Rus-Rating Puts New Spin on Bank Rating

The former head of Thompson BankWatch in Russia launched his own independent bank rating agency Thursday in an effort to bring more transparency to one of the most decried sectors of the economy.

Rus-Rating, brainchild of Richard Hainsworth, has already signed on global powerhouse Citibank and attracted the interest of Russia's largest direct foreign investor, the European Bank for Reconstruction and Development.

Hainsworth said the country's interbank market, with more than 1,300 registered players, is suffering from a lack of detailed, independent information that would help banks make decisions about lending and borrowing from each other.

"So far, bank ratings have been more of an advertising or a PR campaign," Richard Hainsworth, the head of Rus-Rating, said Thursday.

Rus-Rating is not the first bank rating firm in Russia — agencies such as the international firm Standard&Poor's and the domestic company Rating Information Agency already offer a similar service on a monthly or quarterly basis, as does the news agency Interfax and several newspapers and journals.

But Hainsworth maintains that these other players are not direct competitors.

S&P, for example, targets foreign retail investors, not local banks, he said.

"Unlike S&P, we are working with a model of counter-party risk," Hainsworth said. "Banks that have short-term operations with other banks need this info and they need it fast."

And most of the rest use methodologies that don't meet Western standards and are often outright misleading.

"The Russian bank rating market is very difficult," said Alexei Ivashenko, executive director of Rating Information Center, which has been rating Russian banks since 1991. "Rating agencies are selling their opinion based on their reputation, so they get paid only if their opinion is valued."

Rus-Rating charges $800 a year for quarterly reports on any of the banks it rates. For that price, clients also receive monthly updates on selected banks, including financial data, management evaluation, an analysis of its strengths and weaknesses and its political risk.

During its rating process, the company uses Russian accounting standards — a system full of potential pitfalls. But Hainsworth said this system makes the most sense for short-term, Interbank ratings. "International accounting standards are published with a six-months delay, and that is not good enough for what we do," he said.

"Rus-Rating is offering a subjective sort of value-analysis — not just data and facts," said Gail Buyske, senior banker at EBRD.

Lou Naumovsky, the head of Visa International, said his company is planning on working with Rus-Rating as well.

When Fitch IBCA bought Thompson BankWatch in November and shut down its Russian office, Hainsworth decided to establish an agency of his own.

"The guy that runs [Rus-Rating] has years of experience looking at banks in Russia," said Alan Hirst, head of Citibank's operations in Russia and the Commonwealth of Independent States.

"If the Russian banking sector is to evolve into a banking system, players need more information about each other."