Bank Holding Company Act

The Bank Holding Company Act of 1956 (12 U.S.C. § 1841, 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 approve the establishment of a bank holding company and that bank holding companies headquartered in one state are banned from acquiring a bank in another state. The law was implemented,in part, to regulate and control banks that had formed bank holding companies to own both banking and non-banking businesses. The law generally prohibited a bank holding company from engaging in most non-banking activities or acquiring voting securities of certain companies that are not banks.

The interstate restrictions of the Bank Holding Company act were repealed by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA). The IBBEA allowed interstate mergers between "adequately capitalized and managed banks, subject to concentration limits, state laws and Community Reinvestment Act (CRA) evaluations."

Other restrictions, which prohibited bank holding companies from owning other financial institutions, were repealed in 1999 by Gramm-Leach-Bliley Act. In the United States, financial holding companies continue to be prohibited from owning non-financial corporations in contrast to Japan and continental Europe, where this arrangement is common.

Private equity firms, which solicit funds but are not classified as banks and, more importantly, are not backstopped by the Federal Deposit Insurance Corporation, may acquire large ownership positions in a number of non-bank corporations. That is not a problem since private equity firms are not banks.

Bank Holding Company Act
Great Seal of the United States (obverse)
Other short titlesDistributions Pursuant to Bank Holding Company Act of 1956
Long titleAn Act to define bank holding companies, control their future expansion, and require divestment of their nonbanking interests.
NicknamesBank Holding Company Act of 1956
Enacted bythe 84th United States Congress
EffectiveMay 9, 1956
Public law84-511
Statutes at Large70 Stat. 133
Titles amended12 U.S.C.: Banks and Banking
U.S.C. sections created12 U.S.C. ch. 17 § 1841 et seq.
Legislative history
  • Introduced in the House as H.R. 6227
  • Passed the House on June 14, 1955 (371-24)
  • Passed the Senate on April 24, 1956 (58-18, in lieu of S. 2577)
  • Signed into law by President Dwight D. Eisenhower on May 9, 1956

Proposed New Limits on Bank Activities in Physical Commodities

On September 23, 2016, the Federal Reserve Board of Governors (Board) issued a Notice of Proposed Rulemaking concerning whether to impose new restrictions on the activities of banks related to physical commodities.[1] The proposed rule would:

  • increase capital requirements for activities of Financial Holding Companies (FHCs) involving commodities for which existing laws would impose liability if the commodities were released into the environment;
  • lower the limit on the amount of physical commodities that may be held by banks that conduct commodity trading activities;
  • rescind authority for banks to engage in energy tolling and energy management services;
  • delete copper from the list of precious metals that Bank Holding Companies (BHCs) are permitted to own and store; and
  • establish new public reporting requirements on the nature and extent of firms’ physical commodities holdings and activities.[2]

Additionally under a report was issued pursuant to Section 620 of the Dodd-Frank Act. (620 Report),[3] which includes recommendations for legislation to repeal several current authorities for banks to engage in physical commodities activities.

Under the 620 Report the Board recommends legislative action that would:

  • repeal the authority of FHCs to engage in merchant banking activities; and
  • repeal the grandfather authority for certain FHCs to engage in commodities activities under section 4(o) of the Bank Holding Company Act.[4]


