Implications of ACRA
Note kindly translated by Anne-Marie de Grazia
A particularly important and significant piece of information was revealed on Thursday, March 17. Russia has just established its own ratings agency, named ACRA (Analytical Credit Rating Agency or AKRA in Russian). This agency is a private company, but its capital of 44 million Dollars is to be made up by large Russian companies (Sberbank, Severstal, but also Raiffeisenbank). It will be headed by an American, M. Karl Johansson, and by a well-known personality in the audit circles in Russia, Mrs Ekaterina Trofimova. This agency has already recruited 23 auditors and analysts (who were working before for American agencies). It should start working at the end of March, and should be publishing its first « ratings » towards the end of the 2nd Quarter 2016.
Why are these news significant? Le role of the ratings agencies is crucial for the development of a world market of debts, particularly private debts. An investor wishing to diversify his portfolio cannot all by himself have the expertise allowing him to evaluate the solvability of companies which are very diverse as to their origins as well as to their branches of activity. It is therefore logical that he be able to turn to a “rating” established by an independent agency. In fact, the development of (essentially American) agencies, such as Moody’s, Fitch, Standards & Poor’s, made possible the development of a world market of debts. Thus, one might think that the emergence of a Russian agency (and of a Chinese agency as well) would be in keeping with what is called “healthy competition,” and should continue to stimulate the markets. Such is not the case. For the development of this agency, in the contrary, is tantamount to a reaction against the political manipulations engaged into by the American government for the past 18 months, or so. These political manipulations have affected the ratings of the sovereign debt of Russia, but also that of the large Russian companies, be they public or private. As it happens, the value of the rating determines to a great extent the interest rate at which a state, or a large company, can borrow money. Pressures onto the ratings agencies are a weapon in the hands of the American government to attempt to slow down the investment process in Russia.
As a matter of fact, the pressures from the government in Washington have compelled the Russian government to demand that the Russian branches of the agencies take from now on as their “supervisor” the Central Bank of Russia. The agencies, particularly Moody’s and Fitch have decided to close their Russian branches, in order not to become the target of American legal actions, in the wake of the financial sanctions taken by this latter country against Russia. Standard & Poor’s continues to negotiate with the Central Bank of Russia, but it is probable that, when all is said and done, it will follow the other two agencies. As a result, the audits and ratings « market » will be lost for these agencies, and it will be acquired by the new agency ACRA. In a less spectacular manner, the same process is happening in China. It therefore implies, and this is a non-intentional consequence of the political decision of the United States to apply financial sanctions against Russia, and to exert political pressure onto the agencies in their ratings of Russian companies, that we are now entering into an era of fragmentation of this famous « world market» of the debt, which had been coming together over the past thirty years.
Far from constituting a sign of the « good health » of the world market, we must therefore consider the emergence of a Russian and of a Chinese agency as the beginning of a process of political fragmentation of this market. In the middle term, in a few years from now, Russian and Chinese debts will be rated only by a Russian or a Chinese agency. An investor’s will to diversify his portfolio will therefore become a “political” choice, especially as far as concerning the trust that he will be placing in these institutions. In fact, one can think that this will considerably interrupt international capital flows.
As matters stand, the internationalisation of these capital flows has not brought much to the economic development of the countries concerned. The study by D. Rodrik and A. Subramanyan, which goes back several years, leaves no doubt on this point . But, if “financial globalization” is not a factor for the development of investment, then it is more than probable that we must turn back to the methods of so-called “financial repression” which were implemented in the 1960s and 1970s.
The announcement of the beginning of operations of the Russian ratings agency could therefore well be a sign of the “de-globalization” of finance, which would occur, at first, for political reasons, but which would find in economic reasons an incentive to take root. And from this point of view, it is clear that the beginning of operations of ACRA is indeed the most significant event of these past years.
 Rodrik D., « Why Did Financial Globalization Disappoint? » (with A. Subramanian), IMF Staff Papers, Volume 56, Number 1, March 2009, 112-138.