The Gramm-Leach-Bliley Financial Modernization Act of 1999 ("GLB") is the recently enacted federal financial modernization legislation that modernized the way the U.S. banking, securities and insurance industries can provide various financial services to customers. The State of Missouri implemented these innovations for state chartered banks in June of 2000 with the enactment of Senate Bill 896.

GLB also addressed such issues as consumer privacy and community reinvestment. The following is a brief outline of GLB, highlighting some of the major accomplishments of the legislation:

GLB authorized the combination of banking, securities and insurance companies in the same corporate structure, removing Depression era barriers.

  • Financial holding companies (FHC's) authorized
  • FHC may own banks, insurance underwriters, securities underwriters
  • FHC may conduct any activity that is financial in nature or incidental or complementary to financial activity, including "merchant banking," i.e., equity investing
  • "Financial subsidiaries" authorized for national banks
  • May engage in securities, insurance and other financial activities banks cannot perform directly, including securities underwriting (Missouri law already authorized certain of these activities for state institutions)
  • Separate capitalization and limited investment required for financial subs
  • Implemented "functional regulation" -- banking, securities and insurance regulators each concentrate on regulatory expertise area, not all activities of certain companies
  • Expanded SEC jurisdiction over banks involved in securities activities
  • Prohibits state discrimination against banks involved in insurance agency activities

GLB strengthened consumer rights

  • Financial Privacy
  • Requires all financial institutions (banks, insurance firms, securities firms, etc.) to:
    • Allow customer "opt-out" of financial information sharing with unaffiliated third parties (without specific "opt-out" submitted by customer, information can be shared)
    • Not share customer account numbers with unaffiliated third parties
    • Establish and disclose a privacy policy
  • Limits do not apply to disclosure to affiliated companies
  • Compliance with these restrictions not required until July 1, 2001
  • Allows states to be more restrictive, such as requiring institutions to get specific approval ("opt-in") from customers before making disclosures to non-affiliated third parties
  • Requires certain ATM disclosures regarding fees, not finally effective until Dec. 31, 2004

GLB amended Community Reinvestment Act ("CRA") (CRA is a federal law requiring banks to meet entire home community credit needs, including low and moderate income neighborhoods.)

  • Establishes satisfactory CRA ratings as requirement for new powers under GLB
  • Requires disclosure of agreements between financial institutions and third parties
  • Requires fewer CRA exams for highly rated, small-sized banks

GLB terminated "unitary thrift loophole" -- terminated prior power of commercial companies, such as retail stores, to acquire a single federal savings association

GLB instituted Federal Home Loan Bank reform -- increased community bank access to FHLB loan funding

For additional information concerning securities brokerage and insurance activities:

Bank Securities Brokerage Summary
Bank Insurance Agency Activities Summary

For more information on GLB and its effect on the State of Missouri, please contact the Missouri Division of Finance at 573-751-3242, or email: