RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/M/61 
4 March 2010 
 
 (10-1193) 
Committee on Trade in Financial Services  
  
 
REPORT OF THE MEETING HELD ON 2 AND 9 NOVEMBER 2009 
 
Note by the Secretariat
1 
 
1. The Committee on Trade in Financial Services held a meeting on 2 and 9 November 2009, 
under the Chairmanship of Mr. Sudhir Sooklal (South Africa).  The proposed agenda is contained in 
airgram WTO/AIR/3464.  
2. The representative of Ecuador requested its country to be included as co-sponsor of the 
proposal on "The Financial Cris is and Related Matters" mentione d under item E of the agenda.   
3. The agenda was adopted with that addition. 
A. ACCEPTANCE OF THE FIFTH PROTOCOL TO TH E GENERAL AGREEMENT ON TRADE IN SERVICES 
EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS  
4. The Chairperson  recalled that three WTO Members had yet to accept the Fifth Protocol, 
namely:  Brazil, Jamaica, and the Philippines.  He informed the Committee that he had received a 
written communication from the Philippines indicating that there was no significant development to report regarding the domestic procedures for the a cceptance of the Fifth Protocol;  and that the 
Executive Branch was working with the Senate to secure Philippine's acceptan ce as soon as possible.  
The Chairperson then invited Brazil and Jamaica to  provide information on the status of their 
domestic processes. 
5. The representative of Brazil
 said that the domestic procedures had not been concluded yet.  
6. The representative of Jamaica  said that, regrettably, he had not received any update from 
Jamaica's financial regulators as to when the ratificat ion would be finalized.  He added that the issue 
was under consideration and reaffirmed Jamaica's co mmitment to the ratification of the Protocol.  
7. The Chairperson  thanked these delegations for their updates, and encouraged the three 
Members concerned to accelerate their internal pr ocedures for the acceptance of the Protocol, which 
contained promises made mo re than 10 years ago.   
8. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting. 
B. TRANSITIONAL REVIEW UNDER SECTION 18 OF THE PROTOCOL ON THE ACCESSION OF THE 
PEOPLE 'S REPUBLIC OF CHINA  
9. The Chairperson  recalled that the Committee was manda ted to conduct this review pursuant 
to section 18 of the Protocol on the Accession of th e People's Republic of China.  For this year's 
                                                      
1  This document has been prepared  under the Secretariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/FIN/M/61 
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  review, written communications had been receive d in advance from the following Members:  the 
European Communities (S/FIN/W/70);  Japan (S/FIN /W/71);  and the United States (S/FIN/W/72).  
He also drew Members' attention to the notificati ons made by the People's Republic of China to the 
Council for Trade in Services under Article III of the GATS, circulated as documents S/C/N/529 to 
534, which contained relevant information regarding trade in financial services.  
10. The representative of China
 addressed first the questions raised by the European 
Communities, Japan, and the United States on banking services .  
11. She said that the introduction of overseas investors in Chinese banks was still at an initial 
stage.  The 20 per cent cap on equity investment by a single foreign financial institution in a Chinese-
funded financial institution reflected a viable policy orientation in light  of the level of development of 
the Chinese banking industry.  This requirement a fforded both Chinese banks and their foreign stake-
holders considerable latitude for furt her cooperation.  Besides, the current  financial crisis revealed that 
there were many imperfections in risk manage ment and operation modes in the global financial 
system.  She reaffirmed that China would not chan ge the 20 per cent equity cap for the time being.  
12. Turning to the question raised by the European Communities on the 25 per cent foreign equity 
investment threshold, she said that this base limit w as incorporated in the hori zontal section of China's 
schedule of specific commitments.2  Both Chinese and foreign banks were subject to the same 
supervision legislation, namely, the Law on Regulation and Supervision of Banking  and the 
Commercial Bank Law .  She explained that the regulation of  Chinese and foreign-funded banks only 
varied in some specific measures, the main reas on being that, within the WTO framework, foreign-
funded banks should comply with China’s specifi c commitments on the scope of banking services, 
conditions for market access, and restrictions on na tional treatment.  Meanwhile, China still needed to 
take some prudential measures that were different from those applicable to Chinese banks in light of 
the risk features of foreign-funded banks, especially  their branches, so as to protect the rights and 
interests of Chinese depositors and maintain financial stability in China.  
13. In response to the question raised by the Eu ropean Communities about the establishment and 
monitoring of foreign bank branches, she said that China had removed the geographic restrictions and 
service target limitations on foreign banks’ opera tion in RMB business on 11 October 2005, which 
symbolized the elimination of all non-prudential re quirements for foreign banks.  She explained that 
foreign banks were allowed to s ubmit applications for establishing sub-branches simultaneously in 
several cities, such as Shanghai and Beijing.   
14. Regarding the question raised by the European  Communities on the treatment of foreign bank 
branches as separate legal entities (and not as a cons olidated network), the representative of China 
explained that although it relevant regulations required that "where a foreign bank establishes two or 
more branches in the territory of the People’s Repub lic of China, the head office or the authorized 
headquarters shall designate one of these branches  as a management branch", in practice, as the 
branches of various foreign banks were in differe nt development conditions and their head offices 
gave different authorizations to the branches, mo st of these branches were relatively independent in 
carrying out business.  The management branch mainly played the role of a "page boy", i.e. taking in 
charge the tasks of collecting information and repo rting to the head office.  In addition, legally 
speaking, the branches established by a foreign bank in the territory of China did not have the obligation of mutual succession in creditors’ rights and debts.  Therefore, in order to increase the 
                                                     
