The Changing Landscape of the Financial Services Industry: What Lies Ahead?

[...]This paper examines some of the potential consequences ofGLB for the structure of the U.S. financial services industry. Init, we ask how the industry may evolve as this new legislationinteracts with the consolidation trend already under way, whattypes of mergers are most likely to occur, and how profitableand risky the resulting firms might be.We begin by reviewing the consolidation trend that hasoccurred within the U.S. banking industry over the past tenyears. We explore reasons for the trend, focusing on the factorsresponsible for the recent pick-up in its pace. Consolidationaccelerated following the 1980s deregulation of restrictions thatprohibited bank expansion across geographic markets and intoother financial services. If history is any guide, we ought to seefurther consolidation following the passage of GLB. Stock pricereaction to its passage suggests that market participants alsoanticipate more financial consolidation, especially in the lifeinsurance business.[...]