VEB.RF Introduced City Managers to International Urban Development Experience
The first module of the Master of Public Administration programme has been completed. It was attended by 145 people from 29 cities of Russia. The programme was created on the initiative of VEB.RF, together with experts from the SKOLKOVO Moscow School of Management in partnership with the Strelka Institute of Media, Architecture and Design, National Research University Higher School of Economics and the New Economic School.
The first module of the programme was devoted to the study of global urban development trends, as well as their economic role, approaches to planning and organising projects that qualitatively change the lives of city dwellers.
As part of the module, VEB.RF’s key managers and their partners presented their tools and opportunities for urban development. They also shared their experiences in managing and supporting large-scale projects.
“100 cities, managers from which participate in the programme, including Moscow and Saint Petersburg, account for a half of the Russian population and GDP. Nevertheless, non-capital cities have a huge potential for economic growth too. One of the necessary conditions for this is qualified management teams. It is for them that we, together with our partners, have organised an educational programme, which is designed to give an impetus to improving the quality of life in our cities,” VEB.RF’s Chairman Igor Shuvalov noted.
Several dozen economics and urban development experts gave lectures, including Alexander Mamut, Chairman of the Board of Trustees of the Strelka Institute of Media, Architecture and Design; Ruben Enikolopov, President of the New Economic School; Andrei Sharonov, President of the SKOLKOVO Moscow School of Management; Philipp Rode, Executive Director of LSE Cities (London); Alexei Muratov, Partner of Strelka KB; Greg Clark, Senior Adviser for Future Cities and New Industries at HSBC Bank; and Irina Ilyina, Director of the HSE Centre for Regional Studies.
In the practical part of the module, participants were asked to analyse existing strategies for the development of their cities and conduct an audit of current and planned projects.
Andrei Sharonov, President of the SKOLKOVO Moscow School of Management: “When we conducted an anonymous survey of management teams and asked what qualities would they like to develop and learn, the vast majority in three different groups answered identically: confidence and competence. This is the task for us and our educational partners in all the following modules: to create a programme that would increase the level of competence of managers and, as a result, their self-confidence. And the result of these changes should be real urban transformation projects.”
“A great advantage is that we have the opportunity to talk to our financial partner, VEB.RF, as part of this programme. Moreover, we immediately consider our projects with financing opportunities in mind. We are full of optimism. We have many very healthy ambitions, many interesting ideas. I believe that this is an opportunity for each team, for each city, to find a direction that can change the energy of the city. And the energy of the city is those right initiatives that will be implemented through the involvement of our citizens, our residents, therefore this is the key,” he said.
The first intake of the programme included participants from Armavir, Bratsk, Veliky Novgorod, Vladivostok, Vologda, Voronezh, Dzerzhinsk, Ivanovo, Kazan, Kemerovo, Korolev, Kostroma, Krasnogorsk, Krasnodar, Lipetsk, Makhachkala, Nizhnevartovsk, Nizhny Novgorod, Novorossiysk, Orenburg, Orsk, Perm, Sochi, Sterlitamak, Surgut, Tula, Ulan-Ude, Ussuriysk, Ufa, Khimki, Chelyabinsk, and Yakutsk.
VEB.RF Unites BRICS Financial Institutions to Implement Responsible Investment Principles
State Development Corporation VEB.RF has become a leading BRICS development institution in applying the responsible financing principles. As part of the presidency in the BRICS Interbank Cooperation Mechanism (BRICS ICM), this effort has reached the finish line, VEB.RF Deputy Chairperson and Member of the Management Board Natalya Timakova said during OECD’s online conference on 23 July 2020.
This year, VEB.RF chairs the BRICS ICM, and, according to Natalya Timakova, it is going to bring updated responsible investment guidelines to the organisation, among other things. “We have developed the Responsible Financing Guidelines in close cooperation with the OECD, and these are currently being approved by other BRICS development institutions. By the end of the year, we plan to develop clear criteria for the concept of ‘responsible’ and implement the Guidelines in our work. Moreover, VEB.RF plans to continue this effort beyond its presidency, which expires this year, and to promote the Guidelines both in Russia and abroad,” Natalya Timakova added.
Elena Gushchina stressed that VEB.RF has been and remains a leader in cooperation with the OECD. “OECD’s agenda remains a priority not only for us, but also for Prime Minister Mikhail Mishustin. Regardless of whether Russia is a member of the organisation or not, collaboration between experts will allow us to enrich our activities with the best international practices,” she said.
