35. Related Party Transactions

For the purposes of these consolidated financial statements, parties are considered to be related if one party has the ability to control the other party, is under common control, or can exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

The Group’s principal shareholder is the Bank of Russia (refer to Note 1). Other related parties in the tables below comprise key management personnel, their close family members and associated companies of the Group. Disclosures are made in Note 36 for significant transactions with state-controlled entities and government bodies.

As at 31 December 2011 and 31 December 2010, the outstanding balances with the Bank of Russia and other related parties were as follows:

In mln of Russian Roubles Note 2011 2010
    the Bank of Russia Other related parties the Bank of Russia Other related parties
Assets          
Cash and cash equivalents (contractual interest rates: 0.0% p.a. — 3.0% p.a.)   51,254 945 212,451  
Mandatory cash balances with the Bank of Russia   99,512 - 50,532 -
Bonds of the Bank of Russia (yield to maturity: 4% p.a.) 12 - - 433,585 -
Due from other banks (contractual interest rates: 2.0% p.a. — 6.5% p.a.)     840    
Gross amount of loans and advances to customers (contractual interest rates: 9.3% — 21.0% p.a.)     315   528
Impairment provision for loans and advances to customers   - (3) - (7)
Other assets   - 98 - -
Liabilities          
Due to corporate customers (contractual interest rates: 0.1% — 7.0% p.a.)   - 1,462 - 1,163
Due to other banks (contractual interest rates: 3.0% — 7.5% p.a.)   265,642 48    
Subordinated debt (effective interest rates: 6.5% p.a.)   303,294   303,299  
Other liabilities   - 252 - -

As at 31 December 2011 the Group has pledged federal loan bonds (OFZ bonds) and Eurobonds of the Russian Federation on the special accounts with the Bank of Russia as collateral against overnight interbank borrowings that the Group attracts on a regular basis from the Bank of Russia. Refer to Notes 8, 9,12, 13 and 32. The carrying value of assets pledged is as follows:

In mln of Russian Roubles Notes 2011 2010
Trading securities 8    
– Federal loan bonds (OFZ bonds)   15,746 14,715
Securities designated at fair value through profit or loss 9    
– Federal loan bonds (OFZ bonds)   28,608 31,520
Investment securities available for sale 12    
– Federal loan bonds (OFZ bonds)   203,920 42,498
– Russian Federation Eurobonds   5 5
Investment securities held to maturity 13    
– Federal loan bonds (OFZ bonds)   36,721 37,044
Total   285,000 125,782

The income and expense items with the Bank of Russia and other related parties for the year ended 31 December 2011 and 31 December 2010 were as follows:

In mln of Russian Roubles 2011   2010  
  the Bank of Russia Other related parties the Bank of Russia Other related parties
Interest income 9,022 17 32,158 59
Interest expense on subordinated debt (19,492) - (27,851) -
Interest expense other than on subordinated debt (3,326) (7) (343) (8)
Net recovery of provision / (net provision charge) for loan impairment   (18)   (7)
Net gains arising from trading securities     8  
Net gains arising from investment securities available for sale 19   570  
Other operating income - 13 - 6
Operating expenses (1,257) (102) (1,005) (12)

For the year ended 31 December 2011, remuneration of the members of the key management personnel comprised salaries and bonuses totaling RR 2 200 mln (for the year ended 31 December 2010: RR 1 043 mln).

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