of shareholders (participants) of a credit rating agency that was taken in violation of the requirements laid down by this Article, as well as the transactions performed in accordance with the said decision if the voting by the shares (stakes) specified in this Article has influenced the decisions taken by the general meeting of shareholders (participants) of the credit rating agency.
Article 7. Governing and internal control bodies of the credit rating agency
1. The person performing, including temporarily, the functions of a member of the Board of Directors (Supervisory Council), a Chief Executive Officer, his deputy, a member of a collegial executive body, a Chief Accountant, a Deputy Chief Accountant, a Controller (Head of the Internal Control Service), shall meet the business reputation requirements. The person's non-compliance with the business reputation requirements means the following:
1) Non-expunged or outstanding conviction for committing a deliberate crime;
2) Failure of the person who is or was a head of a financial organisation or a member of its Board of Directors (Supervisory Council) to perform the obligation to prevent bankruptcy as prescribed by the laws on bankruptcy, when there was a reason to implement measures to prevent the bankruptcy of the financial organisation, and if less than 3 years have passed since the date of such violation;
3) Imposing on the person subsidiary liability under the law on bankruptcy for the financial organisation’s monetary obligations and/or holding the person responsible for executing its mandatory payment obligations if less than three years have passed after adjudication of bankruptcy of the financial organisation by an arbitration court as;
4) The person's service as a Chief Executive Officer, a member of a collegial executive body, a Controller (Head of the Internal Control Service) or a Chief Accountant of a financial organisation which was declared insolvent (bankrupt)by an arbitration court if less than three years have passed after the date of the relevant decision;
5) The person's service as a Chief Executive Officer, a member of a collegial executive body, a Controller (Head of the Internal Control Service) or a Chief Accountant of a financial organisation if court decisions adjudging the above person delinquent of any misconduct in bankruptcy, deliberate and/or fraudulent bankruptcy, have entered into force in respect of the said person if less than three years have passed since the date of the relevant decision;
6) The person's service as a Chief Executive Officer, a member of the collegial executive body, a Controller (Head of the Internal Control Service) or a Chief Accountant of a financial organisation at the time when the organisation committed a violation for which its licence for a relevant type of activity was withdrawn (cancelled) or for which the organisation was excluded from a relevant register (list) if less than three years have passed since the date of such withdrawal (cancellation) or exclusion from a relevant register (list);
7) The person's service as a Chief Executive Officer including temporarily, a member of a collegial executive body, a Controller (Head of the Internal Control Service) or a Chief Accountant of a financial organisation during one year preceding the date of withdrawal (cancellation) of the licence of the financial organisation or the date of its exclusion from a relevant register (list) for violation of the law (except for persons who submitted proof of non-involvement in taking decisions or committing an action (or inaction) leading to the withdrawal (cancellation) of the licence or exclusion from the register (list)), if less than three years have passed since the date of withdrawal (cancellation) of a license or exclusion of a financial organisation from a relevant register (list);
8) The person's entitlement to give binding directives or ability to otherwise determine actions of a financial organisation, whose licence for the relevant type of activity in the financial market was withdrawn (cancelled) or which was excluded from a relevant register (list) on the grounds provided for by federal laws (except for the persons who submitted proof of non-involvement in taking decisions or committing an action (or inaction) leading to the withdrawal (cancellation) of a licence or exclusion from a register (list));
9) Commission by the person of any administrative offences in finance, taxes and duties, insurance, securities market or entrepreneurial activities as determined by a valid decision of a court, a body or an official authorised to consider administrative offences, more than three times during one year preceding his appointment (election) to the position;
10) Disqualification of the person, the term of which has not expired on the date of his appointment (election) to the position;
11) The person's service as a Chief Executive Officer, including temporarily, a member of a collegial executive body, a Controller (Internal Auditor), or a Chief Accountant of a financial organisation during one year preceding the date of the appointment of a provisional administration for the management of the financial organisation following the suspension of the powers of its executive bodies (except for persons who submitted proof of non-involvement in taking decisions or committing an action (or inaction) leading to the appointment of the provisional administration), if less than three years have passed since the date of the appointment of such administration;
12) Repeated termination of an employment agreement with the person by the employer on the grounds laid down in Paragraph 771 of Section 1 of Article 81 of the Labour Code of the Russian Federation if less than three years have passed since the termination date of such an employment agreement;
13) Provision by the person of any misleading information related to the established qualification requirements and business reputation requirements during five years before the person's appointment (election) to the position;
14) Application to any financial institution, for which the person has prepared and submitted financial statements (or served as an executive or Chief Accountant), of measures stipulated by the federal laws for substantial misreporting during five years preceding the day of the appointment (election) to the position;
15) A court decision finding the person guilty of inflicting damage on a legal entity in the discharge of the person's functions as a member of its board of directors (supervisory board), Chief Executive Officer, his deputy and/or a member of the collegial executive body of a legal entity during five years preceding the appointment (election) to the position;
2. Persons specified in Section 1 of this Article shall comply with the established requirements to business reputation at the time of their appointment (election) to the position and during their entire tenure. The Bank of Russia has the right, in accordance with the procedures laid down by it, to evaluate the compliance of the said persons with business reputation requirements.
3. The Bank of Russia has the right, in accordance with the procedures laid down by it, to demand replacement of the persons specified in Section 1 of this Article in the event their non-compliance with the business reputation requirements is revealed.
4. Persons specified in Section 1 of this Article (except for a member of a board of directors (a supervisory council), a Chief Accountant and a Deputy Chief Accountant) shall meet the following qualification requirements:
1) a person acting as a Chief Executive Officer, his deputy or a member of a collegial executive body shall have a higher education degree in economics, law or mathematics (technical sciences) and experience as a head of an organisation performing rating activities or their structural units, or an analytical agency or research centre, or a financial organisation or its structural unit operating in the financial market, or experience of work in the Bank of Russia or a federal executive body acting as a regulator of the financial market in a position not lower than a structural unit head for at least one year and at least two years in the event of a different type of higher education degree;
2) a person acting as a Controller (Head of the Internal Control service) of a credit rating agency shall have a higher education degree and experience of a Controller (Head of the Internal Control Service) in an organisation performing rating activities, or experience in a financial institution in a position not lower than a specialist, or work experience in the Bank or Russia or a federal executive body responsible for regulation, control and supervision of financial organisations in a position not lower than a specialist, whose duties included drafting decisions related to the financial market operations, for at least one year;
5. The credit rating agency shall notify the Bank of Russia of the following:
1) appointment (election) of the persons specified in Section 1 of this Article to a position, other than a Chief Executive Officer or his deputy and a Controller (Head of the Internal Control Service), within three business days following their appointment (election) attaching confirming documents; and 2) dismissal from the position or termination of powers of the persons specified in Section 1 of this Article, other than a Chief Executive Officer or his deputy and a Controller (Head of the Internal Control Service), not later than on the business day following the day of taking the said decision attaching confirming documents.
6. Such notification shall contain information confirming compliance of the candidate with the qualification and business reputation requirements laid down for a candidate to the relevant position by this Federal Law and regulations of the Bank of Russia and shall be sent in accordance with the procedure laid down by the Bank of Russia for submission of documents, information, and data by credit rating agencies to the Bank of Russia. Requirements to the procedure and form of submitting such notifications are determined by a regulation of the Bank of Russia.
7. Candidates to the position of a Chief Executive Officer or his deputy and a Controller (Head of the Internal Control Service) at the credit rating agency are subject to approval by the Bank of Russia within one month in accordance with the established procedure.
8. The responsibilities of a Chief Accountant of a credit rating agency can be transferred to a person who is not employed by the credit rating agency provided that such a person meets the requirements of this Article. If the accounting services are outsourced to a legal entity on the basis of an agreement, such a legal entity must have at least one employee meeting the requirements specified in Section 1 of this Article.
9. For the purpose of controlling compliance of a credit rating agency and its employees with the laws of the Russian Federation and internal documents of the credit rating agency, such a credit rating agency shall set up and ensure functioning of the internal control bodies in accordance with the procedure laid down by the internal documents of the credit rating agency in accordance with the requirements laid down by the Bank of Russia.
10. A controller (Head of the Internal Control Service) must be a fulltime employee of the credit rating agency.
11. A credit rating agency shall send to the Bank of Russia, as a matter of notification, its internal documents regulating the work of the internal control bodies and information on members of the internal control bodies in accordance with the procedure laid down by the Bank of Russia for submission of documents, information, and data by credit rating agencies to the Bank of Russia.
Article 8. Board of Directors (Supervisory Council) and collegial executive body of a credit rating agency
1. A credit rating agency shall establish a board of directors (supervisory council) and/or a collegial executive body.
2. At a credit rating agency employing more than twenty employees, at least one third, but not less than two members of the board of directors (supervisory council), or at least one third, but not less than two members of the collegial body, in the absence of a board of directors (supervisory body) of a credit rating agency shall be independent members not performing rating actions, promotion of credit rating services or any other activities related to client attraction.
3. An independent member is a person, who:
1) is not related to the credit rating agency;
2) is not related to a person exerting control or having significant influence over a credit rating agency;
3) is not related to a person who is a party in the agreement(s) with a credit rating agency;
4) is not related to the Russian Federation, a constituent of the Russian Federation or a municipal entity.
4. Independent members shall not include members who have been on the board of directors (supervisory council) or the collegial executive body of a credit rating agency for more than seven years in aggregate, and persons affiliated with any other credit rating agency.
(as amended by Federal Law dated April 1, 2020 N 97-FZ)
5. The Charter of a credit rating agency should give the authority to members of the board of directors (supervisory council) of a credit rating agency or members of the collegial executive body in the absence of the board of directors (supervisory council) in the following areas:
1) evaluation of effectiveness of the systems of control over credibility of assigned credit ratings;
2) evaluation of effectiveness of measures and procedures established to prevent, identify, manage, and disclose conflicts of interests;
3) control over compliance with this Federal Law and the regulations of the Bank of Russia adopted in accordance with this Federal Law, and the documents of the credit rating agency including effectiveness of the methodology review function.
6. The size of the remuneration payable to members of the board of directors (supervisory council) of a credit rating agency, or members of the collegial executive body of the credit rating agency in the absence of a board of directors (supervisory council), must not be linked to performance of the credit rating agency and shall be set so as to ensure independence of their judgements.
7. If a conviction of an intentional crime or a court decision to inflict administrative punishment of disqualification takes legal effect in relation to any member of the board of directors (supervisory council) of a credit rating agency, such member of the board of directors (supervisory council) shall be considered excluded from the board of directors (supervisory council) from the effective date of the relevant court decision.
Article 9. Prevention of Conflicts of Interests of credit rating agencies
1. A credit rating agency is obliged to take actions to prevent influence on credit ratings and credit rating outlooks of any existing or prospective conflicts of interests of a credit rating agency, its founders (shareholders, participants), rating analysts, other employees of a credit rating agency, and any parties exercising control or exerting significant influence over it. A credit rating agency shall ensure identification of any existing or potential conflict of interests, its management, and disclosure, if such conflict of interests may affect the analysis and judgments of rating analysts.
2. A credit rating agency shall engage its internal control bodies to control the application of the rules and procedures laid down by it to prevent, identify, disclose, and manage any conflicts of interests for the purpose of ensuring independence of credit ratings and rating analysts from the founders (shareholders, participants) and management bodies of the credit rating agency as well as from its subdivisions and employees responsible for advertising, attracting clients, and rating actions agreements. The credit rating agency shall carry out an annual assessment of the effectiveness of applied rules and procedures specified in this Section in accordance with the procedures stipulated by internal documents of the credit rating agency.
