 
 RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/M/46 
29 October 2004 
 
 (04-4602) 
Committee on Trade in Financial Services  
  
 
REPORT OF THE MEETING HELD ON 28 SEPTEMBER 2004 
 
Note by the Secretariat
1 
 
1. The Committee on Trade in Financial Services held a meeting on 28 September 2004, under 
the Chairmanship of Ms. Miyon Lee (Republic of  Korea). The proposed agenda is contained in 
airgram WTO/AIR/2388.  
2. Before proceeding with the adoption of the age nda, and in order to take advantage of the 
presence of the delegation of Antigua and Barbuda at the meeting, the Chairperson suggested that the 
proposed agenda items be taken up in the following orde r:  A) Acceptance of the Fifth Protocol to the 
GATS Embodying the Results of the Financial Services Negotiations;  B) Technical Issues; C) The 
GATS and the Annex on Financial Services – Intern ational Regulations a nd Financial Services 
(Communication from Antigua and Barbuda et al.);  D) Recent Developments in Financial Services 
Trade;  E) Date of the Next Meeting;  and F) Other Business.  
3. The Chairperson  informed the Committee that she inte nded to make a statement regarding the 
annual review of the implementation by China of the WTO Agreement and of the related provisions 
of China's Accession Protocol under Other Bu siness.  The representative of Chinese Taipei  said that 
he would make a statement concerning a pr esentation at the Committee.  The Chairperson  proposed 
that the agenda be adopted as suggested, and with the addition of these two items under Other 
Business.   
4. It was so agreed . 
A. A CCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN 
SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS  
5. The Chairperson  recalled that three WTO Members had yet to accept the Fifth Protocol, 
namely:  Brazil, Jamaica, and the Philippines.   She invited these three Members to provide 
information on the status of their domestic processes. 
6. The representative of Brazil  said that he had no new developments to report; the Fifth 
Protocol was still undergoing due legislative process in his country.  
7. The representative of the Philippines  remarked that following the general elections in his 
country, it was up to the newly composed Senate to deal with this issue. 
8. The representative of the United States  said that her country was looking forward to the 
speedy ratification of the Protocol by these three Me mbers.  She appreciated the reports provided by 
Brazil and Philippines in that regard. 
                                                      
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/46 
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 9. The representative of Canada
 said that as negotiations moved forward towards the May 2005 
deadline for the submission of revised offers, it w ould be important for these three Members to ratify 
the Protocol.  
10. The representative of Switzerland  urged these Members to work towards the ratification of 
the Protocol as soon as possible.  
11. The representatives of Japan and the European Communities  echoed the comments made by 
Canada, Switzerland and the United States. 
12. The Chairperson  expressed her appreciation for the information provided by Brazil and 
Philippines and encouraged the three Members concer ned to accelerate their internal procedures for 
the acceptance of the Protocol. 
13. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting. 
B. T ECHNICAL ISSUES  
14. The Chairperson  recalled that the Committee had not addressed any technical issues since last 
year.  In her view, the Committee should be able to  play a useful role in identifying and analysing 
technical issues that may be of importance in th e current round of negotiations, as well as in the 
implementation of the existing schedules.  Following the suggestion made at the previous meeting, 
she had consulted several delegations on an informal  basis with a view to analysing how to proceed 
on this matter.  In her view, most Members had shown a preference for discussing technical issues - such as those related to classification or schedul ing of commitments - on the basis of concrete 
proposals by Members, either made in writing or orally at the Committee.  Having said that, she 
suggested that the Committee kept  the door open fo r any possible discussions under this agenda item.  
15. There were no interventions under this agenda item 
16. At the suggestion of the Chairperson, the Committee took note
 of her statement and decided  
to revert to this agenda item at the next meeting. 
C. T HE GATS  AND THE ANNEX ON FINANCIAL SERVICES – INTERNATIONAL REGULATIONS AND 
FINANCIAL SERVICES  
17. The Chairperson  recalled that Members had had an in teresting discussion on this proposal at 
the previous meeting, following a first discussion in October 2003.  A wide range of important issues 
had been raised.  Some Members had said that alt hough standard-setting was not the role of the WTO, 
standards could affect trade in services.  Others had noted that related work in a more horizontal fashion was going on in other subsidiary bodies of th e Council for Trade in Services.  It had also been 
pointed out that Members had the right to regulate , particularly for prudential reasons.  Finally, the 
importance of technical assistance in this area by th e relevant organizations had been emphasized.  
