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The GATS and Financial Regulation: Time to Clear-House?

Published online by Cambridge University Press:  19 August 2019

George A. Papaconstantinou
George A. Papaconstantinou*
Affiliation:
European University Institute, Department of Law, Florence, Italy
*
*Email: [email protected]
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Abstract

In the aftermath of the 2008 global financial crisis, European Union regulators introduced the mechanism of ‘third-country equivalence’ for non-European financial institutions to access the EU internal market. This article evaluates for the first time the GATS-consistency of the European rules on third-country clearinghouses. Through this exercise, the article sheds light on the tension between financial regulation and WTO law, exploring how these two different disciplines can be reconciled. Building on the international economic law principles of non-discrimination and transparency, the analysis reveals that the European financial regulation could negatively impact the access of smaller countries to the EU market. The regulation in question is assessed under the GATS Article VI (Domestic Regulation), Article II (MFN), Article VII (Recognition), and the Annex on Financial Services prudential carve-out. The findings of the European case study indicate that the vast flexibility that trade law has delegated to national regulators possibly has adverse effects on the liberalization of financial services. The article concludes that if WTO Members do not derogate from their GATS obligations and commitments, the stability of the financial system would not be jeopardized, while the prospect of international integration would be increased.

Type
Research Article
Information
World Trade Review , Volume 19 , Issue 3 , July 2020 , pp. 379 - 401
Copyright
Copyright © George A. Papaconstantinou 2019

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References

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4 C. Pirrong, ‘The Economics of Central Clearing: Theory and Practice (ISDA, Discussion Paper Series No. 1, 2011), pp. 6–11, 30–34, www2.isda.org/functional-areas/research/discussion-papers/.

5 G20 leaders gathered to confront the challenges of the 2008 financial crisis. See www.g20.utoronto.ca/2009/2009communique0925.html, para. 13.

6 Bank for International Settlements, Statistics: OTC Derivatives, Semiannual OTC Derivatives Statistics, www.bis.org/publ/otc_hy1810.htm.

7 This term was used by Benöit Coeuré (ECB) at the Federal Reserve Bank of Chicago Symposium on Central Clearing (10 April 2015).

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9 International standards for the regulation of CCPs exist but fall short of generating uniformity among national regimes and facilitating international trade flows. The recognition of third countries’ regimes is key to attaining market access to foreign jurisditions. Nonetheless, these standards put forward good-governance principles for financial market infrastructure regulations. See Bank for International Settlements & IOSCO, ‘Principles for Financial Market Infrastructures’ (2012), www.bis.org/cpmi/publ/d101a.pdf. See Brummer, C., ‘Why Soft Law Dominates International Finance – and Not Trade’, Journal of International Economic Law, 13(3) (1 September 2010), 623–643CrossRefGoogle Scholar.

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12 GATS, Annex 1B to the Agreement Establishing the WTO. See WTO, The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts (Cambridge: Cambridge University Press, 2017), at 357Google Scholar.

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14 For a primer on the interests at stake regarding potential disruptions by regulatory clearing rules after Brexit, see P. Stafford, ‘US Derivatives Regulator Warns EU over Clearing Plans’, Financial Times (2018), www.ft.com/content/fc95e500-0172-3b00-8404-6319ebc52c69.

15 EMIR II passed the plenary vote of the European Parliament last summer and is currently at the trilogue legistlative stage. For more information on the legislative procedure, see www.europarl.europa.eu/RegData/etudes/BRIE/2017/603983/EPRS_BRI(2017)603983_EN.pdf.

16 EMIR, Art. 25 (2) (b).

17 EMIR, Art. 25 (2) (a). Additionally, the actual wording is of significance, see EMIR Art. 25(6): The Commission may adopt an implementing act under Article 5 Regulation (EU) No. 182/2011, determining that the legal and supervisory arrangements of a third country ensure that CCPs authorized in that third country comply with legally binding requirements which are equivalent to the requirements laid down in Title IV of this Regulation, that those CCPs are subject to effective supervision and enforcement in that third country on an ongoing basis and that the legal framework of that third country provides for an effective equivalent system for the recognition of CCPs authorized under third-country legal regimes. It is deduced from that provision that the Commission's assessment of third-countries’ regulatory frameworks is threefold.

