The trend to integrating different types of financial firms, such as banks and insurers, may be on the wane, according to a new report from the Paris-based Organization for Economic Co-operation and Development.

The October issue of Financial Market Trends notes that the virtues of the business model of fully integrated financial services groups, encompassing banking and insurances services as well as other financial services, may be overplayed. “Recent research suggests that the benefits from combining different types of financial services under one roof may be somewhat lower than many observers had previously thought,” the report says.

It observes that much of the recent significant merger and acquisition activity in the financial services sector appears to have been concentrated within the same sector, often driven by consolidation efforts. “Against this background, it seems perhaps to be less clear than in the past whether there will be a continuation of the growing trend towards one-stop banking or the fully integrated conglomeration model,” it concludes.

“The trend to large complex organisations that offer the full range of products may be replaced by more flexible and less integrated (though not necessarily smaller) financial groups that offer a more limited range of core services.”

The OECD says that the market will ultimately determine how this plays out, although “political interference still plays a role”. It notes that public policy in the form of deregulation has played, and still can play, an important catalyst role. “The example of Basel II shows that public policy can also play a facilitating, or even encouraging, role via the adoption of global standards,” it says.

The reports concludes that it is unlikely that the pace of overall financial sector convergence will slow down. “The future financial landscape will be characterised by ever stronger interdependences and inter-linkages among financial institutions,” it predicts. “Competitive forces, although tempered by political interference in many jurisdictions but strongly supported by technology and new financial instruments, will dictate this pace.”