  1. ^ "Risk -based Capital and Other Regulatory Requirements for Activities of Financial Holding Companies Related to Physical Commodities and Risk -based Capital Requirements for Merchant Banking Investments" (PDF). Board of Governors of the Federal Reserve System. Retrieved 4 November 2016.
  2. ^ Berkovitz, Dan M.; Bernstein, Gail C. (21 October 2016). "Federal Reserve Board Seeks New Limits on Bank Activities in Physical Commodities". The National Law Review. Wilmer Cutler Pickering Hale and Dorr LLP. ISSN 2161-3362. Retrieved 4 November 2016.
  3. ^ Notice of proposed rulemaking, Risk-based Capital and Other Regulatory Requirements for Activities of Financial Holding Companies Related to Physical Commodities and Risk-based Capital Requirements for Merchant Banking Investments (Sept. 23, 2016). "Notice of proposed rulemaking, Risk-based Capital and Other Regulatory Requirements for Activities of Financial Holding Companies Related to Physical Commodities and Risk-based Capital Requirements for Merchant Banking Investments". the Board of Governors of the Federal Reserve System. Retrieved 4 November 2016.CS1 maint: Multiple names: authors list (link)
  4. ^ Dempsey, Jr., Guy C. (16 September 2016). "Banking Regulators Issue Dodd-Frank Report on Bank Activities and Investments". The National Law Review. Katten Muchin Rosenman LLP. Retrieved 4 November 2016.


External links

Aftermath of the repeal of the Glass–Steagall Act

The Glass–Steagall legislation was enacted by the United States Congress in 1933 as part of the 1933 Banking Act, amended as part of the 1935 Banking Act, and most of it was repealed in 1999 by the Gramm–Leach–Bliley Act (GLBA). Its protections and restrictions had also been chipped away during most of its existence by lenient regulatory interpretations and use of loopholes.

After Glass–Steagall's 1999 repeal, there was a great deal of discussion in the banking and securities industries, and among policymakers and economists, about the practical positive and negative changes to the business and consumer environment. Later, as financial crises and other issues played out in the United States and even worldwide, arguments have broken out about whether Glass–Steagall, as originally intended, would have prevented these issues.

Bank holding company

A bank holding company is a company that controls one or more banks, but does not necessarily engage in banking itself. The compound bancorp (banc/bank + corp[oration]) is often used to refer to these companies as well.

Branch (banking)

A branch, banking center or financial center is a retail location where a bank, credit union, or other financial institution (including a brokerage firm) offers a wide array of face-to-face and automated services to its customers.

CIT Group

CIT Group Inc. (CIT) is a financial holding company and bank holding company incorporated in Delaware and headquartered in New York City. CIT Bank, N.A., CIT's banking subsidiary, is headquartered in Pasadena, California. The company's name is an abbreviation of an early corporate name, Commercial Investment Trust.

CIT provides financing, leasing, and advisory services principally to middle-market companies and small businesses in a wide variety of industries, primarily in North America. CIT also provides banking and related services to commercial and individual customers through its banking subsidiary, CIT Bank, N.A. ("CIT Bank"), which includes over 60 branches located in Southern California and an online bank.

As of 2018, the company is ranked 658th on the Fortune 1000 list of the largest American companies and is in the top 50 on the list of largest banks in the United States.CIT filed for bankruptcy protection on November 1, 2009, and with the consent of its bondholders, emerged from bankruptcy 38 days later, on December 10, 2009. In August 2015, CIT Group acquired OneWest Bank, a regional bank based in Southern California.CIT is regulated by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of

New York under the U.S. Bank Holding Company Act of 1956.

Commercial National Financial

Commercial National Financial Corporation is a registered financial holding company under the Bank Holding Company Act of 1956 as amended. The company wholly owns Commercial Bank & Trust of PA under the Bank Holding Company Act. The company’s principal business is the operation of Commercial Bank & Trust of PA, which offers various commercial banking and trust services including offering deposit services, providing financial counseling, investing and extending credit. Commercial National Financial Corporation uses CNAF as the trading symbol on the OTCQB tier of the OTC Markets.

Community West Bancshares

Community West Bancshares is a registered bank holding company headquartered in California. It wholly owns Community West Bank under the Bank Holding Company Act. The company delivers a wind range of commercial and retail financial services such as various loan and deposit products through the operation of the bank. As of December 31, 2012, the Company had $532.101 million in total assets, $53.049 million in total stockholders' equity and $434.220 million in deposits.

