Financial services

The financial services sector plays a critical role in any modern economy. The bundle of institutions that make up an economy’s financial system can be seen as “the brain of the economy”, providing the bulk of the economy’s need for many functions.

These functions include: facilitating transactions (exchange of goods and services) in the economy; mobilizing savings (for which the outlets would otherwise be much more limited); allocating capital funds (notably to finance productive investment); monitoring managers (so that the funds allocated will be spent as envisaged); and transforming risk (reducing it through aggregation and enabling it to be carried by those more willing to bear it).

> Background

> Developments in the financial services sector


Relevant provisions  back to top

Principles of trade in financial services are contained, as for all services, in the GATS. Additionally, an Annex to the GATS contains specific provisions applicable to trade in financial services. This deals with such issues as sectoral definitions, services supplied in the exercise of governmental authority, and prudential measures.

Additionally, some WTO members have made commitments in accordance with the Understanding on Commitments in Financial Services. The ‘Understanding’ is an optional and alternative approach to making specific commitments on financial services. It is not part of the GATS, but it was appended to the Final Act of the Uruguay Round.


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Committee on Trade in Financial Services 

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  • Minutes of the meetings of the Committee on Trade in Financial Services (Document code S/FIN/M/*)  > search   > help


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Uruguay Round and Post-Uruguay Round negotiations in financial services 

> Overview of the 1995 and 1997 negotiations on financial services

> Successful conclusion of the 1997 WTO’s financial services negotiations


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Current commitments and exemptions 

For consolidated information on countries’ commitments and exemptions on financial services go to the services database. If you are seeking the commitments of a specific WTO member, go to “Jump to a specific sector for a given Member”, select financial services from the sector dropdown list, select the Member of interest and click “go”. To see a table showing which Members have made commitments in financial services choose “See which Members have made commitments in a specific sector”, select Financial services and click “go”.


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Current negotiations 

Currently, financial services, like all services, are included in the new services negotiations, which began January 2000.

  • Proposals exist on financial services. Additionally, some services proposals covering various sectors also include a section on financial services (Kenya, Japan and Norway).

  • Developments in the negotiations

The negotiations on financial services, as on other services sectors, have gone through different stages since 2000. In line with the GATS mandate (Article XIX), services negotiations were launched in 2000. At that time, negotiations proceeded on an almost purely multilateral basis, with several negotiating proposals being submitted. These proposals highlighted the negotiations’ objectives and concerns of several members.

In November 2001 the services negotiations were incorporated into the Doha Development Agenda, which gave more emphasis to bilateral —request and offer — negotiations. A first timetable was established, with clear dates for the submission of bilateral requests (end June 2002) and initial offers (end March 2003). Interested members started to meet in so-called ‘friends groups’, including the ‘Friends of Financial Services’.


After the failure of the Ministerial Conference in Cancun (September 2003), new guidance was provided by members in July 2004. As a result, revised offers were to be submitted by May 2005. Consequently, some members submitted revisions to their initial offers.

The Hong Kong Ministerial Conference in December 2005 provided new momentum to the services negotiations. Clear objectives for services were established in Annex C of the Ministerial Declaration, with the submission of plurilateral requests being allowed by February 2006 and revised offers by mid-2006.

Members had identified their key negotiating objectives for financial services in the run-up to the Hong Kong Ministerial Conference. As described in document TN/S/23, those objectives included the following:

Scope of commitments (sectoral or modal)

—  commitments on “commercial presence” by a foreign company (Mode 3) for all financial services
—  commitments on Mode 1 (services supplied from one country to another) and Mode 2 (consumers or firms making use of a service in another country) in appropriate sub-sectors (e.g. financial services addressed to sophisticated customers, such as reinsurance, asset management, and securities; marine and energy insurance services; provision and transfer of financial information and financial data processing)

Limitations and discrimination

—    limitations on the right to establish new companies and to acquire existing companies
—    limitations on legal form
—    limitations on foreign ownership (i.e. freedom to establish in the form of wholly-owned subsidiaries, joint ventures or branches)
—    non-discriminatory limitations, such as monopolies, numerical quotas or economic needs tests (ENTs — a test using economic criteria to decide whether the entry into the market of a foreign firm is warranted) and mandatory cessions
—    discrimination in the application of laws and regulations

Regulatory issues and additional commitments for negotiation

—    transparency in the development and application of laws and regulations, transparent and speedy licensing procedures

Scheduling issues to be addressed

—    use of the definitions in the GATS Annex on Financial Services

A plurilateral request on financial services was prepared and sent. The main objectives of the request include the following: Mode 3 commitments to provide rights to establish new companies and acquire existing companies; Modes 1 and 2 commitments in a defined list of sub-sectors; the removal of key national treatment limitations; and the need for transparency in the development and application of laws and regulations relevant to the financial services sector (TN/S/M/19, paragraph 54).
Since negotiations were suspended in July 2006, no members have submitted a second revised offer.
As of today, 71 offers (initial and revised) have been submitted, representing 95 members. Almost half of them contain improvements to financial services commitments. However, improvements are not significant, and in many cases, fall behind the current — more open — regulatory framework (see TN/S/20, paragraphs 46 to 48).


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Additional information and background studies  

Additional information

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  • Official documents on financial services (Document code S/FIN/*)  > search   > help
  • Secretariat background notes on financial services (Document code S/C/W/* and keyword “financial Services and Background Note”)  > search   > help

You can perform more sophisticated searches from the Documents Online search facility by defining multiple search criteria such as document symbol (i.e. code number), full text search or document date.


> Guide to downloading files.

