One-Stop Shopping?

• Author: MOKIMMIE, KATHY
• Position: Effects of Financial Services Modernization Act on Indiana - Brief Article - Column

Has the financial-services modernization act affected Indiana? Small banks are happy.

Non-event," said some observers when the Gramm-Leach-Bliley (GLB) financial-services modernization act passed Congress in late 1999.

Ho-hum, that's pretty much the case. The federal legislation allowed banks, securities firms and insurance companies to affiliate within a financial-services holding company, but there's been no merger mania in Indiana--or nationally for that matter.

The modernization act was passed to enable the huge deals, like the Citicorp/Travelers merger, which was in the works at the time of passage. "I don't recall any other blockbuster kinds of deals," says Joe Barnette Jr., chairman of Bank One Indiana, "but we will see further consolidation, particularly in the insurance arena. He also predicts growth in one-stop shopping for financial services, even if they are not formally organized under a financial holding company.

The big out-of-state players, such as CitiCorp, don't have a physical presence in Indiana so they've had little impact, says John Reed, president of the financial institutions group of David A. Noyes & Co., Indianapolis. "Face-to-face is the predominant way services are delivered here," he says. "As long as that's the case, it's who has the physical presence.

Some of the biggest changes have been happening even without enabling legislation, says Reed. "Everyone is competing with everybody without major charter changes or buying someone in a different industry. Everyone is truing to take a bite out of everyone else's apple."

REAL-ESTATE RUB

In addition to allowing banks, security firms and insurance companies to operate under a financial holding company umbrella, GLB gave the Federal Reserve Board and the Treasury Department the power to determine what other financial or "incidental to financial" services could be offered through the holding company. The American Bankers Association petitioned both agencies to include real-estate brokerages and property-management services under allowable activities, and to the delight of the ABA, a draft rule was published.

Yet comments were 10 to 1 against the idea by the May 1 deadline estimates Joe DeHaven, president of the Community Bankers Association of Indiana, after real-estate agents waged a major campaign to keep bankers out of their business. The National Association of Realtors called the move "The Big Grab," and asked Congress to specifically prohibit the activity.

Dick...