Sberbank - Annual Report 2010 - Together with the Government

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# Together with the Government

Together with the government, we strive to ensure that the country’s social development meets the needs, requirements and desires of the societies of today and tomorrow. We want to build an environment that is modern, mobile and creative, while at the same time providing stability and prosperity.

We support the government’s aims to modernise the economy and social sector and to create new modern infrastructure for public and government services. At the same time, we believe that all parties involved in the modernisation process should benefit from participation and it is our view that in addressing social development issues, we should not harm the Bank’s commercial interests.

In partnership with the government we implement a number of projects across wide-ranging sectors, including: improving public access to government services through the use of information technologies; the reform and modernisation of the housing and utility sector; improving the transparency of state and regional procurement; supporting Russian car manufacturers; the development of carbon finance; and other important areas. The Bank has signed cooperation agreements covering various aspects of socio-economic development with the governments of most Russian regions.

## The Search for a Common Denominator

Sberbank participates in the promotion and implementation of measures facilitating the development of the banking industry, both within Russia and internationally. In 2010, we held meetings with the Russian Government, the Ministry of Economic Development, the Ministry of Finance and the Bank of Russia, at which we discussed the introduction of the Universal Electronic Card. Sberbank also participated in various meetings organised by government bodies and in the activities of working groups to draft the federal laws On the National Payment System and On Electronic Signatures. The Bank also contributed to the preparation of amendments to the federal law On Protecting the Rights of Legal Entities and Individual Entrepreneurs in the Exercise of Governmental Oversight (Supervision) and Municipal Control.

Sberbank was actively involved in amending the federal law On Privatization, which helped to establish a legal foundation for electronic trading and the use of electronic trading platforms. We also provided input on amendments to the second part of the Russian Federation’s Tax Code, with the aim of developing the Russian coin market.

In addition, throughout 2010 Sberbank participated in the preparation of draft amendments to the federal law On Advertising. On several occasions, specialists from the Bank discussed proposed amendments with senior officials at the Bank of Russia and the Federal Anti-Monopoly Service (the main agency responsible for drafting the amendments), presenting not only the Bank’s position but also suggestions from other financial institutions.

Herman Gref, Sberbank CEO and Chairman of the Management Board, is a member of the Russian Presidential Commission for the Modernisation and Technological Development of the Economy. At twelve Commission meetings held in 2010, members discussed important issues such as improving access to financing for high-tech companies, the introduction of energy efficient technologies, enhancing the quality of professional education and the development of information technologies.

In order to improve Russia’s investment attractiveness of Russia and to demonstrate the latest achievements in the area of banking technologies, we sponsor or participate in various events (round tables, conferences, exhibitions and forums) at the international, federal and regional levels. The most significant events attended by Sberbank’s management in 2010 included the St. Petersburg International Economic Forum, the 9th International Sochi 2010 Investment Forum and the World Economic Forum Annual Meeting in Davos.

## The Universal Electronic Card

We are involved in the development of a Universal Electronic Card (UEC) in Russia. This is a public-private partnership project, which is implemented by OJSC Universal Electronic Card, a federal organisation authorised to coordinate and implement the project, and a pool of banks. The shareholders of OJSC Universal Electronic Card include Sberbank, Bank Uralsib and AK Bars Bank. Our investment in the project so far has reached USD 20 million and will continue to grow.

Each and every Russian citizen will be issued a UEC. It will serve as proof of identity (as defined by law), a mandatory medical insurance certificate, a mandatory pension insurance certificate and a payment card among other functions. In short, the card will allow people to access virtually all government services.

On Sberbank’s innovative initiative, ATMs and payment terminals will be used to process the UEC. In addition, the Bank suggested using the card for payment, which will open new opportunities for its holders. For example, cardholders will be able to pay fines or obtain micro financing immediately using the card. Overall UEC technology will considerably increase public access to banking services and improve the population’s quality of life.

The UEC project relies on our experience gained when implementing Social Card projects in a number of regions. A Social Card is a multipurpose card issued to residents with the right to certain social benefits. The card is used as proof of identify and also serves to automatically confirm the holder’s right to benefits, as well as accounting for the actual use of these benefits.

A pilot Regional Social Card project was launched in 2009 in the Astrakhan region in partnership with the Pension Fund of Russia and the regional government. In 2010, the approach was replicated in the Krasnodar and Krasnoyarsk regions and the Chuvash Republic. The number of participants in the project and the possible applications of the card are continuously expanding. It is intended that citizens will be able to apply for the card from 2012.

## Reform and Modernisation of the Housing and Utility Sector

The reform of the housing and utility sector affects the interests of most Russians and carries great significance in the socio-economic development of the country. To contribute to this reform, the Bank has created a special unit — the Directorate for Housing and Utility Sector Projects — and has adopted a Housing and Utility Services Market Strategy. The Strategy pays particular attention to the Bank’s participation in the implementation of the federal Integrated Programme for the Reform and Modernisation of the Housing and Utility Sector for the Period 2010–2020.

Within this programme, we modify existing products and technologies and create new ones for those involved in the housing and utility services market. We also attract strategic investors and invest in regional utility companies ourselves, as well as providing information and consultation on the reform. Sberbank’s projects and approaches are first piloted in selected regions and then replicated across the country.

One of our projects in 2010 to develop the housing and utility sector financed the creation of an integrated waste management system in the Astrakhan region and invested in a company developing utility billing technologies in Belgorod. We also launched a pilot project for letter-of-credit payments for parking spaces sold through the Public Garage programme in a division of the Moskovsky Regional Bank.

In 2010, in collaboration with our partner organisations, the Bank published a booklet called The A–Z of Housing and Utility Services. Questions and Answers, which explained the sector’s reform to the public.

