RESTRICTED  
  
S/FIN/M/77  
 
19 July 2013  
(13-3897)  Page: 1/12  
Committee on Trade in Financial Services    
 
REPORT OF THE MEETING HELD ON 19 JUNE 2013 
NOTE BY THE SECRETARIAT1 
The Committee on Trade in Financial Services held a meeting on 19 June 2013, under the 
chairmanship of Mr Wamkele Mene (South  Africa). The agenda is contained in 
Airgram WTO/AIR/4140. An annotated agenda (JOB/SERV/152) had been circulated prior to the meeting.  
 
1  ITEM A - ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN SERVICES 
1.1.  The Chairperson recalled that Brazil was the only Member that had yet to accept the 
Fifth Protocol. The representative of Brazil said that it was difficult to foresee when the domestic 
procedures for the acceptance of the Protocol wo uld be completed. He endeavoured to keep the 
Committee abreast of any developments in that regard. 
1.2.  The Committee took note of those statements and decided to revert to this agenda item at its 
next meeting. 
2  ITEM B - TRADE IN FINANC IAL SERVICES AND DEVELOPMENT 
2.1.  The Chairman reminded Members that at the informal meeting held on 23 May, Norway 
and Pakistan had announced their intention to make a presentation on mobile banking services 
in Pakistan under this agenda item. Both presentations were circulated as room documents (Branchless Banking in Pakistan, communication from Pakistan, RD/SERV/93, and 
Mobile Banking Services in Pakistan, co mmunication from Norway, RD/SERV/94).  
2.2.  The representative of Pakistan said that th e notion of 'branchless banking' emerged from the 
stark economic reality that a significant percentage  of adult population in Pakistan did not enjoy 
access to formal financial services. That situation motivated a reform process aiming at extending 
the availability of formal financial services to th e economically disadvantaged layers of the society. 
'Branchless banking' was implemented through a variety of partnerships between financial 
institutions, telecom operators, retailers, and other service suppliers. Essentially, the financial 
services were provided by the banks, but the actu al agents on the ground could be different types 
of services suppliers. The technological aspects of the transaction were in the hands of the telecom company involved.  
2.3.  The supply of these services in Pakistan was pioneered by Telenor-Tameer. Six other 
partnership service providers have been author ized since then, and five additional licence 
applications were being considered. In 2012, over 194 million transactions by 25 million people 
were recorded, worth US$9.13 billion.  
2.4.  Pakistan opted for a bank-led model, in which the services must be provided by banking 
institutions, in partnership with other service suppliers. In other words, the bank must be 
responsible for the execution of the transactions and for the safety of the system. The permissible 
types of bank-led model were the followin g: (a) one-to-one, i.e. one bank and one 
telecom company (e.g. Easypaisa); (b) one-to-many, where a bank partnered up with several 
                                               
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/FIN/M/77 
 
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telecom companies, allowing the supply of services  to a larger group of consumers; (c) many-to-
many, where many banks partnered up with various telecom companies and collectively provided a single service platform; and (d) non-telecom ba sed model, where other service suppliers, such 
as post offices, retail stores, petrol stations, and courier companies were allowed to provide basic 
financial service as long as they were in partnership with banks. For example the subsidiary of DHL 
in Pakistan was in the process of setting up branchless banking services in the country.  
2.5.  The range of services available for use with mobile phones included bank accounts, 
money transfer, bill payment, merchant payment, loan disbursement and repayment, and 
money remittances. The reform also took account of the risk factors included in such transactions: customer-related risks, agent-related ri sks, and technology-related risks.  
2.6.  Thus far, 'branchless banking' had had a positive impact on development, by increasing 
access to financial services (about 20 million people were already using these services); by 
improving the allocation of capital; by contributing to the consolidation of the microfinance sector; and by enhancing the tax base. With one third of users being women, 'branchless banking' also led 
to gender empowerment (one of the Millennium Development Goals). In addition, these services 
proved useful in cases of emergencies, such as the 2010 floods that left almost one-fifth of Pakistan's total land area under water. In this situation, where banks were inaccessible, the 
Government used 'branchless banking' services to provide emergency financial assistance to 
people affected by the floods. However, due to insufficient data, it was early to assess the actual impact of these services on employment and entrepreneurship. 
2.7.  The representative of Norway made a pres entation about the experience of Easypaisa as 
a supplier of mobile banking services in Pakist an. Easypaisa was owned and operated by Telenor 
(a Norwegian telecom company) and Tameer bank (a Pakistani bank majority-owned by Telenor). Mobile financial services included money transfer , bank accounts, savings and loans, microfinance, 
and remittances. Banking services were supplied via mobile telephony. The telephone number and 
the ID-card in combination served as identification, in practice much like a bank account number. Transactions were registered, and receipts were se nt, by SMS. All qualified outlets (franchises and 
shops) may perform the services. The larger share of  operations consisted of transactions of small 
amounts, both nationally and internationally. Th e typical transaction was conducted by people who 
moved from rural to urban areas or abroad to work, and sent money back to their families.  
2.8.  In Pakistan, as in other countries, access to ordinary banking services was very low, whereas 
access to mobile telephony was much higher. According to a report produced in 2011 by 
the Boston Consulting Group (BCG), more than 2.5 billion adults were 'unbanked'; in other words, 
they had no access to financial services. At the same time, nearly 2.5 billion people in 
developing countries had mobile phones. This means that there could be up to 2 billion 
mobile phone users who are not financially included and who could be served through mobile financial services (MFS). In Pakistan, according to World Bank estimates, 71% of 
the population reported basic needs of financial services in 2009. The reasons for the low access 
to banking services were physical and structural; physical, because of geographical distance from rural areas to bank branches located in cities, and structural, because poor and uneducated people were not prepared to go through the nece ssary procedures to establish a bank account.  
2.9.  In 2009, Telenor Pakistan partnered with Ta meer Micro Finance Bank to constitute Easypaisa, 
the first service supplier to offer mobile banking services in Pakistan. Before entering into this operation with Telenor, Tameer bank had a brand name in Pakistan as well as the necessary 
banking services expertise. Telenor contributed the telecom expertise, its mobile customers, 
and the distribution network consisting of fran chises and shops. Approved by the State Bank 
of Pakistan, Easypaisa provided basic and reliable financial services to the unbanked, SMEs, 
and the Government. With 60 million transactions a year, Easypaisa ranked as the world's 
third biggest mobile money service in 2012. A network of around 20,000 shops served nearly 5 million users in 750 cities every month. 
2.10.  Mobile banking was already a mature technology. However, in some countries, the 
main challenge for suppliers of mobile banking and financial services was that regulation 
(e.g. licensing) had been designed for the 'old' world of traditional banking. These regulations were of critical importance insofar as they determined who was entitled to hold a license to deliver 
basic services, who was able to acquire a bank, or what kinds of partnership were allowed between 
banks and telecom operators.  S/FIN/M/77 
 
