Russian Prime Minister V.V Putin Conducts a Meeting of State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ Supervisory Board
V.V Putin’s Opening Address
Good evening Esteemed Colleagues!
We’ve got several important issues on our agenda today. First of all, I would like to dwell on the Bank’s annual performance report for 2008.
This was a difficult period for the Russian credit-financial system and for the economy as a whole. Starting from August, we had to withstand the onslaught of the financial crisis and adapt to operating in the new rather severe conditions.
I would like to note that VEB’s team demonstrated a required level of professionalism and the Bank itself operated in a very sustainable and efficient way performing its core activities and acting in the capacity of the Government’s crisis management instrument.
The materials submitted show that despite the crisis, the Bank’s loan portfolio was in excess of 350 billion rubles last year.
The Bank started to finance 21 new projects. They are aimed at developing infrastructure, high-technology sectors, creating new industrial production facilities. They include modernization of railway arteries in Siberia and the Far East; industrial parks were created in Tatarstan and the Kaluga region, high priority was given to the reconstruction of several power generating stations, work was also in progress in the power engineering industry. The Bank started to participate in financing the construction of Olympic facilities in the city of Sochi.
It goes without saying that the Bank will carry on considering applications for new investment projects.
At this meeting we are planning to discuss one of them, this project is aimed at creating engines of new generation at Avtodizel factory.
I’d like to remind you that a principal decision on VEB’s participation in this project was made last December in the course of the working trip to the Yaroslavl region. Here I mean power plants for domestic trucks meeting strict requirements for reliability and ecological standards.
At present, trials of engine prototypes are at their final stage. The Bank’s financing would make it possible to launch their batch production and create more than one thousand and two hundred jobs.
I’d like to mention the Bank’s interesting and promising initiative designed to use foreign investment funds for implementing infrastructure projects.
And in the end we must discuss Vnesheconombank’s efforts to implement the Government’s crisis management measures. In particular, we’ll discuss how the companies that obtained VEB’s credits at the end of 2009 to refinance their loans at foreign financial institutions fulfill their obligations.
The funds made available by VEB made it possible to avoid stripping of Russian companies’ strategic assets pledged abroad. Initially we planned to spend 50 billion dollars for these purposes but actually we had to spend only 10.5 billion dollars, with a part of this sum having been already repaid.
I’d like to say it once more that assistance with refinancing debts is not a gift given by the state to major companies but credits that are to be repaid and serviced properly.
Now let’s move on to our agenda.
At a regular meeting of Vnesheconombank’s Supervisory Board a decision was taken to add the procedure for Vnesheconombank’s implementation of measures provided for by clauses 4 and 6 of Federal Law dated October 13, 2008 № 173-FZ “On Additional Measures for Supporting the Financial System of the Russian Federation” with a requirement for a minimum amount of equity of no less than 3.5 billion rubles for banks to be able to obtain subordinated loans.
Moreover, requirements to borrower banks for lending to the real economy were made more stringent, now they are to secure for a period of one year from the date of obtaining a subordinated loan availability of credits in their loan portfolio to be extended to high-priority economic sectors in line with recommendations of the Russian Economic Development Ministry, with repayment periods of no less than one year at an effective rate not exceeding the Bank of Russia’s refinancing rate increased by three percentage points in the amount no less than the sum of obtained subordinated loan and they are also to maintain the volume of such credits until they repay a subordinated loan.
Vnesheconombank’s Management Board was ordered to hold talks with borrowers over their agreement with the said terms of obtaining subordinated loans.
