Ukrainian authorities have signed a memorandum of understanding to create capital markets infrastructure in Ukraine – to include a new stock exchange, and reform of key financial institutions – that took place at the Ukraine Recovery Conference in Rome, on July 11.
The signatories from Ukrainian side included the Minister of Finance Serhiy Marchenko, First Deputy Prime Minister, Minister of Economy Yuliia Svyrydenko, Ukraine’s central bank, the National Bank of Ukraine (NBU) governor Andriy Pyshny, Acting Chair of the National Securities and Stock Market Commission of Ukraine Yaroslav Shliakhov, and the President of the European Bank for Reconstruction and Development (EBRD) Odile Renaud-Basso.
“The Memorandum aims to make Ukraine’s capital market efficient, transparent, and attractive for investors by creating a unified market infrastructure – from trading to clearing, settlement, and securities custody. This is a strategic step towards building a fully functioning, liquid capital market that can become a source of financing for Ukraine’s recovery and economic growth,” Ukraine’s Ministry of Finance wrote in its press release.
The Memorandum incorporates a wide range of policy actions that include legislative changes, governance reform of market institutions and “investor engagement.”
Ukraine promises to create a single entity that will concentrate key market infrastructure institutions with state participation in the new entity of no less than 25%.
Ukraine’s Finance Ministry wrote that international investors will get access to the new financial market body through a public tender process.
Ukraine intends to enhance the work of two critical institutions that handle securities recordkeeping, clearing, and settlement: the National Depository of Ukraine (NDU) and Settlement Center (SC).
And Ukraine will launch a new stock exchange.
After years of inaction, Ukraine tries again
Ukraine needs to mobilize domestic and foreign capital for recovery and economic growth and, as a precursor to accession to the European Union, it also needs to make changes in capital markets in line with EU legislation, particularly the Financial Services Acquis (Chapter 9).
Ukraine’s clearing and settlement should adhere to EU’s key capital markets directives: the Central Securities Depositories Regulation (CSDR) and the international standards for financial market infrastructures called Principles for financial market infrastructures (PFMI).
But with EU accession, the need to mobilize capital amidst Russia’s devastating full-scale invasion and the signing of the mineral deal between Ukraine and the US this has pushed the country to establish a working capital market rather than promise to do so.
Previously Ukrainian authorities express the need for solid capital market infrastructure for retail clients in Ukraine in 2017, 2020 and in 2021 – but Ukraine still has not witnessed a working retail stock market since 2008’s global financial meltdown.
On June 27, 2017, the then-Acting NBU Governor Yakiv Smolii and Head of the National Securities and Stock Market Commission (NCSSM) Tymur Khromaev signed a memorandum aimed to reshape the country’scapital market infrastructure.
In 2020, Ukraine’s then-Prime Minister Denys Shmyhal promised to create a national stock exchange “within a year”, Interfax-Ukraine reported in September 2020.
Ukrainian authorities signed a memorandum of understanding with EBRD in 2021 to create NEXT UKRAINE (National Capital and Commodity Exchange with the government agreeing to establish a working group to set up the project, according to a Ukrainian Capital report in September 2021.
All eyes will be on the progress of Kyiv’s latest economic commitment .