The Gramm--Leach--Bliley Act: optimal interest margin effects of commercial bank expansion into insurance underwriting

Jyh-Horng Lin, Jeng-Yan Tsai and Paichou Huang

Applied Economics Letters, 2012, vol. 19, issue 15, pages 1459-1463

Abstract: We examine the optimal bank interest margin effects of the Gramm--Leach--Bliley Act (GLBA), particularly allowing commercial banks to engage in insurance underwriting. This article models bank equity explicitly integrating the Down-and-Out Call (DOC) option of insurance underwriting with the standard call option of commercial banking activities. We conclude that commercial banks may not appear to benefit from broader product mix when the expansion of insurance underwriting is relatively large scale or insurance asset quality is relatively low.

Date: 2012
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