Federal legislation that removed Depression-era Glass prohibitions of the Glass-Steagall Act barring cross-ownership of banks, securities firms, and insurance companies. Commercial banks are now permitted to own insurance companies and engage in securities underwriting through federally regulated subsidiaries. A complex piece of legislation, the act marks the culmination of efforts dating to the early 1980s to modernize the U.S. Financial services industry.
Important provisions include:
(1) repealed the sections of the 1933 Glass-Steagall Act mandating the legal separation of commercial banking and investment banking.
(2) eliminated the Bank Holding Company Act of 1956's prohibition on bank underwriting of insurance.
(3) established the Federal Reserve Board as the primary regulator of financial holding companies.
(4) provided for functional regulation of financial activities by state regulatory agencies and other federal agencies.
(5) permitted financial holding companies to conduct activities that are "complementary" to banking.
(6) grandfathered for 10 years the nonfinancial activities of firms engaged in financial business.
(7) allowed bank-owned subsidiaries to underwrite corporate securities, but limited the size of bank-owned securities firms to 45% of total assets or $50 billion, whichever is lower.
(8) prohibited banks from insurance sales or real estate development.
(9) gave the Treasury Department and the Federal Reserve the right to veto each other's decisions on new financial powers.
(10) permitted national banks to directly underwrite municipal revenue bonds.
(11) barred bank holding company mergers with securities firms or insurance companies if any subsidiary bank has a less than satisfactory Community Reinvestment Act (CRA) rating.
(12) required banks and community groups to disclose the terms of certain CRA-related agreements.
(13) extended the time period between CRA examinations to five years for banks and thrift institutions with assets under $250 million that have outstanding CRA ratings.
(14) prohibited sharing of customer account numbers with third-party marketing firms and required financial institutions to establish privacy policies and disclose these policies to customers once a year.
(15) prohibited approval of Unitary Thrift holding company applications received after May 4, 1999, and barred commercial companies from buying existing unitary thrifts.
(16) prohibited states from interfering with insurance sales by national banks.
(17) stripped the Comptroller of the Currency of legal advantage in court disputes with state insurance regulators over state laws enacted after September 3, 1998.
(18) allowed Federal Home Loan Bank members to use small business loans and farm loans as collateral for advances from a regional Federal Home Loan Bank.
(19) requires operators of automated teller machines to post notices of fees at ATMs.