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2.11.  She concluded by saying that the mobile banking services offered by Easypaisa were 
an example of how trade in financial services might contribute to improving the services offered to poor people living in rural areas. Access to banking services could also improve possibilities 
for business development, thus contributing to development. 
2.12.  The Chairman said that the topic was timely. There were a few areas that Members 
might want to reflect on. First, it became apparent from the presentations that, although there 
seemed to be positive effects of mobile banking on development, it was not yet possible 
to measure those effects due to insufficient data. Second, the effect of regulations on the supply 
of these services was also something the Committee could further explore. 
2.13.  The representative of China said that th e presentations provided a clear example of how 
financial services could contribute to economic growth in developing countries. Pakistan's 
case study on mobile banking services showed  how the supply of financial services through 
modern technology, and within the appropri ate regulatory framework, could benefit 
the economically underprivileged population. The pr esentations also highlighted the important role 
played by policy in promoting the development of  these services. He encouraged other Members, 
particularly developing country ones, to share their experiences in this field.  
2.14.  The representative of Argentina said th at this was a very interesting technological 
development that enhanced financial inclusion. However, financial inclusion had two faces: on one 
side, the facilitation of access to financial services that might be otherwise extremely expensive in non-formalized financial systems, and on the other side, the increase in risks associated, for example, with indebtedness by financially illiterate segments of society. It would be interesting 
to know in that regard what measures had been taken in Pakistan and other countries having 
introduced these services to protect consumers.  
2.15.  The representative of the United States agre ed that this was exactly the type of issue that 
the Committee should be exploring. He concurred wi th the Chairman that the data deficit and the 
impact of the regulatory framework were releva nt issues to discuss. Mobile banking services 
demonstrated the positive synergies between vari ous services sectors, and helped address one 
of the main difficulties facing developing econom ies, namely supply-side constraints. It would be 
interesting to know in that regard if the expansion of mobile banking had helped expand the supply of 'formal financial services' as well. Similarly, in the telecommunications sector, it would be interesting to know whether these types of services expanded people's ability to access 
value added telecommunications services as well. In addition, it would be interesting to learn 
whether and how mobile banking services had impacted other sectors, like agriculture and manufacturing. 
2.16.  The representative of Canada also agreed th at this was exactly the type of issue that should 
be discussed in the Committee. The presentati ons by Norway and Pakistan highlighted 
the important role that trade in financial services played in promoting development and financial 
i n c l u s i o n .  H e  a g r e e d  w i t h  o t h e r s  t h a t  M e m b e r s could benefit from sharing their experiences. 
He supported further discussions under this agenda item. He asked Pakistan what specific financial services were supplied by agents such as petrol stations and chain stores. In particular, he asked whether these agents supplied services similar to those supplied by ATMs in other 
countries, such as deposit-taking or cash withdrawals, or whether they supplied other services.  
2.17.  The representative of Switzerland also agreed that this was the type of discussion 
the Committee should have. Learning more about the type of services or supply modalities 
that could best contribute to development should be an essential aspect of the 
Committee's activities. In many countries, there was a gap between highly developed urban areas and underdeveloped rural areas. It was impo rtant to ensure the development and supply 
of financial services in rural areas as well. Policy had a central role to play in that regard, 
as indicated by China. Mobile banking was a clear example of policy reform geared towards the reduction of disparities between urban and rural areas. The presentations also showed 
the potential for co-operation between firms from developed and developing countries in 
the supply of services. Finally, taking into account the important role of financial advice in 
the supply of financial services (e.g. helping customers choose between different savings options), but also the diversity of agents involved in the supply of mobile banking services, he asked 
Pakistan how regulators ensured that appropriat e financial advice was given to – in principle 
financially illiterate – customers  S/FIN/M/77 
 
