Palms & Company Document


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"The description of the Russian bank reorganization program available to Russian banks. Why Russian banks need a Western Investment Banker to help them adopt this program."

by

Dr. Pyotr Johannevich van de Waal-Palms

Sovetnik Pravitelstva CWA, Tovarichestvo Palmsa, Inc.

Investment Bankers. Washington, United States of America.

RUSSIA : FINANCIAL INSTITUTIONS DEVELOPMENT LOAN BANK INSTITUTIONAL DEVELOPMENT PROGRAM

Terms of Reference

Scope of Program

1. For each Russian bank, the twined foreign bank or consultant (hereafter, referred to as the "Consultant") selected to deliver technical assistance will utilize the diagnostic review report and on site discussions with management in order to prepare an institutional development program tailored to that bank's particular strategy, needs and resources. The consultant will generally act in an advisory capacity during the implementation phase of the program, although line responsibilities may be requested in some critical areas. Training of counterpart and other staff, particularly in new banking processes that are developed, will form an important part of the Consultant's duties. All plans assume significant involvement of Russian bank staff in order to promote skill transfer, minimize the cost of foreign consultants and to ensure that the program remains consistent with the environment and strategy of the bank. The Consultant should arrange for, and will be responsible for, all the services required by the Russian bank under this program. Sub-contracting arrangements are allowed under term of the contract, but services for which this option is to be employed must be specified in the Consultant's proposal and contract documentation and be in accord with World Bank guidelines.

2. The institutional development programs have been structured in nine "modules" corresponding to basic functional areas of banking: (i) strategy; (ii) organization structure; (iii) credit management; (iv) financial management; (v) marketing; (vi) branch management; (vii) human resources management; (viii) training; and (ix) technology. The selection of these modules was based on the finding of the diagnostic reviews that a number of skill deficiencies and procedural and policy inadequacies were common to all banks. However, not all participating banks will pursue or require assistance in all nine modules. The detailed content, prioritization and timetable of each module has been individually developed to take account of each bank's particular strategy, needs and resources.

Strategy

3. In the strategy area, the Consultant will: (i) refine and expand the bank's strategic planning process to cover all important areas of strategic analysis and decision; (ii) train the bank's strategic planning staff and a selected group of line managers in its use; (iii) work with the bank's management to develop a practical strategic plan for the bank and a concrete program for its implementation; and (iv) work with line managers to translate the strategic plans and goals for each major area of the bank.

4. This module will include analysis such as market analysis, competitive analysis, profitability analysis of customers, products and units, and that the plan will define the bank's mission, goals, basic strategies, target markets, products and services, resource requirements, and action programs, covering both corporate and retail banking.

Organization Structure

5. The Consultant will work with management to: (i) assess the existing head office organization structure and a sample of branches in the context of the strategic plan; (ii) plan a new organization structure for the head office focused on successfully executing the strategic plan, exploring specific opportunities for making the structure more market-oriented; (iii) plan a new organization structure for perhaps two representative branches to serve as modules for all branches; (iv) identify the required staffing levels and the main skill requirements in each organization unit; and (v) prepare a concrete plan for implementing new structures.

6. In defining new organizational units, the Consultant will provide sufficient detail about about the unit so the Bank can successfully implement it - e.g., the unit's basic mission, main responsibilities, and key functions for carrying out each responsibility, as well as the required staffing levels and main skill requirements as noted above.

Credit Management

7. The Consultant will: (i) assess the bank's existing credit policies, processes, organization and skills - covering ruble and hard currency lending, enterprise and individual lending, and project finance, from origination through analysis, approval structuring, pricing, administration, monitoring, classification, provisioning and problem loan management - in the context of the credit requirements of the strategic plan and good credit management practice; (ii) identify areas that needs to be improved or developed; (iii) work with management to make those improvements - ultimately necessary to build a fully effective credit management system; (iv) document the new policies and procedures in a credit manual; (v) train a core staff in utilization of the new or modified processes; (vi) identify the additional skill development needed by the bank to effectively execute and sustain the system; and (vii) identify the automation requirements of the new credit management system.

