Bank Holding Company Act
|Other short titles||Distributions Pursuant to Bank Holding Company Act of 1956|
|Long title||An Act to define bank holding companies, control their future expansion, and require divestment of their nonbanking interests.|
|Nicknames||Bank Holding Company Act of 1956|
|Enacted by||the 84th United States Congress|
|Effective||May 9, 1956|
|Statutes at Large||70 Stat. 133|
|Titles amended||12 U.S.C.: Banks and Banking|
|U.S.C. sections created||12 U.S.C. ch. 17 § 1841 et seq.|
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The interstate restrictions of the Bank Holding Company act were repealed by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA).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 Other restrictions which prohibited bank holding companies from owning other financial institutions were repealed in 1999 by Gramm-Leach-Bliley Act.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.
Private equity firms, which solicit funds but are not classified as banks and -- most importantly -- are not backstopped by the Federal Deposit Insurance Corporation, may acquire large ownership positions in a number of non-bank corporations. This is not a problem since private equity firms are not banks.
- Public Law 511, 84th Congress, Chapter 240, 2d Session, H.R. 6227: An Act to Define Bank Holding Companies, Control their Future Expansion, and Require Divestment of their Nonbanking Interests [Bank Holding Company Act of 1956]
- Public Law 91-607, 91st Congress, H.R. 6778: Bank Holding Company Act Amendments of 1970
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