18 EMIR, Art. 25 (2) (d).

19 EMIR, Art. 25 (2) (c).

20 No right is extended to third countries for receiving an equivalence assessment. See European Commission, ‘EU Equivalence Decisions in Financial Services Policy: An Assessment’, Commission Staff Working Paper (2017), p. 8.

21 See ESMA/2012/379, Draft Technical Standards for the Regulation on OTC Derivatives, CCPs and Trade Repositories, para. 126.

22 See Quaglia, L., ‘The Politics of “Third Country Equivalence” in Post-Crisis Financial Services Regulation in the European Union’, West European Politics, 38(1) (2015), 167–184CrossRefGoogle Scholar.

23 For the list of the 32 recognized clearinghouses, see www.esma.europa.eu/sites/default/files/library/third-country_ccps_recognised_under_emir.pdf (lastly checked in February 2019).

24 For the Commission press release, see http://europa.eu/rapid/press-release_IP-16-807_en.htm, and for the Commission Implementing Decision: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016D0377&from=EN.

25 The comparability determinations by the Commodity Futures Trading Commission (CFTC) are even fewer than the ‘equivalence’ assessments. See www.cftc.gov/LawRegulation/DoddFrankAct/CDSCP/DoddFrankCDF5.html.

26 European Parliament, ‘Briefing: Understanding Equivalence and the Single Passport in Financial Services: Third-Country Access to the Single Market’, February 2017, page 3, www.europarl.europa.eu/RegData/etudes/BRIE/2017/599267/EPRS_BRI(2017)599267_EN.pdf.

27 CCPs from Argentina, Malaysia, Chile, China, Turkey, Israel, Taiwan, and Thailand and recently the UK among others have applied for recognition. See ESMA's list for further details, www.esma.europa.eu/sites/default/files/library/list_of_applicants_tc-ccps.pdf.

28 See J. Philpott, ‘Equivalence’ www.theotcspace.com/2015/10/11/%E2%80%98equivalence%E2%80%99-%E2%80%93-key-global-otc-swap-reform.

29 Pursuant to GATS Article XX:3, schedules are an integral part of the GATS.

30 See Marchetti, J. A. and Mavroidis, P. C., ‘The Genesis of the GATS’, European Journal of International Law, 22(3) (2011), 689–721CrossRefGoogle Scholar.

31 Third recital of the GATS Preamble. Cf. Panel Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285 (US–Gambling), para. 6.313.

32 GATS Article I:1; Cf. Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27 (EC–Bananas III), para. 220; Panel Report, Mexico – Measures Affecting Telecommunications Services, WT/DS204 (Mexico–Telecoms), para. 7.41.

33 Appellate Body Report, EC–Bananas III, para. 7.281.

34 See; Bhuiyan, S., ‘Mandatory and Discretionary Legislation: The Continued Relevance of the Distinction under the WTO’, Journal of International Economic Law, 5(3) (1 August 2002), 571–604CrossRefGoogle Scholar.

35 GATS Article XXVIII(a) provides for the definition of a ‘measure’ that includes laws, regulations, rules, and decisions among others.

36 Appellate Body Report, EC–Bananas III, para. 227.

37 GATS Article XXVIII(c). It shall be borne in mind that the list is indicative according to the Appellate Body Report, EC–Bananas III, para. 220.

38 Pursuant to GATS Article XXIX, Annexes are binding for WTO Members.

39 GATS Annex on Financial Services, para. 5(a).

40 Ibid. para. 5(b).

41 Ibid. para. 5(a)(xiv).

42 Panel Report, China – Measures Affecting Electronic Payment Services, WT/DS413/R (China–Electronic Payment Services), para. 7.163.

