Major Reform Challenges Remain Ahead

The main lesson of the first year of implementation of the joint Programmatic Technical Assistance Partnership (PTAP) project jointly implemented by the World Bank and USAID is that Ukraine needs to accelerate the development of a transparent and well-regulated securities market. The objective of PTAP is to help the Government of Ukraine, market regulators and market participants to develop Ukrainian capital markets with the perspective of future integration in the EU single market in financial services, and in particular to create conditions for the successful introduction and development of second pillar pensions. Over the past year, PTAP has delivered advice and support to government and regulatory agencies on four main components: (i) pension reform; (ii) strengthening the legal, regulatory and supervisory framework for securities markets and NBFIs; (iii) strengthening the securities market infrastructure; and (iv) developing the variety of domestic securities, focusing on the government bond market.   Going forward, the capital market policy reform agenda will be shaped by the Free Trade Agreement currently being negotiated between the Ukrainian Government and the European Commission.  Specifically, Ukraine will face three fundamental challenges in integrating its securities market and NBFIs into the EU single market in financial services: (i) harmonization of Ukrainian legislation with the EU securities market and NBFI Directives (Level 1) and Implementing Measures (Level 2); (ii) mutual recognition between Ukrainian securities market and NBFI regulatory agencies and their counterparts in EU member states; and (iii) adaptation of Ukrainian securities market professional participants, NBFIs, and securities issuers to the EU single market in financial services.   “The development of a well-regulated, broad, deep and transparent securities market and a sound NBFI sector is critical for Ukraine to sustain rapid growth and to ensure its successful integration into the EU single market in financial services as envisaged under the Free Trade Agreement with EU”, – says Michel Noel, Lead Financial Sector Specialist from the World Bank. The USAID and the World Bank stand ready to support the Government to design and implement the proposed policy reforms through a broad range of instruments, working in close collaboration with the European Commission.   Contacts: World Bank: Dmytro Derkach, 380 44 490 66 71; e-mail dderkatch@worldbank.org USAID: Olha Myrtsalo, 380 44 492 71 01; e-mail omyrtsalo@usaid.gov.