3. Under the following circumstances a credit rating or a credit rating outlook cannot be assigned, and a credit rating agency shall disclose the information about the impact or potential impact on the assigned credit rating or credit rating outlook:
1) the rated entity is an entity which exercises control or exerts significant influence over the operations of the credit rating agency;
2) the party, which exercises control over the activities of a credit rating agency or exerts significant influence over it, exercises control over the activities of the rated entity or exerts significant influence over it;
3) the credit rating agency is the entity which exercises control over the activities of the rated entity or exerts significant influence over it;
4) the credit rating agency or rating analysts involved in preparing a credit rating and/or credit rating outlook of the rated entity own, directly or indirectly, financial instruments or any other assets of the rated entity;
5) members of the rating committee are close relatives (parents, brothers and sisters or children), spouses, parents or children of the spouse of an employee of the rated entity or of the entity which exercises control or exerts significant influence over it, which may result in a conflict of interests;
6) the founder (shareholder, participant) of a credit rating agency owning 10 and more per cent of the votes as per voting shares (stakes) in the charter capital of the credit rating agency:
a) owns 10 and more percent of the votes as per voting shares (stakes) in the charter capital of the rated entity or has any other property interest in relation to the rated entity;
b) is a member of the management bodies of the rated entity or of an entity which exercises control or exerts significant influence over it;
7) rating analysts are members of the management bodies of the rated entity or of an entity which exercises control or exerts significant influence over it, or have employment relationship with the rated entity or with an entity which exercises control or exerts significant influence over it;
8) the rated entity is a creditor of the credit rating agency for an amount exceeding 10 per cent of the book value of the assets of the credit rating agency or of an entity which exercises control or exerts significant influence over the creditor.
4. A credit rating agency shall identify the emergence of the circumstances set forth in Section 3 of this Article.
5. If any of the circumstances set forth in Section 3 of this Article is identified the credit rating agency must immediately determine whether or not there are grounds to review the existing credit rating or credit rating outlook and take relevant actions concerning such credit rating or credit rating outlook if such grounds exist, following the procedure laid down by the internal documents of the credit rating agency.
6. A person owning 10 and more per cent of the votes as per voting shares (stakes) in the charter capital of a credit rating agency or a legal entity which exercises control or exerts significant influence over the credit rating agency has no right to:
1) own 10 per cent and more of the total number of voting shares (stakes) in the charter capital of another credit rating agency;
2) be a member of management bodies or internal control bodies of any other credit rating agency;
3) vote at a general meeting of shareholders (participants) of any other credit rating agency on issues related to election or appointment of management bodies or internal control bodies of another credit rating agency;
4) otherwise influence the operations of another credit rating agency.
7. The restrictions set forth in Sections 3 and 6 of this Article do not apply to pension contributions to non-state pension funds, investments in mutual funds, bank deposits, and ownership of any other assets, which do not enable a credit rating agency or its employees to influence activities of such persons.
8. The size of the credit rating services fee shall not depend on the level of the assigned credit rating or credit rating outlook or on the agreement of the rated entity with the assigned credit rating or the credit rating outlook.
9. A credit rating agency has the right to provide ancillary services related to marketing forecasts, assessment of companies’ performance, including assignment of ratings, other than credit ratings, evaluation of economic trends, pricing, and any other analysis as well as relevant services of information distribution where this does not create potential conflicts of interest in the process of rating activity.
10. The credit rating agency shall seek approval of the Bank of Russia of the list of ancillary services set forth in Section 9 of this Article in accordance with the Bank of Russia regulations.
11. If the Bank of Russia, within thirty business days from the date of sending the list set forth in Section 10 of this Article, makes no objections to such ancillary services to be provided by the credit rating agency the approval by the Bank of Russia shall be deemed obtained. The Bank of Russia may object to ancillary services if performance of such additional services by a credit rating agency creates a potential conflict of interests in the process of rating activities.
12. A credit rating agency has no right to render advisory services.
13. A credit rating agency shall comply with the confidentiality terms with regard to information disclosed to it by a rated entity as well as meet the requirements for the security and safekeeping of information obtained in the course of business operations of the credit rating agency, as defined by the Bank of Russia.
14. The Bank of Russia has the right to establish any additional requirements to a credit rating agency with regard to identification, prevention, and management of the conflict of interests and disclosure of information thereon.
Article 10. Rating Analysts
1. Rating analysts shall meet the requirements pertaining to the knowledge and professional expertise, as imposed by the credit rating agency and by a regulation of the Bank of Russia.
