. /.RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/W/131
26 October 1999
(99-4682)
Council for Trade in Services Original:  English
COMMUNICATION FROM JAPAN
Japan's questions on Canada's revised Schedule of Commitments
in Financial Services (S/C/W/118)
The following communication has been received from the delegation of Japan with the
request that it be circulated to Members of the Council for Trade in Services.
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This is a response to document S/C/W/118, dated 23 July 1999, which contains a
communication from the Government of Canada, received by the Secretariat on 30 June 1999,
concerning a proposed revision of Canada's Schedule of Commitments in Financial Services.
Japan considers that further information is required to assess the basis for and effect of the
proposed revision.
Specifically :
1. Please explain the difference between the previous condition on the establishment of
locally-incorporated subsidiaries of foreign banks to conduct banking business in
Canada, as specified in paragraph 1 of (3) (p.11 of Canada's current Schedule) and thenew condition under the revised schedule, as specified in the paragraph 1 of (3) (p.13
of document S/C/W/118, hereinafter referred to as the "document").
2. What is meant by the term "a foreign bank", as mentioned in paragraph 1, p.13, of the
document?
3. Please describe the requirements for authorization based on the Bank Act, given that
there is no reference to such requirements in paragraph 2, p.13, of the document.
4. According to paragraph 3, p.13, of the docum ent, it appears that an affiliate company
of an authorized bank, or a bank merged with an authorized bank is not allowed to
establish a bank branch in Canada.  What is the rationale for requiring a bank branch
to be directly established under an authorized foreign bank?  Is the condition evennecessary for a branch whose activity only relates to management?  If so, what is the
reason for this requirement?
5. Please describe the definition and specific lines of business for "full service bank
branches" and "lending bank branches", as referred to in paragraph 4, pp.13 – 14 of
the document.  Also, is our understanding correct that the terms, "full service bankbranches" and "lending bank branches", as mentioned in paragraph 2 and thereafter
on p. 14, can be qualified under the term, "of an authorized foreign bank"?S/C/W/131
Page 2
6. With reference to paragraph 2, p. 14, of the document, what does the phrase, "the
activities in which a specialized financing corporation, as defined in the Bank Act,
may engage", exactly mean?  Specifically, does the term, "a specialized financing
corporation", correspond to government financial institutions, such as the Central
Mortgage and Housing Corporation or the Farm Credit Corporation?
7. With regard to the paragraph 3, p.14 of the document, please describe in concrete
terms the demerits that full service bank branches and lending bank branches may
encounter due to not being able to participate in Canada's Deposit Insurance System.
8. Regarding "deposits in amounts less than $150,000 and payable in Canada", as
mentioned in paragraph 4, p. 14 of the document, please specify the deposit
instruments that are not payable in Canada, or which are under payment obligation
outside Canada?
9. According to paragraph 5 (p.14) to paragraph 1 (p.15) of the document, borrowing by
a lending bank branch is subject to certain limitations.  What is the rationale for these
restrictions?
10. With respect to paragraph 2, p.15, of the document, please specify the demerits that a
lending bank branch may encounter due to not being able to participate in theCanadian Payments Association.
11. According to paragraph 3, p.15 of the document, when establishing a lending bank
branch, an authorized foreign bank cannot simultaneously set up a full service bank
branch, a bank subsidiary, a loan company, nor a trust company that accepts deposits.
What is the reason for this restriction?  Also, please clarify whether an authorizedforeign bank can establish just a bank subsidiary, a loan company, or a trust company
that accepts deposits.
Bearing in mind this request for clarification, Japan objects, therefore, to the proposed
revision going to effect at the end of the 90-day period.  We look forward to receiving Canada'sresponses to our questions and will review the responses and even seek further clarification if
required.  Japan also reserves its right to request consultations as necessary.  We will continue to
inform the Council for Trade in Services of the progress on the matter.
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