ANNUAL REPORT 2004
- The State Bank for Foreign Economic Affairs of Turkmenistan was founded in 1992 by virtue of Decree of the President of Turkmenistan N ΣΟ-278 dated 27.01.1992.
- The main lines of activity of the Bank include effecting payments under export-import operations, attracting foreign credits and provision of crediting of Turkmenistan economy.
- The Bank holds a Licence N 97 issued by the Central Bank of Turkmenistan on 20.02.2003 empowering to conduct credit-clearing and other transactions in Turkmenistan means of paying.
- The Bank has the general licence N 32 issued by the Central Bank of Turkmenistan on 20.03.2003 empowering to conduct foreign exchange transactions.
- The Bank has been the user of information-commercial system REUTERS DEALING from 1993.
- The Bank has been a member of VISA International since 1994.
- Since 1996 the Bank has been issuing the MILLIKART plastic national card.
- The Bank has been a member of international SWIFT system since 1997.
- The Bank has been the member of Turkmenistan Chamber of Commerce and Industry since 1997.
- An independent auditor - PricewaterhouseCoopers.
- The Bank is a member of Turkmenistan Interbank currency exchange.
- Since 1994 the office of the Manager of Islamic Development Bank from Turkmenistan.
- Since 2000 the office of the Manager of European Bank of Reconstruction and Development.
Since 2000 the activity of the State Bank for Foreign Economic Affairs of Turkmenistan has been developing on the background of auspicious economic situation in Turkmenistan. The outcomes have witnessed for a rather successful Bank's operation.
- According to the annual results the Bank's profit, under the national standards, amounted to 77 billion 205 million manats, having exceeded the level of the year 2003 by 16%.
- The charter fund, including reserve fund, has increased by 12,5% and exceeded 279 billion manats.
- The aggregate volume of funds deposited with the Bank has increased by 17% to a total of 455 billion manats.
- At the end of the year 2004 the balance assets of the Bank accounted for 7,9 trillion manats, thereat the specific weight of efficient assets amounted to 86% of total sum of the balance assets.
- The number of customers in service has increased by 16%.
According to the outcomes of the year 2004 the State Bank for Foreign Economic Affairs of Turkmenistan was in the leading of the banking system of Turkmenistan in the following positions:
- Sizes of the charter fund and equity capital;
- Assets' size;
- Volumes of investments in Turkmenistan economy;
- Extent of conducting foreign-trade operations;
- Volumes of foreign exchange transactions;
- Volumes of operations on money and foreign exchange markets;
- Issue and servicing of plastic card both in foreign and national currency;
- Maturity of the network of correspondent banks;
- Means borrowed from the foreign banks.
Dear ladies and gentlemen!
On behalf of the Board of Directors of the State Bank for Foreign Economic Affairs of Turkmenistan I am pleased to present this Annual report of the Bank for the fiscal year of 2004 to Your attention.
According to the results of the past year, irrespective of some decrease of assets associated with successful ending of a series of large-scale investment projects, the State Bank for Foreign Economic Affairs of Turkmenistan continued to hold leading positions in Turkmenistan actually in all directions of its activity. In the main, final financial scores of the Bank have demonstrated a positive dynamics allowing to face the future with optimism. The balance sheet profit under the national standards of the business accounting has considerably exceeded the level of the past year, having totaled 77.2 billion manats. The charter fund of the Bank has increased up to 170.2 billion manats, thereat the aggregate equity amounted to 455,6 billion manats, having exceeded the level of the past year by 17%. Bank's assets totaled 7924,7 billion manats and continue to be at a relatively high level. The number of customers in service of the Bank has increased by 16% as compared with the year 2003. For the fourth consecutive time the successful activity of the State Bank for Foreign Economic Affairs of Turkmenistan has been proved by The Banker journal, having awarded the Bank with a high title the "Best Bank of a year in Turkmenistan". The aforementioned figures and facts confirm the strength of the Bank's positions in the Turkmen banking system, its efficiency and reliability, and once again manifest a high professionalism and solidarity of the Bank's collective.