 
2  "On 1 December 2009, the Treaty of Lisbon amendi ng the Treaty on Europ ean Union and the Treaty 
establishing the European Commun ity (done at Lisbon, 13 December 20 07) entered into force.  On 29 
November 2009, the WTO received a Verbal Note (WT/L/7 79) from the Council of th e European Union and the 
Commission of the European Communities stating that, by virtue of the Treaty of Lisbon, as of 1 December 
2009, the European Union replaces an d succeeds the European Community."  S/FIN/M/61 
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  branches’ capacity of risk prevention as much as possible, China implemented stricter prudential 
requirements for these branches, including separate assess ment of branches of foreign banks.  At the 
same time, China evaluated and monitored the overall risks of all the branches of a foreign bank in the 
territory of China.  In her view, many other Memb ers took similar or even stricter measures in this 
area.  
15. She then turned to the questions posed by the European Communities and the United States 
on electronic payments.  The Chinese government had never stated that it permitted China Union Pay to monopolize electronic payment transactions.  The Chinese bank card service market was open to both foreign and domestic banks.  China Union Pay had gained its market share by providing its 
clients with lower fees and quality services.  Ther e was no monopoly in this case.  China Union Pay 
had cooperation ties with interna tional bank card institutions.  The Chinese government encouraged 
mutual opening up on the basis of reciprocal benefits  and fair play.  She added that, as indicated in 
previous transitional reviews, China had not made  commitments to opening RBM bank cards, and the 
clearing and settlement market to foreign-funded institutions.   
16. Regarding question 10 by the United States, she said that foreign banks had been allowed to 
provide electronic payment services in China in accordance with its accession commitments.  For 
more details, she drew Members' attention to the Administrative Regulations on Foreign-funded bank s 
and the Circular on Issues Concerning Bank Card Business of Wholly-foreign Owned Bank and Sino-
foreign Joint-venture Banks , issued by the China Banking Regulatory Commission (CBRC) in 
June 2007.  At present, bank cards issued by foreign banks in China could be used within the territory 
of China, while RMB cards and foreign currency cards  could also be used outside the territory of 
China.  As per China's market a ccess commitments, foreign banking institutions were able to issue 
bank cards of their choice, which were necessary for transactions in China, provided that they 
complied with Chinese laws and regulations as well as industry standards for payment services.   
17. She further considered that both the Europ ean Communities' and Japan's assertions with 
regard to the location of data systems were incorr ect.  As China had expressed at the previous review, 
there was no "relocation" or "discrimination".  In  her view, this policy was not inconsistent with 
China’s commitments.  It had always been a c onsistent bank card policy of the People's Bank of 
China and other relevant regulat ory authorities that bank card da ta processing systems and core 
payment systems must be located in China.  This  requirement was introduced in accordance with the 
prudential principle, for the purpose of maintaini ng financial information security, strengthening risk 
management, and protecting clients’ rights and inter ests.  As Japan noted in its submission, this 
requirement "is applied equally to  both foreign-funded and Chinese ba nks".  Finally, she said she had 
never heard that, as indicated by Japan in questi on 8 of its submission, locally-incorporated banks 
would be required to install and make oper ational core payment systems by March 2011.  
18. In addition, in her view, Japan's questions on RMB retail business (i.e.  "whether China 
intends not to allow consumers to choose in wh ich banks to deposit RMB"), seemed to twist the 
objective and significance of this policy.  WTO rul es did not prevent Members to introduce prudential 
measures.  Since a large number of foreign banks op erating in China were transnational institutions 
with global presence, and since their branches in Ch ina were not legal entities, China as a host country 
was unable to monitor, control and isolate the ri sk from the overseas parent bank with branches in 
China, and faced difficulties in protecting depositor s effectively.  In fact, China had such an 
experience before.  In 1991, the Bank of Credit and Commerce International (BCCI) suddenly had 
gone bankrupt, leading to the unexpected close of its  Chinese branch in Shenzh en.  In this process, 
however, neither BCCI nor its branch in Shenzh en had notified any risk alert to the Chinese 
supervisory authority.  This, together with wh at had happened with Lehm an Brothers during the 
current financial crisis, spoke in favour of this requirement, which was, in her view, necessary and 
appropriate.  If foreign-funded banks wanted to e ngage in local RMB business, they could choose to 
conduct a full range of RMB business through their s ubsidiaries.  As stated previously, the aforesaid S/FIN/M/61 
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  policy aimed at protecting the rights and interests of  depositors.  She considered that a RMB liquidity 
crisis, which was a cause of concern for Japan, woul d be neither caused simply by this factor nor 
solved by this measure.  For instance, imprope r management or unreasonabl y high deposit-loan ratios 
might be a more direct cause of liquidity crisis.  Nevertheless, this transitional review was not the 
appropriate forum to discuss this issue, and sh e suggested that the Japan ese authorities discussed it 
with their Chinese counterparts bilaterally.  
19. The representative of China turn ed then to the questions on insurance services .  In reply to 
the questions raised by Japan, the representative of China explained that article 11.2 of the revised 
Regulation on Administration of Reinsurance Business  was still a draft, and it was not possible to 
indicate a specific date for its entry into force.  Contrary to Japan's opinion, the requirements in that 
draft article did not pose problems to risk manageme nt by insurance companies.  The purpose of this 
provision was to better manage the potential risks posed by the reinsurance business.   
20. In addition, she explained that according to Article 23 of the said draft Regulation , as long as 
foreign insurance companies followe d the requirements set out in the Implementation Rules for 
Examining and Approving Reinsu rance Transactions between Foreign-capital Insurance Companies 
and their Associated Companie s to process the approval formalities with the China Insurance 
Regulatory Commission (CIRC) for reinsurance transac tions with their affiliated enterprises in the 
fourth quarter of each year, they were allowed to conduct such business with their affiliates after 
obtaining such approval.  The approval informati on was transparent and could be obtained from the 
CIRC's website at www.circ.gov.cn. 
21. She further said that the Interim Measures on Administration of the Training of Board 
Members, Supervisors and Senior Managerial Personnel of Insurance Companies  had been issued on, 
and implemented as of, 15 April 2008.  These Measures  were promulgated to promote team building 
among board members, supervisors and senior manage ment, to regulate the behaviour of insurance 
companies' management personnel, to enhance th e sense of risk, innovation and integrity, and to 
promote the regulated operation of insurance compan ies.  She confirmed that in implementing this 
measure, the Chinese regulators would conduct research  on the reasonable concerns raised by various 
parties.  
22. Turning to the concern raised  by Japan that the dissolution of foreign-funded insurance 
companies was not permitted for a certain period  after establishment, the representative of China 
explained that the conditions of dissolution we re different for property and casualty insurance 
companies and for life insurance companies.  She a dded that interested Members might refer to the 
following laws and regulations for further information: the Bankruptcy Law of the People's Republic 
of China , the Insurance Law of the People's Republic of China , the Regulation on Administration of 
Insurance Companies , and the Regulation on Administration of Foreign-Funded Insurance 
Companies , together with the detailed implementation rul es.  These laws and regulations set out clear 
procedures and requirements for dissolution of insurance companies, and applied equally to both 
Chinese and foreign-funded insurance companies.  
23. Turning to the concerns raised by the Eur opean Communities and the United States regarding 
the approval of branch insurance companies, she explained that China had always granted approval 
according to its commitments, relevant provisions  and procedures, and that the same regulations 
applied to domestic and foreign-funded companies.  The application requirements, materials needed, 
and approval procedures for applications, as well as the laws and regulations  governing the approval 
of branch insurance companies, could all be f ound CIRC’s website, and the applicant was able to 
obtain feedback during the application process.  Besides, she added that, while performing its commitments, China was gradually opening and promo ting the development of its insurance market.  
The promulgation of the new insurance law and rele vant regulations provided for a healthier and  S/FIN/M/61 
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  better regulated market environment.  She suggest ed Members should contact the relevant Chinese 
authorities in case of specific problems.  
24. In reply to the questions raised by the Unite d States on the operations of China Post Life 
Insurance, she explained that the company started its operations on 9 September 2009.  As an 
insurance company, it was regulated by CIRC, and not by the State Post Bureau or other authorities, 
and was subject to the same regulatory requirements as other insurance companies.  Its service target 
market was constituted mainly by farmers and low- income groups in urban and rural areas.  China 
Post, not China Post Life Insurance, had obtai ned a license for  concurrent-business insurance 
agencies, approved by CIRC.  Commercial insuran ce companies, including foreign-funded insurance 
companies, were allowed to establish agent relations with China Post by signing an agent agreement.  
She suggested that interested American companie s should get in touch with China Post for any 
specific business matter.  
25. Making reference to the draft Measures on Administration of Equity of Insurance Company , 
the representative of China said that applying releva nt qualification requirements to foreign investors 
was in compliance with the principle of risk prev ention and prudential supervision.  At present, the 
Measures  were being subject to the public opinion so licitation process.  The competent authority 
would further study the opinions expressed by various parties.  
26. The representative of China said that the mana gement of assets by insurance institutions was 
subject to the following regulations: Provisional Measures Governi ng Insurance Asset Management 
Companies, Provisional Measures for the Administ ration of Overseas Investment with Insurance 
Funds, Provisional Measures for the Administration of Bond Investments of Insurance Institutional 
Investors, Notice on Issues Related to Bond Invest ment, Notice on Regulating the Stock Investment 
Business of Insurance Institutions, Notice on Investing the Insurance Funds in the Infrastructure Debt 
Investment Plans, Notice on the Investment on Equity  of Commercial Banks by Insurance Institutions, 
Notice on the Investment on Subordinated Term Debts of Insurance Companies by Insurance 
Companies and Insurance Assets Management Companies , and so on.  All rules were accessible on 
the CIRC website.  The qualifications required fo r managing assets of insurance institutions were 
contained in the Provisional Measures Governing Insu rance Asset Management Companies  and the 
Provisional Measures for the Administration of Overseas Investment with Insurance Funds .  
27. The representative of China referred then to  the questions raised by the United States on 
"group annuities" and "enterprise annuities" services.  In that regard, she denied the existence of a 
pilot programme for the supply of "group annuities" services.  In the case of "enterprise annuities", 
she said that the existing fund management agencies had been able to meet the operational needs, so 
no relevant qualification applications would be accep ted in the near future.  As a qualified practitioner 
in China, a financial institution, whether fore ign-funded or domestically -funded, could submit an 
application and such application would be accep ted equitably, provided the institution met the 
requirements stipulated in the Interim Measures for the Qualification Accreditation of Enterprise 
Annuity Fund Management Institutions .  She added that the application would be reviewed by experts, 
and the enterprise obtaining more than half of  the votes would be granted the appropriate 
qualification.  However, it was impossible for all applicants to be approved, as mentioned in the 
submission by the United States.  For information on the specific procedures, Members should refer to 
the Interim Measures .  
28. She then said that in accrediting the qualifi cation of enterprise annuities fund management 
institutions, the Ministry of Human Resources and Social Security (MOHRSS) would discharge its 
duties strictly in accordance with the provisions of the Administrative Licensing Law of The People's 
Republic of China .  In so doing, the Ministry would so licit opinions from CBRC, CSRC, and CIRC.  
Contrary to what had been indicated by the Unite d States in its submission, these three agencies had 
never held up an application.  At the same time, Ch ina was mindful of its obligations under the WTO.  S/FIN/M/61 
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  29. The representative of China then turned to the questions on securities .  She said that her 
country had not approved new quotas or products since 2008, due to the impact of the financial crisis 
and other factors.  Quota reviews and approvals would return to normal when the international 
economic and financial situation improved.  
30. According to the Trial Measures for the Administration of Overseas Securities Investment by 
Qualified Domestic Institutional Investors (CSRC Order No. 46, released on 18 June 2007), and other 
laws and regulations, foreign financial institutions  were allowed to provide Qualified Domestic 
Institutional Investors with investment consulting,  asset custody, securities trading and other services.  
A number of foreign asset management companie s, custodian banks, and brokerage firms were 
already providing Qualified Domestic Ins titutional Investors with those services.  
31. Finally, the representative of China addressed the questions on transparency .  She said in 
that regard that China had faithfully honoured its  obligations and commitments on transparency since 
its accession to the WTO.  Prior to the promulgation of trade-related laws regulations or rules, the 
Chinese government and its subordinated agencies, including CIRC, CBRC, CSRC and MOHRSS, put great emphasis on opinions solicited from all parti es by way of public hearings, symposia, internet 
notices, etc. to ensure transparent policy making.  
32. Replying to the last question raised by the Un ited States, she said that since the establishment 
of capital markets in China, the competent authorit y had always attached importance to public opinion 
solicitation on draft laws, regulations and rules.  The CSRC had set up a systematic mechanism for 
public opinion solicitation, and public opinion solic itation had become a general principle of law 
making.  All the CSRC rules must be subject to public opinion solicitation by way of letter inquiries, 
symposia, feasibility study meetings , and on-spot research and investigation.  The process included all 
interested parties, such as central government ag encies, local government, st ock exchanges, brokers, 
securities firms, futures firms, listed companies and investors, both domestic and foreign.  
33. Article 72 of the Legislation Law of the People's Republic of China provided that  "with 
regard to a matter that falls with in the limits of power of two or more departments under the State 
Council, the State Council shall be requested to formulate administrative regulations, or the 
departments concerned under the State Council sha ll jointly formulate rules."  Therefore, for 
regulations involving other regulatory agenci es, CSRC would solicit opinions from relevant 
departments in the drafting stage, or draft the regula tions jointly with relevant departments, then seek 
comments alone or in conjunction with other depa rtments, and finally co-sign and co-release the 
regulations.  In her view, this showed CSRC’ s determination to enhance transparency.  
34. The representative of the United States
 said that it would be helpful to obtain a copy of the 
Chinese statement since it was not entirely clear that all the questions raised had been answered.  He 
added that he did not have any specific follow-up  question, but looked forward to reviewing the 
detailed response provided by China.    
35. The representative of Japan  also requested that the responses be provided in writing.  As a 
follow-up, she asked a question regarding the traini ng of senior staff of insurance companies.  She 
took note of China's comments about that matter, but expressed concern about the implementation of 
those requirements, especially regarding language fo r training.  She asked whether the requirements 
could be implemented in a flexible manner in the case of foreign-funded companies, taking into 
account their language constraints.  
36. The representative of th e European Communities  also requested that the statement be 
distributed in writing.  She said that the Eu ropean Communities were not convinced of the 
explanations put forward by China, in particular with  regard to the plans to lift the limitation on equity 
investment by a single overseas financial institutio n in a Chinese-funded financial institutions, and the  S/FIN/M/61 
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  responses to questions contained in paragraphs 6 and 7 of the submission by the European 
Communities.   
37. The representative of China  said that her country was not obliged to provide Members with 
any written responses, but was nonetheless willing to provide a list of the laws and regulations 
mentioned in her statement.  She took note of Jap an's concerns, and confirmed that the CIRC would 
take them into consideration.  Any company operating in the territory of China must comply with the 
relevant administrative regulations of China.  Senior management must have a very good 
understanding of the laws, regulations, and market condition of the country where they were doing 
business.  In her view, that was quite understandable.  
38. In response to a clarification requested by  the representative of the United States, the 
Chairperson  confirmed that the report of the meeti ng would contain all statements made.  
39. By way of conclusion, the Chairperson  invited the Committee to take note of the statements 
made.  Secondly, he requested the Secretariat to prepare a report, to be presented to the Council for 
Trade in Services.  It would be a f actual report, stating basically that:  
(a) pursuant to section 18 of the Protocol on the Accession of the People's Republic of 
China, the Committee conducted a review of  the implementation by China of the 
WTO Agreement and of related provisions of the said Protocol, in the meeting held 
on 2 November 2009;   
(b) written communications had been received from three Members, namely the 
European Communities, Japan, and the United States;  and 
(c) the details of the discussion, including a ll the interventions made at the meeting,  
  would be found in the meeting report, to be issued as document S/FIN/M/61. 
40. The Committee so decided . 
C. DEDICATED DISCUSSION ON ISLAMIC FINANCE  
41. The Chairperson recalled that this dedicated  discussion on Islamic finance was based on a 
decision by the Committee on 24 June 2009.  As st ated in document Job(09)/158, issued under the 
Chair's responsibility, the purpose of this dedicated  session was to build on previous discussions on 
this topic and to explore and identify the potential tr ade-related aspects of Islamic finance that might 
warrant further consideration by the Committee.  He drew attention in that regard to document 
Job(09)/7 and Corrigendum 1, on the basis of whic h the Committee had started to explore the trade-
related aspects of Islamic finance. 
42. On the basis of document Job(09)/7, the Chairp erson had identified four topics that would 
constitute the framework for this dedicated discussion: 
(a) Market overview.  What are the prime mark ets for Islamic finance?  What are the 
main Islamic financial products available in different jurisdictions?  Who are the 
main suppliers of Islamic finance? 
(b) Regulation and supervision of Islamic finance in different jurisdictions.  What are the 
main mechanisms and structures?  Ho w do they differ from the regulatory and 
supervisory arrangements for traditional fi nance?  Are there specific prudential 
regulatory issues raised by Islamic finance?   S/FIN/M/61 
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  (c) Market access and scheduling issues.  Have  Members encountered restrictions on the 
supply of Islamic financial services in othe r Members?  More generally, does Islamic 
finance raise any particular scheduling issues?   
(d) Classification issues.  Does Islamic finance raise any particular classification issue? 
43. He said his intention was to take up these i ssues together during the discussion that would 
follow the initial presentations.  He proposed to or ganize the session as follows.  Firstly, the floor 
would be given to the two guest speakers, Mr. Muhammad bin Ibrahim, Assistant Governor, Bank 
Negara Malaysia;  and Mr. Mahm ood Shafqat, Senior Joint Direct or, Banking Policy and Regulations 
Department, State Bank of Pakistan.  After thei r presentations, the floor would be offered to 
delegations.  With the aim of making the discussi on as interactive and informative as possible, he 
encouraged all Members to participate, and provide their views on the different topics.    
44. After that introduction, the Chairperson
 invited Mr. Muhammad bin Ibrahim to start off the 
dedicated discussion.  
45. Mr. Muhammad bin Ibrahim  said that Islamic fi nance was introduced in Malaysia in 1983, 
and had gone through three phases since then.  Du ring the first phase (1983-1992), the institutional 
foundations were laid, including the establishment of the first Islamic bank and Takaful company;  the 
enactment of the Islamic Banking Act, the Takaful Act, and the Government Funding Act;  as well as 
the establishment of the Islamic Capital Market.  The aim of the second phase, from 1993 to 2000, 
was to improve competitiveness.  Conventional bank s were allowed to offer Islamic banking services 
via "Islamic windows".  Other important developm ents included the establishment of the Islamic 
Inter-bank money market in 1994, and  the formatio n of Shariah Advisory Councils at Bank Negara 
Malaysia and at the Securities Commission of Mala ysia.  In 2001, Islamic finance entered into a 
process of liberalization and international integrati on.  Three Islamic banking licences were issued to 
foreign banks, and the existing "Islamic windows" we re transformed into Islamic subsidiaries of the 
banks concerned.  Banking prod ucts and services could no longe r be offered through "Islamic 
windows".  In 2002, Malaysia became the host of  the Islamic Financial Services Board (IFSB),  
responsible for international standard setting in the area of Islamic finance.  In 2006, the Malaysia 
International Islamic Financial Cent re (MIFC) was established.   
46. He then provided an overview of regulation and supervision of Islamic finance in Malaysia.  
Malaysia had a dual financial system, with conventi onal and Islamic finance running in parallel.  It 
was important to ensure that there was no regulatory arbitrage and that both systems remained innovative and competitive.  In 2009, section 60 of th e  new Central Bank of Malaysia Act gave Bank 
Negara Malaysia (BNM) the role of  developing Malaysia as an interna tional Islamic financial centre.  
The BNM's Shariah Advisory Council (SAC) was the highest authority for the ascertainment of 
Islamic law in Islamic financial business.  In that  regard, section 56(1) of the said law made it clear 
that the court or arbitrator shall take into acc ount published rulings of the BNM's Shariah Advisory 
Council and to refer any Sharaih questions to the SA C for rulings.  The rulings of SAC were final and 
binding on Islamic financial institutions, courts or arbitrators. 
47. The Islamic banking regulatory framework in Mala ysia had distinct features.  For example, 
corporate governance principles were peculiar to Isla mic finance, and risk management was based on 
unique risks, such as Shariah risk, rate of retu rn risk, displaced commercial risk, and equity 
investment risk.  Capital adequacy standards we re determined on the basis of risk profiles and 
exposures determined based on the underlying Sharia h contracts.  There we re separate accounting, 
clearing, and settlement systems, as well as separate prudential requirements.  Malaysia also had a 
specific Islamic deposit protection insurance scheme.   S/FIN/M/61 
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  48. Malaysia's regulatory standards had been harm onized with international standards issued by 
the Islamic Financial Services Board (IFSB) in orde r to ensure regulatory convergence.  The main 
standards issued by the ISFB were the following:  Capital Adequacy  Standard;  Guiding Principles on 
Risk Management;  Guiding Principles on Corpor ate Governance;  Transparency and Market 
Discipline; Supervisory Review Process;  Capital Adequacy Requirements for Sukuk, Securitisation, 
and Real Estate Investment;  and Guiding Principl es on Governance for Islamic Collective Investment 
Schemes.  
49. The Islamic financial industry in Malaysia was di versified, with financia l institutions offering 
a wide range of products and services.  The were  17 Islamic banks – 11 domestically-owned and 
6 foreign-owned – as well as three international Is lamic banks.  The Takaful sector (i.e.  Islamic 
insurance sector) was composed of eight takaful opera tors, three re-takaful suppliers (the equivalent 
of reinsurance companies), and one international Takaful operator, which was allowed to do Takaful 
in non-ringgit currency.  Additionally, there were eight approved Islamic fund management 
companies, 35 fund management companies with Is lamic mandates, and 144 Islamic unit trust funds.  
There were more than 100 types of Shariah-comp liant products offered by banking institutions.   
50. He then turned to the second part of his presentation, focusing on WTO-related matters.  
Malaysia maintained a level playing field between local and foreign players as regards market entry 
requirements.  In addition, no restrictions were  placed on the number of licenses for international 
Islamic banks (IIBs) and interna tional Takaful operators (ITOs) wi shing to conduct Islamic banking 
business or Takaful in international currencies.  The application for IIB and ITO was open to any 
qualified foreign and Malaysian financial institution which was well capitalized, reputable, had a 
sound track record, adopted best international pr actices set by the international standard setting 
bodies, and was regulated and supervised by a competent home regulatory authority.  The current regulatory regime allowed up to 70 per cent foreig n equity in existing domestically-owned Islamic 
banks, subject to a minimum paid up capital of US$1 billion (except for the three International Islamic 
banks already operating in Malaysia);  up to 70 per cent foreign equity in existing Takaful operators;  
up to 100 per cent foreign equity in IIB, ITO, and retakaful operators;  and up to 100 per cent in 
Islamic mega banks.   
51. Additionally, there were no restrictions on th e number of branches and on the location of off-
site automated teller machines (ATMs) for locally-o wned players.  The number of branches, as well 
as the location of off site ATMs of foreign players, was subject to approval by the BNM.  The main reason for this requirement was to ensure that banking services offered by foreign financial 
institutions were also available beyond urban areas, and to encourage the nati onal agenda of financial 
inclusion.  Malaysia also implemented a liberal polic y regarding expatriates.  No distinction was made 
between domestically-owned and foreign-owned entiti es in the application of prudential standards, 
including minimum capital requirements.   
52. He shared some of the lessons learnt from Malaysia's financial sector opening.  First, 
sequencing and managed li beralization was necessary in order to  speed up market opening.  Second, 
authorities needed to engage with local stakeholders , giving them  ample time to prepare for future 
competition.  Third, it was important to show to pol icy makers and the relevant  stakeholders that the 
net benefits for market opening were very significan t.  Finally, foreign institutions wishing to enter 
the domestic market should be mindful of  the national agenda and aspirations.  
53. He explained that the new liberalization meas ures announced in 2009 focused on three areas, 
namely, issuance of new licences, increases in foreign equity limits, and allowing greater operational 
flexibility.  Two new licences would be issued to me ga Islamic banks with minimum paid capital of 
US$1 billion each, and to new family takaful operators .  Many applications had been received by the 
closing date, in end-October.  Fo reign equity limits in domestic Is lamic banks subject to paid up 
capital of at least US$1 billion, and in takaful comp anies, were increased up to 70 per cent.  Takaful S/FIN/M/61 
Page 10  
 
