Analytical credit rating agency (ACRA) affirms the rating of CCP NCC(hereinafter NCC, or the Organization) at AAA(RU), outlook Stable, says an official statement issued by ACRA.
As it is stressed in the statement, the rating is based on the NCC strong and stable business profile, exceptional liquidity position and high capital adequacy, with the latter compensating for the risk profile. NCC is a systemically important central counterparty according to the methodology of the Bank of Russia.
As a subsidiary of Moscow Exchange Group, NCC performs functions of a clearing organization and central counterparty on the Russian financial market. Since the end of 2017, NCC has been operating as a non-bank credit institution central counterparty.
Strong business profile, which is reflected in NCC’s exclusive role as a clearing organization and central counterparty ensuring the majority of transactions in the key segments of the Russian financial market. ACRA notes high corporate governance and risk management standards implemented at the Organization enabling it to perform activities with the minimum accepted risk relative to the scope of transactions.
High capital adequacy: capital adequacy ratio of central counterparty (N1cc) amounted to 163.4% as of September 1, 2019. This allows to cover risks associated with the functions of central counterparty, as well as risks of potential impairment of NCC’s own balance sheet assets. The factor assessment is supported by the profitability indicator (which has slightly decreased to 28.4% as of the end of 2018) calculated by ACRA coupled with a low operating expenses to operating income ratio (6.3% over the last three years).
Counterparty risk of NCC is mitigated by virtue of rigid admission criteria for participants and strict margining policy (with prompt marked-to-market reevaluations). The structure of central counterparty protection levels combined with a set of measures to be taken in case of default of clearing participants, both provided by the Organization, have a positive impact on ACRA’s assessment of NCC’s risk profile.
The assessment of NCC’s risk profile is constrained by a significant amount of assets exposed to market risk (over 200% of core capital), as well as by materialization of operational risks in 2018 and 2019.