. the historic statutory separation of banking and insurance was altered in 1999 when the congress enacted the gramm - leach - bliley act ( glb act ) and allowed well - managed and well - capitalized banks to affiliate with insurance underwriters and insurance agencies. that brings the federal reserve and state insurance professionals into the same circle. to date, about 630 bank holding companies have chosen to become financial holding companies, the vehicle under the glb act through which bank, insurance, and securities affiliations may take place. of those, about 165 ( more than 25 percent ) use the new glb act authority to engage in insurance agency activities while only 26 ( fewer than 5 percent ) are engaged in underwriting insurance that is unrelated to credit. all of these companies must comply with state laws governing the sales and underwriting of insurance. the significant interest by banking organizations in selling insurance makes sense. the banking system is still dominated, in number, by small banking organizations. more than 90 percent of the banks in this country have total assets of less than $ 500 million each. banks of all sizes have quite large branch networks - as of the end of last year there were almost 67, 500 branches of the more than 7, 800 commercial banks in this country. entering the insurance market as an agent, not as an underwriter, fits naturally with the nature of banking as an industry dominated by smaller providers. more broadly, banking organizations have developed good networks and systems for delivering financial products to consumers - a business model that does not always require manufacture of the product. insurance is increasingly viewed not just as a product that stands on its own, but as an important item on a menu of financial vehicles that help consumers create a portfolio of financial assets, manage their financial risks, and plan for their financial security. many consumers prefer to make their financial decisions and purchase financial planning products at a single location that offers a full package of financial services. thus, banking organizations are a natural alternative delivery system for insurance underwriters looking to expand their customer base. the affiliation of banks and insurance underwriters has been more modest. one large banking organization has affiliated with a large insurance underwriter, and one large insurance underwriter has acquired a small bank. in addition, several foreign banks with insurance operations abroad have begun to offer both insurance and banking products in the united states. before the glb act, these foreign banking organizations were required to choose between operating as a bank in the united states or engaging in insurance activities

insurance supervisors to enhance our mutual understanding of our supervisory frameworks and to facilitate the sharing of supervisory information and consumer complaints. to date, we have information - sharing agreements with nearly all of the states and the district of columbia. while not all of these agreements have been spurred by an important affiliation that requires information sharing, the process of establishing these agreements has introduced us to the appropriate authorities in these states and begun a relationship that will improve our supervisory cooperation and effectiveness if difficulties develop down the road. it is important to have open lines of communication among supervisors and a framework and relationship with the states that prepare us to respond to developments as needed. we are also working with the naic and the state insurance supervisors to compare supervisory approaches for identifying and resolving troubled organizations. banks and insurance companies must comply with very different minimum capital requirements - requirements that are tailored to their businesses. it is important that in circumstances in which affiliated banks and insurance companies are experiencing financial stress, the bank and insurance supervisors be able to work cooperatively to resolve that stress without taking steps that help one regulated institution at the expense of the other. we think that efforts to understand each other ’ s supervisory tools and processes for identifying and resolving troubled institutions will allow functional regulators to work more effectively and cooperatively to find an early and effective solution to troubled institutions. to improve our own understanding of the issues developing in the insurance industry, we have also established resource centers at the board and at the federal reserve bank of boston to monitor developments in the insurance industry. we particularly value the fruitful relationships that we have had with organizations such as the naic, which has welcomed our input and worked to help educate us on important insurance issues, and with various state insurance supervisors, who have fostered cross - training opportunities for us. state regulation of multi - state entities when senator neil breslin, chairman of ncoil ’ s state - federal relations committee, testified earlier this month before the house financial services committee, he identified several initiatives that the states are taking to address issues involving modernization of state insurance regulation. ncoil is to be commended for initiating these efforts. while there are many structural differences between the banking and insurance industries, i would like to share with you the experience of the banking supervisors in maintaining a viable state banking supervision option in an increasingly interstate banking environment. until the early 1980s, banks were prohibited by a combination of federal and state law from establishing branches, or even bank affiliates, across state lines. in the mid - 1980s, several