  companies were also given greater flexibility to ente r into strategic tie-ups with foreign partners, in 
order to strengthen the resilience and competitiveness  of the domestic industr y.  Greater operational 
flexibilities were introduced, allowing foreign takafu l companies with subsidiaries in Malaysia to 
establish branches nationwide with no restriction, a nd to enter into "bancatakaful" arrangements with 
banking institutions.   
54. Turning to scheduling issues, he considered th at Islamic finance fell comfortably within the 
definition of financial services in the GATS, and that the current classification of financial services raised no problems in that regard.  However, the supply of Islamic financial services depended on 
Members' coverage of financial services commitmen ts.  Malaysia did not have to adopt a specific 
classification for Islamic financial services in its agreements outside the WTO.  Malaysia took 
additional commitments under free trade agreem ents reflecting GATS-plus obligations.  
55. With a view to strengthening global inter-li nkages, Malaysia signed seven memoranda of 
understanding (MOUs) with other key financial centr es, such as London and Hong Kong, China.  The 
areas covered by these agreements included capacity building and human capital development, information exchange, and harmonisation of sta ndards and documentation for cross-border Islamic 
financial transactions.  Malaysia's efforts to export Islamic financial expertise had manifested in two 
fronts, namely Sukuk issuance and talent developm ent initiatives.  Multilateral financial institutions 
were allowed to issue Ringgit-denominated sukuk in  Malaysia.  Also, the investor base had been 
widened through the issuance of non-Ringgit denominat ed sukuk, such as the Emas dollar sukuk by 
Petronas.  The International Centre for Educatio n in Islamic Finance (INCEIF) had entered into 
46 MOUs with both local and foreign education servi ce providers to further collaboration in Islamic 
finance education.  
56. The Chairperson
 thanked Mr. bin Ibrahim for his presentation and invited Mr. Mahmood 
Shafqat, from the State Bank of Pakistan, to make his presentation.  
57. Mr. Mahmood Shafqat  said that his presentation would pr ovide a global overview of Islamic 
finance in different jurisdictions and focus on regulat ory issues.  Islamic fina nce had been growing at 
a 30 per cent average annual rate since 2000.  Accord ing to different sources, the asset base of Islamic 
finance ranged from US$700 to 1,000 billion, and was estimated to reach US$1,600 billion by 2012.  
Half of the world's Muslim population – currently  1.4 billion – would opt for Islamic financial 
products in the near future.   
58. Pakistan had developed Islamic banking since 1980.   There were three categories of financial 
institutions:  full fledged Islamic banks, commerci al banks with Islamic banking subsidiaries, and 
commercial banks with Islamic banking branches.  The liabilities of those branches were separated 
from the commercial side of the bank.   
59. The prime markets for Islamic finance were located  in the  Middle East (Bahrain, Iran, Saudi 
Arabia, United Arab Emirates, Qatar and Kuwait);  S outh East Asia (Pakistan, Bangladesh);  the far 
East (Malaysia, Indonesia, Brunei, and Singapore);  Africa (Sudan, Egypt);  and Europe (mainly the 
United Kingdom, but potentially France and Germany) .  The UK had made a lot progress in order to 
turn London into a hub for Islamic financial services.   
60. Islamic financial products were designed on the b asis of different Islamic financial modes.  A 
basic distinction could be drawn between deposit products and fina ncing products.  Deposit products 
could be based on Mudarabah (profit sharing), Wadiah/Qard, and Wakalat ul Istithmar.  The 
Mudarabah-based deposits could be restricted or unres tricted.  In the restricted mode, the funds must 
be invested as determined by the customer, and all the profits and losses from that venture were 
shared between the depositor and the bank.  The unrestricted Mudarabah de posits allowed the banks 
to invest at their discretion, with profits from those investments being distributed among depositors.   S/FIN/M/61 
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  Under the Wakalat ul Istithmar m ode, the bank gathered deposits from customers, and invested them 
as an agent of the customers, r eceiving a fee for that service. 
61. Financing products took basically two forms:  participatory and debt-based.  Under the 
participatory mode, profits from the venture were  shared between the bank and the customer.  
Participatory modes included Mudarabah, Mushar aka, diminishing Musharaka, and Musaqat.  
Diminishing Musharaka was a variant of Musharaka in which the customer and the bank invested 
jointly in a property or venture, with the customer gradually buying out the share of the bank, and profits being shared between the two.  Musaqat wa s basically based on profit sharing.  Debt-based 
modes included Qard and Wadiah.   
62. Trading contracts, which formed the major pa rt of Islamic banks' balance sheets, included 
mainly Murabahah, Ijarah, Salam, Istisna’a, Bai Bith aman Ajil, Istijrar, Bai In ah, and Tawaruq.  Other 
modes included Wakalah (or agency agreement), Hawa lah (assignment of debt),  Kafalah (basically a 
guarantee), Ujrah /Service Charges, and Rahnu (mostly practiced in Malaysia). 
63. These was a basic distinction between Islamic financial services and commercial financial 
services insofar as in the former the needs of the cust omer dictated the appropriate financial solution.  
Additionally, the risks faced by the financial institu tions were different as well.  In Musharakah, for 
example, both sides made a joint contribution to th e capital of the project, and shared in profits and 
losses.    
64. Islamic financial products were based on the di fferent modes outlined before.  For example, 
current accounts could be organized on the basis of Quard;  savings accounts could be offered on the 
basis of Mudarabah;  and term deposits/invest ment accounts were normally based on Mudarabah.  
Islamic banks also offered corporate finance, e.g. trad e finance, working capital, or structured finance.  
Trade finance could be organized, for example, on  the basis of Murabahah, Musharaka, or other 
applicable mode.  Islamic banks also offered diffe rent solutions for consumer finance, small-and-
medium sized enterprises finance, agri culture finance, and microfinance.  
65. Islamic insurance, or Takaful, also involved risk-sharing.  Takaful companies offered a wide 
range of products, such as  family  Takaful (equivalent to life insura nce), banca Takaful for customers 
and/or banks and financial institutions.  He explai ned, for example, that if a bank entered into a 
Murabahah contract with a customer, the bank ha d to purchase the commodities in the market, and 
then re-sell them to the customer at a price agreed by both parties.  In the intervening period, between 
the purchse and the sale to the customer, the bank had to  bear all the risks.  It might seek coverage of 
those risks with Takaful companies.   
66. Other Takaful products include d group Takaful products for companies, health Takaful 
products, general Takaful products , marine Takaful, and Takaful for micro enterprises.   
67. Islamic capital markets comprised two main sect ors:  Islamic equity and the Sukuk sector.  
The Islamic equity sector included Shariah-complia nt shares, which were an essential reference for 
Muslim investors.  The availability of Shariah-comp liant shares led to the introduction of the Islamic 
equity index, which facilitated the tracking and benchmarking of the performance of listed Shariah-
compliant shares.  The Islamic capital market was al so composed of Islamic tradable securities or 
Sukuks, Islamic mutual funds (which could invest in Sukuk, shares or the interbank market), and 
Islamic Real Estate Investment Trusts (REITs). 
68. The main suppliers of Islamic finance were  multinational banks (e.g.  HSBC, Standard 
Chartered, Citibank, and UBS);  as well as local a nd international players, such as Kuwait Finance 
House, Al Rajhi Banking Corporation, Al Bara ka Banking Group, Bank Islam Malaysia, Dubai 
Islamic Bank, Noor Islamic Bank, and CIMB Islamic Bank.  S/FIN/M/61 
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  69. He further noted that the consulting firm Oliv er Wyman had analyzed the market potential for 
retail banking products, distinguish ing between "core markets", "immediate adjacencies", and 
"strategic bets".  Core markets, such as Saudi Arabia, UAE, Kuwait, Qatar, and Bahrain, were highly 
penetrated, and benefited from high disposable income .  Immediate adjacent ma rkets, such as Turkey, 
India, Pakistan, Egypt, and Indonesia, were  populous markets, with lower Islamic banking 
penetration.  Finally, "strategic bets" include d countries with medium-sized populations, but where 
the share of Muslims was high (e.g.  Albani a, Azerbaijan, Kazakhstan, and Tunisia).  
70. The infrastructure for Islamic finance include d institutions such as the Islamic Financial 
Services Board, the Accounting and Auditing Or ganization for Islamic Financial Institutions 
(AAOIFI), the International Islamic Financial Ma rket (based in Bahrain), the General Council for 
Islamic Banks and Financial Institutions (CIBAFI), al so based in Bahrain, and whose main function is 
capacity building, the International Islamic Rating Agency (also based in Bahrain), and the Islamic 
Development Bank (IDB).  The IDB was established in 1974, and was composed of three subsidiaries:  the Islamic Research and Training Ins titute, the Islamic Corporation for Development of 
Private Sector (ICD), and the Islamic Corporatio n for Insurance of Investment & Export Credit 
(ICIIEC).  
71. The Islamic Financial Services Board was an international standard-setting body for the 
Islamic banking and finance industry.  It had issu ed the following standards or guidelines so far:  
Guiding Principles for Risk Management;  Capita l Adequacy Standards;  Guiding Principles on 
Corporate Governance;  Issues in Regulation and S upervision of Takaful;  Guidance on Key Elements 
on Supervisory Review Process;  Disclosure to promot e Transparency and Market Discipline;  Capital 
Adequacy Ratio (CAR) for Sukuk, Securitisations, a nd Real Estate Investment, Guiding Principles on 
Governance for Islamic Collective Investment Schem es;  Technical Note on Issues in Strengthening 
Liquidity Management of IIFS (the development of Islamic money markets);  and Guidance Note in 
Connection with the CAS (recognition of ratings  by ECAIs on Shariah-compliant financial 
instruments).  Additionally, the IFSB had issued drafts on Guiding Principles on Governance for 
Islamic Insurance (Takaful) Operations;  Guidi ng Principles on Shariah Governance Systems;  and 
Conduct of Business for Institutions offering Islamic Financial Services (IIFS).  
72. Islamic financial service suppliers  had developed an export inter est over the years.  Examples 
of internationalization included the Pakistani alBa raka Islamic Bank, and the UAE's Dubail Islamic 
Bank, which had opened branches or subsidiaries abroad .  Some companies, for example, in Bahrain, 
Dubai, and Pakistan, were also developing software  solutions for Islamic financial institutions, which 
by their nature required specific IT support.  Is lamic finance training was another area of export 
interest for countries such as Pakistan.  Islamic fi nancial suppliers were also specialized in the 
issuance of Global Sukuk. 
73. The Chairperson
 thanked Mr. Shafqat for his presentation, and gave the floor to 
Mr. Muhammad Iqbal Azad (General Manager, Oper ations Department, International Islamic Trade 
Finance Corporation), to speak on behalf of the Islamic Development Bank, organization that had 
been especially invited to attend the discussion. 
74. The representative of the Islamic Development Bank  said that the institutions had been 
established in 1974, and had 56 members.  The IDB had set up the International Islamic Trade Finance Corporation (ITFC), as the trade financing arm of the IDB, and whose main task was the promotion of regional and international trade.  The ITFC, which had started its operations on 8 
January 2008, had two divisions: Trade Finance, a nd Trade Promotion and Development.  It had an 
authorized capital of US$3 billion, and was co mposed of 55 members (38 countries and 17 banks 
from member countries).  The IDB and the ITFC had a high level of Shariah Board, composed of renowned experts, and which was responsible for examining and ensuring the Shariah compliance of 
financing products used by IDB.  The main Isla mic financing products used by the IDB and ITFC  S/FIN/M/61 
 Page 13 
 
