Ask Ballo

Anatoly Ballo who is responsible for the State Corporation's core activity - investments and support for top-priority economic sectors, became responsible for anti-crisis support for the real economy when the crisis started. His investment subdivision looked through all 142 applications submitted by banks and companies for refinancing their foreign debts worth 82 billion US dollars and it prepared credits for the ten lucky ones. When you ask someone of VEB's employees about financing specific projects their usual answer is: "Ask Ballo".

Anatoly Ballo refused categorically to meet in a restaurant. "I am not particular about food and the more so I'm too pressed for time to go to restaurants", he says. He suggested that we should have a crisis-time lunch in a simple and quick way. I had to take crisp bread rings and ring-shaped rolls to his office in Sakharov Avenue, 9, and Ballo offered chocolate candies and orange souffle.

The office of VEB's Deputy Chairman who is in charge of the State Corporation's core activity looked to me quite modest and I can say even small. "Why so ascetic?" - I couldn't help saying.- You sort of deal in billions and your office is so tiny". "It's enough for work", he answered drily.

"A Last Resort"

Ballo asks all those who apply to Vnesheconombank for credits one and the same question: "Have you applied to any other banks?" "I don't want Sberbank and VTB to say that we deprive them of projects", he explains. In Ballo's firm opinion, VEB should be a last resort in search of money.

"He has often to say "no" but he always does it in a very refined way", recollects Valery Bezverkhny - a member of the UABC's Board of Directors. Ballo is the State Corporation's key Deputy Chairman, explains a manager of a major company that receives credits from VEB. "If his subdivision says "yes", it's almost a 100% guarantee to receive a credit".

"Ballo and his employees always examine a subject in depth. I think they have the most thorough expert's examination among financial institutions in Russia and this of course makes you respect them", says Elena Matveeva - Group GAZ Management Board Deputy Chairman (VEB is considering the Group's application for financing one of its engine projects).

Airports "are our pride" says Ballo meaning airports in Kaliningrad, Yekaterinburg, Sheremetjevo-3 and the Bank's strategic participation in Pulkovo. "Pulkuvo is our particular pride", he stresses. "Then, foreign banks and international financial institutions said quite openly that if VEB didn't finance Pulkovo, they wouldn't finance it either". "VEB is a sort of marker.  VEB's participation in a project guarantees the project's reliability", he says.

VEB often operates as a mechanism for hedging currency risks, explains Ballo: "Quite often projects fail to withstand currency risks. Paradoxically, but in a number of cases it's easier to incur long-term liabilities in foreign currency than in rubles. Nevertheless, the ruble model of projects proved to be more reliable than the currency one. Now VEB is addressing this problem with regard to first concession road projects. VEB extends currency credits to finance only those projects that generate foreign currency incomes.

VEB's problem, Ballo sighs, is that in economic sectors of key importance for the Bank there are now very few engineering companies: "Sometimes we happened to be in situations when we had to do this engineering work from scratch on our own". In this respect, he gives an example of establishing jointly with German Company MAN Ferrostaal AG an investment-engineering company that came into being in the course of financing the pulp-and-paper mill construction project in the Lower Angara Area.

Ballo is keen to talk at length about each project financed by the Bank, each seems to be the most important, the most loved to him: whether it be the construction of a research and production complex to manufacture semiconductor products, the development and batch production startup of SSJ 100 or the building of the rail branch line the Kuzbass - Far Eastern Transport Hub.

"And do you know how healthy turkey meat is?" asked Ballo suddenly. VEB finances LLC Evrodon in the Rostov region. The company is building an industrial turkey-breeding complex. It is to produce 30 000 tons of turkey meat per year and in the future - 60 000 tons. With the same enthusiasm as before and emotional vigor which is the least expected of a solid investment banker and passion Ballo got down to describing strong points of the project aimed at building a cement factory in the Leningrad region, an automobile cluster in the Kaluga region and a nitrogen fertilizers manufacturing complex in Tatarstan. According to him, this is the best proof that despite the crisis and the fact that the Bank had to scale down some projects because it became responsible for implementing crisis management measures of the government its main line of activity as a development institution didn't "dry up". In the last year the number of projects financed by VEB has increased by 1.5 times, about 70 billion rubles were committed to implement 21 new projects and a program and about 13 billion rubles were committed to finance projects launched earlier. In total, for a two-year period of VEB's operation as a development institution about 100 projects totaling 1 trillion rubles were approved.