Financial Management

8. The Consultant will: (i) assess the full scope of the bank's financial management processes, organization and skill, and identify needed improvements; (ii) work with management to make needed improvements in priority areas - which, at this point, are anticipated to include the accounting system, planning and budgeting process, financial reporting, management information, asset/liability management, treasury operations, performance assessment and internal controls; (iii)train a core financial staff in utilization of new or modified processes; (iv) identify additional skill development needed by the bank to effectively execute and sustain the system; and (v) identify the automation requirements of the new financial management system.

Marketing

9. In conjunction with the strategic planning module, the Consultant will work with the bank's management to: (i) prepare a concrete marketing plan for the bank and its main businesses, recognizing the different needs of corporate and retail banking; (ii) specify the organization and other resources needed for executing the plan; (iii) develop key marketing techniques to be used by the bank in each business area; and (iv) identify the skills needed by the bank to sustain a successful marketing program. The Consultant is expected to transfer skills of market analysis and market planning to the bank during this work and to

generate a formalized market planning and development process.

Branch Management

10. In this area, the Consultant will: (i) review the current system of managing branches and identify needed improvements, particularly in control and risk management; (ii) review the process of planning the branch network and identify needed improvements; (iii) select, with management, a "typical" branch, redesign its work flows, organization, staffing, physical layout, equipment, quality standards for operations and customer service, and other major operating elements so that it can serve as a model for all other similar branches in the network; (iv) plan the development of a computer system for assembling branch asset and liability data on a real-time basis; and (v) prepare a plan for improving head office/branch communications

Human Resources Management

11. The Consultant will work with management to build an effective human resource management system, refining existing human resources

processes such as recruiting, remuneration and incentives, and building or improving human resources processes such as performance/potential appraisal, individual development planning, training and development, transfer and promotion, and succession planning. The Consultant will also train a core human resources staff in the utilization of new or modified processes and identify any additional skill development needed for an effective ongoing human resources management function.

12. During the course of the project, the Consultant will also (i) assess the organizational culture; (ii) identify major aspects of the culture that require change in order for the bank to successfully operate in a commercial, competitive and market-oriented mode; and (iii) define the actions needed to achieve these changes.

Training

13. After the new organization structure is defined, the Consultant will work with training staff to (i) conduct a training needs analysis of key jobs in all units; (ii) prioritize training needs, with a view towards the required integration of training with the business plan, and organize them into a training master plan that meets priority training needs within the required time period and reasonable departmental budgets; (iii) reassess the training infrastructure in the context of the training master plan; and (iv) make needed improvements in areas such as planning the training center, methodologies for training course development, methodologies for conducting training, training materials, on-the-job training, identification and evaluation of external training, selecting and preparing trainers, selecting and preparing trainees, training evaluation, and the training organization.

14. As noted in the above sections, the Consultant is expected to train core staff in all new banking processes developed or modified during the project. In addition, the Consultant is expected to provide training to managers and professionals in other high priority skill areas. The scope and type of this training is to be determined between the Consultant and bank management, based fundamentally on importance, cost, and the relative advantage of the Consultant providing such training compared with other potential providers. The following methods will be utilized for delivering training: (i) "on-the-job" training for the bank's counterpart staff who are working with the Consultant; (ii) training of core functional staff in utilization of new or modified processes developed by the Consultant; modified processes developed by the Consultant in each module of work; and (iii) additional training of managers and professionals in high priority areas as decided between the Bank management and the Consultant.

Technology

15. In this area, the priority for the Consultant will be to clearly define user requirements and refine the bank's automation strategy in the context of the bank's overall strategic plan, then refine the existing automation plan to ensure the most cost-effective implementation.

16. The Consultant may need to achieve this goal through several

stages: (i) evaluating the bank's existing hardware architecture and systems engineering and its near-term automation plans in the context of the new strategic plan; (ii) working with management and its consultants to refine and update the plan; and (iii) continuing to update the plan as new banking processes are developed - e.g., in credit management, financial management, human resource management and branch management. In addition, the Consultant will identify priority needs for development of core technology skills and technology management processes.

