RESTRICTED
WORLD TRADE S/FIN/W/12/Add.10
16July1997
ORGANIZATION(97-3037)
Original: English Committee onTrade inFinancial Services
COMMUNICATION FROM AUSTRALIA
Draft Schedule onFinancial Services
Addendum
Thefollowing communication iscirculated attherequest ofAustralia toMembers ofthe
Committee onTrade inFinancial Services.
_______________
Australia hereby submits itsdraftschedule onfinancial services.
Australia reserves therighttomodify orreduce thisdraftschedule depending ontheprogress
ofthenegotiations, andonagreement byacritical mass ofparticipants toprovide market access and
national treatment forfinancial services.
Australia reserves therighttomake technical amendments tothisdraftschedule (eg.inrelation
totheregistration requirements operated bytheStates andTerritories, under theFinancial Institutions
Scheme, forcredit unions, building societies andfriendly societies).
Allcommitments inthisdraftschedule aresubject tohorizontal commitments oninvestment
ascontained inAustralia 'sGATS schedule ofspecific commitments.S/FIN/W/12/Add.10
Page2
Australia 'sFinancial Services Offer
Australiaisstronglycommittedtoasuccessfulandtimelyconclusiontothisroundofnegotiations
onfinancial services intheWTO. Australia places highpriority onachieving acomprehensive and
broadly-based agreement which isapplied onanMFN basisbyallsignatories. Australia believes that
improved market access andnational treatment commitments thatleadtofreertradeinfinancial services
willbenefit allcountries. Inaddition toincreased opportunities fortrade andinvestment andgreater
security andtransparency forfinancial services suppliers, more openandtransparent financial markets
willpromote thefurther development ofcapital markets andsupport economic growth. Greater foreign
participation indomestic markets willalsoassist inimproving international competitiveness through
theintroduction ofnewtechnology, up-to-date financial systems andinnovative products. Asuccessful
conclusion tothese negotiations isalsoimportant toensure thattheWTO iswellplaced tomeetthe
challenges arising inthemultilateral tradearena inthelead-up tothe1998Ministerial Conference and
beyond.
Australia iscommitted toensuring thatitsownfinancial services market ismodern, efficient
andinternationally competitive. Reflecting this,theAustralian market hasveryfewrestrictions to
entry byforeign services suppliers and,asaresult, thereareonlyalimited number ofaccess restrictions
listed inAustralia 'sGATS schedule. Aspartofthiscommitment, Australia hasalsoimplemented a
number offinancial sector reforms sincetheendoftheUruguay Round andtheGovernment iscurrently
reviewing therecommendations ofamajor inquiry intoAustralia 'sfinancial system. Thepurpose of
thisinquiry istoidentify anyfurther changes thatmaybeneeded toensure thattheAustralian financial
system isabletomeetthechallenges oftherapid changes thatareoccurring ininternational financial
systems, while maintaining stability, integrity andefficiency.
Todemonstrate ourcommitment tothenegotiations, Australia hasdecided toreflect thereforms
made toitsfinancial system inthethreeyears totheendof1996inouroffer. These include anumber
ofimportant changes. Reflecting theimportance weplaceonachieving afullMFN agreement, Australia
willbeoffering toremove itsMFN exemption relating toreciprocity requirements formembership
oftheAustralian Stock Exchange. Following therecent privatisation oftheCommonwealth Bank of
Australia (CBA), Australia willalsobeoffering toeaserestrictions onbanks andother entities from
holding shares intheCBA andtophase outguarantees given totheoperations oftheCBA bythe
Commonwealth Government. Australia willalsobeoffering toeliminate State levelreservations on
foreign ownership offormer State-owned orcontrolled banks subsequent tothesaleofmostofthese
entities. Another major improvement istheoffertoeliminate arange ofrestrictions onshareholdings
andrelationships between banks andAuthorised Money Market Dealers following theelimination of
Authorised Money Market Dealers inMay 1996. Thischange arises outofmoves towards the
introduction ofreal-time gross settlement inAustralia. Asummary ofthese andother improvements
totheAustralian offer arelisted below.S/FIN/W/12/Add.10
Page3
Improvements toAustralia 'sOffer
- TheMFN exemption relating toreciprocity requirements formembership oftheAustralian
Stock Exchange hasbeeneliminated.
