Magazine article American Banker

Prediction: Foreign Banks Will Flee Unless Glass-Steagall Is Repealed

Magazine article American Banker

Prediction: Foreign Banks Will Flee Unless Glass-Steagall Is Repealed

Article excerpt

There's a new word making the rounds of international bankers in the United States.

It's "debanking," and it means shutting down one's U.S. bank branches in order to escape restrictions on selling insurance and underwriting securities here.

So far, this has happened only once. In 1993, ING Group - formed by the 1990 merger of a Dutch bank and insurance company - closed its U.S. commercial bank subsidiary in order to focus on other lines of business.

But in a much-talked-about speech at a recent foreign banking conference here, New York attorney H. Rodgin Cohen said ING may not be the last to debank as consolidation abroad creates more and more financial conglomerates that combine commercial banking with insurance and securities operations.

"I would suggest debanking could become a significant option for foreign banks in the U.S.," said Mr. Cohen, a partner with the law firm of Sullivan & Cromwell.

The only thing that could stop it, Mr. Cohen said, is repeal of the Glass-Steagall Act by Congress, which would allow banks to affiliate with securities and insurance firms.

Lawrence R. Uhlick, executive director of the Institute of International Bankers, a New York-based trade group, agreed with this assessment.

"The problem is caused by the disparity between permissible financial activities in the U.S. and the current systems in place in other major countries permitting a wide range of financial activities," Mr. Uhlick said.

"If the restructuring legislation passes, debanking is likely to be of only theoretical interest," he said. "To the extent that it breaks down, some banks are forced to face up to what do they do. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.