Vnesheconombank Starts to Refinance Russian Companies’ Debt Obligations to Foreign Financial Institutions
Under Federal Law dated October 13, 2008 N
Origin: Press Office of Vnesheconombank
Vnesheconombank Chairman Vladimir Dmitriev’s Interview to the Vesti TV Channel
The Vesti TV Channel VESTI/INTERVIEW, 29.10.2008, 14:43,18-35
HOST: The Federal Service for Financial Markets expects Vnesheconombank to assist it in normalizing the domestic stock market. Vnesheconombank Chairman Vladimir Dmitriev told our channel about the measures Vnesheconombank is going to take to this end.
Vladimir Alexandrovich, Good afternoon.
Vladimir DMITRIEV, Vnesheconombank’s Chairman: Good afternoon.
HOST: Vladimir Alexandrovich, you’ve said that today’s positive dynamics on the Russian stock market is a result of Vnesheconombank’s support. Would you elaborate on this further please?
Vladimir DMITRIEV: I don’t think we have been the only player at today’s trading session but our participation at the end of the business day demonstrates that such a strong player helps to strengthen the market and sustain its growth. Vnesheconombank has been conducting transactions on the Russian stock market for about 10 days using the funds it received from the National Wealth Fund. Every day we agree upon our actions with the Finance Ministry on the scale of our transactions, securities and borrowers in which we are investing funds. Thus, we diversify the National Welfare Fund, make it operate to benefit the Russian stock market and at the same time sustain the stability of the Russian stock market and the financial system as a whole.
On some days Vnesheconombank’s participation aimed at sustaining the said stability and growth of quotes made itself felt quite significantly.
HOST: Vladimir Alexandrovich, what’s the amount of your participation and whom do you support on the stock market?
Vladimir DMITRIEV: Out of 175 billion rubles allocated from the National Wealth fund and intended for conducting transactions on the Russian stock market we invested about 20 billion in shares and about 5 billion rubles in bonds of reliable Russian issuers.
HOST: This means that this is not a whim of speculators but a systematic support.
Vladimir DMITRIEV: Yes, our main principle is to operate on the stock market purposefully and consistently to sustain its stability.
HOST: I’d like to ask the following question: won’t additional functions assigned to Vnesheconombank and the actions you have to take in the situation of financial instability affect your main objective, here I mean, the development of key industries of the Russian economy? But judging by an agreement you have signed today with the United Shipbuilding Corporation there isn’t such a threat at the moment?
Vladimir DMITRIEV: In fact, our employees are working now under considerable pressure because of additional tasks, we didn’t use to perform before, have been assigned to us, of which the main task is to implement additional measures for sustaining the stability of the Russian financial system and that is why we have to operate on the stock market. But in doing so, we, of course, do not set aside our current core activity set forth by the Law and the Memorandum on the Bank’s Financial Policies. Today, we have signed an Agreement with the United Shipbuilding Corporation. This Agreement formalizes our relations and sets forth main lines of our joint efforts in upgrading our civilian and defense shipbuilding in carrying out programs of military-technical cooperation. This program of cooperation is multisectoral, but this Corporation is not, of course, our only partner from the key industries identified for our activity. They include aircraft construction, space industry, communications, high technologies, rational utilization of natural resources and infrastructure. It goes without saying that, given the volatile financial situation we are facing today and have to reckon with, some programs will be suspended temporarily. We have also to take into account the liquidity issues and difficulties our customers face in borrowing at acceptable rates.
HOST: What programs will be suspended at this stage?
Vladimir DMITRIEV: Above all, investment programs, which are at the initial preparation stage because the projects that have already been approved by the Bank’s Management Board and Supervisory Board in infrastructure, high technologies and rational utilization of natural resources are sure to be implemented. And they are funded by foreign creditors who take risks on projects themselves. These creditors include major Japanese and West European banks. This means that despite the crisis, the level of trust in Russia, Vnesheconombank, and reliable borrowers remains stable and this is a sure guarantee that many of the projects that were approved by our corporate governance bodies are bound to be implemented.
HOST: Another confirmation of this is the fact that you managed to raise a syndicated loan facility worth 335 million euros from a consortium of foreign banks. How did you manage to do it, and how are you going to use the money?
