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Rescuing Svyaz-Bank

9 october 2008 года
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Vremya Novostei
N 187, October 2008

 

VEB told about Svyaz-Bank’s future

Vnesheconombank is buying Svyaz-Bank for a symbolic sum of 5 thousand rubles, the Federal Antimonopoly Service has already approved the acquisition and the Central Bank placed a deposit of 2.5 billion dollars with Vnesheconombank for Svyaz-Bank to discharge its current liabilities. Yesterday the heads f the two banks spoke about Svyaz-Bank’s bright future.

Svyaz-Bank’s financial standing was seriously damaged by two factors – the bank’s overindulgence in repo transactions and “unbalanced balance sheet”, that is, short liabilities and long assets said VEB Chairman Vladimir Dmitriev at a specially called briefing yesterday. And he hinted that Svyaz-Bank’s management may have created this sort of situation deliberately. “Long assets were formed at a time when Svyaz-Bank’s management was set to leave the bank before Sberbank’s former top managers came to the bank. Factually, the bank’s liquidity was moved into long credits, - explained VEB’s Chairman. We together with a team from Sberbank are taking all necessary measures to analyze Svyaz-Bank’s treasury and credit transactions including those on the interbank market and on the exchange Repo market”. As of October 1, the amount of Svyaz-Bank’s loan liabilities according to its President – Board Director Alexandr Zhitnik was 90 billion rubles, these liabilities are mostly corporate credits. As he put it, the share of problem credits in the bank’s portfolio is 20 – 25%.

“A number of Svyaz-Bank’s problems are not associated with financial supervision. It’s evident hat we will need professional assistance, which is not related to banking activity”, - said Mr. Dmitriev adding that they will turn to law enforcement authorities for help. The banker said that the situation with Svyaz-Bank was similar to the one when a good fiddle had been placed in the wrong hands.

Together with Svyaz-Bank, VEB received its outstanding obligations to creditors, deposit holders an on the interbank market. In order to fulfill these obligations the bank needed 59 billion rubles, which it didn’t have. “The scale of Svyaz-Bank trouble was estimated at 60 billion rubles and these were the bank’s current liabilities which it couldn’t discharge without Bank of Russia’s and VEB’s assistance”, - explained Mr. Dmitriev. 45 billion rubles of the said amount were committed to Svyaz-Bank in the form of interbank credits and the remaining funds were provided for the bank to discharge its liabilities on the exchange Repo market.

In order to address Svyaz-Bank’s current problems the Bank of Russia will place a deposit of 2.5 billion dollars with VEB for a period of one year with a possibility of prolongation at LIBOR+1%. Thus Svyaz-Bank’s operation will be restored, continuous cash flow to all the bank’s customers including pensioner will be secured, payments under the Post of Russia wage projects will also be made uninterruptedly, said VEB’s Chairman. “Acting a core shareholder we can safely say that from this time onwards all Svyaz-Bank’s obligations will be fulfilled in full as we can use financial resources provided to us”, - said Vladimir Dmitriev. And the benefit is expected to be mutual. According to him, joint operation of the two banks under VEB’s auspices is of great interest, but nobody ruled out the possibility of establishing a Post Bank on the basis of Svyaz-Bank. “We spoke about prospects for cooperating with the Post of Russia with its head Andrei Kazmin”. Given this cooperation, VEB will get rid of non-core asset and the Post of Russia together with the bank will obtain a license for conducting banking transactions of what Mr. Kazmin dreamt about so much.

So far, private depositors and corporate customers have been assured that they will have no problems. But to tell you the truth, there is concern that on the backdrop of the complicated situation as a whole, the bank’s many customers both natural and legal persons would request the bank to transfer their deposits to more stable and more understandable banks”, - said Mr. Dmitriev. And there are already examples of that. According to Mr. Zhitnik deposit outflow from Svyaz-Bank is not significant, but businessman Alisher Usmanov has partially withdrawn his deposit.

Julia MIRONOVA
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