Multibank Holding Company

AAA

DEFINITION of 'Multibank Holding Company'

A company that owns or controls two or more banks. Because of their corporate status, they are subject to more regulations than banks, but also have more options for raising capital. Mutlibank holding companies are governed by the Bank Holding Company Act of 1956 and its amendments. The Act was designed to check the expansion of banks and to ensure that they had separate banking and non-banking functions. 

INVESTOPEDIA EXPLAINS 'Multibank Holding Company'

The rise of multibank holding companies has much to owe to geography and the impact of regional economics. Historically, banks served the area around the physical location of the bank itself. If businesses in the surrounding area failed in large enough numbers, the banks would not be able to stay open. During the Great Depression, for example, the failure of large numbers of farms resulted in many banks across the United States having to close.

Multibank holding companies provide a level of diversification, as a company with banks across several different communities ostensibly is less risky than a company with only one bank. The creation of subsidiaries allowed individual banks to combine administrative operations, which reduced costs while also allowing them to tap into their holding company’s assets in times of crisis.

State banking laws influence whether multibank holding companies are likely to set up in a particular state. Unit banking states tend to have more multibank holding companies since the law prohibits bank branching, while branch and limited-branch banking states tend to have more one-bank holding companies.

RELATED TERMS
  1. Holding Company

    A parent corporation that owns enough voting stock in another ...
  2. Capital

    1) Financial assets or the financial value of assets, such as ...
  3. Bank Reserve

    Bank reserves are the currency deposits which are not lent out ...
  4. Tax Accounting

    Accounting methods that focus on taxes rather than the appearance ...
  5. Branch Banking

    Engaging in banking activities such as accepting deposits or ...
  6. Corporation

    A legal entity that is separate and distinct from its owners. ...
Related Articles
  1. The Rise Of The Modern Investment Bank ...
    Insurance

    The Rise Of The Modern Investment Bank ...

  2. From Booms To Bailouts: The Banking ...
    Home & Auto

    From Booms To Bailouts: The Banking ...

  3. The Evolution Of Banking
    Credit & Loans

    The Evolution Of Banking

  4. Bank Failure: Will Your Assets Be Protected?
    Options & Futures

    Bank Failure: Will Your Assets Be Protected?

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center