entity called a financial holding company. the new law also provides a mechanism for determining prospectively which products or services fit the definition of " financial in nature " or " incidental to financial activity " and therefore qualify as appropriate for a financial holding company. the federal reserve has been accorded a major role in deciding these issues and has also been assigned the role of umbrella supervisor of financial holding companies. as such, the federal reserve will rely as much as possible on the functional regulators of a company's subsidiary banks, securities firms, and insurance entities, but will oversee the financial soundness of the consolidated organization, including the activities that are otherwise unregulated. our focus is the potential risk these nonbank activities can present to banks. in addition, the fed, in conjunction with the treasury department, will respond to requests for determination as to whether new products and services meet the test for " financial in nature " or " incidental to financial activity " to be approved for financial holding companies. this change has made our laws more consistent with changes that occurred in the marketplace and has provided a mechanism for allowing new products as the marketplace evolves. conclusion the past decade has been a time of dynamic change in the financial services industry, and there are no signs that the pace of change will abate. an important component of this change is the growing global reach of many of our financial entities. financial regulators throughout the world will need to continue responding to these marketplace changes and providing oversight consistent with our safety and soundness responsibilities. for that reason, i look forward to today's discussion of financial markets regulation.

legal attention to sorting financial products by industry designation and attempting to confine products with certain characteristics to specific industries. for example, in the 1980s and 1990s we devoted considerable attention to the manner in which a money market fund account with third - party access offered by a securities firm differed from a bank - sponsored interest - bearing checking account. another cross - industry debate focused on whether fixed or variable rate annuities were fundamentally insurance products, bank products, or simply annuities. consumers, not surprisingly, have indicated minimal interest in these legal and regulatory squabbles and have just made their own evaluation of how the product characteristics fit with their personal financial needs. these three factors, the advanced technology, the move toward larger and more complex institutions, and the blurring of financial products - - in turn have also substantially changed the manner in which institutions measure and manage risk. those management innovations, themselves, are not only of great interest and importance to regulatory agencies, but they also are forces driving further change. simply because institutions can measure and manage risk better, they are able to create products that make markets more efficient. issues peculiar to the united states in the united states, our tradition of separating the financial, securities, and insurance industries and, more broadly, separating banking and commerce has consumed a significant portion of our regulatory attention in a manner not required of european countries that have adopted the universal bank concept. in addition, we have a tradition of multiple chartering options for full - service banks. this tradition flows from the previously described dispersion of legal and regulatory authority. therefore, not until the abraham lincoln administration in 1864 was our national banking authority created, and only after the 1929 wall street panic, was a national securities regulator created. today, although nationally chartered banks hold the majority of u. s. banking assets ( 55 percent ), the states continue to charter most insured commercial banks ( 74 percent ). we continue to have very active state bank chartering authorities in all fifty states. the insurance industry is the last bastion of a financial services industry without a federal regulator. to this day, insurance regulation continues under the direction of state insurance regulators. fundamental regulatory changes in whatever form, financial services regulation is adapting to the fundamental changes under way in our respective industries. a dramatic change affecting all of the financial services industries is the shift from a paper - based to an electronic commerce environment. this change requires new definitions for certain basic business practices - - for example, a redefinition of what