“Prudential Carve-out” is an important legal concept under international financial law as well as international economic law. Many countries adopted financial supervision and regulations, in order to ensure the integrity and stability of the financial system or the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier. This article discusses the relationship between “liberalization of trade on financial services” and “financial supervision” under WTO/GATS and its Annex on Financial Services. The main argument of this article focuses on various legal issues of “prudential reasons” from GATS Annex on Financial Services Article 2(a), including: what is the definition of “prudential measures”? what kinds of domestic financial supervisions fulfill the scope of “prudential carve-out”? In practice, if the legal interpretation of “prudential carve-out” is too wide, it shall be used as a means of avoiding the WTO member’s commitments or obligations under GATS. However, if the interpretation is too strict, it shall be limited WTO member’s autonomy of enforcing financial supervision measures. How to avoid members abusing “prudential carve-out” and causes the restriction effects of financial services on trade? This article also analyzes and provides recommendations for the current practice of the Cross-Strait Financial Cooperation Agreement and possible issues of financial supervision in the future bilateral negotiation.