Reporting

17. Given the expected communication difficulties, the PBs and PIU will need documentation of the plans and progress of the work. At a minimum, the technical assistance contractors will prepare and review with the PSs' management the following: Within two months of commencing work, a detailed, updated work plan, including the proposed level of effort (work-weeks/months) and scheduled outputs. Quarterly progress reports documenting findings, conclusions, recommendations, end-products, issues and proposed next steps.

18. Specific reporting requirements, including contract budget and implementation progress measurement criteria, will be agreed between PB management and the contractor during contract negotiations.

19. The two-month updated work plan and all subsequent quarterly reports will be submitted to the PIU. It is the responsibility of the consultant to ensure that these are received within two weeks subsequent to the end of the quarter. Receipt of the quarterly report will be a condition for disbursement of fees due for that period.

20. PB management also will be required to prepare semi-annual evaluations of the program and submit these to the PUI.

Budget

21. Each institutional development program will be designed and negotiated to meet the particular needs of the PB which it is intended to serve. No two programs will be identical. However, most PBs will adopt programs requiring consultant inputs in the nine functional modules outlined below.

------ Work Modules Work-Weeks (Min. Max.)

1. Strategy 30 50

2. Organization 15 25

Detailed Cost Estimates

22. Tentative institutional programs have just been completed for 19 of the 20 preselected banks. Detailed cost estimates for these programs are under preparation.

Timetable

22. Negotiations with twinning banks/ consultants were conducted by EBRD during 1994. EBRD expected that contracts for at least 20 banks would be signed by December 31, 1994. Contracts will be entered for a duration of 2-3 years, depending on the nature of the program, and on the preference of the the partners.

24. The PB management and technical assistance contractor will agree on the most logical sequencing of the work and implementation of the outputs, for discussion and finalization with management. However, at a minimum, the following results will be obtained during the first year of the project :


PROJECT INFORMATION DOCUMENT

RUSSIAN FEDERATION FINANCIAL INSTITUTIONS DEVELOPMENT PROJECT

December, 1994 Borrower: Government of Russian Federations

Beneficiaries: Private commercial banks; Central Bank of

Russia; Ministry of Finance

Estimated Project Cost: US$375 million

Financial Plan: IBRD: US$200 million

EBRD: US$100 million

Other co-financing: US$ 60 million

Government & banks: US$ 15 million

Background

1. Following the collapse of the former Soviet Union (FSU) in late 1991, the Russian Government launched a broad program of economic reform to replace the remnants of the command economic structure with a market-oriented economy based on private ownership. The reform of the financial system has been underway since 1987. As in other economies in transition, the former Gosbank was split into a central bank and several specialized sectoral banks. At the same time, enterprises and other institutions were given the right to create their own financial institutions. New banks proliferated and their number grew from less that 100 in 1988 to almost 2,000 in 1993. These new commercial banks operated initially as corporate treasuries for their owners but are moving rapidly to become full-fledged banks serving corporate and retail customers. Since their financial services have usually been better than those of the specialized state banks they have been able to attract new customers and shareholders despite their more limited access to directed credit from the Central Bank of Russia (CBR). With the rapid implementation of the mass privatization program for non-financial state enterprises, most of these new commercial banks are now also de facto privately owned, or will be privately held within a few months. The Russian experience provides an interesting alternative to financial reforms in Eastern Europe: elsewhere reforms are relying largely on gradual transformation of a few specialized state banks into eventually privately owned commercial banks. In Russia the transformation of the financial sector is much more driven by competitive forces.

2. The Government has been struggling to implement a stabilization program, but so far with little success. Credit and monetary policies are precarious and a large volume of directed credit at subsidized interest rates is being channeled to "priority" sectors and regions (agriculture and the Northern Territories). However, the Government has announced its intentions to phase out directed credit during 1994 and to convert any remaining subsidies into budgetary expenditures. The introduction of a sound policy framework for the financial sector and the reform of financial infrastructure have also been lagging. The regulatory and supervisory framework is still embryonic, as are accounting and auditing, and the payments system is undeveloped and inefficient. There is genuine concern that a large number of the newly created banks have an insufficient capital base, have limited credit assessment skills, suffer from a high loan concentration, often engage in connected lending, and have an inexperience management and staff. However, by comparison to the specialized state banks or their successors in Russia and Eastern Europe, the new Russian banks have made considerable progress. While they are not yet "good banks", they are already good businesses, perhaps the most market-oriented sector within the Russian economy.

