The problem of $20 billion: how Development Bank became a black hole

The resignation of Vladimir Dmitriev as head of VEB, reported by RBC sources, was probably due to the fact that he had performed his tasks "without informing about the risks". How did the corporation become a "cesspool" of bad debts?
Origin source
Why create VEB?

Sam Vnesheconombank counts its history from 1922, but in its current form VEB originated in the pre-crisis 2007, when President Vladimir Putin has signed the law "On Bank for Development". VEB has received the status of state corporation - a banking license had not. Domestic Development Bank was guided by the model of the German KfW - the government agency that operates in accordance with a separate law. KfW actively supports German exports, and all of its obligations are guaranteed by the Government of Germany. State Corporation was engaged in the development of infrastructure, innovations, special economic zones, support for Russian export goods, support of small and medium-sized businesses.

As VEB instead engaged in the development of anti-crisis orders?

The crisis of 2008-2009 became VEB perform functions that were not originally spelled out in his concept: he took to reorganize commercial banks "Globex" and Svyaz-Bank, as well as intervened in the stock market.

In September 2008, "Globex" faced with a massive outflow of physicseskih and legal entities, which resulted in the acquisition of VEB 98.94% of shares of "Globex" for a symbolic 5 thousand. rub. At the same time, Sviaz-Bank, Bank support the telecommunications industry, "began to play" in the underlying securities, as well as a large number of issued loans of dubious quality. As a result, the Central Bank gave VEB to reorganize these banks 212.6 billion rubles. in 2008.

During the crisis of 2008-2009 VEB also bought sagging shares of Russian companies at the expense of the Ministry of Finance deposit of 175 billion rubles. from the National Welfare Fund (NWF), and then sell these securities at a profit of about 100 billion rubles.

Debts and losses of Vnesheconombank

$ 20 billion of external debt accumulated VEB to mid-2015

The $ 3 billion estimated Deputy Finance Minister Tatyana Nesterenko amount of payments on foreign debts in 2016 VEB

73.5 billion rubles. VEB has received damages under IFRS for the first half of 2015

250 billion rubles. VEB has received net loss on the results of 2014. This figure was a record for the bank

Not less than 240 billion rubles. VEB loans issued for the construction of facilities for the Olympics in Sochi in 2014. 183 billion of themthe end of 2014, the Bank recognized the problem

17.2% was the share of problem loans in the loan portfolio at the end of 2014 VEB

1.34 trillion rubles. assessed in December 2015 saved VEB Finance Minister Anton Siluanov

Sources: VEB reporting, media reports, the Ministry of Finance

Why VEB invested in the notoriously unprofitable projects?

Memorandum of VEB's financial policy stipulates that the corporation must invest in projects break-even, but in fact, Vnesheconombank already in 2009-2010 gave billions of dollars in loans for projects that have little chance to pay off. At a time when Putin was prime minister and, consequently, led by the supervisory board of the bank, the bank has issued more than $ 8 billion in loans to an unnamed Russian and Ukrainian investors for the purchase of industrial assets in Ukraine, mainly in the Donbass. Investors this is never called, and VEB reporting they are simply as "third parties", received from VEB loans for the purchase of shares and the financing of Ukrainian metallurgical enterprises. It is known that the money VEB bought packagesstock companies "ISD" and "Zaporizhstal". As stated by Forbes magazine, these investments were made for political purposes, and the actual owner of these enterprises became VEB itself.

Now Ukrainian investment VEB little work, these loans are not serviced - enterprises in the Donbass destroyed. At the end of September 2015 VEB estimated volume of loans anonymous investors to purchase securities and financing of metallurgical enterprises of Ukraine 561 billion rubles. ($ 7.2 billion at current exchange rates), relating them to the category of risk. Provision for impairment of these loans amounted to almost 170 billion rubles.

"Olympic" VEB loans totaling 240 billion rubles. also advance not look even. And at the end of 2014 "Olympic" loans by 183 billion rubles. VEB were classified as problematic. Formally, they are not overdue, but only due to a moratorium on the servicing and repayment of these loans, the extended recently until mid-2017. Without it, the extension of these loans would have been officially non-working, and in fact it comes fromdix statement, Fitch says.

Where VEB took the money?

