Annual Report 2014

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FX and Interbank Money Market Operations, Managing the Bank’s Securities Portfolio

Vnesheconombank operates in the FX, interbank money and securities markets. By reference to the immediate market environment, the Bank engages in FX operations and transactions with securities and derivative financial instruments, as well as places and raises short-term interbank loans.

FX and Interbank Money Market

Slowdown in economic growth, sanctions imposed against Russia and declining oil prices resulted in the ruble depreciation, with the USD/RUB exchange rate going up from 32.73
at 01.01.2014 to 56.26 at 31.12.2014. Russian ruble exchange rate was also influenced
by the Bank of Russia's transition to a free-floating regime in its internal currency market regulation.


As part of its liquidity management procedures and in order to attract ruble funds to finance investment projects, the Bank was actively engaged in FX and, in particular, swap transactions. The total amount of the Bank's FX transactions increased 2.4-fold to reach RUB 15,064.3 bn as opposed to RUB 6,346.1 bn in 2013. Swap turnover increased 3.3-fold from
RUB 3,884.8 to RUB 12,732.8. Currency/ruble transactions grew from RUB 5,052.8 bn
to RUB 14,942.5 bn.


Total turnover of funds borrowed in the interbank market exceeded the previous year figure by 11%. Most of the borrowings were made in Russian rubles with the turnover reaching RUB 5,099.8 bn and demonstrating a 4-fold increase on 2013.


Total turnover of the funds placed in the interbank market showed a 20% decrease on 2013.

Turnover of money market operations (short-term interbank loans), RUB bn (in equivalent
to an average yearly exchange rate)

Managing Securities Portfolio

In 2014, Vnesheconombank engaged in securities-related operations amid negative trends
in the Russian stock market, with MICEX Index and RTS Index falling by 7.1% and 45.2%, respectively.


In the year under review, the Bank's transactions in securities primarily aimed at ensuring its sufficient liquidity. The bulk of operations — 82% of the total amount of transactions
in securities — are accounted for by repo transactions.


The structure of the securities portfolio underwent no considerable changes. Investment
in RUB-denominated shares posted a slight decrease caused by the sale of equity interest
in a Russian company.


In 2014, Vnesheconombank used the funds released upon the redemption of Eurobonds
of Russian issuers to acquire eurobonds issued by major companies, including those controlled by the state and involving minimum credit risk. Furthermore, Vnesheconombank invested in government debt instruments of the Russian Federation — USD-nominated Eurobonds.


Overall, Vnesheconombank's securities portfolio, with due consideration for revaluation and the accrued interest (coupon yield), increased by 7% to reach RUB 410.2 bn as at the end
of the reporting period.



Structure of securities portfolio, %