Ballo's main merit is his system thinking, says Bezverkhny. "He has such a deep insight into a technological environment of various kinds of companies - from agriculture to space, that it is hard to believe".

But for the crisis, VEB might not have started to finance Olympic facilities. In any case, to such a great extent. At the moment, the State Corporation is considering 12 projects totaling 166 billion rubles. We made a decision to finance six of them. "We had to help private investors who were affected by the crisis, says Ballo. We are also co-financing projects on the terms of public-private partnership. We make no allowances for anybody. We are for a level playing ground for all". VEB extends credits guaranteed by Olympstroi, which will take possession of assets if a private investor stops fulfilling his obligations. "This is our safety net", explains Ballo.

In response to my request to give me specific figures illustrating the extent of the Bank's crisis management efforts and tell me about the impact the Bank's efforts to support the financial system had on its balance sheet, Ballo fumbled through his papers on the desk and found a paper with relevant data. It says that Vnesheconombank's total assets increased by more than three times during the crisis (from October 1, 2008 to July 1 of this year). A decision was made to commit 1.3 billion dollars for refinancing Russian companies' and banks' debts to foreign financial institutions (in total, companies drew down 10.5 billion dollars - Vedomosti), the Bank extended subordinated loans worth 276.3 billion rubles, 174.5 billion rubles were spent to support the stock market, the loan portfolio (investment projects and export contracts) - a bit less than 250 billion rubles, Ballo quotes with some relief.

"I Remember that Night Pretty Well"

I couldn't help asking Ballo about a credit extended to Oleg Deripaska for refinancing a loan to foreign banks in the amount of 4.5 billion dollars. I wonder how it was.

"I remember that night pretty well, recollects Ballo. There were so many people in the Bank as though it was not 12 o'clock at night but 12 o'clock in the afternoon. We were in a great hurry to close a transaction. Every minute mattered. We were aware that there was a threat of losing an asset that was in pledge". Ballo is glad that the government and VEB acted at a lightning speed: law Ўн 173 on measures for supporting the financial system was published on October 13 and as early as on October 30 first money was committed. "We had only two weeks to study the transaction and make a substantiated judgment. The process involved five levels of decision making - three - inside VEB and another two - with the participation of the inter-departmental commission and VEB's Supervisory Board. Such a high speed was unprecedented. We did a great job in VEB's style", he said. In Ballo's opinion such a great speed was possible due to the State Corporation's business experience: the refinancing mechanism was combined with the procedures for considering standard investment projects. "Each customer was regarded as a project. What mattered was not an individual customer but benefits the Russian economy could derive from implementing a particular project", said Ballo. I asked: "Why after all did you help PIK, is it really of strategic importance? It turns out that other developers aren't of strategic importance?" "PIK is one of the few integrated regional construction companies; it is of great social importance. It would be unwisely to lose such a company the more so in the period of the crisis. For example, we didn't support Don-Stroi that for the most part involved in building exclusive housing but supported PIK", he answered.

"VEB is still being accused of having supported only those they saw fit in an unsystematic way", here I'm just voicing dissatisfaction of many companies with VEB. "We considered all companies but many companies failed to go through formal procedures", parried Ballo. Now, he says the program of refinancing is closed, it has exhausted itself, enterprises were supported at the appropriate time and then the government put in place a mechanism for extending subordinated loans and refinancing within the framework of the Central Bank. Companies that obtained credits at VEB can have their credits rolled over for a period of one year, says Ballo, the Supervisory Board made such a decision so that borrowers should not have cross defaults with regard to other obligations. Thus, the government did a goodwill gesture for borrowers, he believes. "But it was not an indulgence .All the companies are to fulfill terms and conditions of the current agreements. For example, we require Nornikel's shares (UC Rusal pledged them with VEB) to come under Russia's jurisdiction", Ballo specifies the Bank's approach. Credits are to be rolled over only on market terms, in each company VEB's representatives will be responsible for monitoring the situation.