43 Enshrined in GATS Article I:2.

44 For general discourse on Modes 1 and 2 in the advent of new technologies see U. Ahmed, B. Bieron, and G. Horlick, ‘Mode 1, Mode 2, or Mode 10: How Should Internet Services Be Classified in the Global Agreement on Trade in Services?’, Boston University International Law Journal: Current Topics in International Law (2015); A. Mattoo and L. Sehuknecht, ‘Trade Policies for Electronic Commerce’, World Bank Policy Research, Working Paper 2380 (2000), 14; J. O. Berkey, ‘A Framework Agreement for Electronic Commerce Regulation under the GATS’, Institute for International Finance (2001), 1–2; E. Tinawi and J. O. Berkey, ‘E-Services and the WTO: The Adequacy of the GATS Classification Framework’, OECD (1999), 3.

45 WTO, ‘Trade in Services’, S/L/92, 28 March 2001, ‘Guidelines for the Scheduling of Specific Commitments Under the General Agreement on Trade in Services’, pp. 8–10.

46 Panel Report, Argentina – Measures Relating to Trade in Goods and Services, WT/DS453 (Argentina–Financial Services), para. 7.210.

47 The US commitments for the provision of gambling services under Modes 1 and 2 are identical; Cf. Panel Report, US–Gambling, para. 3.29; S. Wunsch-Vincent, ‘The Internet, Cross-Border Trade in Services, and the GATS: Lessons from US–Gambling, World Trade Review, 5 (2006), 326.

48 On several occasions the parties to derivatives contracts are not members of clearinghouses. Thus, these parties need to acquire the services of other institutions, which are members, to ensure access to the clearinghouse's services. This scenario perplexes our theory and it is intentionally disregarded. See Turing, D., Clearing and Settlement (London: Bloomsbury, 2016), pp. 44–49Google Scholar.

49 Tinawi and Berkey, supra note 44, at 3.

50 WTO, Council for Trade in Services, Committee on Trade in Financial Services, S/C/W/312, S/FIN/W/73, 3 February 2010, p. 13. This paper underlines the problem of distinguishing between Modes 1 and 2 and provides the background discussions at the WTO level.

51 GATS Article XXVIII(m)(i) lays out that ‘juridical persons of another Member’ shall be constituted or organized according to the law of that other Member.

52 For the EU Schedule, see www.wto.org/english/tratop_e/serv_e/serv_commitments_e.htm. However, it should be mentioned that the EU consists of 28 Members, for the time being, and not all Members’ commitments are reflected in the EU schedule, notified to the WTO. Some EU Members schedules are still in force independently. For the sake of completeness, it shall be mentioned that Estonia and Latvia have undertaken Mode 1 commitments for clearing services in their schedules GATS/SC/127 and GATS/SC/126, respectively. The analysis, however, does not delve into particular market access and national treatment commitments on clearing services undertaken by EU Members, but rather captures the greater picture in light of the adoption of the Understanding.

53 The Understanding is not of binding nature and therefore it is up to WTO Members to undertake their financial services commitments in accordance with the principles promulgated by it. The Members that have voluntarily adhered to it are the following: Australia, Bulgaria, Canada, Czech Republic, European Communities (EC15), Hungary, Iceland, Japan, Lichtenstein, New Zealand, Nigeria, Norway, Slovak Republic, Sri Lanka (excluding insurance), Switzerland, Turkey, and the United States.

54 See WTO, supra note 50, p. 10.

55 In respect of Mode 1, the Understanding mandates that a Member shall allow non-resident suppliers of financial services to provide, ‘as a principal, through an intermediary or as an intermediary, and under terms and conditions that accord national treatment’, a specific number of services: (a) insurance of risks relating to maritime shipping and commercial aviation and space launching and freight, (b) reinsurance and retrocession and the services auxiliary to insurance, (c) provision and transfer of financial information and financial data processing as referred to in subparagraph 5(a)(xv) of the Annex and advisory and other auxiliary services, excluding intermediation, relating to banking and other financial services as referred to in subparagraph 5(a)(xvi) of the Annex. When it comes to what appears to be Mode 2, the commitments have quite a broader scope; Members ‘shall permit its residents to purchase in the territory of any other Member the financial services indicated’ in the previous paragraph, and additionally all banking and other financial services listed in subparagraphs 5(a)(v) to (xvi) of the Annex. Consequently, the obligations emanating from the coverage of Mode 1 are narrower than of Mode 2.