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2.18.  The representative of Indonesia said that this discussion on mobile banking was very timely. 
Being an archipelago of more than 17,000 islands,  ensuring the supply of financial services 
throughout the Indonesian territory might be quite challenging. At the same time, Indonesia was one of the largest users of mobile phones in the world. This created a sound basis for 
the development of mobile banking services, as well as access to finance for SMEs, in rural 
and remote areas, thus compensating for the difficulties of establishing financial institutions in those places. However, enhancing people's awareness of mobile banking services, as well as 
consumer protection, were very important. For the aforementioned reasons, Indonesia welcomed 
further discussion and experience-sharing on this issue.  
2.19.  The representative of Brazil said that in 2009 the government launched a vast programme 
of financial inclusion that bore very positive results. Today, all municipalities in the country were 
served by the financial system. Financial inclusion must always be accompanied by financial 
education programmes in order to enhance the population's awareness of different services and avoid excessive indebtedness. As a regulator, hi s main concern was to avoid the worst. In that 
regard, he reminded Members that payments throug h mobile phones were also part of countries' 
payments systems. If badly managed, the payments  system might be a source of systemic risk. 
He asked Pakistan whether specific regulations had been put in place to deal with payment 
system risks.  
2.20.  The representative of India agreed that th is was exactly the type of discussion that should 
be taken up in the Committee. Financial inclusion in remote rural areas was one of the 
major concerns of developing countries, and this was an area where innovative financial solutions 
had been found. He reserved his right to co me back with further comments in the future. 
2.21.  The representative of Australia also agreed that this was the kind of discussion 
that Members should have under this agenda item. She sought further information on 
the cross border use of the payment system to  facilitate, for example, payment by clients 
and remittances.  
2.22.  The representative of South Africa said th at until very recently millions of South Africans, 
roughly half of the population, were 'unbanked'. This situation was due to lack of access to formal 
banking structures and the high costs of bankin g services. Significant progress had been made 
in addressing these constraints, through active governmental intervention. The most recent estimates available to him showed that nowadays about 75% of the population had access to basic 
financial services. However, access to finance was still problematic in rural areas. The government 
expected to solve that deficit through, inter alia , the roll out of broadband to rural areas, and 
the recent granting of a banking licence to the Post Office, which could then supply various 
financial services through its branch network. Consumer protection was also a concern of 
South African policy makers. In particular, he said that unsecured lending in the South African consumer credit market had shown a dramatic increa se over the last couple of years. This rise 
in unsecured lending was due to a combination of factors, notably the reduction of secured lending 
brought about by the tightening by banks of th eir lending criteria in the aftermath of the 
global financial crisis, and the entry of new participants in the unsecured credit market, such as supermarket chains and other retailers. The South African National Creditor Regulator was taking 
active steps to solve this problem. The Sout h African experience showed the importance 
of providing for a well-resourced regulatory mechanism to deal with the risks that might arise while promoting the expansion of financial servic es to the unbanked segments of the population. 
2.23.  The representative of the European Union said that the presentations showed how trade 
in financial services, coupled with technological developments, could be used to promote 
financial inclusion. He sought further information on whether there were specific mechanisms 
to ensure that banks, which were the actual providers of the financial services, selected 
adequate agents on the ground.  
2.24.  The representative of Turkey asked whethe r the different platforms available in Pakistan 
(e.g. one-to-one, one-to-many) were interoperable. Regarding consumer protection, he also asked 
whether insurance schemes were available for users in case something went wrong.  S/FIN/M/77 
 
