Vnesheconombank Chairman Vladimir Dmitriev’s Interview on the Results of Vnesheconombank’s Supervisory Board Meeting
TV Channel VESTI
HOST: Last year, VEB’s loan portfolio exceeded 350 billion rubles. The Bank started to finance 21 projects. Today, the Bank’s Supervisory Board has discussed VEB’s performance for the year 2008. And now VEB Chairman Vladimir Dmitriev is giving a briefing. We are offering you a live broadcast of it.
Vladimir DMITRIEV, Chairman of State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’: 70 percent of the Bank’s loan portfolio accounts for credits extended for a period of more than three years, this means that it is a long-term portfolio.
The Supervisory Board meeting also discussed and approved the results of the tender for selecting an auditing firm. Ernst and Young auditing firm was approved as auditor for the year 2009.
VEB’s Supervisory Board members also discussed issues relating to the current status of the Bank’s loan portfolio that was formed in the course of implementing measures for securing financial sustainability and, in particular, measures for refinancing Russian companies’ foreign debts. You know that out of 50 billion dollars only 10.5 billion dollars were used. We are well aware that some companies have problem repaying credit resources extended by Vnesheconombank through using gold and foreign currency reserves in due time and in full. So, today the Supervisory Board has agreed upon general principles and general approaches with regard to the borrowers that find it difficult to repay debts. If necessary, their debts we’ll be rolled over for 1 year provided that they unconditionally fulfill the obligations they assumed under original credits and in line with the original debt repayment and servicing format.
Today, Vnesheconombank’s Supervisory Board has made a decision on making Vnesheconombank’s transactions with financial resources of the National Wealth Fund on the stock market more flexible. This issue is also being addressed in terms of purchasing a part of Rostelecom’s shares using the National Wealth Fund’s financial resources. Vnesheconombank is to buy these shares out from KIT Finance.
Today, we also discussed another investment project that had already been dealt with by our Management Board in somewhat different configuration. Here, I’m talking about setting up production of modern engines YAM3-530 meeting Eurostandard 4 and 5 at the Yaroslavl engine factory. As a result of consultations at the Government Office and line ministries, the original format of the project was optimized. And now Vnesheconombank’s participation share in the project was reduced from a bit more than 10 billion to 6 billion rubles. The project itself underwent some changes brought about by its optimization. We hope that in its current configuration it will become highly instrumental in upgrading diesel engines and creating a range of engines that are in much demand by a number of automotive industry companies in our country and abroad.
We have discussed issues of financing Olympic facilities that required approval by the Bank’s Supervisory Board but these issues are of technical nature. In any case, we reported to the Supervisory Board on our current work with borrowers implementing investment projects in the city of Sochi in the course of preparations for the Sochi Olympics. We started to finance the project ‘The Sochi Cargo Port” and in the most immediate future we’ll start financing the construction of the Sochi Airport. This is a short summary of our Supervisory Board’s agenda and decisions that were taken.
Agency PRIME-TASS, Elena Malysheva: Couldn’t you tell us if you have discussed an issue of Rusal’s debt restructuring. Rusal is known to have offered VEB to issue bonds to cover its debt. Have you taken any decisions on this issue?
Vladimir DMITRIEV: Today we have made a decision of universal nature; it deals with the borrowers that have problem repaying their debts. As I have already said we agreed on terms and conditions allowing to roll over credits for a period of one year. But our approach is quite strict. The Russian Prime Minister voiced it once at his meeting with Duma deputies and it became a sort of guideline. The approach is that in the case that the borrower is not in a position to fulfill its obligations, pledged property is to be recovered. We have not discussed issues with regard to individual borrowers but addressed the current situation and the problems some borrowers are confronted with and we approved a single, universal approach to potential defaulters.
RIA Novosti: Could you tell us about how much money from the National Wealth Fund is planned to be used for purchasing Rostelecom’s shares. And on what terms? Thank you.
