RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/M/26
29 June 2000
(00-2669)
Committee on Trade in Financial Services
REPORT OF THE MEETING HELD ON 25 MAY 2000
Note by the Secretariat
1. The twenty-seventh meeting of the Committee on Trade in Financial Services was chaired by
Mr. Lotfy Abdel-Hamid of Egypt.  The discussi on followed the agenda contained in airgram
WTO/AIR/1301.  Under Other Business the Chairman added the report to be made by Chairpersons
of the subsidiary bodies to the CTS Special Session.
Item A: Acceptance of the Fifth Protocol to the General Agreement on Trade in Services
Embodying the Results of the Financial Services Negotiations
2. The Chairman recalled that at the previous meeting the Committee had heard information on
the status of the domestic ratification processes and acceptances from 7 (Brazil, Ghana, Kenya,
Nigeria, Philippines, Poland and Uruguay) of the 10 Members that were yet to accept the Fifth
Protocol.  Two of them (Ghana and Kenya) had indicated the imminence of their acceptances, and one(Poland) expected to be able to accept by the end of the year.  The others that had spoken indicated
that domestic processes were under way and that it was a matter of time before the Protocol could be
accepted.  Other Members had stressed the importance attached to the acceptance of the Fifth Protocol
by all Members concerned, and called for progress reports to be given at each meeting.  He announced
that since then Members had received a communi cation from Ghana requesting to the Council for
Trade in Services the re-opening of Fifth Protocol for its acceptance (documents S/C/W144 and 145).
That request would be taken up for decision at the Council meeting the following day.  He inviteddelegations to express their views as to that request.
3. The representative of Ghana recalled that at the previous meeting his delegation had indicated
that the Fifth Protocol had been ratified by Parliament Resolution on 15 December 1999, and that the
signing of the instrument of ratification by the Pres ident was pending.  He was pleased to inform the
Committee that the instrument of ratification had been signed and was on its way to Geneva.  Hisdelegation would be requesting the reopening of the Protocol and hoped to receive the support of all
Members.
4. The representative of the European Communities welcomed Ghana's announcement and
expressed support for reopening the Protocol for Ghana's acceptance.  He encouraged those still
conducting domestic processes to finalize such procedures as soon as possible.  The representative ofthe United States reiterated the importance attached by his delegation to the completion of acceptance
of the Protocol by the Members concerned.  He al so would support the Protocol's reopening by the
Council to allow for Ghana's acceptance.
5. The Chairman invited the other Members that had not yet accepted the Protocol, namely,
Bolivia, Brazil, Dominican Republic, Jamaica, Kenya, Nigeria, Philippines, Poland and Uruguay, to
provide any further information on the status of their acceptances.S/FIN/M/26
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6. The representative of Jamaica said that her country was committed to meeting its obligations
under the WTO agreements, and having participated in the negotiations of the Fifth Protocol to the
GATS, Jamaica was well aware of the importance of implementing commitments undertaken.  She
stated that following participation in those negotiations developments had occurred within the
Jamaican financial sector which had required the Government to intervene to protect depositors and toundertake the restructuring of the financial sector, both by reducing the number of institutions and
strengthening their capital base, as well as by putting in place improved regulatory and monitoring
systems.  She indicated that the initiatives undertaken by the Jamaican authorities were well underway
but had not yet been completed.  In light of that situation, and given the need for stability and careful
management of change in the highly sensitive financial sector at that time, the Government, fully
cognisant of its undertaking, had decided to delay ratification of the Fifth Protocol for the time being.
7. The representative of Nigeria indicated that the matter was under consideration of the
National Assembly.  The representative of Uruguay indicated that the Executive branch had reiterated
the request for approval and submitted again in April the draft law concerning the Protocol.  The
executive branch had also included the Fifth Protocol within those considered as a priority by the
Foreign Affairs Ministry to be presented to the Parliament to expedite the constitutional requirements
for its approval.  The representative of Brazil said that the Protocol had been approved in January by
the Foreign Affairs and National Defense Committee of the Chamber of Deputies, in February by the
Committee on Economic Industry and Commerce Affairs, and in April by the Committee on Justice
and Constitutional Affairs.  There was one approval pending, that of the Committee on Financial
Affairs.  Once the latter was obtained, the text of the Protocol would be subjected to a vote by the
plenary session of the Chamber of Deputies and then in the Senate.  He stressed that the delays werecaused solely by procedural constrains and not to objections on the substance of the Protocol given
that it was fully consistent with the legislation in force in his country for the sector.