 
  were the following:  Murabahah (purchase and resale  contract for the trade operations);  Mudarabah 
(pulling of resources for financing of trade on a pr ofit sharing basis);  Istithna (advance payment for 
manufacturing of capital goods);  Ijarah (leasing of equipment and machinery);  Musharakah (equity 
participation);  and Sukuk (Islamic bond).  In addition to these modes, the ITFC was developing other 
modes of financing, such as Ja'ala, for the financing of service transactions.  
75. Apart from the ITFC, the IDB had a number of a ffiliates, such as the Islamic Corporation for 
Insurance and Export Trade (ICIET), the Islamic Co rporation for Private Sector Development (ICB), 
and the Islamic Research and Training Institute (IRTI).   
76. After these presentations, the Chairperson  opened the floor for discussion. 
77. The representative of Australia  said that his country was interested in the development of 
Islamic finance.  There had been a number of joint initiatives by government, industry and academia 
with a view to developing Islamic Finance, incl uding the establishment of a masters programme on 
Islamic banking and finance by one of Australi a's universities.  He said that the Australian 
government was committed to an open and competitive financial system, and to a socially inclusive 
environment for all Australians.  The Islamic financ e industry in Australia had the potential to make a 
very positive contribution in achieving both obj ectives.  Although Australia did not have a large 
Muslim population – some 400,000 at the moment – its geographical position presented an important 
window into the Islamic finance sector.  There were  therefore trading opportunities in this area for 
Australia.  Last year, the Australian government had established a forum in order to promote the 
Australian financial services sector internationally, a nd Islamic finance had been raised as an area 
with increasing potential.   
78. As had been outlined in the previous presentati ons, Islamic finance raised specific regulatory 
and taxation issues.  Australia welcomed the discussi on of these issues at the Committee.  In his view, 
Australia's regulatory framework was flexible enough to facilitate Islami c finance.  He agreed with the 
opinion that there was no need to make any ch anges to the current classification and scheduling 
practices.  In concluding, he asked what role the Shariah councils or boards had, and how they were 
composed.  
79. The representative of the United States  said that Islamic financial products could be offered in 
her country within its financial structures and laws.  A number of companies in the US were already 
offering Islamic financial products, such home fina ncing, trust funds, lease purchase, joint venture 
business finance, and trade finance.  She asked the presenters whether they had information about the 
relative rates of return on capital of Islamic In stitutions and conventiona l institutions offering 
comparable products in Malaysia and Pakistan.  
80. The representative of Turkey  said that, according to Turkish Banking Law, the financial 
institutions supplying Islamic banking services were  classified as banks, and called "participation 
banks".  In other words, all banking services, in cluding the Islamic and the traditional ones, were 
subject to the same legislation.  Like traditional banks, "participation banks " were allowed to supply 
financial services by establishing in Turkey, provide d they obtained a license and permission to be 
called "participation bank" from the banking and fi nance supervision agency.  After establishment, 
and with a separate license, they could also open up branches and representative offices abroad.  
"Participation banking" was based on Islamic banking,  and was therefore different from conventional 
banking.  Unlike conventio nal banks, which had deposits on the li ability side of their balance sheets, 
"participation banks" had "participa tion funds" as liabilities.  The asset side of the balance sheets was 
composed of loans in both cases.  The main difference between the two types of banks was that 
"participation banks" collected funds and lent them under Islamic rules, and did not perform forbidden 
activities and transactions.  From a supervisory pe rspective, from the licensing stage through to 
liquidation, no difference was made between  participation and conventional banks.  S/FIN/M/61 
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  81. She further explained four "p articipation banks" were operati ng in Turkey, with total assets 
amounting to 4 per cent of banking sector's assets.  Sh e added that the share of foreign capital in three 
of these "participation banks" was over 50 per cent.  She finally considered that Islamic financial 
services fell within the classification of financia l services contained in both the Annex and document 
MTN.GNS/W/120, and that there was no need  to schedule these services separately.  
82. Replying to the questions raised, Mr. bin Ibrahim
 said that the Shariah Advisory Council was 
the highest authority to interpret the Shariah, a nd was responsible for deciding whether a particular 
product proposed by a Islamic financial institution was consistent with Shariah principles.  He 
explained that Malaysia had a two-tier structure:  there were Shariah Advisory Committees in each financial institution (e.g. banks, takaful companies, and stock br oking companies), and a Shariah 
Advisory Council at the  Central Bank, which acted as an arbitrator, issuing final rulings and fatwa in 
case of doubts about Shariah interpretation at th e Committee – second tier – level.  The Shariah 
Council and Committees were composed of scholars a nd industry participants.  Turning to another 
question, he said that the return on equity of Is lamic banking institutions did not differ much from that 
of other banking institutions.  In Malaysia, the re turn on equity ranged from 20 to 30 per cent.   
83. Mr. Shafqat
 said that Pakistan also had a two-tier structure.  There was a Shariah Board at the 
State Bank of Pakistan, which was composed of at least five individuals – two Shariah scholars, one 
expert in accounting and financ ial matters, one legal expert, a representative of banks, and a 
representative of the State Bank of Pakistan.  In ad dition, Islamic financial institutions had Shariah 
advisors, which were appointed by banks after obt aining clearance from the State Bank of Pakistan.  
In other jurisdictions only the Islamic financial in stitutions had their own Shariah Boards, but not the 
Central Banks.  Return on capital was almost similar for Islamic and non-Islamic banks.  
84. The representative of Brazil  asked what relationship the Islamic Financial Services Board 
(IFSB) had with other international standard-se tting organization, such as the Basel Committee on 
Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO). 
85. The representative of Korea  said that Islamic finance had grown significantly over the last 
years and was expected to reach more than US$1 trillion in total assets by the end of 2010.  Many 
financial service companies in Korea had expressed inte rest in using Islamic finance instruments, such 
as Sukuk.  The Korean government  had set up a task  force to review the standards and regulations 
applicable to Islamic finance.  As part of th at review, Korea had hosted various seminars and 
workshops on Islamic finance.  An Internationa l Conference on Islamic Finance would be held in 
Seoul on 19 November, with a view to further reviewi ng the experience of other jurisdictions, such as 
Malaysia, and the state of Islamic financial products  and structures worldwide.  Korea's objective was 
to expand financial transactions with Islamic countries through the use of Islamic finance. 
86. The representative of Egypt  said that, although Islamic finance had been introduced in his 
country 30 years ago, there were only two Islamic banks in Egypt at the moment, namely Faisal 
Islamic Bank of Egypt and the Egyptian Saudi Fina nce Bank.  In addition, conventional banks had 
established Islamic outlets in response to the in creasing demand for these services.  Islamic banking 
was subject to the same supervisory and regulatory re gime applicable to conventional banks, albeit 
with slight modifications to take account of sp ecific features of Islamic banking activities and 
products.  There was therefore only one banking la w applicable to both Islamic and conventional 
banks.  He further explained that Egypt did not have specific market access limitations on Islamic 
banking.  Egypt's  specific commitments on financ ial services applied to conventional and Islamic 
banking activities.  Turning to classification issues, he  considered that Islamic financial services fell 
within the classification contained in both the Annex on Financial Services and document 
MTN.GNS/W/120, and hence there was no need to am end the current classification.  In his view, 
Members should specify in their schedules of co mmitments the types of activities that were  S/FIN/M/61 
 Page 15 
 
