Banking Practice Exam 2025 - Free Banking Practice Questions and Study Guide

The Gramm-Leach-Bliley Act is the correct answer because it was enacted in 1999 and fundamentally changed the face of the financial services industry by allowing bank holding companies to engage in a wider range of financial activities. Prior to this act, the Glass-Steagall Act effectively separated commercial banking from investment banking and insurance services, limiting the scope of services that financial institutions could offer.

With the passage of the Gramm-Leach-Bliley Act, bank holding companies gained the ability to affiliate with insurance companies and securities firms, enabling them to offer a more comprehensive range of services under one corporate umbrella. This increased structural and investment flexibility facilitated broader financial product offerings and allowed for greater competition in the marketplace.

In contrast, the Bank Holding Company Act primarily focuses on the regulation of bank holding companies and does not specifically address investment flexibility in the same way. The other acts listed—such as the Federal Deposit Insurance Corporation Improvement Act and the Financial Institutions Reform, Recovery and Enforcement Act—focus on bank regulation and safety measures rather than enhancing flexibility in structure or investment choices for bank holding companies.