Ministry of Finance of the Russian Federation
Ministry of Finance of the Russian Federation

Statements of Deputy Head of the Government of the Russian Federation – Finance Minister of the Russian Federation A. Kudrin


Regional borrowing reborn, appealing to foreigners - Kudrin

ULAN-UDE. July 1 (Interfax) - A post-crisis rebirth in regional borrowing is under way, with regional bonds sure to appeal to Russian and foreign investors alike, Deputy Prime Minister Alexei Kudrin, who is also the country's finance minister, told reporters in Ulan-Ude.

Budgeted loans will only be issued in emergencies like fires, drought and floods from 2012, Kudrin said. "We'll only be lending for emergencies next year," he said.

Budgeted loans have been issued for crisis-related difficulties, when regional revenue dropped sharply and the market was reticent about lending. "We introduced a new system of support for the regions," he said.

The regions have received 200 billion rubles in three-year budget-balancing loans and around 100 billion rubles in five-year road construction loans, which will be repaid gradually, Kudrin said.

"We're approaching the culmination of the crisis processes. The country's GDP will approach pre-crisis level at the end of the year, and regional revenues have recovered and have started to exceed their pre-crisis level in nominal terms," Kudrin said. The regions themselves need to borrow more actively on the market, now that budgeted loans have served their purpose, he said.

Kudrin said sub-federal loans would be attractive to Russian and foreign investors alike.

"The whole world is looking for a new application, new sectors for debt obligations," he said. "I think that with the right kind of oversight and preservation sustained creditworthiness there ought to be very strong interest in regional borrowing," he said.

Kudrin said 30 regions were reliable borrowers. "Subfederal borrowing is getting a new lease of life. Including in the international dimension," he said.

"Money is coming in through banks and other financial companies that are being set up in Russia, and it is entering the ruble-bond market, the domestic markets, that is foreign companies will be investing not in ruble-denominated Eurobonds but in domestic bonds via the corresponding mechanisms," he said.

Yields on three-to-five year regional bonds are around 7%. "These are absolutely normal rates. We'll lower inflation in the years to come and rates will be around 5%," Kudrin said.


Bank of Moscow rescue least costly option-Kudrin

ULAN UDE, Russia, July 1 (Reuters) - The $14-billion rescue of Bank of Moscow was the least costly option, Finance Minister Alexei Kudrin said on Friday.

Kudrin estimated bad loans held by the bank at 250 billion roubles ($8.98 billion), of which 150 billion roubles in unsecured lending were the most problematic.

But, he told reporters, the cost of buying up the bad loans would have been more expensive than the chosen method of restructuring Bank of Moscow, under which state-controlled VTB will raise its stake to 75 percent.

Kudrin also accused former Bank of Moscow executives, headed by Andrei Borodin, of mismanagement and called for legal investigations both in Russia and abroad.

"We hope that law-enforcement agencies will launch an investigation, and expect foreign investigators also to launch probes," he said. "At the moment, Bank of Moscow's assets are concentrated abroad."


Kudrin promises budgeting loans only in case of emergencies.

ULAN-UDE, July 1 (Itar-Tass) — Russia’s Finance Minister Alexei Kudrin said on Friday the government will extend budgeting loans only in case of emergencies.

“Earlier, the budgeting loans were extended following the crisis, when the regions’ revenues shrank and thanks to such loans the regions did not cut their spending amid the crisis – all social tasks were fulfilled in all Russian regions, therefore the budget loans fulfilled their function,” he said.

“All Russian regions accrued a total of over 200 billion roubles and within three-five years they will be returned,” he said.

“The crisis-related processes had been over, the country’s GDP will reach the pre-crisis level by the end of the year,” Kudrin said. “The regions’ revenues restored and exceed the pre-crisis level in nominal terms, therefore it is high time for regions to transfer to market loans taking care of their loan rating and of how to get it.”

