What Is a Bank Holding Company?

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, with their stake in the company, they exercise control over management and company policies. They can hire and fire managers, set and evaluate strategies, and monitor the performance of subsidiaries’ businesses.

Bank of America Corp., which holds many smaller Bank of America and Merrill Lynch financial institutions, is an example of a holding company.

Understanding the Bank Holding Company

Holding companies, or "Holdcos", exist outside of the realm of banks. Some corporations have been formed just to hold the assets of several subsidiaries, not to produce any products or services.

Bank holding companies are regulated by the Federal Reserve's Board of Governors. Banks that are not owned by holding companies are regulated primarily by the Office of the Comptroller of the Currency, although U.S. banking regulations are so complex and far-reaching that a total of꧒ five federal agencies are involved.

澳洲幸运5开奖号码历史查询:Holding company assets may include limited liability companies or partnerships, real estate, patent trademarks, stocks, bonds, and more. They are partially protected by law from the financial losses of their assets and can structure themselves to spread tax, financial, and legal liabilities among their various subsidiaries, ﷽reducing overall risk.

One well-known holding company in the U.S. is 澳洲幸运5开奖号码历史查询:Berkshire Hathaway, which is owned and run by the investor Warren Buffet. Berkshire Hathaway is a holding company for dozens of businesses in which it holds a significant stake including Dairy Queen, BNSF Railway, Lubrizol, Fruit of the Loom, and Pampered Chef. The holding company also has stakes in the Kraft Heinz Company and See's Candies.

The One-Bank Holding Company

A variation of the holding company is the 澳洲幸运5开奖号码历史查询:one-bank holding company, which, by definition, is a corporation that owns at least one-quarter of the voting stock of a commercial bank.

The one-bank holding company is a creation of the late 1960s. Their formation allowed independent banks the greater operating range o💮f a bank holding company. That is, they could branch out from their dependence on individual depositors into other types of banking activities such as loans and commercial paper.

The ability to issue commercial paper inꦫ capital markets was a particular pr𒅌iority of the one-bank holding companies.

Commercial paper is a key 🌊method for a corporation to raise money quickly and cheaply to meet its short-term liabilities and finance its accounts receivable and inventories. It is a short-term debt instrument, rarely maturing in more than 270 days. It does not pay interest in the traditional sense but is issued at a discount from face value.

Frequently Asked Questions (FAQs)

The Bottom Line

A ban𝄹k holding company is a corporation that owns a controlling interest in one or more 🧸banks but does not itself offer banking services. It can offer a number of advantages as its assets may include limited liability companies or partnerships, real estate, patent trademarks, stocks, bonds, and more.