distinction between financial intermediaries.20 In Germany, the desire to provide a wide range
of products corresponding with the concept of All finanz21 led to large banks adopting various
strategies to enter the insurance sector.22 The Deutsche Bank, for instance, established its own
life subsidiary, Dresdner Bank and embarked on establishing alliance with insurance
companies such as Allianz.23 Commerzbank has also taken up a joint venture strategy.24 In the
UK, building societies provided life insurance-based endowment mortgage, a key product in
the sector.25 The mid 80s also saw the commencement of active sale of life insurance products
produced by subsidiaries or allied companies of large clearing banks through their vast
networks.26 In the 1990s, financial conglomerates already controlled a large market share and
currently have 28% of bank deposits and 46% of the total insurance income in Britain.27
In the US, separation between banking and securities business as established by the Glass
Steagall Act, has not only been gradually relaxed by allowing interpretations of the Act by the
Federal Reserve Board, and other banking regulators through the 1980s, but has also been
superseded by the Gramm Leach Bliley Act.28 The Gramm Leach Bliley Act removed the
distinction between commercial banks and securities business. The early development of
financial conglomerates which was restricted due to the functional separation of commercial
banks and securities business resulted not only from the 1933 Glass Steagall Act but also from
the National Bank Act of 1984, restrictions on branch banking imposed under the McFadden
Act of 1927.29 Separation of banking from other commercial activities hindered the
competitiveness of US banks on the international market scene and made it difficult for some
non US financial groups to gain access to the US market.30 If such a group consisted of both
bank and insurance companies, it could participate either in the banking or the insurance
business.31
The need for a single regulator which regulates not just the banking sector, but also the
insurance and securities sectors, has arisen principally because of the rise of conglomerate
firms. Single regulators are able to manage more effectively cross sector services' risks. The
20
21
22
23
24
25
26
27
28
29
30
31
T Filipova Concept of Integrated Financial Supervision and Regulation of Financial Conglomerates
: The Case of Germany and the UK (Nomos 2007) 39
For more on the All-Finance concept, see E Boehmer 'Who Controls Germany? An Explanatory
Analysis' Institut fuer Handels und Wirtschaeftsrecht, Universitaet Osnabrueck, Arbeitspaper Nr 71
(1998); Deutsche Bundesbank, Die Aufsicht ueber Finanzkonglomerate in Deutschland, Monatsbericht,
(April 2005) 43-48
K Koguchi, 'Financial Conglomeration', Financial Conglomerates (1993) OECD 11
ibid
ibid
ibid
The creation of the EC single financial market has accelerated the process of conglomeration of financial
institutions in Europe. The implementation of the Second Banking Directive and the Investment Services
Directive allows institutions holding licences from any EC member state to engage in banking or investment
services and to offer them throughout the Community; ibid
T Filipova 2007 p 48; Examples of collaborative forces between banks and insurance companies are those
between Lloyds TBS/Scottish Widows, Prudential Insurance Company/M6G/EGG, AXA/Woolwich,
AXA/Bank of Scotland, Zurich/Bank of Scotland, CGNU/Royal Bank of Scotland, Legal and
General/Alliance and Leicester, Legal and General/ Barclays.
In 1990, the Federal Reserve Board authorised, subject to certain conditions, four US banks to underwrite
corporate equities ; ibid pp 12 and 13; also see RM Lastra Legal Foundations of International Financial
Stability 2006 Oxford University Press See forward by Charles Goodhart on page vii
T Filipova 2007 p 49
ibid
M Gruson 'Foreign Banks and the Regulation of Financial Holding Companies' p 4
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