The financial services sector plays a critical role in the modern economy. The bundle of institutions that make up an economy’s financial system provide critical functions, such as facilitating transactions (exchange of goods and services), mobilizing savings, allocating capital funds (notably to finance productive investment), monitoring firms and managers (so that the funds allocated are spent as envisaged), and mitigating risk (reducing risk through aggregation and enabling it to be carried by those more willing to bear it). Opening the financial sector to foreign participation and competition not only expands the availability of financial services to local consumers – individuals and companies – but may also help bring down the cost of these services and improve the performance of these critical functions.
The sector includes all insurance and insurance-related services (e.g. life and non-life insurance, reinsurance, insurance brokerage and agency, actuarial services, risk assessment and claim settlement services). It also covers all banking and other financial services (e.g. deposit-taking; lending of all types; financial leasing; payment and money transmission services; securities trading; securities underwriting; money broking; asset management, including pension fund management; custodial, depository and trust services; settlement and clearing services for financial assets and negotiable instruments; provision and transfer of financial information, and financial data processing and related software by suppliers of other financial services; and advisory, intermediation and other auxiliary financial services, including credit reference and analysis, investment and portfolio research and advice, advice on acquisitions and on corporate restructuring and strategy).
Principles of trade in financial services are contained, as for all services, in the General Agreement on Trade in Services (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, a number of 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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WTO documents
Studies by WTO staff (authored or co-authored)
Borchert, Ingo, Joscelyn Magdeleine, Juan A. Marchetti, Aaditya Mattoo (2020), "The Evolution of Services Trade Policy since the Great Recession", WTO Staff Working Paper ERSD-2020-02 (20 February 2020).
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Marchetti, Juan A. (2016), "The International Banking Landscape: Developments, Drivers, and Potential Implications", in Asli Demirgüç-Kunt, Douglas D Evanoff and George G Kaufman (eds.) The Future of Large, Internationally Active Banks (World Scientific Studies in International Economics, Volume 55), 2016.
Marchetti, Juan A. (2015), "Technical Standards for Financial Services and the GATS: An Exploration of the Issues", in Panagiotis Delimatsis (editor), International Standardization, Marrying Public and Private, Global and Local, Law and Economics (Cambridge University Press), 2015.
Marchetti, Juan A., Michele Ruta and Robert The (2014), "Trade Imbalances and Multilateral Trade Cooperation", in Thomas Cottier, Rosa M. Lastra, Christian Tietje, and Lucia Satragno (eds.) The Rule of Law in Monetary Affairs, Cambridge University Press, 2014.
Claessens, Stijn and Juan A. Marchetti (2013), "Global Banking Regroups", Finance & Development, December 2013, Vol. 50, No. 4.
Marchetti, Juan A. (2011), "The GATS Prudential Carve-out", in Panagiotis Delimatsis and Nils Herger (eds), Financial Regulation at the Crossroads – Implications for Supervision, Institutional Design and Trade (Alphen aan den Rijn: Kluwer Law International), 2011.
Barth, James, Juan A. Marchetti, Daniel Nolle, and W. Sawangngoenyuang (2010), “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).
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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.
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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.
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Some useful links and other resources
Links to other international organizations that deal with financial services:
Other reports or studies
World Bank (2018), Global Financial Development Report 2017/2018: Bankers without Borders.
World Economic Forum (2018), "Addressing E-Payment Challenges in Global E-Commerce", White Paper.
De Haas, Ralph and Neeltje van Horen (2016), "Recent Trends in Cross-Border Banking", in The Palgrave Handbook of European Banking, Beck, Thorsten and Barbara Casu (eds), Palgrave
Rouzet, D., et al. (2014), "Services Trade Restrictiveness Index (STRI): Financial Services", OECD Trade Policy Papers, No. 175, OECD Publishing, Paris
Claessens, Stijn and Neeltje van Horen (2013), "Impact of Foreign Banks", in Journal of Financial Perspectives, 1(1), 1-18, 2013.
Stephanou, Constantinos (2008), "Liberalization of Trade in Financial Services : Lessons from Latin America and the Caribbean", Trade issues in East Asia. World Bank.
Van Horen, Neeltje (2007) "Foreign Banking in Developing Countries; Origin Matters", in Emerging Markets Review, 8(2), 81-105, 2007