VEB.RF’s Chief Economist Andrei Klepach outlined in detail the priorities of Russia's BRICS presidency and said that the VEB.RF’s effort on implementing the responsible financing guidelines is closely linked to the application of the concept of sustainable development in general. “Our efforts in this area are closely correlated with the work of the Bank of Russia. We plan to become a leader in sustainable development and responsible business conduct, extending these principles to the entire economy,” he said. Andrei Klepach presented VEB.RF’s progress in creating a national green finance system. Earlier this month, VEB.RF adopted the Russian Green Finance Guidelines and the Russian National Taxonomy for Green Projects.
The seminar brought together VEB.RF’s officers and representatives of all BRICS national development institutions: the Brazilian Development Bank (BNDES), the China Development Bank (CDB), the Development Bank of Southern Africa (DBSA) and EXIM Bank of India. They presented their approaches to responsible business conduct and shared their experiences in implementing sustainable development standards.
The seminar was also attended by experts from the OECD and the International Finance Corporation, who spoke about the existing international standards for responsible financing and the impact of the BRICS Principles on their further development. OECD’s Head of Sector Projects in the Responsible Business Conduct Unit Tyler Gillard stated that the OECD welcomes the development of responsible financing standards in BRICS and the leading role of Russia, represented by VEB.RF in this field, and noted the need for the entire international community to work together on this issue.
Private sector stakeholders, including Wells Fargo, Deutsche Bank and ING, also welcomed the development of responsible financing standards in BRICS, emphasising the importance of such work for international investors.
The participants agreed to continue cooperation on developing responsible financing standards, adopting BRICS Responsible Financing Guidelines in 2020, and developing detailed recommendations for BRICS development institutions on implementing the Guidelines.
The meeting was moderated by Antonina Levashenko, Head of the Russia-OECD Centre RANEPA, and Tyler Gillard, OECD’s Head of Sector Projects in the Responsible Business Conduct Unit.
Note: the BRICS Interbank Cooperation Mechanism (BRICS ICM) was established in 2010 to develop and strengthen economic and investment cooperation between the BRICS countries. The main areas of activity are the development of comprehensive long-term interbank cooperation between partners in order to strengthen trade and economic relations of the BRICS member countries, the support of the implementation of socially significant and regional projects, and the development of procedures for providing financial and banking services for investment projects that contribute to the economic development of the BRICS countries.
State Development Corporation "VEB.RF" redeemed its Eurobonds Series 1 issue on July 9, 2020.
The Eurobonds for a nominal amount of US$ 1 600 mn were issued on the Irish Stock Exchange in 2010 with a ten-year maturity period and an annual coupon rate of 6.902%.
The redemption of the Eurobond issue and coupon payments were executed in full and in accordance with the terms of the prospectus.
Irish Stock Exchange cancelled listing of Eurobonds Series 1 with effect from 9th July 2020.
VEB published its consolidated financial statements for 2019 as prepared in accordance with IFRS.
VEB published its consolidated financial statements for 2019 as prepared in accordance with IFRS.
VEB.RF Group’s key financials for 2019 are as follows:
- The Group’s assets as at 31 December 2019 amounted to RUB 3,177.4 bn. The decline against the beginning of the year was RUB 184.5 bn (- 5.5%), that was due to the decrease in the loan and leasing portfolios, and assets of disposal groups and non-current assets held for sale. The increase in cash and cash equivalents and investment financial assets positively affected total assets. The increase in liquid assets was carried out in the context of building a necessary liquidity buffer in line with the Group’s conservative approach to risk management.
- Loans to customers accounted for 35.5% of the Group’s total assets. As compared to the beginning of 2019 the loan portfolio after allowance for expected credit losses decreased by RUB 432.8 bn (-27.7%) and reached 1,128.8 bn. The portfolio decrease after allowance for expected credit losses was mostly due to the disposal of Sviaz-Bank, negative foreign currency revaluation and loan repayments performed at faster pace than new lendings.
The amount of loans granted by VEB in 2019 reached RUB 84.5 bn. Investment priority sectors included industry, infrastructure and urban economy, as well as export support.
The Project Financing Factory became fully operational, with syndicated lending in partnership with commercial banks being its mechanism, employing government support.
In 2019 VEB.RF’s supreme collegial management body approved eight projects, implemented through this mechanism, worth a total of over RUB 731,4 bn. The projects were in such areas as chemical (incl. natural gas to chemicals) and metallurgic industry, ports and roads infrastructure, as well as digital economy. In 2019 financing for six projects of the Project Financing Factory began.