 
  liberalized, and not the type of institutions allowed to provide these activities, unless some types of 
institutions were not allowed. 
87. The representative of China  asked two questions.  He first inquired about the reasons behind 
Malaysia's decision to request foreign financial institutions to convert the Islamic windows into 
subsidiaries.  Secondly, he wondered how and what type of firewalls were erected between Islamic 
and non-Islamic financial services provided by the sam e institutions in order to avoid arbitrage.  
88. Replying to the questions raised, Mr. bin Ibrahim  said standards issued by the IFSB and other 
international standard-setting bo dies covered similar grounds (e.g . risk management, governance, 
transparency, supervisory review).  There were, how ever, differences related to the specific nature of 
Islamic finance.  He cited as an example the IFSB guiding principles on governance for Islamic 
Collective Investment Scheme.  Those guidelines established several principles related to Shariah-
related governance.  Capital requirements needed to be adapted to the types of financial products.  
Transparency and disclosure requirements were also more stringent in the IFSB guidelines to take account information asymmetry between the depositor , who invested money, and Islamic banks.  
89. Turning to another question, he said that ba nks were requested to convert their Islamic 
windows into subsidiaries in order to facilitate regu lation and supervision, and in light of the size 
reached by the Islamic finance business in the last ten years.  Subsidiary structures made it easier for 
the regulator to enforce capital- and other governance requirements.  In other words, subsidiaries were 
easier to supervise and regulate than Islamic windows.   
90. Mr. Shafqat
 explained that the IFSB kept regular contact with the BCBS and IOSCO, the 
main objective being to complement the standards an d guidance issued by the latter to take account of 
the specific features of Islamic finance.  
91. Referring to the issue of "firewalls" between  Islamic business and c onventional business, he 
explained that Pakistan had introduced the con cept of dedicated Islamic banking branch.  These 
branches were obliged to segregate their busin ess from the commercial bank, keeping separate 
balance sheets.  Deposits made by Islamic depositors could not be used  by the commercial side of the 
bank, but had to be used in a Shariah-compliant  manner by the Islamic banking branches.  These 
branches were also required to appoint a Shariah advi sor to ensure that their structures and products 
were Shariah-compliant.  In case of dispute between  the bank's Shariah advisor and the State Bank of 
Pakistan's Shariah Board, the latter's decision prevailed.   
92. The representative of the European Communities  said that the EC was open to Islamic 
finance.  As pointed out in the presentations, one of  the main financial centres for Islamic finance was 
indeed located in Europe.  She also confirmed th e EC's view that the definitions in the Annex on 
Financial Services and in document MTN.GNS/W/120  were sufficient to include all aspects of 
Islamic finance, and that no add itional classification was required.  
93. The representative of Switzerland  said that Islamic finance was also growing in his country.  
Swiss banks were active in the Islamic financial ma rket in Switzerland, particularly in the area of 
asset management.  Geneva was also host to one fu ll-fledged Islamic bank.  The existing supervisory 
and regulatory framework in Switzer land provided for an open access for all kinds of Islamic financial 
services and service suppliers.  He was of the view that the classification contained in the Annex on 
Financial Services was comprehensive enough to encompass Islamic financial services. 
94. The representative of Japan  said that there was growing interest in Islamic finance in his 
country.  On 11 November, for example, Japan woul d host an Islamic Finance Symposium, with the 
participation of more than 340 experts a nd practitioners in this field.     S/FIN/M/61 
Page 16  
 
  95. In closing the discussion, the Chairperson
 thanked the delegations of  Malaysia and Pakistan 
for having volunteered to contribute such distinguished  guest speakers to this de dicated discussion.  In 
his view, the exchange had been very useful, allowing Members to improve their understanding of 
Islamic finance, and providing answers to many of  the issues that had emerged in the Committee's 
previous discussions on this topic.   
96. The Committee took note  of the statements made.  
D. TECHNICAL ISSUES  
97. The Chairperson  said that there were two proposals to consider under this agenda item – one 
from the United States on non-life insurance services,  and another one from Pakistan on e-finance.  
98. Before turning to these proposals and th e next agenda item, the Chairperson  informed 
Members that, as concluded at the previous meeti ng, he had conducted inform al consultations with 
interested Members on these two proposals and on the proposal made by Argentina, Ecuador, India, 
and South Africa under the following agenda item, in order to refine the cont ent and organization of 
the work envisaged.  Unfortunately, it had not b een possible to reach a consensus on the proposals 
submitted by the United States, and by Argentin a, Ecuador, India, and South Africa.   
99. In his view, the topics raised in all proposals we re relevant and timely,  and would constitute a 
very good basis for work in the Committee.  They covered issues that were in accordance with the 
mandate of the Committee and required therefore seri ous consideration.  He expressed his hope that 
all delegations would show the necessary flexibilit y to allow the Committee to make progress in the 
consideration of these topics in the interest of all Members.  
100. Having said that, he turned to the proposal by the United States to carry out an information 
exchange program on trade in non-life insurance serv ices.  He reminded Members that at the end of 
the June meeting of the Committee, the United States had agreed to re vise its original proposal with a 
view to taking on board the comments and suggestions  made by Members.  The revised proposal had 
been circulated as a room document on 29 Septembe r 2009, and considered by Members for the first 
time at the meeting held in October.  In his view, the revised proposal was an improvement, and 
constituted a good basis for the organizati on of such an information exchange.  
101. The representative of the United States  recalled that he had given an overview of the revised 
proposal at the previous meeting, when some delega tions had said that they needed more time to 
consider it.  He asked for those delegations' views. 
102. The representative of Chile  noted that the revised proposal reflected the concerns and 
observations made by various delegatio ns with regard to the first ve rsion.  He supported the revised 
proposal. 
103. The representative of India  said his authorities were still considering the proposal.  On a 
preliminary basis though, he remarked that the prop osal had implications fo r market access and was – 
in their view – uncomfortably close to market access issues.  Discussing non-life insurance issues, 
even for the purposes of exchanging information, w ould have a bearing on the negotiations.  He had 
not a definite view to provide on the proposal – since domestic consultati ons were still ongoing – but 
reiterated this preliminary impression which made his delegation feel uncomfortable.  
104. The representative of South Africa  said that the revised proposal was an improvement over 
the original one, thought he had still reservations about the market access side.  Having said that, his 
main concern was to keep a balance in terms of pr esentations and views.  He reserved his right to 
come back with a definite position at a later stage.   S/FIN/M/61 
 Page 17 
 