In 2004 the Bank has been consecutively continuing the realization of the adopted strategy of development aimed at promotion of economic development of Turkmenistan and growth of the common weal. Proceeding from the aforesaid, during the whole year the Bank has been actively implementing functions of the agent of the Turkmenistan Government in opportune servicing of the external debt and attracting foreign credits. Having fulfilling obligations assumed, in 2004 the Bank effected payments in favour of the foreign creditors amounting to 340,8 million US dollars. On the basis of strategic partnership with large foreign banks and financial institutions, within the accounting period the State Bank for Foreign Economic Affairs of Turkmenistan has attracted 69,2 million US dollars on behalf of the Turkmenistan Government. With a view to facilitate the implementation of the state programme of social and economic development of Turkmenistan up to the year 2020, in 2004 the State Bank for Foreign Economic Affairs of Turkmenistan continued the previously taken course to medium- and long-term crediting of the most important investment projects, contributing the strengthening of industrial potential, growth of foreign trade operations of Turkmenistan.
When developing this direction of activity, in the past year the Bank granted credits amounting to 94,6 million US dollars.
Last year the Bank successfully rendered services both corporate customers and retail. Bank's policy in the sphere of corporate business, like in previous years, was orientated towards the support of strategic branches of the national economy. Partners of the State Bank for Foreign Economic Affairs of Turkmenistan are the biggest enterprises of the fuel and energy complex, chemical, textile, food industry, transport and communication. In 2004 the State Bank for Foreign Economic Affairs of Turkmenistan continued the improvement and extension of a complex of retail services and thus strengthened Bank's positions in the field of development of operations with private persons.
In the nearest future the State Bank for Foreign Economic Affairs of Turkmenistan will continue its dynamic development with due consideration of requirements made to each modern universal credit institution. In order to justify the highest confidence of President Saparmurat Turkmenbashi the Great of Turkmenistan in the Bank and comprehending its historical mission in servicing a stable growth of Turkmenistan economy, in increasing the welfare of the Turkmen people, the Bank will as usual develop its basic directions of activity, expand operations in customers' servicing, to the utmost further the creation of new banking products, increase its sustainability and in that way facilitate the strengthening and growth of the whole banking system of Turkmenistan.
When summing up the last year outcomes, I would like to express my most sincere gratitude to all our partners, customers and depositors for long-term mutually beneficial cooperation, trust and support, and convey appreciation of the Bank's employees for their high professionalism, devotion to the business and diligence.
Sincerely yours,
Chairman of the Board
G.B. Geoklenov.
Dynamic development of the State Bank for Foreign Economic Affairs of Turkmenistan in 2004 relied on obvious successes, being attained in development of the Turkmenistan economy. During the years of Independence, owing to the purposeful actions of President Saparmurat Turkmenbashi the Great of Turkmenistan, a mighty industrial potential has been created in the country, the problem of food independence has been solved, and high development of agro-industrial complex has been attained.
Results of profound modernization of economics were shown in macroeconomic indices, among which the following may be singled out:
- GDP volume increased by 21,4% as compared with the year 2003, what corresponds to levels specified in the Programme of social and economic development of Turkmenistan up to the year 2020;
- During 2004 volume of industrial production has increased by 22,0%, thereat its share in GDP grows every year amounting to 38,7%. It is notable that in the structure of industrial production a share of the finished commodity, having high degree of value added, has been rising year by year. In this sphere power industry, oil-refining industry, light industry and such new for Turkmenistan branch as pulp and paper industry are in the lead;
- The volume of agricultural products for the year 2004 has increased by 20,2% as compared with the previous year. It is remarkable that great bulk of products manufactured in the branch (83,2%) is due to the private sector;
- As compared with the previous year investments into the basic capital have increased appreciably. Main sources of formation of investments were equity of the enterprise, means of state funds of development and banking credits;
- Under the impact of growing world prices for finished commodity and raw materials, being exported by Turkmenistan, raise of internal demand for high-tech equipment, building and agricultural machinery the volume of the country's foreign trade turnover has increased by 17% amounting to 7,19 billion US dollars. Thereat, the foreign trade black ink totaled 550 million US dollars;
- The growth of active incomes and raising of the standard of life of the population allow to increase savings in money, foreordaining positive dynamics of deposits in commercial banks. Just in the nearest future the population's means will be one of the main sources of formation of the resource basis in the banking system of Turkmenistan. Taking into account the 1,5 times increase of salary from January 1, 2005, in all branches of the national economy, the positive dynamics of the population's savings will be maintained in the year 2005;
- The banking system, being one of the most sustainable and dynamically developing sectors, has to ensure the support of the economic growth of Turkmenistan. In the banking system the growth of aggregate assets, equity, customers' credit portfolio, means attracted from the legal and physical person have been secured annually.
