Russia's VEB development bank chief reportedly poised to resign

By bne IntelliNews February 18, 2016

The head of Russia's debt-saddled development bank Vneshekonombank (VEB) Vladimir Dmitriev told staff on February 18 that he was about to resign from the post, Vedomosti daily reports, citing unnamed sources in both the bank and government.

The development comes amid ongoing discussions on how to restructure VEB's huge debt portfolio, which is  burdened by grandiose infrastructure projects and heavy exposure to Ukraine prior to the eruption of the 2014 crisis.

Standard & Poor's on February 17 estimated that of the anticipated 3.8% of GDP federal budget deficit, 0.3% of GDP will be spent on supporting VEB.

Vedomosti reported in late January that despite support for Dmitriev voiced by President Vladimir Putin, the government was continuing to look for a replacement candidate, whose appointment would be officially announced at the same time as VEB's support package.

Another government meeting on the bail-out is believed to be due before the end of February. Under Dmitriev, the bank, which posted IFRS losses of RUB250bn in 2014 and RUB73.5bn in the first half of 2015, argued that it needs at least RUB1.5 trillion ($20bn) to cover its liabilities through 2020.

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Kommersant daily on February 17 cited unnamed sources as saying Putin already has a decree prepared and awaiting his signature to seal the dismissal of Dmitriev and appoint deputy head of Russia's state-controlled Sberbank, Sergey Gorkov, as the head of VEB.

Gorkov's positioning for the post was also confirmed by sources of portal. The 48-year-old banker has been with Sberbank since 2008, first heading the human resource department before rising to the position of deputy chairman for international business in 2010.

Reuters reported in January that sources close to the government said a new support plan being devised would cost the budget "no more than $2.4bn this year", a fraction of the previously estimated $12bn, a sum that Russia's budget can no longer afford amid low oil prices.

"The decision suggests that the finance ministry, which has pushed for belt-tightening, is holding its own in a battle for influence with other parts of the Russian government that had been advocating continued high spending," Reuters wrote.

VEB is not actually a bank as it is not under the supervision of the Central Bank of Russia (CBR) and functions as a bank on the basis of a special presidential decree. Its responsibilities include managing Russia's external debt as well as investments by the state pension fund.

However, in recent years it has acted as a de facto state development bank while sinking deeper in trouble. VEB backed investments into big projects like Sochi's development for the 2012 Winter Olympics that since went bad, leaving the bank to carry the burden.

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