Translartion. Region: Russians Fedetion –
Source: Central Bank of Russia –
Rating agencies will assign stars to shares of Russian companies.
RBC Investments discussed with Ekaterina Abasheeva, head of the Central Bank’s corporate relations department, topics that are of greatest interest to private investors: stock ratings and disclosure of information during an IPO.
Over the past year, the Bank of Russia has launched several large-scale reforms aimed at increasing the transparency of the Russian market.
Stock Ratings: Russian Analogue of Morningstar
There are currently two major problems: a lack of quality analytics on companies, as well as the unavailability of information on a number of issuers. In these conditions, a discussion arose about creating stock ratings – a product that, on the one hand, would allow us to tell more about the issuer, and on the other, to identify a range of attractive stocks, noted Abasheeva.
“In the summer of 2025, we plan to launch a pilot project of non-credit ratings of shares of Russian issuers, which is expected to reach full capacity in 2026. The idea is that rating agencies will act as a kind of provider of independent assessments of the fair value of the issuer. It will be determined on the basis of both financial and non-financial metrics. Ideally, over time, the market price should converge with the expert assessment. The rating of shares will be the Russian analogue of the Morningstar project, which has been offering a similar rating product in North America, Europe and Asia for over 30 years. Agencies will assign stars to shares and accompany the ratings with advanced analytics. Thus, investors will receive a transparent and professional guideline on the basis of which they will be able to make investment decisions,” the head of the department explains the idea.
Who will be giving grades?
At the stage of developing the idea of stock ratings, the Bank of Russia considered various options for who would evaluate issuers. “There was an idea to create a new participant in the market that would provide an analytical service. However, it seemed more expensive to us, since it requires the development of new regulations,” says Abasheeva.
An alternative approach is to use the ready-made infrastructure of rating agencies, since they already have experience in the securities market and have proven themselves as independent experts who have earned the trust of issuers and investors. The head of the department notes that the Central Bank held a series of meetings with agencies, where they discussed all the pros and cons: why they can offer a new product.
“We were worried about the discrepancy between the expert assessment and the actual value of the rated entity. And of course, disputes arose over what responsibility the agencies would bear,” she continues. “It seems that the combination of independence, competence and responsibility of the agencies is best suited for the assessment of equity instruments. Now that all the discussions are behind us, the rating agencies have begun to develop methodologies for a new category of ratings. We intend to pilot the project on their basis.”
It is planned that one issuer will be able to receive several ratings from different rating agencies: “Stocks are a very volatile and poorly predictable instrument. Obviously, the dispersion of opinions here, it seems to me, is more important than in relation to bonds, where the ratings are more homogeneous. Therefore, of course, we ideally expected that there would be at least two opinions on stocks from different rating agencies.”
If the agencies’ assessments differ dramatically and send conflicting signals to investors, this could prompt the Central Bank to consider minimum requirements for analysts – their methodologies and the information they use, she adds. However, this will become clear after preliminary testing of the ratings on the initial pool of issuers. Key parameters for assessing companies
According to Ekaterina Abasheeva, at least two rating agencies have already developed and presented their methodologies to issuers and professional analysts. They are based on the model fair value of the issuer, she notes, but other factors that distinguish shares from debt instruments are also taken into account.
This primarily concerns non-financial factors. This is the quality of corporate management, as well as the protection of investors’ interests. In addition, rating agencies will be required to pay attention to the issuer’s information sensitive to foreign sanctions, says the department director.
The final set of parameters may include more factors, since the regulator does not plan to set strict requirements for methodologies at the pilot stage of the project, adds Abasheeva. “The criteria for the quality of corporate governance can take into account possible violations of the law by the issuer and complaints from shareholders,” she gives examples. Shares will have stars
In the matter of how to display ratings, the Bank of Russia, together with rating agencies, did not reinvent the wheel and followed the path of the existing rating system. Star ratings are widely used to evaluate not only financial products, but also restaurants, hotels and films, notes Ekaterina Abasheeva. At the same time, the disclosure of the symbolic assessment will be accompanied by the publication of a full investment report, as well as a press release as its shortened version, she adds.
“The combination of the rating and the report, on the one hand, will allow the investor to quickly navigate the information about the issuer. On the other hand, having analytical support, it is possible to better understand what caused the assignment of a particular rating,” explains the head of the department.
The Central Bank plans to update the stock rating more frequently than bonds, since stocks are more volatile. However, the regulator believes that the main thing here is not to overdo it, and proposes to tie the publication of updated ratings to the release of IFRS reporting – this is approximately once every six months.
When will the first stock ratings appear?
Considering that the working version of the rating agencies’ methodologies has already been prepared, the launch of ratings in pilot mode with the participation of the first issuers is expected in the summer, Abasheeva shares her plans. “We expect the first test assessments based on the methodologies prepared by the agencies to appear in 2025, and in 2026 we plan to analyze the experience gained and understand how we can move forward with the development of the new product,” she predicts. Will ratings be mandatory for companies?