She also recalled that at the last meeting, th e Committee had agreed that further discussion was 
needed and that it would revert to this issue at future meetings, depending on the availability of the 
proponents.  Having said that, she invited Members to make further comments on this proposal. 
18. Since no delegation spoke under this agenda ite m, the Chairperson suggested to turn the 
meeting into an informal mode in order to discuss how to proceed in the future, and to revert to formal 
mode once that discussion was concluded. The Committee so agreed.    S/FIN/M/46 
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 19. In resuming the formal discussions, the Chairperson  said that further treatment of this issue 
along the current lines in the Committ ee might not lead very far.  While she would continue reflecting 
on this issue, she suggested that interested Memb ers should first get together and explore any other 
possible options.  Depending on the outcome, the Committee would then take up the issue again at an appropriate time in the future.   
20. The Committee so agreed. 
D. R
ECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE  
21. The Chairperson  said that there were two issues under this agenda item.  First, the 
submissions by Norway and Turkey; and, second, a presentation by Mexico on "Modernization of the 
Mexican Financial System."  She suggested that Me mbers discussed the two submissions first, before 
turning to the presentation by Mexico. 
22. At the previous meeting, the Committee had addressed a submission by Norway on Marine 
and Energy Insurance, circulated as Job(04)/80; and a room document by Turkey on "E-insurance 
activities by Turkish insurance companies".  Member s expressed interest in continuing the discussion 
on the cross-border supply of marine and energy insurance.   
23. The Chairperson considered that some of the in teresting issues raised in the Norwegian paper 
could be further discussed in the Committee.  First, the paper had suggested that a liberal regime for 
the cross-border supply of maritime and energy insurance services provided benefits to both 
consumers and producers, and attended to concerns  of consumer protection,  and financial sector 
integrity and stability.  That was basically due to the global character of this business; the typical 
involvement of professional parties; and the fact that, as the Norwegian experience showed, 
liberalization would not prevent prudential regulati on.  The question that Members might want to 
discuss was whether full commitments could be unde rtaken on Mode 1 and 2 for marine and energy 
insurance services, taking into account the main feat ures of this industry, the potential benefits from 
liberalization, and the fact that liberalization co mmitments would not prevent prudential regulation.  
Second, the paper proposed a new way of classifying marine and energy insurance services.  This 
classification was outlined in the Annex to the pape r.  Members might want to discuss whether this 
classification would be appropriate and useful for undertaking commitments on these lines of business.  
24. The  room document by Turkey also raised two important issues that Members might want to 
discuss:  First, whether insurance internet sites were mainly devoted to providing company, product 
and agent referral information, but little tran sactional capabilities; or whether transactional 
capabilities had been developed in other countries;   second, whether an attitude of insurance 
companies to shy away from e-in surance initiatives was mainly based on commercial considerations, 
rather than legal or regulatory concerns. 
25. The representative of Norway
 replied to some questions that  had not been fully addressed at 
the previous meeting.  First, under the Norwegia n insurance law, some exceptions applied to the 
general rule that insurance companies had to be  established in Norway through subsidiaries or 
branches to conduct business.  One was a general cross-border exception that allowed foreign non-
incorporated insurers to solicit business, throu gh an authorized broker, from companies exceeding 
certain thresholds regarding man-year annual sal es.  The second exception concerned marine and 
energy insurance.  
26. As stated in the paper, Norway believed lighter  regulation should be a pplied to this segment 
of insurance.  The involvement of relatively few, sophisticated and often multinational parties in large 
premium contracts ensured the adequate assessment of  risks involved in tran sactions with local or S/FIN/M/46 
Page 4  
 
 foreign insurers.  The essential element was th at Norwegian regulators differentiated between 
different types of consumers;  the unsophisticated  ones, who were in need of more consumer 
protection and the large professional parties able to a ssess risks on their own.  This did not imply that 
Norwegian companies in marine and energy insurers were lightly regulated;  rather, they faced the 
same stringent demands as other insurance compan ies incorporated in Norway.  However, Norway 
allowed for cross-border insurance business to take  place, and was inviting other Members to do 
likewise.  This approach was based on the notion of differentiated consumer groups, market forces, 
and home country regulation.  The Norwegian Fi nancial Services Agency (FSA) also had the 
prudential and non-discriminatory possi bility to intervene in contracts (written in Norway or abroad), 
if their terms were considered unsatisfactory or unreasonable.  This option had in fact never been 
used.   
