Ukrainian Financial Forum 2016 was held on September 29-30 at Bristol Hotel. The event was organized by ICU with sponsorship support by Thomson Reuters, with the participation of American Chamber of Commerce, public organization ACI -Ukraine the Independent Association of Banks of Ukraine, CBonds information agency and the Association “Ukrainian stock traders”.
The event has brought together more than two hundred representatives of the financial community in Ukraine, Europe, and the United States, includingmembers of the market, financial regulators and international organizations. A characteristic feature of this Forum – unlike the previous Lviv Financial Forum and Odessa Financial Forum, – is the inclusion of the interactive discussions with participants. During the discussions, participants of the Ukrainian Financial Forum 2016 were offered to answer the question and the speakers to comment on their answers. Thisprovided a better level of interaction between speakers and the audience. Therefore, as a result of this active discussion, there was increased improved mutual understanding between the parties, this allowing for another step towards the development of capital markets in Ukraine.
Among active participants of the forum were the resident representative of IMF in Ukraine Jerome Vacher, the former Minister of Finance of Slovakia and Co-Chair of the Strategic Group of advisors to support reforms in Ukraine Ivan Miklos, market strategist at a Japanese bank Nomura Timothy Ash, Deputy Finance Minister Yuri Butsa, Chairman of the National Commission of Securities securities and stock market (SSMNC) Timur Khromaev, deputy governors of the NBU Dmytro Sologub, and Oleg Churiy, representatives of the European bank for reconstruction and development (EBRD), Jacek Kubas and Hannes Takacs, chief economist for Russia and CIS at BoAMLVolodymyr Osakovsky, Deputy chairmen Parliamentary committee on finance and banking policy Ruslan Demchak, Commissioners of NSSMC Dmytro Tarabakin and Alexander Panchenko, Commissioner of the National Securities and Stock Market Commission Olexandr Zaletov, CEO of Settlement Centre Yuriy Shapoval, Member of Executive Board, National Depository of Ukraine Andrii Porada. CEOs of all three major Ukrainian stock exchanges have also participated in the forum, including, the CEOof Stock Exchange Perspektiva,Stanislav Shishkov, CEO of Ukrainian Exchange, Oleg Tkachenko, and CEO of PFTS, Bohdan Lupiy.
The moderators for the panels includedthe Interim President, Kyiv School of Economics and cofounder of VOX Ukraine, Tymofiy Mylovanov, financial journalist, Darina Marchak, CEO of the Cbonds, Group Sergey Lyalin, Project Manager at the Financial Sector Reform at Project Management Office, the National Reform Council of Ukraine, Victoria Strakhova, managing partner of law firm Avellum Partners, Mykola Stetsenko, Member of the Board ACI Ukraine, Dmitri Lazarev and Warsaw Stock Exchange Representative Office in Ukraine, Ulyana Shtybel.
As per traditionUkraine’s President Petro Poroshenko opened Ukrainian Financial Forum 2016 with a video address.
The President of Ukraine spoke about the need for the country to move away from a policy of merely surviving, and instead towards a policy of economic growth, as inflation decreased to 7% and real GDP growth accelerated (from 0.1% YoY to 1.7% in 1Q16 and 2Q16 respectively).
Near term tasks include the creation of an attractive environment for investment to attract internal and external investors (an Investment Committee has been already created), removing hindrances to exports, full use of economic potential, and a search for resources in local markets, that should primarily come from pension and health care reforms.
Head of NBU Valeria Gontareva emphasized that NBU drastically changed monetary policy during the last year. It shifted to inflation targeting, and retained a flexible exchange regime. And after “three years of hard work”, the banking sector has been cleaned and “it is on the way to recovery”.
Liberalization of currency exchange regulations will be gradual. NBU is aiming for rationality and consistency, because volatility will cause exchange-rate destabilization and, hence, will increase inflation.
Jerome Vacher, resident representative of IMF in Ukraine, noted the beginnings of growth, but pointed to the necessity of finding a way to make it sustainable, and eliminate as much as possible the past boom-and-bust pattern in the economy. He feels the economy should rely more on the activity by small and medium enterprises/businesses, and overall economic growth should be more equitable.
Ivan Miklos, the former Minister of Finance of Slovakia and co-chairman of Strategic Advisory Group for Supporting Ukrainian Reforms pointed out that economic reforms have not yet passed the point of no return. Not only must reforms be continued, but they must be accelerated and deepened in the coming days and months. It should be noted that reforms after Maidan far exceeded those before Maidan, although there are deferred reforms that could have been carried out during this short post-Maidan period.
Konstantin Stetsenko, ICU Managing Director spoke about positive aspects of the market, as the real market is maturing. Investment structure is becoming more secure, some government bonds were up, although some stocks are falling significantly. He was in agreement with other speakers that markets need more instruments: a wider range of secure investments and securities. He also noted that large companies have started to use REPOs as alternatives for deposits.
Konstantin Stetsenko noted that the market needs new hedging instruments. It needs derivatives laws adapted to developing market infrastructure. After this is put into effect, it could be adapted to the OTC market, and two or three years later, at the stock exchanges.
Timur Khromayev, Chairman of the National Securities and Stock Market Commission (NSSMC) noted that 36% of the planned reforms in the sector have already been accomplished. There are a number of steps to further transform supervision and increase its effectiveness:
Oleg Churiy, Deputy Governor of the NBU has agreed that the administrative regulations on FX market are negatively impacting the economy. However, they prevent another devaluation shock that may follow should they be quickly rescinded. It would require lasting macroeconomic stability and sufficient foreign reserves for the administrative regulations to be deemed unnecessary.
Makar Paseniuk, Managing Director, ICU noted that there is a potential for interest rates to fall to 6%—a level where aggressive, high-return investors will be substituted by the more risk-adverse. But at this stage two “little” issues arise.
First, investor’s rights protection. Makar Paseniuk: “Judicial reform – is urgent has no alternatives. There will noinvestments protection without the judicial reform, do not be deceived by illusions.
Second, a clearly defined set of investment ideas for Ukraine. It have to be privatization of state-owned enterprises, privatization of large state-owned enterprises, the sale of insolvent banks assets by the DGF, which are estimated to worth around US$2bn, and the introduction of state-owned land to the market, estimated to be around US$15bn. Makar Paseniuk:”Clear invest ideas and investment protection. Nothing complicated, seemingly simple. The same seemingly simple things for the last 25 years”.