A universal bank is a type of

bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

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 Financial services are service (economics), economic services tied to finance provided by financial institutions. Financial services encompass a broad range of tertiary sector of the economy, service sector activities, especially as concerns finan ...

such as

insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect ...

. 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 The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

and the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

, 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 Private banking is a general description for banking, investment and other financial services provided by banks and financial institutions primarily serving high-net-worth individuals (HNWIs) – those with very high income or substantial asset ...

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.

History

Following the 1907 financial crisis, the U.S. Monetary Commission wanted to understand the major financial systems of the world. A treatise by Jakob 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. More recently,

Emory University Emory University is a private university, private research university in Atlanta, Georgia, United States. It was founded in 1836 as Emory College by the Methodist Episcopal Church and named in honor of Methodist bishop John Emory. Its main campu ...

economist Caroline Fohlin has questioned the validity of the Gerschenkron hypothesis.

Examples

Notable examples of universal banks include

Bank of America The Bank of America Corporation (Bank of America) (often abbreviated BofA or BoA) is an American multinational investment banking, investment bank and financial services holding company headquartered at the Bank of America Corporate Center in ...

, Citigroup, JPMorgan Chase, and

Wells Fargo Wells Fargo & Company is an American multinational financial services company with a significant global presence. The company operates in 35 countries and serves over 70 million customers worldwide. It is a systemically important fi ...

of the United States; UBS and

Credit Suisse Credit Suisse Group AG (, ) was a global Investment banking, investment bank and financial services firm founded and based in Switzerland. According to UBS, eventually Credit Suisse was to be fully integrated into UBS. While the integration ...

Switzerland Switzerland, officially the Swiss Confederation, is a landlocked country located in west-central Europe. It is bordered by Italy to the south, France to the west, Germany to the north, and Austria and Liechtenstein to the east. Switzerland ...

; BNP Paribas, Crédit Agricole and Société Générale of

France France, officially the French Republic, is a country located primarily in Western Europe. Overseas France, Its overseas regions and territories include French Guiana in South America, Saint Pierre and Miquelon in the Atlantic Ocean#North Atlan ...

; Barclays,

HSBC HSBC Holdings plc ( zh, t_hk=滙豐; initialism from its founding member The Hongkong and Shanghai Banking Corporation) is a British universal bank and financial services group headquartered in London, England, with historical and business li ...

, Lloyds Banking Group, NatWest Group and Standard Chartered of the

; Deutsche Bank of

Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...

; ING Bank of the

Netherlands , Terminology of the Low Countries, informally Holland, is a country in Northwestern Europe, with Caribbean Netherlands, overseas territories in the Caribbean. It is the largest of the four constituent countries of the Kingdom of the Nether ...

; RBC of

Canada Canada is a country in North America. Its Provinces and territories of Canada, ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, making it the world's List of coun ...

; Standard Bank Group of

South Africa South Africa, officially the Republic of South Africa (RSA), is the Southern Africa, southernmost country in Africa. Its Provinces of South Africa, nine provinces are bounded to the south by of coastline that stretches along the Atlantic O ...

. Examples of pure investment banks generally do not exist except in America, and include the Bank of New York Mellon, Goldman Sachs, and Morgan Stanley.

References

Banking Banking terms Separation of investment and retail banking {{bank-stub