Vladimir DMITRIEV: In the first place, we are going to use money of the National Wealth Fund held now by Vnesheconombank. Here we are talking about a stake whose amount is less than the one being purchased by the Deposit Insurance Agency. And we insist that this stake amounting to about 40 percent of all shares should be managed by Vnesheconombank taking into an account an objective of consolidating the state’s assets in the telecommunications sector and here I mean Svyazinvest and Telecom.
Interfax: Are you going to sell any shares or bonds purchased for the money of the National Wealth Fund or are you going to use available resources of the National Wealth Fund?
Vladimir DMITRIEV: The balance of available funds is not sufficient to participate in buying out the stake offered to us from KIT Finance. So, we’ll have to sell certain assets purchased on the stock market in order to use proceeds to prevent KIT Finance from going bankrupt.
-Which stake are you going to purchase?
Vladimir DMITRIEV: In total, I’m talking about KIT Finance’s 40 percent stake. The purchase price is at the lower end of the range and amounts to 230 rubles per share. In total, we are purchasing a little more than 10 percent.
-You mean VEB?
Vladimir DMITRIEV: Yes, I do.
-And is the Deposit Insurance Agency going to purchase remaining shares?
Vladimir DFMITRIEV: Yes, it is.
Is the Deposit Insurance Agency going to purchase shares for its own money?
Vladimir DMITRIE: Yes, it is
On Decisions Made by Vnesheconombank’s Supervisory Board
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
Vnesheconombank’s Supervisory Board Regular Meeting Held
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 Supervisory Board Regular Meeting Held
Russian Prime Minister V.V. Putin chaired a meeting of Vnesheconombank (VEB) Supervisory Board.
V.V. Putin’s Opening Address:
Good afternoon, Dear Colleagues,
We need to discuss a wide range of issues today. And one of them is Vnesheconombank’s participation in implementing the Government’s measures to cope with the crisis, including the Bank’s participation in the programs designed to support small and medium-sized business. Moreover, we’ll discuss VEB’s proposals for its participation in the construction of Olympic facilities.
I have already spoken today about additional measures for supporting the banking system at a meeting of the Government. It’s also a matter of providing additional funds to Vnesheconombank to enable it to expand the scope of its activity and fulfill its obligations and decisions.
In accordance with the Law and the Memorandum on Financial Policies, one of the Bank for Development’s top-priority objectives is to support small and medium-sized businesses and, above all, those operating in the real sector of the economy that introduce high technologies and create new jobs. Today, as we see it, it is the most topical task.
By now, the Bank has already extended credits worth 8.9 billion rubles and till the year-end is to finance projects for a total amount of at least 30 billion rubles. We must approve today all the documents required for implementing this program.
Another serious issue on the agenda deals with the preparations for the Sochi Olympics. VEB is tasked with becoming one of principal creditors of Olympic facilities construction. In the conditions of the world crisis, this step would make it possible for developers to raise long-term financial resources on acceptable terms and of course with due regard to reliable performance guarantees.
In this regard, I think it necessary to work out a financing scheme in such a way as to use VEB’s credit resources to pay for actually performed work, exercising, of course, permanent control over their real volumes and value.
VEB’s Management Board has developed basic approaches for the bank’s participation in financing Olympic facilities. We’ll also discuss them today.
Let’s proceed to discussing issues on our agenda.
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.
On Vnesheconombank Supervisory Board’s Decisions
Vnesheconombank’s Supervisory Board approved the introduction of changes to the Procedure for Implementing Measures by Vnesheconombank provided for by articles 1 and 2 of Federal Law N 173-FZ “On Additional Measures for Supporting the Financial System of the Russian Federation”.
The new revision of the Procedure has a number of changes concerning mandatory and additional requirements to the borrower (credit institution). In particular, obligations of only those Russian credit institutions are to be refinanced whose own funds amount to no less than 15 billion rubles and whose credit rating is not lower than the established level (B- under S&P rating scale) and against which the Bank of Russia imposed no sanctions as of the date of submitting an application for refinancing. Additional requirements to borrowers from among credit institutions are to submit aggregate data on their loan and guarantee portfolio for the year 2008 with regard to credits and guarantees extended to industries of the real sector of the Russian economy as well as Strategies for Lending the real Sector of the Economy and Population of the Russian Federation for a Period of 2009-2011.
