Vnesheconombank Chairman Vladimir Dmitriev’s Interview to the TV Channel Russia 24 (Davos, the World Economic Forum)

TV Channel Russia 24
INTERVIEW
28.01.2011, 17:45

CORR: Post-crisis risks are in the limelight of this Forum. What, in your opinion, are the most evident risks for the Russian economy in this period of time?

Vladimir DMITRIEV, Vnesheconombank Chairman: Risks are pretty serious, and since the start of the Forum almost all its participants have been discussing them in earnest. In this respect, I can’t help mentioning our President Dmitry Medvedev’s address, in which he described terrorism as a global threat to all countries. And this theme has been discussed extensively and is in the limelight now. Almost all the Davos Forum’s participants express their sympathy and extend their condolences in connection with the Domodedovo terrorist attack. This is another testimony to the fact that terrorism is a global threat and that we should address it together. This is a serious risk we have to face. But it is this challenge that makes our Government give a serious thought to the economic background of terrorism. Here I mean the state of the economy, employment, education. Undoubtedly, we are aware of other risks and, above all, these are economic risks. And in this sense, the past financial crisis and it’s almost safe to say that it’s past, showed Russian financial authorities, the regulator, the Central Bank, the Government took important measures based on the already existing economy regulation instruments to alleviate the impact of the crisis, above all, on the Russian banking system and on the economy as a whole. I think that banking and corporate legislation improvement would enable us to minimize emerging risks.

CORR: How should banking legislation be changed?

Vladimir DMITRIEV: Recently, to be more exact, this week, the Russian Prime Minister has chaired a meeting on the banking sector development strategy up to 2015. The strategy provides for the improvement of banking legislation in terms of tightening prudential supervision over banks’ activity. The crisis itself and post-crisis developments showed that we have to a greater extent focus our attention on banks’ balance-sheet ratios, banks’ beneficiaries and their day-to-day operations. In this respect, we have already done a lot. Nevertheless, we have to take serious steps to make the banking system as safe as possible.

CORR: In the time of the crisis VEB was a sort of life line for Russian companies. Now the crisis is over. What lines of activity is VEB choosing for itself?

Vladimir DMITRIEV: Despite the fact that during the crisis in 2008, 2009 and to some extent in 2010 we had been taking serious crisis management measures initiated by the Government and the Central Bank we didn’t stop undertaking our activity as a Bank for Development. Of course, in this sense, we have no problem re-profiling the activity of some of the Bank’s subdivisions, which in the period of the crisis were engaged in taking measures for reorganizing banks, capitalizing the banking system, refinancing Russian companies’ foreign debts. Now we have additional resources to undertake our core activity aimed at developing infrastructure, supporting small and medium-sized enterprises, operating in the key economic sectors where top priority is to be given to pursuing economic modernization policy formulated by this country’s leadership. In this respect, we have modernization projects that are included in our loan portfolio. Under the Bank’s new strategy up to 2015, we are to increase the proportion of innovation projects in our loan portfolio. Now this proportion is about 15 percent. As a development institution, which focuses on supporting industrial exports and Russian investments abroad, we give top priority to boosting this line of activity. Here, I’d like to single out two important things we are going to do in the most immediate future. First, we are going to establish an Export Credit and Investments Insurance Agency as Vnesheconombank’s 100-percent subsidiary. A document on introducing an appropriate amendment to applicable legislation is under consideration in the Government and is to be submitted to the State Duma soon. Second, this line of our Bank’s activity is designed to raise foreign investments for the Russian economy. At the Davos Forum the Russian President called for establishing a Sovereign Investment Fund. On the one hand this call was a challenge for us and on the other a guide for action. From our point of view this Fund would be a timely and a serious step to mobilize resources for our economy in order to undertake institutional reforms in the economy as well as to channel investments into key economic sectors and to raise foreign investments. All the investors we are communicating have a stake in working in Russia, they are talking of sharing risks between them and Russian institutions. In this case the state and we as a Bank for Development are ready to take an active part in this activity.

CORR: Vladimir Alexandrovich, I’ve also read that you made a successful bond placement here in Switzerland and that you placed bonds in francs. Would you tell us about this placement? I’ve also read that you are going to place bonds in rubles, yuans and yens?

Vladimir DMITRIEV: It was our debut bond issue in Switzerland. We passed this difficult test successfully as we did several times last year when we entered capital markets. Although all our bond issues were debut ones, they were successful, and now our bonds are trading at rates better than the ones of any borrowings of Russian borrowers and banks. These are 15-year, 7-year and 10-year bonds. As far as franc-denominated bonds are concerned we placed bonds worth half a billion francs for a period of five years. First, the bond period and volume have been so far beyond the reach of Russian borrowers and the rates were pretty attractive. Soon we’ll make public all information about this successful bond issue. In fact we are going to expand our borrowing program. Last year in all types of borrowings we raised more than eight billion dollars both in rubles and in foreign currency. This year we hope that we wouldn’t lower this level in terms of borrowings both on the capital market and the interbank market taking into account tied loans. We intend to consider the possibility of making borrowings in yen. I can’t rule out that we’ll be interested in the pound sterling. So, we are exploring all the possibilities to extend credits to our corporate customers.

CORR: Vladimir Alexandrovich, thank you very much for your interview and for finding time for us.

Vladimir DMITRIEV: Thank you.