With a view to further the growth of investment activity, both in the governmental and private sectors of economy, and impart a long-term sustainable nature to the economic growth of Turkmenistan, in 2004 the government of the country took considerable steps aimed at improvement of the national legislative basis. At the regular 15th meeting of Khalk Maslakhaty (People's Council), held on the eve of the 13th anniversary of Turkmenistan Independence, new Tax Code, Earth Code and Water Code were approved and adopted.
Strategy of development of the State Bank for Foreign Economic Affairs of Turkmenistan is orientated, first of all, towards the active operation in attracting foreign capital and its allocation in priority branches of the country's economy, in order to attain goals set by the Programme of the President of Turkmenistan "Strategy of economic, political and cultural development of Turkmenistan for the period up to the year 2020". When realizing this strategy, the Bank orients to the strategic partners from the oil and gas complex, branches of agroindustrial complex, industrial and social sphere.
One of the basic objectives of the Bank in the investment activity is as follows:
- Attracting medium- and long-term foreign capital for investing projects of the highest priority both in economic and social aspects as Turkmenistan Government's agent.
- Opportune and high-quality servicing of attracted foreign loans;
- Implementing functions of the office of the Manager of Islamic Development Bank from Turkmenistan.
In 2004 the Bank continued financing the projects in oil and gas branch (projects of diesel oil hydrofining), in transport branch (modernization of rail depot), as well as realization of projects, being financed at the expense of credit lines, granted by the Chinese Government. In total, during the year borrowed funds amounting to 70,11 million US dollars has been used.
In an effort to realize and implement intergovernmental agreements between Turkmenistan and Chinese People's Republic on granting preferential credits (100 million Chinese yuans), the work in enabling the financing of new projects for purchase of oil and gas equipment, telecommunications in the field of communication and development of the textile industry was continued.
In order to attract new investments into the developing branches of the country's economy during a year, on initiative of the foreign investors, the Bank organized and carried out JBIC missions aimed at conducting macroeconomic analysis of Turkmenistan, analyzing oil and gas sector of Turkmenistan and discussing new projects in the textile industry, as well as the mission of Malaysian Eximbank for analysis of the current situation of the object put into operation and financed with their participation.
During the year 2004, fulfilling liabilities in opportune servicing of the external debt, the Bank has effected payments in favour of the foreign creditors amounting to 340,82 million US dollars and closed 11 credits. Last year the State Bank for Foreign Economic Affairs of Turkmenistan took active part in the development and negotiation of terms and schemes of repayment of foreign loans, permitting to reduce expenditures for paying both basic debt and interests.
As a result of the work accomplished during the year the sum of foreign loans, being reckoned on the balance of the State Bank for Foreign Economic Affairs of Turkmenistan, totaled 1 billion 77 million US dollars, and at the end of the year 2004 in the context of the countries was as follows:
- Japan 47,6%
- Germany 34,2%
- France 6,4%
- Turkey 3,6%
- Great Britain 1,2%
- Malaysia 1,2%
- Other 5,8%
In 2004, simultaneously with servicing and utilizing previously attracted loans, the Bank worked over and studied the opportunities of financing new projects in different branches of economy, including such projects as renewal of fleet of vessels of the country's fish industry, reconstruction and modernization of several industrial objects in the chemical industry, construction of a new textile complex.
During the period under report the State Bank for Foreign Economic Affairs of Turkmenistan has been making its credit policy proceeding from financial needs of the country's growing economy, efficiency and payback of investment projects, as well as in strict accordance with the policy of President Saparmurat Turkmenbashi the Great of Turkmenistan pursued in the field of social and economic development of Turkmenistan.
In 2004 priority directions of the credit policy of the State Bank for Foreign Economic Affairs of Turkmenistan were as follows:
- Development of crediting export-import operations;
- Bank's participation in the field of investment crediting;
- Improvement of the quality of the credit portfolio, having been formed, and minimization of risks associated therewith.
In the financial year the Bank continued to carry out crediting investment projects that promote the growth of the country's industrial potential. Last year the Bank granted credit means totaled more than 492,124 billion manats, including new credits amounting to 87,627 billion manats. For the previously concluded credit agreements 404,497 billion manats were issued. On account of the credits granted, as well as servicing agreements concluded, such large projects as construction of the diesel oil hydrofining unit at Turkmenbashi complex of oil refineries and equipment delivery for repair oil wells were realized.
According to 2004 year-end results, the credit portfolio of the State Bank for Foreign Economic Affairs of Turkmenistan, having been formed owing to financing the projects in state sector of economy, totaled 6,19 trillion manats, including more than 98% of credits of medium- and long-term nature that were granted to the enterprises of state sector of economy. On January 1, 2005, the structure of the credit portfolio of the State Bank for Foreign Economic Affairs of Turkmenistan in the context of the branches of economy was as follows:
- industry 82,5%
- agriculture 9,2%
- transport and communication 5%
- other 3,3%
During the year the Bank has been carrying out a purposeful work in improving the quality of the credit portfolio being formed, in particular, a periodical analysis of financial and economic activity of the enterprises-borrowers was accomplished and resulting from such analysis the customers were given recommendations for increase of work efficiency of their enterprises, additional possible sources for credits' repayment were worked over. As a result of the work conducted, the volume of past-due loans has decreased by 14% as compared with the beginning of the year 2004.
When realizing its goals and objectives, the Bank relies on mutually beneficial strategic cooperation with corporate customers, which basis is formed of the partners from oil and gas complex, branches of agroindustrial complex, power complex, transport and communication, industrial and social infrastructure. Besides, Bank's services are used by enterprises and firms of different forms of property, representing major and medium-size business, joint ventures and foreign companies.
The development of the corporate business, based on interaction with major companies, permits not only to increase total volume of business, but to diversify credit risks in various segments of economy.
Bank's policy in the field of development of the corporate business is being built with due consideration of the customers' interests and aimed at complete and high-quality satisfaction of their requirements that is achieved through:
- the high professionalism of the staff, having direct contacts with the clientele;
- an individual approach and flexibility when rendering services;
- an observance of full confidentiality;
- offering a broad spectrum of the banking services to the customers;
- offering special banking products to the clientele that take into consideration their needs;
- a flexible and competitive price-formation policy of the banking products offered;
- application of the out-of-date information technologies;
- a developed network of the correspondent banks.
Striving to become an active partner of major enterprises and corporations, the Bank renders a broad spectrum of consulting services in effecting settlements under planned export/import transactions, in profitable deposit of unencumbered monetary funds, in other financial issues with a view to warn them against possible errors and optimize financial operations. The latter is of special importance for the clientele, engaged in the foreign economic activity, as it requires the consideration of a great number of factors and regulatory documents.
In 2005, in order to maintain its leading positions, the Bank intends to further develop its corporate business through offering banking products with high value added, thereby expanding its sphere of influence and strengthening the customers' basis.
