RESTRICTED  
  
S/FIN/M/84  
 
22 May 2015  
(15-2674)  Page: 1/6  
Committee on Trade in Financial Services    
 
 REPORT OF THE MEETING HELD ON 17 MARCH 2015 
NOTE BY THE SECRETARIAT1 
The Committee on Trade in Financial Services held a meeting on 17 March 2015 under the 
Chairmanship of Ms Caroline McCarthy (Australia). The proposed agenda is contained in 
Airgram WTO/AIR/CTFS/1. An annotated agenda by the Chairperson had been issued 
on 12 March 2015 (JOB/SERV/202). The Committee adopted the agenda. 
1  ITEM A – ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GATS 
1.1.  The Chairperson recalled that Brazil was the only Member that had yet to accept the 
Fifth Protocol.  
1.2.  The representative of Brazil said that there had been no developments. 
1.3.  The Committee took note of that statement an d decided to revert to this agenda item at the 
next meeting. 
2  ITEM B - REGULATORY ISSU ES IN FINANCIAL SERVICES  
2.1.  The Chairperson informed that the Secretaria t had been following up on participation by the 
IMF and the Islamic Financial Services Board (IFSB) at a meeting of the Committee, so as to 
complete the Committee's review of recent developments in global financial regulatory reform and their implications for trade in financial services. Unfortunately, neither the IMF nor the IFSB were 
able to attend this meeting. The Chairperson added that the Secretariat would try to secure their 
participation at a future meeting. 
2.2.  The Chairperson also recalled that at the last meeting, Brazil proposed that the Committee be 
briefed by two further international bodies on their recent standard-setting activities. The first is 
the Global Forum on Transparency and Exchange of Information for Tax Purposes 
(http://www.oecd.org/tax/transparency ), which last year held its 7th annual meeting and agreed 
on a new global standard on Automatic Exchange of Information (AEOI), which has been initially 
adhered to by 51 countries. The second body is  the Financial Action Task Force (FATF-GAFI) 
(http://www.fatf-gafi.org ), in charge of "setting standards and promoting effective implementation 
of legal, regulatory and operational measures for combating money laundering, terrorist financing 
and other related threats to the integrity of the international financial system". At the last meeting, 
some Members indicated that they needed furt her time to think about whether it would be 
appropriate to invite these bodies to present before the Committee. As promised at the last meeting, the Chairperson conducted consultations on  this matter with interested delegations prior 
to this meeting. Her assessment of those consultati ons was that all Members were prepared to join 
consensus on this proposal and proceed to invite  these two standard-setting bodies to present 
before the Committee, with only one proviso – that this should be a one-off information briefing 
only. In other words, there should not be any expectation of a periodic exchange of information, as 
was agreed to in the case of the other international standard-setting organizations that came before the Committee last year.  
                                               
1 This document has been prepared under the Secret ariat's own responsibility and is without prejudice 
to the positions of Members or to thei r rights and obligations under the WTO. S/FIN/M/84 
 
