Bank holding company

From MarketsWiki
Jump to navigation Jump to search

A bank holding company, under U.S. law, is an entity that directly or indirectly owns, controls, or has the power to vote 25% or more of a class of securities of a U.S. bank. Bank holding companies are required to register with the Board of Governors of the Federal Reserve System and are subject to the Bank Holding Company Act of 1956.[1]

Bank holding companies agree to increased regulation by the SEC and other branches of government in return for more ease in raising capital than a traditional bank. A bank holding company can assume debt of shareholders tax free, borrow money, acquire other banks and non-bank entities more easily, and issue stock with greater ease. It can also repurchase its own stock once issued.

Bank holding companies are also required to hold more capital on reserve.