NBU plans to update Ukrainian capital market infrastructure together with int'l partners

MOSCOW. Feb 6 (Interfax) - The National Bank of Ukraine (NBU) sees the importance of improving the capital market's infrastructure in expectation of the crisis ending and the start of large-scale recovery, NBU Governor Andrei Pyshny said at the European Business Association's Global Outlook event in Kiev on Wednesday.

"We are committed to working together with international partners to address this issue understanding the need to resolve it for the sake of large prospects," Ukrainian media quoted Pyshny as saying.

Head of Ukraine's National Securities and Stock Market Commission (NSSMC) Ruslan Magomedov said this week that he and Francis Malige, the European Bank for Reconstruction and Development (EBRD) financial institutions managing director, had discussed the possibility of establishing a separate consolidated institution to unify all elements of the capital market under EBRD auspices.

"Such an approach will enable the capital markets to function as an effective source of financing and will raise more foreign and domestic investments. It will be particularly relevant during Ukraine's recovery," Magomedov said.

In June 2024, Ukraine said in its updated Memorandum of Economic and Financial Policies under the Extended Fund Facility (EFF) program that the NSSMC, the NBU and the Finance Ministry proposed priority measures to improve the capital market's infrastructure following consultations with the International Monetary Fund and other international financial institutions (IFIs). At the first stage of this process, the NSSMC approved an NBU resolution, enabling the Ukrainian central bank to expand its link with Clearstream to facilitate access to municipal bonds and other debt instruments connected to Ukraine's recovery.

During the second stage, the NSSMC, the state-controlled National Depository of Ukraine (NDU) and the NBU will establish a direct link between the NDU and foreign central securities depositories before the end of July 2025 with the IMF's technical support to provide foreign investors with a wider range of instruments and markets. The NBU, the NSSMC and the Finance Ministry had until the end of August 2024 to present further measures to update the capital market's infrastructure.

Ukrainian authorities also considered creating a new stock exchange to ensure the smooth operation of the secondary market for government bonds, because the Kiev-based PFTS exchange was undercapitalized, and its owner confirmed the absence of plans for additional investment.

"Capital of around $0.5 million will be partly provided by state-owned banks (30 percent) and the remainder from private sources, including IFIs," the IMF then said in a document published on its website.

Plans to create the new exchange were initially expected to be announced in August 2024, but it did not happen then, and the NSSMC extended the liquidity compliance deadline for the PFTS exchange until February 28, 2025. However, the new exchange was never established, and PFTS met the liquidity requirement.

Following a December 2024 update of the program with the IMF, it was said that the NBU, the NSSMC and the Finance Ministry were going to develop a target capital market infrastructure model by the end of December 2024 in consultations with the IMF to attract foreign investors. It was said then that the NBU and the NSSMC would continue to work together with the NDU to prepare to establish a direct link between the NDU and foreign central securities depositories by late July 2025 to offer foreign investors access to a broader range of instruments and markets.

"To reduce risks for the secondary bond market, the NBU and NSSMC coordinated efforts to enable the Settlement Center (the central counterparty, majority-owned by the NBU) to provide services for contract conclusion and clearing of OTC operations involving government bonds," the document said.

Another licensed exchange, Perspektiva (Dnepropetrovsk), operates on Ukraine's capital market along with PFTS. Unlike, the NDU and the Settlement Center, both based in Kiev, the two exchanges are privately owned.