The National Bank of Georgia has become a signatory to the Multilateral Memorandum of Understanding of the International Organization of Securities Commissions (IOSCO) and an ordinary member of IOSCO.

 

Ordinary membership of IOSCO is expected to increase investor confidence and interest in the Georgian securities market and enhance the National Bank of Georgia's reputation as a securities market regulator. Additionally, ordinary membership of IOSCO will expand the opportunity to integrate into international markets, while enabling the NBG to ensure effective capital market supervision through cooperation with regulators of other states and the exchange of relevant information.

 

The main precondition for ordinary membership of IOSCO is the harmonization of the capital market regulatory framework with best international standards and IOSCO regulatory principles that are recognized worldwide. Hence, as soon as the National Bank of Georgia became an associate member of IOSCO, with the involvement of public and private sector representatives and international financial institutions, the work on the First Generation reform of the Securities Market Regulatory Framework began in 2018:

 

• In 2016, with the enactment of the Law of Georgia "on Accounting, Reporting and Auditing", the Accounting, Reporting and Auditing Supervision Office was established. The law establishes standards for the transparency of financial reporting in Georgia, critical for issuers of public securities and potential investors to make informed decisions.

 

• Considering the level and scale of capital market development in Georgia in 2018-2021, the regulation and supervision framework for the issuance of securities, intermediaries and market infrastructure was significantly improved;

 

 

• In 2020, two legal acts crucial for the development of the capital market came into force, which fully meet international standards:

 

1. 1. Updated Law of Georgia "on the Securities" Market and legislative documents regulating issues such as the transparency of securities issuers, insider trading and market manipulation;
   2. Law of Georgia "on Investment Funds" and legislative documents that regulate the principles of establishment, management and operation of investment funds and asset management companies in Georgia.

 

As part of the same reform, a number of enterprises privatized in the 1990s were relieved of regulatory pressure and, in line with IOSCO standards, the rights and responsibilities of the National Bank of Georgia as a capital market regulator were significantly improved. Simultaneously, the development of certain sectors of the securities market (including securitization and secured bonds framework), will involve the continued upgrade of the legislation.

 

The NBG’s permanent ordinary membership IOSCO status illustrates the effectiveness of the First Generation reform, resulting in Georgia’s capital market regulatory framework brought in line with international standards. This is one of the important, yet insufficient preconditions for market development.

 

Importantly, the development of the capital market, especially in small countries, is a rather complex process, involving effective coordination between public and private sectors.