New law legitimizes ways banks do business.

Tony Plath is an associate professor of finance at UNC Charlotte. An expert on the North Carolina banking industry, he explains the implications of the financial-reform law that became effective in November.

BNC: The new law allows banks to underwrite insurance and offer brokerage products. Don't many banks already do that?

Plath: They essentially found loopholes in the law. The regulatory agencies have permitted banks on a selected basis to re-enter the securities business. Under the Section 20 exemption to Glass-Steagall, banks were allowed to do some underwriting. In the Bank Holding Company Act, there was a special exemption that allowed banks to sell insurance in communities with fewer than 5,000 people. They took advantage of that. BB&T Corp. is a good example. It has learned how to integrate a bank with a relatively large insurance agency.

So what are the practical applications of this legislation?

This has much more legislative significance than it does economic significance. It allows legislation to catch up with what's going on in the real world. We're not going to see Bank of America Corp. and First Union Corp. suddenly doing things that they weren't previously doing. The significant part of the legislation goes to the ease with which banks can sell or underwrite insurance and their ability to represent broker-dealer products. You could do that in the past; it was just difficult because you had to make sure you observed the letter of the law.

Will there be advantages for consumers?

I don't think prices are going to decline. Competition may increase and, as a consequence, there will be less upward pressure on prices overtime. There will be greater efficiency, which means lower operating costs associated with the provision of financial products through the banking industry. The savings will occur over time. Consumers are going to get part of it. Shareholders are going to get part of it.

Will there be increased merger activity?

In the middle tier and for smaller banks. I suspect they're going to be buying insurance agencies and brokerage companies and vice versa. I do think some of the big insurance companies in the United States will begin to buy banks. Does that mean they're going to buy Bank of America? No, they can't afford it.

Do you foresee Jefferson-Pilot Corp. entering the banking industry?

That's the $64,000 question. It's plausible. It's more likely that Jefferson-Pilot will be an attractive takeover candidate for one of...