- Theprohibition onbanks (resident andnon-resident) fromholding shares intheCommonwealth
Bank ofAustralia andother entities from holding more thanfivepercentofitsissued share
capital havebeenremoved.
- Theentry relating toguarantees bytheCommonwealth Government given tothefinancial
operations oftheCommonwealth Bank hasbeenmodified. Thenewentry reflects transitional
arrangements forthephasing outofthese guarantees.
- Therestrictions placed onshare ownership ofAuthorised Money Market Dealers bybanks
(domestic andforeign), andtherestrictions imposed onrelationships anddealings between
authorised dealers andrelated banks havebeeneliminated.
- Theprohibition onforeign banks located overseas from raising funds inAustralia hasbeen
eased toallow suchbanks toraisefunds inAustralia through theissueofdebtsecurities, subject
toconditions.
- Theentry relating tothereservation byStateandTerritory governments oftherighttoprohibit
foreign control ofState-owned orcontrolled banks hasbeenremoved. Anewentry reflecting
thetransitional guarantees given tosome oftheassets andliabilities oftheformer State-owned
orcontrolled banks hasbeenadded.
- Anumber oftechnical andother changes, forexample theaddition oftexttoclarify thatforeign
banks mayestablish locally incorporated subsidiaries inAustralia aswellasbranch operations,
havealsobeenmade.S/FIN/W/12/Add.10
Page4AUSTRALIA
DRAFT SCHEDULE ONFINANCIAL SERVICES
Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
7.FINANCIAL SERVICES
Australia undertakes itsspecific commitments onfinancial services inaccordance withthe"Understanding onCommitments inFinancial Services" (herinafter
referred toasthe"Understanding").
Theobligations under theUnderstanding areaddressed inthisdraft Schedule additionally tothose covered bytheprovisions ofPartIIIoftheAgreement and
theAnnex onFinancial Services. Market access commitments withrespect to"cross-border supply" and"consumption abroad" arebound inthisSchedule to
theextent oftheobligations inparagraphs 3and4oftheUnderstanding.
These specific commitments onfinancial services aresubject tothegeneral limitations contained inthe"Horizontal Commitments" section ofAustralia 's
GATS Schedule.S/FIN/W/12/Add.10
Page5Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
A. Insurance and
insurance-related services3) Approval ofnon-resident lifeinsurers is
restricted tosubsidiaries.
3) Registered foreign lifeinsurance
companies arerequired tohave a
principal officer resident inAustralia.
1),3)Anauthorised insurance company
operating inAustralia asa
non-incorporated entity must appoint an
Australian resident asagent ofthe
insurer.
3) Most State andTerritory Governments
maintain restrictions, bywayof
monopolies orlicensing provisions and
associated controls onpremiums andother
terms ofpolicies, inthefollowing areas
ofinsurance:
Compulsory Third Party Motor Vehicle
Accident: VIC, WA, TAS, NT,ACT
(monopolies); NSW, QLD, SA(licensing,
premiums/ policy terms).
Workers Compensation: SA,VIC, QLD
(monopolies); NSW, WA, TAS
(licensing, premiums/ policy terms).
4) Thetemporary entry ofspecialists inthe
operation ofaninsurance service supplier
established inAustralia ispermitted
subject totheterms stipulated inthe
horizontal section.3) Sub-national guarantees areprovided to
some State andTerritory Insurance
Offices.S/FIN/W/12/Add.10
Page6Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
1) Theinvestment atinterest inAustralia of
official reserves byforeign central banks
andforeign government monetary
institutions isapproved bytheReserve
Bank provided thatitobtains assurance
from theinvesting authority thatitwill
aimtobeastable holder oftheAustralian
dollar andthatitwillconsult withthe
Bank intheevent ofsignificant changes
initsAustralian dollar portfolio.