27. He believed that commitments would not undermine governments' ability to have the 
necessary control over capital movements, for example, through reporting requirements.  
Commitments would, however, redu ce the uncertainty reflected in political and economic risks, and 
could contribute positively to the development of the shipping and energy sectors.  Having said that, 
he turned to some of the questions raised at th e previous meeting, including the question how the 
Norwegian authorities ensured that certain - in fact  most - insurance lines were restricted.  Under 
Mode 1, often defined as active soliciting into a market in areas open to cross-border business, the 
Norwegian FSA monitored the market through control over the brokers - as contracts were required to 
go through an insurance broker authorized in Norway - and through general supervision. In the case of 
marine and energy insurance, for reasons described in the paper, a Norwegian consumer could, on his 
own initiative, approach foreign brokers not authori zed in Norway (Mode 2) without any limitations 
or restrictions. 
28. He agreed that the interest of  unsophisticated third parties merited special attention.  Norway 
did not generally allow third party car liability insu rance to be written internationally, as there could 
be an incentive for the buyer of mandatory third pa rty liability insurance to buy the cheaper insurance, 
disregarding the quality of the insurer.  Additionally, if the insurer was abroad, it could be difficult for 
the unsophisticated consumer to claim his money.   
29. He finally said that although the paper had focused  on marine and energy insurance, many of 
the points made were applicable to insurance of  large commercial risk, an area where Norway had 
offered to undertake substantial commitments in these negotiations. 
30. The representative of Korea
 focused on the regulatory aspects of cross-border trade in 
insurance.  He said that the sophistication of in surance consumers varied across countries as well as 
sectors.  In this respect, the regulators of developi ng countries had reason to be careful in liberalizing 
cross-border trade.  Having this in mind, he asked a specific question on paragraph 16 of the paper.  In 
his view, the paragraph seemed to suggest that s upervision of foreign insurance companies in their 
home countries should be recognised by the host count ries.   He wondered whether there were any 
efforts made by the Norwegian authorities to coor dinate with the supervisory authorities of other 
countries.  He also wondered whether there were re cognition arrangements with foreign regulators for 
the authorization of foreign insurance providers acting as brokers. 
31. The representative of Japan  referred to paragraph 5 of the paper where it was explained that 
no specific requirements were levied on a foreign company writing marine and energy insurance in 
the Norwegian market through Mode 1, provided the contracts were supplied through an insurance 
broker authorised in Norway.  The foreign insura nce company was not subjected to any licensing or 
registration requirements to conduct this line of business.  He sought further explanations on the 
regulatory basis for this regime.  S/FIN/M/46 
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 32. The representative of Canada  asked how small vessels in Norway were insured and whether 
owners of small vessels in Norway (e.g. pleasure craft and small fishing vessels) were able to get insurance directly from foreign insu rers through a Mode 2 sort of approach.  In addition, she asked 
whether Norway required shippers to have insurance.  Finally, with regard to the authorised brokers, 
she enquired whether all firms that were registered w ith a broker had to be located in Norway or off-
shore. 
33. The representative of the United States
 said that Norway's paper highlighted a number of 
important themes relating to cross-border insurance.   The distinction between sophisticated and non-
sophisticated consumers for the purpose of regulat ing cross-border insuranc e was familiar to many 
countries at all levels of development.  Indeed, it was the basis for the cross-border commitments in 
insurance already provided by many Members, whether on the basis of the Understanding on 
Commitments in Financial Services or otherwise.  The United States was particularly interested in 
discussing the category of large commercial risks.  In the case of the United States, regulation did not 
focus on particular sectors but on the size of th e company that was seeking the insurance or the 
amount of premium on the particular type of insu rance.  Her delegation would appreciate any more 
information that Norway might like to provide in that  subject.  With regard to the definition of marine 
and energy insurance, she asked how Norway ensured that owners of vessels that might not be 
sophisticated had the protection of the Norwegian regulator.  She also asked whether Norway could 
clarify how these two categories (marine and energy and major risks) related to each other since a supplier of insurance might qualify under both categor ies.  She finally considered that the paper 
constituted a good basis for delegations to share information about the approaches followed to 
liberalize cross-border insurance. 
