The financial services sector
plays a critical role in any modern economy. The bundle of
institutions that make up an economy’s financial system can be seen as
“the brain of the economy”, providing the bulk of the economy’s need
for many functions.
These functions include: facilitating transactions (exchange of goods and
services) in the economy; mobilizing savings (for which the outlets would
otherwise be much more limited); allocating capital funds (notably to
finance productive investment); monitoring managers (so that the funds
allocated will be spent as envisaged); and transforming risk (reducing it
through aggregation and enabling it to be carried by those more willing to
Principles of trade in
financial services are contained, as for all services, in the GATS.
Annex to the GATS contains specific provisions applicable to
trade in financial services. This deals with such issues as sectoral
definitions, services supplied in the exercise of governmental
authority, and prudential measures.
Additionally, some WTO
members have made commitments in accordance with the Understanding
Commitments in Financial Services. The ‘Understanding’ is an
optional and alternative approach to making specific commitments on
financial services. It is not part of the GATS, but it was appended
to the Final Act of the Uruguay Round.
For consolidated information on countries’ commitments and exemptions on
financial services go to the
If you are seeking the commitments of a specific WTO member, go
to “Jump to a specific sector for a given
Member”, select financial services from the
sector dropdown list, select the Member of interest and click
“go”. To see a table
showing which Members have made commitments in financial services choose
“See which Members have made commitments in a
specific sector”, select Financial services
and click “go”.
Proposals exist on
financial services. Additionally, some services proposals covering
various sectors also include a section on financial services
(Kenya, Japan and Norway).
Developments in the
The negotiations on financial services,
as on other services sectors, have gone through different stages since 2000.
In line with the GATS mandate (Article XIX), services negotiations were
launched in 2000. At that time, negotiations proceeded on an almost purely
multilateral basis, with several negotiating proposals being submitted.
These proposals highlighted the negotiations’ objectives and concerns of
In November 2001 the services
negotiations were incorporated into the Doha Development Agenda, which gave
more emphasis to bilateral —request and offer — negotiations. A first
timetable was established, with clear dates for the submission of bilateral
requests (end June 2002) and initial offers (end March 2003). Interested
members started to meet in so-called ‘friends groups’, including the
‘Friends of Financial Services’.
After the failure of the Ministerial
Conference in Cancun (September 2003), new guidance was provided by members
in July 2004. As a result, revised offers were to be submitted by May 2005.
Consequently, some members submitted revisions to their initial offers.
The Hong Kong Ministerial Conference in
December 2005 provided new momentum to the services negotiations. Clear
objectives for services were established in Annex C of the Ministerial
Declaration, with the submission of plurilateral requests being allowed by
February 2006 and revised offers by mid-2006.
Members had identified their key
negotiating objectives for financial services in the run-up to the Hong Kong
Ministerial Conference. As described in document
TN/S/23, those objectives
included the following:
Scope of commitments (sectoral or modal)
— commitments on “commercial
presence” by a foreign company (Mode 3) for all financial services
— commitments on Mode 1 (services supplied from one country to another)
and Mode 2 (consumers or firms making use of a service in another country)
in appropriate sub-sectors (e.g. financial services addressed to
sophisticated customers, such as reinsurance, asset management, and
securities; marine and energy insurance services; provision and transfer of
financial information and financial data processing)
Limitations and discrimination
— limitations on the right to
establish new companies and to acquire existing companies
— limitations on legal form
— limitations on foreign ownership (i.e. freedom to establish in the form of
wholly-owned subsidiaries, joint ventures or branches)
— non-discriminatory limitations, such as monopolies, numerical quotas or
economic needs tests (ENTs — a test using economic criteria to decide
whether the entry into the market of a foreign firm is warranted) and
— discrimination in the application of laws and regulations
Regulatory issues and additional
commitments for negotiation
— transparency in the development and
application of laws and regulations, transparent and speedy licensing
Scheduling issues to be addressed
— use of the definitions in the GATS
Annex on Financial Services
A plurilateral request on financial
services was prepared and sent. The main objectives of the
request include the following: Mode 3 commitments to provide rights to
establish new companies and acquire existing companies; Modes 1 and 2
commitments in a defined list of sub-sectors; the removal of key national
treatment limitations; and the need for transparency in the development and
application of laws and regulations relevant to the financial services
sector (TN/S/M/19, paragraph 54).
Since negotiations were suspended in July 2006, no members have submitted a
second revised offer.
As of today, 71 offers (initial and revised) have been submitted,
representing 95 members. Almost half of them contain improvements to
financial services commitments. However, improvements are not significant,
and in many cases, fall behind the current — more open — regulatory
TN/S/20, paragraphs 46 to 48).
Additional information and
background studies back to top
Search Documents Online
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Official documents on financial
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on financial services (Document code
S/C/W/* and keyword “financial
Services and Background Note”)
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Barth, James, Juan A. Marchetti, Daniel
Nolle, and W. Sawangngoenyuang (forthcoming), “WTO Commitments vs.
