Before the Gramm-Leach-Bliley Financial Services Modernization Act (GLB) was passed in 1999, competition among the various segments of the financial services industry was strictly limited by law. GLB removed many of the Depression era barriers that restricted competition. Now many of the leading financial services companies are doing business across sectors as the convergence of products and services that began in the 1970s continues to gather momentum. However, others have chosen different paths. Some have elected to become specialists in their fields, in some cases shedding segments of the financial services business they owned before the act was passed. Today, financial services consumers have much the same kind of choice as they do in other industries. They can select from an ever broadening array of financial tools and a wide spectrum of financial services distributors, from companies that aim to serve their customers’ multiple needs to those that specialize in one or two types of products.

When the act passed it was expected to spur massive cross-sector mergers. Mergers did occur but for the most part not among leading players. Banks bought specialized securities firms, accounting for 34 percent of securities industry mergers between 2001 and 2005. Banks also bought insurance agencies and brokers, rather than insurance companies as had been predicted. Some of the largest insurance brokerages now belong to banks. Insurance companies applied for new thrift charters to open banks instead of buying existing ones. Moreover, the arrangement that provided the major impetus for the passage of GLB, Citigroup’s merger with Travelers Insurance Group, has been dissolved. In 2002 the bank spun off the property/casualty insurance unit of Travelers, which was bought by the St. Paul Companies in 2003, and sold the life unit to MetLife in 2005.
  • 1916 National Bank Act limiting bank insurance sales except in small towns

  • 1933 Glass-Steagall Act prohibiting commercial banks and securities firms from engaging in each other’s business

  • 1956 Bank Holding Company Act restricting bank holding company activities

  • 1995 VALIC U.S. Supreme Court decision allowing banks to sell annuities

  • 1996 Barnett Bank U.S. Supreme Court decision allowing banks to sell insurance nationwide

  • 1999 Gramm-Leach-Bliley Act allowing banks, insurance companies and securities firms to affiliate and sell each other’s products

  • 2001 U.S. House of Representatives Banking Committee becomes the Financial Services Committee

  • 2002 Citigroup spins off its Travelers’ property/casualty insurance unit

  • 2005 Citigroup sells its Travelers' life unit