Project Objectives and Description

3. The ultimate objectives of the program are to increase the quantity and improve the quality of banking services, promote banking stability, and contribute to a more efficient allocation of bank credit (including any bank lending financed by the Bank or other international source). The immediate goal is to create a core group of banks which will: (i) serve as models of "good banks" for the entire financial sector; (ii) form an embryo of a private clearing system operating at the federal level; and (iii) qualify an on-lenders of World Bank and other international lines of credit. The project will consist of three components: (i) a commercial banking component, consisting of institutional strengthening programs and systems modernization programs for private commercial banks; (ii) a bank supervision component, consisting of the development of on-site and off-site supervisory capabilities at the CBR; and (iii) a bank accounting component, which will focus on the modernization of bank accounting and auditing standards and practices.

4. The commercial banking component is central to the program, and involves the provision of technical assistance to private commercial banks. The support provided could take a variety of forms, with a particular emphasis on promoting twinning arrangements with reputable foreign banks. The component would support a three-pronged program consisting of: (i) a program for strengthening bank operations; (ii) a program for systems modernization; and (ii) measures aimed at enhancing the financial soundness of banks. The program of institutional strengthening would be articulated around the preparation of a strategy and business plan for each participating bank (PB), and the formulation and implementation of a functional development program, with a particular focus on credit and risk assessment, loan portfolio management, budgeting and internal control. Systems modernization programs, consistent with and supporting the banks' development strategies and business plans, would include technical assistance, hardware, software, and related services. PBs would be required to meet prudential standards pertaining to their capitalizations, lending and resource mobilization practices, and financial reporting. This would be complemented by yearly audits carried out according to international standards.

5. A comprehensive and in-depth screening of Russian banks has lead to the preselection of 20 banks for participation in the program. It is expected that a number of other banks meeting the eligibility criteria will join the program at a subsequent time. Among the preselected banks, four are in St. Petersburg, six in Moscow, one in Togliatti, two in Ykaterinburg, one in Tyumen, one in Omsk, two in Kemerovo, one in Khabarovsk and two in Vladivostok. Through their branch networks, these banks serve most major economic areas of the country. Among the 20 banks is a mixture of new banks and "spin-offs" from former state specialized banks. They range widely in size, from several of the largest Russian commercial banks, with over 50 billion rubles in shareholders' equity and over 500 billion rubles in assets, to relatively small banks, with 2 to 10 billion rubles in shareholders equity and 30 to 100 billion rubles in assets. The aggregate capitalization of these banks is about US$700 million.

6. The bank supervision component, which will finance the training of 650 bank supervisors and the development of supervisory material and procedures, is expected to have a substantial impact on the system only over the medium/long-term. As spelled out above, PBs would be required to meet specific prudential standards. These standards would be extended gradually to the rest of the banking system. The bank accounting component would finance programs to support the introduction of modern accounting and auditing standards and practices.

Rationale for Bank Involvement

7. The rapid development of the private sector in Russia requires the support of a robust and efficient financial sector. The recently published sector review "Russia-The Banking System in Transition", sets out an agenda for reform. An immediate priority is to put in place the principal building blocks of financial sector infrastructure, i.e., the clearing and settlements system, a rudimentary supervision capability, banking legislation, an accounting and auditing system, a securities market infrastructure and a framework for improving individual financial institutions. Another priority is to develop programs and institutions to provide finance for the private sector. The Bank's initial support to these priority needs will be through the proposed Loan, described below, and a parallel "Enterprise Restructuring Loan ERL", designed to provide credit to restructuring private enterprises. Further, a loan to support the modernization of the payments system is also under preparation and scheduled for Board presentation by late 1994, after completion of comprehensive studies on standards and technological options expected to be completed by June 1994. Policy reforms will be addressed under a forthcoming second Rehabilitation Loan, and formal training will be supported under the proposed Managements and Training Loan. The proposed project will create the on-lending institutional framework for the ERL and for a parallel EBRD loan (which also includes a line of credit directed at restructuring privatized enterprises), as well as for a number of other forthcoming Bank loans.