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Background studies

WTO documents

Studies by WTO staff

Barth, James, Juan A. Marchetti, Daniel Nolle, and W. Sawangngoenyuang (forthcoming), “WTO Commitments vs. Reported Practices on Foreign Bank Entry and Regulation: A Cross-Country Analysis”, forthcoming “Oxford Handbook of Banking”, edited by Allen Berger, Phil Molyneux, and John O.S. Wilson.

Barth, James, Juan A. Marchetti, Daniel Nolle, and W. Sawangngoenyuang (2006), “Foreign Banking: Do Countries’ WTO Commitments Match Actual Practices?”, WTO Staff Working Paper ERSD 2006-11 (October 2006). Abstract   Download

Kono, Masamichi and Ludger Schuknecht (1998), “Financial Services Trade, Capital Flows and Financial Stability”, WTO Staff Working Paper No. ERAD-98-12, World Trade Organization.
Abstract  Download

Mattoo, Aaditya (1999), “Financial Services and the WTO: Liberalization in the Developing and Transition Economies”, WTO Staff Working Paper No. TISD9803 (March 1998), World Trade Organization.

Roy, Martin, Juan A. Marchetti, and Aik Hoe Lim (2006), “Services Liberalization in the New Generation of Preferential Trade Agreements (PTAs): How Much Further than the GATS?”, WTO Staff Working Paper No. ERSD-2006-07 (September 2006), World Trade Organization. See the discussion on financial services liberalization in PTAs.
Abstract   Download


Some useful links and other resources

Links to other international organizations that deal with financial services:

Basel Committee on Banking Supervision
International Association of Insurance Supervisors
International Organization of Securities Commissions
Organization for Economic Cooperation and Development
World Bank

Other reports or studies

Claessens, S., A. Demirgüc-Kunt and H. Huizinga (1998), “How Does Foreign Entry Affect the Domestic Banking Market?” (May 1998), World Bank Policy Research Working Paper No. 1918.

Claessens, Stijn (2006), “Competitive Implications of Cross-Border Banking” (February 1, 2006), World Bank Policy Research Working Paper No. 3854.

Claessens, Stijn and T. Glaessner (1998), “The Internationalization of Financial Services in Asia” (May 26, 1998), World Bank Policy Research Working Paper No. 1911.

Demirgüc-Kunt, A., R. Levine, and H.G. Min (1999). “Opening to Foreign Banks: Issues of Stability, Efficiency and Growth’, in Proceedings of the Bank of Korea Conference on the Implications of Globalization of World Financial Markets”, December 1998.

Dihel, Nora and & Ben Shepherd (2007), “Modal Estimates of Services Barriers,” OECD Trade Policy Working Papers 51, OECD Trade Directorate.

Dihel, Nora, and Blanka Kalinova (2004), “Services Barriers and their Economic Impact: Examples of Banking and Telecommunications Services in Selected Transition Economies,” OECD Trade Policy Working Papers 7, OECD Trade Directorate.

Dobson, Wendy, and Pierre Jacquet (1998). “Financial Services Liberalization in the WTO”, Washington, DC: Institute for International Economics.

Francois, Joseph F. and L. Schuknecht (2000), “International Trade in Financial Services, Competition, And Growth Performance” (February 2000), CIES Working Paper No. 6.

Harms, Philipp, A. Mattoo, and L. Schuknecht, Ludger (2003), “Explaining Liberalization Commitments in Financial Services Trade” (March 2003), World Bank Policy Research Working Paper No. 2999.

Kalirajan, K., G. McGuire, D. Nguyen-Hong and M. Schuele (2001), “The price impact of restrictions on banking services”, in Findlay C. and T. Warren, eds, “Impediments to Trade in Services: Measurement and Policy Implications”, New York: Routledge.

Kireyev, Alexei (2002), “Liberalization of Trade in Financial Services and Financial Sector: Stability Analytical Approach” (August 2002), IMF Working Paper No. 02/138

Kireyev, Alexei (2002), “Liberalization of Trade in Financial Services and Financial Sector Stability Empirical Approach” (August 2002), IMF Working Paper No. 02/139.

Mattoo, Aaditya, R. Rathindran, and A. Subramanian (2001), “Measuring Services Trade Liberalization and its Impact on Economic Growth: An Illustration” (August 2001), World Bank Policy Research Working Paper No. 2655.

McGuire, G. and M. Schuele (2000), “Restrictiveness of International Trade in Banking Services”. In Findlay, C. and Warren, T. (eds.), “Impediments to Trade in Services: Measurement and Policy Implications”, New York, Routledge.

Sorsa, Piritta (1997), “The GATS Agreement on Financial Services: A Modest Start to Multilateral Liberalization” (May 1997), IMF Working Paper No. 97/55.

Tamirisa, Natalia (1999), “Trade in Financial Services and Capital Movements” (July 1999), IMF Working Paper No. 99/89.

Tamirisa, Natalia T., P. Sorsa, G. Bannister, B. McDonald, and J. Wieczorek (2000), “Trade Policy in Financial Services” (February 2000), IMF Working Paper No. 00/31.

Verikios, G. and X-G. Zhang (2001), “Global Gains from Liberalising Trade in Telecommunications and Financial Services”, Productivity Commission Staff Research Paper, Canberra, October 2001.

Woodrow, R. Brian (2000), “The 1997 World Trade Organization Accord on Financial Services: Its Impact on and Implications for the World Insurance Industry”, “The Geneva Papers on Risk and Insurance — Issues and Practice”, 2000, vol. 25, issue 1, pages 78-103.