Vanderbilt Journal of Transnational Law

First Page



The European Community recently adopted the Second Banking Directive, which will lead to liberalized banking regulation throughout the Member States. Community banks will engage in a broad range of activities including commercial lending, selling securities, and issuing insurance. This broad range of activities will allow Community banks to compete more efficiently in global markets. In contrast, the strict regulatory structure of the United States includes the Glass-Steagall Act, which separates investment banking and commercial banking. This separation creates inefficiencies that reduce the competitiveness of United States banks in both international and United States markets. These inefficiencies are highlighted by the innovative Second Banking Directive. This Note will summarize the important provisions of the Second Banking Directive, including the single license system, which allows banks to operate in all twelve Member States after they have been licensed by one Member State, and the treatment of non-Community states or "third countries." Next, this Note will review the history of the Glass-Steagall Act, its recent modifications by regulatory agencies and courts, and the prospects for congressional reform. The author then examines the effects of the Second Banking Directive on the Community and the United States. Generally, Community banks will consolidate and compete more effectively in the international markets, including that of the United States. Finally, the author argues that both United States and Community banks will benefit more from continued United States regulatory action than from sweeping United States legislation.