Annual Report 2008




WWW.VBANK.RU
“The difficult economic situation in 2008 demonstrated
that our conservative policy and reliance on long-term
client relat...
Contents




           4    A Letter of the Chairman of the Management Board
                of Bank Vozrozhdenie

      ...
A Letter of the Chairman
of the Management Board
of Bank Vozrozhdenie




                           Dear shareholders, pa...
Portrait of the Bank                                                                                                      ...
Professional Business Strategy
Vozrozhdenie Bank adheres to
a conservative development strategy
based on organic growth. T...
Bank’s Strategy                                                                                                           ...
Main Events of 2008                                              • Bank Vozrozhdenie recognized as best public company for...
Transparency and Openness
Vozrozhdenie Bank’s greatest asset is
our strong, strong relationships with our
customers, share...
Corporate Governance




Bank Vozrozhdenie has a diversified shareholder structure,                  Achievements in corpo...
Management Bodies                                                Board of Directors                                       ...
The Board of Directors approved a number of new internal         • The Human Resources and Compensation Committee         ...
Share in authorized                                                              Elected to the Board   Chairman of the Ma...
Management Board

                                                             Share in the authorized                    ...
Management Board




Dmitry L.                Tatyana F.              Lyudmila A.           Alexander V.           Mark M....
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
Annual Report 2008 ENG
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Annual Report 2008 ENG

  1. 1. Annual Report 2008 WWW.VBANK.RU
  2. 2. “The difficult economic situation in 2008 demonstrated that our conservative policy and reliance on long-term client relationships enable the Bank to get through all trials with distinction. The economic instability will, of course, continue in 2009, but Bank Vozrozhdenie looks confidently to the future and plans to maintain the high performance of its business and strengthen its positions on the market.” Dmitry Orlov, Chairman of the Management Board, Bank Vozrozhdenie
  3. 3. Contents 4 A Letter of the Chairman of the Management Board of Bank Vozrozhdenie 6 Portrait of the Bank 7 Bank’s Shareholders 10 Bank’s Strategy 11 Highlights of 2008 11 The Bank’s Key Performance Indicators in 2008 12 Main Events of 2008 13 Major Transactions 16 Corporate Governance 17 Dividend Policy 17 Corporate Governance Structure 18 Management Bodies 18 Board of Directors 23 Chairman of the Management Board 23 Management Board 28 Control Over the Bank’s Financial and Business Activity 30 Russian Economy and Banking System in 2008 42 Key Business Segments 43 Retail Business 47 Corporate Business 54 Bank Cards 56 Activity on the Financial Markets 60 Risk Management 60 Capital Adequacy 61 Credit Risks 65 Liquidity Risks 67 Market Risks 67 Interest Risk 70 Financial Results 74 Independent Auditor’s Report 80 Information Technology 82 Human Resources 86 The Bank and the Community 88 Information on Meeting the Provisions of the Corporate Conduct Code 95 Adress and Contacts
  4. 4. A Letter of the Chairman of the Management Board of Bank Vozrozhdenie Dear shareholders, partners and colleagues! With the continuation of the unfavorable situation in 2009, the Bank faces new challenges to boost efficiency, further cut 2008 was not an easy year for the Russian banking costs and, of course, reduce credit risks. The Bank’s plans for system and the country’s economy in general. In such 2009 include a substantial increase in loan loss provisions, circumstances, the professionalism of the Bank’s employees from 4.8% of the loan portfolio at the end of 2008 to 7–7.5% and the confidence of the Bank’s clients and partners play given a normal course of events or even to as much as 8–9% a decisive role. if the pessimistic scenario becomes a reality. Nevertheless, the Bank plans to remain profitable in 2009 as well. We planned for slower growth and the deterioration of the situation in 2008, and hence we were well prepared by The crisis has proved the soundness of the Bank’s traditional the time the crisis hit in the fall of 2008, having accumulated orientation toward clients from the small and medium a substantial amount of liquid assets, reduced the growth of business sector and retail customers, as well as its lending and adapted lending practices to the new conditions. commitment to providing comprehensive banking services. Our close knowledge of our clients and the long-term A conservative policy and preemptive action against relationships that we have built enable us to look at 2009 with increased macroeconomic risks enabled the Bank, despite confidence. the difficult situation, to grow assets by 27%, maintain the high quality of its loan portfolio, strengthen liquidity and demonstrate further growth of performance indicators. Dmitry Orlov We are pleased to report that in 2008 the Bank managed to increase return on equity to 23.3% from 21% in 2007 and return on assets to 2.5% from 2.1%, while reducing the cost- to-income ratio from 62.7% to 52.7%, surpassing the target of 60%. In order to reduce operating costs, the Bank slowed regional expansion, opening