In 2004 the State Bank for Foreign Economic Affairs of Turkmenistan proceeded with active participation in the development of the banking services market for the physical persons. The Bank renders its clientele a broad spectrum of retail financial services:
- complex settlement ad cash servicing in the national and foreign currencies;
- various types of term deposits with interest payments upon expiration of terms or on a monthly basis;
- transfers of funds anywhere worldwide;
- servicing of the VISA and MILLICART plastic cards;
- effecting conversion transactions.
As a result of the flexible policy offered to customers regarding commissions charged for the services rendered and of the high quality of servicing, the number of retail customers has grown by 17% and amounted to about 30 thousand 491 people during the previous year.
One of the priority directions in expanding the spectrum of retail services, rendered by the Bank, is operations with the plastic cards. During the accounting year the Bank continued working in the field of developing the card business, in particular, in an effort to renew and enlarge the hardware support of the system, servicing plastic cards, a market of manufacturers of cash machines and experience of other banks in this spheres were studied. As a result of the accomplished work the Bank's strategic partner was selected through which the Bank will carry out the renovation and expansion of a network, servicing plastic cards, and a scope of services rendered to the owners of cards will be widened.
Rendering retail services to the population is carried out mainly through specialized subdivisions of the Head Office and a network of Bank's cash machines.
The Bank is able to maintain positions as the leader among Turkmenistan banks in rendering this kind of services due to its rapid and high-quality remittance of international client and inter-bank transfers, as well as international settlements in export and import through letters of credit, guarantees and collections along with appropriately developed network of correspondent banks. During 2004 such operations expanded to significant volumes.
According to data for the year 2004 the volume of international settlements with letter of credit transactions totaled 319.877.337,57 US dollars. The number of letter of credit transactions totaled 97, including 95 import ones amounting to 241.880.751,52 US dollars and 2 export ones amounting to 77.746.586,05 US dollars.
As of January 1, 2005, the number of letters of credit in use totaled 25, including 24 import letters of credit amounting to 117.279.947,24 US dollars, including:
- 11 import letters of credit, opened on account of credits amounting to $107.240.176,53. They include letters of credit, opened on account of funds of foreign creditor banks, on account of direct loans, being granted to clientele by foreign financial institutions and banks, letters of credit, opened on the basis of agreements on opening and servicing letters of credit of corporate clientele;
- 13 import letters of credit amounting to $10.039.770,71;
- 1 export letter of credit amounting to $2.667.054,03 (current remaining liabilities).
Apart from the letters of credit opened on account of client's own funds, the Bank worked with letters of credit opened on account of credit facilities of foreign banks, international financial institutions, and on account of own funds.
The volume of international client and interbank payments has increased insignificantly as compared with the previous year (about 1%) and totaled $4.769.472.878,93, whereas the volume of payments inside Turkmenistan in the national currency has grown as compared with the previous year by 23$ and totaled 5.651.845.524.158,88 Turkmen manats.
During the last year the Bank has considerably expanded its volume of operations both on international currency and monetary markets, thus allowing the Bank to strengthen significantly its lead positions in the foreign currencies transaction markets. Thereat, the primary types of operations included the following:
- attracting deposits of funds in currencies on the domestic market of Turkmenistan;
- carrying out short0term deposit operations associated with managing the Bank's liquid assets on the international monetary market;
- carrying out conversion operations on its own account on the international currencies market aimed at gaining profits from exchange margins;
- realization of conversion operations as requested by the Bank's customers;
- conducting foreign hard cash operations;
- providing consultations to the Bank's customers on the basis of economic and financial information coming via channels of information agencies.
Last year the Bank began active operations to attract deposits of funds in foreign currencies from other banks in Turkmenistan. Henceforth, such funds are to be used for maintaining liquidity and for arbitrating deposits of funds in the accounts of foreign banks. Besides, the Bank continued to attract funds of its corporate clients to short-term deposits in foreign currencies for the purpose of changing the structure of liabilities and accordingly increasing indices of the Bank's instantaneous liquidity. From the beginning of the year, total volume of deposits attracted in foreign currencies (adjusted for prolongation) totaled 49.859.800.00 US dollars.
