International transparency requirements and domestic

financial regulation

Third Annual GATS Seminar on Financial Services

British Institute of International and Comparative Law

16 May 2005

Prof. Christine Breining-KaufmannUniversity of Zurich

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International organizations stating transparency

requirements

• IMF• BIS, IOSCO and IAIS• WTO-GATS

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IMF

• Articles of Agreement, Article VIII:5• Code of Good Practices on Transparency in

Monetary and Financial Policies (1999)– Creates no legal obligations– Provisions form part of the general surveillance

activities by the IMF and are included in lending programmes

– Considerable practical impact

• Reports on the Observation of Standards and Codes – The main tool for monitoring compliance with the

Code of Good Practices on Transparency in Monetary and Financial Policies.

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BIS

• Three types of regulations:– Minimal standards

• 1988 Basel Capital Accord and the revised framework

– Best-practice papers on risk management issues• Liquidity risk and interest rate risk

– The Core Principles for Effective Banking Supervision

• BCBS regulations– Legally non-binding– Politically binding

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Transparency requirements in the Basel framework

• Goals– To facilitate banking supervision– To identify potential risks

Core Principles for Effective Banking Supervision:„... supervisors should encourage and pursue market discipline by

encouraging good corporate governance ... and enhancing market transparency and surveillance.“

• Provisions related to transparency in Basel II– Paragraph 91: Access/transparency in ECA– Paragraph 779: Transparency as part of the supervisory

process

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IOSCO and IAIS

• IOSCO– Objectives and Principles of Securities

Regulation (1998)

• IAIS– Principles Applicable to the Supervision of

International Insurers and Insurance Groups and Their Cross-Border Business Operations (1999)

• BIS, IOSCO and IAIS joint reports– Supervision of financial conglomerates– Initiatives to combat money laundering and the

financing of terrorism– Compliance function in banks

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WTO-GATS

• Article III Transparency– Predictability for market participants– Contributes to transparent decision-making

• Article VI:4 GATS Domestic regulation– Mandate for developing disciplines– Accountancy

• GATS Annex on Financial Services– Prudential carve-out– Relationship to Article VI:4 GATS

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Relationship between different international

transparency requirements• IMF and WTO-GATS

– Agreement between the IMF and the WTO (1996)• Exchange of and access to information• Observer status of IMF and World Bank in

the Dispute Settlement Body

• BIS and WTO-GATS– No institutionalized dialogue between

the WTO and the BIS

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Implications for domestic regulation

• Different transparency standards

• Different objectives• Different legal nature

– Binding treaty law – GATS– Soft law – BIS– Hardening soft law – if the WTO were

to refer to the BIS standards

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Open issues

• Relationship between WTO-GATS and IMF obligations. Can they mutually enforce each other?

• Content of prudential carve-out and its relationship to standards outside the WTO framework?

• Legal quality of de iure non-binding standards if applied within GATS framework?

• How to coordinate standard setting activities within WTO and IFIs?