RESTRICTED  
  
S/FIN/M/83  
 
16 February 2015  
(15-0928)  Page: 1/11  
Committee on Trade in Financial Services    
 
 REPORT OF THE MEETING HELD ON 28 NOVEMBER 2014 
NOTE BY THE SECRETARIAT1 
The Committee on Trade in Financial Services held a meeting on 28 November 2014 under the 
Chairmanship of Ms Caroline McCarthy (Australia). The proposed agenda is contained in 
Airgram WTO/AIR/4399. An annotated agenda by the Chairperson had been issued on 
21 November (JOB/SERV/195). The Committee adopted the agenda. 
 
1  ITEM A - ADOPTION OF THE ANNUAL REPORT 
1.1.  The Committee adopted the annual report as contained in document S/FIN/W/87. 
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, which had commenced with presentations by the other international standard-setting bodies in February. Unfortunately, neither the IMF nor the 
IFSB were able to attend this meeting. The Ch airperson added that the Secretariat would try to 
secure their participation at a future meeting. 
2.2.  As announced at a previous meeting, the Russian Federation made a presentation on its new 
institutional structure of financial regulation and supervision. The presentation was made by 
Ms. Olga Goncharova, Director of Non-credit Financial Institutions Statements Collection and Processing Department of the Central Bank of Russia. The presentation was circulated in Room Document RD/SERV/119.  
2.3.  The representative from the Russian Federation (Ms. Goncharova) said that before 2011, 
Russian financial markets were supervised by five regulatory bodies, namely the Bank of Russia, the Ministry of Finance, the Ministry of Labor,  the Federal Service for Insurance Supervision and 
the Federal Financial Markets Service. In 2011, the Federal Service for Insurance Supervision was 
merged into the Federal Financial Markets Service (FFMS), and the relevant functions of the Ministries of Finance and Labor were also transferred to the FFMS. In March 2014, the FFMS 
(which had been subordinated to the Bank of Ru ssia in September 2013), was finally dissolved and 
the Bank of Russia became the 'mega-regu lator' of Russian financial markets.  
2.4.  The reasons for the establishment of a single financial regulator were the following: to create 
an independent regulatory body; to ensure suffici ent resources provided by the Bank of Russia's 
own budget; to develop financial markets and to foster a competitive environment; to exercise 
oversight over the shadow banking system by enhancing supervision of non-credit financial 
organizations; to develop a comprehensive approach to financial stability analysis; to eliminate 
overlapping regulatory requirements and accountin g standards; and to improve the supervision of 
financial groups consisting of different market participants. 
                                               
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/83 
 
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  2.5.  As a financial regulator, the Bank of Ru ssia focused on the development, regulation, and 
supervision of financial markets. Measures taken to develop the financial sector included the reorganization of non-governmental pension funds into joint-stock companies; the obligation for non-governmental pension funds to join the pension funds guarantee system; the accreditation of 
central counterparties (CCPs); the enactment of corporate governance codes; and the 
improvement of bond issuance mechanisms. Other initiatives – still pending implementation – included the improvement of financial literacy; the reduction of the administrative burden of 
financial market participants; and the development of financial market self-regulation.  
2.6.  The Russian Federation adopted a three-ti er supervisory system, consisting of remote 
supervision, on-site supervision, and behavioural supervision. Further development of a risk-oriented approach to supervision was envisaged, together with a progression from stand-alone 
prudential supervision to consolidated prudential supervision over financial groups. 
2.7.  In order to avoid regulatory arbitrage, the Bank of Russia aligned with G-20 requirements, 
including new prudential requirements (Basel III); new requirements for too-big-to-fail 
institutions; regulation of 'shadow banking'; the development of over-the-counter (OTC) 
derivatives market infrastructure; and new solvency requirements for insurance companies.  
2.8.  The balance after one year was positive . The transfer of functions between agencies 
proceeded smoothly, and the mega-regulator managed to retain human resources from the 
Federal Financial Market Service. Market participants had already noticed improvements in the quality of supervision. 
2.9.  The representative of Brazil turned to th e review of recent developments in international 
regulatory reform, and suggested that the Commi ttee invite the Global Forum on Transparency 
and Exchange of Information for Tax Purposes an d the Financial Action Task Force (FATF) to 
present their work. Quoting from the relevant websites, he further explained that the Global Forum 
was "the premier international body for ensuring the implementation of the internationally agreed 
standards of transparency and exchange of in formation in the tax area", while the FATF's 
objectives were "to set standards and promote effective implementation of legal, regulatory and 
operational measures for combating money laund ering, terrorist financing and other related 
threats to the integrity of the international financial system." In his view, presentations from those two standard-setting fora would enable the Committee to also focus on financial integrity issues as opposed to financial stability, as a necessary complement to the discussions held thus far.  
2.10.  The representative of the United States said he was not in a position to give consent to that 
suggestion. He needed to consider it further, so as to have a clearer understanding of the purpose 
of bringing those two organizations before the Committee.  
2.11.  The representatives of the European Union and South Africa supported the proposal.  
2.12.  The representatives of Australia and Switzerl and said that they would also need more time 
to reflect on the proposal.  
2.13.  Replying to a question by Australia, the re presentative of Brazil said that, although hosted 
at the OECD, both organizations received their mandates from the G-20 and were composed of 
both OECD and non-OECD members. The Global Forum had 123 members while FATF had 36 members, including in both cases developing countries.  
2.14.  The representatives of Chile and Japan said that if other standard-setting organizations 
were to be invited, the Committee should make sure that the issues discussed fell within its 
mandate. In that regard, they expressed doubts as to whether taxation issues fell within the 
Committee's mandate. For that reason, they woul d need to reflect further before deciding.  
2.15.  The Chairperson said she would conduct co nsultations on the suggestion by Brazil before 
the next meeting with a view to moving forward or adjusting the proposal as needed.  
2.16.  The Committee took note of the statements ma de and decided to revert to this agenda item 
at the next meeting. S/FIN/M/83 
 
