Thomas Murray Upgrades the Central Securities Depository Rating for the National Depository Center at AA- Stable Outlook

10 July 2008
Print version

LONDON – Thomas Murray has upgraded The National Depository Center’s (NDC) rating at AA-, which means very low risk. The outlook is ‘Stable’. The rating is made up of the following components:

Public CSD Rating NDC Rating
Overall Rating AA-
Asset Commitment Risk A+
Liquidity Risk A+
Counterparty Risk A+
Financial Risk AA
Operational Risk AA-
Asset Servicing Risk AA-

The ‘AA-’ rating as assigned by Thomas Murray reaffirms NDC’s strong financial position and the low participant exposure to risk across NDC’s operations. The outlook has been assigned as ‘Stable’ which suggests that there are no imminent developments that may change the rating at this stage.

The upgrade in the rating recognises NDC’s commitment to develop and strengthen its processes and systems in an ongoing effort to minimise risk for market participants. In this respect NDC has made substantial progress over the past year particularly in reducing counterparty, financial and operational risk.

The Counterparty Risk rating has been improved from A to A+. This recognises the changes to the participant criteria that are being introduced which presumes that MICEX/NDC clients are mostly professional market participants licensed through the Federal Financial Markets Service [FFMS]. Effective January 2008, FFMS began a programme to impose higher capital requirements on all licensed bodies. These bodies are also required to report financial and trading information to both FFMS and MICEX.

Financial Risk rating has improved from AA- to AA following the further increase in insurance coverage to USD 50 million, (previously USD 25 million) in August 2007, and the increase in capital to RUB 1.35 billion (approx USD 55 million, previously USD 35 million), as at the end of 2007. Profits have continued despite the reduction in safekeeping fees by 15%. Also, the cost of the new settlement system ‘Eclearsettle’, a three year project, has been largely absorbed over the last two years.

NDC have maintained the momentum of continuous improvement in operational areas to mitigate operational risk over the last year, and as a result, Operational Risk has been upgraded to ‘AA-’. The main measures taken that led to the rating upgrade in Operational Risk are:

  • The quality of procedures has been enhanced across operations. Staff use and understanding of the procedures is part of internal audit control.
  • The Electronic Document Interchange system [EDI] supports efficient electronic securities reconciliation between NDC and the registries, and between participants and NDC.
  • Two new quality control roles have been established within the operations department to oversee and check that operational processes are correctly completed on time.
  • The external operational audit carried out by Deloitte in 2008 found no significant deficiencies in respect of the internal control objectives. Further audits are planned for 2009.
  • There have been improvements to the BCP plan with some staff now working permanently from a second site.
  • The DRP arrangements have been enhanced, are more robust, have been tested, and incorporate a near-hot backup site.

Although corporate governance is not presently rated, NDC has sound governance arrangements that support the public interest borne out by both CBR and MICEX being major stakeholders in terms of NDC’s voting structure, participant inclusion in the Board of Directors and key committees, the commitment to continuous process efficiency improvement and risk reduction, and provision of improved services and fee reductions for participants.

Simon Thomas, CEO and Chief Ratings Officer of Thomas Murray said: "Thomas Murray has worked closely with NDC in the past two years in order to assess the controls and risk mitigation procedures surrounding their operations and it is pleasing to see that NDC’s commitment to continuous improvement and risk reduction materialise in a rating upgrade. The increase in the ratings for Counterparty, Financial and Operational Risks reflect the progress that NDC has made in particular by strengthening its resources in the form of capital and insurance as well as their across the board risk reduction measures. NDC appears to be in a good position to continue supporting the Russian infrastructure. However, it faces a significant challenge and some uncertainty until the new CSD Law which will set out the landscape for central security depositories operating in Russia, is introduced".

Nikolay Egorov, Director of The National Depository Center, said: "The National Depository Center is pleased to see the recognition to the efforts made over the past year by an increase in the overall rating and the ratings for three of the risk components. The work with Thomas Murray that has been ongoing, has helped us identify and act on areas on which to focus our future risk development efforts. This independent view on The National Depository Center’s risk profile will continue to provide confidence to our participants, shareholders and other interested parties of the risk mitigation procedures in place at The National Depository Center".

The Central Securities Depository rating assesses the risk exposures for investors associated with the processes the CSD has in place to facilitate the safekeeping and the clearing and settlement of securities, where applicable. It assesses six key risks. The methodology considers the capabilities of the depository and the quality and effectiveness of its operational infrastructure. It also assesses the depository’s willingness and ability to protect its participants or clients from losses. As part of the rating, the scope and quality of the depository’s services is assessed. The ratings are on a consistent global scale, using the familiar AAA to C ratings scale. Once the rating is assigned there is an ongoing surveillance process to monitor the depository.

Separately, Thomas Murray maintains proprietary assessments of over 140 CSDs globally as part of the Thomas Murray Depository Risk Assessment services.

For further information contact:

  • The National Depository Center: Olga Rink, tel. +7(495) 232-0910, e-mail: .
  • Thomas Murray: Simon Thomas/John Woodhouse, tel. +44 (0) 207-830-8300, e-mail: , .


About NDC:

Not-for-Profit Partnership "The National Depository Center" is the largest settlement depository in Russia, servicing the full range of equity securities of Russian issuers. It services 100% of transactions conducted in the federal bond and the Bank of Russia bond markets, more than 95% of transactions conducted in the corporate and regional bond markets, and stock exchange share transactions. NDC provides storage of global certificates and depository accounting for 99% of corporate bond issues, and 95% of sub-federal and municipal bond issues. For 1Q 2008 the value of assets in storage was more than RUR4.2 trillion. NDC is the largest paying agent on behalf of corporate bond issuers. It is Russia's national numbering agency, the substituting numbering agency for the CIS, authorised to assign the international ISIN and CFI codes. It is also a member of the international accounting infrastructure, providing settlements on the global financial markets using direct accounts at Clearstream Banking S.A. and Euroclear Bank. It also holds accounts at the Central Depository of the Republic of Kazakhstan and the NDC of the Republic of Azerbaijan.

Among NDC’s founders are MICEX and Bank of Russia (the founders’ shares in the property of NDC are 46.7% and 39.3% respectively, and in the votes 50.2% and 42.3% respectively). Members include GPB OJSC (Gazprombank), Evrofinans Mosnarbank, Rosbank, VTB Bank (Vneshtorgbank), Bank of Moscow, Rossiysky Credit Bank, Vneshekonombank, ING Bank Eurasia, JP Morgan Bank International LLC, UniCredit, Deutsche Bank, and Sberbank. The Partnership also has a stake in Depository Clearing Company CJSC (36.96 %) and in Settlement Depository Company CJSC (28.54%).

About Thomas Murray:

Thomas Murray is a specialist custody rating, risk management and research firm specialising in the global securities services industry. Thomas Murray was established in 1994. The Company tracks and analyses over 250 custodians globally and monitors the risk of over 100 capital market infrastructures.  The Company has a strong position as a provider of public and private ratings and risk assessments on global custodians, domestic custodian banks and capital market infrastructures.


Public Rating. This assessment has been compiled from information provided by third parties and the CSD and has been verified by Thomas Murray analysts during an on-site visit to the CSD. The report has been reviewed by the CSD. The ratings that have been assigned to the risks that are reviewed in the report have been determined by Thomas Murray analysts and approved by the Thomas Murray Rating Board. The ratings have been assigned in accordance with the process outlined in the published methodology as developed by Thomas Murray and on the basis of information confirmed by Thomas Murray analysts during a site visit to the CSD.


The publication date represented here is July 2008. This is the date that the assessment report has been reviewed by third parties including the CSD. The report is updated on an on-going basis throughout the year as new information is received and should be read in conjunction with the relevant newsflashes issued since the publication date.


