Financial services is a term used to refer to the services provided by the finance industry. Banks, insurance companies, investment banks, and brokerages, are examples of the types of firms forming this industry: They provide money and investment and related services.

Contents

1 USA: Gramm-Leach-Bliley Act 2 Market 3 Glossary 4 Large financial services companies 4.1 Industrial companies with large financial services operation

USA: Gramm-Leach-Bliley Act

The term financial services became more prevalent in the US partly as a result of the Gramm-Leach-Bliley Act of the late 1990s which allowed different types of companies in the US financial services industry to merge. Critics of this act say the term financial services attempts to make the unison of these operations sound natural, ignoring the possible problems from combining them, such as conflicts of interest and monopolization. Others, noting that many of the restrictions abolished by the Gramm-Leach-Bliley Act had never existed in other countries or had been abolished earlier than in the USA, say the term financial services is a natural one in long term use which means nothing more than its constituent words.

In the USA almost every company now which previously described themselves as a bank, insurance company, or brokerage house, now describes themselves in some way as a financial services institution. Allstate Insurance, for example, now provides CDs and investment brokerage services. Bank of America offers full featured brokerage products, while E-trade has expanded into offering bank accounts and loans. Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank; keeps their original brands; and adds it to its holding company simply to diversify its earnings. Outside the United States, for example in Japan, it is also permitted to have non-financial services companies within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. This is essentially the style of Citigroup and JP Morgan Chase.

In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company. This is the style of Washington Mutual and Wells Fargo.

Market

Financial services is the largest and most profitable industry in the world. Financial services, while as a whole industry is slow growing, is also extremely fragmented, with the largest company (Citigroup), only having a 3 percent US market share. In contrast, the largest home improvement store in the US, Home Depot, has a 30 percent market share, and the largest coffee house Starbucks has a 32 percent market share, etc. Despite this fragmentation, these companies are as a group by far the most profitable in the world, and if any grew to the same market share percentages as any other retail industry, the potential profit would be enormous.

Glossary

Glossary for reading financial services reports

• NCL - net credit losses
• NIM - net interest margin
• NPA - non performing assets

Large financial services companies

1. Citigroup (bank)
2. JP Morgan Chase & Co (bank)
3. American International Group (insurance)
4. Bank of America (bank)
5. Fannie Mae (credit)
6. HSBC Group (bank)
7. ING Group (insurance, bank)
8. Royal Bank of Scotland (bank)
9. Berkshire Hathaway (insurance)
10. BNP Paribas (bank)
11. Freddie Mac (credit)
12. UBS AG (bank)
13. Wells Fargo (bank)

Industrial companies with large financial services operation

1. General Electric (insurance, credit, through four subsidiaries ([1] (http://www.ge.com/en/company/investor/GEFinancialStrength.htm)))
2. General Motors (credit through GMAC)
3. Toyota Motor (credit)
4. DaimlerChrysler (credit)