Vnesheconombank Chairman Vladimir Dmitriev’s Interview on the Results of Vnesheconombank’s Supervisory Board Meeting

1 june 2009 года

TV Channel VESTI
01.06.2009, 20:50

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

-Thank you.


On Signing Memorandum between Vnesheconombank, OJSC RZHD and OJSC TransKonteiner

28 may 2009 года

In the course of 4th international Business Forum ‘Strategic Partnership 1520’ (the city of Sochi)State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’, OJSC Russian Railways (OJSC RZHD) and OJSC TransKonteiner entered into a Memorandum on Cooperation in implementing projects aimed at developing transit railway transport corridors connecting Europe and Asia.

On behalf of Vnesheconombank the Memorandum was signed by Management Board Member – Vnesheconombank Deputy Chairman Anatoly Ballo, on behalf of OJSC RZHD – by Senior Vice President Boris Lapidus, on behalf of OJSC TransKonteiner – by General Director Petr Baskakov.

Under the Memorandum the parties agreed to cooperate and coordinate their efforts in implementing projects to develop international transit railway infrastructure, establishing a rail through service to carry out cargo transportation on the territory of Kazakhstan and Russia and in creating a unified infrastructure to handle cargoes in order to boost Russia’s transit potential and encourage the export of transport services.

The implementation of this Memorandum would help to expand the transport-logistic infrastructure in Russia and CIS countries, reintegrate transport networks of the former Soviet republics as well as enable Russian and CIS transport companies to implement joint projects aimed at boosting the development of transport business’ various segments.

Under the Memorandum on Vnesheconombank’s financial policies, one of the Bank’s main lines of investment activity is to implement investment projects aimed at removing economic growth infrastructure restrictions including the development of transport infrastructure.


Origin: Press Office of Vnesheconombank
Contact person: Ekaterina Karasina
Phone: +7 (495) 608-46-93, Fax: +7 (499) 975-21-34


Vnesheconombank Approves the Starting Date for Placing Bonds Series 01

28 may 2009 года

Vnesheconombank approved the starting date of June 3, 2009 for placing bonds series 01 for an amount of 2 billion US dollars.


Origin: Press Office of Vnesheconombank
Contact person: Ekaterina Karasina
Phone: +7 (495) 608-45-93, fax: +7 (499) 975-21-34


On Agreement between Vnesheconombank and the Government of the Republic of Mordovia

27 may 2009 года

State Corporation ‘Bank for Development and foreign Economic Affairs (Vnesheconombank)’ and the Government of the republic of Mordovia entered into an Agreement on Cooperation.

On behalf of Vnesheconombank the Agreement was signed by Vnesheconombank Chairman Vladimir Dmitriev, on behalf of the Government of the Republic of Mordovia – by the Republic’s Head Nikolay Merkushin.

The Agreement aims to establish strategic partnership and promote long-term, effective cooperation between the parties in investment activity.

Under the Agreement the parties intend to cooperate in raising funds to finance investment projects scheduled to be implemented on the Republic’s territory. Top priority is to be given to projects in electric power industry, smelting industry, timber industry, agro-industrial complex as well as in high technology sector. A list of projects is to be made on the basis of the Republic of Mordovia’s Socio-Economic Development Strategy up to the Year 2025 and Vnesheconombank’s main lines of activity.

The implementation of this Agreement would help to boost investment activity aimed at developing the Republic of Mordovia’s industrial, socio-economic and infrastructure potential.


Origin: Press Office of Vnesheconombank
Contact person: Ekaterina Karasina
Phone: +7 (495) 608-46-93, Fax: +7 (499) 975—21-34


Vnesheconombank Chairman V. A. Dmitriev’s Interview to the TV Channel Vesti-24

25 may 2009 года

HOST: Vladimir Alexandrovich, thank you for finding time for us.

Vladimir DMITRIEV, Vnesheconombank Chairman: Good afternoon.

HOST: Vladimir Alexandrovich, are you going to attend the Petersburg Economic Forum and what do you expect of this event?