Vnesheconombank’s Supervisory Board made a decision to extend subordinated loans to the following Russian lending institutions: CJSC JSCB NOVIKOMBANK in the amount of 478 719 000-00 rubles, OJSC JSCB ROSEVROBANK in the amount of 980 000 000-00 rubles, OJSC TransKreditBank in the amount of 2 930 000 000-00 rubles, OJSC Bank Saint-Petersburg in the amount of 1 466 000 000-00 rubles JSCB Transkapitalbank (CJSC) in the amount of 729 998 500-00 rubles, OJSC Pervobank in the amount of 725 000 000-00, OJSC SKB-bank in the amount of 810 000 000-00 rubles, OJSC Promsvyazbank in the amount of 4.000.000.000-00, OJSC Bank ZENIT in the amount of 2 140 000 000-00 rubles, CJSC Bank Russky Standard in the amount of 4 958 783 400-00.
The Supervisory Board also approved a decision on extending by Vnesheconombank a credit line with a limit of up to 10 billion rubles for a period of up to 15 years to the winner of the tender held by the Administration of Saint-Petersburg for the right to conclude an agreement on building, reconstructing and operating facilities incorporated in the assets of the Pulkovo airport on the basis of public private partnership.
The Supervisory Board also approved Vnesheconombank’s participation in financing the project to build a propylene manufacturing complex with a capacity of 500 thousand tons a year at Tobolsk-Polymer (LLC) (the Tyumen region) by way of opening credit lines for Tobolsk Polymer (LLC) for a period of up to 13.5 years.
Origin: Press Office of Vnesheconombank
Contact person: Ekaterina Karasina
Phone: +7 (495) 608-46-93, Fax: +7 (499) 975-21-34
V.V Putin’s Opening Address
Good afternoon, Esteemed Colleagues!
Today we are holding our regular meeting of Vnesheconombank’s Supervisory Board. We are to discuss a wide range of issues relating to providing further support for the Russian financial system.
I’d like to remind you that last week we discussed at length the situation both in the banks themselves and the measures to increase lending to the real economy. A number of important decisions were made on improving the mechanism for extending state guarantees and on additional capitalization of banks.
I’d like to stress that the main goal of our efforts remains the same – it is to create the most favorable conditions for businessmen’s access to state funds and to make lending interest rates more acceptable for borrowers.
A key role in these efforts is delegated to Vnesheconombank. It should carry on performing its functions as a bank for development.
By the end of 2009, the amount of development credits extended by Vnesheconombank to the domestic economy will be in excess of 300 billion rubles.
High priority should be given to financing projects of national significance aimed at removing infrastructure restrictions and creating new jobs.
I’d like to ask you to focus on providing support for small and medium-sized enterprises. By the way, Russian state banks will commit 100 billion rubles for these purposes and VEB’s program is estimated at 30 billion rubles.
It’s very important to ensure that committed resources reach the real economy in full and are used extensively to support troubled enterprises. I hope that that the Bank will speed up its efforts to this end.
Under the difficult financial conditions we need to set stricter terms of extending credits. Up until now, Vnesheconombank has already extended credits to six commercial banks for a total amount of 257 billion rubles.
Today, Vnesheconombank’s Supervisory Board has considered 12 more applications worth more than 19 billion rubles. In this respect I would like to say that these funds will be made available under the new rules. This means that credits are to be extended for a period of no less than one year at the Central Bank’s interest refinancing rate plus three percentage points. So, it’s necessary to hold additional negotiations with banks and agree to operate on these terms.
Vnesheconombank would also continue to participate in implementing measures for the financial restructuring of Svyaz-Bank. In order to exercise control over the recovery and possible write-offs of Svyaz-Bank’s bad loans, which arose prior to last year’s October, I recommend to set up a special commission and incorporate representatives of law enforcement authorities into it. VEB’s Supervisory Board should exercise control over work performed.
Vnesheconombank’s issuance of foreign-currency denominated bonds would contribute to increased financing of the Russian economy. This step would make it possible to not only neutralize commercial banks’ excessive foreign currency liquidity but also commit raised funds to serve operations of domestic enterprises on foreign market for refinancing Central Bank funds raised earlier.
In the course of our meeting we are supposed to make a decision on issuing foreign currency denominated bonds for a total amount of 5 billion US dollars.
