Proceeding from Functions

Published, 29.04.2005

Andrei DENISOV

VEB's Chairman Hopes that the Draft Law on the Bank's Legal Status Will be Brought before Parliament before the End of the Year

Vnesheconombank's Chairman Vladimir Dmitriev believes that this year should become crucial in Vnesheconombank's fate. The banking sector development strategy is aimed at bringing VEB's status in line with applicable legislation. "We need to amend applicable or enact new legislation that would bring VEB's activity in conformity with the current legal framework," said Mr. Dmitriev at a press conference devoted to the Bank's performance for 2004.

The draft law on VEB's status has been already worked out in the Bank and is being studied by ministries and departments concerned. Vladimir Dmitriev hopes that despite the complicated approval process, the draft law would be submitted to Parliament this year. The Bank's Chairman is fairly reluctant to say what final form the draft law would take and what kind of status it would be in the long run. "Our assumption is that Vnesheconombank must remain a large financial institution", - said Mr. Dmitriev. The draft law sets forth functions that should be assigned to VEB. In this respect, he believes, "differing approaches are not likely to emerge". But as to an issue of Bank's future organizational and legal form, it is to be settled by the government.

At the same time some decisions concerning VEB's business have already been made. The Bank decided against diversifying its business - it would not engaged in retail and mortgage banking and in working with small- and medium-size companies. But there is no doubt that VEB is destined to remain a unique institution: for its 80-year history, as Mr. Dmitriev said, it "absorbed" functions of debt management agency, development bank and central foreign economic transactions operator. Thus, in terms of its functions it is quite similar to Germany's state-owned development bank Kreditanstalt fuer Wiederaufbau (KfW) whose business is governed by a separate law which doesn't require the bank to have banking license.

Meanwhile, an important event has already happened in the Bank's life. The government has at last taken all necessary measures to put into effect the 2003 concept of promoting non-raw materials exports (specifically, the federal budget allocates 600 million dollars in guarantees to promote exports and 100 million dollars to subsidize interest rates). Vladimir Dmitriev says that two Il-96 aircraft are to be supplied to Cuba under Vnesheconombank's program to promote industrial exports in 2005. VEB conducted this transaction against the government guarantee worth 90 million dollars. The Banker also added that there are some projects in the works to support industrial exports "associated with Middle and Far East, American continent and South-East Asia countries".

There emerged a new priority in VEB's business - several days ago it signed an agreement on strategic cooperation with the Administration of the Krasnoyarsk Territory. As Vladimir Dmitriev puts it, the Bank is committed "to help develop regions' economic potential through infrastructural projects". By infrastructure we mean roads, telecommunications, port and airport infrastructure. VEB is considering a number of projects in these sectors in Saint Petersburg and other north-western regions.

VEB's performance in managing pension savings of the so-called "undecideds" have not been revealed in VEB as they expect the authorities to approve standards on disclosing information on this matter. Vladimir Dmitriev stressed that there is no doubt that in 2004 VEB generated incomes through investing pension savings in a limited number of instruments it is authorized to invest in. But the government is in no hurry to take even the most rational decisions to help manage these funds more effectively. VEB's representatives spent several months to persuade bureaucrats to allow them to conduct transactions in Russian eurobonds not only on stock exchanges (where turnovers of these securities are extremely small) but also on European over-the-counter market. Now VEB hopes that its investment declaration will be expanded. At present, VEB is authorized to invest pension funds in government ruble-denominated bonds, Russian eurobonds and mortgage bonds issued against guarantees (mortgage bonds are not available yet). As VEB's Trust Management Department Director Alexander Popov said, at the moment, the Bank is seeking permission to invest pension savings in sub-federal bonds and top-level corporate bonds.

Vnesheconombank's net profit amounted to 3.54 billion rubles from 2.9 billion rubles in 2003. Its tax payments also increased and were 807.4 million rubles from 783 million rubles in 2003.