Monetary institutions, responsible for
bothreserve assets andcommercial
investments, arepermitted toinvest in
Australia uptoalimit under thesame
conditions.
1),3)Aforeign bank located overseas is
abletooffer itsservices toAustralian
enterprises, butisnotallowed toraise
deposit funds inAustralia orundertake
business within Australia unless itisan
authorised bank (orestablishes amoney
market corporation, subsidiary etc.).
Foreign banks located overseas may,
however, raise funds inAustralia through
theissue ofdebtsecurities provided that
those securities areoffered/traded in
parcels ofnotlessthan$A500,000 and
thesecurities andanyinformation
memoranda clearly state theissuing bank
isnotauthorised under theBanking Actin
Australia.S/FIN/W/12/Add.10
Page7Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
1),3)Dealings inforeign exchange in
Australia must becarried outthrough a
dealer authorised bytheReserve Bank.
Only banks, including branches of
overseas banks, andfinancial institutions
incorporated inAustralia withthe
required minimum capital baseare
eligible toseekauthorization asaforeign
exchange dealer.
3) Foreign banks satisfying prudential
requirements andcompetition policy
considerations mayconduct banking in
Australia. Foreign banks mayundertake
banking operations inAustralia through
locally incorporated subsidiaries and/or an
authorised branch. However, abranch
maynotaccept "retail" deposits. A
foreign bank wishing toaccept "retail"
deposits must seekauthorization asa
locally incorporated subsidiary forthat
purpose. Foreign bank branches may
accept deposits (andother funds) inany
amount from incorporated entities,
non-residents andtheir ownemployees.
Deposits (andother funds) mayonlybe
accepted from other sources where the
initial deposit (orother funds) isgreater
than$A250,000. Deposit-taking outside
ofthisisconsidered tobe"retail" banking
business.S/FIN/W/12/Add.10
Page8Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
Acquisition, byforeign interests, of
control ofanyofAustralia 'sfourmain
banks (Commonwealth Bank ofAustralia,
National Australia Bank, Westpac
Banking Corporation andAustralia and
New Zealand Banking Group) isnot
permitted.3) TheAustralian Industry Development
Corporation andother Commonwealth
owned entities which mayconduct
financial operations areguaranteed bythe
Commonwealth Government. While the
Commonwealth solditsremaining
shareholding intheCommonwealth Bank
ofAustralia (CBA) on19July1996, a
transitional Commonwealth guarantee has
been provided toalloftheliabilities of
theCBA. Thelength oftime thatthe
guarantee applies depends onthe
characteristic oftheliability.
Anumber ofState andTerritory
Governments operate central financing
authorities through which the
Government 'swholly orpartly-owned
statutory authorities andbusiness
enterprises areobliged toborrow (andin
some cases invest) their funds, or
otherwise obtain certain financial services:
SA-South Australian Government
Financing Authority, Local Government
Finance Authority ofSouth Australia
TAS -Tascorp
NSW -NSW Treasury Corporation
VIC-Treasury Corporation ofVictoria
QLD -Queensland Treasury Corporation,
Queensland Investment Corporation
NT-Northern Territory Treasury
Corporation
WA-Western Australian Treasury
CorporationThefinancial operations ofsome State or
Territory owned entities maybe
guaranteed bytheState orTerritory
Governments. Anumber ofState and
Territory Governments have alsoprovided
transitional guarantees tosome ofthe
assets andliabilities offormer
State-owned orcontrolled banks.S/FIN/W/12/Add.10
Page9Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
3) TheAustralian Stock Exchange liquid
capital requirements forstockbrokers may
have theeffect offavouring participation
intheExchange bysubsidiaries rather
thanbranches offoreign companies.
Anapplicant must beabody corporate in
order toobtain approval toconduct a
stock exchange orafutures exchange.3) Amajority ofthedirectors ofa
stockbroking organisation participating in
theAustralian Stock Exchange must be
Australian residents.
4) Thetemporary entry ofspecialists inthe
operation ofafinancial service supplier
established inAustralia ispermitted
subject totheterms stipulated inthe
horizontal section.