In connection with the creation and launch of the Agency as a new organization, particular attention was given during 2004 to issues of organizational and technical infrastructure and human resources, as well as to the rational usage of the Agency’s resources.

In accordance with the Deposit Insurance Law, the Agency is managed by the Board of Directors, the Management, and the General Director.

During the reporting period, the Board of Directors met eight times and reviewed 40 questions, of which 34 concerned the Agency’s core activities.

The Board of Directors adopted a range of fundamental organizational and administrative documents, including the Statute on the Board of Directors and the Rules for the Management of the Agency, and approved key documents relating to the participation of banks in the deposit insurance system and the Agency Management’s estimation of predicted expenditures from the federal budget to cover any potential deficit in the mandatory deposit insurance fund in 2005.

The decisions of the Board of Directors are implemented by the Agency’s Management. In 2004, the Management met 55 times and reviewed 240 questions. The Management’s work is planned, based on the decisions of the Board of Directors and on federal law regulating the activities of the Agency.

The Expert Analytical Council, convened under the aegis of the Agency, comprises 28 representatives from among the research community, public associations of depositors and banks, and other organizations involved in the deposit insurance system. During 2004, the Council met three times, during which it discussed issues regarding the tax exposure of the assets of the mandatory deposit insurance fund, the appropriateness of the size of deposit compensation to the current state of the economy, and the Agency’s activity concept for implementing the Federal Law on the Insolvency (Bankruptcy) of Credit Organizations.

On 23 March 2004, the Agency registered with the tax authorities and accounts were opened at the Bank of Russia for the autonomous management of the mandatory deposit insurance fund and the Agency’s other resources.

The Agency’s day-to-day activities are organized on the basis of forward-looking plans. Planning is done through the development, approval and oversight of half-year plans.

As part of the automation of the Agency’s accounting, taxation, financial and human-resources management, the Agency has implemented the Parus management system.

In order to support the identification and visualization of the deposit insurance system, as well as its acceptance in the professional community and among the population at large, the Agency developed and registered a trademark and corporate style, both for itself and for the deposit insurance system. The key element of these trademarks and style is the visual symbol ‘Two interlocking palms’, a stylized representation of two hands, protecting the circulation of money (banknotes). In full colour, blue symbolizes the clarity of decisions and the firmness of goals, while green symbolizes calm and confidence.

All work performed on contract for the Agency for a sum exceeding the equivalent of $10,000 was performed by contractors selected through a tender process. For this purpose, the Management approved the Statute on the Selection of Contractors for the Agency and created a tender commission, which operates in accordance with those rules.

The tender commission accredited specialized organizations hired as contractors for the Agency in eight categories: auditing; trading; evaluation; determination of creditor demands and maintenance of the register; asset management; maintenance of accounting at credit organizations; provision of integrated services in the bankruptcy proceedings of credit organizations; and legal consultation. As of 1 January 2005, 53 organizations had been accredited.

Twelve tenders were held in 2004 to select contractors for the Agency, and their results were approved by the Management. The total value of the contracts awarded to the tender winners exceeded 48 million rubles, including VAT.

The Agency’s expenses outside of the permissible uses of the resources of the mandatory deposit insurance fund were funded by the transfer by the Russian Federation of assets worth 2.3 billion rubles from ARCO.

 

The investment of temporarily unallocated financial resources was conducted within the limitations set out in the Statute on the Investment of Temporarily Unallocated Financial Resources, approved by the Agency’s Board of Directors on 3 February 2004. The calculation of current limitations for investment in specific assets, the extension of the expiration date of these limitations, and changes to their size were conducted in accordance with the relevant regulations and were approved by the Agency’s Management. Oversight of investment was conducted by the Internal Audit Service.

As of 1 January 2005, the total amount of temporarily unallocated resources was 1.57 billion rubles. Of that, 1.455 billion rubles were invested in financial instruments. The remainder – 115 million rubles – was reserved to cover the Agency’s expenses and to fund participation in security trades.

The average profitability of the fund’s investments was 11% annually, and average profitability at realization was 10.7% annually. Investment income in 2004 was 97.8 million rubles.

The Agency’s maintenance expenses in 2004 were allocated in accordance with the estimate approved by the Board of Directors on 3 February 2004 (Protocol No. 3).

The estimate of maintenance expenses for the Agency in 2004 was approved by the Board of Directors at 194.1 million rubles. The Agency’s Management operated under the principles of reasonable sufficiency and minimization of maintenance costs. Over the course of the year, the Agency was able to realize savings of 40.6 million rubles, thus expending 79.1% of the estimate.

