Bailing Out VEB

An article in the Russian business daily Vedomosti today revealed that contrary to rumor, the head of state bank Vnesheconombank (VEB) Vladimir Dmitriev would retain his post. The decision to keep Dmitriev in place had been made early last week at a meeting with President Vladimir Putin.

VEB has apparently been struggling for some time in the midst of the economic downturn. The reasons for this are multiple, but this is perhaps the best explanation:

“The main problem is that the bank is not governed as an independent agency or a business entity,” said Sergey Aleksashenko, a former Russian central banker. “It is governed like a second budget … (ignoring) economic efficiency or economic results.”

In early December, Economy Minister Ulyukaev said “it would be better to liquidate it [VEB]”, but he conceded that this was not actually an option. He also noted that the bank had bad loans totaling more than $15 billion.

Over the holidays, Finance Minister Siluanov informed the public that the government would “cut interest rates on the central bank’s deposits” in VEB:

“We agreed that the interest rate on deposits, placed using NWF [National Welfare Fund] funds, will be cut, significantly cut, to 0.25 percent,” Siluanov said.

“We agreed that VEB will get access to liquidity which the budget has. In other words the treasury will be able to place its liquidity not only in commercial banks, but also in VEB,” the minister said.

“We agreed that the central bank, with its deposits, will implement the same measures to improve VEB’s balance,” Siluanov added.

Today, Vedomosti repeated this information and noted:


In December an official familiar with the discussions in the government told “Vedomosti” that VEB could obtain OFZs in the amount of 200 billion robles. This was the figure discussed, the official from the financial and economic bloc confirmed. This is the option considered optimal by the management of VEB, said an employee of the state corporation.

Vedomosti also reports that a discussion on how best to support VEB is scheduled for 3 February. Prime Minister Dmitry Medvedev will be in attendance.


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