The rating of AA- affirmed by Thomas Murray for the National Settlement Depository (NSD) includes the following components:
| CSD Rating | NSD Rating |
| Overall Rating | AA- |
| Asset Commitment | AA- |
| Liquidity Risk | A+ |
| Counterparty Risk | AA- |
| Asset Safety | AA- |
| Asset Servicing | AA- |
| Financial Risk | AA |
| Operational Risk | AA- |
| G&T Risk | A+ |
The overall rating of AA- represents a weighted average of the eight risk components and relates to a very low risk exposure profile with stable outlook. The latter indicates that there have been no significant developments in the market that may alter the Overall Risk in the near future.
The Asset Commitment Risk was upgraded from A+ to AA- as a result of the change in the settlement model for Moscow Exchange trades (i.e. the switching to T+2 settlement cycle), which eliminated the full pre-funding requirement for the most liquid securities and therefore the opportunity cost of having traded stocks blocked intra-day has been eliminated for these securities.
The other change for this year’s review was the inclusion of two new components into the Overall Risk calculation, namely Asset Safety Risk (rated as AA-) and Governance and Transparency Risk (rated as A+).
Other changes during the 2013 review include:
- Although NSD has assumed more potential risk by taking on the processing of equities corporate events from DCC, the controls and systems appear to have coped well, resulting in no discernible increase in Asset Servicing Risk exposure for its participants.
- NSD developed an internal risk training programme for its employees.
- NSD opened nominee accounts with all registrars after becoming the single CSD in the market.
- NSD signed an agreement with Interfax for the collection of corporate actions information.
- NCC now acts as CCP for the most liquid securities and has a fails management procedure with the clearing members. NSD cooperates with NCC with respect to the clearing and settlement of on-exchange trades.
- NSD now offers settlement against payment for OTC trades with the option of using all of BIS Settlement Models 1, 2 and 3.
Overall, the CSD rating assesses the risk exposure for investors associated with the processes the CSD has in place to facilitate the safekeeping and the clearing and settlement of securities, where applicable, through analysing eight key risks (rating components). The methodology takes into consideration the capabilities of the depository and the quality and the effectiveness of its operational infrastructure. It also assesses the depository’s willingness and ability to protect its participants or clients from losses. As a part of the rating, the scope and the quality of the depository’s services is also assessed. The ratings draw on a consistent global scale, ranging from AAA to C. Once the rating is assigned, there is an on-going surveillance process to monitor the rated depository.
Impact on investors: The AA- rating of NSD confirms the robustness of the Russian CSD as an integral part of the local capital market infrastructure.
Source: National Settlement Depository