Banking Practice Exam

The Gramm-Leach-Bliley Act is significant for its role in modernizing the banking industry and facilitating the formation of financial holding companies. One of the key provisions of this act is its delegation of regulatory oversight of these entities to the Federal Reserve. Financial holding companies can engage in a variety of financial services, including commercial banking, investment banking, and insurance services, and the Federal Reserve is tasked with ensuring they operate within a sound regulatory framework.

The other acts listed do not assign this particular responsibility. For instance, the Riegle-Neal Interstate Banking and Branching Efficiency Act focuses primarily on enabling banking institutions to operate across state lines, while the Financial Institutions Reform, Recovery and Enforcement Act and the Federal Deposit Insurance Corporation Improvement Act aim to address issues like the savings and loan crisis and to improve the financial stability of institutions, respectively. However, none of these pieces of legislation transferred regulatory authority over financial holding companies to the Federal Reserve as the Gramm-Leach-Bliley Act did.