Change of banking practices

The idea of banking, insurance and consulting business all being offered by the same organization is increasingly affecting traditional banking practices. In pursuit of a new source of profit, many banks have strayed far from the business of taking and safeguarding the public's deposits and running the payment systems. The change made banks look different in from a decade ago.

This change is already seen in America, Europe and Japan. American and Japanese commercial banks are pushing their merchant banking as deeply into the securities business as they feel the regulators will let them get away with. In America, Bankers Trust, Chase Manhattan, Citicorp and J.P. Morgan have all been allowed to set up securities - underwriting affiliates slipping through the Section 20 loophole of the legislation separating commercial and investment banking.

For their part, investment banks and securities houses have become direct suppliers of credit to a wide range of customers.

Though forbidden from commercial banking in their home markets, American and Japanese investment banks and securities houses happily run such affiliates abroad.

It is not only the boundaries between the banking and securities industries that are becoming blurred. So are those with insurance and commerce.

Everywhere ordinary commercial firms are making deep incursions into financial services, Retailers and manufacturers own securities companies, insurance firms, thrifts and nоn-bank banks. They offer a wide range of credit, investment-banking and insurance services, to companies and individuals alike.

UNIT 6