8. The representative of Bolivia stated that after the negotiation of the Fifth Protocol had been
concluded, Bolivia had faced problems in the financial sector which had led to a modification of the
Law on Banking.  The financial sector was a sector which affected all aspects  of the economy and thepopulation.  While it was necessary to attend to the credibility of the WTO, it was also necessary to
pay attention to the credibility of the financial sector in her country.  Bolivia was not for the time
being in a position to accept the Fifth Protocol.  The representative of Kenya said that, as indicated at
the previous meeting, his delegation was still waiting for the signed instrument to be sent fromCapital, and hoped to receive it shortly.  The representative of the Philippines said that the Senate
Committee on Foreign Relations had concluded deliberation on the Protocol in March.  The reportfrom that Committee endorsing the ratification of the Fifth Protocol was still pending.  Given theabsence of any opposition until then, his delegation expected that the Plenary Session of the Senate
would favourably consider the ratification of the Fifth Protocol.  The representative of the
Dominican Republic said that the Senate had initiated consideration of the Protocol but, unfortunately,
had returned it to the Executive Brach due to its containing provisions that were not in Spanishlanguage.  The Government would have to present a Spanish-only version of the Protocol for theSenate to be able to consider it.  He did not expect to have difficulties in fulfilling that requirement,
and expected that the following legislative pe riod would be able to approve the Protocol.
9. The Chairman thanked delegations, and in par ticular Ghana, for the information given.  He
encouraged those that had not been in a position to update the Committee on the state of ratification or
acceptance procedures in their countries, to do so as soon as possible, either in writing before thefollowing meeting or orally at that meeting.  He invited comments from other Members.
10. The representative of the United States expressed appreciation for the information provided.
He observed that considerable progress had been made in the last two months.  At the same time, he
noted with great concern the reports of those Members indicating lack of progress and without
specification as to when their internal processes would be concluded.  He reiterated what had beenS/FIN/M/26
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said at the previous meeting as to the fulfil ment of commitments undertaken in good faith in
negotiations being a pillar to the functioning of the WTO.  His delegation would hope that every
effort would be taken to find ways to get the commitments in place as soon as possible.
11. The representative of the European Communities also thanked those that gave progress
reports.  He expressed concerned about those Members where progress was stalled.  He recalled that
the Fifth Protocol negotiations had been concluded in a situation were some Members had been
experiencing a crisis in their financial markets.  He stressed that by undertaking commitments at the
multilateral level confidence in the economies would be  increased and thus contribute to the reform
efforts, stability and sound economic development.  The Fifth Protocol's commitments could help
Members to face financial stability problems.
12. The Chairman stressed the importance Members attached to the acceptance of the Fifth
Protocol by all countries concerned.  It would be ve ry unfortunate if undertakings already given could
not be put into affect due to procedural constraints, thus undermining confidence in the multilateral
system.  He felt it extremely important to complete the acceptance of the Protocol before initiating the
exchange of specific commitments in the sector la ter in the current services negotiations; perhaps the
Committee should start thinking about possible ways to expedite the acceptance process, which could
be discussed at the following meeting.
Item B: Technical Issues
13. The Chairman recalled that at the previous meeting the Committee had continued its discussion
of what it could usefully do during the year to prepare for the current round of services negotiations.
A brief exchange of views on how to proceed in re lation to the two issues proposed by the previous
Chairman for discussion, namely the Distinction between Modes 1 and 2 and the Sectoral
Classification of Financial Services, had taken place.  In relation to the Distinction between Modes 1
and 2, some delegations observed that the matter had been on the table for some time and no serious
practical problem had been identified.  Delegations heard a proposal to put the matter aside for the
time being as it was not felt to be a priority issue; however, it had been argued that it was notappropriate to remove the matter from the Committee’s discussions.  As to the Sectoral Classification
of Financial Services, expressions of interest had been voiced by two delegations: one of them facing
an actual problem in that regard in the context of accession negotiations, and the other wanting to
address the relationship between the sector's Clas sification of the Annex on Financial Services and
that of the Central Product Classification (CPC).  For those reasons, the two issues had been kept on
the agenda to explore ways to pursue such work.  He invited comments or proposals regarding the
distinction between Modes 1 and 2.