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  3  ITEM C - TRADE IN FINANC IAL SERVICES AND DEVELOPMENT 
3.1  Financial inclusion and the GATS 3.1.  The Chairperson said that following a requ est by the Committee, the Secretariat prepared a 
Background Note on "Financial Inclusion and th e GATS" (S/FIN/W/88). The purpose of the Note 
was not to replicate the growing literature on financial inclusion, but rather, to discuss the issue 
from a trade policy perspective, addressing also th e role that the GATS may play in that regard.  
3.2.  In presenting the Note, a representative from  the Secretariat said that, over the last decade, 
financial inclusion had become a public policy priority around the world, and had moved up the 
reform agenda both at the international and national levels. The increased emphasis on financial inclusion reflected a growing realization of its positive effects on poverty reduction and economic growth. However, for all its importance, financial inclusion had not been yet explored from a GATS 
perspective. The Note was therefore a first attempt to do that. The Note provided an introduction 
to the issue and an overview of the most impo rtant trade and trade policy aspects involved. In 
order to frame that discussion in the appropri ate context, the Note provided the necessary 
background on the definition and measurement of  financial inclusion, and identified as many 
sources of information and data as possible in order to assist Members in their own research and analysis. The Note also provided an overview of  strategies and policies pursued by governments 
with a view to achieving further financial inclusion. Section 6 of the Note addressed the issue from 
a trade policy perspective, focusing in particular on the potential role of the GATS. He added that the subject was very broad and went beyond the boundaries of a single document. Its many aspects – those that were highlighted in the document as well as those that may have been 
overlooked – could of course be further explored . The Secretariat stood ready to provide further 
in-depth analysis of specific to pics, should Members so wished.  
3.3.  The representative of South Africa shared  his country's experiences in promoting access to 
financial services. South Africa was committed to implementing the G-20 Principles for Innovative 
Financial Inclusion. South Africa's National Development Plan (NDP) set a target of 90 per cent financial inclusion by 2030.  
3.4.  South Africa had a highly sophisticated, well regulated financial services sector and was a net 
exporter of financial services both regionally and globally. Despite the success of this sector, the issue of promoting development through financial services remained a challenge. It was estimated that in 1994 only 36.2 per cent of South African adults had access to a bank account. As a result 
the National Treasury in conjunction with the private sector developed a voluntary code of conduct 
– the Financial Sector Charter Code – which sought to direct the financial services industry toward targets that will promote development in a broader sense.  
3.5.  A key element of the Code was the promotion of financial inclusion. Compliance was assessed 
according to various factors, namely densification, physical access, product type and electronic access. From a banking perspective, the objective was to ensure access to money transmission 
means for day-to-day purposes; savings products; credit for low-income housing; and financing 
for agricultural development and small-and-medium-sized enterprises (SMEs). Densification required that there should be one point availabl e to supply these services for every 1,000 adults. 
Physical access meant that transactional services must be available within a 1-5 km radius, ATMs 
must be available within a 10km radius, and sale s points must be within a 15 km radius. The 
improvement of access through electronic means was also taken into account in assessing compliance.  
3.6.  In order to assist financial institutions in achieving these goals, the Minister of Finance 
instituted a limited exemption to the Know-your-Customer (KYC) principle, which formed part of South Africa's financial regulatory regime. In terms of this exemption, a bank was relieved of the 
obligation of verifying a person's residential address, in case a maximum balance of approximately 
$250 and daily transaction limits of approximat ely $500 were maintained. The World Bank noted 
that this exemption positioned South Africa as a leader in risk based Know-Your-Customer (KYC). In order to specifically realise the benefits of mobile banking, a further exemption permitted non 
face-to-face account opening. As a result of th ese exemptions, banks, often in conjunction with 
retailers and mobile operators, were able to offer the various services aimed at promoting access without compromising on the security goals of Know-Your-Customer.  S/FIN/M/83 
 
