A bank holding company is a company that controls one or more

bank A bank is a financial institution that accepts 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 markets. Because ...

s, but does not necessarily engage in banking itself. The

compound Compound may refer to: Architecture and built environments * Compound (enclosure), a cluster of buildings having a shared purpose, usually inside a fence or wall ** Compound (fortification), a version of the above fortified with defensive struc ...

bancorp (''banc''/''bank'' + '' corp ration') is often used to refer to these companies as well.

United States

In the United States, a bank holding company, as provided by the

Bank Holding Company Act of 1956 The Bank Holding Company Act of 1956 (, ''et seq.'') is a United States Act of Congress that regulates the actions of bank holding companies. The original law (subsequently amended), specified that the Federal Reserve Board of Governors must appr ...

( '' 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 of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

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 m ...

, 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 companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

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 charter, regulate, and supervise all natio ...

or the

Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is one of two agencies that supply deposit insurance to depositors in American depository institutions, the other being the National Credit Union Administration, which regulates and insures 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 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 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. There are also added expenses of operating with an extra layer of administration.

2008 credit crisis

As a result of the

global financial crisis of 2008 Global means of or referring to a globe and may also refer to: Entertainment * ''Global'' (Paul van Dyk album), 2003 * ''Global'' (Bunji Garlin album), 2007 * ''Global'' (Humanoid album), 1989 * ''Global'' (Todd Rundgren album), 2015 * Bruno ...

, many traditional

investment banks Investment banking pertains to certain activities of a financial services company or a corporate division that consist in advisory-based financial transactions on behalf of individuals, corporations, and governments. Traditionally associated wit ...

and finance corporations such as Goldman Sachs,

Morgan Stanley Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...

, American Express,

CIT Group CIT Group (CIT), a subsidiary of First Citizens BancShares, is an American financial services company. It provides financing, including factoring, cash management, treasury management, mortgage loans, Small Business Administration loans, le ...

and GMAC (now

Ally Financial Ally Financial is a bank holding company organized in Delaware and headquartered in Detroit, Michigan. The company provides financial services including car finance, online banking via a direct bank, corporate lending, vehicle insurance, mor ...

) 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 of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

's credit facilities.

References

External links