The Gramm-Leach-Bliley Act: One Year Later

It has been one year since Congress passed and President Clinton signed the Gramm-Leach-Bliley Act ("GLBA") into law in November 1999. The passage of GLBA ended more than sixty years of separation between commercial banks and securities firms, removing barriers established during the Great Depression and allowing affiliations between banks, securities firms, and insurance companies. As November 2000 approaches, it is a good time to examine how GLBA has changed the financial services industry in the short-time and evaluate the impact of GLBA.

Financial Holding Companies And Financial Subsidiaries

As of September 29, 2000, the Federal Reserve Board ("FRB") had deemed effective the financial holding company ("FHC") election of more than 400 top tier holding companies. The companies that have elected FHC status include large banking organizations (e.g., Citigroup, Inc., Bank of America Corporation, First Union Corporation), small banking organizations, foreign banking organizations (e.g., Credit Suisse Group, Deutsche Bank Aktiengesellschaft), insurance agencies (e.g., Neighbor Insurance Agency, Inc., Newburg Insurance Agency, Inc.), and securities firms (e.g., Charles Schwab, J.P. Morgan). The Office of the Comptroller of the Currency ("OCC"), on the other hand, has approved approximately 60 financial subsidiaries to engage in activities such as insurance sales and securities underwriting.

Financial Affiliations

Relatively few domestic affiliations between banks and insurance companies or securities firms have occurred since the passage of GLBA. At the same time, several foreign banks have announced their intention to acquire domestic investment banking firms (e.g., UBS- PaineWebber Group; Royal Bank of Canada-Dain Rauscher & Co.; Dresdner Bank-Wasserstein, Perella & Co.). The most significant domestic bank/securities firm affiliation to date has been the Charles Schwab Corporation ("Schwab") acquisition of U.S. Trust Corporation ("U.S. Trust"). The FRB approved Schwab's application to acquire U.S. Trust and become a financial holding company on May 1, 2000. On the insurance side, MetLife, Inc. has filed an application with the FRB to acquire Grand Bank, N.A. and become a financial holding company, and ULLICO, Inc. has filed an application with the FRB to acquire Amalgamated Bank of Chicago. At least one other insurance company, Vesta, has announced plans to enter the banking business as well. Ironically, the largest bank/insurance...