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Financial and Fiscal Transactions Department

Financial and Fiscal Transactions Department Treasury Single Account Cash Balance Management Transactions Moscow 2018. Key Objectives of the Transactions. Key Elements of Transactions. Select Elements of Transactions. Main Transaction Development Stages.

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Financial and Fiscal Transactions Department

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  1. Financial and Fiscal Transactions Department Treasury Single Account Cash Balance Management Transactions Moscow 2018

  2. Key Objectives of the Transactions

  3. Key Elements of Transactions

  4. Select Elements of Transactions

  5. Main Transaction Development Stages MoF and Treasury management’s decision on the need to manage liquidity Placing funds in bank deposits – first Central Bank-MoF-Treasury transactions Creating regulatory framework for depositing funds in banks Deposits – anti-crisis tool of the Government of the Russian Federation New placement mechanism for Treasury deposits A new Treasury’s power – managing balances Loans to Subjects of the Russian Federation Purchasing foreign currency Loans to municipalities Deposits in foreign currency Floating rate REPO Currency Swap On-demand deposits Floating rate deposits On-demand deposits Purchasing foreign currency at currency exchange Fund-raising tools Multiple-day REPO Overnight REPO

  6. Main Transaction Development Stages MoF and Treasury management’s decision on the need to manage liquidity Placing funds in bank deposits – first Central Bank-MoF-Treasury transactions Creating regulatory framework for depositing funds in banks Deposits – anti-crisis tool of the Government of the Russian Federation New placement mechanism for Treasury deposits A new Treasury’s power – managing balances Loans to Subjects of the Russian Federation Purchasing foreign currency Deposits in foreign currency Loans to municipalities Floating rate REPO Currency Swap On-demand deposits Floating rate deposits On-demand deposits Deposits with central counteragent Fund-raising tools Multiple-day REPO Overnight REPO

  7. Floating vs Fixed Rate

  8. Types of Transactions

  9. deposit account

  10. Depositing Requirements for Credit Institutions • General License issued by the Bank of Russia • Equity (capital base) no less than 5 bn RUR • International rating no lower than investment grade (Fitch-Ratings, Standard & Poor’s, Moody’s Investors Service) General License issued by the Bank of Russia Equity (capital base) no less than 25 bn RUR Russian rating no lower than investment grade (AKRAandRAEX) or equity of 100 bn RUR and the Bank of Russia’s control 24banks 17 banks General License issued by the Bank of Russia Equity (capital base) no less than 250 bn RUR Russian rating no lower than investment grade (AKRA) 6 banks

  11. Diagram of Deposit Placement with Banks Placement Terms Treasury of Russia 1 3 Corpus of Offers Bidding Cut-off Rate 4 2 Requests for funds within the limit Offer Trade Mechanism (Exchange Application SW) Funds Transfer 5 Contracting 7 Credit Institutions 6 Acceptance of Offer 9 Receipt of Funds 8 Statement submission 9

  12. Outcomes of Depositing Funds with Banks As of October 1, 2018 Amount of Incomes Amount deposited 49,381.19 bn. RUR 358.52 bn. RUR

  13. Repurchase operation (or repo)

  14. Diagram for REPO Transactions Sovereign securities Roster of offers, roster of contracts MoF of Russia Treasury of Russia Selection criteria, cut-off rate Report 6 Bank of Russia Offers to purchase Bank of Russia 1 3 Cut-off rate Corpus of offers Execution of transactions 4 Bidding Procedures 5 2 Offers to sell (limit) Trading Mechanism (Depository, Clearing Agency) Budget Funds Lending institutions Execution of transactions 5

  15. Outcomes of REPO Transactions From 2015 – 2018 As of October 01, 2018 Amount Placed, bn. RUR Amount of incomes, bn. RUR 7 and more days 7 and more days 106,275.2 68.1

  16. Basic Budget Lending Terms

  17. Budget Loan Granting Diagram FT territorial branch Borrower’s account 40201,40204 FT CO 3 Funding request (on the 2nd day) Account reinforcement (on the 4th day) 4 FFTD Borrower’s reporting (every 10 days) 6 2 1 Checklist: -powers of officials • Abiding by the funding limit (1/12 of revenues) • Tenor not exceeding 90 days • Repayment no later than November 25 • % rate in compliance with the law on the budget • restrictions Supplementary agreement to the Agreement (Loan Agreement) signed by the Borrower (loan amount, tenor, total interest, dates of receipt and repayment) (in 4 days) Borrower (represented by an authorized body) 5 Signature of the loan agreement and transfer of funds (on the 4th day) Or denial

  18. Budget Loan Provision Results For 2014 - 2018 As at October 01, 2018. 3 343,6 млрд руб. 3,343.6 Bn. RUR 316,2 млрд руб. 316.2 Bn. RUR

  19. Basic Terms of Purchasing Foreign Currency

  20. Foreign Currency Purchase Diagram Treasury of Russia Transfer of revenues Bank of Russia 3 Treasury’s Account Foreign Currency Purchase 2 4 Information on the results of the currency purchase Order to utilize surplus oil and gas revenues 1 MoF

  21. Foreign Currency Purchase Statistics Interest paid 0.6 mln. RUR Interest paid 9.9mln. RUR Interest paid 1,183.2 mln. RUR Transferred to NWF Transferred to the Reserve Fund

  22. Balance Management OUTCOMES(2008-2018) As at Oct. 1, 2018. Placement Volume Amount of Accounted Revenues 444.7 Bn. RUR 165,416.6 Bn. RUR

  23. Risk Management in the Course of Transactions • Organize internal control • Functional delineation (front-office, back-office, middle-office) • Legal Framework: • Establish requirements for lending institutions(gen. license, equity, good standing on the FT-related transactions, etc.) • Empower Treasury to: • directly debit a lending institution’s arrears on deposit transactions and REPO agreements; • Debit arrearson budget loans from the incoming revenues of regional or local budgets; • Transparency of transactions (www.roskazna.ru) Quality Assurance Agreement with counteragents (PAO Moscow Exchange, NSD)

  24. Future Evolution of Transaction Types • On demand • Currency swap • Purchase/sales of foreign currency at the exchange • Deposits with the central counteragent • Currency swap • Direct REPO • Contracting loans for the cash gap (MoF of Russia) • Extrabudgetary Funds

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