Credit One Bank

Credit One Bank, N.A., simply referred to as Credit One Bank, is a U.S.-based bank specializing in credit cards. It has corporate offices in Las Vegas, Nevada. The bank is held by Credit One Financial, a bank holding company registered in Nevada. Credit One Financial is a wholly owned subsidiary of Sherman Financial Group, LLC. As of 2017, Credit One Bank services more than 7 million cardholders across the United States.

Federal Reserve Reform Act of 1977

The Federal Reserve Reform Act of 1977 enacted a number of reforms to the Federal Reserve, making it more accountable for its actions on monetary and fiscal policy and tasking it with the goal to "promote maximum employment, production, and price stability". The act explicitly established price stability as a national policy goal for the first time. It also required quarterly reports to Congress "concerning the ranges of monetary and credit aggregrates for the upcoming 12 months." It also modified the selection of the Class B and C Reserve Bank Directors. Discrimination on the basis of race, creed, color, sex, or national origin was prohibited, and the composition of the directors was required to represent interests of "agriculture, commerce, industry, services, labor and consumers". The Federal Reserve Act, which created the Federal Reserve in 1913, made no mention of services, labor, and consumers. Finally, the act established Senate confirmation of chairmen and vice chairmen of the Board of Governors of the Federal Reserve. The Federal Reserve Reform Act made the Federal Reserve more transparent to Congressional oversight.

First Interstate Bancorp

First Interstate Bancorp was a bank holding company based in the United States that was taken over in 1996 by Wells Fargo. Headquartered in Los Angeles, it was the nation's eighth largest banking company.The name (along with the company logo) has continued to be used in the banking world after the merger by First Interstate BancSystem who had been using the name under a franchise agreement since 1984.

Florida National Bank

Florida National Bank (FNB), founded in 1905, was the second largest commercial bank in Florida. Florida National Group was acquired in 1990 by First Union Corporation, which was renamed Wachovia in 2001.

Gramm–Leach–Bliley Act

The Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, (Pub.L. 106–102, 113 Stat. 1338, enacted November 12, 1999) is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the bipartisan passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. Furthermore, it failed to give to the SEC or any other financial regulatory agency the authority to regulate large investment bank holding companies. The legislation was signed into law by President Bill Clinton.A year before the law was passed, Citicorp, a commercial bank holding company, merged with the insurance company Travelers Group in 1998 to form the conglomerate Citigroup, a corporation combining banking, securities and insurance services under a house of brands that included Citibank, Smith Barney, Primerica, and Travelers. Because this merger was a violation of the Glass–Steagall Act and the Bank Holding Company Act of 1956, the Federal Reserve gave Citigroup a temporary waiver in September 1998. Less than a year later, GLBA was passed to legalize these types of mergers on a permanent basis. The law also repealed Glass–Steagall's conflict of interest prohibitions "against simultaneous service by any officer, director, or employee of a securities firm as an officer, director, or employee of any member bank".

Industrial loan company

An industrial loan company (ILC) or industrial bank is a financial institution in the United States that lends money, and may be owned by non-financial institutions. They provide niche financial services nationwide. ILCs offer FDIC-insured deposits and are subject to FDIC and state regulator oversight. All "FDIC-insured entities are subject to Sections 23A and 23B of the Federal Reserve Act, which limits bank transactions with affiliates, including the non-bank parent company." ( ILCs are permitted to have branches in multiple states (which is permitted by many states on a reciprocal basis). They are regulated and supervised by state-charters and insured by the Federal Deposit Insurance Corporation. They are authorized to make consumer and commercial loans and accept federally insured deposits. Banks may not accept demand deposits if the bank has total assets greater than $100 million. ILCs are exempted from the Bank Holding Company Act.

ILCs assist numerous charities and provide millions of dollars annually in grants, low interest loans, and service through the Community Reinvestment Act (CRA). Currently, only seven states offer an ILC bank charter. Most ILCs have been chartered by the Utah Department of Financial Institutions. Other states permitting ILCs include California, Colorado, Minnesota, Indiana, Hawaii, and Nevada.