Moreover, the Procedure now includes requirements to the terms of credit transactions provided that the borrower is a credit institution. They stipulate that the Bank shall receive a letter of recommendation from the Central Bank with a positive conclusion that the Bank can conduct a Credit Transaction and that the borrower shall guarantee that representatives of the Central Bank and/or authorized government bodies are incorporated into the borrower’s management bodies and that Russian owners’ share in the borrower’s capital is not lower than 50%+1 share during a credit transaction period and that the borrower shall provide acceptable security.
The Supervisory Board also approved Vnesheconombank’s participation in refinancing foreign debt obligations worth 1.5 billion US dollars of a company in the mining and smelting complex whose operation is of great socio-economic importance for the Russian Federation.
Origin: Press Office of Vnesheconombank
Contact person: Ekaterina Karasina
Phone: +7 (495) 608-46-93, Fax: +7 (499) 975-21134
Vnesheconombank’s Supervisory Board made a decision to appoint Mikhail Kopeikin as Management Board Member – Vnesheconombank Deputy Chairman. Earlier, Mr. Kopeikin was Deputy Chief of the Administration of the Government of the Russian Federation.
Origin: Press Office of Vnesheconombank
Contact person: Ekaterina Karasina
Phone: +7 (495) 608-46-93, Fax: +7 (499) 975-21-34
On Decisions by Vneseconombank Supervisory Board
Vnesheconombank’s Supervisory Board approved Vnesheconombank’s participation in refinancing a number of transactions by oil and gas complex enterprises and OJSC Bank VTB, the operation of which are of great socio-economic importance to the Russian Federation, in the total amount of 2 billon US dollars.
At present, the total amount of transactions approved by the Supervisory Board in refinancing foreign debt obligations of non-credit real sector enterprises and a credit institution responsible for financing the real sector of the economy is 11.8 billion US dollars.
The Supervisory Board also approved the first transactions in extending subordinated loan facilities to Russian banks. Thus, Vnesheconombank started to implement certain provisions of Federal Law dated 13.10.2008 N 173-FZ “On Additional Measures for Supporting the Financial System of the Russian Federation”.
Subordinated loan facilities in the total amount of 17.1 billion rubles are being extended to Russian credit institutions operating actively in the real sector of the economy: Alfa-Bank - in the amount of 10.2 billion rubles, Nomos-Bank – 4.9 billion rubles, the Khanty-Mansi Bank – 2.0 billion rubles
Origin: Press Office of Vnesheconombank
Contact person: Ekaterina Karasina
Phone: +7 (495) 608-46-93, Fax: +7 (499) 975-21-34
On the Results of Vnesheconombank Supervisory Board Meeting
Commenting on the results of the meeting, Vnesheconombank Chairman Vladimir Dmitriev said at a press briefing that Russia banks and companies submitted to VEB applications worth 78 billion dollars for refinancing foreign debts. According to him, 9.8 billions in applications were made available and out of them 7.5 billion dollars have been already transferred to banks and companies for refinancing their debts. “In the near future, we expect funds to be transferred for conducting a number of transactions, which were approved”, said V. Dmitriev.
V. Dmitriev also said that Vnesheconombank’s Supervisory Board had resolved to consider applications for refinancing from state monopolies provided that they carried on implementing investment programs. “Vnesheconombank’s Supervisory Board made a decision to consider natural monopolies’ applications for refinancing provided that they carry on implementing their investment programs”, he stressed.
Moreover, V. Dmitriev said that Vnesheconombank’s Supervisory Board recommended to provide state financing to Alfa-bank, NOMOS-bank, Khanty-Mansi bank. As he put it, “these banks both provide retail banking services and service corporate customers which play a significant regional role.
