Abstract

The recent financial crisis showed that financial instability transcends national borders. In the wake of the crisis, many WTO Members adopted new prudential measures, including regulatory instruments to resolve too-big-to fail institutions. The Dodd-Frank Act embodies the US postcrisis response. Dodd-Frank introduced a Resolution Authority, aimed at preventing future government bailouts and bankruptcies of too-big-to-fail institutions. From an international trade perspective, the Most-Favoured-Nation (MFN) and National Treatment (NT) principles of The General Agreement on Trade in Services (GATS) may limit certain applications of the Resolution Authority. US subsidiaries with a foreign parent are not to be treated less favourably than domestic companies or competitors from third countries providing like services. The US could thus fall short of its MFN and NT principles if it uses the Resolution Authority in a selective manner. The Panel Report in Argentina-Financial Services makes it clear that the Prudential Carve-Out will not provide unlimited justification in such cases. In a broader context, it is argued that the GATS’s MFN and NT principles should be seen as a stabilizing force in maintaining financial stability across borders.

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