Save (from) banker Kostin!

Sergey Aleksashenko, Live Journal

Sergey Aleksashenko (former First Deputy Chairman of the Central Bank of Russia) in his blog writes that Andrey Kostin’s success in wasting VTB money exceeds all the reasonable limits.

Alekshashenko discusses all occasions, on which VTB already has successfully ‘beat out’ money from the state.

He argues that as a result of the proposed financial bailout all the population of Russia will have to pay their own money and this is all just so that no losses are created in the VTB balance and in order to save Kostin’s reputation.

Aleksashenko concludes that Kostin needs to be sacked, as he does not bring anything other than losses to the bank and its shareholders.

The rescuers from Neglinnaya


Vedomosti writes that VTB has finally achieved its goal and convinced the state to bail out Bank of Moscow.

Vedomosti also cite Andrey Borodin who stated: ‘It seems that, for VTB, and whoever controls the shares, which help them run Bank of Moscow, it is more expedient to seek state aid, with all the adverse publicity that it brings to both the Bank of Moscow and VTB itself, than to adopt the commercial solution of selling on the ‘suddenly risky’ Bank of Moscow shares, at the price they paid for them.’

Bank of Moscow is not as bad as VTB portrays it to be


This article in Izvestia discusses whether the provision of financial aid to Bank of Moscow by the state is really that necessary. Izvestia argues that the whole situation with Bank of Moscow brings a strong feeling of déjà vu. They provide the following example. In 2004 VTB (then Vneshtorgbank) took under control Guta Bank (nowadays the retail business of VTB – VTB 24). Izvestia says it is “interesting” that back then the Central Bank gave $700 million to rescue this credit institution and the same Mikhael Kuzovlev, who in 2011 took over the steering wheel of Bank of Moscow, was appointed Chairman of the Board of Directors of Guta Bank.

Putin will take care of Bank of Moscow tells its readers that the decision regarding the rescue of not so long ago stable bank will be made at the meeting of the Prime Minister Vladimir Putin.
This article cites Andrey Borodin as saying that he predicted that the destructive position of the bank during the negotiations with the companies who borrowed from the Bank of Moscow can cost a lot to the government and to the tax payers. refers to Sergey Aleksashenko (former First Deputy Chairman of the Central Bank of Russia) who reminds that people have already paid 2650 rubles each for the rescue of VTB 2 years ago. According to Sergey Aleksashenko each person will pay 1000 rubles more: ‘I don’t have any doubts that raider [VTB] will get its prey… However, following this, what should foreign investors think about Russian investment climate, whom the Russian President wants really much to see in Russia?’ concludes that investors understood everything very well about the climate: VTB eurobonds have dropped by few percent on Monday.

VTB’s Acquisition of the Bank of Moscow

The situation around VTB and the Bank of Moscow is becoming more and more complicated every day, following VTB’s acquisition of a major shareholding in the Bank at the end of February. The State bank’s actions and statements have become increasingly contradictory. The position may seem impenetrable from a commercial point of view, but that reflects the fact that the principle motivation behind the change of control of Bank of Moscow was political.

This view is reflected in the latest media coverage which reports that analysts from international banks are finding it increasingly difficult to provide a meaningful analysis of Bank of Moscow because the deal with VTB has taken it into “a misty area of Russian politics”.

What we all know about the Bank of Moscow

Bank of Moscow started from very small beginnings.  It began in March 1995 when the Moscow City Government established a join stock company known as “Moscow Municipal Bank – Bank of Moscow” in which the City held a 51% stake and which only employed 6 people.  Over the next 16 years, thanks to strong management under the Presidency of Andrei Borodin and a clear commercial vision, Bank of Moscow was built into a major financial institution and a major universal commercial bank in Russia, offering its clients the full range of banking products, and employing in the region of 9000 people.

Between 1996 and 2003, Bank of Moscow rose from 47th to 8th place in the list of top-equity Russian banks. Under Borodin’s leadership, Bank of Moscow was, from 2007, one of only a handful of banks in the country with an investment grade rating, such that in August 2006, J. P. Morgan International Finance Limited, part of JPMorganChase, became a minority shareholder in the Bank of Moscow, and in 2010, Goldman Sachs and Credit Suisse Group AG similarly acquired 3.88 percent and 2.77 percent stakes respectively.
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Do you need my advice?

If we cast our minds back to early 2011, the Bank of Moscow stood out from its rivals boasting high international credit ratings and had just welcomed very reputable international institutions such as Goldman Sachs to its shareholder list. A fully commercial bank was operating with transparent loan procedures and a profitable and frequently audited balance sheet. Bank of Moscow was a highly respected international bank whose brand value alone amounted almost to 1 billion USD. That is why, until VTB took over, the idea that Bank of Moscow needed funding would have sounded ridiculous.

When I first heard the rumours about VTB requesting incredible levels of state aid, I suddenly remembered a story which happened 12 years ago, when before the crisis of 1998 Bank of Moscow carried out a purchase of a controlling package of shares of ‘Mosbusinessbank’.
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My Condolences

I am saddened to learn of the news today that Dmitry Vladimirovich Maslov, the General Director of Investlesprom, has died in an air crash last night. Dmitry Vladimirovich was on the board of the plane Tu-134 of ‘Rusair’, which crashed on the 20 of June at 23.40 near Petrazovodsk.

Dmitry Vladimirovich loss is felt by all who knew and loved him. I send my sincere condolences to his family and friends.

Recent developments between the Bank of Moscow and SSG

Andrey Borodin said today, commenting on the recent developments in Bank of Moscow and SSG:

Yesterday, my former first deputy, Lyudmila Davydova, resigned from Bank of Moscow. Lyudmila is an exceptionally honorable, hard working and professional person. During the past six months, she has also demonstrated a very strong character and moral courage, which most of my male colleagues could only dream of, Lyuda, I bow to you! Thank you for all the years of working together!

Board of Directors of Stolichnaya Insurance Group decided to replace its director. Now, a VTB representative is heading the Group. I do not see any grounds for such a decision. A. Sudakov was in position; he accomplished important work on integrating various unrelated insurance assets and managed to take the company through the financial crisis. It has not even been explained to the company employees and clients what the reasons for his dismissal were. In my understanding, there is only one reason for this – Mr. Sudakov’s refusal to ‘put on a t-shirt with a VTB logo’. Indeed, this is an example of high standards of corporate governance.

Reaction to the Open letter to the Chairman of VTB

In my open letter to Mr. Kostin, the President of VTB, which was published in most of Russian mass media on Monday, I predicted that the destructive position of the bank during the negotiations with the companies who borrowed from the Bank of Moscow can cost a lot to the government and to the tax payers. As it became apparent from today’s information published in ‘Vedomosti’, my prediction starts to come true. According to the newspaper, VTB has addressed the government for the financial aid of 150 billion roubles for supposed ‘disposal’ from the Bank of Moscow of the problematic loans. Continue reading