VEB-Invest is to be responsible for dealing with bad credits, as they emerge, that is, their collaterals. The company was established to manage bad assets received in the course of rescuing Globex. We are going to develop the competence in dealing with problem assets at VEB-Invest, promises Ballo. "Therefore, we are already well-equipped", he jokes.

A Point of no Return

The crisis compels us to reevaluate our values completely, says Ballo. "Once we sacredly believed in various indicators and coefficients. For example, foreign banks accepted 25% plus one of Nornikel as pledge from UC Rusal and felt comfortable but several months later everything devalued. Ballo says that they are rethinking values in the banking community; we have to take a more serious approach to bank modeling. Demand is growing for professionals who can predict the consequences of a crisis and see which sectors are going to receive an impetus for development, he says. "The crisis showed that even the most problem-free projects could get in a real crisis situation, a lot depends on engineering managers' proficiency", sums up Ballo. The crisis taught us to be more cautious, he says: "If we approve a project for implementation we base our decision on its worst-case scenario". Now VEB is trying not to approve greenfields and projects on a business-idea level", he says.

There were cases when the crisis changed the project structure. For example, VEB suspended the funding of the second stage of the Moscow Business Incubator for small-size enterprises. "We'll see how the first stage will operate and then we'll start to think about the second one", said Ballo.

"We often have to approve projects that have already passed the point of no return. If financial resources were invested we must go on financing the project in order to avoid throwing real money down the drain", he says.

A Certain Symbolism

"What a family name - Ballo?" It is an Assyrian family name, explains Ballo. It's a shame to say that I don't know my ethnic language. My great grandfather came to Moscow in the Ў®20s so I am a third generation Muscovite. I grew up in Tishinka. Ballo graduated from the Moscow Finance Institute majoring in international economic relations. Many of his former fellow students became famous. Their names are known to everybody: Vladimir Dmitriev, Mikhail Prokhorov, Alexandr Khloponin, Andrei Akimov, Ballo counts off on his fingers.

Anatoly Ballo was the first in his family to receive higher education. His father was a cabinet maker. It was Ballo's father who recommended him to apply for the Moscow Finance Institute. "I did well at school so I had no problem getting enrolled", Ballo says to me. Now Ballo's father is proud of his son's successful career. "It's an honor for a representative of such a small ethnic group to hold such a senior position".

In 1991, Ballo started to work at Gosbank of the USSR. "Then, many looked upon me as an idiot. Civil service was not considered to be prestigious. Everyone wanted to find a job in Western representative offices of banks, companies and in all kinds of stock exchanges", he says. "I remember my first working day at the Bank; it was on August 19, 1991, when the State Committee for the State of Emergency (GKCHP) announced a state of emergency, there was a tank or an infantry combat vehicle in the Central Bank's enclosed court. They might have been searching for the Communist Party's gold. It was pretty amusing. I guess they haven't found any gold so far", he laughs. After the breakup of the Soviet Union, Ballo worked for another year at the Central Bank of Russia in the organizing committee on establishing a Russian Project Finance Bank (a subsidiary institution of the EBRD). "A sort of development bank", jokes Ballo. And then he said bitterly: "At the time, our attempt to establish a project finance bank failed. Only two years ago Vladimir Dmitriev's team created a bank for development on the basis of VEB".

Ballo is proud of working at VEB. "It's the oldest banking institution that has been operating since 1924". Now, he says, we are in a way getting back to the past as VEB is engaged in recovering the economy as it did in the past. "There is a certain symbolism in it".

Hobby under the Nick of "Fedya"

Football

Ballo is a great fan of Spartak. In the past, he used not to miss a single match, now he is pressed for time. His favorite football player is Fedor Cherenkov who is soon going to be 50. "He is a very creative, truly popular player,- says Ballo. - All of a sudden my eight-year-old son started to support Luch-Vladivostok (laughing). Primorsky region Governor Sergei Darkin promised to give me a uniform of this team but he hasn't done it so far".