An Extraordinary Meeting of Vnesheconombank Supervisory Board Held

13 october 2008 года

v. V. Putin, the Russian Federation Prime Minister, chaired the meeting of the Supervisory Board of the Bank for Development — Vnesheconombank

Opening address:

Honorable colleagues!

In the past few days, as you are well aware — and we have already discussed it at the Presidium meeting today — the Government has taken a series of important measures designed to protect the national economy against the negative impacts of the global financial meltdown.

In my judgment, securing sustainability and resilience of the Russian banking system, ensuring a stable and continuous operation of Russian enterprises is a key objective. In addressing the task, the Bank for Development — Vnesheconombank (VEB) has an important role to play.

By the year-end, Vnesheconombank’s charter capital will be increased by RUB 75 billion. These funds could be used for the purchase of the Russian securities and insurance of transactions on the domestic financial market.

Another RUB 175 billion worth of funds from the National Wealth Fund will be transferred for management to VEB to maintain the stability of the Russian stock market, including the purchase of the Russian companies’ corporate bonds. Actually, I mentioned it just a couple of days ago.

Furthermore, the financial bailout package provides for allocation of RUB 950 billion as subordinated funding to Russian banks. It is going to be the so-called ‘long money’ extended for a 10-year term. These funds are intended for recapitalization of the Russian banks and, at the same time, should help resolve the liquidity crunch.

Thus, the Central Bank of the Russian Federation (CBR) will advance RUB 500 billion to the Russian Savings Bank (Sberbank) and RUB 450 billion to Vnesheconombank, which, in its turn, will distribute the subordinated funding as follows: VTB — RUB 200 billion, Rosselkhozbank — RUB 25 billion, other commercial banks — RUB 225 billion. However, the shareholders of such commercial banks should be prepared to use their own equity to recapitalize the banks.

More importantly, these banks must be sound and solid, have a high potential and high credit ratings.

Along with the stimulus package for the banking sector, we should obviously support the real sector of the Russian economy. Today, we have already discussed it in detail. Primarily, the real economy sector should be ensured access to financial resources.

Lots of Russian enterprises have been raising foreign credits. Regrettably, at present, this mechanism is not working any longer. Meanwhile, debts are coming due.

Obviously, we should come up with alternative solutions and seek to refinance our companies’ foreign borrowings drawing, first and foremost, on internal sources of refinancing. That could help to stave off the threat of selling off the Russian enterprises’ assets at knockdown prices that have nothing to do with the fair value of businesses.

To this end, the Central Bank is allocating USD 50 billion to Vnesheconombank, with the right to obtain refinancing of foreign credits to be granted primarily to companies that raised them prior to 25 September 2008, i.e. before the aid package was announced.

Today, we are going to approve the procedure and conditions VEB will have to apply when refinancing Russian enterprises. This decision is critically important. It would help to immediately address the needs of the Russian borrowers.

I am fairly confident the eligibility criteria for obtaining subordinated loans would be as follows:

First, a Russian company’s core business is to be focused on the real economy sector on the territory of the Russian Federation;
Second, its activities should be viewed as important either for the region’s economy or strategic industries. Equally important, we could not possibly afford ‘to lose’ assets, if it leads to negative social impacts;.
Third, we must refinance only those credits that were raised to deliver investment projects or acquire assets in Russia, in the Russian economy, I am emphasizing.
Finally, the bailout package is intended for those companies that will attract co-financing on their own, thus sharing risks with the state.
All these steps are specified in the amendments to the Federal Budget and in Federal Law ‘On Additional Measures for Supporting the Financial System of the Russian Federation’. The State Duma and the Council of Federation have already approved the Law. The amendments to the Budget are subject for discussion this week. I hope that the Russian Government and members of the Parliament will manage to arrive at the right decisions and agree their positions. There is no time to be lost.

By the moment the above acts become effective, Vnesheconombank should take all organizational decisions. The Bank should be gearing up to effect the required financial operations. That is why we promptly convened an extraordinary meeting of the Supervisory Board of the Bank for Development today.

Now, let us proceed with the agenda.