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2.25.  The representative of Tanzania said th at these presentations and information exchanges 
were extremely helpful for developing countries. She encouraged further discussions at 
the Committee. 
2.26.  The representative of Pakistan addressed the comments and questions raised by 
other Members. Consumer protection was a legitimate concern. Failures in consumer protection 
could emanate from two sources: technology (e.g. data not appropriately stored and protected), and fraudulent activity by third-party service providers, which were agents on the ground. 
These concerns had motivated the choice of a bank-led model (as opposed to telecom- or retail-led 
models), so as to ensure better regulation of the services. For example, a mandatory bank outreach program had been put in place, wi th a view to educating and informing customers. 
Banks were also required to enforce a mechanism for tracking complaints, so as to identify 
the agent concerned and take any necessary disciplinary actions, including the revocation 
of agency licences. All service suppliers must have a mandatory complaint-redressing system, whereby complaints could be received through SMS, and could be redressed following elaborate 
instructions given by the Central Bank.  
2.27.  Answering a question raised by the United States, he confirmed that access to 
mobile banking services had led to an increase in the use of formal banking services. 
Pakistan's Central Bank estimated that since the start of mobile banking services there had been 
a 17% increase in the use of formal banking services by initial users of such mobile services. Replying to a question by Canada, he explained that the services provided at point-of-sales 
included deposits, withdrawals, disbursement of loans, acceptance of loan applications, 
and disbursement of pensions and other benefits provided by the Government.  
2.28.  Addressing the question from Australia on cross-border transactions, he said that within 
the context of the latest reforms undertaken by the Central Bank, consideration was being given 
to allowing these services from a limited number of countries. However, unilateral authorization 
of such services did not necessarily mean that  they would actually take place, unless the 
other trading partner also had an enabling regulatory framework.  
2.29.  Addressing a question from Brazil, he said that payment risk management was taken 
care of by regulations. On the issue of financial advice raised by Switzerland, he explained that 
not every agent was allowed to provide financial advice. Banks had a mandatory agent training program, and only those agents passing the necessary examinations were allowed 
to provide advice. Agents allowed to give out such advice displayed such capacity in their 
points of-business. 
2.30.  Regarding the issue of money laundering and data security raised by the European Union, 
he explained that Pakistan's Central Bank insisted on mandatory and very strict 
'know-your-customer' requirements, which had been put in place by all micro-finance banks and banks supplying mobile banking services. Finally, in reply to Turkey's question, he confirmed that 
all the platforms were interoperable. Both service providers and users of services could use 
multiple platforms simultaneously. 
2.31.  The representative of Norway said that banking and microfinance services were provided 
by Tameer Bank to one million regular customers, while the basic transaction services supplied 
by Easypaisa were accessible to all mobile users in Pakistan. Mobile accounts were available 
to Telenor customers (some 30 million). Referring to the discussion on formal versus informal financial services, she added that by  2013, $700 million had been channelled from 
the informal cash economy into the formalized banked economy.  
2.32.  The Chairman said that the discussion ma de clear that there was a broader issue that 
the Committee should explore further, namely the issue of access to financial services. He would 
conduct informal consultations with interested Members to see how the Committee could 
build upon the discussion started at this meet ing. Suggestions made at previous meetings 
for further work under this agenda item, for example by Australia and Canada, would also be taken up in those consultations.  
2.33.  The Committee took note of the statements ma de and decided to revert to this agenda item 
at the next meeting.  S/FIN/M/77 
 
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3  ITEM C - REGULATORY ISSU ES IN FINANCIAL SERVICES 
3.1.  The Chairman said that this item had been included in the agenda for this meeting in light 
of the discussions at the Working Party on Domest ic Regulation, where views had been expressed 
in favour of discussing financial services regulatory issues at this Committee as well as at 
the Working Party. The idea was to have a better-informed discussion on financial services in the competent Committee, where the sectoral experts sit. The discussion would be reflected in the minutes of the Committee, and members of the Working Party on Domestic Regulation 
could use that information as they deemed appropriate.  
3.2.  The discussion would be based on a Secret ariat Note on Regulatory Issues in Sectors 
and Modes of Supply, contained in document S/WPDR/W/48. The section on financial services 
was contained in paragraphs 185 to 195 of the document. Paragraph 20 of the document 
suggested the following general questions for discu ssion: (a) Are there any other regulatory issues 
in sectors and modes of supply, apart from those discussed, which may also have an impact on 
trade in services?; (b) To what extent might trade-related regulatory concerns in sectors 
and modes of supply fall under the scope of domestic regulation disciplines and be addressed through the envisaged Article VI:4 disciplines?;  and (c) Would the scheduling of Article XVIII 
additional commitments be an effective complementary or alternative way to address any of these 
concerns? In this context, would a "Reference Paper" approach be useful? The Chair clarified 
that these questions were not exhaustive. They had been provided by the Secretariat to help 
stimulate discussions. Members remained free to raise other questions and issues as necessary.  
3.3.  Upon invitation by the Chair, a member of the Secretariat presented the Note. The Note 
had originally been prepared as an input to discussions at the WPDR. Since the Note addressed 
a variety of service sectors, it should not be considered as thoroughly covering all 
regulatory issues arising in financial services. Equally, the questions just read out by the Chairman 
should not be considered as equally relevant for all the sectors in the Note. This was a welcome opportunity, from the Secretariat's pers pective, to further discuss these issues, to 
learn more from Members' concerns and experiences, and to identify issues that might not have 
been captured in the Note but that could be worth considering. 
3.4.  The representative of Argentina acknowle dged the comment made by the Secretariat that 
the Note was supposed to cover regulatory issues for all service sectors, and that in that context 
only a few pages had been devoted to financial services. Commenting on paragraphs 185 and 191 
of the Note, he said that in addition to the three objectives of financial regulation mentioned in the paper (i.e., the integrity and stability of the financial system, the safety and soundness of financial 
institutions, and consumer protection), financial regulation must ensure that the financial sector 
be at the service of the real economy. That is, as stated in the mandate of some central banks, 
for example in Argentina and the United St ates, to promote employment and growth. 
Thus ensuring that that the financial sector fulfilled its crucial role in the functioning of the 
economy, as stated in paragraph 185.  
3.5.  Turning to paragraph 188, he agreed th at problems of information asymmetry between 
lenders and borrowers were an important factor that can lead to market failures, and might 
eventually result in serious crises. He also agreed that negative externalities, partly as 
a consequence also of information asymmetries, might generate endogenous crises, due to contagion within the system. However, the recent financial crisis, much like many others before, 
revealed that an important factor behind it was the absence or lack of strict enforcement of rules, 
which allowed big financial institutions to reduce their equity and liquidity levels to a minimum and get involved in high-risk operations, not for lack  of information but due to the pursuit of profit, 
which manifested itself in significant rise in banks' profitability compared to the historical 
experience, and to other sectors. 
3.6.  He then commented on paragraphs 192 to 194. In his delegation's view, competition in the 
financial sector was not necessarily desirable. It was precisely the heightened competition in the 
sector that, instead of increasing efficiency for the benefit of the whole society, as could ideally 
be expected in other sectors, actually led financial institutions to take on ever higher risks in an attempt to win larger market shares. It was therefore perfectly justified to impose 
preventive rules in order to avoid entry into the system as well as unsuitable behaviour post-entry.  S/FIN/M/77 
 