Project Cost and Financing

8. The project will be jointly financed and supported by the Bank and by the EBRD. Costs estimates are based on about 36 participating banks. Project costs are estimated at US$360 million for the commercial banking component, US$3.5 million for the bank supervision, and US$8 million for bank accounting. The cost of project implementation is estimated at about US$3.5. The Bank loan would amount to US$200 million and the EBRD loan, in an amount of US$100 million would contribute to the financing of the commercial banking component. Grand co-financing of about US$60 million is needed for the commercial banking component and of about US$5 million for the other two components; about US$20 million

would come from a Japanese Grant Facility, and additional co-financing is being sought from other donors. US co-financing is being considered for bank supervision and European Union co-financing is being sought for bank accounting. Banks would be contributing an aggregate amount of about US$10 million to the cost of their programs (large amounts have already been invested by a number of banks to initiate the modernization of their systems. The Government and the CBR are expected to finance the local costs of project administration and of the bank accounting and supervision programs.

Project Implementation

9. The Government will be the Borrower of the loan and has appointed the Ministry of Finance (MoF) to serve as the lead authority for the

management of the loan and the coordination of its implementation. The MoF will be more directly responsible for the commercial banking component, while the CBR will be responsible, under a subsidiary agreement, for the bank supervision and the bank accounting components.

10. To support the implementation of the loan, the Government has established a Project Implementation Unit (PIU) within the MoF, with the general responsibility of assisting the lead authority in the timely, efficient and con effective implementation of the loan. Given their close interrelation, it is envisaged that the proposed project and the Enterprise Restructuring Project would share the same PIU. A high-level committee chaired by the Minister of Finance, and including the Central Bank, a representative of the commercial banks, and representatives of the IBRD and of the EBRD, will oversee the overall execution of the project and will handle issues such as delinquent banks under the program, or the accreditation of new banks. In view of the complexity and magnitude of the program, a team of senior bankers will be responsible for carrying out systematic and ad hoc bank inspections, reporting to the committee. Substantial World Bank and EBRD supervisory resources will also be needed.

11. To advance preparation of the project, a Project Preparation Facility (PPF) was established in October 1993, aimed at inter alia: (i) contributing to the establishment and operation of the PIU: (ii) completion of diagnostic reviews and preparation of initial technical assistance programs for banks: and (iii) preparation of tenders for institutional and financial audits. In addition, a Japanese Grant Facility will support the audit of banks and the early initiation of bank TA programs.

12. Significant progress has been achieved in the preparation of the various components. A comprehensive screening of banks was carried out in close collaboration with the CBR and with the MoF, followed by comprehensive diagnostic reviews of about 45 banks. At preappraisal and on the basis of the diagnostic reviews, a first group of 20 banks was identified for further consideration under the project. Detailed individual terms of reference for institution development programs and systems modernization programs have been prepared and discussed with the concerned banks. Terms of reference for bank audits have also been prepared and the first eight audits began in January 15, 1994. Another group of 12 banks were to be audited commencing March - April, 1994. A systematic program has also been initiated for identifying foreign banks interested in twinning with Russian banks, and twelve foreign banks have already expressed a definite interest in participating in the program.

Environmental Aspects

13. None of the project components is expected to have an impact on the environment. As per OD 4.01. the project has been rated Category "C".

Project Benefits

14. The building up of the financial infrastructure and improved operations in the banking system will lead to a more efficient mobilization of financial resources, and to an improved allocation of resources to viable activities in the productive sector. The project will also promote the modernization and standardization of banks' systems and will enhance the operations of the payments systems. The reformed and strengthened legislative, regulatory and supervisory framework, as well as the institutional development of banks, will help improve the efficiency and prudence of bank operations and thereby instill greater financial discipline in the system. Improvements in accounting and auditing will significantly help improve transparency and reliability of financial data. Assistance in the development of a network of private

commercial banks involved in enterprise financing will contribute to further institutional development and to the broadening of financial markets. All of these improvements in the financial sector will enhance the restructuring of the real economy, contribute to the resumption of growth, and provide a basis for IBRD and other IFI's lending.