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  3.7.  The South African Social Security Agency (SASSA) paid over 16 million grants monthly. 
Grants were now accessible only through a debit card issued to the recipient. Cards may be used to make purchases and funds could be withdrawn from ATMs or from points of sale at various retailers. Moreover, any withdrawals and payments  made were free of charge. While challenges 
remained, this initiative had extended access to banking services for many of the poorest layers of 
South African society. Through these initiatives South Africa had seen successful in promoting financial inclusion, i n particular in terms of 'bancarization', which increased from 55 per cent in 
2005 to 75 per cent in 2013. As a result, the sector  had exceeded the targets set by South Africa's 
National Development Plans for 2015. Finally, he said that the promotion of access to financial services must be seen concurrently with the development of financial literacy. The latter was of particular importance and his delegation looked forward to sharing South Africa's experiences with 
Members in the future. 
3.8.  The representative of Ecuador said that th is issue was very important. Lack of access to 
financial services at an acceptable and sustainable cost was a real obstacle to economic prosperity. 
Governments were increasingly concerned by fi nancial inclusion and were trying to remedy 
financial exclusion by using public policies aiming at increasing access to financial services of the most vulnerable economic sectors and small and medium enterprises, which were often neglected 
by financial service providers.  
3.9.  His authorities were reviewing the Note by th e Secretariat. In any case, he noted that a great 
effort had been put in looking at the most relevant aspects, such as the strategies used to improve financial inclusion, the regulatory policies that seemed to promote financial inclusion, and of course 
the role played by the GATS in this context. He noted in that regard that various paragraph of the 
Note contained analysis of the possible compatibility of various policies with commitments and obligations under the GATS. Such analysis was very useful. In his view, it would also be useful to 
discuss whether Members – through the scheduling of specific commitments – could perhaps use 
trade liberalization as a support to internal efforts aiming at furthering financial inclusion. For example, it might be interesting to discuss how and whether to schedule measures requiring banks 
to offer low charge accounts, priority loans or support to SMEs.  
3.10.  Additionally, as UNCTAD noted in a recent note on the impact of access to financial services, 
financial inclusion and trade liberalization should be coordinated very carefully at the national level. He hoped to be able to share further observations on the Note by the Secretariat, as well as 
further information on Ecuador's experience with financial inclusion, at a future meeting. 
3.11.  The representative of Chinese Taipei found  the Note by the Secretariat very detailed and 
informative. His authorities were still reviewing it and he anticipated his delegation would 
comment on it at a future meeting. Discussions so far, including presentations by Members and 
the seminar on mobile banking, proved very us eful and pertinent. Many Members, including 
Chinese Taipei, had been working actively to promote financial inclusion. The issue should be 
further discussed at the Committee, and perhaps in collaboration with other WTO bodies, such as 
the Committee on Trade and Development. He clarified he was not making any specific proposal, but was simply floating some ideas. He encouraged Members to show their experiences with concrete initiatives and policies aiming at promoting financial inclusion.  
3.12.  The representative of Canada supported th e discussion on the relationship between financial 
inclusion and trade in financial services. His delegation was still reviewing the comprehensive Note 
by the Secretariat and would comment on it at the next meeting.  
3.13.  The representative of the European Union said that the Note was timely. As shown by the 
seminar on mobile banking held the day before, ne w technologies could be used to help unbanked 
populations obtain access to banking services. He  found the section of the Note dealing with the 
role of the GATS particularly interesting. He was of the view, and it was becoming increasingly 
clear, that trade liberalization can play an important role in furthering financial inclusion. In that regard, the seminar on mobile banking showed many  examples of firms setting up mobile banking 
frameworks in other countries and their positive effect on financial inclusion. Having an open 
framework for commercial presence of both banks and telecommunications providers was 
definitely beneficial. Appropriate frameworks should also be in place. These initiatives were perfectly in line with GATS to the extent that  they were non-discriminatory. International 
standards on payments systems, such as those set by the BIS Committee on Payments and 
Market Infrastructures, were also essential. Finall y, he said that the new payment rules adopted by S/FIN/M/83 
 
