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A Bank Holding Company is a corporation or other
legal entity that owns or operates one or more
commercial banks. Bank Holding Companies are
regulated by the U.S.
Federal Reserve Board and must adhere to all
U.S. Banking regulations that affect both banks
and Bank Holding Companies.
Why Do Bank Holding Companies Exist?
Originally, Bank Holding Companies were created to
allow commercial banks to purchase and operate
other banks and to provide a way for banks to
operate in interstate commerce. Prior to the
creation of Bank Holding Companies, a bank could
only operate in its primary State.
As the banking industry grew, banks wanted to get
into other financial markets such as investment
and brokerage services as well as insurance. In
1999, the U.S. Government passed the Gramm-Leach-Bliley
Act Of 1999 which is also called the The Financial
Modernization Act of 1999.
This new law expanded the powers of Bank Holding
Companies and allowed them to offer other
financially-related services.
Bank Holding Companies can usually be identified
by the usage of the word "Banc" or "Bankshares" in
their name, such as United Bankshares or Capitol
Bancorp, but this is not always the case.
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