VEB before the introduction of EU and US sanctions in 2014 borrowed money largely from foreign investors and banks and accumulated by the middle of 2015 about $ 20 billion foreign debt. Now, because of the sanctions VEB has no access to Western markets. However, only in 2016, VEB has to repay about $ 3 billion. Of these, as recalled S & P analyst Viktor Nikolsky, Eurobonds for $ 516 million and Russian bonds at $ 302 million.

"The main problem of VEB - significant non-performing assets. The second - with funding and liquidity problems due to the fact that the corporation is under sanctions. The third - a complex organizational structure, "- says the vice-president, a senior analyst at Moody's Alexander Proklov.

The structure of borrowed funds VEB group (basic)

From 3.987 trillion rubles. VEB's obligations:

28% - issued securities including Eurobonds

25% - borrowed funds from banks, primarily from foreign

15% - deposits and current accounts of individuals and legal entities (mostly bank liabilities "daughters & raquo; VEB)

17% - borrowed funds from the government and the Central Bank

9% - subordinated deposits, including those from the National Welfare Fund (NWF)

Source: VEB's IFRS financial statements for the third quarter of 2015, S & P

According to Moody's, the total capital infusion to VEB by the government in 2007 amounted to 559 billion rubles. (In Tier I capital) and $ 6 billion in Tier II capital. VEB's assets (4.3 trillion rubles. September 30, 2015), equal to about 8% of Russia's GDP (for the first nine months of last year).

Do Dmitriev VEB blame for problems?

Changes in the VEB is long overdue, and decided to start with a change of the head of the state corporation. On Thursday, February 18, Vladimir Dmitriev announced at a meeting with the staff of his impending resignation as chairman of the state corporation, said RBC knowledgeable sources. As his likely successor called the deputy chairman of Sberbank Sergei Gorkov - people from the team of German Gref. Earlier RBC a source close to the VEB, said that the country's leadership intends to put at the head of the state corporation experienced manager inThe ideal of German Gref: "If it were possible, the Gref. Since this is impossible - that one of his deputies, which Gref fostered. "

Vladimir Dmitriev came to Vnesheconombank of the USSR (since 2007 - the state corporation "Vnesheconombank") in 1997 for the post of first deputy chairman, and in 2004 headed the organization. As explained by RBC a source close to VEB's supervisory board, the resignation Dmitriev due to the fact that "he was just doing what he is told, and not informed about the risks", which may be related to these or other government decisions, or that the financial operations carried out by VEB.

What will be invested in 2016 VEB

Despite financial difficulties, Vnesheconombank continued support for Russian exports. So, in 2016, VEB and its subsidiaries are going Eximbank to finance export contracts worth a total of 210 billion rubles. This follows from the version of the government anti-crisis plan, which could be found RBC.

According to him, VEB will finance ten export contracts worth a total of 110 billion rubles. In their chilayers will supply 15 thousand. rail cars in Iran, Azerbaijan, Kazakhstan, Egypt and Cuba, as well as the delivery of 12 Sukhoi Superjet 100 aircraft courts in Ireland, Mexico, Denmark. In addition, the organization will supply power equipment to Vietnam ( "TPP Long Phu 1" project).

Eximbank is going to finance the 158 export contracts for 100 billion rubles. This will include the delivery of vehicles to Vietnam, India, Cuba, Belarus, and Kazakhstan. In addition, it will supply the products of agricultural machinery, rail cars and machinery equipment. The number of countries where the delivery will be made, entered Cuba, Azerbaijan, Turkmenistan, Uzbekistan and others.

Why VEB can not just close?

As one of the possible reforms, the government discussed the gradual closure of the VEB. Meaning - "leave from the legal entity of the state corporation" by passing his projects and debts to the state and to create a new development institute. "Close VEB - one of the options being discussed. But we do know that we need a development institution, we can not do without him - it is not excluded that there will be cosgiven the new ", - said earlier RBC government official. However, this option is not realistic because of the $ 20 billion of external debt of the bank, as well as over-complicated structure of the corporation.

In recent years the group has grown to VEB critical size (total assets reach 8% of GDP), a single clear pattern has been lost, functionality became too wide (from the government agent for public debt management to the Export Bank). Vnesheconombank is now forced to operate six operating segments, each with its own problems: there are, for example, the Ukrainian "Prominvestbank", which has to constantly inject capital have VEB-Leasing, the victim of the collapse of "Transaero", and there is still a fragmented set assets - from the "Resort" Golden ring "to Eximbank.