14. The representative of Switzerland stated that his delegation did not oppose setting the matter
aside, although it was important.  The issue had been  discussed at length in the Committee and in the
Committee on Specific Commitments, so the next step should be to come to conclusions and take
decisions and not a mere examination of the matter.  The representative of Canada strongly supported
the taking up of the issue in the Committee's discussions; he was flexible as to the timing but in any
case it should be tackled before the end of the current year.
15. The Chairman said that given the views expressed the issue would be kept on the agenda with
the understanding that it would be addressed when delegations so wished.  He invited comments or
proposals regarding the Sectoral Classification of Financial Services.
16. The representative of Japan said that the classification of the sector contained in paragraph
5(a) of the Annex on Financial Services captured the characteristics of the sector, including most of its
activities.  Although that classification was not meant to be used for scheduling purposes, his
delegation believed that its use in the current negotiations would be helpful.  Japan had hadS/FIN/M/26
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difficulties in negotiations with an accession country in relation to the classification of financial
services activities.  Concretely, for the accession country in question the financial sector was divided
into three categories, namely, insurance, banking, and securities.  Some of the activities were captured
by banking as well as securities.  In the Financial Services Annex the sector was divided into two
categories, first, insurance and related services and, second, banking and other financial services, thelatter category comprised securities activities also.  It was preferable to use the classification in the
Annex because distinguishing between banking and securities activities was difficult.  His delegation
felt it helpful to discuss the use of the Annex classification for the purpose of the negotiations.  As to
how to pursue that discussion his delegation might revert to that question at the following meeting.
17. The representative of Canada added that there was a broader justification for keeping the item
on the agenda, namely, the need to review the developments that had occurred in the sector since the
creation of the Annex on Financial Services.  New activities had emerged and it was not clear in allcases where those activities were captured by the existing classification.  For instance, the question of
how to treat alternative trading systems e.g. ATSs, ECNs,.  Indeed, when the GATS was negotiated
regulated stock exchanges were thought of as self regulatory organizations, more as quasi-
governmental agencies than as market competitors, and that was no longer the case.  It was not
evident where the aforementioned would be captured by the Annex.
18. The representative of Norway said that it was important to look into whether every activity of
the sector was covered by the Annex; it would be  preferable if Members' submissions defined the
scope of such a discussion.  She requested clarification from the U.S. as to the sort of development the
U.S. would want to see in relation to the definition of the Annex, which was suggested in the
statement of the previous meeting.  The classification in the Annex was the result of consensus, unlikethat of the document W/120.  The representative of the European Communities concurred with the
need for papers from Members to define the scope of the discussion on Classification issues and alsoon the distinction between modes 1 and 2.  The representative of Korea also supported having a
discussion on classification issues, including the use of the Annex on Financial Services to enhancecomparability of specific commitments.  However, the specificities of certain countries’ financial
industry, including their level of development, should be taken into account in the process.  In
particular, how to handle certain services that did not exist in some countries financial industry.
19. The representative of the United States noted that many countries had supported the use of the
Annex on Financial Services for scheduling purposes and added that the U.S. had not found any major
problem with its list of sectors.  It was a concensus document that should be used by all Members.
The issue was to decide whether the use of the Annex was a technical issue or future work.  As to the
comments on modes 1 and 2, she felt that if coun tries found problems with distinguishing the two
modes, such problems could be addressed in the schedules themselves as opposed to taking a general
decision on the issue.
20. In summing up, the Chairman said that on classification work several delegations voiced their
support for looking at the Annex on Financial Services and its coverage of activities that had emerged
in the sector since the conclusion of the Uruguay Round. In that respect, some had called forsubmissions to focus the discussion.  He said that the item would continue in the agenda and
encouraged contributions by Members regarding both the distinction between modes 1 and 2 and
classification issues.
Item C: Other Issues for Future Discussion
21. The Chairman recalled that at the previous meeting the Committee had heard some proposals.
The representative of the United States had shared with delegations some ideas as to the possible
broader role that the Committee could play, and the technical issues that could be considered, in
support of the current negotiations.  Those ideas were contained in a statement distributed as Job No.S/FIN/M/26
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2787, dated 4 May 2000.  Similarly, the representative of Australia had suggested discussing the
meaning of "Prudential Regulation" with a view to developing a definition or reaching a common
understanding of that term.  Her delegation distributed a room paper posing some questions for
reflection.  Some delegations welcomed the ideas and indicated their wish to revert to them at a later
stage.  He invited Members' reactions to the ideas put forward previously and also their views as toany other issue that could be included in future discussions.