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  the European Union adopted earlier in 2014 would make it easier for European consumers to 
choose a bank and open a basic bank account as of 2016. The new rules gave the right to a basic 
payment account to every EU citizen, irrespective of their place of residence or financial situation. Financial education was also very important, and this was an area where both the Commission and 
the European member-states had a role to play. 
3.14.  The representative of India said that the Note was a rich source of information on issues 
related to financial inclusion. Her delegation was currently reviewing the Note and would revert to 
it in due course. Financial inclusion in India had a long history. It was one of the most important 
policy goals of the government. While she was wa iting comments from the capital, she shared 
some preliminary comments on the GATS related as pects of this paper. The Secretariat, while 
establishing the link between financial inclusion and GATS, pointed out four types of governmental 
interventions that could have an impact on the financial sector. One of the interventions, i.e. the 
reduction and elimination of national treatment and market access limitations, was said to be the primary focus of trade liberalization within the GATS. The paper further noted that this could be 
one of the ways to promote financial inclusion. However, in her view, entry and greater 
competition may not automatically promote better access to financial services. The literature showed that most foreign banks focused on urban areas where local profit opportunities were the 
highest, in effect leaving the rural and the semi urban areas unserved. For example, as of 31 
October 2014, out of the 318 foreign bank branches operating in India, 315 were in urban and metropolitan areas. Thus, the role of the go vernment and the public sector banks was of 
paramount importance in promoting financial inclusion in a country of the size of India.  
3.15.  The representative of China said that his delegation was still reviewing the Note. He agreed 
nonetheless that financial inclusion mattered for economic development and poverty reduction. 
China had joined the financial inclusion initiatives under the G-20 framework and attached great 
importance to this issue. He promised to revert to this issue at the next time. 
3.16.  Reacting to some of the comments made, a representative of the Secretariat made a few 
points of clarification. First, the Note was not about financial inclusion per se . A vast literature on 
financial inclusion had emerged over the last years and Members might refer to that as they 
deemed necessary. Instead, although necessary background was provided, the Note was a first attempt to approach financial inclusion from a trade policy perspective, following the comments by Members when the Note was requested. Second, in section 5 of the Note, the Secretariat 
categorized the various policies and regulations adopted by Members, so as to facilitate the 
analysis. It was basically a description of those policies and regulations. The Secretariat did not make, however, value judgments about the appropriateness of these policies. Analysis on the 
effectiveness of such policies had been done el sewhere, both by researchers and international 
organizations specialized in financial inclusion. Finally, in the case of financial inclusion, it seemed clear that trade liberalization was a necessary but not a sufficient condition. As evidenced by the 
initiatives adopted worldwide by both developed and developing countries, specific policies and 
regulations were necessary. However, the evidence also showed that most of those policies did not need to discriminate against foreign service supplie rs; nor did they need to impose market access 
limitations. These issues needed to be seen on a case-by-case basis. 
3.17.  The Chairperson said that this initial discussion was very good and quite informative. She 
thanked in particular South Africa for its statement. Various comments were made on the links 
between financial inclusion and the GATS. Since a number of Members said that they were still 
reviewing the Note by the Secretariat and would like to comment on it, the Committee would 
revert to the Note at the next meeting.  
3.18.  The Committee took note of the statements made and decided to revert to his item at the 
next meeting. 
3.2  Seminar on mobile banking 3.19.  The Chairperson said that the seminar on mobile banking held on 27 November was very 
interesting, informative and stimulating. As she indicated at the end of the seminar, she would 
provide a written informal summary of the seminar's proceedings under her own responsibility, so 
as to have some record and a collection of the main issues discussed. In the meantime, as was always done, the program and the presentations would be posted in the WTO public website.  S/FIN/M/83 
 
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  3.20.  The representative of Brazil said that a clear takeaway from the seminar was that new 
business models, together with the integration of different services, enabled service operators to 
reach rural and underserved urban areas, as well as low-income people. Mobile banking could be a valuable tool for enhancing access to financial services and thus contributing to poverty alleviation. 
However, since many of those services targeted vulnerable segments of the population, financial 
education was needed to protect those consumers,  prevent over-indebtedness and, thus, ensure 
financial stability. The complexity of mobile banking systems justified closer monitoring of the 
systemic risks that might potentially arise. Even  though mobile banking was often regarded as 
domestic phenomenon, there were trade policy implications related to commercial presence and the cross-border day-to-day activities of foreign branches or companies. Taking into account that 
the prospects for increasing trade in this field de pended upon factors such as interoperability and 
standardization, it was important to ensure wide latitude in regulation. The scope of regulation 
should not be curtailed by trade rules and disc iplines. For these to be mutually supportive, 
regulation should rather be strengthened, harmonized, and coordinated. 
3.21.  The representative of the Kingdom of Saudi Arabia said that the seminar was very 
informative and would certainly enrich Members. Turning to his country's experience with mobile 
banking, he said that the Saudi Arabian Mo netary Agency (SAMA) was the regulator and 
supervisor of the banking sector. Banks supplied a full range of banking services and continued to 
improve access to those services through innovative and more convenient means, including mobile banking. The growth and prospects of mobile bankin g in Saudi Arabia were very promising. In the 
past two years, the number of transactions grew on average by 17 per cent on a quarterly basis. 
Mobile banking had proved to be useful and cost effective where mobile penetration was high. A 
survey conducted in 2013 showed that in Saudi Arabia, smartphone penetration was about 73 per 
cent. Further growth and development of mobile banking might be expected. Mobile banking in 
Saudi Arabia was also facilitated by an advanced electronic payment system which was secure and 
efficient. Banks in Saudi Arabia made substantial investment in mobile banking capabilities and continued to develop services tailored to their clients' needs. The main services supplied included 
bank enquiries, account statements, money transfer, bill payment, government services payment, 
and credit cards. SAMA pursued risk-based regulation, in line with international practice.  
3.22.  The representative of China expressed his satisfaction for the seminar, which was well 
organized. Mobile banking may enhance financial inclusion and improve efficiency in developing 
countries. Various issues raised during the semi nar, e.g. the relationship between financial 
innovation and financial stability, and mobile bank ing standardization, should be further discussed.  
3.23.  The representative of Australia said that the seminar showed that mobile banking was of 
increasing interest to many Members. Presentati ons clearly highlighted the risks and opportunities 
faced by customers and regulators in this field.  In her view, the discussion on trade policy only 
touched upon the surface of things. Nonetheless, that discussion clearly highlighted the 
importance of a technologically neutral approach , given the speed and dynamism of technological 
progress in this area. It was also important, as mentioned by speakers and participants, to keep some degree of flexibility so as to ensure adequate consumer protection – those flexibilities were already built into the GATS, including under paragraph 2 of the Annex on Financial Services. The 
Committee should continue to look at mobile banking and related services to ensure that trade 
rules took account of developments in this area. Some of the issues mentioned during the seminar, in particular the issue of cross-border information flows and data localisation 
requirements, were worth discussing. 
3.24.  The representative of India said that the seminar was very informative and interesting. 
Unfortunately, trade policy issues were not discusse d in detail. This did not mean that were not 
trade issues to discuss. One issue that came up during the seminar, for example, and that could 
be relevant from a GATS perspective was the issue of  classification. Classification issues related to 
mobile banking were new to most Members. More debate and discussion on this might be needed 
both internationally, in Members' capitals, and at the Committee. 
3.25.  The representative of Switzerland said that the seminar was very instructive. It allowed 
Members to learn about a variety of issues such as customer protection, customer privacy, data 
safety, data security, and data flows. Members also realized how important an open, transparent 
and well-functioning regulatory environment wa s for the development of mobile banking.  S/FIN/M/83 
 
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  3.26.  The Chairperson encouraged Members to further reflect on the trade policy issues raised in 
connection with mobile banking, which could be further discussed by the Committee in the future.  
3.27.  The Committee took note of the statements made. 
3.3  Presentation by UNCTAD 
3.28.  The Chairperson said that on 12 to 14 November, UNCTAD Held an "Expert Meeting on the 
Impact of Access to Financial Services, including by Highlighting Remittances on Development: Economic Empowerment of Women and Youth". Since the Committee had been addressing these 
issues as well, an invitation had been extended to UNCTAD to present the outcome of the meeting. 
The presentation was made by Ms. Mina Mash ayekhi, Head of the Trade Negotiations and 
Commercial Diplomacy Branch in UNCTAD.  
3.29.  The representative of UNCTAD (Ms. Mashayekhi) focused on the lessons learnt from the 
expert meeting. Financial inclusion was key to increasing income and expanding welfare 
opportunities. Basic payment, savings and insurance services benefitted the poor. Lack of access to financing was a major obstacle affecting SMEs, microenterprises and new firms in developing 
countries. For example, in developing countries, only 34 per cent of firms had a bank loan, 
compared to 51 per cent in developed economies. Around 2.5 billion adults did not have a bank account. The share of adults in developed countries that had a formal bank account was more than 
twice that of developing countries. 
3.30.  Improving the measurement of financial incl usion was a prerequisite for successful policy. 
Important initiatives in that regard included th e IMF's Financial Access Survey; the World Bank's 
Global Findex Database and Financial Access and Enterprise Surveys; and the G-20's Financial 
Inclusion Indicators. Countries should support those efforts to collect and analyse comprehensive 
data, and produce meaningful indicators. 
3.31.  The situation was very heterogeneous acro ss countries and regions. Middle income countries 
had an account penetration rate that doubled that of low income countries. Asia and the Pacific 
exceeded the global average of account penetration (including for women and youth) while Middle East and North Africa and Sub-Saharan Africa la gged behind. Women lagged behind more in Latin 
American countries, while the youth population was particularly affected in Europe and Central 
Asia. Heterogeneity also existed within countries. For example, research in Kenya revealed that 
people with physical disabilities were particularly vulnerable to financial exclusion, with women affected in a disproportionate manner. In countries with differential treatment under the law or by 
custom, women were less likely than men to have an account, to save or to borrow. Measures to 
achieve financial inclusion may not impact equally women and men, and additional efforts were required to ensure benefits for segments th at are more prone to financial exclusion. 
3.32.  Obstacles to financial inclusion included lack of disposable income; as well as physical, 
economic, administrative and psychological barriers such as cost, travel distance, paperwork and lack of trust in the banking system. These barriers affected primarily the poor, women, youth, 
rural population, informal workers and migrants. The level of education, connectivity, capacity to 
generate surplus, and availability of financial suppliers had been found to be among the most 
important determinants of financial inclusion.  
3.33.  Financial inclusion required addressing several constraints, such as inadequate 
infrastructure, low bank penetration in rural areas, and heavy documentation requirements. 
Adequate regulation was necessary in order to tackle information asymmetry and imperfect competition. Information asymmetry may lead to undersupply of credit to particular groups, and 
moral hazard may lead to excess supply and inde btedness. Imperfect competition could lead to 
market concentration, as well as undersupply in rural areas and to the poor. An undiversified financial sector could be vulnerable to external shocks. However, excessive regulation may deter 
access to financial services. For example, anti-m oney laundering (AML) regulation with stringent 
requirements may create bias against low value added customers. Due to all these reasons, policies should promote efficient markets and equitable and affordable access to financial services.  
3.34.  Among the many options to enhance financ ial inclusion, mobile money schemes stood out. 
Mobile network operators offered financial services through wireless applications, including the S/FIN/M/83 
 
