Published 27-03-2013, 09:02
A week before the fifth BRICS Summit in Durban Russian President Vladimir Putin signed the Concept of Participation of the Russian Federation in BRICS [1]. This is the first document of a kind: it outlines long-term objectives and mechanisms to achieve them in a particular global institution. Among other points the Concept reads: "to encourage creation of independent rating agencies of BRICS states destined to contribute to a more objective assessment of the market position of the national companies and banks”. So, Russia perceives the change of rules and realizes the importance of alternative approach to assess markets and would contribute to that.
Russia has not accumulated enough experience in the sphere of financial risk assessment. It lacks rating culture, does not have such a tradition of rating assessment. It will not be a serious exaggeration to suppose that Russian clients of the three leading rating agencies are motivated to attract foreign investors rather than Russian ones. Rating itself is not usually a primary concern for Russian business – whether it is fortunately or unfortunately.
Nevertheless the idea to develop a new financial architecture widely shared by global actors and especially by BRICS members implies the agreement on how to measure success before. It means how to assess economic performance and how to differentiate between stability and crisis on the earliest stages to avoid past mistakes like the Cyprus case. Markets need an independent referee, not the engaged one, and one of the most influential drawbacks of the existing system is a consistent conflict of interests between truthfulness and profitability within the competing rating agencies.
The economies which have not rooted too much into the existing derivative system, but quite acquired sufficient mutual dependence, could succeed in building a new approach up. BRICS countries which are still not members of OECD at the same time have a good chance to launch a new market assessment as a first ‘brick’ of the future world order.
For the twenty years global economic stakeholders have been very sensitive to any hints by the Russian government to direct whatever elements of its economy. Social expenditure increase, industrial policy and especially any financial restrictions have been usually under harsh attack of criticism and considered as just about steps backward to the Soviet past. Russia has gone through the most difficult moments of the economic crisis with primarily careful state policy to the independent bank system which was able to pump economic activity quite incrementally. When EU encourages a sovereign country to nationalize private money from the banks and world economic elites are likely to go implicitly with that, Russia may not stand apart. If rules are changed, stakeholders involved are to agree on that.
Today different global government frameworks like G20, where Russia is presiding this year, and BRICS meeting this week are in search for the new financial architecture in the modern world. The agenda usually includes points on reserve currencies, growth rates, unemployment and other macroeconomic measures. Future of credit ratings both sovereign and business, how to improve them and to enhance the level of credibility – all those issues are to be considered in the same wider context too, with a regard to global economic vision and regulation.
[1] Vladimir Putin approved Policy Concept on Russia’s participation in BRICS http://eng.kremlin.ru/news/5146
Alexander Konkov is Head of the Division for International Peer Review at the Analytical Center for the Government of the Russian Federation and Visiting Lecturer at Moscow State University.
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