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S/FIN/M/80  
 
16 June 2014  
(14-3492)  Page: 1/14  
Committee on Trade in Financial Services    
 
 REPORT OF THE MEETING HELD ON 6 MAY 2014 
NOTE BY THE SECRETARIAT1 
The Committee on Trade in Financial Services held a meeting on 6 May 2014. The proposed 
agenda is contained in Airgram WTO/AIR/4289. An annotated agenda (JOB/SERV/183) had been 
circulated prior to the meeting. The Committee adopted the agenda with that addition. 
 
1  ITEM A – APPOINTMENT OF THE NEW CHAIRPERSON FOR THE COMMITTEE 
1.1.  The Committee elected Ms Caroline McCarthy, from Australia, as its new Chairperson.  
2  ITEM B - REGULATORY ISSU ES IN FINANCIAL SERVICES 
2.1  Recent Regulatory Develo pments in the Financial Sector and the Implications for 
Trade in Financial Services 
2.1.  The Chairperson recalled that, at the last  meeting, the Committee decided to invite the 
international standard-setting organizations, plus the IMF, for a dedicated discussion on recent 
regulatory developments and the implications for trade in financial services. The international 
standard-setting organizations invited to particip ate in the meeting, as agreed by the Committee, 
were the following: the Basel Committee on Banking Supervision (BCBS), the Financial Stability 
Board (FSB), the International Association of Insurance Supervisors (IAIS), the International 
Organizations of Securities Commissions (IOSCO) and the Islamic Financial Services Board (ISFB). The purpose of this discussion was to take stock of the most recent international regulatory reforms and initiatives in the financial sector, and to discuss the potential implications for trade in 
financial services. Unfortunately, the IMF and the ISFB could not attend the meeting due to prior 
engagements and unforeseen circumstances, respectively.  
2.2.  The Committee was honoured to have as distinguished guests Mr David Wright, Secretary 
General of IOSCO; Mr Costas Stephanou, from the FSB Secretariat; Mr Ryan Richards, from the 
BCBS Secretariat; and Mr Bernhard Mayr, senior policy advisor at the IAIS. In terms of the organization of this session, she explained that she would first give the floor to the representatives 
of the international standard-setting organizations to make an initial presentation and, after that, 
the floor would be opened for discussion. The presentations, as well as additional material sent by these organizations, had been circulated prior to this meeting as Room Documents (RD/SERV/98 to RD/SERV/102). 
2.3.  She then introduced the first speake r, Mr Costas Stephanou, from the FSB. 
2.4.  The FSB representative (Mr Costas Stephanou, member of the FSB Secretariat) said that his 
presentation had three main parts: a brief backgr ound on the Financial Stability Board (FSB), the 
main elements of the FSB’s work program for the current year, and, finally, an overview of the 
other work priorities. The FSB was established by the G-20 in April 2009 as the successor to the 
Financial Stability Forum (FSF), with an expand ed membership and a broader mandate to address 
vulnerabilities affecting the global financ ial system, and to develop and promote the 
implementation of effective regulatory and supervisory policies in the interest of financial stability. 
                                               
1 This document has been prepared under the Secret ariat's own responsibility and is without prejudice 
to the positions of Members and to their rights and obligations under the WTO. S/FIN/M/80 
 
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  The FSF had been founded in 1999 by the G7 finance ministers and central bank governors, 
following the Asian financial crisis  
2.5.  The FSB brings together national authoritie s responsible for financial stability in 24 countries 
and jurisdictions, international financial institutions, international groupings of regulators and 
supervisors, and committees of central bank experts (European Central Bank and Committee on 
the Global Financial System). The FSB has a dual nature; it is both a standard setting body and the policy arm of the G-20 for matters related to the financial system.  
2.6.  The FSB consists of a Plenary, a Steering Committee, four Standing Committees (on 
Vulnerabilities Assessment, on Supervisory and Regulatory Cooperation, on Standards 
Implementation, and on Budget and Resources), tec hnical work streams and Regional Consultative 
Groups. The Plenary is the decision-making orga n of the FSB. The Steering Committee provides 
operational guidance between plenary meetings to  carry forward the directions of the FSB. The 
Steering Committee is primarily made up of ce ntral bankers and national banking/financial 
services regulators. Decisions are taken by consensus. There is no formal voting. 
2.7.  Six Regional Consultative Groups has been established (Americas, Asia, Commonwealth of 
Independent States, Europe, Middle East and Nort h Africa, Sub-Saharan Africa). These groups 
served as platforms to discuss FSB initiatives and financial stability issues and for non-members to 
provide input to the FSB’s work programs. Each group met twice a year.  
2.8.  He then turned to the FSB's current policy priorities, namely building resilient financial 
institutions, ending 'too big to fail', creating safer over-the-counter (OTC) derivatives markets, and transforming shadow banking. The first policy prio rity focused on the development and completion 
of the Basel III framework. All FSB members ha d already adopted Basel III risk-based capital 
rules. The BCBS recently completed its work on  two additional policy measures: the Liquidity 
Coverage Ratio (LCR) and liquidity risk monitoring tools, and the Net Stable Funding Ratio. The 
BCBS was currently examining the options for addressing the excessive variation in the calculation 
of risk-weighted assets by banks in different jurisdictions, in order to improve consistency and comparability of bank capital ratios. 
2.9.  Turning to the issue of 'too big to fail' (TBTF), he said that the potential failure of systemically 
important financial institutions led national authorities with no option other than let them fail and face tremendous consequences in the financial system and the economy at large, or save them at a huge cost to tax payers. In order to address this problem, FSB developed a set of policy 
measures, on the basis of three pillars: establishing credible resolution regimes, including 
enhanced cooperation between home and host-count ry supervisors if a failing institutions has 
cross-border activities; improving institutions' loss absorbency, through for example capital 
surcharges for global systemically important bank s (G-SIBs); and subjecting these institutions to 
more intense supervision. 
2.10.  An Assessment of the extent to which TB TF had been ended was sent by the FSB to the 
2013 G-20 Summit, identifying additional measur es needed. In January 2014, together with 
IOSCO, the FSB proposed methodologies for the identification of non-bank non-insurer global systemically important financial institutions (G-SIFI). Together with the BCBS, the FSB identified 29 G-SIBs, for which resolution strategies were being developed. Over the last year, increased 
attention was given to insurance companies. In conjunction with the IAIS, the FSB identified 9 
global systemically important insurers (G-SIIs), fo r which recovery and resolution plans should be 
developed by the end of 2014.   
2.11.  The third policy priority was the reform of  the OTC derivatives market. He recalled in that 
regard that at the Pittsburgh 2009 Summit, G-20 leaders agreed that all standardised OTC derivative contracts should be traded on exch anges or electronic trading platforms, where 
appropriate, and cleared through central counterparties (CCPs); that OTC derivative contracts 
should be reported to trade repositories; and that non-centrally cleared contracts should be subject to higher capital requirements. When that decision was taken, this was largely a non-regulated sector. The inexistence of a single st andard-setting body responsible for developing 
standards in this area made reform more complex. The policy framework took a number of years 
to develop and it was the result of cooperation between the BCBS and IOSCO, under the coordination of the FSB. International standards and guidance in this area were largely in place, S/FIN/M/80 
 