34. The representative of Hong Kong, China
 said that, if he understood correctly, Norway's 
general approach to the supply of insurance th rough Mode 1 and 2 was that it was prohibited to 
provide insurance without authorization, but an exception was made for large commercial risks, in 
particular in the marine and energy insurance se ctors.  Hong Kong, China's approach to insurance 
through Mode 1 and Mode 2 was different and did not generally restrict the supply of insurance 
through these modes.  The only restriction imposed for the purpose of consumer protection concerned 
the solicitation of business, defined basically as ad vertising targeted at consumers in Hong Kong, 
China for the purpose of supplying insurance services.  Apart from that, there were no restrictions on 
either the consumer involving a foreign insurer to conclude an insurance contract or the foreign 
insurer providing any kind of insurance that a consumer in Hong Kong, China might wish to ask for. 
35. The regulatory approaches in Norway and Hong Kong, China also seemed to differ with 
respect to the treatment of third party liability .  He took note of the points made regarding the 
sophistication of consumers and the likelihood th at the market itself would eventually resolve 
problems arising in this area.  However, regulators'  concerns related specifically to the protection to 
be given to the eventual recipient of the insuran ce, particularly in the case of third party liability 
insurance where the final recipient was not the one actually taking the insurance policy.   
36. The representative of Brazil  said that paragraph 6 of the paper defined Mode 2 "as the right of 
the customer on his or her own initiative, without  prior solicitation or active marketing from the non-
resident insurance company, to contact a forei gn insurance company and take out an insurance 
contract abroad".   He asked whether Norway could elaborate further on the definition of Mode 2. 
37. The representative of Norway  took note of the lack of consensus on the difference between 
Mode 1 and 2 in the Committee.  He said that Norway distinguished between the two modes on the 
basis of active solicitation.  This was not an interpretation of Norwegian commitments, but an 
explanation how Norway distinguished them in its regulatory framework.  Transactions were 
considered to take place under Mode 1 when a fore ign non-incorporated company actively targeted 
Norwegian consumers through advertising.  Transac tions were considered to take place under Mode 2 S/FIN/M/46 
Page 6  
 
 when a Norwegian consumer, on his or her own initia tive, went abroad and bought financial services.  
For example, if a Norwegian were to use the Intern et to find a bank in Canada because he wanted to 
raise some money, that would be considered M ode 2.  If that bank put an advertisement in a 
Norwegian newspaper the ensuing transactions w ould be considered to fall under Mode 1.   
38. He believed that the Norwegian regulatory frame work was not different from that in Hong 
Kong, China.  He agreed with the representative of  Korea that the sophistication of consumers could 
vary across countries and sectors.  However, market forces would in effect separate the different consumers.   Regarding the recogn ition of other countries' regulation, he explained that in order to 
establish through branches in Norway, there had to be co-operation between the supervisory 
authorities of the home and host countries and some minimum standards had to be complied with.   
39. In response to the question from Canada, he re plied that smaller vessels were included in 
marine insurance.  On the questi on from the United States about larg e commercial risks, he said that 
in general, commitments for large commercial ri sks would probably include most of marine and 
energy insurance.  It would eventually depend on how large commercial risk was defined.  Norway 
had provided a definition in its initial offer on the basis of numerical benchmarks on man-year or 
annual sales. 
40. Since allowing complete freedom for activ e solicitation under Mode 1 was somewhat 
premature at this stage, he said that Norway re quired the use of brokers.  That would still allow 
foreign companies to access the Norwegian market  (through the broker) and provide a reference point 
for local consumers in case of need.  
41. The Chairperson
 said that discussion on this paper pr ovided a very useful understanding about 
the cross-border supply of marine and energy insu rance.  She then invited comments on the room 
document submitted by Turkey. 
42. The representative of the United States  found the paper from Turkey to be very interesting.  
She considered that it was related to the paper that Norway had submitted.  The United States was 
interested in how country regimes had evolved in terms of allowing cross-border supply of insurance. 