22. The representative of Japan said that there was ambiguity as to the definition of prudential
regulation and felt it useful to conduct a discussion on the subject, recognizing the difficulties of
arriving at a definition of prudential measures given the disparities between financial systems.  He
found the Australian questions a good basis for initiating such a discussion and said that some
examples would be helpful. As a first step, he suggested to collect information on Prudential
Regulation from the International financial organizations such as the International Association ofInsurance Supervisors, the Basel Committee of Banking Regulators and the International
Organization of Securities Commissions (IOSCO).  It was very difficult and unrealistic to aim at
agreeing to a definition of prudential regulation given the diversity among financial systems and the
nature of the existing core principles, which were not legally binding and only constituted best
practices to take into account.  For instance, th e core principles for banking in the Basel Committee
context were guidelines which allowed each country to decide what measures to introduce to achieve
the desired results.
23. The representative of New Zealand thanked Australia for the room paper on the desirability of
developing a definition, or at least a common understanding, of what had been excluded by the
prudential carve-out.  Such a clarification would be very useful.  His delegation was still looking atthe questions posed by Australia and would revert to them at the following meeting.
24. The representative of Hong Kong, China sought clarification as to the terminology used in the
Australian paper, for instance, “product backer ”, “product promoter”, “style of product” and
prudential standards.  The problem identified in the paper and the solutions mentioned were rather
vague.  He felt it useful to look at what evidence  there was that prudential regulation coverage was too
extensive, allowing regulatory behaviour that went beyond what was meant to be covered.  In
principle his delegation was not against discussing those issues, however, prudential regulation had to
be interpreted differently by different financial systems to suit their respective needs of maintaining
systemic stability and investors' protection.  Those issues might vary from economy to economy; if
the definition of prudential regulation were too broad it might become meaningless but if it were too
strict it might not be able to suit the varying market conditions.
25. The representative of Malaysia said that at the previous meeting his delegation had expressed
a reservation on the Australian proposal due to the fact that work on prudential regulation might upset
the fine balance reached in the Uruguay Round through the prudential carve-out.  The proposal had
been discussed internally among Malaysian financial authorities and they were very concerned about
the proposal, which led him to have to oppose it at that stage.  Financial regulators would not want to
have constrains in the prudential area, which might result from work on a definition regarding theprudential carve-out in the Annex.  Malaysia had faced a financial crisis already and in their
experience it would have been counterproductive to be prevented from taking actions when necessary.
Regarding international benchmarks for prudential measures, measures that for other countries could
have worked might not have worked for Malaysia.  Malaysia did not see any reason to modify the
system as it existed, perhaps Australia could indicate whether it was facing difficulties with the carve-out as it stood.
26. The representative of Brazil indicated that the Australian paper was still under consideration
in capital.  He reserved his delegation’s position as to the desirability of discussing the issue and of
specific point in the paper.  The representative of Switzerland felt the issue highly important in theS/FIN/M/26
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sector; the sensitivities around the question were a sign of its importance. The growth of commitments
in the sector would increase the relevance of the issue, justifying its discussion.  He was not
convinced that the aim of such a discussion should be a definition of prudential regulation.  The
Annex on Financial Services gave some elements of a definition since it indicated that prudential
measures should aim at ensuring the stability of th e system and protecting depositors, investors, etc;
thus defining such regulation in terms of their purpose.  The transparency of prudential measures,
referred to in the Australian paper, was related to Japan’s proposal on gathering information to
enhance all delegation’s understanding of what “prudential” was.  Prudential regulation should also be
transparent, perhaps not so much as to individual de cisions of the regulatory authority, but certainly
the general policy of Members should be known.  Given the relevance of the issue as such, and for
transparency purposes, his delegation supported asking relevant institutions what they understood for
prudential measures and their purposes, and also posing the same question to Members.
27. The representative of Argentina indicated that the Australian paper was under consideration
by the relevant authorities.  It was necessary to elaborate a bit more the issue raised by Australia,
given that existing information on the matter did not  allow a full understanding of the concerns raised
in the paper.  Australia could perhaps provide examples of the problems and elaborate a bit more on
what was being proposed.  The representative of Indonesia had not a definitive position on the paper
but expressed concern about defining prudential regulation.  He favoured a flexible approach to the
subject given that the sector was growing and there was no uniform understanding on what prudential
measures were.  It would be useful to consult relevant international organizations to gather
information.  His delegation supported discussing the subject but was not optimistic as to reaching an
understanding, given that flexibility was desirable.  However, that possibility of introducingprudential regulation should not be used as disguised protection.  A measure taken for prudential
reasons could be examined to assess its consistency with the aims set in the Annex on Financial
Services.
