President of the Republic of Uzbekistan Shavkat Mirziyoyev reviewed a presentation dedicated to strategic plans for the further development of the capital market and the deepening of reforms in the banking sector based on international standards.
Current State and Market Potential
According to the data presented, the market value of securities currently in circulation in Uzbekistan amounts to 275 trillion soums. Meanwhile, the volume of securities in free float on the stock exchange has reached 4 trillion soums. There are 717 issuers and 77 professional participants operating in the market. However, market capitalization stands at only 20 percent relative to the Gross Domestic Product (GDP), indicating significant unrealized potential compared to global indicators. In this regard, measures aimed at attracting at least $1 billion in investments to the domestic capital market were discussed.
New Financial Instruments and Liberalization
To achieve the set goals, the introduction of a double listing mechanism is planned. This will allow companies to simultaneously place their securities on both local and foreign stock exchanges. Additionally, the introduction of a wide range of new financial instruments is envisaged, including currency bonds, global depositary receipts (GDRs), foreign securities, and exchange-traded funds (ETFs).
Expansion of the “Regulatory Sandbox” Regime
Particular attention was paid to improving the “Regulatory Sandbox” legal regime. It is proposed to extend the conditions of this regime not only to non-residents but also to residents of the country. For foreign investors, plans include establishing an unlimited duration for the regime. An important innovation will be the permission to trade shares and bonds of foreign companies, which should contribute to reducing the shadow turnover of foreign securities and bringing this segment into the legal field.
Opportunities for Local Issuers
In order to activate domestic investors on the Tashkent Stock Exchange, local companies and banks will be granted the right to issue bonds in foreign currency. This will enable them to attract foreign currency financing domestically without the need to enter external markets. The possibility of expanding the bond market by allowing issuers to issue unsecured debt securities in volumes exceeding their own capital is also being considered.
Improving Regulation
Plans for developing market infrastructure include aligning national legislation with the standards of the International Organization of Securities Commissions (IOSCO). Strengthening the regulator’s powers and gradually increasing the authorized capital requirements for professional market participants are envisaged to enhance market reliability and transparency.
Reforms in the Banking Sector
Over the past seven years, the assets of Uzbekistan’s commercial banks have grown 5.3 times, exceeding 877 trillion soums. The number of banks has reached 35, including three foreign banks that started operations after 2017. Uzbekistan participated for the first time in the Financial Sector Assessment Program (FSAP) of the IMF and the World Bank. Based on the assessment results, the task has been set to bring the financial sector into full compliance with the 29 Core Principles for Effective Banking Supervision of the Basel Committee next year. Plans include the full transition of commercial banks to International Financial Reporting Standards (IFRS), the implementation of Basel III standards, and the creation of a Financial Stability Council with the participation of the government and the Central Bank.
Source: Official website of the President of the Republic of Uzbekistan