Bank Holding Company

What does Bank Holding Company mean in American Law?

The definition of Bank Holding Company in the law of the United States, as defined by the lexicographer Arthur Leff in his legal dictionary is:

A corporation controlling one or more commercial banks, or a commercial bank and some other enterprise. There are primarily two varieties, correlating with two strategies for evading regulation. The first type was set up to get out from under restrictions on branch banks; if “a bank” couldn”t have branches, then corporations were set up to control several banks, thus getting the economies and competitive advantages the statutes sought to prevent. These are traditionally called “multibank holding companies” or MBHCs.

The second variety, usually called “one-bank holding companies” or OBHCs, arose to allow banks to take part in allied financial businesses sought to be barred to them by other statutes. If “a bank” could not, e.g., also run a finance company, then a holding company might be formed which owned a bank and a finance company-and maybe a credit card company, an insurance brokerage firm, etc.