Current role of the Federal Reserve Three years ago, the Congress concluded more than twenty years of negotiation and produced a major reform of financial services laws and regulations. In very brief summary, this new law allows banks, securities firms, and insurance underwriters to function using common ownership by a newly authorized entity called a financial holding company.
The new law also provides a mechanism for determining prospectively which products or services fit the definition of "financial in nature" or "incidental to financial activity" and therefore qualify as appropriate for a financial holding company. The Federal Reserve has been accorded a major role in deciding these issues and has also been assigned the role of umbrella supervisor of financial holding companies.