Entity controlling one or more commercial banks. Bank holding companies are closely supervised by the Federal Reserve Board. Companies owning 25% or more of the voting stock in a bank, or controlling a majority of its directors, are required to file periodic financial statements with the Federal Reserve Board of Governors. U.S. Branch offices of foreign banks also are supervised by the Federal Reserve Board. The Bank Holding Company Act sets standards for acquisitions and permits interstate acquisitions and nationwide branch banking. Although the act previously restricted bank holding company activities to those that are banking related, the Gramm-Leach-Bliley Act Of 1999 significantly widened the scope of authorized activities, allowing any well-capitalized bank holding company to become a Financial Holding Company providing a wide range of banking, investment advisory, and insurance-related services. Bank holding companies are often identifiable by the words banc or bancshares in the corporate name. See alsoOne Bank Holding Company; Permissible Nonbank Activities; Regulation Y.
A company that owns and/or controls two or more banks. Bank holding companies are governed by the Bank Holding Company Act of 1956 and its amendments. Because of their corporate status, they are subject to more regulations than banks, but also have more options for raising capital.
State banking laws influence whether multibank holding companies are likely to set up in a particular state. Unit banking states have more multibank holding companies, while branch and limited-branch banking states have more one-bank holding companies.
Examples of multibank holding companies include BOK Financial Corporation, Camco Financial Corporation, Old National Bancorp, Rurban Financial Corp. and QCR Holdings, Inc.
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In the United States, a bank holding company, as provided by the Bank Holding Company Act of 1956 (12 U.S.C. § 1841(a)(2)(A) 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 Board of Governors, under Regulation Y (12 C.F.R. Pt. 225) has responsibility for regulating and supervising bank holding company activities, such as establishing capital standards, approving mergers and acquisitions 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 or the Federal Deposit Insurance Corporation.
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 shareholders on a tax free basis, borrow money, acquire other banks and non-bank entities more easily, and issue stock with greater regulatory ease. It also has a greater legal authority to conduct share repurchases of its own stock.
The downside includes responding to additional regulatory authorities, especially if there are more than 300 shareholders, at which point the bank holding company is forced to register with the Securities and Exchange Commission. There are also added expenses of operating with an extra layer of administration.
As a result of the Global financial crisis of 2008, many traditional investment banks and finance corporations such as Goldman Sachs, Morgan Stanley, American Express, CIT Group and General Motors Acceptance Corporation successfully converted to bank holding companies in order to gain access to liquidity and funding.
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