SADC negotiations on trade in financial services Workshop for 22 nd TNF Services Johannesburg 4 August 2014

Outline State of play in negotiations Classification Issues arising from sector study Summary of requests and offers Issues related to FIP How will the negotiations make a difference to regional trade Decisions required Key questions for breakout groups

State of play with FS negotiations Sector forum – July 2013 TNF’s in July, November 2013, March 2014 Requests from 7 Member States (of which 1 recently received) Initial offers from 9 Member States (of which 3 recently received) No revised offers as yet in response to bilateral negotiations

Access to finance Country NameATMs per 100,000 Commercial bank branches per 100,000 Access to formal financial services No access to formal/informal financial services) 2009 (year in parenthe-sis)(year in parenthesis) Angola Botswana % (2009)33% (2009) D.R. Congo 0.3 Lesotho % (2011)19% (2011) Malawi % (2008)55% (2008) Mauritius Mozambique % (2009)78% (2009) Namibia % (2011)31% (2011) South Africa % (2012)19% (2012) Swaziland % (2011)37% (2011) Tanzania % (2009)56% (2009) Zambia % (2009)63% (2009) Zimbabwe 2.838% (2011)40% (2011)

Classification W/120Annex on FS A.Insurance and insurance-related services a.Direct life and pensions. b.Direct non-life. c.Reinsurance and retrocession. d.Auxiliary services. i.Direct insurance. a.Life and pensions. b.None-life. ii.Same as W/120 A(c). iii.Same as W/120 A(d, part of). iv.Same as W/120 A(d, part of). B. Banking and other financial services a. – l. List of 14 sub-sectors with CPC numbers v. – xvi. Same list of 14 sub-sectors as in W/120 without CPC numbers.

Issues from sector study – GATS Schedules Many market access and national treatment limitations listed in WTO schedules too general and not specific enough Many limitations prudential and may not need to be listed Some limitations may not or may no longer reflect the current regulatory situation

Issues from sector study The importance of keeping banking markets open and competitive The apparent paradox between the openness of markets, the lack of access to finance and the high cost of banking The importance of access to micro-finance for low-income consumers and the emergence of regional micro-finance institutions

Issues from sector study Access to the national payments system for non-banking institutions An appropriate balance between prudential requirements and restrictions on market access The need for an understanding on financial services, including a prudential carve-out

Summary of requests Sub-sectorRequests Insurance and related services6 requests to 12 Member States covering all sub-sectors where not already committed in GATS Banking and other financial services 7 requests to 13 Member States covering all sub-sectors where not already committed in GATS

Summary of offers - insurance (a) Direct life insurance (b) Direct non-life insurance (c) Reinsurance (d) Ancillary services Mode 1Mainly unbound 1 – none Mainly unbound 1 – none Unbound with some exceptions 2 – none Mainly unbound Mode 23 – unbound 1 – unbound with exceptions 4 – none 2 - unbound 2 – unbound with exceptions 4 – none 2 - unbound 1 – unbound with exceptions 5 – none 2 - unbound 2 – unbound with exceptions 4 – none Mode 31 – unbound 4 – limitations 3 – none 1 – unbound 4 – limitations 3 – none 1 – unbound 5 – limitations 2 – none 1 – unbound 5 – limitations 1 – none

Summary of offers – banking and other FS 2 x MS1 x MS Mode 1(a)-(l) - None (a)-(l) – None except (g)- (h) Exchange controls (a)-(g) – None (h)-(l) - Unbound (a)-(g) – None except (b)- (d) (a),(f)-(k) – Unbound (b)-(e) – None (a)-(l) - Unbound Mode 2(a)-(l) - None (a)-(l) – None except (g)- (h) (a)-(l) - None (a)-(g) – None except (b)- (d) (a),(f)-(k) – Unbound (b)-(e) – None (a)-(l) - None Mode 3LimitationsNone except (a), (f) – limitations (g)-(h) – not offered LimitationsNone, except (j) - limitation Limitations None, with limitation

Prudential carve-out GATS language: “Notwithstanding any other provisions of the Agreement, a Member shall not be prevented from taking measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system. Where such measures do not conform with the provisions of the Agreement, they shall not be used as a means of avoiding the Member's commitments or obligations under the Agreement.”

Issues related to FIP Protocol FIP Annexes: Macroeconomic convergence Cooperation in taxation Development finance Non-bank financial institutions Exchange control policies ICT for Central Banks Payment, clearing and settlement systems Harmonisation of non-banking authorities Cooperation among stock exchanges Anti-money laundering

Decisions required Whether offers sufficient to meet requests, or improvements needed? How to achieve any improvements – whether through continuation of bilateral negotiations or approaches? What to do about prudential carve-out? How TIS negotiations and FIP can complement each other? Additional commitments? How TIS negotiations in financial services can contribute to regional integration of financial services markets? How to present results?

Key questions for breakout groups 1.Requests and offers a.How far do current offers meet requests? b.How will business react to the market opportunities offered? c.What improvements if any are needed? d.How to achieve any such improvements? 2.Prudential carve-out a.Is this needed for SADC? b.What do you think of the GATS language? c.How much of the other language from the GATS Annex on FS is also needed?

Key questions for breakout groups 3.Other issues a.Is the regional banking (and insurance) environment as open as it seems on paper? b.What is the future for regulatory reform of SADC financial services? c.Does micro-finance need to be tackled separately from banking? E.g. through an understanding under the TIS Protocol? d.Is access to national payment systems for non-banking institutions protectionist? Why? What happens in other regions? e.How can initiatives under the FIP be reinforced by commitments under the TIS Protocol?

Questions and comments