Origin: Internet-portal of the Government of the Russian Federation


Briefing for Journalists on Svyaz-Bank’s Financial Rescue held at Vnesheconombank

9 october 2008 года

VEB committed 59 billion rubles to Svyaz-Bank to fulfill its current liabilities to customers


Moscow. October 8. INTERFAX-AFI – Vnesheconombank (VEB) committed 59 billion rubles to Svyaz-Bank (RTS:  SVZB) to fulfill its current liabilities to customers,- Vnesheconombank Chairman Vladimir Dmitriev told journalists on Wednesday.

“The scale of Svyaz-Bank’s trouble amounted to 60 billion rubles and these were the bank’s current liabilities that it couldn’t discharge without Bank of Russia’s and VEB’s assistance”, - he said adding that 59 billion rubles are sufficient to resolve the bank’s current liquidity problem.

According to VEB’s Chairman, 45 billion rubles of the said amount were committed to Svyaz-Bank in the form of interbank credits and the remaining funds were provided for the bank to discharge its liabilities on the exchange REPO market.

“In order to address Svyaz-Bank’s current problems, the Bank of Russia will place a deposit of 2.5 billion dollars with VEB for a period of one year with a possibility of prolongation at LIBOR+1%”, - explained V. Dmitriev.

As he put it, the purchase amount of Svyaz-Bank’s 98% of shares is symbolic. “VEB’s Supervisory Board made a decision to purchase 98% of Svyaz-Bank’s shares for 5 thousand rubles”, - he said.

V. Dmitriev stresses that Svyaz-Bank’s operation has been restored - continuous cash flow to all the bank’s customers including pensioners has been secured, payments within Post of Russia wage projects are also being made uninterruptedly. “ We made it possible for Svyaz-Bank to interruptedly discharge its liabilities to creditors, deposit holders and on the interbank market”, - he said adding that Svyaz-Bank’s customer base is rather large – these are, in particular, raw materials industries and telecommunications companies.

According to V.Dmitriev, in the most immediate future VEB  will become Svyaz-Bank’s core shareholder by buying 98 % of its shares. “Acting as a core shareholder we can safely say that from this time onwards all Svyaz-Bank’s obligations will be fulfilled in full as we can use financial resources provided to us”, - he said.

He added that Svayz-Bank’s current condition is rather difficult but by using the Bank of Russia’s resources and with the help of personnel working at the bank now, a team from Sberbank (RTS: SBER), VEB’s enhanced team and federal authorities we’ll be able to get the bank and its branch network working without fail. “We are working with the bank to restore its normal operation and development’, - said V.Dmitriev.

VEB’s Chairman said that Svyaz-Bank is a bank with an extended network comprised of 49 branches, it relies on the Post of Russia, works with major communications companies and operates in those regions where  VEB is expanding its activity by participating in investment projects. That is why in V.Dmitriev’s words joint operation of the two banks under VEB’s auspices is of great interest.

“Besides nobody rules out the possibility of establishing a Post Bank on the basis of Svyaz-Bank. Here we mean prospects for cooperating with the Post of Russia and its head Andrei Kazmin”,- said VEB’s Chairman.

 On the basis of Svyaz-Bank’s network VEB can also expand its activity in financing small and medium-sized business.

“But we don’t know what is going to happen to Svyaz-Bank, we don’t know if it will remain VEB’s subsidiary, operate within the system of the Post of Russia or will be sold to a strategic investor. We have to sort this problem out, work out various Svyaz-Bank’s development scenarios and choose a path we are going to follow”,- explained V.Dmitriev.

VEB’s Chairman assumed that it would not be possible to correct the situation in Svyaz-Bank within a year and that is why the Russian Central Bank’s deposit is most likely to be prolonged for another year.

V.Dmitriev said that Svyaz-Bank’s private depositors would have no problems, “but there is concern that on the backdrop of the complicated situation as a whole the bank’s many customers both natural and legal persons would request the bank to transfer their deposits to more stable and more understandable banks”.

According to Svyaz-Bank President- Board Chairman Alexandr Zhitnik, deposit outflow from Svyaz-Bank is not significant. Answering the question if businessman Alisher Usmanov has withdrawn his deposit from Svyaz-Bank he answered: “In part”.



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