only ten new branches, closing three of its less successful offices and expanding the ATM network by 92 machines. The introduction of a new automated banking system reached its final phase and is scheduled for completion in 2009. We are grateful to our clients and financial partners for the confidence in us. Customer funds with the Bank grew by 11% in 2008. In October 2008 some clients decided to withdraw their deposits and the Bank fulfilled all its obligations without any delay. In February 2009 we fully recovered the autumn outflow of retail term funds. In July 2008 the Bank raised a 10-year subordinated loan from two international development institutions – Germany’s DEG and FMO of the Netherlands. That allowed us to increase the capital adequacy ratio from 15,2% to 15,7% and confirmed international investors’ confidence in the Bank. 4 BANK VOZROZHDENIE 5 ANNUAL REPORT 2008
  5. 5. Portrait of the Bank Bank’s Shareholders Key indicators Bank Vozrozhdenie, which received its banking license in Bank Vozrozhdenie authorized capital of 250,431,990 rubles 1991, is now one of Russia’s leading financial institutions, consisting of 23,748,694 ordinary (94.8% of authorized Assets RUB 141.2 bln ranking among the country’s top 30 banks. capital) and 1,294,505 preferred shares with a fixed dividend Loans RUB 99.3 bln rate (5.2% of the authorized capital), each with a face value of Bank Vozrozhdenie is developing as a personal bank for 10 rubles. Deposits RUB 51.8 bln corporate and retail clients. Net income RUB 3.1 bln Bank Vozrozhdenie shares are traded on stock exchanges in Equity RUB 15.1 bln • Within its operations with corporate clients, the Bank is Russia and other countries: ROE 23.3% focused on developing and supporting small and medium • The Bank’s shares are traded on Russia’s MICEX and RTS businesses, which account for 70% of the corporate loan (ticker symbol VZRZ) stock exchanges and are included Number of retail clients 1,350,000 portfolio. in the MICEX Financial Index. The common shares were Number of corporate clients 55,000 • In its work with retail clients, the Bank is focused on raising included in the A2 listings of both exchanges in 2007.* Employees 6,635 funds. Retail deposits make up 39% of liabilities. • About 2.3% of common shares (541,165 shares) are part of a Level-1 ADR (American Depositary Receipts) program Branch network 176 With the aim of creating a convenient and accessible and are traded on the Frankfurt, Berlin and Stuttgart stock ATMs 642 infrastructure for clients, the Bank is striving to develop an exchanges. efficient sales network. The key region is the Moscow Region, Largest shareholders on 12.05.2008 where the Bank has the most extensive sales network, The register of the Bank’s shareholders as of January 1, 2009 Ranking in Russia’s banking system* second only to Sberbank, and which accounts for 60% of our Shareholder Share in authorized capital, % listed more than 839 legal entities and 6,389 individuals, client base. many of whom became shareholders more than 10 years Dmitry Orlov 30.70 Loans to small & medium businesses 2 ago. About 40% of authorized capital is held by foreign Bank Vozrozhdenie is proud of the quality of its corporate Burlington Trading Co Limited 12.71 institutional investors. Retail deposits 10 governance and high level of risk management. Brysam Global Partners, L. P. (USA) 9.37 Pretax profit 16 The Bank’s market capitalization as of January 1, 2009 was ATM network 16 Total 52.78 • The Bank has been recognized as the most transparent 6,684,070,000 rubles. Branch network 17 Russian bank for shareholders and investors (Standard & Client funds 25 Poor’s studies for 2006 and 2007). Bank Vozrozhdenie’s strategic goals are to achieve a fair • The Bank’s creditworthiness has been affirmed by market valuation of its shares and to develop its business for Assets 28 international rating agencies. Moody’s has affirmed its the benefit of all shareholders. *Source: RBC Rating rating of Ba3/D-/NP, negative outlook, and the rating from Share price on MICEX Standard & Poor’s is BB-/ruAA-, negative outlook. ‘000 shares Quotes Trading volume (shares) 70,000 2,000 • The Bank has been preparing financial statements under 1,800 International Financial Reporting Standards since 1991. 60,000 2005 2006 2007 2008 1,600 • The Bank has an active Audit Committee and Human 50,000 1,400 MICEX 186,347 349,139 2,050,384 2,940,351 Resources and Compensation Committee, and meetings of 1,200 40,000 RTS 174,238 167,152 380,851 167,612 the Board of Directors are held according to the best world 1,000 practices. 30,000 800 OTC market - - 14,790,607 16,624,485 20,000 600 German 400 10,000 exchanges 481,939 227,539 234,059 76,391 200 (ADR) 0 0 Total 842,524 743,821 17,455,901 19,808,839 01.01.08 01.02.08 01.03.08 01.04.08 01.05.08 01.06.08 01.07.08 01.08.08 01.09.08 01.10.08 01.11.08 01.12.08 * Bank Vozrozhdenie ordinary shares were transferred from the A2 List on the RTS Volume of trading, RUB (left scale) Stock Exchange to the non-listed securities section by the Bank’s request as the Bank’s shares are not actively traded on RTS and the total number of Price (right scale) transactions with the Bank’s shares is very small on this trading floor. 6 BANK VOZROZHDENIE 7 ANNUAL REPORT 2008
  6. 6. Professional Business Strategy Vozrozhdenie Bank adheres to a conservative development strategy based on organic growth. This approach has enabled us to maintain a high level of reliability and remain the only private bank to be ranked consistently among the 30 largest in Russia.