56 United Nations Conference on Trade & Development, ‘A Positive Agenda for Developing Countries: Issues for Future Trade Negotiations’ (2000). 463.

57 For the negotiations on Domestic Regulation, see Delimatsis, P., ‘Concluding the WTO Services Negotiations on Domestic Regulation – Hopes and Fears’, World Trade Review, 9(4) (2010), 643–673Google Scholar.

58 For a categorization of barriers to trade in services, see Hoekman, B. and Braga, C. A. P., ‘Protection and Trade in Services: A Survey’, Open Economies Review, 8(3) (1997), 285–308CrossRefGoogle Scholar; R. M. Stern, ‘Quantifying Barriers to Trade in Services’, Discussion Paper No. 470, University of Michigan (2000), 2.

59 Forth recital of the GATS Preamble.

60 See Bhagwati, J., ‘The Pure Theory of International Trade: A Survey’, The Economic Journal, 74(293) (1964), 18CrossRefGoogle Scholar.

61 Panel Report, US–Gambling, para. 6.432.

62 See Delimatsis., P.International Trade in Services and Domestic Regulations: Necessity, Transparency, and Regulatory Diversity (Oxford University Press, 2007), p. 95CrossRefGoogle Scholar.

63 Panel Report, US–Gambling, para. 6.316. The Appellate Body reaffirmed the panel's finding; Appellate Body Report, US–Gambling, para. 235.

64 See Panel Report, United States – Restrictions on Imports of Cotton and Man-Made Fibre Underwear, WT/DS24, para. 7.65.

65 See Panel Report, European Communities and its Member States –Tariff Treatment of Certain Information Technology Products, WT/DS375, paras. 7.1026–7.1027.

66 In particular, J. Hill, the former Commissioner for Financial Stability, Financial Services and Capital Markets Union, said: ‘Competitive pressures and political reality influence how people think about the equivalence process’, supra note 26, p. 3.

67 The line of reasoning developed by the WTO judiciary can prove a salient guide for understanding the mechanics of the GATS Article VI:1. See Delimatsis, P., ‘Due Process and “Good” Regulation Embedded in the GATS – Disciplining Regulatory Behaviour in Services Through Article VI of the GATS’, Journal of International Economic Law, 10 (2007), 20–28Google Scholar.

68 See Panel Report, European Communities – Selected Customs Matters, WT/DS315 (EC–Selected Customs Matters), para. 7.134.

69 G. Feketekuty, ‘Regulatory Reform and Trade Liberalization in Services’, in P. Sauvé and R. M. Stern (eds.), Services 2000: New Directions in Services Trade Liberalization, 229–230. Cf. Panel Report, EC–Selected Customs Matters, paras. 7.127, 7.490.

70 Ibid., paras. 7.108, 7.431.

71 Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58, para. 160.

72 Panel Report, Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302, para. 7.379.

73 Panel Report, EC–Selected Customs Matters, para. 7.123.

74 Appellate Body Report, EC–Bananas III, para. 200.

75 Panel Report, US–Gambling, para. 6.432; Cf. for the GATT perspective, Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather, WT/DS155, paras. 11.70–11.71; Appellate Body Report, EC–Selected Customs Matters, paras. 200–201.

76 See Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184, para. 7.268.

77 For the European Commission document listing the EMIR Equivalence decisions, see https://ec.europa.eu/info/sites/info/files/emir-equivalence-decisions_en.pdf.

78 ESMA's technical advice are objective-based analyses which examine the non-European countries’ regimes on a line-by-line basis, resulting in a thorough but cumbersome process, that can be verified by the fact that the Dodd-Frank framework got the green light from the Commission only in 2016. See, for example, the ESMA technical advise issued for the US: www.esma.europa.eu/sites/default/files/library/2015/11/2013-1157_technical_advice_on_third_country_regulatory_equivalence_under_emir_us.pdf.

79 The FSB frequently conducts assessments of the regulatory frameworks of G20 on central-counterparties, trade reporting, market transparency, and exchange and electronic platform trading. For the latest report on central-clearing and the regulatory implementation ratings, see FSB, ‘OTC Derivatives Market Reforms: Twelfth Progress Report on Implementation’ (29 June 2017), www.fsb.org/wp-content/uploads/P290617-2.pd (accessed 11 August 2018).

