Financial Services Competitive Enhancement Act

Financial Services Competitive Enhancement Act - Amends the Bank Holding Company Act of 1956 to allow bank holding companies to own shares of certain "qualified securities affiliates." Defines a "qualified securities affiliate" to mean any company which: (1) is a broker or dealer under the Securities Exchange Act of 1934; and (2) engages only in activities permitted by this Act.

Allows any qualified securities affiliate to: (1) buy, sell, deal in, or underwrite asset-backed securities, municipal securities, and securities in which a national bank may deal or underwrite; (2) buy, sell, underwrite, deal in, or distribute commercial paper and long-term corporate debt; and (3) organize, sponsor, operate, or control any investment company.

Directs the Board of Governors of the Federal Reserve System to disapprove the acquisition of a qualified securities affiliate by a bank holding company if the acquisition would result in the affiliation of a large bank or bank holding company (one having assets of more than $30,000,000,000) with a large investment banking organization (one having assets of more than $15,000,000,000).

Establishes criteria for bank holding company funding of qualified securities affiliates. Establishes capital adequacy criteria to be used by the Board in determining whether a bank holding company meets acquisition guidelines.

Establishes restrictions on inter-affiliate transactions, including prohibiting a bank or insured institution from: (1) extending credit to a securities affiliate; and (2) purchasing the assets of a securities affiliate.

Amends the Bank Service Corporation Act to allow bank service corporations to engage in any securities activity in which a qualified securities affiliate may engage.

Establishes restrictions on inter-affiliate transactions.

Amends the Banking Act of 1933 to allow member banks (banks which are members of a Federal Reserve bank) to become affiliates of: (1) a qualified securities affiliate: or (2) a bank service corporation. Permits member banks having assets of less than $500,000,000 to own or control subsidiaries which engage in "authorized securities activities." Defines "authorized securities activities" to include buying, selling, dealing in, or underwriting municipal securities and securities issued by investment companies.

Amends the Bank Holding Company Act of 1956 and the Bank Service Corporation Act to establish expedited procedures for bank holding companies and bank service corporations seeking approval to engage in nonbanking activities.