 
  105. The representative of the United States said that in her view the revised proposal moved away 
from a focus on market access issues, and hoped that  a satisfactory solution could be found in the 
coming weeks.  
106. The Chairperson  said that it was clear that further cons ultations were needed on this proposal.  
107. The Committee took note  of the statements made and decided  to revert to this proposal at the 
next meeting.  
108.  The Chairperson  turned to the proposal made by Pakistan, entitled "Impact of technological 
developments on regulatory and compliance aspect s of banking and other financial services under 
GATS" (document Job(09)/107).  He recalled that  while many delegations supported the ideas put 
forward by Pakistan, others had expressed th e need for more time to review them.  
109. The representative of Pakistan  said that, unfortunately, he had not obtained further replies 
from his authorities to the concerns raised by some de legations at the previous meeting.  He promised 
to address those issues at the next meeting, a nd welcomed any further observations, comments or 
questions that Members might have on the proposal.  
110. The representative of Thailand  said that e-banking was a means of supplying services and not 
a new service.  Technological deve lopments had simply facilitated th e supply of financial services.   
Examples raised in the Pakistan's proposal, such as pa ragraph 2a), b) and c), had generally been well 
captured by the current regulatory and supervis ory framework.  The question could be raised, 
therefore, as to whether such technological devel opments would prove a real challenge to current 
regulatory frameworks.  
111. The representative of Chinese Taipei  said that e-banking was fundamental to the development 
of e-commerce.  According to the assessment of Ch inese Taipei's financial service suppliers, the cost 
of a transaction in a physical bank branch could be 40 times higher than the costs of an e-banking transaction.  Therefore, although the benefits ar ising from e-banking might be high, risks involved 
might be high as well.  A challenge faced by regulat ors was to protect consumers participating in e-
banking transactions.  Chinese Taipei's regulators divided e-banking transactions into different 
categories depending on the level of risk involved.  Given these regulatory challenges, an in-depth 
discussion and information-sharing exercise could be useful to enhance Members awareness of these 
issues.  He supported the idea of having a dedicated discussion on this topic.  However, there did not 
seem to be a pressing need to modify the current classification of financial services.  It would be useful, thus, if Pakistan could provide c oncrete examples calling for a modification.  
112. The representative of the European Communities
 reiterated her delegation's support for the 
proposal in principle, and looked forward to engagi ng in the discussion.  Nevertheless, she requested 
Pakistan to further elaborate on the specific el ements of the proposal, and suggested that the 
Committee follow developments in the recently resumed work programme on e-commerce under the 
General Council's aegis, in order to  avoid duplication of work.  
113. The representative of Chile  said his delegation supported the discussion proposed by Pakistan.  
Adding to what had been said by the representative of  the European Communities,  he considered that 
this Committee had an important role to play in  the reinvigoration of the work programme on e-
commerce. 
114. The representative of India  said his delegation supported the proposal by Pakistan, including 
the drafting of a background Note  by the Secretariat.  He saw no problem in discussing classification 
issues, but cautioned that it might not be possible to amend the classification – if necessary – in a 
timely manner.  S/FIN/M/61 
Page 18  
 
  115. The representative of  Canada
 said that the proposal by Pakistan raised some very important 
questions about how regulation might  be affected by technological change, particularly in a cross-
border context.  Referring to the proposal to task  the Secretariat with writing a background Note, she 
asked Pakistan what data would be used for develo ping such a factual paper.  Turning to the proposal 
to discuss classification issues, she expressed doubts as to whether there was a real need to amend the 
current classification of financial services.  In Canada's perspective, it was not clear that a 
modification was actually necessary, given that the issue at hand was the means of delivering particular services, and not whether a particular activ ity in itself was different or new.  It would be 
useful in that regard if Pakistan could provide  specific examples of service activities to consider.  
116. The representative of Brazil
 said that Pakistan's proposal was timely and pertinent.  He drew 
Members' attention in that regard to a submission made by Brazil in June 2005 (JOB(05)/103), which 
partially addressed this issue.  He suggested that , in pursuing this discussion, the Committee invited 
representatives from IOSCO and the Basel Committee on Banking Supervision in order to take 
advantage of their expertise and experience in this fi eld.  Finally, he stressed that the work in this 
Committee should focus on the implica tions of technology for trade in financial services, in order to 
avoid overlapping with the work carried out in those international standard-setting bodies.  
117. The representative of Pakistan  took note of the issues raised and comments made by 
Members, and said he would provide detailed answers at the next meeting.   
118. The Chairperson  said that Members had a very interesting discussion on the proposals 
submitted by Pakistan and the United States, which would contribute to the work of the Committee. 
He also encouraged other Members to submit proposals or raise issues for discussion at the 
Committee.  
119. The Committee took note  of the statements made and decided  to revert to these proposals at 
the next meeting. 
E. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE  
120. The Chairperson  said there was one proposal under this  agenda item, entitled "Revised 
Discussion document by Argentina, Ecuador, India,  and South Africa on the financial crisis and 
related matters". This proposal had been circ ulated as a room document on 3 November 2009.   
121. The representative of Argentina  said that Argentina, India, South Africa had tabled an initial 
proposal on 17 September 2009 on the implications of the financial crisis for trade in financial 
services.  This document had been discussed in deta il at the informal meeting of the Committee on 
23 September, when Members had made comments and suggestions.  The proponents had responded 
to many of those questions at the formal meeting he ld on 8 October.  While the steps envisaged in the 
proposal were welcomed by many Members, othe rs suggested that their questions should be 
addressed in writing as well.  Consequently, on 26 Oc tober, the proponents had circulated another 
room document, including those clarifications and su ggested steps.  During the informal consultations 
held on 30 October, many Members welcomed those clarifications in writing.  However, there was a 
request to submit a revised proposal.  The document circulated on 3 November was a response to that 
request.  He clarified that the previ ous room document remained valid.    
122. He then referred to some of the issues raised  in the new room document.  Firstly, any wording 
suggesting that the work envisaged could lead to a legal analysis of measures by Members, or their 
consistency with GATS, had been deleted.  Secondly, more detail was provided regarding the three 
suggested steps, together with the original steps.   There were no changes in essence concerning these 
steps.  He clarified that the proposal was without  prejudice to Members' position in the Doha Round 
of multilateral negotiations and to the rights and obligations of Members in the WTO.  The new paper  S/FIN/M/61 
 Page 19 
 