The Group’s total liabilities as at 31 December 2019 amounted to RUB 2,749.8 bn, decreasing by RUB 328.0 bn (-10.7%) in 2019. The decline was mostly due to the decrease in the amounts due to banks and issued debt securities, as well as in the amounts due to customers brought about by the disposal of Sviaz-Bank. At the same time, the amounts due to the Russian Government and the Bank of Russia went up by RUB 179.1 bn, or 30.2%, owing to the Federal Treasury’s placement with VEB.RF of a deposit of RUB 200 bn for a term of up to five years at the below-market rate.
The net operating income for 2019 totaled RUB 58.2 bn as compared to the net operating loss of RUB 11.0 bn for 2018. In the operating income structure, the net interest income amounted to RUB 25.7 bn, net commission income reached RUB 8.2 bn, non-interest income amounted to RUB 24.3 bn.
The Group’s negative financial result for the 2019 came to RUB 52.8 bn, which was, inter alia, stipulated by the reporting rules specifics, when the Group recorded a loss of RUB 46.2 bn at the initial recognition of project financing provided at the below-market rate. Yet, project financing is one of the priorities of VEB.RF as a development institution. The financial result was also negatively affected by the net interest income decrease against the general interest rates drop.
The measures undertaken to improve the balance sheet structure and optimize the business model contributed to the reduction of the 2019 loss by 70.0% as compared to the loss of RUB 175.8 bn in 2018.
In 2019 the Group’s equity went up by RUB 143.5 bn (+50.5%) to reach RUB 427.6 bn as at 31 December 2019.
The range of instruments provided to VEB.RF by the state in 2019, aimed at maintaining the size and structure of VEB.RF’s capital, also included the following:
In March and June 2019 VEB.RF received subsidies from the federal budget in the form of an asset contribution of the Russian Federation of RUB 7.7 bn and RUB 7.8 bn, respectively, to compensate for costs related to the fulfillment of obligations arising from foreign borrowings in the capital markets. The whole amount of the subsidies was recognized within authorized capital.
In March and December 2019 VEB.RF received subsidies of RUB 9.7 bn and RUB 1.5 bn, respectively, from the federal budget as an asset contribution of the Russian Federation in order to make a contribution to the share capital of JSC Far East and Arctic Development Fund for the implementation of priority investment projects in the Far Eastern Federal District. The whole amount of the subsidies was recognized within additional paid-in capital.
It should be also noted that Regulation No. 1611 of the Russian Government “On the Authorized Capital of State Development Corporation “VEB.RF” of 21 December 2018 stipulates that in accordance with Article 18 of the Federal Law and clause 1.1 of Article 78.3 of the Budget Code of the Russian Federation the authorized capital is formed in the amount of the formed part of the authorized capital of VEB.RF and the part of the authorized capital of VEB.RF to be formed through further additional asset contributions of the Russian Federation in the amount of RUB 300 bn.
VEB.RF’s capital adequacy ratio (according to RAS) was 13.6% as at 1 January 2020 (11.8% as at 1 January 2019).
In 2019, VEB.RF retained the credit ratings at the level of the Russian Federation sovereign rating (S&P: BBB, Fitch: BBB, Moody’s: Baa3). The national rating agency ACRA also maintained the VEB’s credit rating at the highest level of AAA.
Economic Partnership Strategy 2025 Prepared with VEB.RF’s Participation to Receive Approval at BRICS Summit in Saint Petersburg in July
A meeting of the BRICS Contact Group on Economic and Trade Issues in Moscow on 26 February supported VEB.RF’s proposals for the Strategy for BRICS Economic Partnership. It is intended that the proposals will be submitted to the BRICS leaders at the Saint Petersburg summit in July 2020.
Zarina Tsekoeva, Vice-President of Strategy, reported to the meeting on these activities and VEB.RF’s contribution to the implementation of national projects in Russia.
In her report on the principal areas of economic cooperation among the BRICS member countries, Tsekoeva drew attention to the issues related to the Sustainable Development Goals, the principles of responsible investment, the agenda for the presidency of the BRICS Inter-Bank Cooperation Mechanism, and the necessity for the BRICS member countries to take part in formulating the common principles of responsible investment.
The report of the Russian Ministry of Economic Development put particular emphasis on digital transformation and sustainable development, including in respect of remote and rural areas. In addition, representatives of Global Rus Trade reported on the establishment of the BRICS Business Women Alliance; research experts and members of the BRICS Expert Council presented a review of BRICS trade relations, noted the importance of supporting infrastructural projects of the New Development Bank, and emphasised the need to work towards the UN Sustainable Development Goals 2030.
VEB.RF holds the presidency of the BRICS Inter-Bank Cooperation Mechanism in 2020.