“VEB is planning to submit a concept for development of its subsidiaries such as the Russian Development Bank, Roseximbank, Svyaz-bank and Bank Globex by mid 2009”, said V. Dmitriev.
Vnesheconombank Chairman Vladimir Dmitriev’s Briefing on the Results of Vnesheconombank Supervisory Board Meeting
Vladimir DMITRIEV, Vnesheconombank Chairman:
In the context of the Bank’s current activity as a development institution I would like, above all, to say that this is the third Supervisory Board meeting where we consider issues of refinancing foreign debts of Russian companies and banks.
Summing up our recent activity we can say that the Supervisory Board made decisions on refinancing in the amount about 10 billion dollars, to be more precise, 9 billion 800 million dollars, out of which 7.5 billion dollars have been already allocated for refinancing Russian companies’ foreign debt obligations.
In the near future, we expect funds to be transferred to finance a number of approved transactions. All in all, we have received applications for refinancing in the amount exceeding 76 billion dollars, to be more specific, even 78 billion dollars. Out of them, 28 billion are requested by banks and 50 billion dollars - by companies.
Decisions offered for consideration by the Supervisory Board are based on the procedure and accords approved by the Supervisory Board and specified in the Procedure for Refinancing Russian Organizations’ Foreign Debts. These decisions and proposals go through appropriate corporate decision-making bodies. They include the Investment Transactions Development Committee, the Credit Committee and the Bank’s Management Board. We work in close contact with core ministries and departments. And in this respect, today’s Supervisory Board meeting, against the backdrop of new applications submitted to Vnesheconombank, was an important stage in making required adequate decisions because, among other things, we dealt with applications received from natural monopolies. And the Supervisory Board decided to consider these applications in the context of implementing investment programs by the largest state-run companies. These programs are being examined now and decisions that will be eventually taken on refinancing should be based on the need for carrying out investment programs by state-run companies in line with decisions to be made by the Government.
Moreover, the Supervisory Board refused to accept some applications because they were not formally in line with the procedure for consideration of applications. Here I mean those companies that borrowed from foreign banks’ Russian subsidiaries or the companies that borrowed without security or with security the loss of which does not entail serious risks associated with national economic security, regional security, loss of strategic assets by the Russian Federation.
The current Supervisory Board and its decisions are important in a sense that an issue of refinancing foreign debt obligations of one of the largest Russian banks, namely, Bank-VTB was considered for the first time. And as far as the State’s support for commercial banks is concerned it’s important to underline the unanimous opinion of Supervisory Board members that we should refinance debt obligations of both companies and banks. We should refinance those debt obligations that are associated with lending real sectors of the Russian economy, the development of banking business aimed at achieving current and strategic economic objectives and supporting corporate customers in such top-priority sectors as defense industrial complex, agriculture, construction complex, a number of other sectors, small and medium-sized business and other top-priority lines of activity.
The same approach was recognized as the only correct and justified one upon considering extending subordinated loans. This theme was also discussed at today’s Supervisory Board meeting. The Supervisory Board approved applications submitted by Alfa –Bank, Nomos-Bank and the Khanty-Mansi Bank. These banks are involved in both providing retail-banking services and servicing corporate customers and play an important role at a regional level. In particular, I mean the Khanty-Mansi Bank. And here the Supervisory Board adopts quite a strict and justified approach related to the need to use state financial resources in the form of subordinated loans extended to corporate customers for them to operate in specific sectors of the real economy in line with priorities set by the Government.
