A bank holding company is a

company A company, abbreviated as co., is a Legal personality, legal entity representing an association of legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...

that controls one or more

bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

s, but does not necessarily engage in banking itself. The compound bancorp (''banc''/''bank'' + '' corp ration') or bancorporation is often used to refer to such companies as well, particularly in the United States.

United States

In the United States, a bank holding company, as provided by the Bank Holding Company Act of 1956 ( '' et seq.''), is broadly defined as "any company that has control over a bank". All bank holding companies in the US are required to register with the Board of Governors of the

Federal Reserve System The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...

Regulation

The

Federal Reserve Board of Governors The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the mo ...

, under Regulation Y () has responsibility for regulating and supervising bank holding company activities, such as establishing capital standards, approving

mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...

and inspecting the operations of such companies. This authority applies even though a bank owned by a holding company may be under the primary supervision of the

Office of the Comptroller of the Currency The Office of the Comptroller of the Currency (OCC) is an independent bureau within the United States Department of the Treasury that was established by the National Currency Act of 1863 and serves to corporate charter, charter, bank regulation ...

or the

Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is a State-owned enterprises of the United States, United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks. The FDIC was cr ...

Bank holding company status

Becoming a bank holding company makes it easier for the firm to raise capital than as a traditional bank. The holding company can assume debt of

shareholder A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...

s on a tax free basis, borrow money, acquire other banks and non-bank entities more easily, and issue

stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

with greater regulatory ease. It also has a greater legal authority to conduct

share repurchase Share repurchase, also known as share buyback or stock buyback, is the reacquisition by a company of its own shares. It represents an alternate and more flexible way (relative to dividends) of returning money to shareholders. Repurchases allow s ...

s of its own stock. The downside includes responding to additional regulatory authorities, especially if there are more than 2,000 shareholders (note: prior to the Jobs Act or

Jumpstart Our Business Startups Act The Jumpstart Our Business Startups Act, or JOBS Act, is a law intended to encourage funding of small businesses in the United States by easing many of the country's securities regulations. It passed with bipartisan support, and was signed int ...

, the shareholder number was 300), at which point the bank holding company is forced to register with the

Securities and Exchange Commission The United States Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its primary purpose is to enforce laws against market m ...

. There are also added expenses of operating with an extra layer of administration.

2008 financial crisis

As a result of the

2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...

, many traditional

investment banks Investment banking is an advisory-based financial service for institutional investors, corporations, governments, and similar clients. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by und ...

and finance corporations such as

Goldman Sachs The Goldman Sachs Group, Inc. ( ) is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered in Lower Manhattan in New York City, with regional headquarters in many internationa ...

Morgan Stanley Morgan Stanley is an American multinational investment bank and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in 42 countries and more than 80,000 employees, the firm's clients in ...

American Express American Express Company or Amex is an American bank holding company and multinational financial services corporation that specializes in payment card industry, payment cards. It is headquartered at 200 Vesey Street, also known as American Expr ...

, CIT Group and GMAC (now

Ally Financial Ally Financial Inc. (known as GMAC until 2010) is an American bank holding company incorporated in Delaware and headquartered at Ally Detroit Center in Detroit, Michigan. The company provides financial services including car finance, online bank ...

) converted to bank holding companies to gain access to the

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...

's credit facilities.

United Kingdom

In the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

, the

Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the Kingdom of England, English Government's banker and debt manager, and still one ...

refers to bank holding companies as “parent financial holding companies” or “parent mixed financial holding companies.”

References

External links

Top 50 Bank Holding Companies from the Federal Reserve Website
* {{DEFAULTSORT:Bank Holding Company Bank regulation in the United States Federal Reserve System Holding companies Separation of investment and retail banking