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3.7.  Turning to paragraph 195, he said that financial liberalization over the last decades had not 
been beneficial, in terms of stability or spill over  effects, to the rest of the economy. In order 
to avoid financial crisis and serve the rest of the economy, the financial sector must be subject to demanding regulations and supervisory mechanisms. The elaboration and reworking of such 
regulations in order to adapt them to new circumstances (a process sometimes described as 
burdensome, as in point (e)) might call for analyses that cannot be carried out at the speed of financial transactions. For these reasons, financial authorities should not be pushed to quickly 
authorize new products or services. Turning to items (h) and (i), it was also important – from 
a financial stability point of view – to promote diversity among institutions so that the difficulties encountered with specific products do not lead to a widespread crisis due to similarities in the portfolios of financial institutions.  
3.8.  Referring to item (k), he said that the re form of regulations on capital requirements played 
a key part in the attempts to avoid major financial crises. The recent crisis showed that the banking system was undercapitalized. He wondered why banks, which are entrusted 
with savings from the public, needed to have on ly one-thirtieth of their capital relative to 
their assets when any firm in the non-financial sector had a much higher ratio. Undercapitalization had been widely acknowledged as one of the main factors leading to the recent crisis, and 
had motivated the Basel III reforms, whic h were opposed only by the banks.  
3.9.  He also considered that restrictions on advertising of financial products (item (j)) were 
sometimes justified due to another form of information asymmetry: that between financial institutions and the general public, not necessarily highly-specialized in finance. It was 
well known that many institutions advertised conditions for their products that only someone with 
a lot of information and ability to process it could understand. Therefore, some restrictions on advertising might be more than justified for consumer protection. 
3.10.  Once again, the financial sector was not on ly crucial but also characterized by peculiarities 
that justified a special treatment that, without being arbitrary or discriminatory, could prevent 
and solve, at the lowest possible cost to society,  its clear tendency to fall into massive crises. 
In his view, this was the point of view that dominated and should dominate the debate about 
the need for reformulation of policies and that should, of course, be applied equally to domestic and foreign institutions both in terms of access to, and operation in, the market. 
3.11.  The representative of India congratulated the Secretariat for the excellent Note. He then 
passed the floor to a colleague from the Insuranc e Regulatory and Development Authority (IRDA), 
who shared India's regulations and practice s regarding the regulatory issues raised 
in paragraph 195 of the Note. In response to items (a) and (b) in that paragraph, she said that 
there was a well-developed legal framework in pl ace in India. IRDA, the insurance supervisor 
in India, was an autonomous body formed under an Act of the Parliament (i.e., the Insurance Regulatory and Development Authority Act, 1999). The Insurance Act of 1938 and regulations 
framed thereunder laid down a broad regulatory framework for the sector. All the regulations 
were available in the public domain and were easily accessible.  
3.12.  Turning to the issue of transparency and la ck of public comment, she said that the process 
for issue and/or amendment of regulations was clearly laid down in the IRDA Act and was based 
on a two-step process. Firstly, after an in dustry-wide discussion, an 'approach note' was 
placed before the authority for its approval. Simultaneously, the concurrence of the Insurance Advisory Committee (IAC) was sought. The regulations or amendments to the 
regulations were thereafter issued, incorporating the views of the IRDA and the IAC. 
All applicable rules, regulations and guidelines were hosted on the website of the supervisor and were fully available in the public domain.  
3.13.  Coming to point (c) on inadequate time to implement new regulations, she said that 
consultations on regulations took place by exposi ng the draft for public comment. Views and inputs 
were received and considered. A revised draft was subsequently taken to the IAC before final issuance. All stakeholder concerns were duly  considered and sufficient time for suitable 
changes in the insurer or intermediary systems pr ocesses was provided for by the regulations.  
3.14.  She then turned to item (d), on written information on the status of licence applications. 
Insurance regulations in India were fully placed  in the public domain and the regulations on S/FIN/M/77 
 
