The Last Soviet Bank Emerges from the Underground
Published 29.04.2005
Vnesheconombank of the USSR Decides to live within the Law
Yesterday, Vnesheconombank of the USSR (VEB) Chairman Vladimir Dmitriev said that the draft law "On VEB" prepared by the Bank would be brought before the State Duma before the end of the current year. If deputies approve it, VEB that has been operating for the past 14 years within a dubious legal framework will, at last, acquire legal status. But we can't say that it would become a universal bank. Only one of the three options offered to the government envisages that VEB is to receive a banking license.
Vnesheconombank of the USSR is one of the largest Russian banks. There are Russian foreign debts worth tens of billions of dollars on its balance. In 2004, the amount of international payments made through VEB was $28.2 billion. The average annual amount of securities recorded in custody accounts was $8.3 billion. The Bank's net profit for 2004 amounted to 3.54 billion rubles. The Bank is one of the largest taxpayers among Russian banks. The Bank's total tax payments to the budgets of all levels were 807.4 million rubles last year.
It is well known that Vnesheconombank of the USSR has never had a banking license. Now it is operating within a dubious legal framework - under former president Boris Eltsin's decree. The Government tried to resolve this legal collision by merging VEB with Roseximbank or Vneshtorgbank, or by establishing a VEB-based debt management agency, but all these attempts were doomed to failure. For many years, VEB's former management had favored the idea that a special law on VEB should be enacted, but their words had never been translated into deeds.
And yesterday, VEB Chairman Vladimir Dmitriev brought up this subject again. "We have done a lot to determine VEB's legal status. We have prepared a draft law identifying our Bank's objectives and goals. At present, the draft law is being agreed upon in various government departments and we hope to finish the approval process and brought the draft law before the State Duma before the end of the year", - he said.
Nobody at the Bank makes no secret of the fact that while preparing the draft law they tried to draw on Kreditanstalt fur Wiederaufbau's (KfW) experience. Established in 1948 in order to rebuild the German economy this bank's status has been unique so far. The bank's status was set forth in a special law and it was not until 2001 that the bank's status was emended. Under para 1a of this law German government is liable for all KfW's obligations. By the way, in the summer of 2003, VEB and KfW signed an agreement on co-operation to promote Russian and German exporters.
As far as VEB's and KfW's objectives and goals are concerned, they have much in common, except that the Russian bank is the agent for the government in managing foreign debt. In the case that the State Duma will pass the law "On VEB", Vnesheconombank will differ substantially from the German bank. But it remains unclear in what form VEB is going to be registered and whether it is going to receive a banking license.
Yesterday, Mr. Dmitriev declined categorically to elaborate on his plans on the issue. According to him, various departments have different approaches to deciding VEB's fate. That is why the draft law "On VEB" prepared by Vnesheconombank's employees includes three possible scenarios. And, as VEB Chairman V. Dmitriev admits, only one of them envisages that VEB is to obtain a banking license. But does it really need it? As Vladimir Dmitriev said yesterday VEB doesn't intend to engage in retail and mortgage banking. "In our view, we should not go into this business. We have no plans to compete with other banks in this market sector", - he says.
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