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  the priority having shifted to national implementation. He emphasized that due to the global 
nature of derivatives markets, where most transactions took place across borders and involving counterparties in different jurisdictions, coordination between regulatory authorities was crucial. Jurisdictions had developed different approaches to  solve the issues raised by the cross-border 
nature of transactions, such as "equivalence" and "substituted compliance".  
2.12.  The fourth major policy priority was shadow  banking, broadly defined "credit intermediation 
involving entities and activities (fully or partia lly) outside the regular banking system". In 2013, 
the FSB issued policy recommendations to strengthen  oversight and regulation of shadow banking. 
The objective was to address bank-like risks to financial stability emerging outside the regular banking system while not inhibiting sustainable non-bank financing models that do not pose such risks. The FSB set out a monitoring framework for the shadow banking system in its report to the 
G20 in October 2011. Based on this framework, the FSB published the results of its third annual 
monitoring exercise in November 2013 using end-2012 data. The report includes data from 25 jurisdictions and the euro area as a whole, bringi ng the coverage of the monitoring exercise to 
about 80% of global GDP and 90% of global fina ncial system assets. The BCBS was expected to 
ccomplete rules on banks’ interactions with shadow banking in 2014. The FSB would further develop information-sharing process on shadow banking policies in 2014. 
2.13.  Other work priorities included monitoring and reporting on implementation by FSB members 
of internationally agreed reforms (including repo rting to the G20 on the impact of reforms on 
Emerging Market and Developing Economies (EMDEs)); assessing global financial system vulnerabilities and undertaking early warning exer cises together with the IMF; and undertaking 
policy work in other areas, including the creation of a Global Legal Entity Identifier (LEI); 
addressing data gaps; enhancing cooperation and information exchange; promoting sound compensation practices; reducing reliance and improving oversight of credit rating agencies 
(CRAs); and working with international organisations to address regulatory factors affecting long-
term investment finance. 
2.14.  The Chairperson thanked Mr Stephanou for an extremely interesting overview of the FSB 
work. She then called on David Wright, Secretary General of IOSCO, to make his presentation.  
2.15.  The representative of IOSCO (Mr David Wright) said that IOSCO, established in 1983, was 
the global standard setter for the securities sector. It was composed of over 120 securities 
regulators and 80 other securities markets participants (i.e. stock exchanges, financial regional 
and international organizations). IOSCO was the only international financial regulatory 
organization including all the major emerging markets jurisdictions within its membership. IOSCO main objectives were to protect investors; to maintain fair, efficient and transparent markets; and 
to address systemic risks. 
2.16.  Current priorities included strengthening global securities markets; capacity building; 
enhancing adherence to, and widening the scope of, the Multilateral Memorandum of 
Understanding concerning Consultation and Cooperation and the Exchange of Information 
(MMOU); emerging risk identification; and dealing with cross-border conflicts of law. The MMOU, 
approved in 2002, set an international benchmark for cross-border co-operation. It had provided securities regulators with the tools for combating the cross-border fraud and misconduct that can 
weaken global markets and undermine investor co nfidence. It had been signed by 101 of IOSCO's 
members, out of a potential of 125 signatories.  
2.17.  He explained that IOSCO had about 85 different work streams, covering OTC derivatives, 
shadow banking, non-bank non-insurance systemically important financial institutions (NBNI 
SIFIs); credit rating agencies (CRAs); corporate governance; investor education and protection; and the assessment of standard implementation. As  the world was shifting towards more market-
based financing, securities regulators were destined to play a bigger global role. More work was 
required by regulators on risk detection, data  gathering, and improving the understanding of 
contagion channels and connectivity. 
2.18.  Following the outbreak of the current financial crisis, IOSCO adopted a new strategic 
direction that emphasized the need for securities regulators to identify, monitor and manage 
emerging systemic risks. Current concerns included the potential reversal of capital flows to S/FIN/M/80 
 
