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Reconsidering the Separation of Banking and Commerce

57 Pages Posted: 13 Mar 2011 Last revised: 29 Sep 2015

Mehrsa Baradaran

University of Georgia School of Law

Date Written: March 1, 2011


This Article examines the long-held belief that banking and commerce need to be kept separate in order to ensure a stable banking system. Specifically, the Article criticizes the Bank Holding Company Act (BHCA), which prohibits non-banking entities from owning banks. The recent banking collapse has caused and exacerbated several problematic trends in U.S. banking, especially the conglomeration of banking entities and the homogenization of assets. The inflexible and outdated provisions of the BHCA are a major cause of this movement toward conglomeration and homogenization. Since the enactment of the BHCA, the landscape of U.S. banking has changed dramatically. The strict separation of commerce and banking embodied in the BHCA does not reflect these changes. This article argues that allowing commercial firms to own banks could lead to a more diversified and less risk-prone financial structure, and gives examples of possible changes and potential ownership structures that could reduce risks in the financial system.

Keywords: Banking, Finance, Corporations

JEL Classification: G21, G28

Suggested Citation

Baradaran, Mehrsa, Reconsidering the Separation of Banking and Commerce (March 1, 2011). George Washington Law Review, Vol. 80, p. 385, 2012. Available at SSRN:

Mehrsa Baradaran (Contact Author)

University of Georgia School of Law ( email )

225 Herty Drive
Athens, GA 30602
United States
646-382-2632 (Phone)

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