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A universal bank is a type of bank which participates in many kinds of banking activities and is both a commercial bank and an investment bank as well as providing other financial services such as insurance.[1] These are also called full-service financial firms, although there can also be full-service investment banks which provide wealth and asset management, trading, underwriting, researching as well as financial advisory.
The concept is most relevant in the United Kingdom and the United States, where historically there was a distinction drawn between pure investment banks and commercial banks. In the US, this was a result of the Glass–Steagall Act of 1933. In both countries, however, since the 1980s the regulatory barrier to the combination of investment banks and commercial banks has largely been removed, and a number of universal banks have emerged in both jurisdictions.
In other countries, the concept is less relevant as there was no regulatory distinction between investment banks and commercial banks. Thus, banks of a very large size tend to operate as universal banks, while smaller firms specialised as commercial banks or as investment banks. This is especially true of countries with a European Continental banking tradition.
Universal banking and private banking often coexist, but can exist independently. The provision of many services by universal banks can lead to long-term relationships between universal banks and their customers.[2]
- ^ "Is There a Future?". The Economist. September 18, 2008.
- ^ Fohlin, C. (2007). Finance Capitalism and Germany's Rise to Industrial Power. Studies in Macroeconomic History. Cambridge University Press. ISBN 978-1-139-46154-2. Retrieved 2023-10-29.