2. Rating analysts shall not be involved in any rating actions related to the rated entity if:
1) they were in an employment or business relationship with the rated entity in the course of one calendar year prior to the date of the rating action;
2) they directly or indirectly own securities, other financial instruments or other assets of the rated entity or any persons exercising control or exerting significant influence over such an entity.
3. The restrictions set forth in Section 2 of this Article do not apply to pension contributions to non-state pension funds, investments in mutual funds, bank deposits, and ownership of other assets, which do not enable a credit rating analyst to influence activities of these entities.
4. The credit rating agency shall not allow rating analysts to be involved in discussions related to payment for services of the credit rating agency with a rated entity or any persons exercising control or exerting significant influence over it, or with credit rating agency employees and any other persons.
5. The credit rating agency shall establish an appropriate rotation mechanism (change of lead rating analysts involved in preparing a credit rating and/or credit rating outlook in respect of the same rated entity) in accordance with the requirements of this Article.
6. A lead rating analysts shall not be involved in the rating actions related to one and the same object of credit rating for more than four consecutive years and more than five consecutive years in relation to sovereign credit ratings. Lead rating analysts who ceased to participate in rating actions related to the same object of credit rating as a result of rotation may not participate in any rating actions related to this object of rating for two years from the rotation date.
7. The salary of rating analysts, including chairmen of rating committees, shall not depend on the amount of revenues a credit rating agency receives from the rated entity or from any person which exercises control or exerts significant influence over it.
8. A rating analyst may not own shares (stakes) in the charter capital of a credit rating agency.
9. Rating analysts shall not accept gifts with the value exceeding three thousand roubles in the form of services, monies or any other property from the rated entities or any other parties the credit rating agency has business relationship with. If the credit rating agency becomes aware of any rating analyst accepting gifts from a rated entity or parties which exercise control or exert significant influence over it, the credit rating agency shall within one month conduct a check of the actions of such a rating analyst, which could influence credit ratings or credit rating outlooks and were performed three months prior to and three months after receiving of the gift. If the rating agency identifies any grounds for reviewing a credit rating or credit rating outlook it shall take relevant actions in respect of the credit rating or credit rating outlook in accordance with the procedure stipulated in the internal documents of the credit rating agency.
10. A rating analyst shall not occupy any position in the management bodies of the rated entities and persons, which exercise control or exert significant influence over it for six months from the date of the last rating action in relation to the object of credit rating, in which he was involved as a lead rating analyst.
Article 11. Rating Committees
1. Rating actions are performed by a group of rating analysts, including a chairman of a rating committee, responsible for taking decisions on rating actions (hereinafter, rating committee) in accordance with the procedure stipulated in internal documents of the credit rating agency in accordance with the requirements of this Federal Law and regulations of the Bank of Russia.
2. Persons responsible for advertising, client attraction, and rating actions agreements at a credit rating agency, and persons who have access to information contained in the contract documentation related to any object of credit rating may not participate in meetings of a rating committee.
3. Only rating analysts including a chairman of a rating committee appointed in accordance with the procedure defined by internal documents of a credit rating agency shall have voting rights at meetings of rating committees have.
4. A rating committee shall consider a report and proposals from the lead rating analyst on the credit ratings and/or on the credit rating outlook and take a decision on the rating actions.
5. In case of disagreement with any decision of a rating committee its member has the right to make a duly substantiated appeal, which shall be considered at the second meeting of the rating committee involving rating analysts who did not participate in the previous committee meeting.
6. A rated entity has the right to make a duly substantiated appeal in case of disagreement with the assigned credit rating and/or credit rating outlook. The credit rating agency shall consider such a duly substantiated appeal according to the procedures and timeframe laid down by its internal documents.
7. A rating committee shall consist of not less than five rating analysts, including a lead rating analyst for the object of credit rating, a chairman of the rating committee, and one rating analyst specialising in the class of objects of credit ratings other than that which the object of credit rating examined at the meeting of the rating committee belongs to (in the event the credit rating agency assigns credit ratings to different classes of objects of credit ratings).
