Diversifying products and skills
What prompts the creation of London's new financial conglomerates? And why have most of the securities houses been so willing to surrender their independence? Clearly, the deregulation of stockbroking has presented different opportunities to different financial entities. To a US investment bank, for example, it will afford an entree to market making and dealing in UK securities without having to operate through a local broker or jobber. While few have actually bought directly into firms, they clearly intend to be active through the creation of their own inhouse teams and then applying directly to the London Stock Exchange for membership. The general rationale for this approach is that they can build on existing expertise and achieve the same goals at lower cost.
To UK merchant and commercial banks - authors of most of Britain's new financial groupings - acquisition has largely been predicated by a need to diversify their range of financial products and skills in a climate where earnings from major corporate and government business is under extraordinary pressure. This has included the expansion of corporate advisory services to the distribution and trading of UK equities and commercial paper.