43. The representative of Canada  raised two questions.  She wonde red first if the legislation on 
signatures referred to in paragraph 9 was already sign ed.  Secondly, even if the Internet sites seemed 
to have limited transactional capabilities, as point ed out in paragraph 4, she wondered if it was 
possible for current customers to perform other operations like checking progress on claims or moving monies between accounts. 
44. The representative of Japan
 said that Internet sales of insurance products in Japan remained 
quite small.  Generally speaking, the importance of safeguarding prudential concerns was becoming 
increasingly important as more and more customers fe lt comfortable with the Internet as a means of 
buying insurance products.  He asked whether the Turkish government was considering any measures 
to promote Internet sales of insurance services. 
45. The representative of Australia  said that his country did not define individual products based 
on regulatory regimes.  Insurance service providers  were required to meet statutory requirements 
regardless of the mode of supply.  The provisi on of Internet and telephone insurance services was 
becoming increasingly popular in Australia, somethi ng linked to the wider uptake of technology in 
general.   
46. The representative of Switzerland  asked how data protection issues were dealt with in Turkey.  S/FIN/M/46 
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 47. The representative of Hong Kong, China  asked whether the reference to on-line insurance 
was meant to cover only insurance provided over the Internet but still within the territory of Turkey, 
or also cross-border insurance coming from other countries. 
48. In terms of cross-border supply of insuran ce, the regime in Hong Kong, China did not 
distinguish between the means by which the ser vice was supplied.  Irrespective of whether the 
services were being supplied through agents or co rrespondents, or through electronic means, they 
were treated equally under the regulatory regime.  This was also the case for cross-border supply of 
insurance services.   
49. The representative of Turkey  said that as part of its efforts to harmonize legislation with EC 
legislation, Turkey had passed a law dealing with electronic signatures.  The law had been put into 
effect on 13 July and application would start at the beginning of 2005. 
50. In Turkey, legislation put no limitation on on-line sales and distribution of insurance 
contracts.  There was no obligation on physical deliv ery of insurance policies.  This was left to both 
parties' discretion.  Physical and virtual on-line de livery of policies did not differ in terms of their 
legal validity, provided the documents had the require d format.  Regarding data protection, he said 
that there was no specific law on e-commerce in Tu rkey, but studies were underway.  Governmental 
bodies were responsible for data  and data protection.   
51. Finally, he explained that Turkish insura nce legislation applied within geographical 
boundaries and was based on local licensing of co mpanies and intermediaries, and home country 
control.   
52. The Chairperson  then offered the floor to Mr. Sadi Lara Reyes, Deputy Director-General of 
Financial Analysis and International Affairs in the Mexican Ministry of Finance, to make a 
presentation on the Modernization of the Mexi can Financial System – Legal Framework. 
53. The representative of Mexico  said that his presentation would focus on the legal and 
regulatory reforms introduced after the financial cr isis that had hit Mexico in the mid-1990s. The 
presentation was to focus particularly in the peri od 2001-2004.  The general objectives of financial 
reforms were mainly to strengthen the financia l sector;  promote and increase the proportion of 
internal savings channeled throughout the financ ial system;  enhance and promote credit schemes 
addressed to all sectors;  and strengthen corporate governance structures of financial institutions and 
public companies.  Other objectives included the development and innovation of financial products 
and services;  improving supervisi on and regulation;  attending the popular savings and credit sector;  
granting greater operational autonomy to development banks in order to make their own operations 
without having to be subject directly to the Minist ry of Finance;  and creating a mortgage promotion 
entity in order to encourage and develop the housing sector through mortgage financing.  
