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Barry L. Bulakites

President of Table Bay Financial Network, Inc.

After the recent demise of Enron, the financial services industry was subjected to intense government scrutiny and an onslaught of fraud allegations against top executives. JP Morgan Chase and Merrill Lynch were also targeted, while Lehman Brothers declared bankruptcy. Nevertheless, new technologies make the financial services industry more customer-focused and competitive. For the continued success of this industry, regulatory measures must be made foolproof.

Since the 1990s, the financial services industry has experienced numerous crises, such as the dot-com bubble, Black Monday, and the subprime mortgage crisis. The Gramm-Leach-Bliley Act and other stringent regulations are a result of these crises. However, the financial services industry continues to face numerous obstacles. To overcome these obstacles, the United States requires a comprehensive strategy for economic reform.

United States financial markets are among the largest and most liquid in the world. The finance and insurance industries contributed 7.2% of the U.S. gross domestic product in 2014. This represents a tremendous amount of economic activity and job creation. The U.S. Department of Labor estimated that 888,600 people were employed in the securities and investment industry. Despite these obstacles, the industry is expanding at an astounding rate.

A more open financial services industry could also attract more foreign companies. Japan has a universal banking system, and banks dominate its equity market, but historically it has not been as competitive as the United States. As a result, the Japanese government has already begun to promote competition in the financial services industry. Japan may, in the future, attempt to create new niches for American players. For example, there is a chance that a foreign bank will acquire a Japanese regional bank with a robust retail network. However, such a purchase is currently prohibitively expensive.

Merging with a bank is another way to establish a new business type. Thus, the bank would retain its original brand while incorporating the acquired company into its holding company. However, this does not guarantee the new company's success. For instance, large insurance companies have already begun to develop brokerage firms. However, this strategy has not produced the desired results, particularly in profits and market share.

As a result of these trends, foreign banks now represent a growing proportion of the U.S. market. As of June 1988, there were 265 foreign banking institutions with $617 billion in assets in the United States. This accounted for roughly 20% of commercial banking assets and 25% of business loan assets. In addition, the four largest banks in California are Japanese. This indicates that Japanese banks control nearly a quarter of the retail banking market in Japan.

New factors are influencing the industry. First, the regulatory landscape is changing. This new environment requires businesses to adapt quickly to new obstacles. For instance, the expanding regulatory environment has focused on cybersecurity and social and environmental issues. Second, employees seek the company's purpose. This is an essential competitive factor moving forward.

The size of the global market also influences the U.S. financial services industry. Some companies in the sector are international and have headquarters in the United States. In addition, they own property in both developing and developed nations. Their expansion is contingent on the demand for their products. As a result, these organizations are more competitive in the global market.

Similar to other industries, globalization is occurring in the financial services industry. The number of commercial banks operating in foreign markets has increased due to international trade. Additionally, large investment banks compete internationally. They advise on mergers and acquisitions and engage in global stock trading. Reuters also provides a global trading system that connects derivative markets. This provides firms with a more innovative and competitive environment. It also increases the variety of financial products.

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