Quest for a Seamless

clangpotatoSoftware and s/w Development

Oct 28, 2013 (4 years and 15 days ago)

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Draft CARICOM Financial
Services Agreement (and
Quest for a Seamless
Financial Landscape)

Economic Intelligence and Policy Unit

CARICOM Secretariat

eipu@caricom.org


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Outline of Presentation



Background


Critical Issues to be Considered


Articles


The Way Forward

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Relationship Between Revised
Treaty and the Agreement



Revised Treaty Sets the Broad
Policy Framework


The Agreement Expands on
Treaty Provisions


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Chapter Three

The
Provisions

Article 32

Prohibition of New Restrictions



on the Right of Establishment

Article 33

Removal of Restrictions on the



Right of Establishment

Article 36

Prohibition on New Restrictions on


the Provision of Services

Article 38

Removal of Restrictions on Banking,


Insurance and Other Financial



Services


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Chapter Three Cont’d

Article 39

Prohibition of New Restrictions on



Movement of Capital and Current



Transactions

Article 40

Removal of Restrictions on




Movement of Capital and Current



Transactions

Article 41

Authorisation to Facilitate




Movement of Capital

Article 44

Measures to Facilitate Establishment


Provision of Services and Movement


of Capital

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How to Conduct Business
in the Community


Cross Border Supply


Mode 1

Consumption Abroad

Mode 2

Commercial Presence

Mode 3

Movement of Natural Persons

Mode 4


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Cross
-
Border Supply


Mode 1


Correspondent relationships


Direct trade between
institutions from one
country and consumers in
another



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Commercial Presence
Mode 3


Agencies


Branches


Joint Ventures


Representative Offices


Strategic Alliances


M&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

Irrevocabl
y 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

Corp
orat
e

Domestic
companies

cross listed

Different
settlement
cycles

T+1, T+3, T+5

Once weekly, every day , three
days , twice per month

Market actors

Traders

Brokers
/ dealers

1 Credit rating
agency

C
A
S
R

Collect
ive
invest
ment
schem
es

Investment
advisors

14 Insurance
regulators

Domestic
companies

Foreign
compani
es

Regional

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Doing Business in the
Community
cont’d


Brokers Acting as Principals
and Agents


Housing Finance Institutions


Investment Firms


Other Market Participants



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Sample of a Financial
Institution with Cross
-
Border
Operations



Commercial Bank HQ in a Member
State


Merchant Bank


Trust Company


Commercial bank in Antigua and
Barbuda, Barbados, Grenada ,

Jamaica ,
St Kitts and Nevis ,St. Lucia, St. Vincent

&
the Grenadines , Suriname


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Intra regional 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 activities
Cont’d


Development Finance Company


Information Technology


Personal and Property Security


Regulated by 5 central banks in
CARICOM


Listed on three stock exchanges


Faces 4 different exchange rate regimes





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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
operations 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
operations cont’d


Operates in non CARICOM countries


Conduct business in multiple
currencies


Multiple languages different exchange
rate regimes


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Non financial company
operations cont’d


Associated companies in


General Trading


Waste disposal


49% in a finance company


General Insurance

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Market Participants in
one member state


11 Brokers


2 Dealers


28

Investment Advisers


78 Reporting Issuers



8 Underwriters


2 SROs


13 Traders

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What is the CFSA ?


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


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The Articles


General Parameters = 4 articles


Institutional Support and Trade
Facilitation=7 Articles


Regulation , Regionalisation and Factor
Cooperation =13 Articles


Transparency and Accountability = 4
Articles


Dispute Settlement


Miscellaneous

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General Parameters

Article 1 Definitions



Article 2 Scope and Coverage


Article 3 Market Access for Financial



Institutions




Article 4 New Financial Services


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Institutional Support and
Trade Facilitation


Article 5 Data Processing in the Financial



Services Sector






Article 6 Credit Information Facility








Article 7 Credit Rating Agency









Article 8 Portability of Pension











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Institutional Support and
Trade Facilitation Cont’d

Article 9 Education and Training




Article 10 Payment and Clearing




Systems





Article 11 Anti
-
Money Laundering

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Regulation, Regionalisation
and Factor Cooperation


Article 12


Intra
-
Regional Trade in




Financial Services








Article 13



Cross Border Supervision of



TCCs and Conglomerates.






Article 14


National Treatment














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Regulation, Regionalisation and
Factor Cooperation cont’d

Article 15



Most Favoured Nation





Treatment









Article 16


Prudential (Carve
-
Out)




Requirements








Article 17

Regionalisation of Local




Asset Ratio











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Regulation, Regionalisation
and Factor Cooperation

Article 18



Depositors Protection











Article 19


Collateral in the Cross Border



Market











Article 20


Self
-
Regulatory






Organisations











Article 21


General Exceptions












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Regulation, Regionalisation and
Factor Cooperation Cont’d

Article 22


Reservations/Safeguards









Article 23


Senior Management and




Board of Directors







Article 24


Mergers and Acquisitions


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Transparency and
Accountability

Article 25 Transparency





Article 26 Corporate Governance



Article 27 Confidential Information



Article 28 Prospectus





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How will the CARICOM Financial
Services Agreement Operate



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



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Guiding Principles


IOSCO Core Principles=Securities
Industry Guidelines


Basle=Banking Industry
Guidelines


IAIS =Insurance Industry
Guidelines


FATF=Anti Money Laundering

Guidelines

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Why the Agreement



To Establish a Seamless Financial

Services Market within the

Community



To Set Identical Requirements for

Financial Institutions Operating

Intra
-
Regionally



To Create Equal Opportunities in

the Community

for all

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The Financial
Institutions



Greater Opportunity for
Product Innovation


Lower Transactions Costs


Base for Greater Global
Competitiveness


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Benefits for Institutions
cont’d


Lower liquidity risk


Larger market for high risk capital
such as venture capital


Increased market depth


Increased competition


Access to a larger pool of potential
investors

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The Consumer


Wider range of financial
products


Lower transactions costs


Increased choice


Overall improvement in service
quality

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Business Organizations



Easier access to financing
capital


Increased investment
opportunities


Lower cost of capital

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The Economy


Larger more efficient financial
institutions


Increased investment and production


Increase in employment


Positive impact on the level of GDP and
also on GDP growth






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Overall Benefits


Predictable environment for
financial markets which is:


Fair


Efficient


Transparent


pooling liquidity, and allowing
supply and demand for financial
instruments to interact on a
CARICOM

wide basis

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OBSTACLES, CONSTRAINTS
and CHALLENGES


Internal pressures


Limited economic growth


National mindset


Lack of preparedness to
compete


Lack of depth of prevailing
market structures

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What does the Agreement mean
for the financial services industry

?



Greater role for regulators and supervisors


More sharing of information


Greater cooperation

to ensure
safety and soundness of the sector


One failure can send shock waves
throughout the entire Region


Greater exposure


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