Today we’ll also analyze the Bank’s work on providing financing for Olympic facilities subject to decisions on providing these financial resources made earlier at the previous meeting of Vnesheconombank’s Supervisory Board.
In total, VEB has already provided financing for eight projects for the total amount of 63 billion rubles. These projects are the Sochi thermal power station, the Sochi Airport, the Port of Sochi Immertinsky, the main Olympic village, the Sochi Sea Port, the rubbish recycling complex in the city of Sochi.
Financing worth 1.8 billion rubles was already opened last week.
Let’s get down to work.
Origin: Internet-portal of the Government of the Russian Federation
Об утверждении Порядка осуществления Внешэкономбанком финансовой поддержки малого и среднего предпринимательства
Наблюдательный совет Внешэкономбанка утвердил Порядок осуществления государственной корпорацией «Банк развития и внешнеэкономической деятельности (Внешэкономбанк)» финансовой поддержки малого и среднего предпринимательства.
Vnesheconombank Chairman Vladimir Dmitriev’s Briefing on the Results of Vnesheconombank Supervisory Board Meeting
TV Channel Vesti-24
Host: Till the year-end, Vnesheconombank is to finance small and medium-sized businesses for an amount of at least 30 billion rubles. Prime Minister Vladimir Putin has said about it today at a meeting of VEB’s Supervisory Board. At the moment, Vnesheconombank Chairman Vladimir Dmitriev is starting his briefing at the White House. Our channel is going live.
Vladimir Dmitriev: Today we held a regular meeting of VEB’s Supervisory Board. At the meeting we discussed a wide range of issues dealing with the Bank’s business activity and some basic principles of managing certain lines of the Bank’s activity. In the first place, the meeting heard the report by the Chairman of Vnesheconombank on the work performed, the current status of the loan portfolio, the Bank’s performance for the previous year and Vnesheconombank’s liquidity standing. By basic indicators of loan portfolio, we achieved target figures. The figures provided for by Vnesheconombank’s development strategy for a period of 2008-2012, are 270 billion rubles. In the last year, our loan portfolio increased by 102 billion rubles and the profit for the last year exceeded target figures. It is about 9.5 billion rubles. Of course, balance sheet ratios are not in line with target ones in our strategy for obvious reasons. And one of the reasons is the Bank’s participation in a whole range of measures to cope with the crisis, above all, provided for by Law 173, that is, the Bank’s participation in refinancing Russian companies’ and banks’ foreign debts, extending subordinated credits and managing a portion of funds of the National Wealth Fund, here I mean our operation on the stock market. We have also discussed issues of supporting small and medium-sized business. Those who have been following our Bank’s activity apparently know that last year, the Supervisory Board approved a provisional procedure for working with small and medium-sized businesses. The procedure was provisional because the Russian Development Bank was the main operator of the program. And at a time when the provisional procedure was approved, the Russian Development Bank’s capital was not formally contributed to Vnesheconombank’s capital. Once the Russian Development Bank’s capital was contributed to Vnesheconombank’s capital and after we assessed our capabilities to implement this program we worked out a procedure that was agreed upon with all interested ministries and departments and, above all with the Ministry of Economic Development and the Finance Ministry. We agreed upon this program with main economic entities and organizations, which promote interests of small and medium-sized business and these, above all, are “Opora” and Delovaya Rossia. VEB’s Supervisory Board has approved this procedure today. We also stated that 9 billion rubles had been allocated to support small and medium-sized business through regional banks with which the Russian Development Bank has appropriate agency agreements. But it is safe to say that this figure is a lot higher if we mean Vnesheconombank’s banking group, which incorporates Svyaz-Bank and Globex Bank. And we are interested in carrying on supporting small and medium-sized business and step up this activity through Vnesheconombank’s subsidiary banks. We also agreed to allocate up to 30 billion rubles to support small and medium-sized business this year. We were tasked with increasing dramatically the share of small and medium-sized businesses financed through our program and operating in the real sector of the economy, in