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registration of insurance companies were also available in the public domain. There was a 
regular interaction with the applicant; hence ther e had been no occasions when the applicant was 
not aware of the status of the licence application. 
3.15.  Discussing the issue of burdensome requir ements for new products and the time required 
for the approval of new products, she explained th at insurance companies in India were required 
to follow 'file and use' norms for launching new products and modifying existing products. While there was no requirement for prior approval of these products, in case the regulator had any 
concerns on the product features, pricing, etc., the same was taken up with the insurer concerned 
and if no further concerns were raised in a ti me span of 30 days the product was deemed to 
be cleared. Thus, products were deemed approved if no concerns were raised within a time period of 30 days. 
3.16.  Turning to the issue of recognition of international accounting, auditing and actuary 
standards, she explained that the Institute of Chartered Accountants of India and the 
Institute of Actuaries of India were the independen t professional bodies in charge of overseeing 
the relevant international accounting, auditing and actuarial standards in the insurance sector. 
Various standards issued by these bodies were in accordance with the corresponding international standards. 
3.17.  Regarding the obligation for insurance companies to employ locally qualified actuaries 
(item (g)), in order to be employed in an Indian insurance company, a foreign qualified actuary needed to obtain the membership of the Institut e of Actuaries of India. The membership process 
for a foreign qualified actuary was a simple and hassle-free exercise aimed at equipping 
him/her with the Indian market situation. Hence no hindrance was envisaged in the process. 
3.18.  Turning to the issue of undue limits on supply of product lines, she said that section 2 of the 
1938 Insurance Act clearly defined product lines in which insurance companies could carry on 
business. Thus far, no concerns had been hear d. Regarding the existence of tight rules on 
the distribution of insurance products, IRDA  had issued regulations providing detailed 
licensing procedures and the code of conduct for various intermediaries. Other financial service 
institutions were also licenced to distribute insurance products as corporate agents and brokers 
within the broad framework of the regulations. 
3.19.  The procedures for advertising insurance products (item (j)), were governed by specific 
IRDA regulations. Broad parameters for compliance  in case of distance marketing had also been 
laid down through regulatory guidance. The aim and purpose of both regulations was to protect 
the interests of policy holders and avoid miss-selling. Distribution through internet was currently at a nascent stage in India and only a few insurers had started marketing their products on-line.  
3.20.  Turning to the level of minimum registered ca pital, she explained that in the case of India, 
initial capital requirements had not been an impediment for setting up insurance companies. In fact, the Indian experience showed that applicant companies usually sought to set up 
operations with capital requirements of even 2 or 3 times the minimum prescriptions. So this 
had not been a problem in the case of India.  
3.21.  Turning to the issue of approval processe s, she said that the registration requirements 
for Indian insurance companies were governed by specific IRDA regulations. Various aspects 
of registration processes were covered in detail. There was no system of preparatory approval; 
hence no difficulties were faced by the applicant.  In order to understand the process, applicants 
usually sought the guidance of IRDA prior to making a formal application. 
3.22.  IRDA was the only regulator of insurance in India. Companies must obtain registration 
from IRDA to carry on insurance business in India. At the time of registration of an Indian insurance company, IRDA relied on self-certi fied copies of documents filed by the applicant. 
There was thus no requirement of notarization. As part of its due diligence obligations, IRDA also 
carried out random checks on the internet and contacted the applicant's home country regulator in order to verify the applicant's track record, credibility, performance and strength. 
3.23.  The last question was on the need to have all personnel approved by the 
regulatory authority. In the case of India, due diligence was carried out at two levels; firstly, S/FIN/M/77 
 
