./.WORLD TRADE
ORGANIZATIONS/FIN/5
24 November 2000
(00-5037)
REPORT OF THE COMMITTEE ON TRADE IN FINANCIAL SERVICES
TO THE COUNCIL FOR TRADE IN SERVICES
1. The Committee on Trade in Financial Services held four formal meetings during 2000 on
13 April, 25 May, 13 July, and 9 October.  The reports of these meetings are contained in documents
S/FIN/M/25-28.  The discussions of the Committee focused on four items: the acceptance of the FifthProtocol to the GATS, technical issues, other issues for future discussion and the request for observer
status from the International Associations of Insurance Supervisors.
2. With regard to the acceptance of the Fifth Protocol, the Committee noted at its first meeting
of the year that 10 Members (Bolivia, Brazil, Dominican Republic, Ghana, Jamaica, Kenya, Nigeria,
Philippines, Poland and Uruguay) were yet to accept the Protocol.  As part of its monitoring function,the Committee invited those Members to report on th e situation regarding their domestic ratification
processes and acceptance.  The Committee heard progress reports from all of those 10 Members:
three of them expected to be able to accept by the end of the year and five indicated that domestic
processes were underway, although with procedural delays, and that it was only a matter of time
before their acceptances could be finalized.  Two Members informed the Committee that followingthe 1997 negotiations developments within their financial systems had required the undertaking of
regulatory reforms in the sector.  Those initiatives would need to be completed before the ratification
and acceptance of the Fifth Protocol could take place.  At the meeting held on 13 July, the Committee
was informed that Ghana had accepted the Protocol on 26 May, bringing down to 9 the number of
outstanding acceptances.
3. In relation to technical issues, discussions based on a non-exhaustive checklist of issues for
discussion prepared by the Secretariat (S/FIN/W/1 4) had suggested the issues of the distinction
between modes 1 and 2 and the sectoral classification of financial services as starting points.
Regarding the distinction between modes 1 and 2, while recognizing its importance for the clarity of
commitments, the Committee decided that the issue should be tackled at a later stage when concrete
problems are identified.   With respect to Classification issues, it has been suggested that there is a
need to look at the classification contained in the Annex on Financial Services with a view toassessing its coverage vis-à-vis the current characteristics of the financial services industry and
markets.  Some delegations have noted that since the Uruguay Round new activities seemed to have
emerged in the sector whose coverage by the existing Annex classification was not obvious and
indicated that consideration of the matter continued in Capitals.  Additionally, it has been proposed to
have a full discussion on various negotiating approaches that have been used so far, for instance, theUnderstanding on Financial Services; the improvement of commitments and the harmonization of
classification of financial services.
4. Under other issues for future discussion, the Committee discussed the desirability of
addressing issues related to "Prudential Regulation", an idea presented by Australia.  A number of
delegations failed to see the need for clarification of the definition contained in the Annex onFinancial Services and voiced that the prudential exception constituted a fine compromise to preserve
regulatory flexibility in this sensitive sector which warranted caution.  Alternatively, some delegations
proposed addressing general regulatory issues as a way to enhance delegations' understanding of the
specific issues involved.  In that context a proposal for gathering information on regulatory workS/FIN/5
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conducted by relevant international organizations (informal submission by Japan) was presented.
While some delegations would accept an information gathering exercise with no links to any
discussion about prudential measures, others strongly opposed such an exercise regardless of how it
might be conducted.  Concerns have been expressed as to the objectives of this proposal as some
delegations fail to see the relevance of the info rmation that could be gathered to the Committee's
work.  They also felt that such an exercise could develop into a discussion on the legitimacy of
Members’ prudential regulations.
5. The Committee considered a communication from the International Association of Insurance
Supervisors, dated 27 March 2000, requesting observer status.  In view of the fact that some
delegations regard granting observer status to be an issue with systemic implications, the Committee
decided to defer its decision on this request until the conclusion of the ongoing discussion on observer
status of intergovernmental organizations in the General Council.
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