On minimum credit rating for securities to be included in Bank of Russia Lombard List
While implementing a countercyclical approach to compiling its Lombard List, the Bank of Russia raises requirements for the minimum credit rating of issues (issuers) of a number of bonds included in the Lombard List taking account of the expected liquidity surplus in the medium term and the adequate amount of collateral held by credit institutions.
Starting from 1 January 2018, the minimum credit rating of issues (issuers) of bonds of the constituent territories of the Russian Federation, municipalities, and resident legal entities other than credit institutions1 will be established at no lower than A(RU)/ruA by classification of credit rating agencies ACRA JSC/Expert RA JSC2 respectively.
While deciding on the inclusion of securities in the Lombard List, the Bank of Russia also takes into account the results of its assessment of the credit quality of these bonds (issuers’ solvency), terms of their placement and circulation, and other material circumstances.
The decision on raising the minimum credit rating for bonds to be included in the Lombard List does not apply to bonds issues included in the Lombard List before 1 January 2018.
It will also be possible to include in the Lombard List bonds of the constituent territories of the Russian Federation, municipalities, and resident legal entities other than credit institutions, whose issues (issuers) have not been assigned credit ratings in line with Bank of Russia requirements, provided that their performance is secured by the Russian government guarantees or the joint surety of AHML JSC (for mortgage-backed bonds).
The Bank of Russia constantly monitors free collateral in the banking sector to refinance credit institutions and, if necessary, is prepared to react flexibly to any market changes.
1 Following the earlier decision of the Bank of Russia, the inclusion of bonds of credit institutions and insurance companies, as well as Vnesheconombank bonds in the Lombard List has been suspended from 1 October 2017 (Bank of Russia press release of 7 July 2017 ‘On Changed Approaches to Compiling Bank of Russia Lombard List’).
2 The respective ratings were previously set at BBB(RU)/ruBBB by classification of credit rating agencies ACRA JSC/Expert RA JSC respectively.
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