54. In 2001, several changes were introduced, incl uding the following laws:  Ley de Instituciones 
de Crédito (Banking Law);  Ley para Regular las Agrupaciones Financieras (Holding Companies 
Law); issuance of the Ley de Sociedades de Invers ión (Investment Companies Law); reforms to the 
Ley del Mercado de Valores (Stock Exchange Mark et Law); issuance of the Ley Orgánica del Banco 
del Ahorro Nacional y Servicios Financieros (Org anic Law of the National Savings and Financial 
Services Bank);  issuance of the Ley de Ahorro y Crédito Popular (Popular Savings and Credit Law); 
reforms to the Ley General de Organizaciones y Ac tividades Auxiliares de Créd ito (Organizations and 
Credit Auxiliary Activities Law);  reforms to th e Ley General de Instituciones y Sociedades 
Mutualistas de Seguros (Institutions and Mutual Insu rance Companies Law);  issuance of the Ley para 
Regular las Sociedades de Información Crediticia (Law to Regulate Credit Information Companies); 
and reforms to the Ley de la Comisión Naciona l Bancaria y de Valores (National Banking and 
Securities Commission Law).  In 2002, the main actions were the liquidation of Banrural;   which S/FIN/M/46 
Page 8  
 
 was the Development bank that lent basically to agricultural sector, and the creation of Financiera 
Rural,  which was not a bank but a facilitor of credit to  that sector.  Improvements were introduced to 
the Development Banks  Organic Laws as well as to the Pension System Law.   The government also 
enacted the Law on Transparency and Competition fo r Guaranteed Credits.  In 2003, changes were 
introduced to the Guarantee Law; the Law Regulati ng Credit Information Companies, and the regime 
on Money Laundering and Terrorism Financing.  In 2004, a Law for Transparency and the Ordaining 
of Financial Services was passed.  Additionally, Pr ompt Correction Actions were introduced in the 
context of the Banking Law. 
55. In order to reactivate credit, several laws were introduced.  The system of guarantees 
(collateral) was reformed in order to grant certain ty to debtors and creditors and to re-balance their 
relationship.  The law led to lower transaction cost s, a reduction of interest rates and down-payments, 
more alternatives to guarantee credits, and increased competition among fiduciary institutions.  The Law on Transparency and Competition for Guaranteed Credit was also reformed in order to allow  
users to know what type of agreement they we re entering into.  A new Law to Regulate Credit 
Information Companies was drafted with a view to protecting the rights and interests of the users of 
services offered by the so-called information bureaus.   
56. The new Law for the Transparency and Ordaining of Financial Services regulated 
commission fees,  inter-banking fees and other aspects related with the provision of financial services; prohibited the institutions to carry out discriminator y practices; established transparency requirements 
in contracts and checking accounts statements, cred it and debit cards, and matters relative to the 
operation of Compensation Chambers ;  and contained transparency mechanisms in order to allow 
clients of credit institutions to have information on transactions and fees.  
57. Development banks were also reformed in or der to effectively attend priority sectors for 
Mexico's development.  The main  changes focused on strengthening the popular, mortgage, and rural 
sectors.  In the popular sector, reforms included th e creation of the National Savings and Financial 
Services Bank (Bansefi);  the issuance of th e Popular Savings and Credit Law; and the 
implementation of a rescue program  for Savings and Loan Entities. The main development in the 
mortgage sector was the creation of the Sociedad Hipotecaria Federal (SHF). The rural sector witnessed the liquidation of Banrural and the creation of Financiera Rural.  
58. Several reforms were introduced to the regulatory and supervisory framework, in order to turn 
it into a prevention mechanism based on prudentia l regulation and auto-regulation schemes in line 
with international standards. The main reforms included a modification of the Banking Law and the 
Holding Companies Law; the streamlining of prude ntial regulation through diverse actions;  the 
reform of the regimes dealing with money laundering and terrorism financing;  the adoption of prompt 
corrective actions;  and a new Securities Market Law.  
59. The reforms introduced to the Banking Law a nd the Holding Companies Law focused on the 
adoption of better corporate governance practices in line with OECD principles; the enhancement of 
financial operations allowed; and the strengt hening of supervision and regulation.  
60. With regard to prudential regulation, several actions had been taken with regard to capital 
standards (in line with the Basel Ca pital Accord);  methodologies to determine loan ratings;  internal 
controls, comprehensive risk management;  disclosur e of financial information;  and integration of 
credit files.  
61. In the case of money laundering and terrori sm financing, Mexico fulfilled the 40 
recommendations on money laundering and the 8 special recommendations on terrorist financing 
issued by the Financial Action Task Force.  The concept of "know your customer" had been  S/FIN/M/46 
 Page 9 
 
 
 consolidated in order to clearly identify the persons carrying out transactions through financial 
institutions.  The quality of reporting to financial authorities had also been improved.  