8. Terms of reference of a rating committee, including the procedure for a rating committee operation shall be approved by the internal documents of the credit rating agency in accordance with the requirements laid down by the Bank of Russia.
9. A credit rating agency shall send to the Bank of Russia its terms of reference of the rating committee and other internal documents regulating the work of the rating committee as well as the information about the rating committee members in accordance with the procedure laid down by the Bank of Russia for submission of documents, information, and data by credit rating agencies to the Bank of Russia.
Article 12. Methodology
1. A credit rating agency shall perform rating activities in accordance with the applied methodology based on the analysis of all information at the disposal of the credit rating agency.
2. A credit rating agency has the right to deviate from the applied methodology in exceptional cases if the applied methodology disregards or incorrectly takes into account characteristics of an object of credit rating, and application of such a methodology may result in distortion of the credit rating and/or credit rating outlook. A credit rating agency shall document each case of deviation from the applied methodology and disclose it on the official website of the credit rating agency when publishing credit ratings or credit rating outlooks. The reasons for such deviation must be clearly specified.
3. Systematic deviation by a credit rating agency from the applied methodology is not allowed. If a credit rating agency deviates from the applied methodology more than three times in a calendar quarter the credit rating agency is obliged to analyse the methodology and review the applied methodology.
4. A credit rating agency shall ensure the obtaining of information from reliable sources and be responsible for the selection of the information sources, except for cases if such information is provided to the credit rating agency by the rated entity.
5. If the information is insufficient or unreliable for the application of the methodology a credit rating agency shall refuse to assign a credit rating and/or credit rating outlook or withdraw the assigned credit rating and/or credit rating outlook.
6. A credit rating agency shall submit the applicable methodologies and any amendments thereto to the Bank of Russia in accordance with the procedure laid down by the Bank of Russia for submission of documents, information, and data by credit rating agencies to the Bank of Russia.
7. A methodology applied by the credit rating agency shall:
1) contain the description of all key qualitative and quantitative factors determining the ability of the rated entity to perform its financial obligations and the description of their influence on credit ratings and credit rating outlooks;
2) provide for continuous application of methodology in the process of rating activities;
3) provide for the possibility to compare credit ratings by various classes of objects of credit rating;
4) provide for systemic application of the methodologies, models, and key rating assumptions as one set;
5) determine grounds for its review in order to maintain its relevance;
6) provide for verifying accuracy of credit ratings, inter alia based on historical data, by identifying discrepancies between premises and assumptions used in the methodology, and the actual information on payment defaults by rated entities or actual recovery rates.
8. A credit rating agency shall disclose the information on the influence of premises used in the applied methodology on the change in credit ratings assigned in accordance with such a methodology.
9. The credit rating agency shall continuously monitor the assigned credit ratings, and review credit ratings and the established methodology not later than one calendar year from the date of assignment or the most recent review of the credit rating or the date of the last review of the applied methodology. Sovereign ratings are subject to review no later than one hundred and eighty two days from the date of their assignment or the last review.
10. If any errors in the applied methodology are identified, which has affected or may affect credit ratings and/or credit rating outlooks, a credit rating agency shall take actions set forth in Paragraphs 2 and 3 of Section 12 of this Article and send to the Bank of Russia the information about the identified errors and actions taken in accordance with the procedure laid down by the Bank of Russia for submission of documents, information, and data by credit rating agencies to the Bank of Russia.
11. Should the identified errors influence credit ratings, the credit rating agency shall disclose the information on such errors on its official website.
12. If any planned changes in the applied methodology are material and affect or may affect credit ratings a credit rating agency shall:
1) send to the Bank of Russia and post on its official website the information about the planned changes to the applied methodology specifying the reasons for, and effects of, such changes, inter alia for credit ratings assigned on the basis of such methodology;
2) assess the need to review credit ratings assigned in accordance with such methodology not later than six months from the date of making changes to the applied methodology;
3) review credit ratings not longer than within six months if the assessment provided for in Paragraph 2 of this Section identifies the need for their review.
13. The credit rating agency shall organise, and ensure the functioning of, a group of employees of the credit rating agency to approve and review methodologies (hereinafter, methodology committee).
14. The methodology committee shall include not less than three members. Members of management bodies of a credit rating agency, rating analysts, and employees of departments responsible for advertising, client attraction, and rating actions agreements may not be members of the methodology committee.
15. The credit rating agency, as a matter of notification, shall send its internal documents regulating the work of the methodology committee, and information on members of the methodology committee, to the Bank of Russia in accordance with the procedure laid down by the Bank of Russia for submission of documents, information, and data by credit rating agencies to the Bank of Russia.
16. The Bank of Russia shall control compliance of the credit rating agency's methodology with the requirements established in this Article.
17. State authorities of the Russian Federation, state authorities of the constituents of the Russian Federation, the Bank of Russia or local selfgovernment bodies have no right to influence the content of credit ratings and the methodology applied by a credit rating agency.
Article 13. Disclosure of information on activities of credit rating agencies
1. The credit rating agency shall ensure disclosure of the following information on an ongoing basis:
1) the list of credit ratings and credit rating outlooks, including any withdrawn credit ratings;
2) the list of existing or potential conflicts of interests;
3) the list of ancillary services;
4) the rules for disclosure of credit ratings and any information related thereto including credit rating outlooks;
5) description of the pricing policy, inter alia in relation to various classes of objects of credit rating;
6) methodology, description of models (including methods of their calculation and construction), key rating assumptions, the lists of all quantitative and qualitative factors (specifying the boundaries for expert judgements of rating analysts on each such factor), and data sources;
7) procedures of performing rating actions;
8) the information about correspondence between the international rating scale and the national rating scale for the Russian Federation (where available).
2. A credit rating agency shall approve the documents containing information set forth in Paragraphs 1-8 of Section 1 of this Article and any amendments thereto, and disclose such information not later than three calendar days after the date of approval by the credit rating agency of the document containing such information (or approval of amendments to such document), while the disclosure of the information that is subject to approval of the Bank of Russia is due not later than three calendar days from the date of such approval.
3. A credit rating agency shall disclose the following information on a periodic basis:
1) historical data on default levels by rated categories of the applied rating scales – every six months;
2) the list of credit ratings assigned during the last calendar year specifying the share of unsolicited credit ratings in the total number of assigned credit ratings – annually;
3) the list of rated entities and any other entities whose share in the compound annual revenues of the credit rating agency equalled to, or exceeded, 5 per cent as of the end of the last expired calendar year – annually.
4. The credit rating agency shall disclose the transparency report for the last year not later than 31 of March of each year. The transparency report shall include the following information:
1) information about the structure of the credit rating agency and the composition of shareholders (participants) of the credit rating agency;
2) description of the principles of operation of the internal control bodies;
3) statistic information about the distribution of rating analysts by the classes of objects of credit rating, and rating actions of assigning and reviewing credit ratings performed during the reporting period;
4) information about the management bodies and the senior management of the credit rating agency;
5) information about the internal policy of the credit rating agency related to recordkeeping;
6) findings of the annual audit of the credit rating agency by an internal control body;
7) information about the rotation of lead rating analysts over the reporting period;
8) information about revenues of the credit rating agency with the breakdown by rating and any other activities for the reporting period.
5. A credit rating agency shall disclose the information stipulated in this Federal Law on its official website in the public domain. The credit rating agency shall disclose information and documents in the Russian language.
6. Credit rating agencies shall submit to the Bank of Russia documents, information and data related to their rating activities, including historical data, the manner, composition, and timeframe of the submission being laid down by the Bank of Russia.
7. Credit rating agencies shall submit documents, information, and data to the Bank of Russia in the Russian language.
8. The Bank of Russia has the right to publish documents, information and data received from credit rating agencies on its official website, the manner, scope, and timeframe of the submission being laid down by the Bank of Russia. The composition of the said documents, information and data may not exceed the composition of the information disclosed by a credit rating agency on its official website in the public domain.
9. The address of the official website of a credit rating agency is to include the domain name owned by such a credit rating agency.
