2006年-世界发展银行全球_The_Development_of_Non-bank_Financial_Institutions_in_Ukraine___Policy_Reform_Strategy_and_Action_Plan_140页_1mb

Summary of "The Development of Non-bank Financial Institutions in Ukraine"

Core Content

This document outlines the development of non-bank financial institutions (NBFIs) in Ukraine and presents a policy reform strategy and action plan aimed at enhancing the financial sector's capacity to support Ukraine's integration into the European Union (EU). It provides an in-depth analysis of the current state of NBFIs, identifies key challenges, and proposes six pillars of reform to address these issues.

Main Points

1. Ukraine's Financial Sector and NBFIs

• Ukraine is seeking to integrate into the EU, which presents both opportunities and challenges for its financial sector.
• NBFIs are considered the weaker component of the financial sector in Central and Eastern Europe.
• The development of NBFIs is crucial for the country to benefit from EU integration, particularly in areas like export finance, infrastructure finance, and housing finance.

2. Current State of NBFIs in Ukraine

• Equity Market:

  • Highly concentrated, with the 10 largest companies accounting for ~70% of the market.
  • Low liquidity, most trades occur over-the-counter (OTC).
  • Only ~4% free float, and the market is fragmented with 12 exchanges and trading systems in 2005.
  • ~75% of trading volume is concentrated in PFTS.

• Money Markets:

  • Structural liquidity surplus has reduced interbank market activity.
  • Term interbank activity is limited due to concerns about credit quality.
  • Secured interbank activity is dominated by collateralized lending due to legal and tax uncertainties.

• Government Bond Market:

  • Launched in 1996, but faced a crisis in 1998.
  • In 2005, ~8% of GDP was in the form of government securities, compared to ~39% in CE3 countries.
  • Only ~1.4% of GDP worth of securities were in domestic circulation.

• Sub-sovereign Bond Market:

  • Emerged in 1985–1998 with 14 issuers raising UAH 217 million.
  • Inactive until 2003 due to restrictive registration requirements after the 1998 debt crisis.
  • In 2003, Kiev issued a US$150 million Eurobond and a UAH 150 million domestic bond (~0.1% of GDP).
  • Development is hampered by legal and regulatory deficiencies.

• Corporate Bond Market:

  • Grew rapidly from 2001 to 2005, reaching ~2.5% of GDP.
  • In contrast, CE3 countries had less than 1% of GDP in corporate bonds.

• Pension Sector:

  • Prior to 2004, Non-State Pension Funds (NSPFs) were not-for-profit and operated under company law.
  • Many NSPFs were mismanaged, leading to significant losses for pensioners and depositors.
  • As of 2003, ~47 NSPFs with ~US$60 million in assets remained operational, compared to 3.8% of GDP in CE3 countries.
  • The 2004 pension reform shifted the system from PAYG to a more complex structure, leading to fiscal and social imbalances.

• Insurance Sector:

  • Insurance penetration reached 5.6% of GDP in 2004, with market density at US$75 per capita.
  • However, only 7.9% of premiums were paid out in claims, attributed to insurance being used for tax evasion and fund transfers.
  • Insurance development is constrained by low transparency and weak consumer protection.

• Investment Funds:

  • Investment funds were established during mass privatization to pool privatization vouchers.
  • After the 2001 ICIS Law, only 20 funds self-liquidated, while 75 investment funds and 95 mutual funds remained unregistered.
  • As of January 2004, 32 investment funds were registered, including 22 venture capital funds.

• Factoring and Leasing:

  • Factoring accounts for only 0.1% of total bank lending, with no specialized legislation.
  • Leasing, despite legal frameworks in 1997 and 2003, represents less than 1% of GDP, compared to 3.2% in CE3 countries, due to unamended tax and accounting laws.

3. Corporate Governance Issues

• Ukraine's corporate governance rating is lower than that of Russia and other CIS countries, and much lower than EU accession countries.
• Weak governance leads to low transparency, poor accountability, and weak shareholder rights.
• The World Bank survey rated Ukraine's corporate governance at 3.5 (out of 7) and ranked it 77th globally.

4. Regulatory Challenges

• Lack of Independence:
  • NBFIs regulators (SEC and NBFIR) lack political and financial independence.
  • Senior appointments are influenced by political favoritism rather than competence.
• Under-funding:
  • Regulators are underpaid, leading to staff distraction and high personnel turnover (~50% annually).
• Weak Enforcement:
  • Poor enforcement capacity results in low transparency and non-level playing field.
• Merger Proposal:
  • A proposed merger of SEC and NBFIR lacks proper cost-benefit analysis and public discussion.
  • The reform should be carefully managed over the medium-term to avoid exacerbating current issues.

Key Recommendations

• Pillar I: Strengthen the independence, funding, and enforcement capacity of NBFIs regulators.
• Pillar II: Develop money markets and domestic and municipal bond markets.
• Pillar III: Restructure equity markets to improve transparency, efficiency, and consolidation.
• Pillar IV: Accelerate the introduction of funded pension schemes and improve transparency and consumer protection in the insurance sector.
• Pillar V: Transform corporate governance and increase market transparency.
• Pillar VI: Broaden access to NBFI finance.

Conclusion

The document emphasizes the importance of reforming the regulatory and institutional framework for NBFIs in Ukraine to support its integration into the EU. It highlights the need for political and financial independence of regulators, improved corporate governance, and better market infrastructure to enhance the development of NBFIs and their contribution to the financial sector.