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TEXT-S&P on likely changes to Russia's regional governors
March 20, 2012 / 1:42 PM / 6 years ago

TEXT-S&P on likely changes to Russia's regional governors

March 20 - Despite numerous leadership changes forecast for Russia's
regional governments this year, Standard & Poor's Ratings Services' view of the
regions' creditworthiness will likely remain unaffected. This is according to a
report titled, "A Wave Of Change For Russia's Governors, But The Ratings Remain
The Same," published today on RatingsDirect.	
In total, we think about a quarter of the 83 governors heading Russia's 	
regional governments could be replaced in 2012. For some, their term of office 	
is expiring. For others, the reduced power of Russia's ruling party, United 	
Russia, renders their own positions uncertain. At the federal level, ongoing 	
leadership reshuffles may result in some governors assuming national posts, 	
while others may be replaced by former federal officials. And if proposed 	
direct elections are introduced at the regional level, some incumbents could 	
be ousted.	
While a change of leadership theoretically can be accompanied by a change in 	
financial strategy and budget policy, in practice the appointment of a new 	
governor rarely signals an immediate change of sufficient scope to affect our 	
view of a region's creditworthiness and our ratings.	
In our view, there is no clear link between the poor credit quality of a 	
region and the ability and willingness of its governors to retain their 	
positions. As far as we are aware, since 2005 no governor has been replaced 	
because of weak budgetary performance, high indebtedness, or persistent 	
refinancing risks for the region, unless triggered by obvious mismanagement of 	
budget funds. Moreover, several governors of regions that have what we view as 	
persistent financial difficulties have been regularly reappointed for multiple 	
Similarly, we have not observed a clear link between a governor's appointment 	
and a potential financial policy agenda, given the limited transparency in the 	
current selection process.	
At the start of this year, outgoing president Mr. Medvedev announced a 	
proposal to resume the direct elections of governors that took place during 	
1993-2005. A candidate's potential influence, be it positive or negative, on a 	
region's future financial policies and performance would become clearer. If a 	
new governor were to relax previously prudent policies and increase debt and 	
liquidity pressures, or spend beyond the bounds of the region's economic and 	
financial profile, we could lower our rating on a region. We believe, however, 	
that the long-term benefits of holding direct elections would outweigh these 	
We believe that direct elections could make governors more accountable to the 	
regional representative body and electorate, which might eventually help 	
improve the transparency and efficiency of budgetary spending. Overall, this 	
could strengthen the predictability and resilience of the institutional 	
framework under which Russian regions operate.	
The report is available to subscribers of RatingsDirect on the Global Credit 	
Portal at  If you are not a RatingsDirect 	
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 	
or sending an e-mail to Ratings 	
information can also be found on Standard & Poor's public Web site by using 	
the Ratings search box located in the left column at

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