The ‘first filers’: An examination of the first financial holding companies

Abstract

The passage of the Gramm–Leach–Bliley Act in late 1999 profoundly changed the regulatory environment for US banking organisations. For the first time in over 50 years, these organisations could freely engage in commercial banking, investment banking and insurance underwriting within one organisation. Prior empirical research based upon stock market reactions to regulatory liberalisations suggests that large banks will benefit greatly from this legislative change. The authors' examination of the large bank holding companies that were first to file for the new powers indicates that they are highly profitable and rely more on non-interest income. They also operate with lower capital than other banks. Surprisingly, many smaller banks are among the first filer group.