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Draft CARICOM Draft CARICOM Financial Services Financial Services

Agreement (and Quest Agreement (and Quest for a Seamless for a Seamless

Financial Landscape) Financial Landscape) Economic Intelligence and Policy Economic Intelligence and Policy

UnitUnit

CARICOM Secretariat CARICOM Secretariat

eipu@caricom.orgeipu@caricom.org

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Outline of Outline of PresentationPresentation

BackgroundBackground Critical Issues to be Critical Issues to be

Considered Considered Articles Articles The Way Forward The Way Forward

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Relationship Between Relationship Between Revised Treaty and the Revised Treaty and the

AgreementAgreement Revised Treaty Sets the Revised Treaty Sets the

Broad Policy Framework Broad Policy Framework The Agreement Expands The Agreement Expands

on Treaty Provisionson Treaty Provisions

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Chapter Three–The Chapter Three–The Provisions Provisions

Article 32Article 32 Prohibition of New Restrictions Prohibition of New Restrictions on the Right of on the Right of

Establishment Establishment

Article 33Article 33 Removal of Restrictions on the Removal of Restrictions on the Right of Establishment Right of Establishment

Article 36Article 36 Prohibition on New Restrictions Prohibition on New Restrictions on on the Provision of Services the Provision of Services

Article 38Article 38 Removal of Restrictions on Removal of Restrictions on Banking, Banking, Insurance and Other Insurance and Other Financial Financial Services Services

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Chapter Three Cont’dChapter Three Cont’d

Article 39Article 39 Prohibition of New Restrictions Prohibition of New Restrictions on on Movement of Capital and Movement of Capital and Current Current TransactionsTransactions

Article 40Article 40 Removal of Restrictions on Removal of Restrictions on Movement of Capital and Movement of Capital and

Current Current Transactions Transactions Article 41Article 41 Authorisation to Facilitate Authorisation to Facilitate

Movement of CapitalMovement of CapitalArticle 44Article 44 Measures to Facilitate Measures to Facilitate

Establishment Establishment Provision of Services Provision of Services and Movement and Movement of Capital of Capital

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How to Conduct How to Conduct Business in the Business in the

CommunityCommunity Cross Border SupplyCross Border Supply Mode 1Mode 1

Consumption Abroad Consumption Abroad Mode 2Mode 2

Commercial Presence Commercial Presence Mode 3Mode 3

Movement of Natural PersonsMovement of Natural Persons

Mode 4Mode 4

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Cross-Border SupplyCross-Border Supply Mode 1 Mode 1

Correspondent Correspondent relationships relationships

Direct trade between Direct trade between institutions from one institutions from one country and consumers country and consumers in another in another

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Commercial Presence Commercial Presence Mode 3Mode 3

AgenciesAgencies Branches Branches Joint Ventures Joint Ventures Representative Offices Representative Offices Strategic Alliances Strategic Alliances M&AM&A

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OECS

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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

Irrevocably 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

Corporate

Domestic companies

cross listed

Different settlement cycles

T+1, T+3, T+5Once weekly, every day , three days , twice per month

Market actors

Traders

Brokers / dealers

1 Credit rating agency

CASR

Collective investment schemes

Investment advisors

14 Insurance regulators

Domestic companies

Foreign companies

Regional

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Doing Business in the Doing Business in the Community Community cont’dcont’d

Brokers Acting as Brokers Acting as Principals and Agents Principals and Agents

Housing Finance Housing Finance InstitutionsInstitutions

Investment Firms Investment Firms Other Market ParticipantsOther Market Participants

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Sample of a Financial Sample of a Financial Institution with Cross-Institution with Cross-

Border OperationsBorder Operations

Commercial Bank HQ in a Commercial Bank HQ in a Member State Member State • Merchant BankMerchant Bank• Trust Company Trust Company • Commercial bank in Antigua and Commercial bank in Antigua and

Barbuda, Barbados, Barbuda, Barbados, Grenada , Jamaica , St Kitts and Grenada , Jamaica , St Kitts and Nevis ,St. Lucia, St. Vincent & the Nevis ,St. Lucia, St. Vincent & the Grenadines , SurinameGrenadines , Suriname

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Intra regional Intra regional activities Cont’d activities Cont’d