In 2004 the Bank carried out operations connected with placements of funds in short-term deposits in foreign banks. The currency portfolio consists mainly of US dollars, and of unencumbered funds on the correspondent accounts in Euros, British pounds sterling. Total volume of the deposited funds in accounts of the most reliable foreign banks amounted to 550.000.000,00 Us dollars. In 2004 the profits from the deposits grew by 22%.
In an effort to accelerate operational profitability, the Bank carried out operations connected with diversifying its currency portfolio into Euros for further engaging these funds into short-term deposits. The aforesaid promoted the increase of profitability of the deposit operations as well as gaining additional profits from exchange margins. Thereat, strict observance of limits enabled the Bank to control risks arising from implementing such transactions.
During the year 2004, in order to secure functioning its cash subdivisions, the Bank purchased foreign currency in cash amounting to 1,5 million US dollars and 4,8 million Euros, and 150 thousand British pounds sterling were purchased in connection with the growing demand for the British currency.
In 2005 the Bank's activity in Treasury area will be aimed at expanding volumes of transacted operations and at improving their efficiency.
One of the most important directions in activity of the State Bank for Foreign Economic Affairs of Turkmenistan remains the expansion of cooperation with financial institutions, thus securing an efficient and competitive development of the most significant spheres of business and protection of the bank's interests.
While working in these directions in 2004, the Bank paid special attention to the following:
- extending cooperation with the national export-import and insurance agencies;
- expanding cooperation with international banks and development funds;
- enhancing cooperation with the foreign and local commercial correspondent banks.
In the field of cooperation with the national export-import and export insurance agencies for a long period of time the Bank has established business partnership relations with the Japan Bank of International Cooperation, Eximbanks of China, Czechia, USA, Turkey, Malaysia, and such export insurance companies as Germes in Germany, Kofas in France and OND in Belgium. The relations formed enable the State Bank for Foreign Economic Affairs of Turkmenistan to maintain its leading positions on the market of foreign loans, being one of the main sources of funding its active operations, especially financing projects in strategically important branches of Turkmenistan economy.
As concerns cooperation with international banks and development funds, the Bank pays especial attention to improving relations with the European Bank of Reconstruction and Development (EBRD), Islamic Development Bank, OPEC Fund, etc.
Fulfilling functions of the office of Deputy Manager of EBRD from Turkmenistan, the Bank promotes constructive dialogue between the Turkmenistan Government and EBRD, and works in the credit line, being allotted by EBRD to develop medium-size and minor business in the private sector of economy.
Owing to activating cooperation with the Islamic Development Bank, thereat the State Bank for Foreign Economic Affairs of Turkmenistan is the office of the IDB from Turkmenistan, with OPEC Fund and Saudi Development Fund, the realization of the project of construction and equipment of three medical diagnostic centres was completed, and the realization of the project of water supply of the Balkan velayat (the western region) was continued. In addition, an agreement of financing the project on widening the sanatorium in Archman and Yilysuv was concluded, and grants for preparedness of the feasibility studies associated with the reconstruction and laying of highways were allotted. Projects on construction of power transmission lines from Turkmenabat to Atamurat cities with erection of a substation in Atamurat city, and granting a credit line to the State Bank for Foreign Economic Affairs of Turkmenistan for financing projects of medium-size and minor business were evaluated.
Last year in the field of the correspondent relations, the Bank orientated towards optimization of a system of correspondent accounts in the top-level banks of the USA, Europe and CIS.
Consequently, in the bank of UBS AG, Zurich, Switzerland, supplementary accounts in Euros, Japan yens, pounds were opened in the name of the Bank, enabling unhampered transacting FOREX operations with this bank. The aforementioned bank also granted the State Bank for Foreign Economic Affairs of Turkmenistan a clean credit line amounting to 3 million Swiss francs for operations of commercial financing. At present the correspondent network of the State Bank for Foreign Economic Affairs of Turkmenistan is the most extensive one amongst the Turkmen banks assisting its rapid and efficient international settlements and payments on instructions of the customers. The established limits and credit lines enable the Bank and its clientele to carry out active operations on international markets.