In accordance with the estimate of capital expenses approved by the Board of Directors for 2004, the Agency procured the main resources needed to support operations, expending a total of 31.5 million rubles, or 84.5% of the approved estimate (37.7 million rubles).

In a separate decision, the Board of Directors allocated 640 million rubles for the acquisition in 2004 of a building to house the Agency. In the second half of the year, the Agency purchased the office building in Moscow at ul. Verkhny Tagansky tupik, No. 4.

In order to carry out its two functions – deposit insurance and the liquidation of insolvent banks – the Agency needed to recruit a team of highly qualified specialists, capable of carrying out the tasks set out in legislation.

The Board of Directors reviewed the Agency’s organizational structure twice in 2004 (on 22 January and 27 October), once at the Agency’s founding and once again after the Agency was delegated additional functions.

The Agency’s personnel are drawn from the most qualified and experienced staff of the State Agency for the Restructuring of Credit Organizations Corp. (ARCO) and also includes high-class specialists from other organizations, some of whom assumed leadership roles.

As of 1 January 2005, the Agency employed 180 people. Of those, 88% have higher education, including 38% with an economics degree and 15% with a law degree (see Figure 6). The Agency also employs four doctors of science and 11 candidates of science.

And important part of the Agency’s human resources policy is to prepare and increase the qualifications of its staff. The Agency organized six educational courses, attended by 96 staff members, in order to work through issues and peculiarities connected with the implementation of the Deposit Insurance Law.

Moreover, over the course of 2004 120 Agency employees took part in 20 seminars and conferences. In selecting educational programs, the greatest attention was given to issues involving the activities of credit organizations, legal regulation, financial analysis, taxation, accounting, and the transition to international accounting standards.

One of the Agency’s fundamental operating principles is that of transparency and open access to information.

The formation of the Agency was accompanied by an active public educational campaign in the mass media. This campaign saw the appearance of more than 150 informational materials in various publications, on television and on the radio (including 82 in the central media and 70 in regional media).

Over the course of the year, the Agency’s leadership gave 11 press conferences and briefings dedicated to various aspects of the creation of the deposit insurance system.

The Financial Press Club of Russia in 2004 gave the Agency’s management its Diploma for adherence to the principles of informational openness and fruitful collaboration with the mass media.

The Agency’s Internet website is functioning, at the URL www.asv.org.ru, and includes relevant laws and other normative acts, the Agency’s documents, information for depositors and banks, answers to the most frequently asked questions, materials on international experience in deposit insurance, publications about the Agency, and statements by its executives.

The Agency’s executives and leading specialists, together with representatives from the Bank of Russia and banking associations, conducted a series of visits to the regions of the Russian Federation with the most active retail banking markets. Such trips were made to Ekaterinburg, Nizhny Novgorod, Novosibirsk, Omsk, Perm, Samara, Tyumen, and Chelyabinsk.

The purpose of these visits was to give detailed information to the public about the launch of the deposit insurance system, and to meet with local leaders and the representatives of regional banks. At these meetings, the Agency distributed detailed information about its normative acts, gave practical recommendations for the calculation and payment of insurance premiums, and clarified many questions that arose. Thematic press conferences were also organized for regional media.

Since mid-November 2004, the Agency has operated a telephone ‘hotline’ for bank depositors, which was advertised on the Agency’s website and at given to banks for distribution. Statistics show that the bulk of callers’ questions (70%) concern whether or not a specific bank has been enrolled in the insurance system.

In order to study international experience in the field of deposit insurance, to help establish and develop professional contacts with peer organizations, and to raise the international prestige of the Russian banking sector, the Agency collaborated with foreign and trans-national organizations.

In February 2004 the Agency joined the International Association of Deposit Insurers (IADI), which facilitates the exchange of experience between deposit insurers around the world. Other members of the IADI include the U.S. Federal Deposit Insurance Corp. (FDIC), the Canadian Deposit Insurance Corp., the Corporation for Deposit Insurance of Japan, the South Korean Corporation for Deposit Insurance, and Deposit Guarantee Fund (France), the Swedish Deposit Guarantee Council, and other analogous organizations. The Agency participated in the IADI Research and Guidance Committee’s work on the preparation of guidelines for deposit insurers on coordination between participants in the maintenance of financial stability and the regulation of bank insolvency.

In March 2004, an Agreement on the basic terms of cooperation was concluded with the U.S. Treasury Department, according to which the Agency will receive consultations on deposit insurance issues, including on the development of the Agency’s operating procedures, the evaluation of the financial stability of the deposit insurance system, the determination of rates and collection of insurance premiums, etc.

In order to further support the international exchange of experience in the field of deposit insurance, representatives of the Agency took part in 10 international conferences dedicated to issues of deposit insurance.