Vladimir DMITRIEV: Of course, I am. Vnesheconombank is a regular participant in this major event. Vnesheconombank’s high-powered delegation is going to attend this Forum. Traditionally, we view it as a place where we can share opinions, especially in the current situation. It is very important and useful for us to participate in it and speak at a number plenary and section meetings. This year we are performing several functions. As usual, we are one of the Forum’s sponsors. As I’ve already said we are participating in a number of formal events. Moreover, Russia, which is acting as this year’s Chairman of the Shanghai Cooperation Organization, is also acting as the Chairman of the SCO Interbank Consortium. Vnesheconombank represents Russia’s interests in the SCO Interbank Consortium and we are going jointly with the SCO Business Council to organize a major conference for SCO member countries’ business and banking community on a crucially important theme – crisis and ways of tackling it.

HOST: What questions would you like to be answered?

Vladimir DMITRIEV: At least I hope that at this Forum, like at the previous ones, we would be told what to do next, how to expand business, what investment agreements we can expect and in what lines of activities we’ll cooperate with our partners. And at this Forum, I can say without any doubt that we achieved good results with respect to the agreements and arrangements made at the previous forums.

HOST: But the situation is radically different compared with the previous forums. Up until now, your Bank’s participation in all forums resulted in signing agreements.

Vladimir DMITRIEV: At this Forum we are also going to sign and make public agreements on investing funds in the Russian economy. Here I mean foreign potential investors and Russian enterprises. By the way, last year we made public our intentions together with Australia’s major infrastructure Bank Macquarie and Russia’s investment – finance company Renaissance to establish an Infrastructure Investments Fund. In several weeks we might make public the establishment of this Fund, and the number of this Fund’s participants has increased. In addition to the institutions I have already mentioned the Fund is comprised of our Kazakh partners such as the Kazakhstan Sustainable Development Fund Samruk Kazyna, the European Bank for Reconstruction and Development and international finance corporations. The Fund will be formed for an amount of 1 billion dollars and at least 50% of this amount will be used to make investments in infrastructure projects in Russia.

HOST: One of the most important issues to be discussed at the Petersburg Economic Forum is going to be the implementation of the crisis management program in Russia. And here we can scarcely overestimate Vnesheconombank’s participation in this program, suffice it to say that Vnesheconombank’s participation accounts for 62% of the crisis management package. I think this is more than 1.5 trillion rubles. How would you assess this program efficiency?

Vladimir DMITRIEV: I view this issue not in terms of Vnesheconombank’s interests but in terms of efficiency of the program itself and its impact on the Russian economy and the banking system. At any rate, I think that the crisis management measures being implemented through Vnesheconombank achieved desired results. Here I am talking about refinancing Vnesheconombank’s corporate customers’ foreign debts. Factually, at a time when the program was launched we succeeded in rescuing a number of companies from going bankrupt and from stripping assets of strategic importance for the Russian economy. Then, the situation changed. Russian companies started turning to commercial banks for credits at commercial interest rates and in general they created a situation that made it possible to avoid grave circumstances for the Russian real economy including socio-economic ones, given that a number of enterprises are of strategic significance for the future of certain regions and the country as a whole. We believe that that the program of supporting the banking system through extending subordinated loans to Russian commercial banks proved to be quite effective. 257 billion rubles in credits have been already extended, another 10 banks are on the waiting list and they will obtain subordinated loans worth about 20 billion rubles. The state believes that its share in co-financing capitalization of banks could be increased. And you know that a principal decision was taken that at the second stage of extending subordinated loans the state’s participation in the capitalization of banks should be increased threefold as compared to the first stage. We also believe that measures for diversifying the National Wealth Fund and its use inside the country for conducting transactions on the stock market proved to be effective. Acting as an operator of this measure, Vnesheconombank showed good profitability. The amounts of these transactions were made public and despite the fact that parameters tend to change depending on the situation on the market it is safe to say that this measure generated quite a substantial income incomparable with the income generated from investing these funds in foreign securities.

