These are busy times for Russia's Agency for Restructuring Credit Organizations (ARCO). The government agency operates under Central Bank orders, taking over management of banks that have been hit hard by the financial crisis.

ARCO has to make tough decisions when injecting funds into banks on the verge of bankruptcy. The Russia Journal interviewed the agency's first deputy general director, Marina Chekurova, to find out about its latest projects.

RJ: What is happening now with the restructuring of Investbank? A capital increase was planned and the foreign shareholders wanted to keep their stakes.

MC: The foreign partners, companies, not banks, are interested in the bank's further development and would like to see it attract new clients and provide new services such as retail banking, mortgages, consumer credits and loans to small businesses. The foreigners are willing to cooperate with ARCO along these lines.

RJ: Apart from Investbank, have Westerners shown an interest in any of ARCO's other projects?

MC: So far, direct interest has been expressed only in Investbank, but we are involved in ongoing negotiations with international organizations, in particular, with the EBRD [European Bank for Reconstruction and Development].

RJ: What results has work with the EBRD brought? Are there any promising projects?

MC: Talks have centered on co-financing banks undergoing restructuring under ARCO's supervision. The banks would have to meet strict criteria set by the EBRD. ARCO would step in first and clean up the bank's balance sheet, and only after that would possible co-financing be discussed. One important point is that no money would go directly through ARCO's accounts. It would be EBRD financing for banks recommended by the Central Bank for restructuring.

RJ: Alexander Smolensky [president of SBS-Agro] said that foreign investors have proposed their participation in the restructuring of his bank. Is this true, and what extent could foreign participation take?

MC: So far, talks on SBS-Agro have involved only foreign creditors, not foreign investors. SBS-Agro's restructuring plan proposes that foreign creditors would see the debts owed them by the bank converted into shares either in SBS-Agro or in other banks. So this is not attraction of new capital, it is a debt restructuring. No banks are named directly. Certainly, as things stand, there is no talk of attracting new capital.

RJ: What is ARCO doing to bring its programs to the attention of foreign investors.

MC: We held a seminar for representatives of foreign banks in Moscow. At the end of September, we will hold another one. Almost all the Western banks working in Moscow have come to see us, and they now have information on ARCO and its projects. If all stays on track, at the end of October, ARCO's management will visit London to meet with leading investors. It will be a full-on, three-day program during which we will meet with 10 to 12 major investment companies, investment banks and media specializing in the economy; first of all, the Financial Times.

But we are still aware that the emphasis has to be put on Western banks working in Moscow. If, on the other hand, we are pushing for political decisions to be made, then it does make sense to go to the banks' head offices and meet with their top people.

RJ: How realistic is it to attract foreign capital at the moment. Will it happen before or after the elections? How attractive is a bank undergoing restructuring? Don't investors prefer healthy banks?

MC: There are no completely healthy banks in Russia at the moment. Opening a bank from scratch requires about a year. That is why it makes economic sense for investors to concentrate on the banks undergoing restructuring. ARCO will have a stake of 50 percent of shares, plus one, which it will sell after restructuring is completed. Unlike shareholders in healthy banks, we won't object to selling our shares.

As for foreign capital, most likely it will start flowing in only in a year's time. Everything will depend on the political situation.

RJ: Apart from co-financing, in what other ways could ARCO work with foreign partners?

MC: We would cooperate not only on the basis of direct investment. We are looking, for example, at the possibility of bringing in personnel from other banks to manage the banks we are working with. This is the most cost-effective approach - to bring in our personnel so they can get the bank ready for a future buyer.

If foreign investors, for whatever reason, don't invest in the banks to be restructured, ARCO will carry out the restructuring itself and then look for investors within Russia. We don't intend to build "Potemkin villages" and don't have any grandiose plans for creating, say, a Bank of New York here in Moscow.