Abasheeva says that issuers have responded positively to the idea of stock ratings, and some of them have expressed a desire to participate in the pilot project.
The department director emphasized that the Central Bank assumes that in the near future the presence of a stock rating will become mandatory for a certain type of company. This primarily concerns issuers that do not disclose information due to sanctions risks. “We consider them as potential subjects of regulation. It is important that the rating indirectly tells about the company what it cannot tell about itself due to sanctions problems. But this will definitely not happen at the start, but when we understand that the product has become operational,” she explained.
A small group of companies will participate in the pilot in 2025. By the end of the year, rating agencies have agreed to test stock ratings free of charge, says Abasheeva.
According to the regulator, the issuers that demonstrate the best practices in information disclosure and corporate governance will be primarily interested in the stock ratings. For them, the Bank of Russia, together with the Moscow Exchange, has launched a program to increase shareholder value. “Participation in the program will allow investors and shareholders to form an idea of the issuer’s current business, expectations for the stock price and dividend payments. The rating will serve as expert confirmation of the investment attractiveness of the companies,” she explains.
Transparency of issuers during IPOs
The second important reform initiated by the Bank of Russia is aimed at increasing the transparency of the IPO procedure. At the end of January 2025, the regulator presented a report for public consultations “Information Transparency in the Securities Market: Issuers and Conditions for the Initial Public Offering of Their Shares”. The document included proposals to improve the information quality of placements, change the content of information disclosed by issuers and adapt it to the needs of retail investors.
Over the course of a month, the regulator met with market participants to collect feedback and discuss proposals. According to Ekaterina Abasheeva, the most sensitive and controversial proposals were the proposals to include forecast indicators in the issue prospectus, the presence of two reports from independent analysts when a company goes public, and the definition of the role and responsibility of placement organizers. In the rest of the proposals in the advisory report, the Central Bank received support from investors, issuers, and placement organizers, she added.
Forecast indicators
The Bank of Russia believes that if a company publicly broadcasts forecasted performance indicators in its IPO marketing materials, they must correspond to what is disclosed in the securities prospectus, notes Abasheeva. According to her, companies can now describe the “best prospects” for their development in advertising materials. The investor has no choice but to focus on them, since there are simply no others. “We want to change the situation. It is important that the forecast indicators disclosed by issuers reflect reality – you can’t highlight only the good and hide under the carpet what is not in the issuer’s favor,” explained Ekaterina Abasheeva.
The minimum set of forecast data in the prospectus may include revenue, net profit or loss, net profit per share, and return on equity. Issuers may provide all figures in the range mode, the width of which may be set by the regulator, Abasheva added.
In addition to the range, the forecast horizon is important. The Central Bank knows of cases where the issuer in advertising brochures indicated potential growth of 40%, 100% – but it is unclear on what time horizon. Therefore, the Bank of Russia proposes to make the forecast horizon mandatory for at least one year, but issuers can choose a longer period.
At the same time, responsibility for forecasts does not go away, Abasheeva emphasizes. “If you include deliberately false information in the prospectus, intentionally mislead investors, then you must be aware of your responsibility for this,” she explained. Analytical reports from professionals
According to Ekaterina Abasheeva, this point caused some concerns among market participants. The main argument against independent assessment was that there are not enough analysts on the market now who can cover the IPO market, she says. However, from the regulator’s point of view, it is a question of chicken and egg: if there is demand for analytical reports, there will be analysts.
Market participants also see a possible conflict of interest among analysts, when issuers will choose those who are guaranteed to “draw” them beautiful reports. To this, Abasheeva responded that the Bank of Russia has well-established mechanisms for working with the known problem: “A conflict of interest is a topic that is clear how to work with, because otherwise we would not have audit services or ratings for the same bonds. We do not see any problems here,” she notes.
According to her, independence can be defined as the absence of other commercial interests of the person providing analytical services. Currently, the organizers of placements simultaneously evaluate the issuer and offer its shares to their clients when providing brokerage services, and acquire them for their portfolio.
Allocation disclosure requirement may become mandatory
In May 2024, the Central Bank tried to “spur” issuers and placement organizers to be open by sending an information letter. In the document, the regulator proposed that companies disclose their approaches to distributing shares among different categories of investors before the IPO, and then publish information on the actual distribution of shares among buyers.
However, the information letter was advisory in nature and not all issuers heeded it. Currently, the Bank of Russia is considering the possibility of transferring the recommendations to the mandatory level, noted Abasheeva.
“We are now proposing to make it mandatory to disclose information about both the proposed allocation and the actual distribution of shares,” said Abasheeva.
It is planned that the Bank of Russia will present the results of the discussion of the report in the summer of this year and will determine the standards that will become mandatory for IPO candidates.
Gleb Kukharchuk, Dmitry Polyansky, “RBC Investments”
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