WASHINGTON — The Gramm-Leach-Bliley Act did more than free banks, insurers, and brokers to buy one other, though that was its main intention.

A year after enactment, here’s what has happened with its three other main pieces.


The best thing to come out of Gramm-Leach-Bliley for community banks is about to kick in.

The Federal Home Loan Bank System is expected to start accepting both farm and small-business loans this winter as collateral for advances to banks with less than $500 million of assets. The move should ease the liquidity crunch many small banks are experiencing.

The Federal Housing Finance Board, the system’s regulator, is close to approving plans from seven of the 12 Home Loan banks that describe how the new lending will be conducted, according to agency spokesman Steve Hudak. The five other Home Loan banks are expected to file their plans soon.

The Federal Home Loan Bank of Des Moines is expected in December to become the first to actually make an advance against a farm or small-business loan, Mr. Hudak said.

Not only is collateral being broadened, but also banks can use the funds for a wider array of loans.

Since the law made it easier for banks to clear the eligibility hurdles, nearly 500 have joined a Home Loan bank, bringing total membership to 7,720, Mr. Hudak said. In the last year, advances increased roughly 18%, to $430 billion.

Gramm-Leach-Bliley also made membership for thrifts voluntary. None has quit the system, however, since enactment.

The new law also requires the Finance Board to overhaul the capital requirements applied to Home Loan banks. That project is still in the works, with comments due Nov. 20 on a proposed framework. Mr. Hudak said the board is slated to vote on the plan Dec. 20. If this is done on schedule, the 12 Home Loan banks would have until next September to explain how each plans to meet the new capital standards.


New consumer protections kick in next July, and any company offering a financial product or service must comply. The protections include annual notices explaining how the customer’s data are used. The law prevents financial companies from sharing information with unrelated third parties unless they get the customer’s permission.

Congress, as well as some state legislatures, is expected to return to the issue next year, mainly to consider whether this “opt-in” requirement should be broadened to include data sharing among affiliated companies. “Early next year we’re going to be back in huge fights over privacy,” predicted American Bankers Association lead lobbyist Edward L. Yingling.

Even without legislation, however, House Banking Committee Chairman Jim Leach said privacy protections will continue to expand. This is because any company that offers a product deemed “financial” by the law or by regulators must comply with the new rules. As regulators expand the definition of financial, more products and more companies will be covered, he said.

That should gain the banking industry allies in its fight to stave off stricter limits, Mr. Yingling said.

But Treasury Under Secretary Gary Gensler predicted that lawmakers will eventually toughen Gramm-Leach-Bliley’s privacy provisions.

“This is all going one way,” he said. “I think the Congress will come back and do more in the future because the American people want more.”


The law lengthened the Community Reinvestment Act exam cycle for banks with less than $250 million of assets to every five years if they earn an “outstanding” rating and every four years for banks with “satisfactory” ratings.

But regulators are still working on rules to enforce a CRA compromise that led to the law’s enactment. Sen. Phil Gramm, R-Tex., insisted that community groups receiving funds from banks be held accountable.

The law requires these groups to file annual reports detailing how they spent the money. The federal agencies charged with enforcing this provision closed the comment period on their proposed rule on July 21, but it has not been adopted yet. Though neither banks nor community groups like the proposal, it is not expected to change much before being adopted this year.

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