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Auniversal bank is a type ofbank which participates in many kinds of banking activities and is both acommercial bank and aninvestment bank as well as providing otherfinancial services such asinsurance.[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 theUnited Kingdom and theUnited States, where historically there was a distinction drawn between pureinvestment banks andcommercial banks. In the US, this was a result of theGlass–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 aEuropean Continental banking tradition.
Universal banking andprivate 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]
Following the1907 financial crisis, the U.S. Monetary Commission wanted to understand the major financial systems of the world. A treatise byJakob Riesser, the director of a Berlin bank, argued that the German universal banking system possessed beneficial characteristics that allowed it to efficiently provide inexpensive capital to industry and promote growth.Alexander Gerschenkron also advanced the hypothesis that universal banking was critical to Germany's industrialization. In 2007,Emory University economistCaroline Fohlin has questioned the validity of the Gerschenkron hypothesis.[2]
Notable examples of universal banks includeBank of America,Citigroup,JPMorgan Chase, andWells Fargo of the United States;UBS andCredit Suisse ofSwitzerland;BNP Paribas,Crédit Agricole andSociété Générale ofFrance;Barclays,HSBC,Lloyds Banking Group,NatWest Group andStandard Chartered of theUnited Kingdom;Deutsche Bank ofGermany;ING Bank of theNetherlands;RBC ofCanada;Standard Bank Group ofSouth Africa.
Examples of pure investment banks generally do not exist except in America, and include theBank of New York Mellon,Goldman Sachs, andMorgan Stanley.[citation needed]
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