 
  also clarified that the analysis would be a non-a ttributable one, and that no individual Member would 
be named.  
123. The representative of the European Communities  said her delegation was still unclear about 
the purpose of the suggested steps.  The financial cris is might have originated in the financial sector, 
but it had affected the global economy.  Consequen tly, the measures taken by Members in response to 
the crisis also expanded to the entire economy.  That was the reason why the EC was unsure as to why 
the exercise suggested by the proponents should take  place within the framework  of this Committee.  
In her view, the proposal was not so much about the or igins of the crisis, but about the response to it.  
And such a response was not restricted to financia l service providers, but horizontal.  Therefore, any 
analysis should be done in a body dealing with tr ade in a horizontal manner, such as the Trade Policy 
Review Body (TPRB).  This had been the EC's position since the beginning of this discussion, and 
there was nothing new in the revised proposal that would call for a reconsideration.    
124. Phase 2 of the proposal included the suggestion that the Secretariat eventually determine 
whether measures taken by Members were trade distorting.  In the EC's view, that was not the job of the Secretariat.  If the proponents considered th at measures taken by any Member had caused a 
distortion to trade in financial services, then they had to produce evidence to this effect.  It was up to 
Members to provide this evidence, and not for the Secretariat.  Even if a discussion among Members 
on a particular measure was necess ary, the Committee was not the appropriate forum.  Rather, such 
discussions should take place bilaterally or, if subs idies were concerned, in the Working Party on 
GATS Rules (WPGR).  The EC had fundamental concerns  about the aims of this proposal in general, 
and could not agree to the steps set out in the revised proposal. 
125. The representative of South Africa 
associated himself with the views expressed by the 
representative of Argentina.  The proposal had been significantly amended from its original version in 
an effort to accommodate as many views as possible.  It was important that Members moved together 
in unison, with a view to better understanding the imp act of the financial crisis on trade in financial 
services.  South Africa's concerns related to how de veloping countries were being impacted by the 
global economic crisis.  Specifically, his delegati on was concerned about how the various stimulus 
measures in the largest economies were affecting th e real economies of developing countries such as 
South Africa.  Together with Argentina and India, his delegation had tabled this proposal in writing to 
the Committee in September 2009, outlining concre te steps in terms of research that seemed 
warranted.  Based on the feedback and questions recei ved from Members, the three delegations had 
provided written answers and , more importantly , amended the proposal to take account of the 
concerns raised.  
126. He explained that South Africa was one of th e countries actively and constructively engaged 
in multilateral efforts to tackle th e crisis, for example, by proposin g (in various sub-committees of the 
G20, and along with other devel oping countries) that unsecured credit derivative transactions be 
subject to regulatory scrutiny.  He recognised the valuable work that various international 
organizations were carrying out in order to devise a sustainable, effective and stronger international 
monetary and financial regulatory framework.  He also believed that the WTO, and this Committee in 
particular, had a specific role to play in that re gard.  South Africa, unlike some developed countries 
with vast resources, did not have the luxury of  financial support programmes such as bail-outs and 
stimulus packages.  Instead, it relied on the rules- based multilateral system to level the playing field 
and to produce credible global rules in interna tional financial governance and trade in financial 
services.  The globalisation of trade in financia l services demanded global action in different 
multilateral fora that examined the crisis from di fferent angles consistent with their mandates.  
127. He then turned to some of the comments made  on the proposal.  It had been asserted that the 
work called for in the proposal was beyond the expertise of the Secretariat.  He recalled in that regard 
that this was the same Secretariat that had recently completed major reports on Trade and S/FIN/M/61 
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  Environment, and Trade and Employment, with UNEP and the ILO, respectively.  The proposal made  
it very clear that, in conducting its analysis, th e WTO Secretariat would draw o n the expertise a nd 
researc h of the relevan t internat ional o rganisations.  Conseque ntly, it was  difficult fo r South Africa t o 
accept that research on the i mplications of t he financial crisi s on trade in financial se rvices was 
beyond the capability of the Se cretariat . 
128. Another assertion was that Me mbers did not need the W TO to inform them of the r esearc h 
conducted by other mu ltilatera l 
organizations on the eco nomic crisis.  This was also di fficult to 
accept.   Since t he launch of the Doha Round , there had bee n several events at the WT O and other fora 
where re presentatives fro m th e business secto r, research organizations and the Bretton Woo ds 
institutions made presentatio ns exto lling the effects  of fu rther lib eralization in the financial sector, and 
how these wou ld benefit develo ping co untries.  That p ractice had been acti vely supporte d and 
enco uraged by the very sa me Me mbers w ho were now arg uing that they did not need the WT O to tell 
them about research being done by other organizations.  
129. Another claim  that had to be rejected was that t he exe rcise proposed led to a duplicat ion of 
resources.  His delegation viewed th is exe rcise as a n integra l part of the wo rk of the Secretariat, to 
address sys temic challenges t hat had been presented to Members by the global financial crisis.  As the 
representative of Argentina said, t he purpose was not to "finger point" or to undertake a legal 
consistency analysis.  Rather, what was envisaged was an economic exa mination of the extent t o 
which t rade in financial services was af fected by financial s upport programmes.  Further, this exercise 
must be seen in the contex t of the GATS a nd th e obligations thereof, which had been accepted by all 
Members.    
130. He rec ognised that, while t his Co mmittee had historically not dealt with issues re lated to 
market access negot iations in f inancial services, no indication had been given that the "d emandeurs" 
would moderate their  market access demands.  In his view, s uch moderation would take account of 
the dramatic changes that had taken place in the secto r since the DDA had co mmenced.  He saw an 
imbalance in that regard:  on the one hand, c ontinued aggress ive market access demand s were made i n 
the midst of a c risis, while, on the o ther hand, some Members a ppeared to have little a ppetite to 
engage in efforts that would help the whole Membership understand the extent to wh ich trade in 
financial services was being affected by financial support pr ogrammes.  Ma rket access demands 
continu ed to be agg ressively advanced without due r egard for the r egulatory reforms undertak en as a 
starting point .  In concluding, he said that the three ste ps called for in the pr oposal wer e simple and 
clear.  They were meant to throw light on some of t he most imp ortant challenges that a ll Mem bers 
were conf ronted with, either directly or indirectly.  
131. The representative of Brazil  said that, as expressed on previous occasions, the Committee 
should not refrain from analysing the impacts of th e current crisis on trade in financial services, 
notwithstanding the systemic importance of some  recent governmental measures to diminish its 
effects.  Members should assess to which extent trad e in financial services had been effected by the 
measures taken.  In his view, the scope of this jo int proposal fell within the Committee's mandate.  It 
was his understanding that the revision incorporated  the great majority of concerns raised by 
Members.  The proposal was balanced and had an appropriate scope.  Besides, the proposal already took account of the work undertaken by other WT O bodies.  This avoided duplication, and added 
value by focusing on trade in financial services.  He  shared the view that the proposed work should 
maintain a broad and systemic pe rspective, rather than starting a finger pointing exercise.   
132. The representative of Chile
 said that the revised proposal had incorporated most of the 
concerns expressed by Members on previous occasions.   His delegation supported this initiative, since 
Committee had a responsibility in this area.  He then addressed the criticisms advanced by some 
Members with regard to the proposal.  The point ha d been made by the representative of the EC that 
the objectives were not clear.  In his view, the object ives in the revised paper were sufficiently clear.   S/FIN/M/61 
 Page 21 
 
 
  It had also been said that, in order not to dup licate work, this discussion should remain within the 
TPRB.  He reminded Members that in TPRB meetings, the EC had stated that the effects of measures 
should be considered in the releva nt WTO subsidiary bodies.  And this was exactly what the proposal 
was aiming at – to analyse these measures as they aff ected trade in financial services, and in light of 
the GATS.  
133. In his view, the counter-arguments put forwar d by some Members were somewhat weak.  
This led him to think that other reasons were mo tivating the delegations concerned.  The two phases 
proposed in the proposal were interesting.  The first phase was further divided into three different 
steps.  He saw no valid reasons for the Commit tee not to develop those steps, including the 
organization of a sort of seminar to discuss the measures taken to face the financial crisis, a Note by 
the Secretariat explaining the provisions of the GATS that were of particular relevance to financial 
services, and a literature review by the Secretariat describing the analyses carried out by other organizations on different aspects of the response to the crisis.  He reminded Members that his 
delegation had previously expressed some concerns regarding the scope of the activities envisaged in 
phase two of the proposal, as originally drafted.  Ho wever, these concerns had been taken care of to a 
great extent by the reassurance provided by the pr oponents that the examination would be of a non-
attributable nature, and would look not only at the negative effects of  these measures, but also at the 
positive effects on the financial sector and the econom y as a whole.  In his view, the Committee was 
the competent body to carry out such work.  
134. The representative of Japan
 said that his delegation was ready to go ahead with the initial 
steps outlined in the so-called phase one.  Howe ver, his delegation had some reservations on 
paragraph 11(e), which might lead to some overlap w ith the work of other international organizations.  
He suggested that the proponents refocus only on phase one, to avoid giving the impression that there were two consecutive phases, which had caused concern among some Members.  
135. The representative of the United States
 continued to have serious reservations about many of 
the elements in this proposal.  The US was sympat hetic to the effects of the financial crisis on 
developing Members, and was willing to discuss b ilaterally any specific measures that might have 
adversely affected financial services in other Members' domestic markets.  However, it was impossible to distinguish the effects of measures in  the financial sector from the effects of other – 
fiscal – measures.  As pointed out by Chile, unde r the agenda item on recent developments, Members 
could elaborate on their specific experience regarding the effects of the crisis and related mitigation 
efforts, rather than task the Secretariat to do an  examination.  Members could start sharing their 
experiences at the next meeting.  
136. The representative of Ecuador
 supported the statement made by Argentina.  The revised room 
document, which was co-sponsored by his delegation, represented a constructive approach that took 
into account the concerns of some Members.  In  his view, the Committee was the appropriate forum 
to carry out this exercise.  The first phase was es sentially informative or academic, and should not 
give rise to concern.    
137. The representative of the Philippines  welcomed the revised proposal, which was more 
balanced.  He endorsed implementation of phase one. 
138. The Chairperson  said that he had been asked by the representative of Malaysia, who could not 
stay for the remainder of the meeting, to convey her delegation's support of the proposal.  
139. The representative of Switzerland  said his delegation supported phase one of the proposal.  
He expressed some concerns regarding phase two, particularly paragraph 11(e), as the issue raised 
was not within the scope of trade in services as define d in the GATS.  Like Japan, he felt that the issue S/FIN/M/61 
Page 22  
 
  of international credit lines was better dealt with in other international organizations such as the 
International Monetary Fund.  
140. The representative of India
 reacted to some of the comments made.  He acknowledged, as 
some Members had said, that the response to th e crisis had gone beyond the financial sector.  
However, the Committee could restrict its analysis to  the measures taken in the financial sector.  Also, 
as proven by the analyses conducted by the WTO Secretariat with UNEP and the ILO on trade and 
environment and trade and employment, respectively, its competence was not in question.  In addition, the Committee certainly was the appropriate forum to deal with these issues.  When they had 
been raised at the TPRB, the EC had been of the opinion that the appropriate forum was this 
Committee.  This had motivated India and the other proponents to bring these issues to the 
Committee.  There would not be any duplication of wo rk with other bodies.  He took note of the 
suggestion made to take part of this discussion to  the Working Party on GATS Rules.  In addition to 
the sector-specific work carried out in this Committee, the issue could certainly be taken to the WPGR 
in the context of the latter's discussion of a defin ition of subsidies.  He hoped that Members would not 
oppose such a discussion in the WPGR either.  Noting the concerns of some Members with regard to 
phase two of the proposal, he suggested that the Committee began work on phase one, without 
prejudice to Members' position on phase two.  He  would appreciate specific comments from Members 
on what was exactly acceptable.  
141. The representative of Norway
 reminded Members that his count ry also supported a discussion 
in the Committee of how trade in financial service s was affected by measures adopted during the 
financial crisis.  Noting the concerns of some Me mbers, he agreed with Switzerland and India that 
work could start on phase one.  Afterwards, Member s could assess the situation, and consider whether 
it was possible to continue with the other phase.  
142. The representative of Canada  also expressed some concerns with the second phase of the 
proposal, in particular with regard to paragraph 11(e).  In her view, the economic impact of the 
measures taken in response to the financial crisis mi ght not be specific to financial services, nor might 
they be necessarily negative.  There would be merit in looking also at the positive impact of measures 
on the overall economy.  She considered that th e Committee might not necessarily be the appropriate 
forum for discussing that larger issue.  However, that being said, Canada did not have any concerns 
with the specific work outlined in phase one of the proposal. , As suggested by Switzerland, India and 
Norway, one solution might be to focus on phase one, which seemed to enjoy greater support among 
the Membership. 
143. The representative of Australia  supported phase one of the revised proposal, and suggested 
that phase two be postponed for the moment, pe nding developments on phase one.  Relevant work 
would benefit from an element of discussion, al ong the lines suggested by the United States that 
Members exchange information on their respective experiences.  The appropriate occasion might be 
the event foreseen in paragraph 11(b) of the proposal.  It would be useful therefore that sufficient time 
be allocated for discussion in this Committee.  
144. The Chairperson  observed that there seemed to be an emerging view that the Committee 
could perhaps consider embarking on phase one of this proposal.  He sought Members' views 
regarding the idea of initiating this phase.  
145. The representative of the European Communities  said her delegation could envisage 
proceeding with phase one, but had still some concer ns regarding phase two.  Also, she did not feel 
entirely comfortable with the references made to  phase one, because these implied the existence of a 
second phase.  She would appreciate further discu ssion on some aspects of phase one, such as the 
topics for discussion, the experts to be invited, an d the sequence of steps.  She thought that the  S/FIN/M/61 
 Page 23 
 