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  Emerging Markets; risks related to shadow ba nking; the concentration of risks in central 
counterparties (CCPs); cybercrime; resolution policy; and the situation in property markets.  
2.19.  In 2013, IOSCO agreed to establish a Task Force on Cross Border Regulation, in order to 
help national policy makers and member regulators in addressing the challenges they face in 
regulating cross-border activity. The Task Force will develop a tool box of measures to address 
securities markets activities that cross borders. If  appropriate, it will then develop principles to 
guide the coordinated use of these tools. The tools to be considered may include substituted 
compliance, mutual recognition and supervisory co-operation.  
2.20.  He finally expressed some personal views on the issue of the institutional weakness of 
global financial regulatory bodies. He said in that regard that institutions like IOSCO had no rule-making powers, no enforceability mechanisms, and no formal dispute settlement procedure. 
Standard-setters were asked to make global standards with no legal authority to enforce 
compliance. In his view, there were three options. The first one was to keep the status quo, which will inevitably lead to greater fragmentation of global capital markets. The second option was to 
have an international treaty. This was desirable but not likely. The third option was what he called 
"pragmatic enhancement". This would entail ex-ante regulatory coordination on major regulatory changes; symmetric political timing of national legislation; greater granularity of global standards; 
informal dispute settlement based on the WTO mode l; and strengthened international cooperation 
and coordination. 
2.21.  The Chairperson thanked Mr Wright for hi s presentation, and turned then to Mr. Ryan 
Richards, from the BCBS. 
2.22.  The representative of the BCBS (Mr. Ryan  Richards) said that the BCBS was the primary 
global standard-setter for the prudential regulati on of banks and provided a forum for cooperation 
on banking supervisory matters. It was composed of 27 member countries. Members were 
represented by their central banks and by the authority with formal responsibility for the 
prudential supervision of banks (where this is not the central bank). The BCBS provided a forum 
for regular cooperation on banking supervisory matters, with the objective of enhancing 
understanding of key supervisory issues, and improving the quality of banking supervision 
worldwide. The Basel Consultative Group (BCG) facilitated broad supervisory dialogue with non-member countries 
2.23.  At the moment, the BCBS had four priorities : i) Complete the crisis-related policy reform 
agenda; ii) Continue to deepen the program of monitoring and assessing the implementation of 
agreed reforms; iii) examine the regulatory fram ework’s balance between simplicity, comparability 
and risk sensitivity; and iv) improving the effectiveness of supervision. 
2.24.  The financial crisis revealed the following weaknesses: the banking sector was not 
sufficiently resilient to financial and economic stress; there was excessive on- and off-balance sheet leverage; loss-absorbing capital and liquidity buffers were insufficient; systemic institutions 
were highly interconnected; lack of transparen cy regarding bank exposures; inadequate risk 
management and governance practices; among others. In light of that situation, the BCBS introduced a number of fundamental reforms to it s prudential regulatory framework through the 
Basel III framework: more and higher quality capital; a leverage ratio; capital buffers; a capital 
conservation buffer; a countercyclical capital buffe r; liquidity and funding standards, and better 
risk measurement. The Basel III reforms would be phased in over the period 2013-2019. Other complementary reforms were also under way. 
2.25.  After this introduction, he then focused on Basel III leverage ratio and liquidity regulation, 
the proposed supervisory framework for large exposures, and OTC derivatives reform. The objective of Basel III leverage ratio was to constrain the buildup of leverage in the banking system 
and thereby enhance financial stability. It was designed to be a simple and transparent non-risk 
based measure. It was supplementary to risk-based capital requirements.  
2.26.  Basel III introduced two liquidity ratios: a liquidity Coverage Ratio (LCR), and a Net Stable 
Funding Ratio (NSFR). The LCR was intended to promote short-term resilience of banks by 
requiring them to hold sufficient high-quality liquid assets to withstand an acute 30-day stress 
scenario. The LCR would take effect as of 1 January 2015 but the minimum requirement would be S/FIN/M/80 
 
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  phased in through 2019. The NSFR aimed at prom oting resilience over the longer term through 
incentives for banks to fund activities with more stable sources of funding. A consultative document with proposed revisions to the NSFR was published in January 2014. Implementation was scheduled for 2018 
2.27.  The BCBS also developed a single harmonized international standard for large exposures, 
aiming at constraining the maximum loss a bank could face in the event of a sudden failure of a counterparty or group of connected counterparties, and reducing  contagion risk arising from the 
failure of a counterparty. The final standard was published in April 2014. It was expected to take 
effect as of 1 January 2019.  
2.28.  Turning to OTC derivatives reform, he said that in September 2009, G20 leaders agreed 
that all standardised OTC derivative contracts should be i) traded on exchanges or electronic 
trading platforms (where appropriate); ii) cleared through central counterparties; iii) reported to 
trade repositories; and iv) be subject to higher ca pital requirements if not centrally cleared. In 
November 2011, the G20 leaders called on the BCBS and IOSCO to develop margining standards 
for non-centrally cleared OTC derivatives. 
2.29.  Finally, he turned to the issue of implementation review. He said that the BCBS adopted a 
comprehensive Regulatory Capital Assessment Prog ram (RCAP) in 2012, which sought to ensure 
full, timely and consistent implementation of Ba sel prudential standards. The RCAP comprised a 
three-pronged approach: i) monitoring timely is suance and adoption of Basel standards; ii) 
assessing consistency of application; and iii) analysing reliability of regulatory outcomes. All BCBS members were to undergo an assessment on risk-based capital standards by 2016. The 
assessments allowed national authorities to make adjustments in order to improve consistency. 
The results of those assessments were published.  
2.30.  The Chairperson thanked Mr Richards for hi s presentation, and turned then to Mr. Bernhard 
Mayr, senior policy advisor at the IAIS. 
2.31.  The representative of the IAIS (Mr Bernhard Mayr) said that the IAIS, established in 1994, 
represented insurance regulators and supervisors from more than 200 jurisdictions in nearly 140 
countries. Its mission was to promote effective and globally consistent supervision of the insurance 
industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders; and to contribute  to global financial stability. His presentation 
focused on two issues: the so-called three-laye r approach developed by IAIS, and the policy 
measures for global systemically important insurers (G-SIIs).  
2.32.  The three tiers of the IAIS approach were the Insurance Core Principles (ICPs), the Common 
Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) and the 
policy measures for G-SIIs. The IAIS ICPs applied to all insurers and insurance groups, regardless 
of size or systemic importance, unless otherwise specified. The ComFrame built upon and operationalized the ICPs with regard to the cross-border supervision of International Active 
Insurance Groups (IAIGs). IAIGs by definition created a need to foster supervisory cooperation 
and convergence of supervisory requirements in order to achieve effective supervision. Policy 
measures on G-SIIs would apply only to designat ed G-SIIs and would be appropriate for the risks 
that G-SIIs pose to the financial system, if any. 
2.33.  In October 2011, the IAIS published the re vised ICPs. The previous version of the ICPs was 
issued in 2003. The ICPs were an internationally developed set of principles, standards and guidance applicable to supervisors of insurance companies. They sought to encourage convergence 
towards a globally consistent supervisory framework and serve as a benchmark for insurance 
supervisors in all jurisdictions. The ComFrame was finalized in December 2013. It was a set of international supervisory requirements focusing on the effective group-wide supervision of IAIGs. 
The ComFrame was built and expanded upon the hi gh level requirements and guidance currently 
set out in the ICPs, which generally applied on both  a legal entity and group-wide level. The IAIS 
developed criteria for identifying IAIGs. Those criteria were based on two aspects: international activity and size. International activity was meas ured by two indicators: (i) premiums should be 
written in not fewer than three jurisdictions, and (ii) the percentage of gross premiums written 
outside the home jurisdiction should be no less than 10 per cent of the group's total gross written S/FIN/M/80 
 