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  possibility to use the mobile phone to store money, make transfers (facilitating remittances) or 
payments. The growth of mobile money schemes had been exponential. In October 2014 there 
were around 250 mobile money schemes in developing countries (up from 130 in March 2012). Of these, 226 provided person-to-person domestic transfers, 62 facilitated international remittances, 
10 were engaged in government-to-person services, and 8 supplied mobile micro insurance. Kenya 
was often highlighted as one of the most successf ul mobile banking experiences. In March 2013, 
M-PESA had 17 million active customers, was li nked to 25 banks and 700 ATMs, and had over 
37,000 mobile money agents. While domestic mobile transfers between consumers still 
predominated, the reception of international mobile transfers via Western Union was also available. 
3.35.  Mobile money schemes were implemented through different business models: bank-centric 
(e.g. India); mobile network operator-centric (e.g . Kenya); or mixed models. The choice of model 
was related to the specific regulatory situation of  each country. Experience showed that the focus 
should be on enabling innovation without prescribing a specific model. For all its benefits, mobile 
money was not a panacea for financial inclusion. It still accounted for a smaller value of 
transactions than traditional instruments. In Kenya, for example, the daily value of transactions between banks was almost 700 times larger than between M-PESA accounts. Successful 
experiences, such as Kenya's, may be hard to rep licate since they depended on the critical mass of 
users and on the specific regulatory environment.  
3.36.  Governments adopted different business models in order to address traditional access 
barriers. State-owned, cooperative, developm ent and community banks, as well as Islamic 
finance, had been adopted in many cases as a complement to private banking services. The use of 
banking correspondents was facilitated by the existing networks of agents and institutions (e.g., post offices, retail agents). Posts, which had the world’s largest physical network (500,000 postal 
offices in developing countries compared to 275,000 bank branches), and operated in remote 
areas, had long been serving as correspondents  offering a wide range of financial services. 
Services provided through post offices included international money transfers, government 
payments, insurance and savings.  
3.37.  There was a strong relationship between remittances, financial inclusion and poverty 
reduction. Remittances represented major and usually steady flows that increased households' income and spending in social services (e.g., he alth and education). Remittances contributed to 
financial services demand by making recipients more inclined to join the formal financial sector. 
Estimates showed that a 10 per cent rise in remittances may lead to a 3.5 per cent reduction in the share of people living in poverty. Trade policy could be relevant for remittances and financial 
inclusion. Trade and cooperation agreements at the regional and multilateral levels, together with 
regulatory cooperation, provided a platform for the promotion of the temporary movement of natural persons, which usually led to cross-border remittances. Transfer costs were a major 
impediment. South-South remittances were costly due to lack of information and lack of 
competition (e.g., exclusivity contracts). One of the Sustainable Development Goals was to reduce the transaction costs to less than 3 per cent of migrant remittances and to eliminate remittance corridors with costs higher than 5 per cent by 2030. The G-8 and the G-20 agreed on the target of 
reducing the global average transfer costs to 5 per cent of remittances in 5 years (it was 8.1 per 
cent in the second quarter of 2014). 
3.38.  Governments could play an important role by developing a sound regulatory and 
institutional framework, and by taking direct measures to encourage the supply of financial 
services. These direct measures may include subsidies and mandatory requirements, including universal services obligations. Examples included the obligation to offer basic or low-fee accounts, 
the prohibition to refuse basic financial services to poor clients, the prohibition of avoiding service 
in particular areas, exemptions from onerous documentation requirements, priority sector lending, mandatory lending to SMEs, and lending to poor people at lower interest rate with easy repayment and no profit margins. Policies could also aim at increasing demand for financial services. For 
example, governments could make payments, such as pensions, through electronic transfers to 
bank accounts. They could also support availability  of information, including by setting standards 
for disclosure and transparency. Improved financial literacy, through inter alia the 
institutionalization of financial training in the education system, the dissemination of information 
outside the school system and the design of reach out programmes, could also support demand for financial services.  S/FIN/M/83 
 
