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| financial regulation in the united states | |
| federal reserve | |
| holding companies | |
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REGULATION The Federal Reserve Board, under Regulation Y (12 C.F.R. Pt. 225) has responsibility for regulating and supervising bank holding company activities, such as approving Mergers And Acquisitions and inspecting the operations of such companies. This authority applies even though a bank owned by a holding company may be under the primary supervision of the Comptroller Of The Currency or the Federal Deposit Insurance Corporation . New or smaller banks often convert themselves into bank holding companies to take advantage of the greater financial flexibility this designation affords them. Becoming a bank holding company makes it easier for the firm to raise capital than if it remained a traditional bank. It can assume debt of Shareholder s on a tax free basis, borrow money, acquire other banks and non-bank entities more easily, and issue Stock with greater ease. It also has a greater legal authority to Repurchase its own stock once issued. The downside includes greater levels of regulation, especially if there are more than 300 shareholders, at which point the bank holding company is forced to file with the Securities And Exchange Commission . There are also added expenses of operating with an extra layer of administration. This is usually offset by the fact that BHCs are often exempt from many of the state regulations and fees that a traditional bank would face. SEE ALSO EXTERNAL LINKS
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