EEB1 Draft CARICOM Financial Services Agreement (and Quest for a Seamless Financial Landscape) Economic Intelligence and Policy Unit CARICOM Secretariat

EEB2 Outline of Presentation Background Background Critical Issues to be Considered Critical Issues to be Considered Articles Articles The Way Forward The Way Forward

EEB3 Relationship Between Revised Treaty and the Agreement Revised Treaty Sets the Broad Policy Framework Revised Treaty Sets the Broad Policy Framework The Agreement Expands on Treaty Provisions The Agreement Expands on Treaty Provisions

EEB4 Chapter Three–The Provisions Article 32Prohibition of New Restrictions on the Right of Establishment Article 33Removal of Restrictions on the Right of Establishment Article 36Prohibition on New Restrictions on the Provision of Services Article 38Removal of Restrictions on Banking, Insurance and Other Financial Services

EEB5 Chapter Three Cont’d Article 39Prohibition of New Restrictions on Movement of Capital and Current Transactions Article 40Removal of Restrictions on Movement of Capital and Current Transactions Article 41Authorisation to Facilitate Movement of Capital Article 44Measures to Facilitate Establishment Provision of Services and Movement of Capital

EEB6 How to Conduct Business in the Community Cross Border SupplyMode 1 Consumption Abroad Mode 2 Commercial Presence Mode 3 Movement of Natural Persons Mode 4

EEB7 Cross-Border Supply Mode 1 Correspondent relationships Correspondent relationships Direct trade between institutions from one country and consumers in another Direct trade between institutions from one country and consumers in another

EEB8 Commercial Presence Mode 3 Agencies Agencies Branches Branches Joint Ventures Joint Ventures Representative Offices Representative Offices Strategic Alliances Strategic Alliances M&A M&A

EEB9 OECS

EEB10

EEB11 14 Ministries of Finance 8 Central Bank 83 Domestic banks Foreign Banks 2 CARICOM Banks 3 depositor’s insurance schemes Two exchange rate regimes Fixed Currency Union Irrevocabl y Fixed Floating Managed float Free float Committee of Central Bank Governors Caribbean Group of Bank Supervisors 6 SECs 7 Stock exchanges 5 CSDs Reporting issuers Debt Domestic debt sovereign Corporate Regional sovereign Corp orat e Domestic companies cross listed Different settlement cycles T+1, T+3, T+5 Once weekly, every day, three days, twice per month Market actors Traders Brokers / dealers 1 Credit rating agency CASRCASR Collect ive invest ment schem es Investment advisors 14 Insurance regulators Domestic companies Foreign compani es Regional

EEB12 Doing Business in the Community cont’d Brokers Acting as Principals and Agents Brokers Acting as Principals and Agents Housing Finance Institutions Housing Finance Institutions Investment Firms Investment Firms Other Market Participants Other Market Participants

EEB13

EEB14 Sample of a Financial Institution with Cross-Border Operations Commercial Bank HQ in a Member State Merchant BankMerchant Bank Trust CompanyTrust Company Commercial bank in Antigua and Barbuda, Barbados, Grenada, Jamaica, St Kitts and Nevis,St. Lucia, St. Vincent & the Grenadines, SurinameCommercial bank in Antigua and Barbuda, Barbados, Grenada, Jamaica, St Kitts and Nevis,St. Lucia, St. Vincent & the Grenadines, Suriname

EEB15 Intra regional activities Cont’d Commercial Bank and Financial Services in Non CARICOM Countries Insurance Stock Brokerage Operation Asset Management Training Conduct business in multiple currencies

EEB16 Intra regional activities Cont’d Development Finance Company Information Technology Personal and Property Security Regulated by 5 central banks in CARICOMRegulated by 5 central banks in CARICOM Listed on three stock exchangesListed on three stock exchanges Faces 4 different exchange rate regimesFaces 4 different exchange rate regimes

EEB17 Non Financial Parent Company in a Member State Operation in 9 CARICOM Countries Subsidiary companies Airline Catering Industrial and restaurant catering General Trading Automotive Baking Investments Meat Processing

EEB18 Non Financial Firm’s operations cont’d Non Financial Firm’s operations cont’d Listed on two CARICOM stock exchanges Subsidiary listed on 1 stock exchange 45% of a General Insurance Company that is cross listed Real estate Finance company

EEB19 Non financial company operations cont’d Operates in non CARICOM countries Operates in non CARICOM countries Conduct business in multiple currencies Conduct business in multiple currencies Multiple languages different exchange rate regimes Multiple languages different exchange rate regimes

EEB20 Non financial company operations cont’d Associated companies in Associated companies in –General Trading –Waste disposal –49% in a finance company –General Insurance

EEB21 Market Participants in one member state 11 Brokers 11 Brokers 2 Dealers 2 Dealers 28 Investment Advisers 28 Investment Advisers 78 Reporting Issuers 78 Reporting Issuers 8 Underwriters 8 Underwriters 2 SROs 2 SROs 13 Traders 13 Traders

