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

Key Objectives of the Transactions Ensure regular and frequent conduct of transactions guarantee a certain minimum amount of transactions approximate supply to demand based on financial market situation data offer a range of transactions varying in execution times offer an open and accountable mechanism for transactions use an up-to-date effective trade platform make Federal Treasury’s transactions a “guiding light” for the financial market

Key Elements of Transactions Balance Management by the Treasury of Russia Legal and Regulatory Framework Harmonizing decisions within the public finance administration Modern payment and account and trade infrastructure Full financial reporting Effective risk-management mechanisms Software, information and telecommunication infrastructure Transparency and Accountability of the Transaction Process

Select Elements of Transactions Legal and Regulatory Framework Budget Code, sectoral laws; Rules approved by the Government; Operating procedures approved by regulations of the MoF and Treasury; Treasury’s internal orders organizing operation. Transparency and Accountability All decisions are taken exclusively on the basis of public requests; Timely disclosure of information; All actions are regulated by the regulatory framework. Harmonizing decisions All mechanisms are coordinated among the Bank of Russia, MoF and Treasury; All decisions regarding transaction parameters are subject to mandatory coordination among the Bank of Russia, MoF and Treasury; Daily information exchange between the Bank of Russia and Treasury.

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 Overnight REPO Multiple-day REPO

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 deposits On-demand deposits Floating rate REPO Currency Swap On-demand deposits Deposits with central counteragent Multiple-day REPO Fund-raising tools Overnight REPO

Floating Rate Contract Floating vs Fixed Rate Fixed Rate Contract Floating Rate Contract % changes to match the market situation Conditions are more in line with the real market situation % remains unchanged over the entire effective contract period

Purchasing securities under REPO agreements Types of Transactions Purchasing securities under REPO agreements Placing funds as bank deposits In RUR and foreign currencies Loans to budgets of the Subjects of the Russian Federation and local budgets Purchasing foreign currencies

Placement of Federal Budget funds as bank deposits deposit account 

Depositing Requirements for Credit Institutions 2008 2018 2017 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 (AKRA and RAEX) or equity of 100 bn RUR and the Bank of Russia’s control 24 banks 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

Diagram of Deposit Placement with Banks Treasury of Russia Placement Terms 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 7 Contracting Credit Institutions 6 Acceptance of Offer 9 Receipt of Funds 8 Statement submission 9

Outcomes of Depositing Funds with Banks As of October 1, 2018 Amount deposited Amount of Incomes 49,381.19 bn. RUR 358.52 bn. RUR Bank of Russia’s exchange rate: 1Euro = 76.2294 RUR 647.8 bn. € 4.7 bn. €

Securities Purchase (Sales) Transactions under REPO Contracts Repurchase operation (or repo)

Bidding Procedures 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 Sovereign securities 3 Cut-off rate Corpus of offers Execution of transactions 4 Bidding Procedures 5 2 Offers to sell (limit) (Depository, Clearing Agency) Trading Mechanism Budget Funds Lending institutions Execution of transactions 5

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 Bank of Russia Euro exchange rate as at October 01, 2018 1 EUR = 76.2294 RUR 1 394.1 bn. € 0.9 bn. €

Loans to Budgets of Subjects of the Russian Federation and Local Budgets

Basic Budget Lending Terms 1. Loans shall be provided by the Russian Federation (Treasury) to Subjects of the Russian Federation and Municipalities. 2. The Federal Treasury Management enters into an Agreement with the Borrower, in the place of the account 40201 (40204), for the current fiscal year. 3. The loan shall be provided out of the Federal Budget single account balance. 4. The loan amount shall not exceed one twelfth of the budget revenues, with the exception of subsidies, subventions and other intergovernmental transfers of targeted nature. 5. The interest rate is 0.1% p.a. 6. Loan tenor shall not exceed 90 days and the loan shall be repaid no later than November 25. 7. To obtain a loan, a Loan Agreement shall be entered into (3 working days from the day of request to the day of funds receipt). 8. Only one loan shall be provided at one time. 9. Loan shall not be provided if there exist budgetary funds placed as bank deposits.

Budget Loan Granting Diagram FT territorial branch Borrower’s account 40201,40204 FT CO 3 Funding request (on the 2nd day) 4 Account reinforcement (on the 4th day) FFTD 6 Borrower’s reporting (every 10 days) 2 1 Supplementary agreement to the Agreement (Loan Agreement) signed by the Borrower (loan amount, tenor, total interest, dates of receipt and repayment) (in 4 days) 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 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 Subjects of the Russian Federation For 2014 - 2018 As at October 01, 2018. Bank of Russia’s Exchange Rate as at 01.10.2018: 1 EUR = RUR76.2294 43.9 bn. € 4.1 bn. € Subjects of the Russian Federation Municipalities 3 343,6 млрд руб. 3,343.6 Bn. RUR Year Subjects of the Russian Federation Municipalities 2014 521.6 -  2015 869.6 47.2 2016 758.6 89.6 2017 729.2 109.7 2018 (as at October 1, 2018) 464.5 69.7 TOTAL 3,343.6 316.2 316,2 млрд руб. 316.2 Bn. RUR

Purchasing Foreign Currency

Basic Terms of Purchasing Foreign Currency The Treasury places the foreign currency purchased in the bank currency accounts opened at the Central Bank in the name of the Federal Treasury. Interest is paid on the balances of the Treasury’s foreign currency accounts with the Central Bank. The volumes of purchases and sales of foreign currencies are determined by the Treasury in coordination with the MoF in a way that ensures uniform conversion of funds within the planning period. Volume of foreign currency purchase and sales transactions depends on the Federal Budget oil and gas revenues, exceeding the amount considered as basis when drafting the budget for the current year: All amounts exceeding USD 40 per barrel. Purchase/sales of foreign currencies at the domestic currency market: “in order to improve stability and predictability of domestic economic conditions and reduce the impact of the variable energy market situation on the Russian economy and public finance”

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

Foreign Currency Purchase Statistics Purchased currency equivalent to 10,000.0 mln. RUR. Purchased currency equivalent to 202, 241.1 mln. RUR Purchased currency equivalent to 829,130.0 mln. RUR Purchased currency equivalent to 2,742,041.0 mln. RUR Interest paid 0.6 mln. RUR Interest paid 9.9 mln. RUR Interest paid 1,183.2 mln. RUR Transferred to NWF Transferred to the Reserve Fund Bank of Russia’s Exchange Rate as at 01.10.2018: 1 EUR = RUR76.2294 131.2 mln. € 2,653.1 mln. € 10,876.8 mln. € 35,970.9 mln. €

165,416.6 444.7 OUTCOMES (2008-2018) Balance Management As at Oct. 1, 2018. Placement Volume Amount of Accounted Revenues 165,416.6 Bn. RUR 444.7 Bn. RUR Bank of Russia’s Exchange Rate as at 01.10.2018: 1 EUR = RUR76.2294 2, 170.0 bn. € 5.8 bn. €

Risk Management in the Course of Transactions TSA Cash Balance Management Day-to-day risk management Current External Risk Management Preventive measures 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 arrears on 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)

Future Evolution of Transaction Types New Cash Placement Transactions New Fund-Raising Transactions Placement of state-owned entities 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