Project Risks

15. Uncertainties in the macro economic situation and inexperienced management jeopardize the solvency of PBs. The introduction of banking standards for the PBs and improved bank supervision, as well as the strengthened managerial, financial, and operational capacities of PBs should contribute to reducing this risk. Another risk relates to the lack of familiarity of the Russian counterpart with Bank's procedures, which may slow down project.implementation. The early establishment of the Project Implementation Unit (PIU), as well as training of counterpart staff, should address this risk.


Preliminary List of Banks Selected for On-Lending Audit

Moscow Region

  • 1. IMPERIAL BANK Moscow
  • 2. INKOMBANK Moscow
  • 3. MENATEP Moscow
  • 4. MOSBUSINESSBANK Moscow
  • 5. STOLICHNY BANK Moscow
  • 6. TOKOBANK Moscow
  • North West Region

  • 7. BANK ST. PETERSBURG Petersburg
  • 8. BALTISKY BANK Petersburg
  • 9. PROMYSHLENO - INDUSTRILNY Petersburg
  • 10. PETROVSKIY BANK Petersburg
  • Volga Region

  • 11. AVTOVAZBANK Togliatti
  • Urals Region

  • 12. SKB Ykaterinburg
  • 13. URALPROMSTROYBANK Ykaterinburg
  • Siberian Region

  • 14. KUZBASSPROMBANK Kemerovo
  • 15. KUZBASSOTZBANK Kemerovo
  • 16. OMSKPROMSTROYBANK Omsk
  • 17. ZAPSIBCOMBANK Tyummen
  • Far East Region

  • 18. DALRYBANK Vladivostok 19. FESBANK Vladivostok
  • 20. REGIONVNESHTORGBANK Khabarovsk
  • PALMS & COMPANY TO HELP RUSSIAN COMMERCIAL BANKING SECTOR As part of a program undertaken in co-operation with the Russian Government and the World Bank to strengthen local commercial banking services, the European Bank for Reconstruction and Development (EBRD) signed a US$ 100 million loan agreement [today] in the presence of the Russian Ambassador in London . The aim of the program is to strengthen and develop a core group of between 30 and 40 Russian commercial banks that are expected to assume prominent roles within the developing Russian commercial banking sector.

    Ron Freeman, First Vice President of the EBRD, said "We regard this program as a foundation project, the first phase in an on-going process. It means that the Bank will be able to establish more effective working and co-financing relationships with individual commercial banks and thereby develop a more aggressive approach to restructuring private sector companies in Russia. It lies at the heart of the Bank's mandate."

    Quote from Russian Ambassador?? "In the absence of fully effective capital markets, the commercial banks are likely to play a key role in the transformation and restructuring of the Russian economy."

    With the first part of the Mass Privatization Programme complete and an estimated 12,000 medium and large sized companies privatized, the demand for commercial banking services has increased dramatically. Although a large number of new commercial banks have been established in Russia during the last three years, the quality and range of services they are able to provide is, at present, inadequate to deal with that demand. In addition to the program, a jointly financed EBRD/World Bank credit line will shortly be in place to provide loan financing to these companies via the core group of banks.*

    The proceeds of the loan will be on-lent to the banks via a Project Implementation Unit established within the Ministry of Finance. The project has three main components: i) strengthen bank operations by preparing and implementing strategies and business plans for each of the banks; ii) develop measures aimed at enhancing the financial soundness of the banks and; iii) develop and strengthen the banks' information technology and automation programs. Technical assistance for the first two components would be provided mainly through contractual twinning arrangements with foreign banks.

    Palms & Company is prepared to act as financial advisor and investment banker to Russian banks to assist them in (1) Identifying U.S. banks that are willing to participate as twinning partners with the Russian Bank, (2) assist the Russian bank to establish its eligibility with the EBRD and make efforts to have the Russian bank included in the program. (3) Assist the Russian bank to develop international correspondant bank relationships and participate in international banking and trade finance.