“I will say more, now when the debt crises may still pertain, the world is looking for new sectors of debt obligations, therefore there will be a huge interest in Russian regions’ loans. We have around 30 regions, which are reliable borrowers, this means that their loans can be breathed new life, including that on the global scale on the market of international bonds,” he said.

Kudrin is on a working visit to the Republic of Buryatia to mark the 350th anniversary of its voluntary accession to Russia.


VTB to boost stake in Bank of Moscow to 75% through additional share issue and buyout of other shareholders - Kudrin

ULAN-UDE. July 1 (Interfax) - VTB will increase its stake in Bank of Moscow (RTS: MMBM) to 75%, Russian Deputy Prime Minister and Finance Minister Alexei Kudrin, told journalists on Friday.

"The Central Bank and Deposit Insurance Agency have prepared a plan, which I have agreed on, that puts the main burden of collecting loans [Bank of Moscow's toxic loans] on VTB. VTB needs to consolidate a packet worth up to 75% and boost Bank of Moscow's capitalization by 100 billion rubles," he said.

When asked about VTB would consolidate this packet, Kudrin said that it would do so through various means. "In various ways, such as boosting capitalization and through buying out share from shareholders," he said.

He added that a CB loan and an additional share issue would help Bank of Moscow reach its necessary level of capitalization, as well as VTB's efforts to provide financial assistance without problems. "We believe that this is the least expensive option," he said.

He said that another mechanism would be providing financial assistance, not through VTB, would be more expensive. For instance, 160 billion rubles would be needed to return deposits to deposit-holdings, $3 billion - for payments to external borrowers and around 200 billion rubles - for returning funds to the budget on various levels.

When asked the source of the funds the CB would provide in a loan to the DIA for Bank of Moscow, Kudrin said that this would come from the CB's own funds. "Essentially, this would partially influence as a decrease in the CB's profit for the short-term. Later on, these funds would be restored through the return on the loan," Kudrin said.

Since February 2011, VTB has owned 46.48% in Bank of Moscow and a blocking packet in Capital Insurance Group, which owns around 17% in Bank of Moscow.

Businessman Vitaly Yusufov owns 19.91% in Bank of Moscow through Cyprus-based Losanp Trade Ltd. This packet was acquired from the bank's former president, Andrei Borodin and his advisor Lev Alaluyev.

In addition to VTB, Losanp and Capital Insurance Group, other major shareholders in Bank of Moscow are Durland Investments (6.86%) and Plenium Invest (4.51%). The beneficiaries of these companies are still unknown.


VTB must boost stake in Bank of Moscow to 75 pct for bailout - Kudrin.

ULAN-UDE, July 1 (RIA Novosti) - State-run VTB Bank should boost its stake in Bank of Moscow to 75 percent to bail out the former Moscow government's lender, Finance Minister Alexei Kudrin said on Friday.

VTB launched a hostile takeover bid in February with the purchase of a 48.46 percent stake in the Bank of Moscow. VTB managed to oust the Bank of Moscow management loyal to former Moscow mayor Yury Luzhkov who was fired by Russian President Dmitry Medvedev last fall over a lack of trust.

Once VTB gained operational control of the Bank of Moscow, it found a big hole in the bank's loan book resulting from the provision of loans to real estate projects that are hard to recover.

"We consider the buyout of 'bad assets' to be inexpedient and wrong. The Central Bank and the Deposit Insurance Agency have prepared a scheme, which was agreed with me, under which VTB will have to take up the main burden for loan recovery. VTB will have to consolidate the share package to 75 percent and recapitalize the bank," Kudrin said.

Under the rescue package, the Central Bank and the Deposit Insurance Agency will lend the Bank of Moscow 295 billion rubles at a concessional rate of 0.51 percent for ten years. The loan will come from the Central Bank, which will lend the funds to the Deposit Insurance Agency at a rate of 0.5 percent for five years.

VTB will also contribute 100 billion rubles to enlarge the Bank of Moscow's authorized capital from the current 18 billion rubles.