A holding company has the sole purpose of owning another company’s outstanding stocks. This can allow for reduced risk, while providing for control of various companies. In regards to banks, bank holding companies controls other banks, credit unions and financial institutions. However, they don’t usually perform banking activities themselves. Purely a financial move and a matter of ownership, bank holdings provide a certain level of security for its investors.
This industry is regulated by the federal reserve government, which is responsible for establishing things like capital standards. The federal reserve also performs inspections and approves mergers and acquisitions. Holding companies take on debt of shareholders, whether there are a few or many. This allows them to issue stocks easily and even gives them more borrowing power.
There are laws to follow, such as those set forth by the Federal Deposit Insurance Corporation, or FDIC, which guarantees that each depositor is insured up to a certain amount of money per insured bank. Banks are commercial or state institutions that handle monetary transactions, with services offered including check cashing, deposits, mortgages and even auto loans. They also manage bonds, sell safety deposit boxes, issue interest and act as public notaries. They can be local, with just one branch, or regional and even national, with hundreds of branches. They usually offer savings and checking accounts, all with varying interest levels.
A bank holding company is concerned with gaining financial control over another institution, entity or organization. They essentially own portions of the company without engaging directly in the business practices.
A bank holding company owns significant stocks in one or more banks but does not act as a bank itself. The sole purpose of the BHC is holding ownership stocks in other businesses. If you are interested in learning more about bank holding companies, then you might want to contact an institution that can give you the answers to your questions. There are many BHCs listed in your online directory, so pick a few and call them to get more information. When you contact the company, you will need to know what questions to ask them. First, you can start off by asking them if they are domestic or if they own stocks in foreign markets as well. Those that are domestic will need to abide by laws set by the Federal Deposit Insurance Corporation (FDIC). Ask them to tell you about how FDIC laws dictate the way they deal with investments in a citizen or community bank with credit accounts, mortgages, and trusts. The financial industry is complicated to most laymen, so you might need to speak to someone that can give you detailed information in a way that makes sense to you, so ask to speak to a customer representative at the corporate. If you are contacting the holding companies because you are interested in opening a bank or other financial institution with them, then you might also need to discuss your options with a lawyer so that you know exactly how the stock ownership options can work for you.