    INVESTMENT BANKING SERVICES - FOR RUSSIAN BANKS

    Palms & Company, Inc., Investment Bankers (established 1934)

    Russian Venture Capital Fund of America

    Ukrainian Venture Capital Fund of America United States Interbank Ruble Exchange Service:

    We will sell to Russian Banks our time and knowledge and expertise to show you how to make the most of your chances for participation in this program and how to create favorable conditions in general for attracting capital and financing outside of programs of this type and attract technical assistance, 'know how', marketing and management. We will help you to prepare Investment contracts and negotiate a transaction.

    Dr. Pyotr Johannevich van de Waal-Palms, Dr of Economics and advisor to U.S. and Russian Government, is President of Palms & Company, Investment Bankers, established in 1934 and the 14th largest investment banker in the United States in 1985 in terms of new capital invested in new businesses. He was an invited delegate to, and attended the Yeltsin-Clinton Summit and various government meetings such as with Deputy Prime Minister Anatoliy Borisovich Chubais at the New York Stock Exchange. He is also President of Russian Venture Capital Fund of America, which has been instrumental in the investment of more than $100 million in Russia.

    He is also President of The United States Interbank Ruble Currency Exchange (Mesjbankkovkaya Valuutnaya Birshje), which maintains a market in the ruble on world markets at free market prices. Palms & Company has been licensed by the Ministry of Foreign Economic Relations of Russia since 1989. Dr. Palms is an expert on Russian business practices, laws and regulations and financing and teaches business at Russian Academy of Science, Vladivostok, Moscow Business School and Leningrad Management School. His articles about business, privatization, defense conversion , unemployment inflation, monetary policy, devaluation, and fiscal policy are widely published in Russian newspapers. Dr. Palms has 40 years international experience as financial and marketing advisor to international businesses operating in market economies and to businesses in countries transitioning to market economies, such as Russia. For the past five years he has worked exclusively for Russian companies.

    References and testimonials provided to serious potential clients:

    The White House, Secretary of Energy, U.S.

    Small Business Administration, U.S. Department of Commerce, United States

    Minority Business Development Agency, U.S.. Office of Economic Development, U.S. Community Services Administration, Russian Academy of Science, President Yeltsin's Council of Economic Advisors

    The firm is listed in the following directories and books which are available at most Western public libraries:

    We sometimes co-invest in Russian companies which have lead co-investor participation from one or more of the following colleagues.

    The combined assets of these organizations exceed $20 billion dollars.

    Cost of our Work:

    Expenses: You pay for use of office rent, telephones, fax machines, computers, attorneys, accountants, financial advisors, office supplies, copy machines, utilities, interpreters, translators, travel, printing, postage, writing, automobile use, long distance charges, etc., including all expenses which you have for the work. The amount you pay is a rate of $250 per hour for the time devoted by Dr. Palms to your project. In this amount is included also all of all staff and subordinates and their combined overhead expenses.

    The average time needed for financing a project ranges from 1000 to 2000 hours. This is paid at the beginning of our work.

    Compensation: At the completion of our work we receive a commission of 2.5% of the capital which has been invested in your Bank.

    Terms: We will accept payment in dollars, deutsche marks or rubles or in exports of fur skins of sable or mink of fox. All business has some risk.

    Further information and answers to questions are available to interested parties. Our work is best suited, and most useful for Russian banks who want at least $10 million in capital investment. We will provide visas to Russian Bank Managers who wish to visit us in Seattle to discuss business possibilities.


    EXPLANATION OF WHY YOU NEED A WESTERN INVESTMENT BANKER TO REPRESENT YOUR INTERESTS

    When the Russian bank does not have its own Investment Banker representative it must accept whatever Western Bank is offered to it as a twinning partner. The EBRD gives its money only in concert with the Western Bank twinning partner. It is the Western bank, that receives the money and the Russian bank will have no choice about by whom they are chosen, unless they have their own representative searching for the right Western Bank to 'twin' with.

    Since the right American Bank for the development of the Russian Bank does not know about the program and does not know about the Russian Bank, Such American Bank will not know to make an offer The money then goes to any Western Bank accepted by EBRD that makes an offer that EBRD likes and the Russian Bank can accept it or refuse it but it has no other option.

