The Globalization of Financial Services

The Globalization Of Financial Services

In this age of globalization, the key to survival and success for many financial institutions is to cultivate strategic partnerships that allow them to be competitive and offer diverse services to consumers. In examining the barriers to - and impact of - mergers, acquisitions and diversification in the financial services industry, it's important to consider the keys to survival in this industry:

1. Understanding the individual client's needs and expectations

2. Providing customer service tailored to meet customers' needs and expectations

In 2008, there were very high rates of mergers and acquisition (M&A) in the financial services sector. Let's take a look at some of the regulatory history that contributed to changes in the financial services landscape and what this means for the new landscape investors now need to traverse.

Diversification Encouraged by Deregulation

Because large, international mergers tend to impact the structure of entire domestic industries, national governments often devise and implement prevention policies aimed at reducing domestic competition among firms. Beginning in the early 1980s, the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn-St. Germaine Depository Act of 1982 were passed.

By providing the Federal Reserve with greater control over non-member banks, these two acts work to allow banks to merge and thrift institutions (credit unions, savings and loans and mutual savings banks) to offer checkable deposits. These changes also became the catalysts for the dramatic transformation of the U.S. financial service markets in 2008 and the emergence of reconstituted players as well as new players and service channels. (For more on this, check out our Financial Crisis Survival Guide special feature.)

Nearly a decade later, the implementation of the Second Banking Directive in 1993 deregulated the markets of European Union countries. In...