  7. 7. Bank’s Strategy Highlights of 2008 Bank Vozrozhdenie • The bank's cards business generates a growing proportion of the Bank’s commission income and enables The Bank’s Key Performance Indicators in 2008 is a personal bank it to expand its range of services to retail and corporate RUB mln USD mln clients. The Bank puts an emphasis on customer service for corporate and retail clients. technologies, reliable services, the development of its ATM Results to IFRS 2008 2007 2006 2008 2007 2006 network and introduction of new services based on bank Assets 141,211 111,404 73,426 4,806 4,539 2,789 at end of the year Bank Vozrozhdenie is focused on providing comprehensive cards. services to corporate and retail clients. By offering clients average for the year 128,171 91,767 58,376 5,169 3,603 2,147 a broad range of services the Bank achieves a high level of We see the Bank’s technological sophistication as crucial Equity cross sales and high proportion of stable non-interest income to remaining competitive and improving the quality of client 15,065 11,890 5,509 513 484 209 at end of the year in its revenue structure. The Bank’s business is growing services, so the development of technology is an important average for the year 13,469 9,086 4,192 544 358 154 along with constant control over costs in order to improve component of the Bank’s strategy. By the middle of 2010 efficiency, reduce the share of unit operating costs and the Bank plans to complete the transition of all branches Net interest income 8,494 5,570 3,484 289 227 132 ensure high return on equity. and divisions to a new technology platform. The automated Provisions 2,199 885 393 75 36 15 banking system (ABS) that is being introduced allows One of the Bank’s main priorities is to increase customer centralized management of the Bank’s product line, and is Non-interest income 4,836 3,577 2,386 165 146 86 loyalty and strengthen competitive positioning by developing integrated in real time with the Bank’s payments processing Operating expenses 7,029 5,732 4,243 239 234 157 the Bank’s brand and improving the quality of customer system, Bank-Client system and Processing Center. Disposal & restructuring 0 0 -150 0 0 –5 service. The Bank is growing organically and specializes in traditional Profit before tax 4,102 2,530 1,084 140 103 41 The Bank’s business is segmented into four key areas: banking services, maintaining a low level of dependence Tax 965 626 283 33 26 11 the retail business, corporate business, bank card business on borrowing in public capital markets, whilst operating in and operations on financial markets. financial markets only to support liquidity. Net profit 3,137 1,904 801 107 78 30 Earnings per share RUB 125 RUB 80 RUB 39 $ 4.25 $ 3.26 $ 1.48 • In the corporate segment, the Bank focuses on servicing In order to improve the quality of its services, the Bank medium and small businesses, striving to diversify its is building an efficient sales network based on branches Return on equity 23% 21% 19% client base by various sectors of the economy. The Bank and ATMs. The future growth of Bank Vozrozhdenie’s sales Return on assets 2.5% 2.1% 1.4% supports clients at every stage of business development. In network will take place primarily in European Russia, in the medium term the Bank intends to increase its market regions with strong economic potential. We do not intend to share in the corporate segment and strengthen its position expand our business outside of Russia. in the Top-20 Russian banks by volume of services provided to corporate clients, particularly medium and small We aim to further increase the proportion of professional businesses. investors among the Bank’s shareholders, boost the liquidity Leveraging established relationships with corporate clients of its shares and increase its market capitalization. and strong market positions in the regions, the Bank strives Management continues to control a substantial portion to increase cross sales, offering employees of corporate of the Bank’s capital and is implementing a development clients retail banking products and products based on bank strategy aimed at increasing business performance and cards. market capitalization to the benefit of all shareholders. • In the retail sector the Bank makes a particular effort to As a public bank Bank Vozrozhdenie is constantly striving attract term deposits. A substantial resource base founded to improve transparency and corporate governance. on household savings constitutes one of the Bank’s primary International experts at Standard & Poor’s have repeatedly competitive advantages and shields it from serious shocks. recognized ours as the most transparent Russian bank for The Bank plans to increase market share in this segment shareholders and investors, while a survey of the investment and maintain its position in the Top-10 Russian banks community conducted by Thomson Reuters recognized in such areas as retail deposits, clearing and payment Bank Vozrozhdenie as having the best investor relations of services. any company in the banking and finance. 10 BANK VOZROZHDENIE 11 ANNUAL REPORT 2008
  8. 8. Main Events of 2008 • Bank Vozrozhdenie recognized as best public company for Major Transactions investor relations in the financial sector, in the Thomson In 2008 Bank Vozrozhdenie did not put together any large Business developments Reuters Extel Survey – Focus CIS 2008, conducted deals (as defined by the Article 78 of the federal law • Ten new branches were opened while three by Thomson Reuters in partnership with the Interfax No. 208-FZ On Joint-stock Companies). underperforming offices were closed. International Information Group. • Bank Vozrozhdenie issued over 1.25 million cards, • The strength of Bank Vozrozhdenie’s brand was confirmed Related party transactions including over 100,000 revolving credit cards. by authoritative ratings. Bank Vozrozhdenie was one of just According to a decision made by the annual General Meeting • The equity investment fund Brysam Global Partners seven Russian banks included in a rating of the 500 leading of Shareholders (Minutes No. 1 dated June 27, 2008), acquired 9.9% of Bank Vozrozhdenie common shares and global financial companies by brand value, published by the Bank put together deals (loans, guarantees, deposits, became one of the Bank’s largest shareholders. BrandFinance at the end of 2008. acquisition of rights of claim and other operations under • Bank Vozrozhdenie raised 10-year subordinated loan the license on execution of banking operations) in which of US$50 million from two international development Cooperation with the authorities members of the Board of Directors and executives bodies institutions: Germany’s DEG and FMO of the Netherlands. • Bank Vozrozhdenie joined the Moscow small business of the Bank were recognized as interested parties under • The Bank introduced new services for ATM users, including lending program. Article 81 of the federal law No. 208-FZ On Joint-stock the option of depositing into the accounts of MasterCard • Bank Vozrozhdenie renewed status as authorized bank of Companies. cards issued by any Russian bank at Bank Vozrozhdenie, at the Moscow Government. ATMs, at capable of accepting cash. • Bank Vozrozhdenie entered into a general deposit The deals were made by the Bank in the course of its daily • The Bank introduced new products based on bank cards: agreement with the state corporation Housing and Public business activity. The substantive conditions of the interested - Revolving credit cards with grace period (previously Utilities Reform Fund. party deals made by the bank did not differ from the Bank offered credit cards without a grace period); • Bank Vozrozhdenie qualified to bid in Finance Ministry the conditions of other similar deals made by the Bank. - Exclusive cards in the Visa line: Visa Infinite credit auctions for deposits of federal budget funds. cards. • Bank Vozrozhdenie was included in a list of lenders The amount of each deal (several related deals) made by • Standard & Poor’s assigned Bank Vozrozhdenie whose guarantees can be used as a security under the by the Bank with each interested party did not exceed the limit counterparty ratings: BB- long-term, B short-term, and Central Bank loans. (5,850,000 rubles) set by the decision of the Annual General ruAA- on the national scale. • Bank Vozrozhdenie won the right to receive unsecured Meeting of shareholders of Bank Vozrozhdenie. loans from the Central Bank of Russia. Corporate governance The amount of each deal with credit risk concluded with • The Bank approved a risk management strategy. Stronger market positions interested parties did not exceed the limit (2,000,000 rubles), • The Bank set up a Human Resources and Compensation • Bank Vozrozhdenie for the first time ranked among and the amount of several related deals with each interested Committee. the world’s Top-1000 banks as published by The Banker. party did not exceed the limit (4,000,000 rubles) set by • Bank Vozrozhdenie ranked among the Top-100 Russian the decision of the Annual General Meeting of shareholders Market recognition banks by market capitalization, published by Kommersant- of Bank Vozrozhdenie. • Bank Vozrozhdenie ranked among the five companies with Dengi. the best corporate governance in Russia in a survey carried • Bank Vozrozhdenie ranked among the 30 best Russian out by Troika Dialog. banks by key indicators, according to Expert RA. • Bank Vozrozhdenie rank in 11th in a rating of bank • Bank Vozrozhdenie ranked in second place among recognition and 10th in a rating of client loyalty to banks, Russian banks in lending to small and medium businesses in a survey conducted by the National Agency for Financial according to RBC Daily. Studies (NAFI). 12 BANK VOZROZHDENIE 13 ANNUAL REPORT 2008
  9. 9. Transparency and Openness Vozrozhdenie Bank’s greatest asset is our strong, strong relationships with our customers, shareholders and partners, based on openness and transparency. It is these relationships that distinguish us today and will continue to distinguish us in the future.
  10. 10. Corporate Governance Bank Vozrozhdenie has a diversified shareholder structure, Achievements in corporate governance in 2008 Dividend Policy Corporate Governance Structure with a free float of about 60%. Maintaining a corporate • Bank Vozrozhdenie ranks among the five companies with Under the Provision on Dividend Policy, which regulates governance system comparative to the best global practices the best corporate governance in Russia, in a survey the procedure and conditions for annual dividend payments, and constantly enhancing them have contributed greatly conducted by Troika Dialog. the amount of funds set aside for dividend payments should to the Bank’s competitiveness. Thanks to active efforts to • Bank Vozrozhdenie was recognized as the best company not exceed 10% of net profit earned in the completed increase the transparency of its business, in its many years within the public financial sector in the area of investor financial year. Dividends on preferred shares amount to on the public market the Bank has earned a reputation relations according to the Thomson Reuters Extel Survey – 20% of face value. The provision fully protects the rights among Russian credit institutions as a leader in corporate Focus CIS 2008. This survey was carried out by Thomson of shareholders as well as takes into account the dynamic governance. Reuters in partnership with the Interfax International development requirements set out by Bank Vozrozhdenie. Information Group. The principles and procedures of corporate governance are • Yulia Vinogradova, Adviser to the Chairman of the Bank’s The text of the Provision on Dividend Policy is posted on set up in the Bank’s Article of Association, which defines Management Board was declared the best Investor Bank Vozrozhdenie website, www.vbank.ru/en, in the section the structure of governance and the powers of the Bank’s Relations professional in the financial sector for the second Investor Relations – Corporate Governance – Internal management bodies and its internal control and audit bodies. consecutive year, by the Thomson Reuters Extel Survey – Documents. Focus CIS 2008. In 2004 the Bank adopted a Corporate Governance Code,* Main conditions of dividend payments which together with the Code of Corporate Ethics sets out The priorities in 2009 will be to further improve the corporate • The existence of a net profit for the previous financial year. the following additional obligations of Bank Vozrozhdenie: governance system in the following areas: • The absence of restrictions on dividend payments stipulated by Russian legislation. • Increase information transparency; • Development strategy; • The absence of outstanding losses from past years. • Improve the decision making processes; • Management of bank risks (improving the system of risk • A recommendation from the Board of Directors and • Reduce risks; assessment, expanding the methodological base for decision of the General Meeting of Bank’s shareholders • Prevent conflict of interest; analysis); to pay dividends. • Ethical principals that guide the Bank in relations with • Policy for prevention of conflicts of interest; shareholders, clients, business partners, state and • Improvement of information policy (increasing the level municipal authorities, competitors and employees. of information transparency); Declared and accrued dividends • Procedure for reporting to the Board of Directors by on Bank Vozrozhdenie shares Priorities for corporate governance development in 2008 executive and control bodies. • Distribution of powers among management bodies. 2007 2006 • Organization of activities of the Board of Directors, Amount of Amount of including relations with executive bodies. % of share dividends, % of share dividends, • Development of rules and procedures to support face value ‘000 RUB face value ‘000 RUB observance of corporate ethics principles. Ordinary shares 5 11,874 5 10,374 • Improvement of internal control system. • Special attention was paid in 2008 to improving procedures Preferred shares 20 2,589 20 2,589 for risk management and control over financial and Total 14,463 12,963 business operations. * A new version of the Corporate Governance Code, renamed the Corporate Conduct Code in line with Federal Financial Markets Service (FFMS) recommendations, was approved by the decision of the Board of Directors (Minutes No. 6 dated March 30, 2009) in March 2009. 16 BANK VOZROZHDENIE 17 ANNUAL REPORT 2008
  11. 11. Management Bodies Board of Directors In accordance with best corporate governance practices Board of Directors report The Board of Directors is the management body that carries and recommendations of the FFMS Corporate Conduct The Board of Directors that was elected at the annual General General Meeting of Shareholders out general management of the Bank’s operations, with Code independent directors have been elected to Meeting of Shareholders in 2008 held four meetings in The General Meeting of Shareholders is Bank Vozrozhdenie the exception of issues that, under current legislation Bank Vozrozhdenie Board of Directors since 2002. the period to December 31, 2008. Another four meetings are highest management body. The Bank provides for equal and the Articles of Association, fall within the scope of The Board uses the most conservative criteria to determine scheduled to be held before the annual General Meeting of participation of all shareholders in the meeting, their timely responsibilities of the General Meeting of Shareholders. the independence of members of the