Legal Definitions - Glass–Steagall Act

The Glass–Steagall Act, also known as the Banking Act of 1933, is a federal law that aims to protect bank depositors by limiting the securities-related activities of commercial banks. Specifically, the law prohibits banks from owning brokerage firms or engaging in the brokerage business.

For example, under the Glass–Steagall Act, a commercial bank cannot offer investment services or sell securities to its customers. It also cannot own a brokerage firm or engage in any activities related to buying or selling securities.

The purpose of the Glass–Steagall Act is to prevent conflicts of interest and protect the stability of the banking system. By separating commercial banking from investment banking, the law aims to prevent banks from taking excessive risks with their customers' deposits.