    The Russian Bank can only get control of its destiny and participate actively in finding the right international bank partner if it has a representative in America that will find the right American Bank to match their technology and ideas for reorganization and development and then interest this Bank and negotiate for the Russian bank It may well be also a conflict of interest for the Western Banks selected by EBRD to represent also the Russian Bank in presenting the joint plans for doing business of both parties to the EBRD for their approval and participation in the financing. The Western Bank selected by EBRD will be interested in their own commercial interest and in pleasing EBRD and not first and foremost in the commercial interests of the Russian Bank.

    Only an experienced Western investment banker who knows and understands market economy business practices and norms can represent the interests of the Russian Bank in the best way. Such work can take 6 to 9 months and involves expenses for rent, telephone, communications, travel, interpreters, translation, meetings, discussion, computers, office supplies, attorneys, accountants, engineers, and many other things.The normal expenses will be between 250,000 and $500,000 . The intended result is to create an investment of up to $20 million in a Russian Bank with a strong Western bank as co-investor.

    We are ready to work with you if you are interested to provide such investment banking and advisory and consulting services to Russian Banks, who are willing to pay for such work. When Russian Banks come to the conclusion and discover and decide that they need an American investment bankers to help them get this money, we are ready to start working with them.

    In addition to the $375 million from EBRD there is also money available from forty other investment funds with more than $2 billion dollars in capital. There is no shortage of money. We understand the plans of many Russian Banks and there are many good plans which would interest AMERICAN Banks if these Banks were made aware of the existence of the Russian Banks and the EBRD program by an experienced Western investment banker who understands Russia and America. Because American receive capital participation from EBRD there is a high interest to join in this program with Russian Defense Industries. The slow progress until now is because Russian Banks have not had a firm to represent them in the U.S.

    The many western government programs of economic assistance, which are provided free, have confused the Russian Banks about the nature of private investors, companies and investment bankers in the West which do not give free services like their government gives. Such governments give the services free because they have collected taxes they can give away. Private American companies cannot give money away. They must earn their money for expenses and invest their money and receive a profit or their shareholders will terminate their employment.

    For discussions in Russian language in Moscow 7-095-324-6134 7-095-324-4249, Alexander Wislobokov

    For discussions in Russian language in United States of America, Washington D.C., Tel: 1-703-818-0508 Fax: 1-703-818-00236 , Email: sanich@juno.com Alexander Goldenberg

    For discussion in English or Dutch: 1 425 828-6774 E-mail: palms@PeterPalms.com Dr. Pyotr Joannevich van de Waal-Palms

    Offices in Vilnius Lithuania E-mail serg@novatex.lt,
    Grigorij Kolesnikov
    2012 Vilnius, Zirmunn 58-41, Fax: (3702) 42-54-40 Tel: 3702 72-11-34
    Other e-mail: root@gigrin.aiva.lt or novatex@taide.lt

    Offices in Gomel, Belarus: David Sticknety, E-mail david@belarus-online.com
    IAEWP I.L. U.N. P.O. Box 97 Gomel 246050
    Tel: 375-232-54-4404, Pager (Russian only) 375-232-53-9130 - A770

    Office in St. Petersburg: Tate Ulsacker, Dun & Bradstreet Nord, Tel: ( ) , Fax ( ) E-mail <idcinfo@cityline.ru palms@m16.medport.ru

    UKRAINE Oleg Jourin PhD
    P.O. Box 25 Lutsk-23 City Volyn Region, Ukraine 262023
    Tel: 380-3322-45521 Fax: 380-3344-30631
    http://www.theoffice.net/patron
    E-mail: patron@theoffice.net

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    Palms & Company, Inc., Investment Bankers (1934-1997): Palms Palms Bayshore Building, 6421 Lake Washington Boluevard Northeast, Kirkland, WState of Washington, United States of America, 98033-6876;
    http://www.peterpalms.com
    Phone: 1-425-828-6774 & 1-425-827-5528
    Copyright 1995, Palms and Company, Inc.; all rights reserved; email: palms@PeterPalms.com
    Date Last Revised: Sept. 9, 1997