Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Kudrin for Merger of VEB, VTB

The Finance Ministry has told the government that the country's second and third largest banks should be merged as part of efforts to overhaul the banking sector, Finance Minister Alexei Kudrin said Friday.

Vneshekonombank (VEB) and Vneshtorgbank (VTB) functioned as a single bank during Soviet times, dealing with almost all the Soviet Union's foreign banking relations. After the breakup of the Soviet Union in 1991, the government split the cumbersome structure into VTB, which dealt with foreign trade, and VEB, which became the government's foreign debt agent and a commercial bank.

The government now plans to split VEB into a debt agency, VEB USSR and a commercial bank, VEB RF.

It also plans to buy the Central Bank's 99.9 percent holding in VTB, as it must by law let go of its interests in commercial banks by 2003. VEB RF and VTB will then be merged.

Kudrin said the government would have to pay the Central Bank 42 billion rubles ($1.34 billion) for its VTB shares.

"We shall have to spend about the same sum, or about $1.5 billion, to create the authorized capital of VEB, after the split into VEB RF and VEB USSR, in order to preserve the volume of business it had," Kudrin said.

The European Bank for Reconstruction and Development plans to buy a 10 percent to 20 percent stake in VTB for about $300 million. "The merger would not hinder EBRD purchase," Kudrin said.