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  2.3.  On that basis, she proposed that the Co mmittee invite the Global Forum and the FATF to 
make a presentation at the next meeting or at a future meeting, depending on their availability.  
2.4.  The Committee so decided.  
2.5.  Before concluding, the Chairperson encouraged Members to make good use of this agenda 
item, which had proved to be a useful setting to exchange information and discuss specific 
regulatory issues. She encouraged Members to make presentations or statements, or indeed submit communications on regulatory aspects of fi nancial services trade, following the example of, 
inter alia , South Africa and the Russian Federation in previous meetings.  
2.6.  The Committee took note of the statements made, and decided to revert to this agenda item 
at the next meeting. 3  ITEM C - TRADE IN FINANC IAL SERVICES AND DEVELOPMENT 
3.1  Financial inclusion and the GATS 
3.1.  The Chairperson recalled that, following a request by the Committee, the Secretariat had 
prepared a Background Note on "Financial Inclus ion and the GATS" (S/FIN/W/88). As stated in the 
Note, its purpose was not to replicate the growing literature on financial inclusion, but rather, to discuss the issue from a trade policy perspective, ad dressing also the role that the GATS may play 
in that regard. The Committee had a first discussion on this at the last meeting, but many 
Members indicated that their comments were only of a preliminary nature and/or that they would 
revert to the Note at the present meeting. She opened the floor for further comments on the Note and discussion on this issue, including any sugges tions that Members might have for further work 
on this topic. 
3.2.  The representative of China thanked the Secr etariat for the Note. China's financial regulators 
considered the Note useful for advancing research on financial inclusion. China's financial industry 
had developed significantly since the economic reforms. However, financial services continued to 
be unevenly distributed. Economically developed areas, urban areas and populous areas had much better access to financial services than rural populations, small- and micro businesses and the low-income urban population. The latter groups still ha d very limited access to financial services. The 
promotion of financial inclusion was a prominent objective of the Chinese government 
3.3.  The Government had introduced specific policies to promote financial inclusion, such as 
financial subsidies, tax reductions and differentiated deposit reserve requirements. In addition, 
preferential regulatory measures had also been im plemented to help rural populations, and small- 
and micro businesses gain access to financial services. For example, branches of banks and insurance companies were encouraged to establish in underdeveloped areas, with priority approval 
rights through the so-called "green channel"; and China Post was encouraged to establish a life-
insurance company so as to provide insurance services in remote areas 
3.4.  In 2015, the China Banking Regulatory Commi ssion (CBRC), together with the People's Bank 
of China (PBC) and other agencies, developed a st rategy plan for the development of financial 
inclusion in China during the period of 2016-2020. The plan touched upon different aspects related 
to financial inclusion, such as service and product innovation, the development of financial infrastructure as well as legal and regulatory systems, and financial education.  
3.5.  The representative of Canada also thanke d the Secretariat for the Note, which in his view 
provided an insightful overview of financial in clusion around the world, both in developed and 
developing Members, and of the various policies and strategies used to improve access to financial 
services. Canada agreed with the comments made by the European Union at the previous meeting 
that trade liberalization had an important role to play with respect to financial inclusion. The presentations made by various Members, including the most recent one from China on mobile banking, showed that trade and financial services supported financial inclusion by facilitating the 
transfer of new banking technologies and innova tions around the globe. Indeed, in his view, 
Canada's open approach to trade in financial services had contributed to its high rate of financial inclusion, also noted in the Secretariat paper. In addition, he noted the paper's conclusion that 
research suggested that financial inclusion mattered for economic development and poverty S/FIN/M/84 
 
