Thomas Murray Upgrades the Central Securities Depository Rating for the National Depository Center at AA- Stable Outlook

LONDON , July 10 /PRNewswire/ -- Thomas Murray has upgraded The National Depository Center's (NDC) rating at AA-, which means very low risk. The outlook is 'Stable'. The rating is made up of the following components: CSD Rating...

LONDON , July 10 /PRNewswire/ -- Thomas Murray has upgraded The National Depository Center's (NDC) rating at AA-, which means very low risk. The outlook is 'Stable'. The rating is made up of the following components:

The 'AA-' rating as assigned by Thomas Murray reaffirms NDC's strong financial position and the low participant exposure to risk across NDC's operations. The outlook has been assigned as 'Stable' which suggests that there are no imminent developments that may change the rating at this stage.

The upgrade in the rating recognises NDC's commitment to develop and strengthen its processes and systems in an ongoing effort to minimise risk for market participants. In this respect NDC has made substantial progress over the past year particularly in reducing counterparty, financial and operational risk.

The Counterparty Risk rating has been improved from A to A+. This recognises the changes to the participant criteria that are being introduced which presumes that MICEX/NDC clients are mostly professional market participants licensed through the Federal Financial Markets Service (FFMS). Effective January 2008 , FFMS began a programme to impose higher capital requirements on all licensed bodies. These bodies are also required to report financial and trading information to both FFMS and MICEX.

Financial Risk rating has improved from AA- to AA following the further increase in insurance coverage to USD 50 million, (previously USD 25 million) in August 2007 , and the increase in capital to RUB 1.35 billion (approx USD 55 million, previously USD 35 million), as at the end of 2007. Profits have continued despite the reduction in safekeeping fees by 15%. Also, the cost of the new settlement system 'Eclearsettle', a three year project, has been largely absorbed over the last two years.

NDC have maintained the momentum of continuous improvement in operational areas to mitigate operational risk over the last year, and as a result, Operational Risk has been upgraded to 'AA-'. The main measures taken that led to the rating upgrade in Operational Risk are:

Although corporate governance is not presently rated, NDC has sound governance arrangements that support the public interest borne out by both CBR and MICEX being major stakeholders in terms of NDC's voting structure, participant inclusion in the Board of Directors and key committees, the commitment to continuous process efficiency improvement and risk reduction, and provision of improved services and fee reductions for participants.

Simon Thomas , CEO and Chief Ratings Officer of Thomas Murray said: " Thomas Murray has worked closely with NDC in the past two years in order to assess the controls and risk mitigation procedures surrounding their operations and it is pleasing to see that NDC's commitment to continuous improvement and risk reduction materialise in a rating upgrade. The increase in the ratings for Counterparty, Financial and Operational Risks reflect the progress that NDC has made in particular by strengthening its resources in the form of capital and insurance as well as their across the board risk reduction measures. NDC appears to be in a good position to continue supporting the Russian infrastructure. However, it faces a significant challenge and some uncertainty until the new CSD Law which will set out the landscape for central security depositories operating in Russia , is introduced.

Nikolay Egorov , Director of The National Depository Center, said "The National Depository Center is pleased to see the recognition to the efforts made over the past year by an increase in the overall rating and the ratings for three of the risk components. The work with Thomas Murray that has been ongoing, has helped us identify and act on areas on which to focus our future risk development efforts. This independent view on The National Depository Center's risk profile will continue to provide confidence to our participants, shareholders and other interested parties of the risk mitigation procedures in place at The National Depository Center".

This content continues onto the next page...