innovation sectors and in various industries. And in this respect, I would like to remind you that yesterday Vnesheconombank signed and agreement with the largest national development institution, namely, Germany’s Banking Group KfW on providing 200 million euros to regional banks this year to support small and medium-sized businesses operating in innovation and, above all, energy-saving technologies sector and also in those sectors that reduce green house effect. We have also discussed and approved basic principles of Vnesheconombank’s participation in financing the construction of Olympic facilities. According to Russian Prime Minister and Chairman of our Supervisory Board Vladimir Putin, Vnesheconombank is becoming one of the Government’s main financial instruments for funding Olympic facilities. But the financing procedure agreed upon and approved today provides, of course, for participation of interested investors in the following proportion: 30 - investors’ funds, 70 – Vnesheconombank’s borrowed funds. This is not, of course, patronage and sponsorship; this is participation in certain stakes of the state and private business. We obtained the Government’s authorization for financing Olympic facilities upon appropriate condition precedents. We have also dealt with other projects associated with Olympic infrastructure and funding specific Olympic sports facilities. These are decisions taken earlier on “Roza Khutor” and “Gornaya Karusel.” The meeting of VEB’s Supervisory Board has also backed Vnesheconombank’s proposal to extend a subordinated loan to Gazprombank. The Supervisory Board recommended to continue extending subordinated loans to other banks, with much emphasis on ensuring that funds allocated by the state and intended for augmenting Russian banks’ capital base are used to finance top-priority sectors. They include agriculture, small and medium-sized business, defense-industrial complex and a number of other lines of our banks’ investment and credit activities. In this respect, strict requirements have been set out; they stipulate that for a period of at least half a year prior to extending a subordinated loan, credits extended to top-priority sectors in banks’ loan portfolio should be no less than the amount of subordinated loan to be extended, and later on, during an entire tenor of subordinated loan, funds in the amount of no less than the sum of subordinated credit, should be used to finance top-priority industries. To this end, Vnesheconombank like the Central Bank will dispatch its authorized representatives (commissioners) to commercial banks to exercise control over how banks fulfill their obligations to finance top-priority sectors.
Today we have also discussed an issue of Vnesheconombank’s participation in rescuing Hungary’s airline Malev. In this respect, we have taken appropriate decisions and their implementation depends on the Hungarian side’s readiness for symmetrical participation in rescuing Malev Company. We entered into the project earlier by financing the purchase of Malev Company by Airbridge Company. And naturally, we can’t be indifferent to the future of this Company. If the Company cooperates with Russian air carriers it will be able to increase its passenger traffic significantly and improve its financial standing substantially.
These are almost all basic issues we have discussed today at our Supervisory Board meeting. If you have any questions I would be pleased to answer them.
Sergei Bondarenko, Information Agency Interfax. Vladimir Alexandrovich, would you tell us please if the Supervisory Board has approved today a subordinated loan to Gazprombank alone, what’s the amount of the loan? To my best knowledge, they asked for 15 billion. Has the Supervisory Board considered any other proposals for extending subordinated loans, what are their amounts? Could you specify the banks that applied for subordinated loans and the amounts of these credits? Thank you.
Vladimir Dmitriev: We have discussed today not only Gazprombank but also a number of other banks that submitted documents of various degrees of preparedness to Vnesheconombank. We have taken a decision over Gazprombank. In fact, a credit extended by Vnesheconombank from the funds of the National Wealth Fund amounts to 15 billion rubles, given that its shareholder Gazprom is to provide a similar amount of funds to increase the bank’s capital. I can’t name any other banks that we have discussed because we haven’t taken any decisions over them. But I believe that in the most immediate future, we’ll discuss other banks as well with due regard to criteria I’ve already mentioned, and appropriate decisions are sure to be taken.