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at the time of registration, and secondly, at the time of appointment and reappointment. 
The insurance legislation stipulated prior approv al from IRDA for appointment and reappointment 
of CEOs, whole-time directors and managing directors of insurance companies. The fit and proper criteria for all directors of insurance companies were clearly outlined in the corporate 
governance framework issued by IRDA. 
3.24.  The representative of Australia welcomed the opportunity to discuss regulatory issues 
in financial services. In her view, paragraph 195 of the Note usefully captured many of the 
trade barriers faced by financial service suppliers. Lack of transparency in regulation was a 
key concern. Often, however, the issue was not whether the relevant regulations were published 
but whether the laws and regulations themselves specified the criteria used to issue licences to operate financial services, particularly in the banking sector. Such non-transparent criteria 
for licence issuance could allow for discretion in decision-making by the regulatory authority, 
therefore reducing the predictability for foreign financial service providers. Australian financial services suppliers had also identified stringent licensing processes as a key issue of interest. 
In some jurisdictions, multiple licenses and authorization – sometimes up to 20 - were required 
for foreign banks to provide certain financial products, resulting in a lengthy and resource-intensive process. She noted that it was sometimes difficult to distinguish between 
prudential measures and trade-restrictive measures, given that some measures might have 
a dual effect. However, in some countries, excessive capital requirements, above international norms such as Basel III, had been identified by some Australian financial service suppliers 
as inhibiting investment in those countries. Small financial service suppliers are particularly 
affected by those restrictions.  
3.25.  The representative of China said that his delegation had reservations regarding some of the 
issues raised in paragraph 195 of the Note. For example, item (e) of that paragraph identified 
specific procedures for the approval of new products, forms, rates and services, as burdensome. 
In his view, automatic approval of new financial services was an obligation contained in the Understanding on Commitments in Financial Services, which was adopted by a minority 
of Members. Particularly after the global financial crisis, it was only natural for financial regulators 
to be more cautious before approving new financial products. Regarding items (h) and (k) of paragraph 195, he said that when limits on th e supply of product lines and minimum registered 
capital requirements were applied on a national treatment basis, it was arbitrary to pass 
judgement on their reasonableness or undue na ture, given the differences among financial 
systems worldwide. Regarding the existence of multiple regulatory authorities, he said that countries had different regulatory systems. Some adopted the integrated financial 
supervisory system while others adopted the functional or segregated supervisory system. 
The existence of multiple regulatory authorities did not necessarily mean that the authorization process would be lengthy and cumbersome. In other words, there was no direct causal link 
between the multiplicity of regulators and the leng th and complexity of the authorization process. 
He reserved the right to come back to this issu e after consulting with the relevant regulatory 
authorities in his country.  
3.26.  The representative of Canada also welcomed the opportunity for Members to share their 
views on the interplay between financial regula tion and trade. His delegation agreed with 
the Note's basic premise that the financial services sector had unique characteristics that had motivated special treatment in regulation and trade agreements. Two of these special 
characteristics were its highly regulated nature and the key role of international organizations 
other than the WTO in setting international regulatory standards. It was important to maintain flexibility to ensure robust and effective regulation and supervision. Although Canada favoured 
due process, particularly with regard to licensing procedures and approvals, and the elimination 
of opaque regulation and unfair trade practices, it generally advised caution in developing overly restrictive trade disciplines on financial sector regulation. Financial sector regulation was evolving and innovation played a key role in enhancing financial sector regulation. Discouraging innovation 
and creating risk and uncertainty for Members' financial sector regulatory frameworks was a sure 
way to discourage trade in financial services. Turning to the questions in paragraph 20 of the Note, he said that given the unique nature of the sector, sector-specific disciplines may be the best way 
to address regulatory barriers in financial services . This was already reflected in the GATS, through 
the Annex on Financial Services and the Understanding on Commitments in Financial Services. However, it could also be possible to address regulatory barriers in financial services 
through horizontal disciplines on domestic regulation provided there was room to tailor 
such disciplines in ways that conform to the unique nature of this sector. Finally, he encouraged S/FIN/M/77 
 
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the Working Party on Domestic Regulation, when discussing financial services issues, to work 
closely with the Committee on Trade in Financial Services and to engage where necessary with other international organizations, particularly those involved in setting standards and reviewing financial sector regulation (e.g., the IMF throug h its Financial Sector Assessment Programmes).  
3.27.  The representative of Hong Kong, China also welcomed the opportunity to discuss 
regulatory issues in financial services. Getting the regulatory framework right was particularly 
important for financial services. However, achieving that objective did not necessarily mean that 
there was a need to have more regulations, more secretive regulations, or regulations that gave 
undue discretion to regulatory authorities. In his delegation's view, having the right regulatory framework for financial services meant having a framework that was predictable, transparent, impartial, trade-friendly and efficient. It was in this light that Hong Kong, China 
welcomed paragraph 195 of the Note, which spelled out a number of regulatory challenges 
or regulatory hurdles faced by the industry. Ea ch of these regulatory challenges deserved 
further discussion. His delegation saw this paragraph as a scorecard for regulators to measure 
their regulatory practices. In his view, Hong Kong , China's 'scores' were quite good although he 
did not go into the details in the interest of time. He further considered that having a consensus on these regulatory challenges did not mean that all Members should have the same regulatory 
framework. A good number of the issues raised in paragraph 195 were relevant for the 
horizontal disciplines negotiated in the Working Party on Domestic Regulation. For example, the 
issues mentioned in subparagraphs (a), (b), (c), (d),  (e), (f), (l), (m) and (n) could be captured by 
horizontal disciplines. It was clear nonetheless that the financial services sector raised its own 
regulatory challenges. Therefore, developing sectoral disciplines for financial services was another 
option for Members to consider. Whether those sectoral disciplines would be mandatory or voluntary, in the form of additional commitments, would depend on the scope and ambition 
of such disciplines. Although it may be early to pass judgement on the latter point, these are 
options for Members to consider in the future should they consider sectoral disciplines on financial services on top of the horizontal disciplines on domestic regulation. Some of the issues raised 
in paragraph 195 were not, in his view, domestic regulatory issues, but issues that touched upon 
market access and national treatment commitments.  
3.28.  The representative of Brazil associated himself with the statement made by Argentina, 
which captured many of the concerns of his dele gation. Some of the issues raised in the Note 
should be considered with caution. Although they could be considered as representing good 
regulatory practices, not all of them could be automatically applied to the financial sector in view of its peculiarities. He agreed with Canada on the need for the Working Party on Domestic 
Regulation to work closely with the Committee on Trade in Financial Services and other relevant 
international financial institutions on matters related to financial services.  
3.29.  The representative of the European Union said  that the first part of the Note captured very 
well the specificities of the financial services sector and the need for regulation. As indicated in 
the Note, while the main objectives of financial regulation continued to be the integrity and stability of the financial system, the safety and soundness of financial institutions, and the protection of consumers, it was important to adapt those objectives, and in particular 
the instruments through which those objectives are pursued, to ever-changing circumstances, 
as recently evidenced by the global financial crisis. It was also important to make sure that regulatory frameworks were adapted to technological change and to the increasing 
interconnected nature of the global financial system. Without getting into the details of the 
regulatory issues raised in paragraph 195 of the Note, he stressed that it was important to strengthen domestic regulatory disciplines. Many of them could be captured through 
horizontal disciplines. He did not rule out, however, the possibility of complementing those 
horizontal disciplines with more sector-specific ones. 
3.30.  The representative of Turkey said that the paper was very useful. She had circulated it 
among Turkish financial regulatory agencies and had only received comments thus far from the 
Insurance regulator. On the basis of those comme nts, she then described the Turkish practices 
with regard to the regulatory issues raised in  paragraph 195 of the Note. Regarding items (a) 
and (b) in that paragraph, she said that all insurance legislation was made publicly available in the 
website of the Undersecretary of the Treasury. All pu blic institutions were required to submit their 
draft regulations to the Prime Minister after rece iving the opinion of the relevant stake-holders 
and agencies. In addition, pursuant to sector announcements, draft legislation was published in 
the appropriate section of the Undersecretary of Treasury's website. Regarding item (c) S/FIN/M/77 
 
