Worldtradeinstitute.ch1 Financial Services: A Swiss Perspective Christine Breining & Thomas Cottier World Trade Institute, Berne Symposium on Assessment of Trade in Services WTO Geneva

Worldtradeinstitute.ch2 Summary of Paper Financial Services - a key industry in Switzerland employees jobs abroad Structural changes: –Trend towards all finance and one-shop services: regulatory challenge –Concentration: 413 (1995) to 375 (2000) banks –Electronic banking (10-15% of customers)

Worldtradeinstitute.ch3 Regulatory Responses International Agreements and Arrangements: –Technical Agreements following dismantling barriers (trade facilitation, mainly technical and contractual issues) –Agreements seeking liberalization and market access improvement (EC, NAFTA, GATS) –Agreements promoting financial stability (BIS) Challenge of Interface and Coherence

Worldtradeinstitute.ch4 Bank for International Settlement (BIS) Basle 1997: 25 Basle Core Principles of Effective Banking Supervision –Methods of prudential regulation –Methods of cross-border banking 2001: Core Principles of Systematically Important Payment Systems Soft law standards (G 10)

Worldtradeinstitute.ch5 Prudential Regulation Prudential regulations of paramount importance and a necessary companion of trade liberalization Where to place them ? –exclusively national law (home control) –exclusively international law (harmonization) –mixed regimes?

Worldtradeinstitute.ch6 Establishment or Cross Border? Exclusive home control relates to the concept of establishment abroad (3rd mode) Progress in modes 1 and 2 are impeded by exclusive and thus highly varied home controls Transparency alone will not do The EC experience: mutual recognition

Worldtradeinstitute.ch7 Current WTO Rules Art. VI: 4 GATS: authority to develop standards; Art. VI:5 GATS: interim rules Art. VII: Mutual Recognition and CMFN (and Annex FS para. 3) Annex FS Art. 2: (carve out?) Notwithstanding any other provision of this Agreement, a Member shall not be prevented from taking measures for prudential reasons.... Where such measures do not conform with the provisions of the Agreement, they shall not be used as a means of avoiding the Members commitment or obligations under the Agreement.

Worldtradeinstitute.ch8 Regulatory Options (1) Status Quo (case by case) –home rules, variations, adjudication (DSU, including non-violation complaints), taking into account Basle instruments likely –protracted implementation modes 1 and 2 likely Mutual Recognition (CMNF) –Discriminatory potential (in particular for LDCs)

Worldtradeinstitute.ch9 Regulatory Options (2) TRIPs Approach –Incorporation of Standards –No treaty standards available –Inter-organizational tensions

Worldtradeinstitute.ch10 Regulatory Options (3) SPS/TBT Approach –Reference to external standards –Possibility to apply stricter home standards (subject to consistent risk analysis and management) –Problem of broad legitimacy of standards –Plurilateral Approach or Opting-out option

Worldtradeinstitute.ch11 Regulatory Options (4) Commitment to international Standards as part of negotiated individual concessions and thus part of schedules: –Recourse to Basle Rules and others (IMF?) –Recourse to adopted WTO set of rules –Specifically negotiated rules and conditions (MFN) –Value of concession linked to quality of PS commitment

Worldtradeinstitute.ch12 Conclusions Whatever regulatory option is chosen, negotiators should remember: –Prudential regulation and market access are of equal importance –Prudential regulation is a a key element of good governance and the rule of law –Good goverance and the rule of law depend on vertical and thus international checks and balances