Board of Directors. Shareholders in 2009. notification into preferences regarding timing of the event as The Regulations on the Board of Directors define well as the provision of information needed to make strategic The Board’s responsibilities include strategic planning independent directors as those who: The Board of Directors in 2008 focused on issues concerning decisions as laid out in the meeting agenda. of the Bank’s activities, monitoring its financial and business management of bank risk. operations, establishing and implementing an effective − who have not been an official or an employee of the Bank Bank Vozrozhdenie holds an annual General Meeting of system of internal control, ensuring the observance of for the previous 3 years; The Board of Directors considered the following priority Shareholders to review and allow all shareholders to discuss shareholders’ rights, as well as overseeing the activities − who is not an official of another entity where any official issues: the results of the Bank’s operations in the previous financial of the executive bodies. of the Bank is a member of the Human Resources and year. In the period between the annual meetings the Board Compensation Committee of the Board of Directors; • The creation of the Audit Committee and Human Resources of Directors might decide to hold an extraordinary meeting Bank Vozrozhdenie Board of Directors has 12 members − who is not an affiliated person to an official of the Bank; and Compensation Committee of the Bank’s Board of of shareholders at its own discretion, or at the request of who are elected by a cumulative voting during the annual − who is not an affiliated person to the Bank (except for Directors; the Audit Commission, the auditor or shareholders who own General Meeting of Shareholders for the period until the next the membership in the Board of Directors) and an affiliated • The approval of strategy on managing bank risks; at least 10% of voting shares of the Bank. annual General Meeting or extraordinary General Meeting person to its affiliated persons; • The liability of members of the Board of Directors and where the agenda includes the election of new members to − who is not a party in liabilities with the Bank which terms executive bodies for incurring losses to the Bank as a result Bank Vozrozhdenie gives its shareholders a real opportunity the Board of Directors. presuppose that he/she may acquire property (receive of inefficient management of bank risks; to participate in the management of the business. Holders funds) with the value of not less than 10 percent of total • Review of the Bank’s results under IFRS; of more than 2% of voting shares can submit proposals for A new Board of Directors was elected at the General Meeting annual income, except for remuneration for participation • Amendments to the Bank’s Articles of Association the agenda of shareholder meetings, as well as nominate of Bank Vozrozhdenie shareholders held on June 27, 2008. in the activity of the Board of Directors of the Bank; and material conditions of Agreements with members candidates for the Board of Directors. In order to ensure Newly elected to the Board were Robert Willumstad, − who is not a major counterparty of the Bank (a counterparty of the Bank’s Management Board and Chairman of the most effective decision making process the Bank managing partner at Brysam Global Partners; with the total amount of transactions between him/her the Management Board. provides its shareholders with the opportunity to review Vladimir Panskov, former Russian finance minister (1994– and the Bank throughout the year of 10 or more percent documents and information relating to issues pertinent 1996) and former Audit Chamber auditor (1997–2006); and of the balance sheet value of the Bank’s assets); The Board of Directors’ key decisions were: to the shareholder meeting agenda 30 days before the date Yury Poletayev, former chief executive of Moscow Narodny − who has not been a member of the Board of Directors of the meeting. Bank, London (2000–2005). of the Bank for more than 5 years; • Decision to set up the Audit Committee and the Human − who does not represent the government. Resources and Compensation Committee of the Board The new Board, at its first meeting which took place at of Directors; the end of the shareholder meeting, elected Yury Marinichev In the past fiscal year the Board of Directors had six • Decision on approval and making Alterations to as Chairman. independent directors, all of them are recognized as No. 7 of the Bank’s Articles of Association; professionals in the areas of their activity. • Decision on approval of the Bank’s strategy on risk management; • Decision on approval of significant conditions of Agreements with members of the Bank’s Management Board; • Decision on approval of principles of bonus payments to the employees of the Bank’s Head Office, establishing the procedure of paying compensations to members of the Bank’s executive bodies. 18 BANK VOZROZHDENIE 19 ANNUAL REPORT 2008