Igor Karachin, TV Channel “Rossia”. Vladimir Alexandrovich, in his speech the Prime Minister said that one of the most important objectives, and you are fulfilling it, was to extend various credits not only to major borrowers but also to small and medium-sized businesses. Could you, without going into particulars, say about the way the situation is developing in these lines of activity? Maybe, you could tell us how many small and medium- sized businesses receive financial support from your Bank in the regions? Is there any average amount of a credit, are there any microcredits extended by your Bank? What are the leaders in obtaining such credits by federal districts, could you name specific districts, for example the Central Federal District or maybe the Far Eastern Federal District that are the leaders in obtaining such credits? Thank you.
Vladimir Dmitriev: Actually, the dynamics of extending credits to small and medium-sized business demonstrates clearly that the program implemented through the Russian Development Bank is in high demand and can be significantly expanded through adding new industries and new regions. But in the first place, it should be noted that we would be able to increase the amount of credit resources to be extended from 9 billion to 30 billion rubles as early as this year and we have no doubts that this target figure will be reached. This is our first task and the second task assigned to us is to place much emphasis on real sectors of the Russian economy, on innovation business. I’d like to say that the dynamics of implementing the program aimed at supporting small and medium-sized business through the Russian Development Bank for a period of four years was quite positive. Four years ago about 60 percent of the loan portfolio accounted for trade and service sector and only 17-18 percent accounted for the real sector of the Russian economy, currently the proportion is as follows: 60 percent accounts for industrial sector, that is, construction industry, transport, and the remaining part - for service sector and trade. At the moment, trade accounts for the 17-18 percent that accounted earlier for the real sector of the economy. It should be also noted that we are not the only institution responsible for supporting small and medium-sized business with a significant portion of our loan portfolio accounting for small and medium businesses. Nevertheless, some experts believe that this program could operate a lot more efficiently if commercial banks were responsible for implementing it without establishing such a multi-tier system of financing. But in our opinion, we have to take into account two key considerations. Fist, commercial banks whose main objective is to generate profits are, of course interested in high interest rates and short payback periods. And it is for this reason, most of credit resources provided to small and medium-sized business account for the trade sector. And it is for this reason, commercial banks’ loan rates are prohibitively high and unacceptable for small business which give high priority to innovations, high technologies and industrial sectors. All interest rates in excess of 20% are perhaps within the capabilities of only highly profitable businesses in the trade sector. It is extremely difficult to exercise control over a great number of banks in terms of their activities sectorial priorities. But the program justifies itself because the Russian Development Bank is responsible for exercising control not only over the proper, purpose-oriented use of credit resources with due regard to sectorial priorities but also over interest rates. And on average, an interest rate for end borrowers through the program of supporting small and medium-sized business is about 16 percent. Of course, if our Bank’s capital is increased, we’ll continue, with due regard to minimum margin needed to cover administrative costs, to finance, lend regional banks and institutions responsible for developing small and medium-sized business at minimal interest rates.
As far as regions are concerned, the Central Federal District, Tatarstan and the Volga region are the leaders in obtaining subordinated loans. But we are becoming increasingly aware that we should move beyond the Urals and enhance our positions in Siberia and the Far East. We believe that it is crucially important to work in close contact with various sectors and companies to create new jobs in small and medium-sized business and here I mean job creation for those people, who for obvious reasons such as downsizing, lack of orders, output contraction, lose their jobs. In this regard, we are working with our steel workers, automobile industry, Russian railways, that is, with those sectors that were hardest hit by the crisis and suffered huge job losses.
Rossiiskaya Gazeta. Vladimir Alexandrovich, we have found out that yields from investing pension savings funds under VEB’s management reached last year a negative value of minus 0.46 percent per annum. This means that for the first time over a period of four years VEB lost some part of pension savings funds. Would you comment on these data please and how is VEB going to manage pension funds to make them generate incomes?
