Law and bank holding act

Most importantly, any bank holding company wishing to expand had to apply to the Board to do so.

bank holding company act section 4

One major reason for the taboo was the view that branching allowed large banks from big cities to compete against state banks in small towns and against national banks which originally were only allowed to operate a single branch.

B No company is a bank holding company by virtue of its ownership or control of shares acquired by it in connection with its underwriting of securities if such shares are held only for such period of time as will permit the sale thereof on a reasonable basis.

A bank holding company could operate branches in multiple states.

bank holding company act foreign bank

That consideration implied a tradeoff. On May 14,the Federal Reserve Board published a proposed rule that it feels would simplify and make more transparent the standards under which the Federal Reserve Board determines that a company controls a banking organization or another company.

A chain bank is a collection of banks owned by an individual or a group of individuals.

Law and bank holding act

While the first two prongs of control — 25 percent or more of any class of voting securities and controlling the election of a majority of the directors — are objective determinations of control, ownership of between 5 and 25 percent of any class of voting securities requires that the Federal Reserve Board review all the facts and circumstances on a case-by-case basis in order to make a control determination.

Banks avoided some of these branching restrictions by forming chain or group banks.

Bank holding company ownership limitations

Shortfalls and Fixes The banking landscape in the United States has always been heavily influenced by regulations. Savage, Donald T. The test also is applicable to any companies the BHC might want to acquire because it can only gain control of another company if it can engage in the activities in which a BHC or FHC can engage. This paragraph does not prohibit a section 2 h 2 company from holding shares that were lawfully acquired before August 10, G An organization operating under section 25 or section 25 a [1] of the Federal Reserve Act. Philadelphia: Temple University, In , Congress responded by giving the Federal Reserve much more oversight of the banking industry. Kane, Edward J. The announcement of the proposal contained a chart summarizing the proposal. Willit, Virgil, ed. These two oversights would require later legislation. Written as of November 22, The Federal Reserve System: an Encyclopedia. However, this created complications as well. But with bank holding companies defined, regulation could have some teeth.
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Bank Holding Company