  12. 12. The Board of Directors approved a number of new internal • The Human Resources and Compensation Committee Board of Directors regulations of the Bank: gives the Board of Directors recommendations on appointments to management positions, and recommends Share in authorized Elected to the Board • A new edition of the Provision on making large deals, deals candidates for election to the Board of Directors. Name, year & place of birth, title capital Education Membership in committees of Directors with interested-parties and deals on lending to related The Committee also develops the Bank’s policy on incentive Yury M. Marinichev Moscow Road Institute; parties of Bank Vozrozhdenie; programs, including recommendations on compensation 1937, Russia S. Ordzhonikidze Engineering Chairman of the Board of Directors; 0.23 1994 • Regulation on making deals on assignment of for senior executives. and Economics Institute of Chairman of the Board of the Moscow Regional Union Bank Vozrozhdenie rights (claims) on loans given to legal Moscow of Consumer Cooperatives entities; The members of the Human Resources and Compensation Dmitry L. Orlov • Corporate Ethic Code of Bank Vozrozhdenie. Committee are: Robert B. Willumstad (Chairman of 1943, Russia 30.70 Moscow Finance Institute 1994 the Human Resources and Compensation Committee), Chairman of the Bank’s Management Board The committees of the Board of Directors Yuri V. Poletayev and Otar L. Margania. Robert B. Willumstad Two committees have been established under the Board 1945, USA of Directors to oversee key issues affecting the Bank’s The Human Resources and Compensation Committee held Independent Director; Chairman of the Human development on behalf of shareholders. three meetings in the period from its election to December Senior Adviser, Brysam Global Partners; – Adelphi University Resources & Compensation 2008 Member of the Board of Directors, AEF; 31, 2008. Another three meetings are scheduled to be Member of the Board of Directors, IXE; Committee • The Audit Committee oversees the preparation of financial held in the period before the annual General Meeting of Member of the Board of Directors, CIB; statements, fulfillment of financial targets and financial Shareholders in 2009. Member of the Board of Directors, Johnson & Son, Inc. audits of the Bank. In addition the Committee gives Lyudmila A. Goncharova recommendations on the appointment of independent 1958, Russia Deputy Chairwoman of the Bank’s Management Board; auditors and supervises their work. In order to ensure Ternopol Finance & Chairman of Council of Garmoniya pension fund; Member 1.41 1996 maximum protection of shareholders’ interests Economics Institute of the Board of Directors of LLC Baltiisky Kurort; the Committee includes three non-executive members of Chairman of the Board of Directors of CJSC V-Registr; Chairman of the Board of Directors of OJSC Yunost the Board of Directors and is headed by an independent member of the Bank’s Board of Directors. Alexander V. Dolgopolov 1961, Russia Moscow G.V. Plekhanov Deputy Chairman of the Bank’s Management Board; The members of the Audit Committee are: Member of the Board of Directors of OJSC Avista; 0.36 Institute of the National 1997 Economy Vladimir G. Panskov (Chairman of the Audit Committee), Member of the Board of Directors of Garmoniya Alexander N. Zhizhayev and Nikolai S. Zatsepin. pension fund Valery P. Zhigulich The Audit Committee held four meetings in the period from 1952, Russia Sverdlovsk Institute of its election to December 31, 2008. Another three meetings Independent Director; 0.002 2007 the National Economy Member of the Board of Directors of OJSC S. A. Zverev Plant are scheduled to be held in the period before the annual in Krasnogorsk General Meeting of Shareholders in 2009. Alexander N. Zhizhayev Moscow Auto-Mechanical 1946, Russia – Member of Audit Committee 2005 Institute Independent Director 20 BANK VOZROZHDENIE 21 ANNUAL REPORT 2008
  13. 13. Share in authorized Elected to the Board Chairman of the Management Board Management Board Name, year & place of birth, title capital Education Membership in committees of Directors The Chairman of the Management Board of In order to ensure effective day-to-day management Nikolai S. Zatsepin Bank Vozrozhdenie is responsible for managing current of the Bank’s operations, the Board of Directors elects 1951, Russia 0.16 Moscow Institute of Civil Member of Audit Committee 1994 operations in accordance with the powers given to him a corporate executive body – the Management Board. It General Director of CJSC Mozhaisk Wholesale Aviation Engineers & Retail Company by the Articles of Association and the General Meeting of is responsible for making critical decisions regarding Shareholders. the operational management of the Bank’s activities Otar L. Margania which require joint approval. The Management Board has Member of Human Resources 1959, Russia 1.28 Leningrad State University 2003 Senior Vice President, VTB Bank & Compensation Committee Dmitry Orlov is the Chairman of the Management Board 12 members. of Bank Vozrozhdenie. He was born in 1943 and graduated Nikita S. Mikhalkov from the Moscow Finance Institute with a specialty in Credit Compensation for members 1945, Russia Independent Director; Russian State Institute of and Finance. A 40-year veteran of the Russian banking of the Bank Vozrozhdenie management bodies – 2007 Chairman of the Management Board of Studia TRITE LLC; Cinematography sector Mr. Orlov has been the Chairman of Vozrozhdenie’s Total amount of compensations (salary and bonuses) paid to President of the Russian Cultural Fund; Management Board since the Bank’s foundation in 1991. members of Bank Vozrozhdenie executive bodies in 2008 was Chairman of the Union of Russian Cinematographers 242,189,476 rubles. Vladimir G. Panskov Mr. Orlov is the Chairman of the Board of Trustees of 1944, Russia Independent Director; 0.003 Moscow Finance Institute Chairman of Audit Committee 2008 the Finance Academy under the Government of the Russian Professor, Russian State Distance Learning Finance Federation, a Member of the Board of the Association & Economics Institute of Russian Banks, and a Member of the Board of Yury V. Poletayev Representatives of Authorized Banks for the City of Moscow. Member of Human Resources 1943, Russia – Moscow Finance Institute 2008 & Compensation Committee Independent Director Dmitry Orlov has a 30.7% share in Bank Vozrozhdenie authorized capital. 22 BANK VOZROZHDENIE 23 ANNUAL REPORT 2008
