RESTRICTED
GENERAL AGREEMENT S/IGFS/2
21December 1994
ONTRADE INSERVICES
(94-2861)
Interim Group onFinancial Services
NOTE ONTHE MEETING OF1DECEMBER 1994
1. Thesecond meeting oftheInterim Group onFinancial Services waschaired byMrFrank
Swedlove ofCanada. Thediscussion followed theagenda forthemeeting contained inAirgram
PC/AIR/45.
2. FollowingagreementintheGroupthatSloveniabegrantedobserverstatus,theChairmaninvited
comments onthedocument entitled "Measures bytheGovernment oftheUnited States andthe
Government ofJapan regarding Insurance" (reference S/IGFS/W/1) which hadbeencirculated since
thelastmeeting. Therepresentatives oftheparties tothedocument confirmed thatthecommitments
therein contained were extended toallforeign providers andwere multilateral innature.
3. Regardingtheseconditemontheagenda,exchangeofinformationregardingrecentliberalization
measures, theChairman noted thatSwitzerland hadcirculated acommunication concerning arecent
modification initslegislation intheareaoffinancial services (contained indocument S/IGFS/W/2)
inlinewiththeagreement ofparticipants intheGroup toexchange information onsuchmatters.
Concerning agroup ofcountries, therepresentative oftheEuropean Communities noted thattheentry
intoforcetookplace on1July1994oftwoimportant Directives intheinsurance area: the3rdNon-Life
Coordination Directive andthe3rdLifeCoordination Directive. TheDirectives setupthesupervisory
regime permitting theoperation ofthesingle licence andtheconcept ofhome country control, sometimes
referred toasthe"European Passport", forinsurance companies operating within thesingle European
market.
4. Thedelegate ofthePhilippines noted thatthenewBanking Actwhich waspassed inJuly1994
inthePhilippines hadabolished averyrestrictive regime thathadbeeninplace fornearly 50years;
access would nowbeallowed forforeign banks through theacquisition of60%ofthevoting stock
ofexisting domestic banks, through locally incorporated subsidiaries orviatheestablishment ofabranch
withfullbanking authority. Complementary reforms hadalsobeenundertaken intheinsurance sector
where insurance hadbeentaken offthenegative listofthe1991Foreign Investment Act,thusallowing
fortheestablishment ofmajority foreign-owned orwholly foreign-owned insurance, reinsurance and
intermediary companies aswellastheestablishment ofabranch ininsurance andreinsurance. The
delegation ofMorocco informed theGroup thatlawshadbeenpassed recently concerning negotiable
instruments andinvestment funds aswellasbanking andtheimplementation ofsuchlawswould take
place shortly.
5. ThedelegationoftheUnitedStatesinformedtheGroupofthemajorprovisionsoftheRiegle/Neal
Interstate Banking andBranching Efficiency Actof1994 andtheimplications ofthebillforforeign
banks intheUnited States. TheRiegle/Neal legislation afforded foreign banks national treatment in
respect ofinterstate banking andbranching andcontained other provisions intended toequalize
competitive opportunities forUSandforeign banks intheUSmarket. Specifically, thebillpermitted
nationwide interstate banking byacquisition ofabank inanystateoneyearafterenactment ofthe
./.S/IGFS/2
Page2
legislation, regardless ofexisting regional compacts ornational reciprocal agreements. Second, the
billpermitted interstate branching bymerger: beginning on1June1997, theresponsible banking
regulators would beabletoapprove amerger transaction between abankandanout-of-state bank;
thebankthenwould convert themerged bank'soffices intobranches ofthebank. Third, thebillalso
allowed inter-state branching bydenovoestablishment ofdirect branches. Abankwould beableto
establish andoperate adenovobranch inastateinwhich thebank didnotalready operate solong
asthehoststateopted-in byexpressly permitting instatelawdenovointerstate branching.
6. Regarding thenextagenda itemontheprogress ofbilateral negotiations, twodelegations said
thattheyhadmixed impressions fromtheconsultations theyhadheld: ontheonehand, thediscussions
hadbeenuseful from astock-taking andtransparency point ofview interms ofclarifying existing
commitments; ontheother hand, some partners hadstated thattheywere notprepared forvarious
reasons toenvisage making improvements intheirschedules. Thiswasofparticular concern given
theshorttime-frame forachieving improvements incommitments; theeffective negotiating period ahead
wasinfactonlyfourmonths, rather thansixmonths, afterentry intoforce oftheWTO agreement.
Itwasimportant, therefore, fordelegations tousethemultilateral forum which Geneva provided and
toensure thattheappropriate expertise fromcapitals waspresent infuture rounds ofbilateral contacts.
Another delegation underlined thatanumber ofpreliminary discussions hadbeenuseful andlooked
forward tointensifying consultations inthenearfuture. Onedelegation saidthatithadexplored with
some ofitstrading partners theextent towhich liberalization could beincorporated inschedules in
theformofbinding commitments and,onthebasisofinformation thatithadreceived, would formulate
further specific requests which would beconveyed toitspartners.
7. Onedelegationnotedthatsomecountrieshadmadecommitmentsthatwerestillseriouslydeficient
incertain respects, suchasincomplete sectoral coverage, theimposition ofscreening requirements
oreconomic needs tests, other barriers toentry andexpansion, limitations ontheformofestablishment
andtheamount offoreign equity, discriminatory capital requirements, onerous restrictions onintra-
corporate transferees anddiscriminatory limitations ontheability offoreign firms tofundthemselves
oroffercertain services. Thesame delegation underlined thefactthatitneeded firmcommitments
from anumber ofitspartners which addressed these kinds ofmarket access andnational treatment
barriers inorder tobeinaposition toaccept abroad MFN obligation infinancial services under the
GATS.
8. Other delegations noted thatpreliminary discussions hadbeenuseful fortransparency purposes
andoneexpressedtheintentionofmakingimprovementsinitscurrentoffer.Itwasimportanttomaintain
asense ofurgency about these discussions andtoavoid asituation where meaningful commitments
would bemade inthelastfewdaysoftheextended period ofnegotiations. Another delegation said
thatanumber ofuseful clarifications hadbeenmade withregard toscheduled commitments butitwas
lessclearwhere theprocess washeading; theoverall goalofthedelegation wasabigger andimproved
package intheservices areaasawhole andnotonlyinfinancial services.
9. TheChairman concluded thatthecomments showed thatthebilaterals thathadtaken place
wereagood stock-taking session -thatprogress hadbeenmade inachieving abetter understanding
ofthefinancial services regime ofcountries -butthatmuch work remained tobedone. Turning to
thesubjectoffuturework,theChairmanremindedtheparticipantsthattheInterimGroupwasestablished
tomonitortheprogressofnegotiationsuntilthecreationoftheCommitteeonTradeinFinancialServices.
Itwasnotpossible atthepresent timetoknow when thefirstmeeting oftheServices Council would
occur,sincethisdependedonthefirstmeetingoftheGeneralCouncil,andthereforewhentheCommittee
onTrade inFinancial Services would beestablished. Whatever happened interms ofinstitutional
arrangements, however, theChairman suggested thatitwould beuseful tohavefurther bilateral contacts
inapproximately twomonths. Itwastherefore tentatively agreed toschedule further bilaterals inGeneva
fortheweek of23January, tobefollowed byamultilateral meeting on27January 1995.