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  reduction. It was Canada's view that discussions in this Committee should maintain a clear link 
between trade in financial services and development. He further argued that trade liberalization supported financial inclusion, which in turn contri buted to development. However, he stressed that 
financial inclusion was only one of the benefits of financial sector liberalization, and the Committee 
should not unnecessarily narrow the discussion of trade in financial services and development 
simply to issues of access and inclusion. He suggested that Members used this agenda item to share their experiences more broadly with respect to  liberalization of trade in financial services, 
including its link to development.  
3.6.  The representative of India said that at the last meeting, her delegation had provided its 
views on the GATS-related aspects of the backgrou nd Note by the secretariat. She added that she 
would share India's experience in promoting access to financial services and financial inclusion. 
The institutional mechanism put in place in India for promoting financial inclusion and financial 
literacy was overseen by the Financial Stability and Development Council (FSDC), headed by the Finance Minister. The FSDC was composed of all financial regulatory authorities. The FSDC had 
also constituted a technical group to focus only on financial inclusion and financial literacy to 
coordinate the efforts of all the financial sector regulators in the field of financial inclusion. Under this group, a national strategy for financial inclusion and education had been prepared. She 
explained that India was following a planned and st ructured approach of direct state intervention 
to address the twin issues of demand and supply.  
3.7.  Regulations had been framed with an ob jective of providing banking services to 600,000 
villages in India and to create an enabling environment for banks to do so. Financial inclusion was 
being furthered in a mission mode through a combin ation of strategies ranging from relaxation of 
regulatory guidelines, provision of new products and supportive measures to achieve sustainable and scalable financial inclusion.  
3.8.  With the view to increasing financial inclusion and bank penetration, in January 2010 
domestic commercial banks were advised to draw  up Board approved Financial Inclusion Plans 
(FIPs), to be rolled out over the next three year s. These plans should include self-set targets in 
respect of rural brick-and-mortar branches open ed, business correspondences employed, coverage 
of unbanked villages, and introduction of products specifically designed to cater to the financially 
excluded segments. The first phase (2010-2013) had been completed, and banks had already submitted their FIPs for the period 2013-2016.  
3.9.  Taking into account the country's financia l infrastructure (47 domestic schedule commercial 
banks and 82 regional rural banks with about 100,000 branches), the Reserve Bank of India 
adopted a bank-led model for financial inclusion,  which sought to leverage on technology. The 
financial inclusion initiatives were Information and Communication Technology (ICT) based and 
were supposed to ride on new delivery models that would need to be developed by the market participants to best suit requirements. Thus, ba nking services would be provided using hand-held 
devices, such as Point-of-Sale (POS) machines an d mobile phones. Other players, such as mobile 
companies, were also allowed to partner with banks and offer services collaboratively. Considering that financial literacy was important for the promotion of financial inclusion, for consumer protection and ultimately for financial stability, India had also adopted an integrated approach 
whereby financial inclusion and financial literacy would go hand in hand.  
3.10.  In order to step up opening of branches in rural areas, the following initiatives had been 
taken. Branch authorization had been relaxed, and banks had been mandated to open at least 
25% of their branches in unbanked rural centre s. In 2006, banks were permitted to use the 
business correspondent/business facilitator model to ensure increased banking penetration. In order to ensure that all the financial needs of the customers were met, banks had also been 
advised to offer a minimum of four basic products to customers: a basic savings account, a 
remittance mechanism for electronic benefits transfers and other remittances, a pure savings account, and entrepreneurial credit in the form of a Kisan Credit Card (KCC) or a General Credit Card (GCC). The Reserve Bank of India also introduced a basic saving account deposit with zero 
minimum balance and no charge for maintaining a minimum balance, and with the facility of ATM 
debit and smart cards, without any charges. At pres ent, every eligible Indian citizen had the right 
to open basic saving accounts with banks. Know-your-customer rules had also been simplified.  S/FIN/M/84 
 