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  premium. The size of IAIGs was measured by two alternative indicators: total assets of not less 
than U$S50 billion, or gross written premiums of not less than U$S10 billion. 
2.34.  In July 2013, the FSB formally announced the list of the first 9 G-SIIs following 
recommendation by the IAIS. The next designatio n of G-SIIs will be announced in November 
2014. The G-SII policy measures were designed to reduce moral hazard and the negative 
externalities stemming from the potential disord erly failure posed by a G-SII. The three main 
measures were enhanced superv ision, effective resolution, and higher loss absorption (HLA) 
capacity. 
2.35.  In this context, the IAIS was developing group-wide global capital standards. The first step 
towards that goal was the development of global Basic Capital Requirements (BCR) for G-SIIs, which were expected to apply to G-SIIs from 2015 or shortly thereafter. The second step was the 
development of Higher Loss Abso rbency (HLA) requirements to apply to G-SIIs, due to be 
completed by the end of 2015. The HLA would build on the BCR and address additional capital requirements for G-SIIs reflecting their systemic importance in the international financial system. 
The third step was the development of a risk-based  group-wide global insurance capital standard 
(ICS), due to be completed by the end of 2016, and to be applied to IAIGs (as defined using the ComFrame criteria) from 2019.  
2.36.  The Chairperson thanked Mr Mayr for his presentation and opened the floor for discussion. 
2.37.  The representative of Switzerland asked two questions to Mr Wright (IOSCO): first, to what 
extent has the MMOU (signed by Switzerland in 2010) contributed to facilitating the supply of 
services in modes 1 and 3?; and, second, what are the difficulties faced by the Task Force on 
Cross-border Regulation and what outcomes co uld be expected? He also asked the following 
question to Mr Mayr (IAIS): to what extent has the Multilateral Memorandum of Understanding adopted by the IAIS in 2007 in order to foster cooperation and information exchange contributed 
to facilitating the supply of services in modes 1 and 3?  
2.38.  The representative of Canada provided an update of the country's domestic financial sector 
reforms. Canada's long standing financial stabili ty had been underpinned by traditionally strong 
prudential supervision and regulation, conservative  financial sector policy and business models of 
banks as well as sound economic fundamentals. Canada recently completed a financial sector assessment program that assessed the implementati on of the international banking insurance and 
securities principles. In its assessment, the IMF confirmed that Canada continued to be a front 
runner in terms of implementing international st andards. Canada's regulatory and supervisory 
framework was found to be strongly compliant with international standards and to benefit from a good coordination among the federal oversight bodies. The IMF also noted that Canada was among 
the first advanced economies to adopt the Basel III capital standard and to establish a framework 
for domestic systemically important banks. The IMF further suggested the establishment of a common capital markets regulator. Canada's new minister of finance recently reiterated the 
importance of continuing to move forward with w illing provinces and territories to jointly establish 
a national security regulator. Such a regulator would have four main benefits: it would foster more efficient globally competitive capital markets in Canada; it would improve investor protection through more comprehensive and coordinate enforcement; it would enhance Canada's capacity to 
identify and manage systemic risks; and, fourth, it would enable Canada to speak with a single 
voice in international forums related to capital markets. Progress on the establishment of a national security regulator would be of particular interest to Canada's trading partners.  
2.39.  He asked the following questions to the representatives of the International Standard 
Setting organizations: Are you aware of any specific measures or examples of how these regulatory reforms have impacted trade in financial services, either positively or negatively? If 
negatively, do you have any suggestions on what can be done about it? 
2.40.  The representative of Ecuador asked Mr Stephanou (FSB) whether he could provide further 
detail of the supervisory measures that would apply specifically to G-SIFIs and how these 
measures would differ from those applied to other types of financial institutions. He further asked 
the representatives of the BCBS and FSB whether th ey could elaborate on the inherent features of 
derivative instruments that made the development of standards and the actual supervision of those activities so difficult.  S/FIN/M/80 
 
