But measures to support troubled institutions will need to be unwound carefully to avoid distorting competition, the WTO said in a restricted report to members, dated February 3.
“The financial crisis does not seem to have prompted a widespread introduction of trade restrictions in financial services,” said the report by the WTO secretariat, prepared at the request of members.
With only a few exceptions, countries maintained policies regarding typical market access limitations such as foreign equity caps or incorporation requirements.
While some countries such as India slowed down previously announced liberalisation plans, others such continued to open up financial services markets, such as Malaysia, which announced a broad liberalisation package in April 2009, it said.
Coordinated exit strategies
The WTO said support measures for banks such as nationalisation, recapitalisation or expanded government guarantees often constituted some form of state aid or subsidy and so could affect competition in financial services.
Such measures and other regulatory moves enjoy a waiver from the WTO’s non-discrimination rules under the “prudential carve-out” which allows members to take whatever action necessary to defend the stability of their financial system.
The WTO noted that expanded bank guarantees had often been prompted by similar moves in other countries, leading governments to follow suit for fear that inaction could result in even healthy banks suffering a competitive disadvantage.
As a result such measures must be unwound carefully.
“A persuasive case can be made in favour of countries’ coordination of exit strategies, particularly where there is potential for financial and regulatory arbitrage across jurisdictions,” it said.
The US and EU are the biggest importers and exporters of financial services, but have developed differently since the crisis.
US exports of financial services seem to have stabilised in the second quarter of 2009, falling only one percent year-on-year after a 13 percent drop in the first quarter.
But EU exports were 26 percent lower than a year earlier in the second quarter after falling 30 percent in the first three months, it said.
In the first quarter of 2009, the latest period for which estimates are available, world exports of financial services fell 26 percent year-on-year, after expanding only two percent in 2008 due to a year-on-year decline that started in the third and fourth quarters.
Besides the US and EU, some Asian countries suffered particularly big drops in the first quarter of last year, with Hong Kong falling 32 percent year-on-year, Taiwan 53 percent and South Korea 56 percent.
World exports of financial services, including insurance, had reached $370bn in 2007, after growing 10 percent a year since 2000, the WTO said.
The WTO said the origins of the crisis lay in a variety of factors, including lax monetary policy, risky lending and poor regulation. That suggested trade liberalisation in financial services – granting market access and national treatment – was not a cause of the crisis but could help transmit it faster.