28. The representative of the European Communities felt that defining prudential regulation was
possibly too ambitious since it was difficult to agree on something that would be useful to all.  At the
same time, he concurred with Switzerland in that the issue should remain in the agenda of future
meetings, taking into account the necessary caution in addressing the subject given the differences
among countries and the provisions of the Annex on Financial Services.  He saw the need to address
regulatory issues in the sector without attemptin g to define what prudential regulation was.  The
regulatory freedom of Members needed to be preserved while at the same time ensuring that specific
commitments in the sector were not undermined by inappropriate prudential regulation.  He found it a
good idea to involve relevant International Organizations by requesting information.
29. The representative of the United States said that her delegation would continue reviewing the
Australian paper and requested clarification on its status.  The U.S. was interested in exploring a
number of technical issues in financial services including certain regulatory issues. At the same time,
the exception found in the financial services annex for prudential regulation was an extremely
important provision and represented the reconciliation of a number of significant interests.  Thus, theU.S. was inclined to be cautious in considering the need for any further definition of that provision at
that time.  Thus far they had not found compelling evidence that excessive prudential regulation was
undermining commitments.  She supported the calls for any relevant examples.  She noted that the
Annex in paragraph 2 stated that measures shall not be used as a means of avoiding a Member's
commitments and obligations under the agreement, and therefore her delegation would welcomeinformation on measures that may pertain.  Her delegation had supported work on a more general
manner on certain domestic regulatory issues and keeping track of how those issues were being
addressed in the WPDR, while maintaining the possibility of more detailed examination of those
issues in the context of financial services.  As to what those issues might be, her delegation was still
conducting internal consultations and was not in a position to elaborate further at that stage. She notedS/FIN/M/26
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the aspect on openness and transparency of the regulatory process contained in the Australian paper
and requested further facts from that delegation on those aspects of the proposal.
30. The representative of India indicated that his delegation was still looking at the paper.  The
prudential carve-out was one of the key elements in financial services because it reflected a balance
and therefore it was necessary to proceed with caution; without really knowing whether that balancewas being upset, whether prudential measures had been used as disguised protection, entering into
discussions on definitions would be premature.  As to issues of transparency and other regulatory
matters, to the extent that they were being considered in the WPDR it was necessary to avoid
duplication of work and wait for that process to advance before engaging in any further work in the
financial services committee.
31. The representative of Norway noted that Norway's  financial regulators were very interested in
the issue of prudential regulation and domestic regulation in general.  She supported the proposals by
Switzerland and the U.S. in relation to transparency.  When addressing the matter of prudential carve-
out, she observed that delegations had in mind the n eed for flexibility for their own regulators but, on
the other hand, there was also an interest in having transparent rules in that area because it was
important for countries to know how other countries applied prudential regulation to their financial
services suppliers.
32. The representative of Australia said that his delegation had no specific advice on the issue and
that work was still being conducted by the Australian Treasury and Regulatory authority looking at a
possible definition of prudential regulation.  His delegation had no intention to impose the issue on
Members; the purpose was to identify what sort of response the initial suggestion contained in the
room paper would receive, and further work would be contingent to those responses.  The reason forthe suggestion was that Members were doing work which in terms of concepts and principles was
entirely analogous in other areas, e.g. in trying to define legitimate objectives of regulation, possible
criteria for possible emergency safeguards measures, and the components and parameters of a
necessity test.  In all of those areas work was similar to the suggestion of exploring what the content
of prudential regulation might be.  The problem formulated in the paper was deliberately vague.  Itwas possible that the ambit of prudential regulation might be defined by others, for instance, in the
context of dispute settlement or by the market.  As to constraining domestic economic policy,
Australia considered flexibility inherent in any definition of prudential regulation; any legitimate
accepted set of measures to maintain the stability and security of the financial system must necessarily
be very wide.  It was easy to argue against engaging in the sort of work suggested in the room paper
as it would be to argue against work on the necessity test by saying that the result would be too broad
or too strict to suit all.  What Australia had suggested was to clarify and refine how to find the rightfit, where ideas could be found and where ideas from delegations' current work could be applied.
