The development of capital markets and NBFI sector is critically dependent on the establishment of a sound regulatory and supervisory framework in which regulatory authorities are independent of the executive power and have a strong capacity for enforcing regulations.

Strengthening the State Commission for Securities and Stock Market (SSMSC)
As a collective body of the central executive, SSMSC lacks political and operational independence. It is dependent on the State budget for its funding and is seriously under-resourced. It has a shortage of skilled staff and its systems are only partially automated. Commissioners and staff do not have adequate legal protection when acting in good faith in discharging their duties. Supervision by SSMSC is limited to reviewing the regular reports submitted by market intermediaries, and it has a challenge to effectively monitor and control the large number of regulated entities.

Strengthening the State Commission for Regulation of Financial Services Markets (SCRFSM)
As a collective body of the central executive, SCRFSM has limited political and operational independence. It is funded by the State budget, has no financial autonomy, and is seriously under-funded. Following the adoption of the Amendments of the Law on Financial Services, a re-registration and re-licensing of NBFIs would be required, significantly stretching the SCRFSM’s capacity. An influx of new non-state pension funds may also be expected following the planned introduction of the second pillar.

To address these issues, the CMP has been working to assist GOU to undertake a comprehensive reform of the SSMSC and SCRFSM, focusing on:

• Strengthen regulators’ adequate political (legal and institutional) and financial independence.
• Improve the existing technological support of regulators to allow timely collection and analysis of data (even mandatory regulatory reports) thus defusing the quality and timeliness of the regulatory analysis and corrective actions.
• Establish and implement at the SSMSC an electronic disclosure system by issuers of securities in the stock market in a format that meets EU and international standards for the purpose of providing to the investors free access to the information on the issuers in a real time mode.
• Support the development at the SCRFSM an electronic system for the collection and dissemination of business and financial information on non-state pension funds in accordance with international standards insuring that that information will be provided free of charge to the public on a real-tome basis.
• Increase the enforcement capacity of regulators to improve the transparency, corporate governance, business and financial disclosure and level playing field in the market.
To develop the regulatory and methodological framework for risk-based supervision of regulated entities over the medium-term; and
• To develop the analytical capacity for risk-based supervision of regulated entities over the medium-term.

  In parallel, CMP assists SSMSC and SCRFSM in establishing a multi-year twinning program with a financial sector regulator in a European country, with the support of multilateral and bilateral donors. This program would focus as a matter of priority on strengthening the procedures and practices of regulators the areas of licensing, risk-based supervision and enforcement in line with international standards, on the oversight of corporate governance principles and practices by joint stock companies (JSCs), and on supporting further development of the legal and regulatory framework for capital markets and NBFIs in line with international standards, through information sharing, technical advice, in-house and international training programs, and IT support.