At its latest meeting, the Supervisory Board also considered an issue of Vnesheconombank’s participation in rescuing Bank Globex and Svyaz-Bank. The Supervisory Board backed Vnesheconombank’s proposal for pursuing particular lines of activity with regard to each of these banks in order to take additional measures for securing their financial sustainability and further development in the interests of State Corporation ‘Bank For Development and Foreign Economic Affairs as well as in the interests of those customers, those corporate borrowers, those natural entities who are served by these banks. We know that Svyaz-Bank is a system-forming bank as 15 million pensioners receive their pensions through this bank. The Bank has its branches in 49 constituent entities of the Russian Federation as well as 5 thousand outlets selling the Bank’s services. Actually, half a million employees of the Post of Russia receive their salaries through Svyaz-Bank and the Bank works with such companies as Telecom, Svyazinvest and others. That is why the approved plan envisages further developing the services sector and providing both borrowed funds and modern banking services to corporate customers, as well as offering retail banking services. The same applies to Bank Globex. The Bank whose balance sheet as is the case with Svyaz-Bank would be cleaned up thus allowing this bank to perform functions of an auxiliary or supporting structure for achieving objectives set before State Corporation ‘Bank for Development and Foreign Economic Affairs.
We agreed with the Supervisory Board that by mid next year we’d formulate and submit a comprehensive operational concept of all Vnesheconombank’s subsidiary banks activity. These banks are the Russian Development Bank, Russian Export-Import Bank, Svyaz-Bank, Bank Globex.
The prospect for consolidation is obvious; at least, for a part of these banks and here I mean consolidation of their businesses and establishment of a single major banking structure with due regard to the Post of Russia’s core activities. Bank Globex, Svyaz-Bank and the Russian Development Bank have gained considerable experience in working with major corporate customers, with natural entities. They are experienced enough in implementing wage schemes, managing pension savings funds and in supporting small and medium-sized business which is Vnesheconombank’s top-priority objective. We are going to pursue this objective not only relying on well-proven formulas cooperating with the Russian Development Bank, which in its turn is working with regional banks, but also working directly through our new subsidiary banks that have an extensive branch network. Of course, we are going to pursue this objective working directly with regional banks. That all means that we are establishing a major, core business-oriented group of banks designed to work directly and in close contact with small and medium-sized businesses through regional banks. We are putting in place a system of guarantees and a system of cooperation with regional institutions responsible for the operation of small and medium-sized businesses and guaranteeing repayment of credits extended to finance small and medium-sized business.
Thus, summing up the decisions taken I would like to emphasize the fact Vnesheconombank’s proposals were approved.
And finally, I would like to say that we submitted for consideration an issue of increasing Vnesheconombank’s charter capital with no decision on this issue having been taken. This is a very important issue because the Bank’s activity on extending subordinated loans, refinancing foreign debt obligations of Russian companies and banks, rescuing banks, diversifying the management of the National Wealth Fund, using part of resources, here I mean 175 billion rubles allocated to the Bank for operating on the Russian stock market automatically reduces Vnesheconombank’s capital base both in case of extending subordinated loans and revaluating securities and funds allocated by the Finance Ministry from the National Wealth Fund are recorded on the Bank’s balance sheet and therefore negative revaluation decreases the Bank’s capital. Building up reserves for refinancing foreign debt obligations also narrows Vnesheconombank’s capital base. And if we are to speed up Vnesheconombank’s activity as a development institution, Vnesheconombank’s capital is bound to be increased. It’s a matter of capital size. It should be adequate. In this respect, the government may take a different decision – in particular, a decision on guarantees. For example, in KfW, a German Development Bank, our peer, part of its obligations is secured by state guarantees.
- What amount of funds is expected to be allocated to refinance Bank VTB’s debt and on what terms? Could you specify the amounts of subordinated credits approved by the Bank’s Supervisory Board to be extended to Alfa-Bank, Nomos-Bank and Khanty-Mansi Bank?
Vladimir DMITRIEV: The Supervisory Board approved a proposal for allocating 950 million US dollars to Bank VTB but VTB is ready to co-finance 25% of this amount.
The Supervisory Board also approved extending credits to banks that are among the largest thirty banks: to Alf-Bank in the amount of 10.2 billion rubles, Nomos-Bank – 4.9 billion rubles, the Khanty-Mansi Bank – 2 billion rubles.
- One more point on the Bank’s capital increase. What amount do you expect to receive?
