President of Russia Vladimir Putin: Mr Shuvalov, good afternoon.
I know that you have already taken measures to optimise the bank’s activity. I would also like to hear your proposals regarding the coordination of various investment institutions in Russia.
Vnesheconombank’s goal has always been to develop the economy, its real sector. It can be reached in a most optimal way and with the most optimal instruments through the coordination of various development institutes. Generally, how is work proceeding in this field?
Vnesheconombank Chairman Igor Shuvalov: Mr President,let me again thank you for entrusting me with this position. My job was to join the implementation of the Presidential May Executive Order under the leadership of the Government. We are involved in all governmental bodies and we are engaged in all the areas outlined by the executive order.
As for our ability to lend, in June the Government decided on a new financial model for Vnesheconombank, which means that we will not be the only creditor, with the exception of certain decisions made by the President or the Government. We need to learn to work with the largest credit organisations so that Vnesheconombank would be able to provide the necessary services and take on risks in order to increase the capacity of credit organisations in providing loans to the economy.
In the previous period, Vnesheconombank provided some 3 trillion rubles in loans. Together with our experts, we calculated that in the next five years, with the new model, Vnesheconombank will be able to provide the same amount, taking into account that if our largest lending organisations such as Sberbank, VTB and Gazprombank join the work, we will be able to increase this sum three or four times, in other words, lend more than 3 trillion rubles. It would be a real contribution to the implementation of the Presidential May 7 Executive Order.
What are we doing to that end? First of all, we have optimised the number of our workers. This is not an easy job and requires talking to people and showing understanding, but the group must consist of highly skilled professionals so that their authority would be recognised by both the Government and the lending organisations. We have let go of many people, and as of October 1, we have a new staffing structure. We invited some of the best experts from other lending institutions, thus forming a high-class team of professionals. We will continue working on this.
Another area is Vnesheconombank’s accumulated problem loan portfolio. Many can read in the press that the bank is operating at a loss. In fact, the loss does not reflect the current activity; it is a solely accounting operation. We use it to show that we are managing the accumulated problems. We are not hiding them from the public. We are working with the Central Bank and the Finance Ministry, but for some time Vnesheconombank will show a loss, not from current activity but from previous operations.
We know how to deal with these assets in the best possible way. We are not doing this alone but together with ministries and agencies and we are doing our best to show our development function in this case. This relates to such assets as the timber industry, cement plants and the agro-industrial sector. There are numerous operating enterprises that are very important for the regional economies. We are finding ways of using business operators and other existing companies to manage these assets so that their cost would be increased rather than reduced.
Regarding the new portfolio, we use a fully up-to-date risk assessment system, and are making sure that Sberbank, Gazprombank and VTB acknowledge the risks we have identified without reassessing them. On our side, we will be working in such a way as to recognise the risks called out by these institutions without additional assessment.
For our operations, we need funds. I reported to the Prime Minister that we had agreed with the Finance Ministry on a preliminary scheme to legally envisage subscription capital, the way it is done with other development banks internationally. This is a certain amount of funds earmarked in the budget to be provided to our institution by the Ministry when we need it. The money is not funnelled in advance, but is drawn as required.
We have been working with the world’s largest credit institutions such as the China Development Bank and similar banks in Japan, and these have been eagerly negotiating and signing agreements with us.
As for external debt, we have talked the matter over and have agreed the terms. As concerns both Vnesheconombank’s capital and our foreign debt, we believe we can settle the issue before the end of 2018 if you give us your approval.
Vladimir Putin: We discussed this with the former Government for a long time. You have been part of these discussions on multiple occasions. Do you think that the proposals outlined in the project will be able to clear the balance sheet and ensure that Vnesheconombank is performing its role as a development institution rather than focusing exclusively on debt repayment?
Igor Shuvalov: Yes, we will be able to go full steam ahead with the new programme to issue loans, as well as build new and upgrade existing production facilities. We will of course be lending support to development goals, performing our chief function.
Vladimir Putin: Good.