Vnesheconombank has helped oil companies and aircraft manufacturers and is now dealing with Sviazbank.
The Supervisory Board of Vnesheconombank, Russia's state bank for development and foreign economic affairs, held its session yesterday and Sviazbank's future took front and centre.
Prime Minister Vladimir Putin, the Board's Chairman, started by pointing out just how much the government had done for the country's banking system. "In stark contrast with the dramatic economic crisis of 1998, we managed to prevent the banking system from crashing and the largest financial institutions from going bankrupt. As we all remember, almost all the largest commercial banks, including Inkombank, Imperial, Stolichny Bank Sberezheny (Capital Savings Bank), ONEKSIM and many others, which seemed to be as strong and steady as rocks, ceased to exist in 1998," the prime minister said, adding that the institutions' owners had lost very little compared to what the people lost - huge parts of their life savings.
In Putin's opinion, VEB is playing a vital role in supporting the financial system. For one, the bank has already provided a total of 388 billion roubles in subordinated loans to 16 banks that were specially selected and committed themselves to increasing their loan programs at affordable interest rates. "Our latest arrangement is for the interest rate to be the Central Bank's rate plus 2% to 3%. I'm not entirely sure that it was implemented efficiently and on time, but I certainly hope that it had a positive and stabilising effect during the toughest period," Putin said. He added that the subordinated loans had a maturity period of ten years and would support the country's business activity in the long run.
The deposits of 18 banks that were hit the hardest by the downturn were insured by the federal Deposit Insurance Agency at a fraction of the cost. Sviazbank, which also failed to withstand the financial downturn, was transferred to VEB's management and is being rehabilitated. For that purpose, the Central Bank has placed a deposit of 2.5 billion roubles at VEB. "Now, our task is to formulate Sviazbank's development strategy and the terms under which we'll involve partners in the project," Putin explained. It should also be noted that Sviazbank's development strategy is closely connected to the idea of using it as a basis for establishing a federal post bank jointly with the Pochta Rossii (Post of Russia).
Yet, VEB will also invest in large infrastructure projects and companies rather than simply supporting its smaller counterparts. The Supervisory Board decided to invest 21 billion roubles in the United Aircraft Corporation's authorised share capital just yesterday, for example. The funds will help the corporation settle its creditors' and suppliers' accounts. The corporation will also receive another 10.7 billion roubles from the budget early next year. "The funds will go towards manufacturing new civil aircraft, new Russian airborne vehicles, rather than on plugging the leaks," the prime minister noted.
The Supervisory Board also considered a new investment project in Russia's Far East - financing the reconstruction of the Khabarovsk oil refinery. The refinery will be fully modernised with up-to-date and environment-friendly technology, which will enable the production of motor fuel of the highest quality standards: Euro 4 and stricter. The project is estimated at 1.3 billion dollars.
A special engineering company will supervise the implementation of current and future projects and have the right to take measures if VEB's funds are used inappropriately or ineffectively. Apart from that, another VEB subsidiary - VEB-Capital - is due to commence operation soon and manage the bank's assets.
Pyotr Skobelev