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  3.39.  Turning to trade policy and regulatory reform, she said that trade liberalization efforts 
needed to be coordinated and synchronised with adequate domestic regulation to promote financial inclusion. GATS-related issues were also addressed at the expert meeting. While specific commitments under the GATS had not had a negative effect on financial inclusion, participants at 
the meeting were of the view that the right to re gulate must be preserved and expressed concerns 
about the contours of the prudential carve- out in the GATS. The implications of GATS 
commitments should in any case be further analyz ed. The meeting also looked into preferential 
trade agreements. Concerns were raised in particul ar with regard to the potential effect of these 
agreements on state-owned enterprises.  
3.40.  The main conclusions of the meeting were the following. Data collection and measurement 
should be improved. Policies should seek a bala nce between efficient markets and equitable and 
affordable access to financial services, pursuing simultaneously financial inclusion, financial 
stability, and financial integrity. Governments had an important role in setting up sound and proportionate regulatory frameworks and incentives to increase supply and affordability of financial 
services (e.g. promoting competition and universal access, and addressing infrastructure 
constraints). Trade liberalization may promote efficiency in financial services; it needs to be adequately coordinated with domestic regulation  to promote financial inclusion and prudential 
objectives. New technology, such as mobile money, reduced physical and economic barriers. 
Access to technology, network interoperability, a level playing field and coordination between regulators and operators were necessary. Stan dards, though necessary, should not become 
barriers for developing countries. Traditional barriers could be addressed by innovative business 
models, including bank correspondents, as well as state-owned, cooperative, development, and 
community banks. Remittances were the major source of external private financial inflows into developing countries, and a promising source of dema nd for financial services. Hence, safer, faster 
and less costly remittances could contribute significantly to financial inclusion. 
3.41.  The representative of Brazil said that as highlighted at UNCTAD's expert meeting, the 
liberalization of trade in financial services alone was no panacea for financial inclusion. An 
adequate regulatory and institutional framewor k must be set up beforehand, and should be 
perfected and refined during and after trade openin g. In the absence of that, trade liberalization 
might actually yield negative results in terms of financial inclusion. Unregulated or partially regulated foreign banks may for example pick the richest and most profitable clients, to the 
detriment of rural or poor areas, SMEs, women,  small farmers and the youth. Therefore, broad 
policy and regulatory space was crucial for financial inclusion purposes. Developing countries in particular should always carefully assess the effects of trade agreements on financial inclusion 
policies and other legitimate policy goals before undertaking specific commitments. 
3.42.  The representative of the Philippines sh ared her country's experience with financial 
inclusion. The Philippines banking system remained strong and resilient and the network of 
banking offices and ATMs had been expanding thro ugh the years. However, increasing access to 
financial services remained a challenge. Presently, nearly 600 of the country's 1634 cities and municipalities remained unbanked and the distribu tion of banking services was skewed towards 
highly urbanised and populous areas, leaving much of the low income areas significantly 
underserved. As early as 2000, the Central Bank of  the Philippines (BSP) successfully set in place 
an enabling policy and regulatory framework for microfinance. In 2007, the BSP was one of the 
first central banks in the world to establish an office dedicated to financial inclusion. The BSP's 
general approach was to ensure that an enabling regulatory environment was in place allowing 
innovation and market access solutions to  thrive. Between 2009 to 2013, the Economist 
Intelligence Unit Global Survey on Microfinance had ranked the Philippines as number one in the 
world in terms of policy and regulatory framewor ks for microfinance. Turning to the Philippines' 
experience in mobile financial services, she said  that in 2009, the BSP issued a comprehensive e-
money regulatory framework. The regulations provided qualifications for e-money issuers, such as capital requirements, fit-and-proper standards, rules for the issuance of e-money and parameters 
for the developments of e-money agent networks . The regulation also addressed the potential 
entry of new players. E-money had delivered sign ificant gains. There were currently over 10,600 
active e-money agents supplying services throughout the country. 
3.43.  The representative of Ecuador echoed the statement by Brazil. Liberalization of trade in 
financial services was no panacea for financial inclusion, but should form part of regulatory reform 
initiatives. He expressed his satisfaction that the importance of remittances for financial inclusion S/FIN/M/83 
 
