OREANDA-NEWS. Fitch Ratings regards National Clearing Centre's (NCC) financial obligations under general collateral certificate (GCC) repo transactions as reference liabilities for the company's Issuer Default Ratings. NCC is a key operating subsidiary of the Moscow Exchange Group (MOEX) and performs the function of a central clearing counterparty in Russia.

An uncured failure on NCC's part to perform on GCC repo obligations (which are all denominated in local currency) would therefore most likely represent a default of NCC, resulting in its Local and Foreign Currency IDRs being downgraded to 'RD' (Restricted Default), or 'D'. However, NCC's IDRs do not directly address the operational ability of NCC to safeguard and return collateral taken in respect of GCCs.

GCCs are denominated in Russian roubles and are issued by NCC in exchange for traditional collateral (cash, bonds rated BB- and above and shares) posted by market participants in dedicated (specific to each market participant) collateral pools at NCC. An individual GCC therefore represents a claim on the specific collateral posted in respect of that GCC. If posted collateral is in the form of securities, NCC applies certain haircuts to them and makes daily margining to ensure the sufficiency of collateral to back the nominal value of issued GCCs. NCC is not permitted to re-use the collateral it receives in respect of the GCCs.

GCCs are undated, unquoted and cannot be traded on the open market, but can be sold (with an obligation to repurchase) in a repo transaction through NCC, which acts as a central counterparty. GCCs that are not sold under repo transactions represent NCC's obligation to return posted collateral to the pledger upon request. If GCCs are used in a repo transaction, upon the latter's maturity NCC is obliged to repurchase them from a cash lender at nominal value.

NCC's Local and Foreign Currency IDRs of 'BBB' and 'BBB-' respectively reflect the exceptionally strong credit profile of the central clearing house in the context of the local market, based on its intrinsic strength, as reflected in its 'bbb' Viability Rating (VR). The latter is driven by NCC's high resilience to potential losses due to strong risk management and controls, the largely short-term nature of the company's risk exposures, and robust solvency, which is further protected by extra buffers and a loss cap (with any excess loss to be shared among market participants). The VR also reflects the company's strong liquidity, counter-cyclical and low-cost funding base, and continued robust performance. NCC's Long-Term Foreign Currency IDR of 'BBB-' is constrained by Russia's Country Ceiling.

Fitch's IDRs for banks usually express the agency's opinion on the risk of default of senior obligations to third-party, non-government creditors, as in Fitch's view these are typically the financial obligations whose non-performance would best reflect the uncured failure of the entity. As per the agency's criteria, in cases where there are different categories of senior liability, the IDR is rated to the (material) category with highest risk.