Bank Holding Company Act of 1956, as amended (BHC Act) | Practical Law (2024)

FAQs

Bank Holding Company Act of 1956, as amended (BHC Act) | Practical Law? ›

The main thrust of the act was that it gave the Federal Reserve broader regulatory powers over bank holding companies. They now had to register with the Board and submit to supervision. Most importantly, any bank holding company wishing to expand had to apply to the Board to do so.

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. An Act to define bank holding companies, control their future expansion, and require divestment of their nonbanking interests.

More leeway was granted by the Douglas Amendment to the Bank Holding Company Act of 1956. This particular legislation, introduced in the mid-1980s, allowed states to rule whether out-of-state bank holding companies would be permitted to establish, operate, and own banks within their borders.

A bank holding company is a corporation that owns a controlling interest in one or more banks but does not itself offer banking services. Holding companies do not run the day-to-day operations of the banks they own. However, they exercise control over management and company policies.

Regulation Y, issued by the Federal Reserve, governs corporate bank holding company practices and those of state-member banks. Regulation Y establishes the minimum ratios of several categories of capital to standardize total risk-based assets that bank holding companies must maintain to stay healthy.

Disadvantages of a bank holding company

A bank holding company is faced with the costs of meeting the accounting, record-keeping and reporting requirements imposed by the Board of Governors of the Federal Reserve.

(3) For the purposes of any proceeding under paragraph (2)(C) of this subsection, there is a presumption that any company which directly or indirectly owns, controls, or has power to vote less than 5 per centum of any class of voting securities of a given bank or company does not have control over that bank or company.

The 1956 act redefined a bank holding company as any company that held a stake in 25 percent or more of the shares of two or more banks.

Section 13 of the Bank Holding Company Act establishes prohibitions and restrictions on proprietary trading and on investments in or relationships with covered funds by certain banking entities, including state member banks, bank holding companies, savings and loan holding companies, other companies that control an ...

Congress granted to the bank holding company the opportunity to invest without the approval of the Federal Reserve Board (the Board) in any company as long as the acquired share ownership did not exceed 5 percent of the outstanding voting shares of the nonbank company.

What is the threshold for a bank holding company? ›

EGRRCPA raised the asset threshold for bank holding companies and savings and loan holding companies to be considered assessed companies from $50 billion or more in total consolidated assets to $100 billion or more in total consolidated assets.

The investment restrictions also generally provide that BHCs and FHCs may invest in real property only under limited circ*mstances. They may own real estate for their premises and use.

Section 3 governs the acquisition and ownership of banks and bank assets by bank holding companies and companies seeking to become bank holding companies.

Section 106 provides aggrieved customers with (1) treble damages, (2) fees and (3) costs. 1. Traditional Bank Product Exception: Banks can condition a transaction on the customer's purchase of a "traditional bank product".

Federal Reserve Board regulations require bank holding companies to maintain a minimum Tier 1 capital ratio of 4% and a minimum total capital ratio of 8%.

A holding company is a parent company—usually a corporation or LLC — whose purpose is to buy and control the ownership interests of other companies. The companies that are owned or controlled by a corporation holding company or an LLC holding company are called its subsidiaries.

The bill was designed “to provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes.” The measure was sponsored by Sen. Carter Glass (D-VA) and Rep. Henry Steagall (D-AL).

The BSA authorizes the Department of the Treasury to impose reporting and other requirements on financial institutions and other businesses to help detect and prevent money laundering.

What is a Holding Company? A holding company is a parent company, limited liability company, or limited partnership that holds ample voting shares in another company. The shareholding is arranged in a way that the holding company can control the policies of its subsidiary company and oversee its management decisions.