10. The Bank of Russia shall have the right to impose special requirements as regards the marking and disclosure of information related to credit ratings of certain classes of objects of credit rating.
Article 14. Requirements for disclosure of Credit Ratings and Credit Rating Outlooks
1. Credit ratings and credit rating outlooks assigned by a credit rating agency shall be subject to disclosure on the official website of the credit rating agency in the public domain.
2. Prior to the disclosure of credit ratings and credit rating outlooks the credit rating agency shall send to the rated entity a notification containing information set forth in Paragraphs 1-8 of Section 3 of this Article, for the purposes of remedying any factual errors and eliminating confidential information, during the working hours of the rated entity not later than one business day prior to disclosure of a credit rating or of credit ratings outlook. A credit rating agency is not allowed to make any amendments to the above information at the request of the rated entity on any other grounds.
3. Disclosure of credit ratings and credit rating outlooks shall be accompanied by a text specifying the following:
1) methodology applied to determine the credit rating;
2) dates of the first and the latest credit rating publication;
3) the expected review period for credit rating outlook;
4) all material information sources including the rated entity;
5) the fact of primary assignment of a credit rating if such rating is assigned for the first time;
6) the fact of providing ancillary services to the rated entity, if such services were provided;
7) any existing limitations on credit rating or credit rating outlook, in particular with respect to the quality of information on the rated entity at the disposal of the credit rating agency;
8) rationale for the assigned a credit rating or credit rating outlook.
4. Sovereign credit ratings shall be reviewed and disclosed in accordance with the calendar submitted by a credit rating agency to the Bank of Russia in accordance with the procedures laid down by the Bank of Russia for submission of documents, information, and data by credit rating agencies with the Bank of Russia. After submitting the calendar to the Bank of Russia a credit rating agency shall post it on its official website. In the event of any deviations from the dates laid down by the calendar for review and disclosure of sovereign credit ratings a credit rating agency shall disclose information about the reasons for such deviations in accordance with the procedure and within the timeframes laid down by the Bank of Russia.
5. When disclosing unsolicited credit ratings, including unsolicited sovereign ratings, the credit rating agency shall:
1) indicate that such a credit rating is unsolicited;
2) indicate the fact of participation or non-participation of the rated entity and any persons in control of, or having significant influence over, such an entity in the assignment of the credit rating.
6. The Bank of Russia shall have the right to establish any additional requirements to disclosure of credit ratings and credit rating outlooks.
Chapter 3. Regulation and supervision in the area of credit rating agencies’ activity
Article 15. Powers of the Bank of Russia for regulation and supervision in the area of credit rating agencies’ activity
1. In exercising its authority of regulation and supervision of credit rating agencies’ activity, the Bank of Russia shall:
1) keep the register of credit rating agencies; determine the procedure for keeping the register of credit rating agencies, the composition of information entered in the register, and the procedure of access of interested parties to the information contained in the register of credit rating agencies;
2) enter the information on a credit rating agency in the register of credit rating agencies and exclude it from the said register;
3) keep the register of branches and representative offices of foreign credit rating agencies and determine the procedure for keeping this register, the composition of information entered in the register;
4) establish the technique of computation of the size of the own funds (capital) of a credit rating agency;
5) conduct examination of credit rating agencies’ activities in accordance with procedures laid down by it;
6) send to credit rating agencies binding prescriptions on remedying any identified violations, and apply measures to credit rating agencies, as stipulated by this Federal Law, in the event of failure to comply with such prescriptions;
7) review complaints and submissions from individuals and legal entities related to activities of credit rating agencies in accordance with the procedures laid down by the laws of the Russian Federation;
8) keep record of credit ratings and credit rating outlooks assigned by credit rating agencies;
9) determine the content, form, and submission procedure for reporting by credit rating agencies;
10) laying down the procedure for submission of documents, information, and data by credit rating agencies to the Bank of Russia, which determines, inter alia, the list of documents, the composition of information and data to be submitted to the Bank of Russia, as well as the form and the timeframes for the submission;
11) may perform mapping of rating scales used by credit rating agencies, including foreign credit rating agencies, and publish the information about the related
