The question to be answered as negotiations continue is whether Australia can collect gains that outweigh potential losses in its power to regulate its own highly regarded financial sector, including its ability to decide what financial services groups come to this country, and the circumstances in which they come.

The new agreement would take into account the globalisation of markets since the 1995 creation of another multilateral agreement, the General Agreement on Trade in Service (GATS).

It contemplates data processing exchanges, and dispute resolution mechanisms that could override local rules and regulations that are deemed to be protectionist. Financial groups in countries that have signed the agreement could also more easily establish themselves and expand in other countries that have signed up.

Expansion by acquisition would be possible, and one of several small South American countries negotiating the accord, Panama, wants no ''numerical restrictions'' on how expansion occurs.

Australia has one of the most open and deregulated financial markets in the world. Its financial markets are not rule-free, however, and the new services trade agreement has the potential to conflict with or even override rules that are in place.

Ownership of Australian banks for example is limited to 15 per cent, unless the Treasurer of the day allows a higher stake.

The Howard government also said in its 1997 response to the Wallis inquiry into the financial system that it would consider a foreign takeover of one of the big four Australian banks.

No bids followed. Australia's banks were in a box canyon, with a dominant share of a market that was remote, and growing slowly.

Australia's outperformance since then and its increasing connectivity with Asia may be changing that view, however, and the services trade agreement could make Australia's big four banks more open to foreign takeovers at the same time as their ability to merge themselves continues to be restricted. The ''four pillars'' ban on big bank mergers has been supported by successive governments, and the head of the new financial system inquiry, David Murray, has said that he does not expect his inquiry to recommend its removal.

Australia's highly regarded banking regulator, APRA, sits behind the banks, applying prudential rules shaped by a global template but modified for local conditions. Foreign investment generally is screened by the Foreign Investment Review Board, and the Treasurer can block or approve a deal on national interest grounds.

The ownership rules at least might be in conflict with the new agreement, but it is of course still a work in progress.

The European Union, the United States and Australia are for example proposing that the right of groups to expand in other countries be subject to ''conditions, limitations and qualifications'' that a nation might impose. There is wriggle room there, and other work-arounds are inevitable.

Australia's control over its financial system might still be affected. The reintroduction of foreign capital controls in another financial crisis, however unlikely, could for example be proscribed.

It would be worth it if important new markets opened up for Australia, but that depends on who signs. The US, Canada, Europe and Central and South American countries including Chile, Colombia, Costa Rica, Panama and Peru are negotiating alongside Australia, but Japan, South Korea and Taiwan are the only east Asian countries involved so far.

The expectation is that more countries will join as the talks progress. They need to come from Asia to create a big access dividend for this country, and key Asian countries including China and India have strict foreign ownership regimes.