Viewing cable 05OTTAWA3103, SPP: FIRST FINANCIAL SERVICES WORKING GROUP
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|05OTTAWA3103||2005-10-17 20:18||2011-08-30 01:44||UNCLASSIFIED||Embassy Ottawa|
This record is a partial extract of the original cable.
The full text of the original cable is not available.
DEPARTMENT FOR EB/IFD, EB/OMA, WHA/EPSC, AND WHA/CAN
TREASURY FOR WILBUR MONROE
STATE PASS FEDERAL RESERVE BANK FOR ANN MISBACK
STATE PAS SEC FOR SHAUNA STEELE
STATE PASS OCC FOR GERALYNN BATISTA
STATE PASS COMMODITIES FUTURES TRADING COMMISSION FOR
COMMERCE FOR ISRALY ECHEGARAY
¶1. Introduction and Summary: Treasury DAS for International Monetary and Financial Policy Mark Sobel led the U.S. delegation to the first Security and Prosperity Partnership (SPP) Working Group meeting and the 11th NAFTA Financial Services Committee meeting near Ottawa on October 4, 2005. The session was chaired by Gerry Salembier, Director for Financial Institutions at Finance Canada and the Mexican delegation was led by Guillermo Zamarripa Escamilla, head of the Bank and Savings Unit at the Ministry of Finance (Hacienda). Canada will draft a record of the meeting for clearance by Mexico and the U.S. in which the report on SPP issues will be covered in a format that can be presented as a separate report to the leaders, highlighting completion of the first items in the work plan. There was agreement that the U.S. will host the 2006 meeting, with details to be confirmed later. End Introduction and Summary.
NAFTA Chapter 14
¶2. The meeting opened with a review of NAFTA Chapter 14 issues, with most discussion on nominees for the Financial Services roster. Canada and Mexico have proposed five roster members each; the US has proposed four and confirmed that we hope to be able to reveal the fifth nominee within a few weeks, after Congressional consultation. There was consensus on exploring the possibility of flexibility in the length of nominees’ terms. There were no legislative notifications relating to federal reservations in Section A of the Schedules to Annex VII.
SPP Work Plan
¶3. The morning session was devoted to reviewing progress on the SPP work plan for the Financial Services Working Group. Following is a brief and by no means comprehensive summary of some of the major points raised in the discussions. (Numbers are keyed to the June 2005 SPP Report to Leaders.)
– 1. Further collaboration on training programs for bank, securities and insurance regulators and supervisors: The parties will report to Leaders that two items in the work plan have been completed. These items comprise an inventory of existing technical assistance training programs for financial regulators, their value, and whether there is need for more extensive training programs. It was agreed that the existing program is comprehensive and should be continued. The parties also outlined initiatives to boost financial literacy and financial education, agreeing that things are on a positive track and can continue independently of the SPP process.
– 2. Automatic Clearinghouse Issues: The U.S. and Mexico reported progress, but agreed more work will be needed before making the ACH process bi-directional.
– 3. Tax issues: Negotiations are underway between the U.S. and Canada and the working group will evaluate progress at the end of the year. The Canadian side flagged concerns about a non-agenda item – the 30% withholding tax on clients of branches of U.S. insurance companies in Canada.
– 4. Banking/Tax issues: On tax issues, the FSWG recognized that U.S. and Canadian negotiators are working on revision of the bilateral tax treaty, and it was agreed to update those elements of the work plan towards the end of this year. The FSWG will report that an item regarding information sharing on interest income by Canadian nationals will be dropped from the work plan as it has progressed as much as possible.
– 5. Banking and insurance issues: the Mexican delegation noted that the sectors are very distinct in Mexico. The fact that 80% of bank capital is foreign changes the dynamic. On insurance issues, experts will be meeting later this month and their findings will be incorporated into the FSWG’s final meeting report.
– 6. Securities issues: Salembier reminded WG participants that in Canada regulatory jurisdiction is provincial and stressed the Federal government’s commitment to remedying that “piece of unfinished business.” The Finance minister met last week with provincial counterparts to discuss evolution towards a single national securities regulator. Salembier noted that Quebec has temporarily exempted the London Stock Exchange from recognition requirements as a step towards facilitating exchange access. The Toronto Stock Exchange (TSX) continues its strong advocacy for access to U.S. trading screens. The SEC invited the TSX to meet with the new chairman to explain their proposal. Salembier, in an aside, noted that firms would welcome clarification from the SEC on when contacts in the U.S. trigger the “solicitation” recognition threshold.
– 7 With regard to reciprocity/harmonization of insurance requirements for motor carriers, the GOC side hoped that “in the spirit of progress” they would see a more forthright response from the U.S. to get the process underway. The U.S. side responded that the Insurance Trilateral Working Group would follow up on this and other issues in the near future, and their results could be incorporated into the report.
– 8. Annuities: The issues under this category remain bracketed. The Mexican delegation stressed that reform of Mexico’s social security system is a thorny domestic issue that will be handled in channels other than the SPP.
– 9. Supervisory and Regulatory Standards: There was some discussion of the nature of this item on the work plan, but agreement that the parties will continue to cooperate in facilitating application of standards and, where appropriate, working towards convergence.
– 10. Financing for Development: The Canadian chair of the FSWG explained that despite efforts to interpret the scope of the working group as broadly and comprehensively as possible, establishing a grant to fund development in Mexico fell outside his area of jurisdiction and might be more usefully pursued by another SPP working group. The U.S. expressed similar views. It was agreed that although this item is bracketed and is unlikely to progress under the auspices of the FSWG, it will remain on the work plan unless or until the Mexican Presidency decides it should be removed.
NAFTA Financial Services Committee
¶4. The meeting continued in the afternoon with updates by each party on regulatory and legislative developments and the financial services aspects of other international agreements. Mexico provided a preview on plans for changes in bank regulation, covering complementary services companies, capitalization standards, multiple scope financial institutions and bank investments. Other plans include a project on sanctions implementation on financial institutions, a new securities market law and reform of the insurance laws.
¶5. Canada reviewed upcoming legislative initiatives including the 5-year review of financial sector legislation, enhancements to the anti-money laundering and anti-terrorist financing regime and changes in private defined benefit pension plans.
Update on Fireman’s Fund
¶6. Mexico provided an update on the status of this NAFTA Chapter 11 case, and Canada, stressing its neutrality in matters of fact, provided copies of its submission on the prudential carve-out.
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