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. Last Updated: 07/27/2016

Moody's Service Cuts Debt, Bank Ratings




Moody's Investors Service has cut Russia's country ceiling for foreign currency debt to B2 from B1, the agency said in a statement.


The ratings group also downgraded its long-term foreign currency deposit ratings for 11 Russian banks, cut the debt ratings of three banks and lowered its financial strength ratings for eight banks to E+ from D+.


The agency said the cut in ratings was due to concerns that Russia's financial crisis had hit bank liquidity by shaking confidence in the bank system, making foreign investors more cautious and reducing the liquidity of government securities portfolios.


It added that the reduced bank ratings were in line with earlier announced downgrades for sovereign foreign currency debt and long-term foreign currency deposits.


"The outlook for the banks' deposit and debt ratings is negative in line with the country's ratings," Moody's said.


It added that the bank downgrades reflected the potential risk of a ruble devaluation given the large open short-term currency position of the banking system.


"The current government is adamant that there will not be a near-term devaluation but much will depend on market confidence, the government's ability to refinance treasury bill debt and to meet its fiscal objectives," Moody's added.


Meanwhile, fellow U.S. credit rating agency Standard & Poor's announced that it is reviewing Russia's single-B-plus foreign currency debt rating.


"We are concerned about the Russian government's ability to stabilize the economy and its fiscal accounts in particular, which has caused a deterioration in market confidence," said Alexei Remizov, S&P sovereign analyst.


He declined to comment about the timing of any potential rating change.


Specifically, the situation has aggravated the vulnerability of the ruble's exchange rate and created a liquidity squeeze on interbank lending in Russia, he added.


These factors could further impair Russia's ability to service its foreign exchange debt in the long-term, Remizov said.


Standard & Poor's currently has a stable outlook on Russia's debt ratings.


In response to the liquidity freeze currently gripping the market, the Central Bank on Wednesday expanded commercial bank access to overnight credits and imposed limits on foreign exchange purchases beginning Thursday, saying the measures would calm markets and did not affect ruble convertibility.


The Central Bank is also stepping up supervision of banks.