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of paragraph 195, she explained that a transition period was given between the publishing date 
and the effective date of new regulations in order for the insurance sector to prepare for implementation.  
3.31.  Addressing item (e), she explained that insurance companies were required to send the 
relevant information concerning products to be introduced for the first time to the Undersecretary 
ten working days prior to the release of the product to the market. If no objection was received, the product could then be put to the market by th e company. Turning to item (f), she said that 
international accounting, auditing, and actuarial standards were taken into account when 
preparing insurance regulations. In reply to the issues raised in item (j) of paragraph 195, she said that rules and regulations on the advertising of insurance products were aimed at preventing statements that were unreal, misleading, or deceiving, or that might give rise to 
unfair competition.  
3.32.  Turning to item (m), she confirmed that there was a single insurance regulator in Turkey, 
namely the Undersecretariat of the Treasury. Regarding item (n), she further explained that all the 
documents required for licensing and qualification procedures were accepted in authenticated 
form, i.e., original, notarized or certified. Finally, in relation to item (o), she said that only the founders, boards of directors, managers and internal auditors of insurance companies were obliged 
to hold the qualifications required in the relevant articles of the Insurance Law and the Regulation 
on the Operation and Principles of Insurance an d Reinsurance Companies. She reserved the right 
to come back with further comments and responses.  
3.33.  The Chairman suggested that the Committ ee revert to this agenda item at the next 
meeting, so as to give Members another opportunity to comment on the Note. Secondly, he took 
note of the point raised by Members about the need to communicate and interact with the Working Party on Domestic Regulation. A report would be provided to the Chairperson of 
the Working Party, bringing the attention of such  body to the issues discussed at the Committee. 
He also said that the Committee had kept close contact with other international standard-setting organizations over the last years, albeit in different contexts. In his view, the Committee should 
explore how to intensify those contacts and interaction. He announced he would consult Members 
on these matters.  
3.34.  The Committee took note of the statements ma de and decided to revert to this agenda item 
at the next meeting.  
4  ITEM D - TECHNICAL ISSUES (CLASSIFICATION ISSUES) 
4.1.  The Chairperson recalled that, at the previous meeting, the Committee had continued its 
consideration of classification issues. Since discu ssions had not been very substantive, he had not 
prepared a specific summary.  
4.2.  The Committee turned to informal mode to continue the discussion. 4.3.  After the discussion, the Committee decide d to revert to this agenda item at the 
next meeting. 
5  ITEM E - RECENT DEVELOPMENTS  IN FINANCIAL SERVICES TRADE 
5.1.  The Chairman said that, as a standing feat ure of the agenda, this item had been used by 
delegations to either present and discuss recent  developments in individual Members' markets 
or introduce proposals that eventually led to specific dedicated discussions or seminars, for example on macro-prudential policy and regula tion, on non-life insurance services, and on the 
impact of technology on regulation and supervision. This focus on recent developments was what 
made this agenda item unique and distinguishable from other agenda items, which focused instead 
on technical issues or on the long-term impact of financial services trade on development. It was 
in the interest of all Members, and certainly with in the competence of this Committee, to keep 
abreast of developments in the financial services sector, either at the global or country level. He invited Members to express their views, suggestions or ideas on how to make better use of this agenda item in future meetings. S/FIN/M/77 
 
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5.2.  There were no further interventions.  
5.3.  The Committee took note of the statement ma de by the Chair and decided to revert to this 
agenda item at the next meeting.  
6  ITEM F - OTHER BUSINESS 
6.1.  No issues were raised under this agenda item. 
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