Bank Holding Company Act of 1956
Encyclopedia
The Bank Holding Company Act of 1956 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 prohibited bank holding companies headquartered in one state from acquiring a bank in another state. The law was implemented in part to regulate and control banks that had formed bank holding companies in order 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The interstate restrictions of the Bank Holding Company act were repealed by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994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Other restrictions which prohibited bank holding companies from owning non-financial institutions were repealed in 1999 by Gramm-Leach-Bliley Act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. Instead, private equity firms which solicit funds and in essence provide commercial banking services, have taken advantage of the workaround available to acquire large ownership positions in a number of non-financial corporations, enabling the enterprise to obtain financing.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
Act of Congress
Act of Congress
An Act of Congress is a statute enacted by government with a legislature named "Congress," such as the United States Congress or the Congress of the Philippines....
that regulates the actions of bank holding companies.
The original law (subsequently amended), specified that the Federal Reserve Board of Governors
Federal Reserve Board of Governors
The Federal Reserve Board of Governors is the main governing body of the Federal Reserve System. It is charged with overseeing the 12 District Reserve Banks and with helping implement national monetary policy. Governors are appointed by the President of the United States and confirmed by the Senate...
must approve the establishment of a bank holding company, and prohibited bank holding companies headquartered in one state from acquiring a bank in another state. The law was implemented in part to regulate and control banks that had formed bank holding companies in order 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
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 [IBBEA] amended the laws governing federally-chartered banks in order to restore the laws' competitiveness with the recently relaxed laws governing state-chartered banks. The goal was the return to a balance between the...
(IBBEA). The IBBEA allowed interstate mergers between "adequately capitalized and managed banks, subject to concentration limits, state laws and Community Reinvestment Act
Community Reinvestment Act
The Community Reinvestment Act is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods...
(CRA) evaluations."
Other restrictions which prohibited bank holding companies from owning non-financial institutions were repealed in 1999 by Gramm-Leach-Bliley Act
Gramm-Leach-Bliley Act
The Gramm–Leach–Bliley Act , also known as the Financial Services Modernization Act of 1999, is an act of the 106th United States Congress...
. In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, financial holding companies continue to be prohibited from owning non-financial corporations in contrast to Japan and continental Europe where this arrangement is common. Instead, private equity firms which solicit funds and in essence provide commercial banking services, have taken advantage of the workaround available to acquire large ownership positions in a number of non-financial corporations, enabling the enterprise to obtain financing.