Sberbank’s plans for 2011 in the reform and modernisation of the housing and utility sector include providing loan financing for integrated regional utility development programmes in pilot regions and the replication of this experience in other regions.

## The Electronic Trading Platform

In order to improve and optimise its procurement practices, Sberbank formed a dedicated Procurement and Tender Directorate, which oversaw the creation of CJSC Sberbank-AST, an electronic trading platform. At the beginning of 2009, the platform was selected as one of the five platforms for state and regional procurement through electronic tenders, and received five-year accreditation as a national electronic trading operator. In this way, Sberbank helps to improve the transparency of state and regional procurement and promotes fair competition.

In 2010, we published the Rules of the Electronic Trading Platform. According to the document, potential contractors and suppliers are accredited and participate in tenders free of charge. A fee is paid by the winner of a state or regional contract. CJSC Sberbank-AST runs practical workshops to educate potential participants about recent changes in relevant legislation and practical tips for using the platform for state and regional procurement. Similar workshops are held for foreign suppliers in order to ensure equal opportunities for all companies eligible to participate in trading.

In December 2010, CJSC Sberbank-AST was named Company of the Year 2010 at the National Business Awards in the Information Technology (Electronic Trading) category.

## Supporting the Russian Car Industry

Sberbank partnered with the government in its ‘Cash-for-Clunkers’ programme launched in March 2010. The programme aimed to support Russian car manufacturers and improve the affordability of new cars. Through the scheme, people could scrap their old cars for a ‘scrapping premium’, which could be used to partially pay for a new Russian-made car.

We were the first Russian lending institution to offer special vehicle loan terms and conditions to programme participants. When applying for a loan at a car dealership, customers were able to use their scrapping certificate or authorisation to scrap their car as part of their down payment on a new vehicle. This measure made it easier for customers to buy new cars.

Since 2009, we have been involved in an incentive programme to encourage people to buy Russian-made automobiles by providing car loans at preferential interest rates. In 2010, the Bank provided a total of RUB 13.3 billion worth of loans through this programme.

## Developing Carbon Finance

In 2004, the Russian Federation ratified the Kyoto Protocol to the UN Framework Convention on Climate Change, an international agreement def ining approaches towards the reduction of greenhouse gas emissions. In 2009, the Government of the Russian Federation appointed Sberbank as an agent for implementation of the economic mechanisms defined by Articles 6 and 17 of the Kyoto Protocol.

Through a specifically created unit, the Directorate for Management of Energy Efficiency and Environmental Projects, the Bank performs the public function of an ‘operator of carbon units’ on a commercial basis. Our activities are aimed at protecting the interests of Russian investors implementing energy efficiency projects, and at expanding the Bank’s loan portfolio and enhancing its quality.

In 2010, Sberbank signed a number of memoranda with foreign companies determining the procedure for further cooperation in the preparation of emissions trading contracts. In the same year, the Bank conducted two tenders to select projects for the joint implementation mechanism (Article 6 of the Kyoto Protocol). The first tender was announced in February 2010 and the second in September 2010. Projects were selected on a number of criteria, including energy efficiency and environmental performance, technological and financial potential and economic and social effect.

| 1st tender | 2nd tender | Total
--- | --- | --- | ---
Number of applications | 40 | 58 | 98
Number of projects approved | 15 | 18 | 33
Total reduction through approved projects, tonnes | 29,992,993 | 29,970,000 | 59,962,993

To create a framework for the implementation of projects conditional to the reinvestment of carbon revenues in new emission reduction and energy efficiency projects, in 2010 Sberbank drafted model agreements between the ‘operator of carbon units’ and project investors. Jointly with investors, Sberbank participated in the preparation of project design documents for projects relying on loan financing from the Bank.

In October 2010, on behalf of the Government of the Russian Federation, Sberbank paid Russia’s outstanding fees to the UN Secretariat. This removed the obstacle for Russia’s inclusion in the International Transaction Log, which is a necessary condition for participating in the economic mechanisms defined by Articles 6 and 17 of the Kyoto Protocol.

We plan to expand the range of services we offer to investors in the emissions trading market, a new segment for Russian business.

## The Government as a Customer

Federal and regional governments often face the need to attract funds from sources other than their respective budgets for the implementation of investment projects or to cover current expenditures. Sberbank has traditionally partnered with the government in addressing this objective, acting as an underwriter or lender.

In 2010, the Bank arranged the sale of four regional/sub-federal bond issues totalling RUB 4 billion and co-arranged a sale of bonds issued by the Republic of Belarus (Sberbank’s participation was worth RUB 3.025 billion).

As of January 1, 2011, the balance of the Bank’s loans to the governments of Russian regions amounted to RUB 127.9 billion and RUB 24.9 billion to municipal districts. In addition, we invested RUB 149.4 billion in Russian sub-federal and municipal bonds.

Sberbank’s regional banks provide banking services to regional governments and regional administrations, electoral commissions, branches of the Federal Treasury and the Federal Pension Fund. Sberbank serves budget accounts in areas in which the Bank of Russia is not represented through its own institutions.

Sberbank helps to improve the transparency of the targeted use of budgetary funds by opening special purpose accounts for general contractors and subcontractors in public projects significant to the development of Russian society and the country’s economy.

One such project is the reconstruction of the M4 Don federal motorway, which connects Moscow and Novorossiysk, passing through Voronezh, Rostov-on-Don and Krasnodar. In July 2010, an opening ceremony was held for several sections of the road. Other public projects overseen by the Bank in a similar manner include the reconstruction of the second stage at the Mariinsky Theatre in St. Petersburg and the construction of facilities at the Far East State University and the Conference Centre on the Russky Island in Vladivostok.

## History

- As One with Society
- Transparency
- Sberbank Trade Union
- Working Conditions
- The Sense of a Common Cause

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