Commercial Bank and Financial Services in Non CARICOM Countries

Insurance Stock Brokerage Operation Asset Management Training Conduct business in multiple

currencies

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Intra regional Intra regional activities Cont’dactivities Cont’d

• Development Finance Company• Information Technology • Personal and Property Security• Regulated by 5 central banks in Regulated by 5 central banks in

CARICOM CARICOM • Listed on three stock exchanges Listed on three stock exchanges • Faces 4 different exchange rate Faces 4 different exchange rate

regimesregimes

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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

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Non Financial Firm’s Non Financial Firm’s operations cont’doperations 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

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Non financial company Non financial company operations cont’doperations cont’d

Operates in non CARICOM Operates in non CARICOM countries countries

Conduct business in multiple Conduct business in multiple currencies currencies

Multiple languages different Multiple languages different exchange rate regimesexchange rate regimes

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Non financial company Non financial company operations cont’doperations cont’d

Associated companies in Associated companies in – General Trading General Trading – Waste disposal Waste disposal – 49% in a finance company 49% in a finance company – General Insurance General Insurance

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Market Participants in Market Participants in one member state one member state

11 Brokers 11 Brokers 2 Dealers 2 Dealers 28 Investment Advisers28 Investment Advisers 78 Reporting Issuers78 Reporting Issuers 8 Underwriters 8 Underwriters 2 SROs2 SROs 13 Traders 13 Traders

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What is the CFSA ? What is the CFSA ?

Framework to Framework to operationalise Intra-operationalise Intra-regional regime for the regional regime for the unrestricted movement unrestricted movement of capital and financial of capital and financial resourcesresources

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The Articles The Articles

General Parameters = 4 articles General Parameters = 4 articles Institutional Support and Trade Institutional Support and Trade

Facilitation=7 Articles Facilitation=7 Articles Regulation , Regionalisation and Factor Regulation , Regionalisation and Factor

Cooperation =13 Articles Cooperation =13 Articles Transparency and Accountability = 4 Transparency and Accountability = 4

Articles Articles Dispute Settlement Dispute Settlement Miscellaneous Miscellaneous

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General ParametersGeneral Parameters

Article 1 DefinitionsArticle 1 Definitions

Article 2 Scope and Coverage Article 2 Scope and Coverage

Article 3 Market Access for Article 3 Market Access for Financial Financial Institutions Institutions

Article 4 New Financial ServicesArticle 4 New Financial Services

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Institutional Support and Institutional Support and Trade FacilitationTrade Facilitation

Article 5 Data Processing in the Article 5 Data Processing in the Financial Financial Services SectorServices Sector

Article 6 Credit Information FacilityArticle 6 Credit Information Facility

Article 7 Credit Rating Agency Article 7 Credit Rating Agency

Article 8 Portability of PensionArticle 8 Portability of Pension

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Institutional Support and Institutional Support and Trade Facilitation Cont’dTrade Facilitation Cont’d

Article 9 Education and Training Article 9 Education and Training

Article 10 Payment and Clearing Article 10 Payment and Clearing SystemsSystems

Article 11 Anti-Money LaunderingArticle 11 Anti-Money Laundering

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Regulation, Regulation, Regionalisation and Regionalisation and Factor CooperationFactor Cooperation

Article 12 Article 12 Intra-Regional Trade in Intra-Regional Trade in Financial Services Financial Services

Article 13Article 13 Cross Border Supervision of Cross Border Supervision of TCCs and Conglomerates. TCCs and Conglomerates.

Article 14 Article 14 National Treatment National Treatment

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Regulation, Regionalisation Regulation, Regionalisation and Factor Cooperation and Factor Cooperation

cont’dcont’dArticle 15Article 15 Most Favoured Nation Most Favoured Nation

Treatment Treatment

Article 16 Article 16 Prudential (Carve-Out) Prudential (Carve-Out) RequirementsRequirements

Article 17 Article 17 Regionalisation of Regionalisation of Local Local Asset Ratio Asset Ratio

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Regulation, Regulation, Regionalisation and Regionalisation and Factor CooperationFactor Cooperation

Article 18Article 18 Depositors Protection Depositors Protection

Article 19 Article 19 Collateral in the Cross Collateral in the Cross Border Border Market Market