Vladimir DMITRIEV: I am not ready to give exact figures because they are to be agreed upon with the Finance Ministry, the Ministry of Economic Development and the Central Bank as well. But I mentioned the factors that worsen our Bank’s balance sheet indicators. I became increasingly confident that our approach had been heard and Vnesheconombank really needs the stated amounts to address the tasks it is currently fulfilling. Problems are piling up, become more complicated and comprehensive and require tremendous efforts. It’s clear to everybody. Nevertheless, we believe that the Bank must and can continue its core activity as a development institution. By the way, an increase in the Bank’s capital is required not only for major projects which were announced but also for working with small and medium-sized business. We plan that 30 billion rubles in additional capital would be allocated to small and medium-sized business and these 30 billion rubles will be included into the total amount of the Bank’s capitalization. We expect to receive several hundreds of billions of rubles.
- Vladimir Alexandrovich, you outlined a program of rehabilitating the two banks, namely, Bank Globex and Svyaz-Bank. Do you need additional money to rehabilitate them?
Vladimir DMITRIEV: In our opinion, the financial resources we received from the Central Bank are sufficient to rehabilitate the banks and get them to operate normally.
- Don’t you need any additional funds?
Vladimir DMITRIEV: This issue is under consideration, but today’s decisions were based on the amount of resources, which has already been allocated to Vnesheconombank.
- You’ve said that these additional resources will be somehow used to render assistance to the Post of Russia. Could you explain in more detail how you are going to use them?
Vladimir DMITRIEV: So far I can’t say anything because today’s decision states Vnesheconombank’s readiness to prepare a comprehensive Plan of Business Consolidation and a program to develop our subsidiary banks by mid next year. And here I mean not only Bank Globex and Svyaz-Bank. One of scenarios is to establish a structure similar to the German Post Bank. This concept is now being developed at the Post of Russia. We have already studied the concept and think it is worthwhile. But I’d like to reiterate that we are supposed to prepare a comprehensive plan by mid next year so that we can study various scenarios and among other things learn from international business experience. And I’d like to emphasize that the current situation in the banking community makes it necessary for us to consolidate business and enhance capital base.
- So, you haven’t made up your mind yet which banks will be incorporated into this new post holding or a post bank?
Vladimir DMITRIEV: From our point of view, Roseximbank is a specialized financial institution responsible for implementing a system of guarantees to promote Russian industrial exports. But as far as three other banks - the Russian Development Bank, Bank Globex and Svyaz-Bank - are concerned we believe that they should be consolidated and a financial structure should b be established on their basis.
- Is this going to be Vnesheconombank’s subsidiary?
Vladimir DMITRIEV: If we decide to establish this sort of financial structure, it’s going to be Vnesheconombank’s subsidiary for a certain period of time. Then it’s up to the Supervisory Board to decide whether we should attract strategic investor or transform them into joint stock companies. These are possible options. But above all should secure sustainable development and operation of Svyaz-Bank and Bank Globex and should not negatively impact to these banks’ current activities.
- Thus, their main line of activity would the Post of Russia and small business.
Vladimir DMITRIEV: There is no doubt about it.
- Thank you. And one more thing. You said that you would reconsider some of investment projects you had already approved?
Vladimir DMITRIEV: Among other things we may…
- You’ll quit some projects?
Vladimir DMITRIEV: I do not rule out the possibility of reconsidering decisions on those projects, which have been approved but not accepted for financing. So, in the most immediate future, actually, in the coming two weeks (our experts have already agreed upon many things with line ministries) we have to examine our loan portfolio in the most serious way for making final decisions and for the Supervisory Board to approve them with regard to projects already approved and, more so, accepted for financing but with regard to which no corporate decisions have made.
- This applies to projects, which were approved by your Bank as a Bank for Development rather than a “Rescuer Bank”.
Vladimir DMITRIEV: You are quite right. And as to our rescue efforts, there is no other way out - we have to rescue.
-Thank you. It is too early to say what projects you are going to quit, isn’t it?
Vladimir DMITRIEV: Yes, it is.
- Thank you.