Reported Practices on Foreign Bank Entry and Regulation: A
Cross-Country Analysis”, forthcoming “Oxford Handbook of Banking”,
edited by Allen Berger, Phil Molyneux, and John O.S. Wilson.
Barth, James, Juan A. Marchetti, Daniel
Nolle, and W. Sawangngoenyuang (2006), “Foreign Banking: Do Countries’
WTO Commitments Match Actual Practices?”, WTO Staff Working Paper ERSD
2006-11 (October 2006).
Kono, Masamichi and Ludger Schuknecht
(1998), “Financial Services Trade, Capital Flows and Financial
Stability”, WTO Staff Working Paper No. ERAD-98-12, World Trade
Mattoo, Aaditya (1999), “Financial Services
and the WTO: Liberalization in the Developing and Transition
Economies”, WTO Staff Working Paper No. TISD9803 (March 1998), World
Roy, Martin, Juan A. Marchetti, and Aik Hoe
Lim (2006), “Services Liberalization in the New Generation of
Preferential Trade Agreements (PTAs): How Much Further than the
GATS?”, WTO Staff Working Paper No. ERSD-2006-07 (September 2006),
World Trade Organization. See the discussion on financial services
liberalization in PTAs.
Some useful links and other resources
Links to other international organizations that deal
with financial services:
Claessens, S., A. Demirgüc-Kunt and H.
Huizinga (1998), “How Does Foreign Entry Affect the Domestic Banking
Market?” (May 1998), World Bank Policy Research Working Paper No.
Claessens, Stijn (2006), “Competitive
Implications of Cross-Border Banking” (February 1, 2006), World Bank
Policy Research Working Paper No. 3854.
Claessens, Stijn and T. Glaessner (1998),
“The Internationalization of Financial Services in Asia” (May 26,
1998), World Bank Policy Research Working Paper No. 1911.
Demirgüc-Kunt, A., R. Levine, and H.G. Min
(1999). “Opening to Foreign Banks: Issues of Stability, Efficiency and
Growth’, in Proceedings of the Bank of Korea Conference on the
Implications of Globalization of World Financial Markets”, December
Dihel, Nora and & Ben Shepherd (2007),
“Modal Estimates of Services Barriers,” OECD Trade Policy Working
Papers 51, OECD Trade Directorate.
Dihel, Nora, and Blanka Kalinova (2004),
“Services Barriers and their Economic Impact: Examples of Banking and
Telecommunications Services in Selected Transition Economies,” OECD
Trade Policy Working Papers 7, OECD Trade Directorate.
Dobson, Wendy, and Pierre Jacquet (1998).
“Financial Services Liberalization in the WTO”, Washington, DC:
Institute for International Economics.
Francois, Joseph F. and L. Schuknecht
(2000), “International Trade in Financial Services, Competition, And
Growth Performance” (February 2000), CIES Working Paper No. 6.
Harms, Philipp, A. Mattoo, and L. Schuknecht,
Ludger (2003), “Explaining Liberalization Commitments in Financial
Services Trade” (March 2003), World Bank Policy Research Working Paper
Kalirajan, K., G. McGuire, D. Nguyen-Hong
and M. Schuele (2001), “The price impact of restrictions on banking
services”, in Findlay C. and T. Warren, eds, “Impediments to Trade in
Services: Measurement and Policy Implications”, New York: Routledge.
Kireyev, Alexei (2002), “Liberalization of
Trade in Financial Services and Financial Sector: Stability Analytical
Approach” (August 2002), IMF Working Paper No. 02/138
Kireyev, Alexei (2002), “Liberalization of
Trade in Financial Services and Financial Sector Stability Empirical
Approach” (August 2002), IMF Working Paper No. 02/139.
Mattoo, Aaditya, R. Rathindran, and A.
Subramanian (2001), “Measuring Services Trade Liberalization and its
Impact on Economic Growth: An Illustration” (August 2001), World Bank
Policy Research Working Paper No. 2655.
McGuire, G. and M. Schuele (2000),
“Restrictiveness of International Trade in Banking Services”. In
Findlay, C. and Warren, T. (eds.), “Impediments to Trade in Services:
Measurement and Policy Implications”, New York, Routledge.
Sorsa, Piritta (1997), “The GATS Agreement
on Financial Services: A Modest Start to Multilateral Liberalization”
(May 1997), IMF Working Paper No. 97/55.
Tamirisa, Natalia (1999), “Trade in
Financial Services and Capital Movements” (July 1999), IMF Working
Paper No. 99/89.
Tamirisa, Natalia T., P. Sorsa, G.
Bannister, B. McDonald, and J. Wieczorek (2000), “Trade Policy in
Financial Services” (February 2000), IMF Working Paper No. 00/31.
Verikios, G. and X-G. Zhang (2001), “Global
Gains from Liberalising Trade in Telecommunications and Financial
Services”, Productivity Commission Staff Research Paper, Canberra,
Woodrow, R. Brian (2000), “The 1997 World
Trade Organization Accord on Financial Services: Its Impact on and
Implications for the World Insurance Industry”, “The Geneva Papers on
Risk and Insurance — Issues and Practice”, 2000, vol. 25, issue 1,