HOST:  Did this measure prove to be profitable for Vnesheconombank alone because to my best knowledge the President thought that the ways of supporting the stock market were not relevant?

Vladimir DMITRIEV: In this case Vnesheconombank receives fixed income and on the other hand we are to extend these resources on condition of fixed interest rate. In any case, it is an open ended issue. We are energetically discussing an issue of going ahead with this program with the Finance Ministry but until we reach final agreements with the Finance Ministry I can’t give you a precise answer to your question as to what extent this measure proved to be profitable for Vnesheconombank.

HOST: How profitable is it for Vnesheconombank to extend subordinated loans?

Vladimir DMITRIEV: We view this measure, above all, in terms of its efficiency for the banking system as a whole. We also receive here a fixed income in the amount of 1%. Funds are made available to us at a rate of 7%. We extend subordinated loans at a rate of 8% but it is very important to exercise stringent control over the future use of these funds. First, at the stage of preliminary consideration banks are thoroughly checked for meeting certain criteria and parameters under which they are to be in line with the decisions made by the Bank’s Supervisory Board to extend credits to the real economy in the amount of subordinated loans received and this is to some extent an innovative approach. And credits are to be extended for a period of no less than one year. Now, parameters or caps of interest rates at which these credits will be extended to the real economy are being set in the amount of refinancing rate plus 3 percentage points and we insist that the Central Bank which dispatches its commissioners to institutions enjoying the state’s support should exercise control over all these parameters.

HOST: Vnesheconombank participates in the government program of issuing state guarantees. Recently, the President has said that not a single guarantee has been issued. What’s your opinion about it?

Vladimir DMITRIEV: In fact, the question of issuing state guarantees posed a problem until a principal decision was made that we should change our approach to these guarantees and extend them on a joint and several basis together with commercial banks in order to eliminate risks in the case that the borrower fails to fulfill its obligations and that we should bear joint and several responsibility for these guarantees. I think that in the most immediate future this measure would be one of the most important ones in the crisis management program, and in the near future the situation would be normalized and the measure would be put into effect.

HOST:  Vladimir Alexandrovich, pension savings funds managed by Vnesheconombank showed negative profitability last year; nevertheless this minus can be regarded as a big plus because compared with other trust management companies minus half a percent is a great achievement. Today, you’ll be given a chance to expand the range of these funds’ management. How do you feel about the instruments being offered to you? 

Vladimir DMITRIEV: In fact, we ended last year with negative profitability and at the same we ranked third. Only one private company showed positive profitability. Nevertheless, we are not satisfied with our performance. As far as I know, we have been raising the question of expanding our investment declaration and enabling us to diversify our investment portfolio for two years. Up until now, we have been entitled to invest pension funds only in government securities or in bonds guaranteed by the state. As agreed with institutions responsible both for implementing the pension reform and for investing pension funds, we succeeded in introducing amendments to the 111th Law that provides for expanding our investment declarations significantly. Without going into details I’d like to say that we do intend to retain our conservative portfolio. The amount of pension funds under our management now is about 340 billion rubles; in the near future we expect to receive another 114 billion rubles and we’ll receive about 230 billion rubles till the year end. These are huge resources and they should work for the economy. The more so, as opposed to the National Wealth Fund, the Reserve Fund or the previous Stabilization Fund, which was formed with the help of super profits from high energy prices these pension funds were generated by the economy itself. So they should be working for the economy. As far as investment instruments are concerned, the expanded investment declaration would enable us to invest funds in bonds of highly reliable Russian issuers, mortgage bonds not secured by state guarantees, sub-federal bonds, foreign issuers’ highly reliable bonds. We think that would-be pensioners’ funds invested in the above mentioned securities package would generate profitability in excess of inflation rates and would assist major Russian companies in implementing their ambitious investment projects.

HOST: Do you expect pension funds to generate such high yields as early as this year?

Vladimir DMITRIEV: I am judging by the bonds being placed now by such companies as Transneft and RZHD. Their bonds’ yields are higher than inflation.

