The 'A' rating indicates that the autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region (FGBD PR) qualifies as a guarantee institution with a high degree of financial stability and a good level of SME assistance in the region. The full or partial default risk is low.

The Fund was established in 2009 at the government of Pskov region with the aim of facilitating the access of regional SME businesses, to loans and other financial resources. The Fund undertook the first surety commitment in 2009.

The guarantee institution's rating is supported by its robust guarantee coverage, acceptable loss ratio and effective recovery of funds through applicable recourse procedures.

Over its existence (since 2009), the Fund has provided 325 surety agreements for a total amount of RUB 293 million, which enabled borrowers to take out RUB 754.4 million in loans from the partner banks. In H1 2014, FGBD PR secured the 49th position in AK&M Rating Agency's Ranking of Guarantee Institutions comprising 52 entities in terms of the size of their respective surety commitments (the Fund's portfolio reaching RUB 99 million as of October 1, 2014). At the start of Q4 2014, the Fund's guarantee capital multiple was 52.5%, an evidence of insufficiently effective spending of budget funds by the Fund.

The Fund's financial investments have a high level of reliability, most of the credit institutions it cooperates with being among the leading Russian banks rated at least 'A++' on the AK&M Rating Scale. The Fund's deposits are well-diversified in terms of size ranging from RUB 6 million to RUB 45 million, in conformity with the applicable regulatory limit for a deposit per banking institution (34% for a guarantee capital of at least RUB 150 million). The maximum amount deposited by the Fund with one bank is 23.9%).

As of September 30, 2014, the Fund has effected 4 indemnity payments for a total amount of RUB 1.1 million to its partner banks. The Fund was among the top 10 guarantee institutions in AK&M Rating Agency's above-mentioned Ranking of Guarantee Institutions in terms of the loss ratio. As of October 1, 2014, the Bank's loss ratio was 0.3% decreased by 0.02 p.p. against the previous quarter.

The Fund has recovered RUB 227.6 thousand from the defaulted borrowers. Therefore, its recovery ratio was 20.7%, which is relatively high compared with other guarantee institutions ranked by AK&M RA.

At the same time, we regard the lower earnings from compensations for the sureties provided as a negative rating driver.

FGBD PR traditionally earns profits from own funds placed on deposit accounts with credit institutions (such earnings accounted for 90.1% of the Fund's total income on October 1, 2014). The Fund's earnings from compensations under the surety agreements totaled RUB 929 thousand (9.9% as of the same date), their absolute size looking down in 2013-2014. For the 9-month period in 2014, this source of income decreased by 51.5% compared with the same period in 2013 (in 2013, the earnings from compensations shrank by 11.7%).

At the same time, the Fund's efforts to build up provisions against possible loan losses totaling RUB 4.9 million for the 9-month period in 2014 are appreciable as an offsetting factor.

Autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region (FGBD PR) was registered in September 2009. The sole founder of the guarantee institution is the government of Pskov region.

Over the period of its existence, FGBD PR concluded more than 325 guarantee and surety agreements for a total of RUB 300 million, raising 4 rubles in SME-targeted external investments per each ruble of public investment. As of October 1, 2014, the Fund's portfolio of surety commitments amounted to RUB 99 million, the amount of funds raised reached RUB 754 million. Autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region secured the 49th position in AK&M Rating Agency's H1 2014 Ranking of Regional Guarantee Institutions comprising 52 entities.

This press release is based on the Statement of assignment of a guarantee institution rating to the autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region (FGBD PR).

The credit rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

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