Russia’s Finance Ministry has criticized the decision by Moody's to take rating actions on seven Russian financial institutions following the downgrade of Russia's government rating.

      The banks affected are Sberbank, Bank VTB JSC, Gazprombank, Russian Agricultural Bank, Agency for Housing Mortgage Lending OJSC, Vnesheconombank and Alfa-Bank. Alfa-Bank is the only one from the list that is privately owned, the rest are state-controlled lenders.

      “These actions follow the weakening of Russia's credit profile, as reflected by Moody's downgrade of Russia's government debt rating to Baa2 from Baa1 on 17th of October, 2014,” reads the official statement.

      Deputy Finance Minister Alexey Moiseyev believes the move is unjustified.

      Earlier, Russia-IC reported that Moody's Investors Service downgraded the government of Russia's debt rating by one notch to Baa2 from Baa1 in a move that could speed up capital flight in a country already suffering from liquidity and investment crunch.

      Here were the key drivers, according to the rating agency, behind the downgrade:

      • Russia's increasingly subdued medium-term growth prospects, exacerbated by the prolongation of the Ukraine crisis, including through the impact of expanded international sanctions.

      • The gradual, but ongoing erosion of the country's foreign-exchange buffers due to capital flight, Russian borrowers' restricted international market access and low oil prices.

      “Even prior to the crisis in Ukraine, the potential growth rate of the Russian economy was falling, constrained, according to the IMF, by economic rigidities such as infrastructure bottlenecks and shortfalls in labor skills and education,” read the press release.