Asset Commitment Risk - The period of time from when control of securities or cash is given up until receipt of countervalue. This risk concerns the time period during which a participant’s assets, either cash or stock, are frozen within the CSD and payment system pending final settlement of the underlying transaction(s). Following settlement, the risk period is extended until the transfer of funds and stock becomes irrevocable. It excludes any periods when assets, cash or stock, are committed to a market participant including brokers, banks and custodians, not caused by CSD processing.

Liquidity Risk - The risk that insufficient securities and or funds are available to meet commitments; the obligation will be covered some time later. This is where for certain technical reasons (e.g., stock out on loan, stock in course of registration, turn round of recently deposited stock is not possible) one or both parties to the trade has a shortfall in the amount of funds (credit line) or unencumbered stock available to meet settlement obligations when due. These shortfalls may lead to settlement ‘fails’ but do not normally lead to a default.

Counterparty Risk - The risk that a counterparty (i.e., a participant) will not settle its obligations for full value at any time. This is simply the total default of a direct participant of the CSD. This is the event when a participant is unable to meet its financial liability to other participants. This risk only goes as far as direct participants of the CSD and excludes clients of direct participants that default on liabilities to such participants, even if such a default should systemically cause the direct participant to subsequently default.

Asset Servicing Risk - The risk that a participant may incur a loss arising from missed or inaccurate information provided by the depository, or from incorrectly executed instructions, in respect of corporate actions and proxy voting. This risk arises when a participant places reliance on the information a depository provides or when the participant instructs the depository to carry out an economic transaction on its behalf. If the depository fails either to provide the information or to carry out the instruction correctly then the participant may suffer a loss for which the depository may not accept liability. The depository may provide these services on a commercial basis, without statutory immunity, or it may provide the service as part of its statutory role, possibly with some level of protection from liability. This risk is likely to become much higher when international securities are included in the service.

Financial Risk - The ability of the CSD to operate as a financially viable company. This risk concerns the financial strength of the depository and if its financial resources are sufficient to meet the on-going operation of the organisation. This risk also includes where the CSD may act as central counterparty, or otherwise acts in a Principal capacity.

Operational Risk - The risk that deficiencies in information systems or internal controls, human errors or management failures will result in losses. The risk of loss due to breakdowns or weaknesses in internal controls and procedures. Internal factors to be considered in the assessment include ensuring the CSD has formalised procedures established for its main services. The CSD should have identified control objectives and related key controls to ensure operation and proper control of established procedures. Systems and procedures should be tested periodically. There should be external audit processes in place to provide third-party audit evidence of the adequacy of the controls.



Extremely low risk


Very low risk




Low risk




Acceptable risk


Less than acceptable risk


Quite high risk


High risk


No rating has been given due to insufficient information


Copyright © 2004 - 2008 by Thomas Murray. Reproduction in whole or in part prohibited except by permission. All rights reserved. The services and analysis provided by Thomas Murray are provided on an "as is" basis and Thomas Murray make no representations or warranties, express or implied, as to the accuracy, adequacy or completeness of its analysis or results to be obtained from accessing and using this report (or any information included therein), including without limitation, any warranties of merchantability or fitness for any particular purpose or use. Neither Thomas Murray nor their affiliates shall be liable to any user or anyone else for any inaccuracy, error or omission, regardless of cause, in this report or for any damages resulting therefrom. In no event shall Thomas Murray have any liability for lost profits or for indirect, special, punitive or consequential damages, even if advised of the possibility of such damages. Thomas Murray shall have no liability to any third party arising from or related to this report. Neither this report nor any component of the service provided by Thomas Murray is a rating, endorsement or guarantee of any Depository or its financial strength or a recommendation to enter into any agreement with any Depository. Thomas Murray relied on information provided by third parties believed to be accurate and reliable but due to the possibility of human or mechanical error, Thomas Murray can not guarantee the accuracy of any such information.

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