33. The representative of Japan concurred with the importance of transparency in domestic
regulation.  However, he expressed reservation as to the need for disciplines on the notification of
proposed regulation and the solicitation of comments from interested parties for financial services,
taking the administrative burden into account.
34. The Chairman said that on the proposal for work on prudential regulation views ranged
between objection and support.  Most delegations that spoke found it unrealistic to aim at reaching a
definition.  Some delegations felt that the issue could be taken up in the interest of transparency and to
enhance mutual understanding.  Others felt it pr emature to initiate discussion without having more
clarification of the elements of the proposal.  Some delegations suggested obtaining information fromrelevant organizations to enhance understanding.  One delegation had opposed the proposal.  The
Committee would revert to the discussion on future work at the following meeting.S/FIN/M/26
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Item D: Recent Developments in Financial Services Trade
35. The Chairman requested any updates on regulatory or economic developments in countries
that affected financial services trade.
36.  The representative of Turkey said, in connection with the document that had been distributed
regarding the recent changes in the Turkish banking system, that Members could find the text of the
new Banks Act at the internet address www.treasury.tr
37. The representative of the Czech Republic informed the Committee about two acts related to
the insurance services sector that had been recently adopted in his country.  The first Act was on
liability insurance for damage caused by the operation of vehicles, and amendments of some related
Acts.  That Act abolished the monopoly of the Czech Insurance Company and established the Czech
Insurance Bureau as successor of the former bureau of compulsory motor insurance.  The supply of
those services had been liberalized and allowed on a non-discriminatory basis.  The second, i.e. theAct on Insurance, included provision on stricter requirements for capital adequacy of insurance
undertakings in connection with the current extended  permitted activities; and on control of owners
and persons in the statutory supervisory bodies of an insurance undertaking and reinsurance
companies.  It also provided that the approval of the general insurance terms and conditions was no
longer required as a condition for the granting of au thorization; and that the Ministry of Finance as the
supervisory body had powers to impose specific measur es in case of determining that an insurance
undertaking was not able to meet its commitments with respect to policy holders.
38. The representative of Korea informed on recent developments in the liberalization of Korea's
financial services.  Korea had implemented a liber alization of financial services program since
December 1997.  That liberalization had been based on the recognition that the model of its financialmarket should be shifted to a more open and market-based one by introducing advanced financial
techniques and increasing competition.  After the 1997 Asian financial crisis, the Korean government
realized that enhancing financial sector compet itiveness through more decisive market opening
measures would be the key not only to ending the financial crisis swiftly but also to preventing future
crisis.  Korea had liberalized all types of commercial presence in financial services areas includingbanking, securities, insurance and other financial services.  It had also abolished all measures that
discriminated against foreign suppliers, except those that served prudential purposes.  The key
measure taken after December 1997 were the following: a) Banking: establishment of foreign bank
subsidiaries had been allowed in April 1998, eliminating the last existing restriction on commercial
presence in the sector. b) Securities: the establishment of foreign securities subsidiaries had been
liberalized in April 1998 and all limitation on foreign direct investment in Korean securities
companies had been abolished. c) Insurance: FDI's in insurance agencies, brokerage and claimsettlement businesses had been fully liberalized.  d) In the securities investment trust business,
limitations on foreign equity participation in existing Korean companies had been abolished in July
1998.  In addition, Korea had implemented liberalization measures in the cross-border supply of
services by revising the regulations on foreign exchange transactions.  In April 1999 almost all current
account transactions of corporations and financial institutions had been liberalized.  The capitalaccount transactions’ regulation system had been also changed from a positive to a negative listing,
and as a result all capital account transactions were free unless otherwise specified.  Other cross-
border services that had been liberalized after December 1998 included investment advisory, credit
information, and credit rating services.  He hoped that the Committee would take due note that those
liberalization efforts had been done in a very difficult time for the Korean economy.
39. The representative of Japan stated that his delegation shared the concerns regarding the
Financial Modernization Bill of the U.S. that had been raised by the delegation of the European
Communities at the previous meeting, in relation to the interim rule by the Federal Reserve Bank
concerning applications by foreign firm to become financial holding companies.S/FIN/M/26
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40. The Chairman thanked Members for the reports given and said that the Committee took note
of the statements made.