 
  Secretariat paper on GATS provisions would come firs t, followed by the literature review, and then 
the discussion with experts.   
146. The representative of the United States  did not want to see this as a "phase one/phase two" 
process because, as noted by the EC , this implied the existence of a second phase.  The steps outlined 
in the first phase should constitute a stand-alone exer cise.  There might be an additional first step 
which, as suggested earlier by the United States, would imply a discussion among Members of their 
respective experiences.  In addition,  it was necessary to clarify the te rms of reference for the literature 
review, and for any future workshop or event, be fore agreeing to proceed with these elements.  
Finally, as said at the previous meeting, there was no need for a paper outlining what provisions in the 
GATS were relevant to  financial services. 
147. The representative of South Africa  said a discussion among Members, not only about process 
but also about the substance, had always been envisag ed as part of this proposal.  He felt encouraged 
by the consensus that started to emerge on the ideas included in paragraphs 11(a) to (c) of the 
proposal.  He suggested that Members called tho se ideas "initial steps".  The Committee could later 
consider, after carrying out those steps,  how to take the process forward.  
148. The representative of Chile  was pleased with the idea of focusi ng on the first three elements, 
contained in phase one of the proposal.  The sugges tion by the United States that Members exchanged 
information on their experiences could be include d in some way into these initial steps.   
149. The representative of Argentina  said that there would no problem in replacing the title "phase 
one" by another formulation making reference to th is initial exercise.  C oncerning the sequence of 
ideas, he said that, as suggested by the United States  and the EC, the event could take place at the end 
of this first phase.  Although the terms of reference of the literature review appeared to be clear, he 
was prepared to further discuss them.  Turning to  the suggestion made by Australia, he said that a 
discussion among Members had indeed been envisaged at  the very end of the process, as described in 
paragraph 11(f) of the proposal.  However, he saw  no problem in Members sharing their respective 
experiences as part of phase one.  The Committee could take a decision on the first three steps without 
mentioning the rest of the proposal, and agreed that the details of each of step would be discussed in 
consultations among Members.   
150. The representative of India  supported the idea of agreeing to undertake the first three steps, 
and adding the experience-sharing exercise suggested  by the United States.  The details could be 
worked out in consultations. 
151. The representative of the United States  did not see the need for a paper from the Secretariat 
outlining which GATS provisions were relevant to financial services.  Rather, it would be useful if 
Members discussed their specific e xperiences.  This should be the first step.  Second, the United 
States could not agree to a literature review wit hout seeing its terms of reference.  Finally, the 
United States was not ready to join a consensus for an event without clarifying the need for and 
content of such an event.   
152. The delegate then clarified what was meant by  sequencing.  The first step should be the 
exchange of experiences among Members.  That w ould help determine how the literature review 
could be framed, and how the event would be orga nized – if Members decided to have one.  In 
summary, the US delegation was prepared to go ah ead with this exercise, without calling it phase one, 
and under the assumption that each step was conditioned upon the previous one.  
153. The Chairperson  gave the floor to the  Secretariat to share its perspective on how to take these 
issues forward.  S/FIN/M/61 
Page 24  
 
  154. A representative from the Secretariat
 said that an appropriate sequence could be as follows:  
first, the paper on relevant GATS provisions, then th e literature review and finally, the event.  The 
Secretariat had not yet prepared a Note on the GATS provisions of particular relevance to financial 
services trade, but these issues were usually discussed as part of the Secretariat's regular technical 
cooperation activities.  The event should come last, sin ce it would take time to organize.  In preparing 
this event, as it was usually the case, the Secret ariat would seek more specific information from 
Members regarding the objective, the potential sc ope and the contributors.  Members would provide 
the Secretariat with a clear set of parameters for th e organization of such an event.  He envisaged a 
consultative process before taking a final decision in that regard.  The Secretariat would develop an 
outline and circulate it to Members for comment.  It would be natural to  include a debate among 
Members, in addition to their deliberations at th e Committee.  The literature review would require 
some guidance from Members with regard to its ob jectives, and issues for discussion.  The terms of 
reference would be drafted accordingly.  He did not think that the review would be controversial.  
155. The Chairperson  asked whether the United States represen tative could agree to the Secretariat 
preparing a background Note on the relevant GATS provisions.  
156. The representative of the United States  said it might be better to ask the whole Membership 
rather than one particular delegation.  The need for such a paper was still unclear.  In the absence of 
specific information on the problems Members ha d in understanding how the GATS applied to 
financial services, the United States had reservations about this.  
157. The representative of Argentina  said that it would not be the first time a Committee requested 
the Secretariat to write such a Note.  He had never heard the United States delegation expressing 
objections to that kind of exercise.  Though some  delegations had express ed concerns, that the 
exercise might go beyond clarifying the relevant GATS rules, the Secretariat Note would actually help Members frame and structure the discussion.   
158. The representative of South Africa
 echoed the views expressed by the representative of 
Argentina.  The Secretariat had already prepar ed Notes on computer and related services, 
construction, and other sectors, and as repetitive as th ey might be, they had always been useful for 
Members.  He was confident that the Secretariat would conduct this exercise in a manner consistent 
with its role and mandate.    
159.  The representative of Chile  requested the United States to reconsider its position on this 
specific matter.  A Note by the Secretariat would be to the benefit of all Members, developed and developing alike.  He hoped that this Note woul d be the first step of this work programme.  
160. The representative of Ecuador
 expressed surprise and concern about the US position.  A Note 
by the Secretariat would allow Me mbers to focus their discussions. 
161. The representative of India  said that the whole Membership had agreed on the Secretiarat 
preparing sectoral and modal papers.  Financial services was one of the sectors included in that exercise.  From that perspective, he did not see th e need for another mandate to the Secretariat to 
prepare a paper on financial services, since the sec toral paper would certainly include elements on 
GATS provisions, the Annex on Financial Servic es, and he Understanding on Commitments in 
Financial Services.  It was not clear to him what  objections could be raised against something all 
Members had agreed upon.  Instead of further discu ssing the Secretariat paper, he suggested that the 
Chairperson held consultations on other sugges tions made, including the US idea of experience 
sharing.  He reminded Members that there was alread y a timetable foreseen for the circulation of all 
sectoral papers.  The paper on financial services would achieve the same objectives as the one 
envisaged in this proposal.  He suggested that th e circulation of that pa rticular paper be brought 
forward.    S/FIN/M/61 
 Page 25 
 
 
  162. The representative of South Africa  reminded Members that of the origins of the idea to task 
the Secretariat with drafting a Note on GATS provisions  specifically relevant to financial services.  It 
had emerged as a reply to questions raised by so me Members, including the United States, regarding 
the relevance of the GATS for the broader exercise that South Africa and others were proposing.   
163. The Chairperson  said that a Secretariat Note would help Members structure their 
presentations when sharing their experiences, as pr oposed by the United States.  Many contributions 
would certainly be prepared and delivered by fi nance officials who were not as familiar with the 
GATS as trade officials.  He then asked Members whether they could agree on him holding consultations on the sequence of these initial steps, the terms of reference fo r the literature review 
and, ultimately, the event itself.   
164. The representative of the United States
 said that the exchange among Members foreseen in 
the US suggestion was to take place within the Co mmittee and not as an event that included outside 
participants.  If, the Committee later chose to organi ze such an event, that would require a different 
decision.  It was important that the Committee itself did some work in this area, rather than tasking 
the Secretariat and others.  The Committee served precisely as a forum for Members to present their 
concerns and interests.  Interested Members coul d explain at a future meeting how they had been 
affected by the crisis and by the measures taken in  response to it.  That would the appropriate first 
step.  Members could then decide whether add itional information was necessary and whether to 
proceed with a literature review.  
165. The representative of India  took note of the comments just made by the United States 
delegation.  The same reasoning should apply to all other proposals for work submitted to this 
Committee, including the proposal by the United Stat es on non-life insurance.  He wondered in that 
regard why the Committee should ask outsiders to co me and present their experiences with barriers in 
Members' markets, rather than doing that work tsel f.  In his view, this was difficult to understand.  
166. The Chairperson  said that it might not be possible to reso lve this issue at th is meeting.  Noting 
the suggestion made by India concerning the financ ial services paper, he asked the Secretariat what 
the timetable was for the release of such a paper.  
167. A representative from the Secretariat  recalled that the sectoral discussions originally 
scheduled for November had been moved to the first cluster of 2010 because of unforeseen developments and Members' desire to have more time available for DDA-related activities in the run 
up to the Ministerial Conference.  The dates for th e following clusters of service meetings would be 
discussed later that week at the Special Session of the Council for Trade in Services.  However, as 
envisaged thus far, the sectoral paper on financia l services had not been scheduled for discussion at 
the first cluster of service meetings in 2010.  The in tention was that the next meeting of the Council 
for Trade in Services addressed the papers on audiov isual services, mode 3 and energy services.  A 
decision had still to be taken on the actual dates of the next cluster.   
168. The sectoral paper on financial services could al so be used for the purpose of whatever 
discussion Members might want to have in this Comm ittee.  As the representative of India had said, 
relevant GATS provision would naturally be part of su ch a sectoral paper, taking into account that the 
GATS contained specific instruments that were of  particular relevance for financial services, 
including – but not limited to – the Annex on Financial Services and the Understanding on 
Commitments in Financial Services.  The paper woul d normally be available for the second cluster of 
meetings, in April or May 2010.  If that was the case, Members should expect the paper to be 
circulated four or five weeks prior to the meeting.   S/FIN/M/61 
Page 26  
 
  169. The representative of the United States
 said that that the idea of the sectoral paper as 
suggested by India was a good way forward.  Such sect oral papers were expected for financial and 
other service sectors.   
170. The Chairperson  asked Members whether an indication s hould be given to the Secretariat to 
bring the circulation of the paper forward so as to allow for an earlier discussion.   
171. The representative of Chile  said that waiting until the second cluster of 2010 would be too 
long, and that it would be better to discuss the paper in the February cluster. 
172. A representative from the Secretariat  said that he could envisage circulating the paper around 
mid-January, but it would not be possible to guarantee the availability of the pape r in the three official 
WTO languages by that time.  The French and Sp anish versions would inevitably have to be 
circulated later.  He reminded Members that the ac tual dates of the February cluster had not been 
decided yet, and that those dates would determine th e actual time available to review the paper.  He 
stressed that it would be very difficult to produce it before mid-January.  
173. The Chairperson  said that the sectoral paper on financial services would serve a useful 
purpose in taking the Committee's work forward.  He expressed satisfaction that Members had 
managed to identify one area of commonality in that regard and added that he would hold 
consultations on all the other issues raised at the meeting.  
174. The Committee took note  of the statements made and decided  to revert to these issues at the 
next meeting. 
F. OTHER BUSINESS  
175. There was no issue raised under this agenda item.  
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