CP

efficiency of our capital markets. Recognizing this fact, Congress has authorized some

major changes, and more are on the horizon.

The result of the ongoing regulatory changes has been a blurring of the distinc-

tions between the different types of institutions. Indeed, the trend in the United States

today is toward huge financial service corporations,which own banks, S&Ls, in-

vestment banking houses, insurance companies, pension plan operations, and mutual

funds, and which have branches across the country and around the world. Examples of

financial service corporations, most of which started in one area but have now diversi-

fied to cover most of the financial spectrum, include Merrill Lynch, American Ex-

press, Citigroup, Fidelity, and Prudential.

Panel a of Table 1-2 lists the ten largest U.S. bank holding companies, and Panel b

shows the leading world banking companies. Among the world’s ten largest, only two

(Citigroup and Bank of America) are from the United States. While U.S. banks have

grown dramatically as a result of recent mergers, they are still small by global stan-

dards. Panel c of the table lists the ten leading underwriters in terms of dollar volume

of new issues. Six of the top underwriters are also major commercial banks or are part

of bank holding companies, which confirms the continued blurring of distinctions

among different types of financial institutions.

Identify three ways capital is transferred between savers and

borrowers.

What is the difference between a commercial bank and an investment

bank?

Distinguish between investment banking houses and financial

intermediaries.

List the major types of intermediaries and briefly describe the primary

function of each.

Financial Institutions 21

TABLE 1-2 Ten Largest U.S. Bank Holding Companies and World Banking Companies,

and Top Ten Leading Underwriters

PANELA PANELB PANELC

U.S. Bank Holding Companiesa World Banking Companiesb Leading Underwritersc

Citigroup Inc. Deutsche Bank, Frankfurt Merrill Lynch & Co.
J.P. Morgan Chase Citigroup, New York Salomon Smith Barneyd
Bank of America BNP Paribas, Paris Morgan Stanley
Wells Fargo & Co. Bank of Tokyo-Mitsubishi, Tokyo Credit Suisse First Boston
Bank One Bank of America, Charlotte, N.C. J.P. Morgan
Metlife Inc UBS, Zurich Goldman Sachs
First Union HSBC Holdings, London Deutsche Bank
FleetBoston Financial Fuji Bank, Tokyo Lehman Brothers
U.S. Bancorp Sumitomo Bank, Osaka UBS Wartburg
SunTrust Banks Inc. Bayerische Hypo Vereinsbank, Munich Bank of America Securities

Notes:
aRanked by total assets as of December 31, 2000; see http://www.americanbanker.com.
bRanked by total assets as of December 31, 1999; see http://www.financialservicefacts.org/inter__fr.html.
cRanked by dollar amount raised through new issues in 2000; see The Wall Street Journal, January 2, 2001, R19.
dOwned by Citigroup.

An Overview of Corporate Finance and the Financial Environment 19