UK Accounting Glossary
A bank holding company is a company that owns or control over 25% of a bank. A company that owns or controls more than 25% of a bank holding company is also considered a bank holding company. A bank holding company is regulated pursuant to the Bank Holding Company Act of 1956, as amended. A bank holding company is required to register with the Board of Governors of the Federal Reserve System. In 1966, the Bank Holding Company Act of 1956 was amended to detail acquisitions of bank holding companies. In 1970, the Bank Holding Company Act of 1956 was further amended to limit the business activities of a bank holding company to bank-related activities only. However, in 1999, the Gramm-Leach-Bliley Act (i.e. Financial Service Modernization Act) deregulated bank holding companies. Under this act, a bank holding company could elect to become a financial holding company. Upon filing a declaration with its particular reserve bank, the bank holding company, as a financial holding company, was able to purchase investment firms or insurance companies. As a financial holding company, a bank holding company could also create an affiliate to handle investments and insurance services. In 2008, as a result of several bankruptcies, buy-outs, and government takeovers of many major financial institutions (i.e. Bear Sterns, Fannie Mae, Freddie Mac, Merrill Lynch, Lehman Brothers, etc.), the US government took actions to ensure that a bank holding company was no longer able to act as an investment bank. Bank holding companies were once again required to focus on banking activities.
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This glossary post was last updated: 4th February 2020.