Item E: Request for Observer Status- International Association of Insurance Supervisors
41. The Chairman recalled that at the previous meeting the Committee had discussed briefly a
communication from the International Association of Insurance Supervisors (IAIS), dated 27 March
2000, requesting observer status in that committee.  Some delegations had voiced their support for
granting that observership based on the relevance of the requesting entity's work to the Committee’s
discussions; others had been inclined to grant observership on "ad hoc" basis, for meetings addressing
insurance concerns only.  As to the latter, he reminded delegations of how the Committee had
structured its work in the past; issues were treate d for the financial sector as a whole, and the agenda
was not divided in subsectors.  It might be difficult, therefore, to determine in advance those meetings
where insurance issues would come up.  One delegatio n had been of the view that the request should
be considered in the context of the discussion conducted in the General Council.  Then delegations
had expressed their wish to postpone the deci sion on the request until the following meeting.
42. To give further information, he added that the IAIS' membership was comprised of national
insurance regulators and supervisors, which were governmental entities, from over 100 jurisdictions
(including Argentina, Australia, Austria, Belize, Bolivia, Brazil, Belgium, Canada, Chile, Denmark,Ecuador, Egypt, El Salvador, Germany, Ghana, Guat emala, Hong Kong China, India, Israel, Jamaica,
Japan, Korea, Macao, Malaysia, Mauritius, Mexico, New Zealand, United States).  He then asked
whether the Committee was in a position to take a decision on the IAIS’s request.
43. The representative of the United States requested clarification as to the options before the
Committee.  At the previous meeting her delegation had supported granting observership on “Ad hoc”
basis but not limited to insurance.  The Chairman cl arified that at the previous meeting the delegation
of India had suggested observership on Ad hoc basis limited to meetings addressing issues on
insurance.  He added that based on the way work had been conducted in the Committee, and given
that issues taken up related to the financial sector as a whole, predicting when insurance issues would
be taken was very difficult.
44. The representative of the European Communities supported the request for observer status by
the IAIS.  In the light of the discussion on future work granting that observership would be very
useful in bringing the Committee closer to an International Organization dealing with regulatory
matters in the sector.  He asked for clarification as to the impact that the granting of such observership
by the Committee would have on the discussion conducted in the General Council on observer status.
A representative of the Secretariat said that a discussion in the General Council had been going on for
some time focusing on the treatment of regional organizations.  In all of the subordinate Councils
requests from regional organizations had been put aside, by the bodies’ individual decisions, pending
a decision from the General Council.  There was no question that the Committee had complete
freedom and authority to give observer status, either on a permanent or ad hoc basis, to any
organization.
45. The representative of Malaysia reiterated that at the previous meeting his delegation had
raised the issue in a systemic way.  His delegation needed to consider the request further even after
the clarification by the Secretariat, and requested to defer discussions on the matter.  The
representative of Pakistan concurred with Malaysia.  The representative of Mauritius  called for
consistency and coherence in this regard.
46. The representative of Canada noted that it would be puzzling if the trade policy community
did not have more than a passing interest in what regulator were doing.  The request by the IAIS
should be welcomed.  His delegation supported unqualified observer status for the IAIS.  TheS/FIN/M/26
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representative of Japan recalled that at the latest Services Council the World Tourism Organization
and the World Health Organization had been granted observer status because those two organizations
were relevant to the work conducted in that body.  The IAIS’s work was very relevant to the issues
that the Committee was mandated to address and its membership was open to all WTO Members.  By
analogy, the IAIS should be granted observer status at least on ad hoc basis.
47. The Chairman observed that the Committee had not reached a consensus on the issue.  Some
delegations would like to defer discussion of the ma tter to future meetings; others would like to grant
observer status to IAIS.  He suggested that the Committee revert to that discussion at a future meeting
when the matter was ripe for decision.  The Committee so agreed.
Item F: Date of the Next Meeting
48. The Chairman suggested that the Committee shoul d meet in the same week as the Council for
Trade in Services, which was the week of the 10 - 14 of July.  He would select the date and would
communicate it to Members in due course.  The Committee so agreed.
Item G: Other Business
49. The Chairman indicated that he would be presenting an oral report to the next Special Session
of the Council for Trade in Services, together with  other chairpersons of the subsidiary bodies. That
report would cover the discussions of the two meetings of the year.  He would make that report on hisown authority, unless Members had any objections.  No objections were voiced.
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