Programmatic Technical Assistance Partnership

1
Programmatic Technical Assistance Partnership

• Developing capital market conditions
• for the introduction and development of second
  pillar pensions
• Roundtable with Government, market regulators,
  market participants and donors
• Kyiv, September 27, 2007

2
Outline

• I Background
• II Key capital market conditions for successful
  introduction of second pillar pensions
• III Partnership activity plan

3
I Background

• Joint USAID/World Bank position paper
• Developing securities markets and non-bank
  financial institutions in Ukraine key
  impediments and reform priorities ahead.
• 1. Strengthening market regulatory and
  supervisory framework
• 2. Strengthening government debt management and
  debt market development strategy
• 3. Developing the sub-national debt market
• 4. Developing the equities market
• 5. Developing the market for asset-backed
  securities
• 6. Strengthening securities market infrastructure
• 7. Developing investment funds
• 8. Developing private pensions
• 9. Developing the insurance sector

4
II Key capital market conditions for successful
introduction of second pillar pensions

• 1. Macro-financial stability and balanced
  strategy for financing of transition cost to
  second pillar
• Privatization revenues
• Taxes
• Debt issuance foreign vs domestic
• -gt link with government bond market development
• 2. Strong regulatory and supervisory framework
  for securities markets and NBFIs
• Tracing and background checking of ultimate
  controllers
• Political independence and financial autonomy of
  market regulators
• Capacity of regulators (licensing, risk-based
  supervision, enforcement)

5
II Key capital market conditions for successful
introduction of second pillar pensions

• 3. Efficient capital market infrastructure
• Securities trading platforms
• Securities depository and settlement system
• Custodians and registrars
• Accounting and auditing framework
• Valuation of infrequently traded securities
• 4. Diversified supply of domestic securities in
  which pension funds can invest
• Government bonds
• Non-government bonds (munis, mortgage bonds,
  corporate bonds)
• Equities

6
III Partnership Activity Plan (mid 2007 - mid
-2011)

• 1. Macro-financial scenarios for introduction of
  Pillar 2 pensions
• Alternative macroeconomic scenarios (GDP growth,
  CPI growth, real wage growth)
• Alternative second pillar scenarios (increase in
  contribution rate, decrease in payroll tax rate)
• Alternative financing scenarios (privatization
  revenues, taxes, debt (external vs internal)
• -gt World Bank Advisory

7
III Partnership Activity Plan (mid 2007 - mid
-2011)

• 2. Strengthening of regulatory and supervisory
  framework
• Policy reforms
• Empowering regulators to trace and check
  background of ultimate controllers
• Adopting strategy to increase political
  independence and financial autonomy of regulators
  in accordance with international standards
• Enabling consolidated supervision
• -gt World Bank DPL
• Twinning programs for regulators
• Strengthening licensing and carrying out
  re-licensing program
• Introducing risk-based supervision
• Strengthening enforcement
• FSR -gt USAID CMD Project, World Bank ATF
  Project, multilateral/bilateral donor
• SCSSM -gt USAID CMD Project, World Bank ATF
  Project, multilateral/bilateral donor

8
III Partnership Activity Plan (mid 2007 - mid
-2011)

• 3. Strengthening market infrastructure
• Policy reforms
• Requiring trading of listed securities on the
  exchange where they are listed
• Requiring electronic reporting of OTC trades to
  PFTS
• Limiting ownership (direct or indirect) in
  depositories to maximum 5 ()
• Enabling implementation of G30 standards (lending
  and borrowing of shares, netting)
• Enabling MFS to open correspondent accounts with
  foreign depositories
• -gt USAID CMD Project, World Bank DPL ()

9
III Partnership Activity Plan (mid 2007 - mid
-2011)

• 3. Strengthening market infrastructure
  (continued)
• Strengthening of PFTS
• Implementation of order-driven system
• Implementation of EDS
• Move to DVP
• Developing links with EU stock exchanges
• -gt USAID CMD Project
• Strengthening of MFS
• Move to G30 standards
• Support DVP
• Design and implementation of guarantee fund
• Developing links with EU depositories
• -gt USAID CMD Project
• Implementing IFRS
• Designing IFRS implementation action plan (fall
  07)
• implementing program
• -gt USAID CMD Project, World Bank/FIRST Initiative

10
III Partnership Activity Plan (mid 2007 - mid
-2011)

• 4. Developing supply of domestic securities
• Developing government debt management and debt
  market development
• Government debt management roundtable (April 07)
• Government debt management and debt market
  development strategy (fall 07)
• Strategy implementation
• -gt USAID ATCI Project, World Bank PFM
  Project/FIRST Initiative

11
Contact points

• USAID
• Rick Gurley rgurley_at_usaid.gov
• Natalia Berezhna nberezhna_at_usaid.gov
• World Bank
• Michel Noel mnoel_at_worldbank.org
• Martin Raiser mraiser_at_worldbank.org