RUSSIA DEFENDS ITS FINANCIAL REPUTATION.

The Russian stock market has reacted with predictable gloom to last week’s decision by Moody’s, the U.S. credit-rating agency, to downgrade to "negative" the outlook for Russia’s sovereign credit rating. This reevaluation is a warning that the rating itself (which is already below investment grade) will be reduced if current tendencies do not change. In making this adjustment, Moody’s was merely following the other leading rating agency, Standard and Poor’s, which in December adjusted its evaluation of Russia’s rating outlook from "stable" to "negative." (Financial Times, January 16)

Meanwhile, Russian policy-makers continued to take measures intended to prevent any downgrading in the near future. Last week, Russia’s Central Bank announced that it intends to restrict the amount of money Russia’s domestic banks may borrow from foreign banks and international capital markets to no more than four times their paid-in share capital, or 28 percent of assets. The move came in response to the unrest in international financial markets and is designed to prevent Russian banks from getting into trouble if foreign investors refuse to provide further financing.

Despite the rising cost of its foreign borrowing, Russia is likely to borrow some $3.5 billion on foreign capital markets this year, Deputy Finance Minister Mikhail Kasyanov said last week. In addition to Eurobonds, the government is considering issuing global bonds, which would not be denominated in European currencies. The aim is to diversify the currency-mix of Russian loans and reduce exchange-rate risk. (Russian agencies, January 15)

Samara Oblast Gets Credit Rating.