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  2.41.  Finally, he said that keeping updated on the development of regulatory standards was very 
important for the tasks carried out by the Committee. He suggested that a periodic flow of information between these international standard -setting bodies and the Committee should be 
maintained. This exchange of information could be implemented through the sending of 
documentation (e.g. reports, updates) on a regular basis and periodic presentations such as the 
ones made at this meeting.   
2.42.  The representative of Morocco said that the presentations allowed Members to understand 
the mandate of these organizations and their contribution to financial stability. He asked the 
following questions: 1) are the measures taken under the Basel III framework enough? Are they enough from a macro prudential perspective?; 2) would it be possible to further regulate investment banks, which were at the origin of the latest global financial crisis?; 3) Does the BCBS 
intend to develop standards adapted to the level of development of different countries?  
2.43.  The representative of Korea asked the representative of the FSB whether (and how) 
coordination and consistency among international standard-setting organizations could be 
improved. He then turned to all the speakers an d asked them whether they could elaborate on the 
specific channels through which regulatory reform affected or might affect trade in financial services.  
2.44.  Mr David Wright (IOSCO) said that IOSCO's MMOU had certainly facilitated financial services 
trade because it was a proof of good market regulation. However, he was unable to provide 
quantifications of that effect. Turning to cross-border issues, he said that if jurisdictions applied their legislation without taking into account global standards, conflicts of law might emerge and 
impact financial flows. Although progress had been made in solving cross-border issues, 
differences still remained, particularly between th e United States and the European Union. It was 
important to ensure convergence in the implementation of national laws, as well as principles and 
standards agreed at the global level. Turning to the question raised by Ecuador, he said that 
derivatives markets were extremely complex due to  the variety of products, the complexity of 
transactions, and the existence of several participants (e.g. trading systems, trade repositories, 
and central counterparties). Nonetheless, recent data showed that derivatives were increasingly 
traded on exchanges or trading platforms, which was a sign of progress. Turning to the question 
posed by Morocco, he agreed on the need to have greater understanding of market interactions, greater supervisory intensity and better data. On th e  p o i n t s  r a i s e d  b y  K o r e a ,  h e  s a i d  t h a t  t h e  
coordination and division of labour between the different international standard-setting 
organizations should be improved.  
2.45.  Mr Bernhard Mayr (IAIS) turned to the question raised by Switzerland and said that the IAIS 
MMOU should be expected to have a significant impact on the supply of insurance services, 
although it was difficult to measure. Besides, the counterfactual (i.e. what would be the situation in the absence of the MMOU) was also difficult to  establish. The IAIS had not yet carried out any 
quantification exercise of those effects. It was also difficult to assess at this stage the potential 
effect of the BCR and ICS on trade in financial services. The IAIS would certainly try to assess the impact of these measures in due course, to have a better idea of how these new regulatory standards affect competition and the supply and demand of certain products. 
2.46.  Mr Ryan Richards (BCBS) said that the question about the impact of these standards on 
trade in financial services should probably not be replied to only by the BCBS but also by trade 
experts. At a high level of analysis, it might be expected that these policies would lead banks to 
deleverage, to keep lower yielding assets (making banks less profitable), and to hold higher cost 
capital, among other potential effects. In any case the positive long term effects of more resilient 
financial systems should not be overlooked. In response to another question, he said that Basel III 
was a step in the right direction, part of the solution, but certainly not sufficient. This should be 
complemented by very well informed supervision. Macro-prudential measures had also been considered by the BCBS, whether in the form of countercyclical capital buffers or capital surcharges for G-SIBs. 
2.47.  Mr Costas Stephanou (FSB) said that it was difficult to predict the long term effects of these 
regulatory reforms. Certainly, banking would not be the same as before the crisis. Over the last 
few years however, the situation had led banks to retrench, reducing financial intermediation, 
especially across borders. So, in his view, probably the supply of financial services through mode 1 
had been more affected than mode 3. It was in any case very difficult to disentangle the effects of S/FIN/M/80 
 
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  different factors (e.g. the crisis, financial reforms) on the behaviour of banks. Therefore, it was 
difficult to pass definitive judgement at this stag e on the effects of reforms, which in most cases 
had only recently been finalized and started to be implemented. In any case, any future assessment would need to distinguish between short term and long term effects, and between 
intended and unintended consequences.  
2.48.  It was worth noting that internationally agreed reforms were minimum standards. National 
authorities had the right to go beyond them and adopt additional measures. It was important 
therefore, both from the FSB and WTO perspectives, to ensure that any domestic measure taken 
above internationally agreed reforms did not go against the spirit of those reforms and did not lead to discrimination either. 
2.49.  Turning to the questions raised by Ecuador,  he said that in the aftermath of the global 
financial crisis supervisors assessed their approaches and methods applied to the supervision of 
SIFIs, particularly G-SIFIs, and highlighted ar eas requiring improvements. The FSB, through the 
Supervisory Intensity and Effectiveness (SIE) group, explored the tools and methods used by 
supervisors in order to intensify supervision, which was as important as strong rules on capital and 
liquidity, and became more relevant when capital and liquidity were inadequate. In particular, the SIE had explored the interaction between supervis ors and banks' boards, senior management and 
control functions, as well as the formulation of enhanced supervisory principles for assessing 
various aspects of institutions' risk governance frameworks (e.g. internal audit functions, risk 
appetite frameworks, risk culture), and had kept an ongoing focus on risk analysis tools, such as stress testing, to detect early weaknesses or problems.  
2.50.  On another note, he agreed that flows of information between the FSB and the Committee 
should be regularly maintained, either through pres entations like the ones made at this meeting or 
through the sharing of documents and reports. He drew Members' attention to the fact that a lot of 
information about the FSB activities was already publicly available, including reports that must be 
presented ahead of G-20 meetings.  
2.51.  The need to focus on macro-prudential issues was a very important lesson of the crisis and 
a significant aspect of the reforms. This wa s one area where emerging economies had been 
historically ahead of developed countries. While developed countries had only recently started to test and calibrate macro-prudential tools, emer ging economies had been doing that for quite a 
while. However, there was no common definition of what a macro prudential policy framework was 
or should be. There was no international agreement or standard in this area either.  
2.52.  Turning to the question on how to improve international coordination, he explained that the 
FSB had been established precisely with that object ive – to coordinate at the international level the 
work of national financial authorities and international standard setting bodies and to develop and 
promote the implementation of effective regulatory , supervisory and other financial sector policies. 
The FSB was responsible for coordinating and prom oting the monitoring of the implementation of 
agreed financial reforms and its reporting to the G20. In order to strengthen the coordination and 
effectiveness of this monitoring, the FSB, in collaboration with the standard-setting bodies, established a framework in October 2011 – the Coordination Framework for Implementation 
Monitoring (CFIM) – for monitoring and reporting on the implementation of the G20 financial 
reforms. The CFIM distinguished between priority areas, which undergo more intensive monitoring 
and detailed reporting via periodic progress reports and peer reviews, and other areas of reform. A 
designated body – for example, an FSB working gr oup or the relevant standard-setter – undertook 
the monitoring and reporting of implementation progress in each priority area. The monitoring of 
the implementation in other areas of reform  was undertaken by the FSB's Implementation 
Monitoring Network (IMN) based on survey response s of member jurisdictions. The FSB's Standing 
Committee on Standards Implementation (SCSI) pl ayed a coordinating role within the FSB in 
monitoring implementation efforts and consulted with  relevant bodies as need ed to ensure that the 
scope and approach of reporting – particularly for priority areas – were comprehensive and rigorous. 
2.53.  The representative of South Africa asked th e panellists whether they could elaborate on how 
to further mitigate risks arising from shadow banking, in particular how to mitigate the potential 
spill over effects from shadow banking to the regulated banking sector. S/FIN/M/80 
 