HOST: But in any case, the general profitability is negative, it’s minus 7%.

Vladimir DMITRIEV: You mean in the current portfolio?

HOST: Yes I do.

Vladimir DMITRIEV: You are right. And this is the case because this portfolio was formed by way of investing funds in government securities which are as vulnerable to volatility as the entire financial market.

HOST: Vladimir Alexandrovich, what are the current criteria for evaluating securities’ and financial institutions’ reliability at a time when far from all have confidence in ratings agencies’ data? Here I mean, above all, international financial instruments, institutions.

Vladimir DMITRIEV: In fact this is really so. On the one hand ratings agencies toughened their approaches to assessing risks and on the other they reconsidered approaches to their core activity taking into account that high ratings they tended to assign in the pre-crisis period and also during the crisis to a number of banks and companies were not in line with these players’ performance on financial and other markets. This means that bankruptcies of a number of foreign companies are not in line with high ratings assigned to them. I understand that these discrepancies are forcing ratings agencies into adopting more stringent approaches to ratings they assign. But in this respect, we need more adequate, more objective approaches and perhaps a more comprehensive attitude to all risk factors with respect to various customers of ratings agencies.

HOST: When do you plan to place Vnesheconombank’s bonds?

Vladimir DMITRIEV: These days we are giving presentations for Russian banks. This is a final stage of a number of events aimed at attracting investors’ interest in our bond issue. I believe that bonds would be issued at the beginning of June.

HOST: This is another life jacket for the banking sector.

Vladimir DMITRIEV: I wouldn’t call it a life jacket but nevertheless we believe that the decision to place these bonds would be beneficial for the banking system and the economy as a whole.  This would make it possible to absorb excessive foreign exchange liquidity accumulated by Russian banks. The more so, these funds are being invested at rates which can’t be compared with those we are offering to the market now, that is, Libor plus 1 percentage point. Moreover, banks will be able to use these bonds as agreed with the Central Bank as a pledge instrument to receive refinancing in rubles at the Central Bank. Therefore, these ruble funds would be channeled to the economy to finance Russian companies’ day-to-day activities.

HOST: What amount will these bonds be issued for?

Vladimir DMITRIEV: Our Supervisory Board made a decision to issue bonds worth 10 billion dollars. We are planning to place the first tranche in the amount of 2 billon dollars.

HOST: What can you tell us about financing Olympic facilities?

Vladimir DMITRIEV: We have already started to finance a number of Olympic facilities as well as facilities related to Olympic infrastructure. This includes boosting the Sochi thermoelectric plant’s capacity. We are close to signing a loan agreement and fulfilling conditions precedent to finance the Sochi airport. We have started financing the Roza Khutor ski resort. We are close to signing agreements on financing a number of other Olympic projects. They include the Gornaya Karusel project, a solid waste processing integrated facility, the Sochi cargo port, the Sochi sea port, the Olympic village and a number of other projects. In total VEB’s participation in financing these projects is worth about 50 billion rubles.

HOST: In this respect, did borrowers start to demonstrate increased interest in these Olympic projects?

Vladimir DMITRIEV: You know, borrowers show interest but they have to bear great responsibility. First, this is co-financing and co-investing. Second, these are quite stringent terms of exercising control over the targeted use of funds, technical conditions of construction work and etc. These are significant collaterals. So the waiting list could have been longer but in the first place, we after all, conduct transactions with government money and we extend credits following general principles of credit repayment, interest payment and tenor. So there are many problems but nevertheless the progress is evident.

HOST: So, we can say that work is in progress and I think that crisis fears are receding as compared with our last meeting.

Vladimir DMITRIEV: I quite agree with you despite the fact that the number of problems has increased and we are too busy even to think that the crisis affected entire industries inside and outside our country.

HOST: Perhaps, we got used to living in the crisis situation.

Vladimir DMITRIEV: You know, the crisis puts us to the test once again but I hope we’ll overcome it with dignity.

HOST: Thank you for your interview. See you later in Saint Petersburg.

Vladimir DMITRIEV: Thank you.


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