Resulting from the analysis accomplished and in order to increase the Bank's efficiency and decrease of operational expenses, the Bank's administration has decided to close regional branches of the State Bank for Foreign Economic Affairs of Turkmenistan in 2005. At the same time, using its competitive advantage in the form of the extensive correspondent network, the Bank will offer its services as a correspondent bank for implementing international settlements and payments in the foreign currencies to the local banks with a well-developed branch network in the country's regions.
In accordance with its strategy the Bank continued the development and centralization of its information and technological basis in 2004. With the view of further development of a system of banking activity management, as well as in connection with emergence of new banking technologies a process of modernization of all information systems existing in the bank was continued.
With a view to bring to conformity with the today's requirements made to the SWIFT system of interbank payments, transition to a new software product SWIFTNet was carried out through installing a new software and cryptographic equipment.
Extension of the Bank's scopes of operation required the modernization of the functioning local network of the Bank. Resulting from decision taken on the basis of accomplished study of the state of the Bank's local system, new active and passive equipment of the local network was installed, facilitating the extension of data basis and increase of the volume of operations conducted.
Within the framework of the VISA company's project on transition to a new protocol in 2004 the Bank carried out modernization of relevant equipment, servicing VISA system and organized reserve communication channels.
For more efficient managing the Bank's affiliated undertakings and implanting operative control over their activities a wireless communication was established between the bank and "Altyn Khalka" affiliated undertaking that ensures the remote usage of the enterprise's accounting software.
During the period under report, in accordance with the schedule of stage-by-stage renovation of computer technology previously elaborated, the renewal of the hardware support of the working places of the Bank's employees has been completed.
For more qualitative I&R servicing of the customers the development of Bank's own site in the Internet was accomplished. The site will start its operation in 2005 and will make significantly easier and extend the access to information concerning the Bank, and services it offers for all parties concerned.
In future the Bank envisages the development of the functioning banking computer-based system and introduction of new information technologies not only for their maintaining at the level of out-of-date requirements, but for extending a scope of services rendered to the Bank's clientele.
Being guided by its strategic goals and objectives, in 2004 the State Bank for Foreign Economic Affairs of Turkmenistan carried out operations in improving mechanisms and procedures of risk management. The operations being conducted enable the existing system of risk control, monitoring and management to secure a stable work of the Bank in conditions of changes, occurring in the environment. Bank's strategy in the field of risk management is aimed at maintaining the liquidity target, achieving equilibration of the structure of assets and liabilities according to terms and kinds of currencies, and ensuring the required diversification level depending on branches, customers and investment sizes.
A full-scale system of risk management functioning in the Bank is based on requirements of the Central Bank of Turkmenistan, recommendations of auditing companies, experience of the foreign leading financial institutions and is regulated by internal standards, regulations and procedures. This system requires close and efficient interaction between the Board of Directors, Credit Committee, structural subdivisions, and control-auditing agencies of the Bank. The risk management system helps to minimize and control risks, occurring in the process of the Bank's operation, including:
- Credit risk;
- Risk of liquidity loss;
- Market risk;
- Operational risk.
The complexity and significant volumes of operations, conducted by the Bank, make more and more high demands towards the organization of internal control, which major task is to ensure safety of banking activity and reliability of the Bank's financial accountancy.
As concerns the internal control within the year 2004 a series of purposeful inspections in all structural subdivisions of the Head Office, and complete inspection of the Bank's branches activities were carried out. Summarizing of their outcomes assisted in conducting purposeful modification of the functioning interbank normative basis that regulates the implementation of operations and actions of the personnel, and taking strategic decisions aimed at increase of the Bank's efficiency.
