Beginning of Meeting with Chairman of the Management Board and President of VTB Bank Andrei Kostin 2009-04-16 20:51:00 The Kremlin, Moscow President of Russia Dmitry Medvedev: What do we have to boast about? What successes have we had? What is your bank doing to overcome the effects of the global financial crisis along with the rest of the economy? Please tell. chairman of the Management Board of Vneshtorgbank andrei Kostin: It’s a difficult time to do any boasting, but I can say that since the beginning of the year the bank has been operating steadily. We have been able to expand our loan portfolio, the resources that we provide to the real economy. Since the beginning of the year, we have increased these resources by more than eight percent and we will continue to maintain this pace. Of course, this year will probably be the most difficult for the Russian banking sector, since the main activity of Russian banks has always been loans to industrial companies. It is natural that the general deterioration of the global economic situation and our clients’ difficult financial situation are affecting the banking sector today. I wanted to say that I think the anti-crisis measures proposed by the Government, provided they are accompanied by skilful management within the banks themselves, will ensure the stability of the Russian banking sector in terms of securing the deposits of the population, hitting targets and lending. Therefore I hope that despite these difficulties and the problem of growing bad loans, we will get through this year and the banking sector will function quite smoothly and efficiently. Dmitry Medvedev: I understand. In your view what problems lie ahead? Andrei Kostin: In addition to financial problems, we foresee the problem of strengthening financial discipline, increasing the accountability of borrowers, especially corporate clients and their managers, as well as stamping out the misuse of credit. It is important that the old Russian maxim that “one good turn deserves another” does not become “we can write off everything in a crisis.” In this respect, we perceive a need for a series of government measures, including legislative initiatives, to improve our legislation in this area. We have prepared a number of respective proposals and I would be grateful if you would instruct relevant agencies to consider these issues. It is important to maintain financial discipline, since naturally the lack thereof negatively affects the entire economy. Dmitry Medvedev: As you know, given the problems that have arisen, almost everyone involved in economic relations has to settle their accounts. Everyone suffers: businesses suffer and of course workers, individuals who work there do as well. We are faced with a serious increase in unemployment and this is probably the gravest social problem for the state as it must prevent a further rise in unemployment, to contain the growth rate of unemployment and at the same time maintain capable, full-fledged and self-sufficient workforce, which in turn maintains effective operation of companies, businesses and corporations. In this regard, I have repeatedly directed banks, including your bank, to cooperate fully with corporations to ensure adequate amounts of credit, including via the support being provided under the auspices of the cabinet’s anti-crisis plan. In given circumstances everyone has to behave responsibly and here I absolutely agree with you that despite the current difficulties, the issue of fiscal discipline must remain one of our most important considerations. If a company is able to meet its obligations – and we currently have a situation in which a significant portion of those obligations are being met – if people are working, wages are being paid, contracts made and credit agreements honoured, then all this should help borrowers meet their liabilities in loan transactions. Otherwise we can create a huge chain of non-repayment of loans, which in turn will affect the overall state of our economy. In other words, I believe that we really must think about the issues involved in strengthening financial discipline. It’s true we are having great difficulty supporting a number of industries and there are problems with the interest rate. Indeed, the banking community and the government should take whatever steps are necessary to reduce this rate in the long run, use promotional schemes, give discounts, provide subsidies. But even with all these mechanisms, there is still the basic rule that in addition to observing financial discipline and loan agreements, not only the banks but also the borrowers have to fulfil their obligations. This should also be borne in mind in order to minimise the cases of default, because it is on these cases that the sustainability of our banking system will ultimately be judged. If you have any relevant suggestions I am ready to issue directives to the Cabinet and the Executive Office to put them into practice. Andrei Kostin: Thank you.