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  2.54.  The representative of the European Union said that regulatory convergence had been taken 
up in free trade agreements (FTAs) negotiated by the EU. In that regard, the EU had always 
sought to include in its FTAs an article on regulatory convergence, requiring parties to make best endeavours to ensure that internationally agr eed standards were complied with. These standards 
promoted trade in financial services because th ey ensured that third country financial service 
suppliers were regulated according to similar and comparable rules. This was important for both cross border trade and investment. On another no te, he agreed with Ecuador that the Committee 
should be kept regularly updated of progress with international financial regulatory reform.  
2.55.  The representative of China shared his co untry's experience with the implementation of 
Basel III. As a member of the BC BS and the FSB, the Chinese government had participated in the 
process towards the establishment of the Basel III framework. China was firmly committed to 
global regulatory reform and standards for the pu rpose of building a sound and resilient financial 
system. In April 2011, the China Banking Re gulatory Commission (CBRC) issued the Guiding 
Opinions on the Implementation of New Regulatory Standards in China’s Banking Industry, which 
set forth the overall principles, main objectives, transitional arrangements and working 
requirements in relation to the implementation of Basel III in China's banking industry. In accordance with those Guiding Opinions, China's banking regulatory framework should be 
reformed in line with its development situation and in accordance with international standards. In 
2013, the CBRC issued the Regulation Governing Capital of Commercial Banks (Provisional).  This 
reform initiative aimed at improving the level of risk management in the banking industry and regulatory efficiency. In September 2013, th e BCBS, through the Regulatory Consistency 
Assessment Programme (RCAP), issued a report on the consistency of China's regulations with 
Basel III requirements. Overall, the RCAP assessment team determined that the Chinese capital regulations were compliant overall with the international Basel III standards. 
2.56.  The representative of Brazil said that his country welcomed and supported recent 
international reform efforts in the field of financial regulation. While there was still a lot to be 
achieved, progress had been made towards ensuring a more resilient financial system. As 
highlighted in the presentations, it was importan t that standards set by international-standard 
setting organizations be implemented in accordan ce with the agreed timeframes. He noted that 
Brazil's regulatory framework was generally more rigorous than what had been agreed internationally. Further, Brazil's financial system was sound, transparent and governed by 
adequate rules of cooperate governance. Also, levels of capital held by financial institutions were 
overall higher than what was required by Basel III. Shadow banking in Brazil was comparatively small and properly regulated.  
2.57.  On another note, he said that it was very important that the Committee be kept regularly 
abreast of developments in this area. He therefor e supported the idea of having presentations by 
international standard-setting organizations on a regular basis.  
2.58.  The representative of India asked the re presentatives of international standard-setting 
organizations (i) whether they could further elaborate on the impact of these regulatory reforms 
on trade in financial services through modes 1 and 3; and (ii) whether they could further elaborate on the coordination mechanisms between the various standard-setting bodies. In India, 
coordination among the different regulatory agencies was ensured by the recently established 
Financial Stability and Development Council (FSDC). 
2.59.  The representative of Saudi Arabia supported Ecuador's suggestion to repeat this type of 
presentation on a regular basis so as to improv e dialogue between trade in financial services 
negotiators and financial regulators.  
2.60.  Mr Costas Stephanou (FSB) referred first to the question on shadow banking. As shown in 
his presentation (slide 15), the complexity of shadow banking arose from the multiplicity of 
activities, products and institutions involved. Shadow banking was basically financial intermediation outside the regulated banking system. And this intermediation could be done in a variety of ways, by different actors. The challenge for regulators was to design policies that were 
adapted to the specific needs of different entities. It was important to design policies but also to 
collect data on the various types of non-bank cred it providers. The standard-setting work in this 
area had been parcelled out to different bodies, in  particular the BCBS and IOSCO. On its part, the 
FSB developed an annual information sharing mechanism to identify non-bank and non-insurer 
institutions of a systemic nature operating in each FSB member's jurisdiction.  S/FIN/M/80 
 