2018 Report on performance of Industrial Loan Corporations.

McFadden Act

The McFadden Act is a United States federal law, named after Louis Thomas McFadden, member of the United States House of Representatives and Chairman of the United States House Committee on Banking and Currency, enacted in 1927 from recommendations made by former Comptroller of the Currency Henry May Dawes.

The Act sought to give national banks competitive equality with state-chartered banks by letting national banks branch to the extent permitted by state law. The McFadden Act specifically prohibited interstate branching by allowing each national bank to branch only within the state in which it is situated. Although the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 repealed this provision of the McFadden Act, it specified that state law continues to control intrastate branching, or branching within a state's borders, for both state and national banks.

Pacific Premier Bancorp

Headquartered in California Pacific Premier Bancorp, Inc. is a registered holding company under the Bank Holding Company Act of 1956. Its principle business focuses on Pacific Premier Bank, which offers a range of financial services to individuals, businesses and professionals. The bank operates 44 full service branches and its internet website.

Patriot Act, Title III, Subtitle A

The USA PATRIOT Act was passed by the United States Congress in 2001 as a response to the September 11, 2001 attacks. It has ten titles, with the third title ("Title III: International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001") written to prevent, detect, and prosecute international money laundering and the financing of terrorism.

Title III is itself divided into three subtitles. The first subtitle, entitled Subtitle A: International Counter Money Laundering and Related Measures, is designed to put measures into place that counter international money laundering. It does this by requiring that financial institutions take several new special measures against money laundering — identification is dealt with particularly; by restricting or prohibiting the use of certain types of bank accounts; through adding further legislation that regulates a financial institution's dealing with foreign concerns; by adding new penalties for non-compliance of the law; and through regulations that are designed to facilitate and encourage reporting and communication between financial institutions and the U.S. government.

Paul Gillmor

Paul Eugene Gillmor (February 1, 1939 – c. September 5, 2007) was an American politician of the Republican Party who served as the U.S. Representative from the 5th congressional district of Ohio from 1989 until his death in 2007.

Restoring Proven Financing for American Employers Act

The Restoring Proven Financing for American Employers Act (H.R. 4167) is a bill that would "exempt existing collateralized loan obligations from the so-called "Volcker Rule," which bars banks from making risky trades with their own money and limits their investments in certain funds."The bill passed in the United States House of Representatives during the 113th United States Congress.

Tying (commerce)

Tying (informally, product tying) is the practice of selling one product or service as a mandatory addition to the purchase of a different product or service. In legal terms, a tying sale makes the sale of one good (the tying good) to the de facto customer (or de jure customer) conditional on the purchase of a second distinctive good (the tied good). Tying is often illegal when the products are not naturally related. It is related to but distinct from freebie marketing, a common (and legal) method of giving away (or selling at a substantial discount) one item to ensure a continual flow of sales of another related item.

Some kinds of tying, especially by contract, have historically been regarded as anti-competitive practices. The basic idea is that consumers are harmed by being forced to buy an undesired good (the tied good) in order to purchase a good they actually want (the tying good), and so would prefer that the goods be sold separately. The company doing this bundling may have a significantly large market share so that it may impose the tie on consumers, despite the forces of market competition. The tie may also harm other companies in the market for the tied good, or who sell only single components.

One effect of tying can be that low quality products achieve a higher market share than would otherwise be the case.

Tying may also be a form of price discrimination: people who use more razor blades, for example, pay more than those who just need a one-time shave. Though this may improve overall welfare, by giving more consumers access to the market, such price discrimination can also transfer consumer surpluses to the producer. Tying may also be used with or in place of patents or copyrights to help protect entry into a market, discouraging innovation.

Tying is often used when the supplier makes one product that is critical to many customers. By threatening to withhold that key product unless others are also purchased, the supplier can increase sales of less necessary products.

In the United States, most states have laws against tying, which are enforced by state governments. In addition, the U.S. Department of Justice enforces federal laws against tying through its Antitrust Division.

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