  14. 14. Management Board Share in the authorized Share in the authorized Name, positions at the Bank and other organizations capital Education, professional experience Name, positions at the Bank and other organizations capital Education, professional experience Dmitry L. Orlov Alexander A. Bolvinov Moscow Finance Institute; 1943, Russia 1962, Russia Moscow State Institute of International Relations; 30.70 Has been working with the Bank since 1991, has more than Chairman of the Bank’s Management Board; Head of Human Resources Department; – Has been working with the Bank since 2000 and has 13 years 40 years experience in the banking system Member of the Bank’s Board of Directors Member of the Board of Directors of Garmoniya pension fund experience in the banking system Lyudmila A. Goncharova 1958, Russia Sergei N. Malinin Deputy Chairwoman of the Bank’s Management Board; G.V. Plekhanov Institute of the National Economy in Moscow; Ternopol Finance & Economics Institute; 1963, Russia Member of the Bank’s Board of Directors; – Has been working with the Bank since 1993 and has more than 1.41 Has been working with the Bank since 1991, has more than Head of Corporate Department; Chairman of Council of Garmoniya pension fund; 16 years experience in the banking system 29 years experience in the banking system Member of the Board of Directors of OJSC Avista Member of the Board of Directors of LLC Baltiisky Kurort; Chairman of the Board of Directors of CJSC V-Registr; Alla A. Novikova Moscow Institute of Railway Transport Engineers; Chairman of the Board of Directors of OJSC Yunost 1957, Russia 0.002 Has been working with the Bank since 1991 and has 24 years Chief Accountant experience in the banking system Tatyana F. Gavrilkina Moscow Finance Institute; 1959, Russia Finance Academy of the Russian Government and the State 0.12 Has been working with the Bank since 1991, has more than Andrey A. Shalimov Deputy Chairwoman of the Bank’s Management Board; University – Higher School of Economics; 27 years experience in the banking system 1973, Russia 0.00002 Head of Finance Department Has been working with the Bank since 1993 and has more than Head of Treasury 15 years experience in the banking system Alexander V. Dolgopolov 1961, Russia G.V. Plekhanov Institute of the National Economy in Moscow; Deputy Chairman of the Bank’s Management Board; 0.36 Has been working with the Bank since 1994, has more than Member of the Bank’s Board of Directors; 14 years experience in the banking system Member of the Board of Directors of OJSC Avista; Member of the Board of Directors of Garmoniya pension fund Mark M. Nakhmanovich K.A. Timiryazev Academy of Agriculture in Moscow; 1957, Russia 0.45 Has been working with the Bank since 1993, has more than Deputy Chairman of the Bank’s Management Board 15 years experience in the banking system Yury I. Novikov Leningrad State University; 1962, Russia – Has been working with the Bank since 2003 and has more than Deputy Chairman of the Bank’s Management Board; 13 years experience in the banking system Head of the Bank’s Northwestern Regional Center Dmitry A. Strashok All-Union Institute of Agriculture; 1951, Russia 0.24 Has been working with the Bank since 1994 and has more than Deputy Chairman of the Bank’s Management Board; 15 years experience in the banking system Chairman of the Board of Directors of LLC Baltiisky Kurort Rushan A. Abdullin Finance Academy of the Russian Government; 1968, Russia – Has been working with the Bank since 1993 and has more than Head of Banking Technologies 15 years experience in the banking system 24 BANK VOZROZHDENIE 25 ANNUAL REPORT 2008
  15. 15. Management Board Dmitry L. Tatyana F. Lyudmila A. Alexander V. Mark M. Yury I. Dmitry A. Rushan A. Alexander A. Sergei N. Alla A. Andrey A. Orlov Gavrilkina Goncharova Dolgopolov Nakhmanovich Novikov Strashok Abdullin Bolvinov Malinin Novikova Shalimov Chairman of the Bank’s Deputy Chairwoman of Deputy Chairwoman Deputy Chairman Deputy Chairman of Deputy Chairman of Deputy Chairman of Head of Banking Head of Human Head of Corporate Chief Accountant Head of Treasury Management Board; the Bank’s Management of the Bank’s of the Bank’s the Bank’s Management the Bank’s Management the Bank’s Management Technologies Resources Department; Board; Management Board; Management Board; Board Board; Board; Department; Member of the Bank’s Member of Member of the Board Board of Directors Head of Finance the Bank’s Board Member of the Bank’s Head of the Bank’s Chairman of the Board Member of the Board of Directors of Department of Directors; Board of Directors; Northwestern Regional of Directors of of Directors of OJSC Avista Center LLC Baltiisky Kurort Garmoniya pension Chairman of Council Member of the Board fund of Garmoniya of Directors of pension fund; OJSC Avista; Member of the Board Member of the Board of Directors of Directors of of LLC Baltiisky Garmoniya pension Kurort; fund Chairman of the Board of Directors of CJSC V-Registr; Chairman of the Board of Directors of OJSC Yunost

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