SECTION 2 - BANK HOLDING COMPANY Flashcards
BHC ACT
What is the Bank Holding Company Act definition of Bank Holding companies?
Business organizations (or long-term trust, i.e. >25 years or 21 years & 10 mos. after death) which controls any bank or bank holding company
BHC ACT
What conditions must exist relative to a BHC entering into new activities?
- Well-capitalized
- Well-managed
- Satisfactory or better in CRA
- File with the FRB
- Grandfather provision
BHC ACT
What is a financial subsidiary?
Subsidiary controlled by a state nonmember bank and engages as principal in activities which may be conducted by a national bank only through a financial subsidiary
BHC ACT
Conclusive control exists if?
- Company directly or indirectly controls 25% or more of the voting shares
- Controls in any manner the election of a majority of the directors
- Transferability of 25% of voting securities of a company is conditioned on the transfer of 25% of another company
BHC ACT
Rebuttable presumption of control exists if:
- Controls more than 5% of voting stock if one or more directors/officers serves in any capacity w/ the bank or BHC & no other person controls as much as 5% of the company
- Controls more than 5% if additional voting securities are controlled by individual or immediate family members who are directors/officers of the company & such holdings aggregate 25% or more of voting sec
- Enters into an agreement w/ a bank under which the co. exercises sig influence in the general management or operations of the bank located in the same state
- State-charted bank/trust company
BHC ACT
A company is not a holding company if:
- Ownership involved in underwriting sec issue
- Ownership w/o discretionary voting power
- Shares acquired through debt previously contracted
- Shares controlled through proxy solicitation
- That is an insured bank that directly or indirectly controls a bank located in the same state
- State-charted bank/trust company
BHC ACT
All BHCs must register with the __________, and their prior approval ______________ to formation of any new BHC.
Board of Governors of the Fed - must be obtained prior
BHC ACT
BHC must get Fed prior approval for _____________ or _______ of more than ___% of __________ in any bank or acquisition of substantially all bank assets or for merger of consolidation with another BHC.
- Acquisition of ownership
- Control
- 5%
- Voting shares
BHC ACT
True or false: The Board may approve an application under this section by a BHC that is adequately capitalized and adequately managed to acquire control of or acquire all or substantially all of the assets of a bank located in another state, w/o regard to whether such transaction is prohibited under the law of any state
True
BHC ACT
An acquisition cannot be approved if it will cause the application and affiliates of the applicant to control over ____% of the total deposits of insured depository institutions in the US or _____% for any state.
- 10% for US
* 30% for any state
BHC ACT
What are some of the factors for FRB Board consideration of a merger or acquisition?
- Competitive factors
- Banking/community factors
- Supervisory factors
- Bank stock loans
- Managerial resources
- Money laundering
BHC ACT
Nonbank banks were grandfathered in 1987, but cannot?
- Expand into business it was not lawfully engaged in 1987
- Cross-market w/ affiliate unless such activity was conducted in 1987
- Permit an OD by an affiliate or overdraft its account at a Fed bank on behalf of its affiliates
- Increase its assets at an annual rate of more than 7% during any 12 month period
BHC ACT
A bank shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement that the customer:
- Obtains some additional credit, lease, or service other than a loan discount, deposit, or trust service from to bank or a subsidiary of the bank or BHC
- Provides some additional credit, lease, or service to bank, BHC, or subsidiary
- Will not be able to obtain some other credit property or service from a competitor, a BHC, or a subidiary of competitor
BHC ACT
The BHC Act prohibits tying arrangements, but for bank what 4 services are accepted from the prohibition?
- Loans
- Discounts
- Deposits
- Trust Services
BHC ACT
What is the purpose of the anti-tying provision?
The purpose of these provisions is to prevent banks from using their ability to offer financial products, credit in particular, in a coercive manner to gain a competitive advantage in markets for nonbanking products and services.