80 From GATT jurisprudence, the panel in China–Raw Materials noted that the lack of definition, guidelines, or standards in how the export quotas were allocated by local departments constituted non-uniform administration inconsistent with Article X:3(a). Panel Report, China – Measures Related to the Exportation of Various Raw Materials, WT/DS394, paras. 7.751–7.752.

81 The watering-down of the excessive regulatory scrutiny in equivalence determinations and the focus solely on the regulatory provisions that matter can facilitate the international integration of clearing services. This approach is consonant with efficiency considerations of increasing liquidity and reducing transaction costs in the derivatives clearing business. The International Swaps and Derivatives Association (ISDA) put forward five principles according to which equivalence/subsituted compliance frameworks should operate in order to avoid the current troublesome state-of-play, see ISDA, ‘White Paper: Cross-Border Harmonization of Derivatives Regulatory Regimes’ (September 2017).

82 See GATS Article VI:4.Article VI:5 has been defined as ‘an effort to operationalize the objectives stated in VI:4, the most important of which was the necessity test’, according to the WTO Secretariat in WTO, WPDR, ‘Report on the Meeting Held on 11 May 2001’, S/WPDR/M/11, 7 June 2001, para. 29.

83 The GATS entered into force in 1995 and this category captures the measures in place before then.

84 Panel Report, Mexico–Telecoms, para. 5.30.

85 The Implementing Acts are based on Article 5 of Regulation No. 182/2011 and are highly dependent upon the technical advice on third countries regimes that ESMA produces. The Commission Delegated Regulation (EU) No 153/2013 of 19 December 2012 supplementing EMIR with regard to regulatory technical standards on requirements for central counterparties, on the basis of art. 2 sets out particular conditions in respect of CCP's target member states, types of instruments cleared, its shareholders, margin and collateral, stress tests, compliance, record, outsourcing arrangements, segregation arrangements, membership criteria, and interoperability arrangements. Although numerous criteria are put forward, it is maintained that there is no transparency on the methodology that these criteria are assessed by the EU institutions.

86 This presumption is based on Article 3:8 of the Dispute Settlement Understanding (DSU) which has been confirmed by the WTO judiciary. Appellate Body Report, European Communities – Export Subsidies on Sugar, WT/DS265, para. 300. The concept of nullification or impairment also accommodates non-violation complaints in services, GATS Article XXIII:3.

87 See See WTO, Trade in Services, ‘Decision on Domestic Regulation’, S/L/70, 28 April 1999, para. 23; For a discussion see Delimatsis, supra note 62, p. 39–47.

88 The Appellate Body, European Communities – Measures Affecting Asbestos and Products Containing Asbestos, WT/DS135, para.102, refers to the requirements promulgated by the GATT working party report on Border Tax Adjustments.

89 Appellate Body Report, para. 10.248. Cf. Panel Report, EC–Bananas III, para. 7.322.

90 Appellate Body Report, Argentina–Financial Services, para. 6.24; Cf. Appellate Body Report, European Communities – Measures Prohibiting the Importation and Marketing of Seal Products, WT/DS401, para. 5.82, Appellate Body Report, EC–Asbestos, para. 99.

91 Panel Report, China–Electronic Payment Services, paras. 7.698–7.709.

92 Appellate Body Report, Argentina–Financial Services, para. 6.29.

93 Panel Reports, Colombia – Indicative Prices and Restrictions on Ports of Entry, WT/DS366, paras. 7.355–7.356; United States – Certain Measures Affecting Imports of Poultry from China, WT/DS392, paras. 7.424–7.432.

94 Appellate Body Report, Argentina–Financial Services, paras. 6.38, 6.52, 6.61.

95 Panel Report, China–Electronic Payment Services, para. 7.704.

96 Ibid. paras. 6.38–6.41.

97 Panel Report, Argentina–Financial Services, para. 7.166.

98 Appellate Body Report, Argentina–Financial Services, para. 6.61.

99 Appellate Body Report, United States – Measures Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33, paras. 14, 335.