Last year the "Policy of the State Bank for Foreign Economic Affairs of Turkmenistan for Counteraction of Legalization (Money-Laundering) Profits, Criminally Gained, and Financing the Terrorism" was developed; it reflects common principles and rules in implementing internal control in this field. An internal control, having been realized in the Bank during 2004 for counteracting legalization of criminal profits and financing terrorism, secured:
- minimization of the risk of using Bank as a tool for money-laundering and financing the terrorism;
- Bank's protection against reputation, financial and legal risks arising in connection with possible attempts to use the Bank as a mediator for carrying out operations associated with the money-laundering and financing the terrorism;
- the opportunity to assess the risk of customers' implementation of money-laundering and financing the terrorism pursuant to the principle "Know your customer";
- opportune revelation of transactions liable to obligatory control and suspicious transactions.
Last year the Bank closely cooperated with oversight and supervising bodies of Turkmenistan. No serious admonitions or shortcomings were registered in the work of the State Bank for Foreign Economic Affairs of Turkmenistan.
Manning with highly qualified personnel is a fundamental component of successful work of the State Bank for Foreign Economic Affairs of Turkmenistan. Proceeding from the aforesaid, the Bank's manpower policy is aimed at purposeful formation of highly skilled and dynamically developing team of associates that is capable to respond pliably to any changes in the external environment and solve operatively tasks posed for the Bank.
In 2004 within the framework of realization of the Bank's manpower strategy a work in improving and developing interbank relations, raising the quality of labour conditions, and creating Bank's advantages through heightening the level of responsibility and professional competence of the employees was carried out. The Bank paid special attention to the development of corporate culture, enabling to orientate all subdivisions towards attainment of common goals, and to ensure employees' loyalty.
Within the year the Bank has been consecutively carrying out actions for improving a system of motivations and expanding social programmes for its employees, promoting increase of labour productivity. Personnel motivation includes career development, granting social benefits and compensations, and moneyed assistance in a series of events important in the life of the employees, organization of a rest of full value for employees and their families in the summer period of vacations and sanatorium-and-spa treatment. In order to provide its employees with their own well-furnished flats, the Bank carries out construction of high-rise apartment buildings of improved conveniences. In the nearest future two more blocks of flats, meeting the highest requirements, will be added to a block of flats having been already put into operation. Thus, not less than 60 employees and their families will celebrate their housewarming.
As of January 1, 2005, the number of employees in the system of the State Bank for Foreign Economic Affairs of Turkmenistan was 259 people. For the sake of purposeful selection of personnel from amongst the graduates of profile educational institutions, the Bank regularly arranges probations of the students of the Institute of the National Economy of Turkmenistan, Turkmen State University, Turkmen-Turkish University, Hero of Turkmenistan A. Niyazov College of Finances and Economics. Paying great attention to raising the level of the personnel's skill the Bank, in cooperation with the leading Higher Educational Institutions of the country, correspondent banks and other financial institutions, organizes seminars, trainings and probations for its employees both inside and outside Turkmenistan. In 2004 54 people raised their professional level. The Bank regularly organizes classes to study the sacred book of Saparmurat Turkmenbashi the Great "Ruhnama", having turned to be a spiritual light for the Turkmen people in the epoch of independence.
Development of the State Bank for Foreign Economic Affairs of Turkmenistan in the impending year will be inseparably linked with the further steady rise of the Turkmenistan economy and aimed at realizing the Bank's strategic targets, for which attainment the Bank's administration has specified the following main objectives for the year 2005:
- further active participation in implementing state programmes of social and economic development of Turkmenistan;
- increasing the share of profit-generating assets at the expense of accretion of the Bank's loan portfolio and increase of the quality of the loan portfolio;
- increasing the Bank's own capital;
- expanding the Bank's client base by improving service quality and by offering new types of services;
- further development of banking information technologies;
- enhancing the system of professional training, retraining and attestation of the Bank's personnel;
- commissioning a new administrative building of the Bank and beginning the Bank's functioning in a new office.
Successful realization of tasks to be performed will be a guarantee for strengthening the Bank's potential and competitiveness, and its further prosperity.
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