Article 20 Article 20 Self-Regulatory Self-Regulatory

OrganisationsOrganisations

Article 21 Article 21 General ExceptionsGeneral Exceptions

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Regulation, Regionalisation Regulation, Regionalisation and Factor Cooperation and Factor Cooperation Cont’dCont’dArticle 22 Article 22

Reservations/Safeguards Reservations/Safeguards

Article 23 Article 23 Senior Management Senior Management and and Board of Board of Directors Directors

Article 24 Article 24 Mergers and Mergers and AcquisitionsAcquisitions

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Transparency and Transparency and AccountabilityAccountability

Article 25 TransparencyArticle 25 Transparency

Article 26 Corporate Article 26 Corporate GovernanceGovernance

Article 27 Confidential Article 27 Confidential InformationInformation

Article 28 ProspectusArticle 28 Prospectus

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How will the CARICOM Financial How will the CARICOM Financial Services Agreement OperateServices Agreement Operate

AAlongside and longside and complementary to other complementary to other sector-specific pieces of sector-specific pieces of Legislation such as the Legislation such as the Draft Financial Institutions Draft Financial Institutions BillBill

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Guiding Principles Guiding Principles IOSCO Core IOSCO Core

Principles=Securities Industry Principles=Securities Industry Guidelines Guidelines

Basle=Banking Industry Basle=Banking Industry Guidelines Guidelines

IAIS =Insurance Industry IAIS =Insurance Industry Guidelines Guidelines

FATF=Anti Money LaunderingFATF=Anti Money Laundering Guidelines Guidelines

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Why the Agreement Why the Agreement To Establish a Seamless To Establish a Seamless

Financial Financial Services Market Services Market within the within the CommunityCommunity

To Set Identical Requirements To Set Identical Requirements for for Financial Institutions Financial Institutions Operating Operating Intra-Regionally Intra-Regionally

To Create Equal Opportunities in To Create Equal Opportunities in the Communitythe Community for all for all

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The Financial The Financial InstitutionsInstitutions

Greater Opportunity for Greater Opportunity for Product InnovationProduct Innovation

Lower Transactions CostsLower Transactions CostsBase for Greater Global Base for Greater Global CompetitivenessCompetitiveness

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Benefits for Benefits for Institutions cont’dInstitutions cont’d

Lower liquidity riskLower liquidity risk Larger market for high risk capital Larger market for high risk capital

such as venture capitalsuch as venture capital Increased market depth Increased market depth Increased competitionIncreased competition Access to a larger pool of Access to a larger pool of

potential investors potential investors

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The ConsumerThe Consumer

Wider range of financial Wider range of financial productsproducts

Lower transactions costsLower transactions costs Increased choiceIncreased choice Overall improvement in Overall improvement in

service quality service quality

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Business Business OrganizationsOrganizations

Easier access to Easier access to financing capitalfinancing capital

Increased investment Increased investment opportunitiesopportunities

Lower cost of capital Lower cost of capital

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The EconomyThe Economy Larger more efficient financial Larger more efficient financial

institutions institutions Increased investment and productionIncreased investment and production Increase in employment Increase in employment Positive impact on the level of GDP and Positive impact on the level of GDP and

also on GDP growthalso on GDP growth

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Overall BenefitsOverall Benefits

Predictable environment for Predictable environment for financial markets which is: financial markets which is: – FairFair– Efficient Efficient – TransparentTransparent– pooling liquidity, and allowing pooling liquidity, and allowing

supply and demand for supply and demand for financial instruments to financial instruments to interact on a CARICOM –wide interact on a CARICOM –wide basis basis

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OBSTACLES, OBSTACLES, CONSTRAINTS and CONSTRAINTS and

CHALLENGESCHALLENGES Internal pressuresInternal pressures Limited economic growth Limited economic growth National mindsetNational mindset Lack of preparedness to Lack of preparedness to

competecompete Lack of depth of prevailing Lack of depth of prevailing

market structures market structures

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What does the Agreement What does the Agreement mean for the financial mean for the financial

services industryservices industry ? ? Greater role for regulators and Greater role for regulators and

supervisors supervisors More sharing of information More sharing of information Greater cooperation Greater cooperation to ensure to ensure

safety and soundness of the sectorsafety and soundness of the sectorOne failure can send shock waves One failure can send shock waves throughout the entire Regionthroughout the entire RegionGreater exposure Greater exposure

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