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  2.61.  As he had said before the FSB certainly welcomed providing updates to the Committee on 
the work being done and it could certainly do that on a regular basis.  
2.62.  Turning to the questions raised by India, he  said that not only financial services trade but 
financial intermediation had been affected since the crisis. There was evidence showing that cross-
border financial services had fallen more than the supply of financial services through mode 3, 
although those effects were not exclusively or even primarily due to the financial reforms. He reiterated in that regard that it was difficult to disentangle the impact of reforms which have only 
recently begun to be implemented from the effects of the crisis and the reorganization of markets. 
These were long term questions. In any case, the FSB had engaged to monitor developments, including the impact of reforms, and report to the G-20 on an annual basis. 
2.63.  The FSB was investigating the impact of those reforms on emerging market. It would 
continue to do that, and would prepare another monitoring note for the upcoming G-20 
presidency.  
2.64.  He said that coordination between internat ional standard-setting bodies was ensured by the 
FSB, as the policy-making arm of the G-20. Stan dard setters were responsible, in the first 
instance, for the development of policy and standa rds in their respective fields. The FSB played a 
key coordination role in those reform areas cutting across several sectors, such as OTC 
derivatives, shadow banking and resolution. Th e G-20 ensured leaders commitment to implement 
those reforms.  
2.65.  He confirmed that China underwent an assessment of compliance with the Basel III 
framework and was found to be compliant. He said in that regard that these assessments started 
in 2011, when the BCBS established the Regulatory Consistency Assessment Programme (RCAP). 
All the countries assessed thus far had been found to be compliant. The European Union and the United States were being assessed in 2014.  
2.66.  Mr David Wright (IOSCO) said that nobo dy should underestimate the importance of the 
work carried out by international standard-setting bodies. Big challenges were still ahead and 
strong political leadership and support was essential. Turning to the issue of shadow banking, he 
said that there was a need to better understand how this industry worked, how risk shifted from 
one sector to another, and what the contagion channels were. More data and formal economic research was needed in this area. On another note, he stressed that coordination between the FSB and the other international standard-setting bodies was extremely important, and had worked 
quite well. However, in his view, there were probably too many international financial regulatory 
bodies, each one trying to establish their own mandates. Strict and clear principles were needed in this area. He supported Ecuador's suggestion to continue the practice of updating the Committee 
on a regular basis of developments in international financial standard-setting.   
2.67.  Mr Bernhard Mayr (IAIS) said that coordi nation between the FSB and the other international 
standard-setting bodies, including at working group level, was extremely important. It was 
important to keep cross-sectoral implications in sight, particularly when conducting impact 
assessments.   
2.68.  Mr Ryan Richards (BCBS) echoed the co mments made by the representative of FSB on 
shadow banking. He stressed the importance of the BCBS assessment of Basel III implementation 
in different jurisdictions, which had worked well. He supported the suggestion to continue the 
practice of updating, and exchanging informatio n with, the Committee on a regular basis.   
2.69.  The Chairperson thanked the representatives of the international standard-setting 
organizations for their participation in the meeting. The presentations were very thorough and 
informative. The discussion that followed was also  very interesting and touched upon challenging 
issues. In her view, Ecuador's suggestion that the Committee should keep a regular contact and 
flow of information with the international standard setting bodies had got a good level of support 
from both the international setting bodies themselves and Members. She suggested the Committee should look at ways to coordinate that exchange of information in the future. On another note, she said that the Secretariat would try to ensure the presence of the IMF and the ISFB at a future 
meeting to provide similar updates on their work in the field of financial regulatory reform. S/FIN/M/80 
 
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  2.70.  The Committee took note of the statements made and decided to revert to this issue at the 
next meeting.  
2.2  Communication from South Africa (JOB/SERV/179) 2.71.  The Chairperson turned to the Communication  from South Africa on the regulation of non-
banking financial services. However, South Africa had informed her that it would not be ready to 
engage in a discussion at this meeting, but woul d address the issues and questions raised at the 
next meeting.  
2.72.  The representative of Australia noted that the communication from South Africa stated that 
the country was migrating to a new model of financial regulation. She asked in that regard 
whether South Africa could provide further information on the reasons that drove the change to a new regulatory regime, and to what extent th e changes reflected relevant standards set by 
international regulatory bodies.  
2.73.  The representative of Canada said that th e contributions such as the one by South Africa 
were very important since they helped Members understand the nature and intent of financial 
sector reforms. Commenting on the communication, he noted that South Africa provided a 
different treatment for reinsurance services, even permitting the cross-border supply of reinsurance, which was probably a reflection of the nature of the reinsurance market, which was 
comprised of sophisticated customers with large insurance needs. These features of reinsurance 
should be reflected in Members' trade policies. Se condly, he noted that the South Africa Financial 
Services Board regulated pension funds and collective investment schemes for market conduct purposes. Separating the conduct regulation from the prudential regulation of these entities was 
similar to Canada's approach. The differential regulation of pension funds and collective investment 
schemes was a reflection of the different risks asso ciated with services that were often focused on 
sophisticated consumers. Members should take into account these considerations in the design of 
their regimes for trade in financial services.  
2.74.  He then turned to the issue of credit ra ting agencies. The regulation of credit rating 
agencies by South Africa appeared to focus on ensuring that those agencies had the knowledge 
and necessary expertise to provide accurate analysis and assessments of risk. In addition, South 
Africa indicated that credit rating agencies were legally liable for any damage caused through negligent or intentional conduct. He asked whet her South Africa could provide more information 
regarding the type of negligent or intentional conduct it wished to address, including what 
elements would be considered to establish a case in legal proceedings. 
2.75.  The representative of the European Unio n also asked whether South Africa could provide 
more information on the objectives and purpose of the regulations outlined in the communication.  
2.76.  The representative of Chinese Taipei asked South Africa whether, in implementing 
regulations in non-banking financial services, it had met any difficulty in the areas of licensing 
requirements and procedures, qualification requirem ents and procedures, and technical standards.  
2.77.  The representative of South Africa thanked the Committee members for their indulgence 
and endeavoured to reply to as many questions as possible at the next meeting. 
2.78.  The Chairperson said it was very important that the Committee continued discussing 
regulatory issues such as those raised in th e communication from South Africa. The Committee 
provided a forum for the exchange of informat ion between Members, and for dialogue between 
regulators and trade negotiators.  
2.79.  The Committee took note of the statements made and decided to revert to this issue at the 
next meeting.  S/FIN/M/80 
 