62. The adoption of prompt corrective actions was a major move towards creating strong 
financial institutions.  The government established the basic parameters in order to regulate the 
preventive action by the regulator.  Banks would be cl assified into different categories, with different 
measures applicable to each category. When an in stitution maintained a capital adequacy ratio (ICAP) 
25 percent higher than the minimum required, no m easure would be applied. If the ICAP was less 
than 25 percent above the minimum required, mini mum mandatory measures would be applied and, if 
necessary, additional measures would be set. If th e ICAP was below the minimum required, in 
addition to the previously mentioned measures, ot her set of minimum mandatory measures would be 
applied.  
63. The reforms introduced to the Stock Exchange legislation aimed at improving protection for 
minority shareholders;  strengthening the regulatory framework to define and sanction illegal market 
conduct;  improving corporate governance of stock exch ange intermediaries;  modifying the standards 
for disclosure of relevant information from the issu er; and standardizing the regulation of different 
types of intermediary.   
64. There were still several challe nges ahead, including the mainte nance of an optimal macro-
economic policy in order to reduce inflation and inter est rates,  and the consolidation of the financial 
system regulatory and legal frameworks.  
65. The representative of Chinese Taipei  referred to the adoption of prompt corrective actions by 
Mexico. He said that when financial institu tions found themselves below the minimum capital 
requirements, very often capital restructuring or in jection of fresh capital would be required to bring 
the troubled financial institution back on track.  He asked in that regard whether there had been any 
such cases in Mexico recently, and how the regulator  dealt with the problem.  Second, he noted that 
one of the objectives of the Mexican authorities was to allow for increased merger and acquisition 
opportunities. He enquired about the assessment of the authorities in that process, particularly with 
respect to the increased presence of  foreign institutions in the market .  Additionally, he sought further 
information on the effects on local institutions and consumers.  
66. The representative of Norway  sought further information on Mexico's experience with the 
presence of foreign institutions, and how that pres ence impacted on the stability of the financial 
system.  
67. The representative of Mexico  said that the authorities had not been obliged to apply prompt 
corrective actions thus far.  Experience in that rega rd was therefore limited.  Mergers and acquisitions 
were expected to continue as the market developed.   Foreign institutions, which held already 80 per 
cent of the system's assets, were particularly active in this area. 
68. In concluding, the Chairperson  said that Members had had an interesting discussion under this 
agenda item.  Very important issues had been brought up by the communications from Norway and 
Turkey, and by the presentation from Mexico.  Sh e encouraged Members to continue discussing 
substantive issues on the basis of submissions or  presentations. In the consultations before the 
previous meeting, many delegations had expressed  interest in recent experiences with financial 
liberalization or financial reforms carried out in the context of economic integration processes aimed 
at the establishment of free trade areas or deeper integration schemes.  This issue could also be 
considered under this agenda item in future m eetings.  She encouraged all Members to give 
consideration to that possibility.  S/FIN/M/46 
Page 10  
 
 69. The Committee took note
 of the statements made and decided  to revert to this agenda item at 
the next meeting. 
E. D ATE OF THE NEXT MEETING  
70. The Chairperson  suggested that the Committee hold its next meeting during the next cluster 
of services meetings, on Tuesday 23 November.  
71. The Committee so agreed . 
F. O THER BUSINESS  
72. The representative of Chinese Taipei  reminded Members that at the previous meeting he had 
proposed to bring a senior official from the recently  created Financial Supervisory Body in Chinese 
Taipei to make a presentation.  He suggested that the presentation be scheduled at the next meeting of 
the Committee.  
73. Turning to another matter, the Chairperson  recalled that section 18 of the Accession Protocol 
of the People's Republic of China provided for an annual review of the implementation by China of 
the WTO Agreement and of the related provisions of China's Accession Protocol.  As indicated in 
Section 18, and as noted previously by the Chairman of the Council for Trade in Services, the 
Committee on Trade in Financial Services was one of the bodies in which that review had to be 
conducted.  The results of the Committee's review  would be reported to the Council for Trade in 
Services.  In that regard, she announced that th e Committee would conduct the transitional review of 
China's commitments on financial services at its ne xt meeting, on 23 Novemb er, and proposed that 
the same procedure be followed as last year.  
74. The Committee took note  of both issues.  
 
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