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  3.11.  Recognising the importance of financial literacy as the stepping stone towards financial 
inclusion, the Reserve Bank of India had taken several steps in recent times in promoting financial literacy, such as "Project Financial Literacy", which was aimed at disseminating information regarding the Central Bank and general banking concepts to various target groups. Consumer 
protection had also been improved through, throug h the issuance of various regulatory guidelines.  
3.12.  Financial inclusion had also been promoted by means of a policy of directed credit through 
priority sector lending to ensure that credit flows to those sectors of the economy which might not 
get timely and adequate credit in the absence of specific dispensation. Typically, these include 
small value loans to farmers for agriculture and allied activities, lending to micro and small enterprises, housing loans for poor people, loans to individuals for educational purposes, and lending to low income groups. 
3.13.  In concluding, she said that India's expe rience showed the important role played by the 
government, through direct intervention, and by  the domestic scheduled commercial banks, of 
which public sector banks constituted a large part, in promoting financial inclusion in a big country 
like India.  
3.14.  The representative of the Russian Federation  said that the Note by the Secretariat was very 
useful and was still being analysed by the Central Bank. He hoped he could make detailed 
comments at the next meeting. On a preliminary basis, he said that liberalization of trade in 
financial services was no panacea to achieve financial inclusion. Liberalization was a useful – but not sufficient – condition. As Russia's experience showed, although access and operation conditions were very liberal and identical for domestic and foreign financial institutions, the vast 
majority of foreign banks were concentrated in two regions: Moscow and St. Petersburg. The only 
banks operating in rural areas were state-owned. That showed that liberalization must go hand in hand with strong regulation. Finally, he sought the Secretariat's view on the notion of universal 
service, which had been originally developed for basic telecommunication services. In that regard, 
he asked whether this obligation, which could be imposed on both domestic and foreign suppliers 
as a pre-condition for accessing the market, could be considered a restriction under Article XVI 
(market access) of the GATS.  
3.15.  The representative of Korea said that th e Background Note by the Secretariat was a good 
basis for discussing issues related to financial inclusion. Although the issue of financial inclusion 
was important per se , it should be dealt with in the context of trade in financial services, which 
was the prime responsibility of the Committee. He drew Members attention to page 33 of the Note, 
which contained information on the number of ATMs per 100,000 adults and the number of bank branches for 100,000 adults. As can be seen in that page, Korea's ATMs per capita was much 
higher than the developed countries' average, while the number of branches per capita was lower 
than the developed countries' average. This outc ome was not the consequence of regulation, but 
the result of commercial decisions made by banks themselves. This showed that the policies to 
promote financial inclusion should take into account the domestic situation and people's 
preferences. In the specific case of Korea, fo r banks doing business in rural areas it was more 
practicable to establish ATMs rather than branches, while customers did not have a strong preference for branches as long as they could obtain high-quality services through other means.  
3.16.  The representative of Turkey said that her delegation will make detailed comments on the 
Note at the next meeting. As stated in the Note, a distinction should be made between use of 
financial services and access to financial services. She agreed with India and Russia on the 
important role of governments in promoting financial inclusion. 
3.17.  A representative of the Secretariat replied to the question posed by the Russian Federation. 
He said that the scope of Article XVI of the GATS was very specific, covering six types of measures 
explicitly indicated in paragraph 2 of that Article.  The use of measures, that did not fall under any 
of those six categories, was not prohibited by Article XVI. Moreover, if universal service obligations did not discriminate against foreign services and foreign services suppliers, neither would they be contrary to the National Treatment obligation contained in Article XVII. As long as universal service 
obligations were not contrary to Articles XVI an d XVII of the GATS, Members retained substantial 
flexibility in setting policies and regulations to advance financial inclusion. S/FIN/M/84 
 
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  3.18.  The Chairperson said that the discussion had been quite interesting. Since some Members 
indicated their intention to make detailed comments on the Note at the next meeting, she 
suggested that the Committee revert to this agenda item at the next meeting.  
3.19.  The Committee took note of the statements ma de and decided to revert to this agenda item 
at the next meeting.  
3.2  Follow-up on the seminar on Mobile Banking 3.20.  The Chairperson informed Members that, as agreed, the programme of the seminar on 
mobile banking held on 27 November 2014, including all the presentations, was posted on the 
WTO website 
(https://www.wto.org/english/tratop_e/serv_e /mobbanking_nov14_e/mobbanking_nov14_e.htm ). 
In her view, the seminar was very interesting an d informative. However, a discussion of related 
trade-policy issues was still lacking. She sought Members' views and suggestions for further work 
in this area.  
3.21.  In the absence of intervention by Members,  the Chairperson said that the Background Note 
by the Secretariat on financial inclusion raised a number of very relevant topics, including the 
contribution that mobile banking can make to financial inclusion. Members may be interested in pursuing further – more specific – analysis of some of those topics. She suggested that the 
incoming Chairperson should conduct informal consultations with interested Members with a view 
to identifying specific issues related to financial inclusion or indeed other topics concerning trade in financial services and development that might deserve more specific treatment.  
3.22.  The Committee took note of the statements  made and agreed with the suggestion by the 
Chairperson.  
4  ITEM D - TECHNICAL ISSUES (CLASSIFICATION ISSUES) 4.1.  As agreed in the past, the discussion under this item was held in informal mode.  
4.2.  After the discussion, the Committee decided to put aside this agenda item until specific 
suggestions for discussion were made by any Member. 
5  ITEM E - RECENT DEVELOPMENTS  IN FINANCIAL SERVICES TRADE 
5.1.  The Chairperson recalled that as a standing feature of the agenda, this item had been used to 
either present and discuss recent developments in individual Members' markets or introduce 
proposals that eventually led to specific dedicated discussions or seminars (e.g. on macro-prudential policy and regulation, on non-life insu rance services, on the impact of technology on 
regulation, supervision and compliance). She encouraged Members to use this agenda item as a 
setting to discuss any recent development in financ ial services trade, which may not necessarily be 
of a regulatory nature. In her view, it was in the interest of all Members, and certainly within the 
competence of this Committee, to keep abreast of  developments in the financial services sector, 
either at the global, regional or country level.  
5.2.  The representative of the Russian Federati on made a statement on recent developments in 
his country. Economic growth slowed down to 0.6 per cent in 2014 in comparison to 1.3 per cent 
in 2013. Part of this decline was due to structural factors, including negative demographics and slow productivity growth. Because of demographi c factors, the slowdown was not accompanied by 
an increase in unemployment, which stayed at a historically low level of 5.2%. In 2015, the 
Russian GDP is expected to decline by 3 to 4 per cent, according to the most recent estimates by 
the Bank of Russia. The switch to a floating exchange rate regime since November 2014 was 
expected to act as a stabilizer, boosting the economy's competitiveness. The Bank of Russia's 
monetary policy aimed at curbing inflation to 4 per cent in 2017, and keep it near this mark 
further ahead.  
5.3.  Capital outflows amounted to US$151.5 bil. in 2014. This was largely caused by foreign debt 
repayment, and by the so-called "internal capital outflow", i.e. the conver sion of deposits from 
rubles into foreign currency and the purchase of foreign currency by domestic residents. S/FIN/M/84 
 
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  Dollarization of household deposits had increased since the beginning of 2014, from 19 per cent 
to 27.5 per cent (as of March 1, 2015). Dollarization of corporate deposits increased from 20 per cent to 36.6 per cent. Cash foreign exchange purchases reached $35 bil. Net capital outflow was expected to reach US$110-120 bil. in 2015, with foreign debt service being the main component. 
Capital outflows and the dollarization of deposits had slowed down since the stabilization of the 
ruble in January 2015. 
5.4.  Russia's banking system was struggling to adap t to the abrupt changes in financial conditions 
in the country. Banks would need to face several challenges in 2015, including asset deterioration, 
liquidity shortages, external funding shortages, an d still a high risk of further retail deposits 
outflows. 242 credit institutions were in the red in January 2015, with total losses amounting to RUB 110.1 bil. In January 2014, there were 208 loss -making banks, with total losses amounting to 
RUB 8.8 bil. So, total losses had increased 12.5 times over the last year. As of 1 February 2015, 
the annual growth rate of bank loans to the real sector, corrected for currency appreciation, decreased to 11.7 per cent, compared to 16.4 per cent a year earlier. Retail loan portfolio growth 
rate fell from 25.7 per cent in January 2014 to 10.7 per cent in 1 February 2015. 
5.5.  Following the Bank of Russia's key rate increase in December 2014, the growth of nominal 
interest rates on households' ruble deposits had accelerated. The average interest rates on short-
term and long-term deposits were 12.7 and 11.7 pe r cent, respectively. Nominal interest rates on 
short-term and long-term ruble-denominated loans to non-financial organizations increased to 18.3 and 12.9 per cent, respectively.  
5.6.  The Central Bank will continue efforts to clean up the banking sector. In 2014, 86 licenses of 
weak credit institutions and AML/CFT violators were revoked. Since 1 January 2015, six more 
licenses had been called back.  
5.7.  The Central Bank's policy response also included the injection of capital from the budget and 
reserve funds. A law was recently enacted enabling the placing of up to 10 per cent of the National 
Wealth Fund in subordinated deposits and subordinated bonds of Russian banks with capital exceeding RUB 100 bil. In addition, the government approved the injection of up to RUB 1 trillion 
of treasury bonds into subordinated instruments of banks including some state-owned banks such 
as VTB, Gazprombank and Rosselkhozbank. The ov erall support by the government and the Bank 
of Russia to the national banking system, in terms of liquidity and capitalization, amounted to 15 per cent of GDP. Thanks to that support, ca pital adequacy of banks stood at 11.9 per cent at 
present.  
5.8.  The Committee took note of the statements ma de and decided to revert to this agenda item 
at the next meeting.  
6  ITEM G - OTHER BUSINESS 
6.1.  No issues were raised under this agenda item. 
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