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. Last Updated: 07/27/2016

VEB Offers Liquidity Help to Banks

MTVladimir Dmitriyev says Vneshekonombank will make deposits in banks such as Sberbank, VTB and Gazprombank.
WASHINGTON -- Vneshekonombank, the state bank being remodeled to lead an economic development drive, is willing to deposit funds with commercial banks to support their liquidity, its head Vladimir Dmitriyev said.

Vneshekonombank, or VEB, the country's debt-servicing agent and manager of the state pension fund, is being rebranded as the Development Bank and recapitalized to the tune of $10 billion. But VEB cannot invest all the new funds at once and is ready to put money on deposit to help banks get over a liquidity squeeze triggered by the U.S. subprime mortgage crisis.

"We have offered our services," Dmitriyev said Sunday night in Washington, where he attended the International Monetary Fund and World Bank fall meetings. "The simplest way would be to place deposits at banks -- either against a pledge of certain instruments or in line with [lending] limits that we have established." Dmitriyev named state-controlled Sberbank, VTB and Gazprombank, owned by Gazprom, as banks that "need liquidity support."

VEB expects to receive 180 billion rubles ($7.25 billion) by the end of October from the stabilization fund, which gathers oil revenues.

Dmitriyev said it would take some time for VEB to digest the new capital and that it did not need debt funding right now. But the bank will seek to more than double its borrowing to $2.6 billion in 2008.

"We obviously do not plan to borrow this year -- investors are closing their positions. But next year we do," he said.

VEB is reviewing proposals from investment banks for both domestic and foreign borrowing and will firm up its debt raising plans towards the end of the year, said Dmitriyev.

Total borrowing at the bank is expected to rise to 469 billion rubles ($18.88 billion) by 2010, he also said.