EEB22 What is the CFSA ? Framework to operationalise Intra- regional regime for the unrestricted movement of capital and financial resources

EEB23 The Articles General Parameters = 4 articles General Parameters = 4 articles Institutional Support and Trade Facilitation=7 Articles Institutional Support and Trade Facilitation=7 Articles Regulation, Regionalisation and Factor Cooperation =13 Articles Regulation, Regionalisation and Factor Cooperation =13 Articles Transparency and Accountability = 4 Articles Transparency and Accountability = 4 Articles Dispute Settlement Dispute Settlement Miscellaneous Miscellaneous

EEB24 General Parameters Article 1 Definitions Article 2 Scope and Coverage Article 3 Market Access for Financial Institutions Article 4 New Financial Services

EEB25 Institutional Support and Trade Facilitation Article 5 Data Processing in the Financial Services Sector Article 6 Credit Information Facility Article 7 Credit Rating Agency Article 8 Portability of Pension

EEB26 Institutional Support and Trade Facilitation Cont’d Article 9 Education and Training Article 10 Payment and Clearing Systems Article 11 Anti-Money Laundering

EEB27 Regulation, Regionalisation and Factor Cooperation Article 12 Intra-Regional Trade in Financial Services Article 13 Cross Border Supervision of TCCs and Conglomerates. Article 13 Cross Border Supervision of TCCs and Conglomerates. Article 14 National Treatment Article 14 National Treatment

EEB28 Regulation, Regionalisation and Factor Cooperation cont’d Article 15 Most Favoured Nation Treatment Article 16 Prudential (Carve-Out) Requirements Article 17 Regionalisation of Local Asset Ratio

EEB29 Regulation, Regionalisation and Factor Cooperation Article 18 Depositors Protection Article 19 Collateral in the Cross Border Market Article 20 Self-Regulatory Organisations Article 21 General Exceptions

EEB30 Regulation, Regionalisation and Factor Cooperation Cont’d Article 22 Reservations/Safeguards Article 23 Senior Management and Board of Directors Article 24 Mergers and Acquisitions

EEB31 Transparency and Accountability Article 25 Transparency Article 26 Corporate Governance Article 27 Confidential Information Article 28 Prospectus

EEB32 How will the CARICOM Financial Services Agreement Operate A longside and complementary to other sector-specific pieces of Legislation such as the Draft Financial Institutions Bill

EEB33 Guiding Principles IOSCO Core Principles=Securities Industry Guidelines IOSCO Core Principles=Securities Industry Guidelines Basle=Banking Industry Guidelines Basle=Banking Industry Guidelines IAIS =Insurance Industry Guidelines IAIS =Insurance Industry Guidelines FATF=Anti Money Laundering Guidelines FATF=Anti Money Laundering Guidelines

EEB34 Why the Agreement  To Establish a Seamless Financial Services Market within the Community  To Set Identical Requirements for Financial Institutions Operating Intra-Regionally  To Create Equal Opportunities in the Community for all

EEB35

EEB36 The Financial Institutions Greater Opportunity for Product Innovation Greater Opportunity for Product Innovation Lower Transactions Costs Lower Transactions Costs Base for Greater Global Competitiveness Base for Greater Global Competitiveness

EEB37 Benefits for Institutions cont’d Lower liquidity risk Lower liquidity risk Larger market for high risk capital such as venture capital Larger market for high risk capital such as venture capital Increased market depth Increased market depth Increased competition Increased competition Access to a larger pool of potential investors Access to a larger pool of potential investors

EEB38 The Consumer Wider range of financial products Wider range of financial products Lower transactions costs Lower transactions costs Increased choice Increased choice Overall improvement in service quality Overall improvement in service quality

EEB39 Business Organizations Easier access to financing capital Easier access to financing capital Increased investment opportunities Increased investment opportunities Lower cost of capital Lower cost of capital

EEB40 The Economy Larger more efficient financial institutions Larger more efficient financial institutions Increased investment and production Increased investment and production Increase in employment Increase in employment Positive impact on the level of GDP and also on GDP growth Positive impact on the level of GDP and also on GDP growth

EEB41 Overall Benefits Predictable environment for financial markets which is: –Fair –Efficient –Transparent –pooling liquidity, and allowing supply and demand for financial instruments to interact on a CARICOM –wide basis

EEB42 OBSTACLES, CONSTRAINTS and CHALLENGES Internal pressures Internal pressures Limited economic growth Limited economic growth National mindset National mindset Lack of preparedness to compete Lack of preparedness to compete Lack of depth of prevailing market structures Lack of depth of prevailing market structures

EEB43 What does the Agreement mean for the financial services industry ? Greater role for regulators and supervisors Greater role for regulators and supervisors More sharing of information More sharing of information Greater cooperation to ensure safety and soundness of the sector Greater cooperation to ensure safety and soundness of the sector One failure can send shock waves throughout the entire Region Greater exposure

EEB44