100 See, for example, FSB, supra note 79.

101 Appellate Body Report, Argentina–Financial Services, paras. 6.105, 6.106. Cf Appellate Body Report, EC–Bananas III, para. 233.

102 The LTF standard in the GATT is identical to the one in the GATS; see Appellate Body Report, EC–Seals Products, para. 5.90. The TBT Agreement does not employ the same LTF legal standard because it requires an additional step not justifiable in the GATS geometry, namely the ‘legitimate regulatory distincion’; see Appellate Body Report, United States – Measures Affecting the Production and Sale of Clove Cigarettes, WT/DS406, para. 182.

103 Appellate Body Report, Argentina–Financial Services, para. 6.151.

104 See Appellate Body Report, EC–Bananas III, paras. 244, 246; Panel Report, China–Electronic Payment Services, paras. 7.712, 7.714.

105 Appellate Body Report, Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371, para. 134.

106 Panel Report, Argentina–Financial Services, paras. 7.212, 7.232.

107 The GATS prudential exception is discussed below. See Cantore, C. M., The Prudential Carve-Out for Financial Services: Rationale and Practice in the GATS and Preferential Trade Agreements (Cambridge: Cambridge University Press)CrossRefGoogle Scholar.

108 Appellate Body Report, Argentina–Financial Services, paras. 6.151–6.153.

109 Ibid. para. 6.127.

110 GATS Article VII:1.

111 See Zampetti, A., ‘Market Access through Mutual Recognition: The Promise and Limits of GATS Article VII’, in Sauvé, P. and Stern, R. (eds.), GATS 2000: New Directions in Services Trade Liberalization (Washington, DC: Brookings Institution Press, 2000), pp. 283–306Google Scholar. Cf. Nicolaıdis, K. and Trachtman, J., ‘From Policed Regulation to Managed Recognition: Mapping the Boundary of GATS’, in Trachtman, J., The International Economic Law Revolution and the Right to Regulate (London: Cameron May, 2006), p. 315Google Scholar.

112 GATS Annex, para. 3(a).

113 GATS Article VII:3.

114 For an analysis that argues that like-minded countries tend to conclude MRAs, see Marchetti, J. A. and Mavroidis., P. C. ‘I now recognize you (and only you) as equal: An anatomy of (mutual) recognition agreements in the GATS’, Regulating Trade in Services in the EU and the WTO (Cambridge: Cambridge University Press, 2012), p. 415CrossRefGoogle Scholar.

115 This position is based on research conducted on the Notifications Database of the WTO. It is striking that there is no recognition agreement on financial services notified to the Council, pursuant to GATS Article VII:4, after 2010. See https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S003.aspx.

116 GATS Article VII:2, Annex para. 3(b).

117 GATS Article VII:3.

118 See, for example, note 79.

119 GATS Annex para. 2(a).

120 The wording of the prudential exception is in juxtaposition to the chapeau of GATS Article XIV which pressuposes a necessity assessment of measures, see Delimatsis, P. and Hoekman, B. (2017), ‘National Tax Regulation, Voluntary International Standards, and the GATS: Argentina–Financial Services’, World Trade Review, 17(2) (2018), 272CrossRefGoogle Scholar.

121 Panel Report, Argentina–Financial Services, paras. 7.853–7.945.

122 GATS Annex para. 1(a)

123 Both the panel and the Appellate Body sided with the argument that all measures fall within the scope of the PCO. This reasoning was adopted because it better reflects the GATS rationale, illustrated in paras. 3 and 4 of the preamble, and better captures the content of para. 2(a) and the context of the Annex. See Panel Report, Argentina–Financial Services, paras. 6.825, 7.847; Appellate Body Report, Argentina–Financial Services, paras. 6.253–6.262.

124 Ibid. para. 6.262

125 Panel Report, Argentina–Financial Services, para. 7.879. Cf. paras. 7.904, 7.937, and 7.946.

126 Ibid. para. 7.889.

127 Ibid. para. 7.891.

128 Ibid. para. 7.945.

129 The panel in Argentina–Financial Services underlined that the concept of ‘prudential reasons’ is an evolving one (para. 7.870), while the ‘stability of the financial system’ is an overarching prudential consideration enshrined in the PCO.