Vladimir DMITRIEV: We have been making efforts to raise this syndicated loan facility for several months. To tell you the truth, the borrowing amount could have been greater but for the liquidity crunch on the international markets as a whole. But in terms of transactions to be funded, this amount is optimal for us. We partially close the open euro position that emerged at the beginning of the year but the main objective of the borrowing is to finance the transactions I mentioned above.
HOST: You haven’t identified your main lines of activity, have you?
Vladimir DMITRIEV: Yes, we have identified our main lines of activity. They include, above all, infrastructural projects, and with due regard to the difficulties that metallurgical and construction companies are going through, the implementation of a number of projects aimed at developing transport would be financed at accelerated rates.
HOST: By what criteria are you going to distribute 50 billon dollars allocated to Vnesheconombank for refinancing Russian companies’ debts?
Vladimir DMITRIEV: The criteria have been established by the Bank’s Supervisory Board. And they are built into the procedure, which was also approved by the Supervisory Board and posted on Vnesheconombank’s website. Main criteria are comprised of both quantative and qualitative parameters. According to quantative parameters credits per one borrower are not to exceed 2.5 billion rubles but the Supervisory Board is also entitled to take different decisions. This refers to refinancing credits raised prior to this September and also debts to foreign creditors. And another key criterion stipulates that we are to refinance those debt liabilities, non-fulfillment of which threatens to cause serious economic and social consequences, here I mean adverse consequences to Russia’s system-forming companies.
Our Supervisory Board took a decision on a number of borrowers whose debts are to be refinanced; the amount of their debts is a little bit less than 10 billion dollars. They are prime borrowers who are confronted with a threat of losing their assets due to the unfavorable situation on the international financial markets.
HOST: These borrowers are the oil companies that initially turned for help?
Vladimir DMITRIEV: Yes, we give high priority to the borrowers whose obligations should be fulfilled in the most immediate future.
HOST: Vladimir Alexandrovich, what about providing financial assistance to banks? Vnesheconomank has already acquired Svyaz-Bank and yesterday the Supervisory Board approved the purchase of Globex. Are you going to acquire other banks as well, is this the Bank’s current policy and strategy?
Vladimir DMITRIEV: I would classify this activity as the Bank’s non-core activity but this is our institution’s destiny and even if our Bank didn’t exist we would have to establish it in case of emergency circumstances. As far as Svyaz-Bank is concerned we have fully secured this financial institution’s solvency and financial sustainability. We received financial resources from the Central Bank and we used our own liquid assets to assist Svyaz-Bank to restore payments.
And we can see that outflow of customers’ funds has stopped and that the bank’s is operating normally in all its traditional spheres of activity. And if 15 million pensioners receive their pensions through the bank, it’s no time for joking.
As to Globex-Bank, we also intend to get down to restoring its image and financial sustainability. We don’t think we’ll have any serious problem restoring trust in this bank, given of course, the Central Bank’s assistance but it is safe to say that the situation there is manageable.
HOST: And now my final question: what is going to happen to pension savings? Are they properly protected now?
Vladimir DMITRIEV: I am ready to answer only for the state management company…
HOST: Naturally. 90 percent.
Vladimir DMITRIEV: For Vnesheconombank. For the third quarter, we are of the few management companies, if not the only one, that produced positive results in terms of pension savings funds’ profitability. We had been making consistent efforts to get our investment declaration expanded so that we could invest pension funds in highly liquid and reliable bonds of Russian issuers, that is, blue chips. We really expect that our proposal for expanding our investment declaration would be accepted and backed in the long run by our legislators and we‘ll be also allowed to deposit available money, funds in the amount of up to 20 percent with banks and this on the one hand, will make it possible to increase profitability and on the other, to offer additional liquid assets to our interbank market. And today, we have discussed with our colleagues at a Russian-Chinese business meeting the possibility of investing pension funds or funded portion of pension funds in infrastructural bonds. They could be issued by Russian reliable borrowers such as Transneft and other companies that are in need of significant investments for a long period of time. We are sure that funds of would-be pensioners that they would start receiving in the year 2022 would be invested reliably, without any losses, with sufficient profitability.
HOST: Let’s hope. We wish you ever success. Thank you.
Vladimir DMITRIEV: Thank you. Thank you.