Financial services chapter summary
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The modernized financial services chapter promotes a level playing field between Canadian, Mexican and U.S. financial service providers through a framework of general rules tailored to the unique nature of the financial sector. The chapter also provides protections for investments in financial institutions for all three countries, establishes a framework for regulatory transparency and includes a state-to-state dispute settlement framework tailored to the financial sector. As with the investment chapter, there will be no investor-state dispute settlement mechanism for financial services that applies to Canada. Finally, the financial services chapter includes a strong prudential carve-out, ensuring the right of financial sector regulators to take measures to preserve the safety and soundness of the financial system.
The financial services chapter of the Canada-United States-Mexico Agreement (CUSMA) will provide legal certainty to Canadian financial institutions by locking in current levels of market access and future liberalization by Mexico and the United States. The chapter includes a number of features that bring CUSMA to the same high standard as Canada’s more recent trade agreements, including obligations ensuring that Canadian financial institutions do not face limitations or restrictions in accessing Mexican and U.S. markets, and provisions on financial services that may be supplied on a cross-border basis. The chapter also includes modernized provisions on data transfer and storage to enhance the free flow of information, protect the privacy and confidentiality of personal information and safeguard regulators’ ongoing and unrestricted access to the financial information they need, which is especially important in a financial crisis scenario.
Technical summary of negotiated outcomes: Financial services
- Supports a predictable, stable and transparent investment environment for investors in financial institutions through reciprocal, legally binding rights and obligations
- Reflects Canada’s high-standard approach to financial services trade agreements through the incorporation of:
- a national treatment obligation that provides equal treatment for domestic and foreign financial institutions
- a most-favoured-nation obligation that extends the best terms granted by a party to financial institutions of all other parties
- updated market access obligations to ensure financial institutions do not face measures that restrict or limit their access to a foreign market, and commitments for allowing specifically listed financial services to be provided on a cross-border basis, such as certain insurance services, portfolio management and advisory services, and electronic payment services.
- a prudential carve-out that ensures financial authorities can take measures to protect the soundness of financial systems without violating the agreement
- enhanced transparency obligations that help financial institutions to better navigate regulatory regimes
- commitments to enable the free flow of information while maintaining the ability to protect privacy and the confidentiality of personal information
- a new commitment on data localization that revises a government’s ability to impose local data storage requirements on foreign-owned financial institutions; the commitment includes safeguards to ensure that regulators will have immediate, direct, complete and ongoing access to the information they need, including the ability to require prior authorization before data can be stored exclusively outside the country; regulators can also require that data be stored inside the country if a foreign financial institution cannot meet these accessibility requirements
- a Financial Services Committee to supervise the implementation of the chapter and consider financial services issues that are referred to it by a party
- Provides a binding state-to-state dispute settlement framework that is tailored to the unique nature of financial services disputes, including financial services expertise requirements for arbitrators when there is a dispute
- As a result of the outcome in the investment chapter, financial services are no longer subject to investor-state dispute settlement on a trilateral basis
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