Thomas Murray, the custody rating, risk management and research firm, has maintained the CSD rating for Russia’s National Settlement Depository (NSD) at AA-, which translates as ‘very low overall risk’.
The overall rating of ‘AA-’ reflects a weighted average of the eight risk components and relates to a very low risk exposure profile with a stable outlook. Asset commitment risk was upgraded from A+ to AA-, due to the change in the settlement model for Moscow Exchange trades (switching to T+2 settlement cycle).
The new settlement model 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, said a statement from NSD.
According to the statement, 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.
Simon Thomas, CEO and chief ratings officer of Thomas Murray, said: “Thomas Murray is pleased to have been able to continue supporting NSD by independently assessing its risk profile as it develops its strategy as the single CSD in the Russian market. The rating reflects the emphasis that NSD has input in recent years in reducing risks for market participants."
"This year, in particular, the change from a fully pre-funded model to a T+2 cycle (with margining) has proved beneficial for investors. In addition, NSD managed a smooth transition as DCC was integrated into NSD.”
Eddie Astanin, chairman of the executive board of NSD, said: “Risk management is a major focus of NSD management bodies’ attention—both the supervisory board and the management team. In October 2013 the supervisory board approved the medium-term strategy of NSD risk management system development."
"Implementation of this strategy will make our risk management system more comprehensive and efficient. We believe that the assessment maintained by Thomas Murray provides our clients and investors with comfortable conditions for safekeeping and asset servicing at NSD being the central securities depository.”
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