Uzbekistan plans regulations against suitcase banking

Uzbekistan plans to make it mandatory for foreign brokers to have a local presence or partnerships in order to arrange Eurobonds for Uzbek issuers, the Central Asian nation’s Capital Markets Development Agency (CMDA) told Reuters on Monday.

The regulations aimed at curbing the practice of suitcase banking in the former Soviet republic – which plans a steady stream of international bonds in coming years – could take effect as soon as this month.

Foreign investment banks seeking a slice of the market “will have to open a branch in Uzbekistan or find a licensed local partner” and create a consortium with them under the new rules, CMDA spokesman Bakhadir Abibullaev said.

Suitcase banking, where investment bankers only briefly visit their customer’s country to clinch a deal, is widespread in emerging markets but often criticised for doing little to develop local expertise.

The Tashkent government plans to issue at least $500 million in Eurobonds next year, and Uzbek state-owned companies may borrow even more, with total public sector borrowing likely to be capped at $4 billion per year.

The planned borrowings and regulatory changes are all part of a broader reform programme initiated by President Shavkat Mirziyoyev.

Under Mirziyoyev, Uzbekistan, an exporter of natural gas, cotton and gold, has started opening up its economy in order to boost foreign trade and investment.

It also plans to privatise, including through public listings, some of the largest state-owned companies, and the Eurobond regulations could hint at how Tashkent is going to allocate initial public offering mandates.