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  3  ITEM C - ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON 
TRADE IN SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS 
3.1.  The Chairperson recalled that Brazil was the only Member that had yet to accept the 
Fifth Protocol.  3.2.  The representative of Brazil said that there had been no developments in the internal 
procedures for the acceptance of the fifth protocol.  
3.3.  The Committee took note of that statement an d decided to revert to this agenda item at its 
next meeting. 
4  ITEM D - TRADE IN FINACIAL SERVICES AND DEVELOPMENT  4.1.  The Chairperson recalled that at the previous meeting the Committee continued its 
consideration of 'financial inclusion'. In that context, Chinese Taipei made a presentation on the 
recent amendments to the Regulations Governing Domestic Branches of Financial Institutions, which were specifically introduced to improve access to financial services in the domestic market; 
South Africa shared information on the Southern African Development Community (SADC) 
Integrated Regional Electronic Settlement System (SIRESS), which had recently come into operation; and China briefly described its policy on mobile banking.   
4.2.  She also recalled that, following a request by the Committee at the last meeting, the 
Secretariat was preparing a Note on 'Financial In clusion and the GATS'. Unfortunately, due to the 
ever increasing amount of material in this fiel d, it had not been possible for the Secretariat to 
finalize the Note in time for this meeting.   
4.3.  Also under this agenda item, at the last meeting, China made a proposal to hold a seminar 
on mobile banking. It was her understanding that the proposal was being further developed by China.   
4.4.  The representative of China shared some preliminary ideas on the proposed workshop on 
mobile banking. The workshop could address three aspects of mobile banking: the commercial 
reality and the development of mobile banking across the world and in different regions; 
regulatory issues and policy; and the perspective of  the private sector, in particular the companies 
engaged in the supply of mobile banking. Speake rs should therefore include representatives from 
academia, regulatory agencies, and the business community. He suggested the Chairperson continued with her consultations with interested Members.   
4.5.  The representative of South Africa replied to  questions raised at the last meeting by Australia 
and Canada on the impact of SADC Integrated Re gional Electronic Settlement System (SIRESS) on 
t r a d e .  S I R E S S  h a d  b e c o m e  o p e r a t i o n a l  i n  a  l i m i t e d  n u m b e r  o f  S A D C  m e m b e r  s t a t e s  t o  d a t e .  
Therefore, it was difficult to assess the actual ef fect on trade. Theoretically, an increase in the 
speed of transactions, a decrease in their costs, and a reduction of the risks incurred would stimulate regional trade. However, it was important to note that a payment system was just one 
element affecting trade and therefore, in prac tice, its effectiveness could be promoted or 
undermined by many other sectors. South Africa looked forward to sharing future developments in this regard with Members. Australia also indicated that it would be interested in further information 
on the impact of low value payment projects on sending remittances. In that regard, he said that 
this project was at an early stage of development and it was too soon to comment. However, once 
information became available, South Africa would be happy to share it with Members. 
4.6.  The representative of Australia thanked Sout h Africa for those replies. She also welcomed the 
proposal put forward by China for a workshop on trade aspects of mobile banking, and said her 
delegation would be willing to join consultations on the development of the proposal. 
4.7.  The representatives of the United States, the European Union, Switzerland, and Canada, in 
that order, also welcomed China's interest in having a workshop or session on mobile banking, and 
asked to be included in any consultations the Chairperson may have on this proposal. Canada S/FIN/M/80 
 
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  further suggested that China might wish to develop its ideas in writing, and highlighted that trade 
aspects should figure prominently in the workshop's program.   
4.8.  The representative of Chinese Taipei also w e l c o m e d  t he  p r o p os a l  b y  C h i n a .  I t  w o u l d  b e  a 
good opportunity to discuss how modern technologies affect trade in financial services. 
4.9.  The representative of Chile also supported the proposal by China.  
4.10.  The Chairperson said she would be holding consultations on the proposal by China.  
4.11.  The Committee took note of the statements ma de and decided to revert to this agenda item 
at the next meeting.  
5  ITEM E - TECHNICAL ISSUES (CLASSIFICATION ISSUES) 5.1.  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, she had not 
prepared a specific summary.  
5.2.  The discussion was held in informal mode. 
5.3.  The Committee decided to ask the Secretariat to prepare a compilation of references to 'new 
financial services', and decided to revert to this agenda item at the next meeting. 
6  ITEM F - RECENT DEVELOPMENTS  IN FINANCIAL SERVICES TRADE 
6.1.  The Chairperson recalled that, as a standing feature of the agenda, this item had been used 
by delegations to either present and discuss recent  developments in individual their markets or 
introduce proposals that eventually led to specif ic dedicated discussions or seminars, for example 
on macro-prudential policy and regulation, on non-life insurance services, and on the impact of technology on regulation and supervision. This focus on recent developments 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. She said that it was in the interest of all Members, and certainly wi thin the competence of the Committee, to keep 
abreast of developments in the financial services sector, either at the global or country level.   
6.2.  The representative of Ecuador suggested that the Committee should further discuss the issue 
of regional payments and compensation systems, which were critical for trade in goods and 
services. In Latin America, for example, there wa s the Reciprocal Payments and Credit Convention 
(Convenio de Pagos y Créditos Recíprocos) under the aegis of the Latin American Integration Association (LAIA). It would be interesting and useful to discuss how these systems affected trade in services, in particular financial services.  
6.3.  The Chairperson asked the representative of Ecuador whether his delegation intended to 
submit a written proposal on this issue. 
6.4.  The representative of Ecuador said his de legation was not yet in a position to submit a 
written proposal. He raised the issue as an idea for Members' consideration, and which could be 
covered perhaps by a Secretariat note describing the various regional compensation and payments 
systems. 
6.5.  The representatives of the United States, th e European Union and Japan, in that order, said 
that it would be useful to have the proposal in writing, even if it was in general terms, so that 
Members could have a better idea of the issue and decide how to proceed.  
6.6.  The Chairperson said that she would also pick up this issue in her consultations.  
6.7.  The Committee took note of the statements ma de and decided to revert to this agenda item 
at the next meeting.  S/FIN/M/80 
 
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  7  ITEM G - OTHER BUSINESS 
7.1.  No issues were raised under this agenda item.   
__________