Diagnostic Study of the Georgian Capital Market

The group conducted a diagnostic study of the Georgian capital market, which was prepared through Technical Assistance (TA) 8716: "Strengthening Domestic Resource Mobilization" with support from international financial institutions. The study identified key characteristics of successful capital markets, including a well-developed corporate securities system, a robust treasury securities system, and a favorable legal and regulatory framework. The study also highlighted the importance of transparency, centrality of trading, and market dominance in a successful capital market. The corporate securities market in Georgia has undergone significant changes since 2007. The number of participant firms increased from 2007 to 2014, with a corresponding increase in market share of investment firms and registrars. However, the market still faces challenges related to transparency, quality of reporting, and market dominance. The study notes that the corporate securities market is dominated by a few large players, which can limit competition and innovation. The government securities market in Georgia has also undergone changes since 2007. The issuance patterns, ownership patterns, maturity structure, and secondary trading levels have all been influenced by changes in the market. The study notes that the government securities market has become more transparent and liquid, with increased participation from international financial institutions. Recent encouraging events in the Georgian capital market include the emergence of corporate bond offerings, involvement by Fitch Ratings, and the reorganization of the Georgian Stock Exchange (GSE). The EU-Georgia Association Agreement has also created new opportunities for the capital market, including enhanced linkages to international infrastructure. Looking forward, the study identifies several areas for improvement, including improving the legal framework, harmonizing the tax policy, and promoting centrality of trading and price discovery. The study also recommends streamlining the trading methodology, consolidating and linking the infrastructure, and improving the transparency of the legal regime and market operators. The study provides a comprehensive analysis of the Georgian capital market, highlighting both the progress made and the challenges that remain. The recommendations outlined in the study aim to address these challenges and promote the development of a more robust and efficient capital market in Georgia. The study also highlights the importance of international regulatory linkages and compliance with international standards. The study notes that the Georgian capital market has made significant progress in recent years, but there is still a need for further development and improvement. The study provides a detailed analysis of the Georgian capital market, including its structure, trends, and challenges. The study also provides recommendations for improving the market, including improving the legal framework, harmonizing the tax policy, and promoting centrality of trading and price discovery. The study concludes by emphasizing the importance of continued support from the international financial community and the need for further development and improvement of the Georgian capital market. The study provides a comprehensive analysis of the market and outlines a clear roadmap for its future development.