Vladimir Dmitriev: Nevertheless, I would like to draw your attention to the following fact: despite the said figures, Vnesheconombank is one of the leaders among almost 60 trust management companies. By yield rates, we are in third place. Only one company showed positive profitability. All the remaining companies and an overwhelming majority of private trust management companies showed negative profitability and it was a lot lower than that of Vnesheconombank. And in my opinion, it would be wrong to ask us when we are ever going to make pension savings funds generate yields, given the current situation and those instruments, in which VEB is allowed to invest funds under its current investment declaration, and given the current conditions on the stock market. I would like to stress that we showed positive profitability for nine months of the last year and again it was a lot better than most private trust management companies showed. We hope that after amendments to Federal Law 101,which sets forth our investment declaration, have been passed, we’ll be able to diversify our portfolio and invest pension funds in the bonds of our highly reliable issuers, deposit free funds and invest them in mortgage-backed bonds not secured by the state. We think that a rational combination of these instruments and professionalism of our experts would enable us, and I’d like to stress it again, to be as before among leading trust management companies responsible for managing pension savings funds.
Alina Glushakova, RIA Novosti: Have you agreed upon the mechanism for financing Olympic facilities? What sort of mechanism is it going to be? What about loan rates? And one more question: Yesterday Alexei Kudrin said that VEB had suspended programs to refinance foreign debts. Have you suspended these programs? Or have you made a sort of pause?
Vladimir Dmitriev: As far as Olympic facilities are concerned, and here I mean their non-profit component, we have agreed upon approaches in general and, as I have already mentioned, a proportion of private investors’ participation share and that of Vnesheconombank is to be 30/70 respectively. As to interest rates, they will be based on a refinancing rate set by the Central Bank increased by a margin of no more than one and a half percent. This means that Vnesheconombank plans to operate at a minimum interest margin that may or may not cover administrative costs and protect the borrower and a project as whole against risks. I would like to stress that as a rule commercial banks plan to operate at a margin of no less than 3 percent to cover administrative costs. Higher margin rates pose risks. Therefore, as you can see, a refinancing rate of one and a half percent is more than a serious privilege for the investor participating in financing the construction of Olympic facilities, which are not associated with their commercial component. As far as refinancing of foreign debts is concerned, actually, we have suspended transactions in refinancing foreign debts; we have at least stopped accepting new applications because the measures taken at the end of the last year were taken, so to say, on an ad hoc basis, as the Bank’s customers, who received refinancing, borrowed from foreign financial institutions against collaterals, the loss of which posed a threat of losing strategic assets. These were strategic assets both in terms of their sectorial significance and in terms of their significance to the economy and socio-ecological situation in individual regions. And we didn’t have any other instruments. Now we can see that Russian banks have excess foreign exchange liquidity estimated at no less than 25 billion dollars and this means that companies interested in refinancing their foreign debts can apply to commercial banks; and commercial banks would assess risks, take appropriate collaterals and help companies to settle their relations with creditors. And we can also see that a number of companies including those who were denied refinancing by Vnesheconombank somehow manage to find ways of settling their relations with foreign creditors. They either find institutions that repay their debts or as a rule agree with creditors to restructure their debts. We stopped refinancing foreign debts in order to preserve foreign exchange and gold reserves but we can start refinancing them in the case that a number of Russian banks, which meet criteria for refinancing their foreign debts, won’t be able to settle their debts in any other ways. In particular, many banks might simply fail to be in line with one-borrower limit and for this reason they won’t be able to apply to commercial banks for receiving refinancing. At the same time, they won’t be able to settle their relations with creditors either. So, in each specific case, our Supervisory Board will take individual decisions. So far, we can see no reasons to dramatize the situation. Moreover, it is already well-known that in order to absorb the said excess foreign exchange liquidity we‘ll issue foreign-currency-denominated bonds, and yields from these bonds will be used to compensate for resources we received from the Central Bank, from its foreign exchange and gold reserves and these yields might also be used to restart the program of refinancing through Vnesheconombank.