EBRD: Understanding the Drivers for Russian Asset Securitisation Tõnu Pekk Principal Banker Structured Finance and Securitisation

-2- Agenda Introduction to EBRD –EBRD’s Role in the Financial Sector –Experience in Financing Securitisable Assets Securitisation in Russia –Drivers for Securitisation –Forecast for 2007

-3- Introduction to EBRD International financial institution established in 1991, owned by 60 national and 2 supranational shareholders Shareholders include CEE, CIS and EU member states, USA, Canada, Japan, Australia, New Zealand, EU and EIB Promotes market-based economies in 29 countries from Central Europe to Central Asia; provides debt and equity financing to both state and private sector projects Representative offices in all countries of operation Capital base of € 20 billion 15 successful years of operation

-4- EBRD’s Role in the Financial Sector Promote market-based financial institutions and contribute to institution building Support private and entrepreneurial initiatives, acting as a door opener for local and western investors Engage in policy dialogue with operators and authorities to strengthen regulatory/legislative frameworks and enhance overall corporate governance and institutions Support the development of local capital markets, new securities and the access to secondary market refinancing EBRD provides value-added support

-5- EBRD’s Experience in Financing Securitisable Assets Leasing - Portfolio of loans to finance leasing companies throughout the region in excess of € 500 million Mortgage - Portfolio of loans to both commercial banks and specialist mortgage institutions throughout the region also in excess of € 500 million Introduction of EBRD’s Minimum Standards and Best Practices for mortgage lending with the objective of standardising mortgages to facilitate market transactions

-6- EBRD’s Experience in Financing Securitisable Assets (continued) Consumer Finance - Portfolio of loans to consumer finance institutions in the region; key criteria for selecting best market operators in terms of lending practices and transparency Other Assets - Significant lending to SMEs; trade finance receivables

-7- EBRD Approach in Securitisation and Structured Finance – Completed Deals Poland €25 million and $25 million Mortgage bond framework April 2002 Purchase of ($ and €) mortgage bonds from Poland’s largest mortgage bank Poland €25 million and $25 million Mortgage bond framework April 2002 Purchase of ($ and €) mortgage bonds from Poland’s largest mortgage bank Russia €250,000,000 Securitisation of Russian consumer loans November 2005 €8,500,000 Mezzanine notes Russia €250,000,000 Securitisation of Russian consumer loans November 2005 €8,500,000 Mezzanine notes Russia €300,000,000 Securitisation of Russian consumer loans April 2006 €30,000,000 Hybrid notes €10,000,000 Mezzanine notes Russia €300,000,000 Securitisation of Russian consumer loans April 2006 €30,000,000 Hybrid notes €10,000,000 Mezzanine notes Russia €220,000,000 Securitisation of Russian auto loans November 2006 €20,000,000 Junior notes Russia €220,000,000 Securitisation of Russian auto loans November 2006 €20,000,000 Junior notes Russia $403,000,000 Securitisation of Russian auto loans October 2006 $15,000,000 Junior notes $20,000,000 Commingling risk facility

-8- Securitisation in Russia 2006 Volume ($m) 2005 Volume ($m) Volume Change % 2006 # of Transactions 2005 # of Transactions Deal # Change % 3, ,754%122500% Transaction Volume: Assets Types:

-9- Reasons for Securitisation Lower funding costs Better asset-liability match Lower capital requirements High set-up cost Size limitations Negative side-effects (covenants on existing finance) Advantages: Disadvantages:

-10- Lower Funding Costs Margin over LIBOR/EURIBOR of recent securitisation deals RSB I (consumer finance) A1  165 bp RSB II (auto)A  115 bp B  155 bp MDM (auto)A  110 bp B  165 bp bp on recent 18-month syndicated loans > 250 bp over swap rate in 3-year Eurobonds

-11- Better Asset-Liability Match Deposits still unreliable Increase in volumes  Increase in mismatch Longer maturities  Loan market cannot match Increase in sophistication in risk management  –Realisation of inherent risks in the asset portfolios: prepayment risk, interest rate risk etc.

-12- Lower Capital Requirements Capital adequacy in Russia:  especially beneficial for better quality assets Equity Requirements: Examples: Securitised On balance sheet RSB (Consumer loans)7.2 % 12.5 % 6 % 6.25 % 10 % RSB (auto loans) MDM (auto loans) CMB (RMBS)

-13- Costs & Size Limitations Even small deals made to work Size of eligible portfolios increased due to asset growth: –Mortgages: market doubled every year from 2002 to exceed $10 billion by the end of 2006 –Consumer finance: The volume of Russian consumer loans has grown from $36 billion at the end of 2005 to $66 billion through September 2006

-14- What to expect in 2007? More of the same: –10+ mandates given Domestic deals: –launch of the first public onshore RMBS Synthetic deals: –first CDOs (regional) Moving upstream: –Warehouse structures –Permanent conduits

-15- EBRD Structured Finance and Securitisation Contacts Kurt Geiger Business Group Director Financial Institutions Tel: Fax: Jonathan Woollett Director, Structured Finance & Securitisation Tel: Fax: Grant Metcalfe-Smith Tel: Head, Client Services Fax: Treasury : Financial Institutions Group Treasury Tõnu Pekk Principal Banker, Structured Finance & Securitisation Tel: Fax: