Banks to Become Banks!

This morning I found myself in unfamiliar territory. Yesterday, the Federal Reserve Board of Governors granted the applications of the Last Two Independent Investment Banks to become bank holding companies. The orders can be found here and here.

For those as at sea as I am, I offer the following primer.

1) Bank holding companies were developed by bankers, at the turn of the century, to avoid state bank branching laws.

2) The Bank Holding Company Act of 1935 (12 USCA s. 1842 et seq, also called Glass-Steagall) created federal agencies to regulate them.

3) Section 21 of Glass-Steagall (12 USCA 378) forbids bank holding companies from involving themselves in the securities business.

4) The Financial Services Modernization Act of 1999 (PL 106-102, also called the Gram-Leach-Bliley Act) amended the Bank Holding Company Act by creating a new regulated entity called a financial holding company.

5) Bank holding companies meeting the requirements of sections 4(k) and 4(l) of the Bank Holding Company Act (12 USCA 1843(k) and (l)) and section 225.24 of the Fed's Regulation Y (12 CFR 225.24) may elect to be recognized as financial holding companies.

6) Financial holding companies may engage in any business that is “financial in nature,” or “complementary,” to a financial activity.

A list of financial holding companies can be found here.

Wait! There's more! Banks can be either chartered nationally or by a state. State-chartered banks are regulated by the state's financial services agency. Nationally chartered banks are regulated by the Office of the Comptroller of the Currency.

Banks can also be regulated by the Federal Reserve, if they are members of the Federal Reserve System, and/or FDIC if they have FDIC insured deposits.

Fed actions (FFIN-FRBACT), agreements (FFIN-FRBACT) and interpretive letters (FFIN-FRBIL) may be found on Westlaw - along with FDIC institution letters (FFIN-FDICFIL), interpretive letters (FFIN-FDCIL) and enforcement decisions (FFIN-FDICED). The FFIN-ADMIN database combines the regulatory output of both agencies.