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It is an established policy in the United States to separate commercial banking (the business of taking deposits and making commercial loans) from other commercial activities. The separation of banking and commercial activities is achieved by federal and state banking laws, which enumerate the powers that banks may exercise, the activities that banks may engage in, and the investments that banks may lawfully make, and expressly exclude banks from certain activities or relationships. Some of these provisions could be circumvented if a nonbank company could carry on banking activities through a banking subsidiary and nonbanking activities either itself or through a nonbanking subsidiary.
On April 24, 2001 the European Commission presented a proposal for a Directive1 introducing supplementary supervision of financial conglomerates (the Proposed Directive). The Proposed Directive requires a closer coordination among supervisory authorities of different sectors of the financial industry and leads to changes in the number of existing Directives relating to the supervision of credit institutions, insurance undertakings and investment firms.