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  had been stressed. In his country's experience, remittances had played a fundamental role in 
promoting financial inclusion.  
3.44.  The representative of Chile wondered what the point of this discussion was. For example, a 
number of references were made to discrimination against women in accessing credit or financial 
services in general. While he shared those concerns, he wondered whether it was pertinent to 
discuss that issue in the GATS context, or whether Members would have something to say from a GATS perspective. Those issues were discussed in the relevant fora, and Chile was involved in such 
discussions. Apart from that, he agreed that a sound regulatory framework was needed. However, 
some seemed to link that to specific policies or regulations targeting foreign banks. In that regard, if the objective was to promote financial inclusion, and more generally if regulation was to apply to all the people living in a territory, he saw no reason why such regulations and policies would not 
apply equally to domestic and foreign financial service suppliers. There should be a very good 
reason to implement regulations that would apply differently to established domestic and foreign banks. 
3.45.  The representative of the United States said that trade liberalization and commitments 
should not be blamed for all the ills out there. Well-crafted trade liberalization strategies can 
promote efficiency, competition, and innovation. Trade policies were just part of an overall 
development strategy. It seemed that many of th e financial inclusion problems mentioned thus far 
were the result of domestic regulations that pr evented access to bank accounts. For example, 
people might be prevented from opening a bank a c c o u n t  i f  t h e y  w e r e  n o t  a b l e  t o  s h o w  b i r t h  
certificates or utility bills or some other pieces of information. In other cases, there were 
restrictions on women to enter into contracts or even having a mobile phone. While those were 
problems of financial inclusion, he was not sure that the GATS could address them. Turning to state-owned banks, he said that some of them misallocated and mispriced credit, hampering 
private innovation, forcing other private banks to  misprice loans, and therefore worsening the 
problem. In his view, it was simplistic to say that the problem originated in cream-skimming by foreign banks, while there were in fact internal measures contributing to the problem. Turning to 
the role that trade policy may play, he said that in the case of mobile banking, where many 
services where involved (financial services, tele communications, and computer-related services), 
lack of commitments or a closed market in any of these sectors would actually hinder access to financial services. That provided a good rationale for opening up, and taking commitments on, the 
supply of financial services, telecommunications and other related services.  
3.46.  The representatives of Argentina agreed with the statements made by Brazil, Chile and 
Ecuador regarding the need for a sound regulatory framework for financial services. 
3.47.  The representative of the Bolivarian Republic of Venezuela agreed with the statements 
made by Brazil and Ecuador.  
3.48.  The Chairperson thanked UNCTAD for the pr esentation, which had prompted an interesting 
discussion.  
3.49.  The Committee took note of the statements ma de and decided to revert to this agenda item 
(Trade in Financial Services and Development) at the next meeting.  
4  ITEM D - TECHNICAL ISSUES (CLASSIFICATION ISSUES) 
4.1.  The Chairperson recalled that at the last meeting, the Committee continued its discussion on 
the issue of "new financial services" on the basis of a note by the Secretariat 
(JOB/SERV/187/Rev.1). An informal summary of those discussions, prepared under the Chair's 
responsibility, was contained in document JOB/SERV/188/Rev.1. 
4.2.  As agreed in the past, the discussion under this item was held in informal mode.  4.3.  After the discussion, the Chairperson said that  she would consult with delegations with a view 
to identifying other potential issues for discussion.  
4.4.  The Committee took note of that statement an d decided to revert to this agenda item at the 
next meeting. S/FIN/M/83 
 
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  5  ITEM E - RECENT DEVELOPMENTS  IN FINANCIAL SERVICES TRADE 
5.1.  The Chairperson said that, as a standing feature of the agenda, this item was used in the 
past to either present and discuss recent deve lopments 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 insurance 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.  There were no interventions under this agenda item. 
5.3.  The Committee took note of the Chairperson's statement and decided to revert to this 
agenda item at the next meeting.  
6  ITEM F - ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON 
TRADE IN SERVICES 
6.1.  The Chairperson recalled that Brazil was the only Member that had yet to accept the 
Fifth Protocol.  
6.2.  The representative of Brazil said that ther e had been no developments regarding the internal 
procedures for the acceptance of the Fifth Protocol.  
6.3.  The Committee took note of that statement an d decided to revert to this agenda item at the 
next meeting. 
7  ITEM G - OTHER BUSINESS 
7.1.  No issues were raised under this agenda item. 
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