OREANDA-NEWS. October 10, 2008. Vnesheconombank (VEB) committed 59 billion rubles to Svyaz-Bank (RTS:  SVZB) to fulfill its current liabilities to customers,- Vnesheconombank Chairman Vladimir Dmitriev told journalists on Wednesday.

“The scale of Svyaz-Bank’s trouble amounted to 60 billion rubles and these were the bank’s current liabilities that it couldn’t discharge without Bank of Russia’s and VEB’s assistance”, - he said adding that 59 billion rubles are sufficient to resolve the bank’s current liquidity problem.

According to VEB’s Chairman, 45 billion rubles of the said amount were committed to Svyaz-Bank in the form of interbank credits and the remaining funds were provided for the bank to discharge its liabilities on the exchange REPO market.

“In order to address Svyaz-Bank’s current problems, the Bank of Russia will place a deposit of 2.5 billion dollars with VEB for a period of one year with a possibility of prolongation at LIBOR+1%”, - explained V. Dmitriev.

As he put it, the purchase amount of Svyaz-Bank’s 98% of shares is symbolic. “VEB’s Supervisory Board made a decision to purchase 98% of Svyaz-Bank’s shares for 5 thousand rubles”, - he said.

V. Dmitriev stresses that Svyaz-Bank’s operation has been restored - continuous cash flow to all the bank’s customers including pensioners has been secured, payments within Post of Russia wage projects are also being made uninterruptedly. “ We made it possible for Svyaz-Bank to interruptedly discharge its liabilities to creditors, deposit holders and on the interbank market”, - he said adding that Svyaz-Bank’s customer base is rather large – these are, in particular, raw materials industries and telecommunications companies.

According to V.Dmitriev, in the most immediate future VEB  will become Svyaz-Bank’s core shareholder by buying 98 % of its shares. “Acting as a core shareholder we can safely say that from this time onwards all Svyaz-Bank’s obligations will be fulfilled in full as we can use financial resources provided to us”, - he said.

He added that Svayz-Bank’s current condition is rather difficult but by using the Bank of Russia’s resources and with the help of personnel working at the bank now, a team from Sberbank (RTS: SBER), VEB’s enhanced team and federal authorities we’ll be able to get the bank and its branch network working without fail. “We are working with the bank to restore its normal operation and development’, - said V.Dmitriev.

VEB’s Chairman said that Svyaz-Bank is a bank with an extended network comprised of 49 branches, it relies on the Post of Russia, works with major communications companies and operates in those regions where  VEB is expanding its activity by participating in investment projects. That is why in V.Dmitriev’s words joint operation of the two banks under VEB’s auspices is of great interest.

“Besides nobody rules out the possibility of establishing a Post Bank on the basis of Svyaz-Bank. Here we mean prospects for cooperating with the Post of Russia and its head Andrei Kazmin”,- said VEB’s Chairman.

 On the basis of Svyaz-Bank’s network VEB can also expand its activity in financing small and medium-sized business.

“But we don’t know what is going to happen to Svyaz-Bank, we don’t know if it will remain VEB’s subsidiary, operate within the system of the Post of Russia or will be sold to a strategic investor. We have to sort this problem out, work out various Svyaz-Bank’s development scenarios and choose a path we are going to follow”,- explained V.Dmitriev.

VEB’s Chairman assumed that it would not be possible to correct the situation in Svyaz-Bank within a year and that is why the Russian Central Bank’s deposit is most likely to be prolonged for another year.

V.Dmitriev said that Svyaz-Bank’s private depositors would have no problems, “but there is concern that on the backdrop of the complicated situation as a whole the bank’s many customers both natural and legal persons would request the bank to transfer their deposits to more stable and more understandable banks”.

According to Svyaz-Bank President- Board Chairman Alexandr Zhitnik, deposit outflow from Svyaz-Bank is not significant. Answering the question if businessman Alisher Usmanov has withdrawn his deposit from Svyaz-Bank he answered: “In part”.