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. 

BREAKING DOWN '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. International Banking Act of 1978

    Federal banking legislation that put all domestic bank branches ...
  2. Branch Banking

    Engaging in banking activities such as accepting deposits or ...
  3. Limited Service Bank

    Any type of banking business facility that is located separately ...
  4. Bank

    A financial institution licensed as a receiver of deposits. There ...
  5. Nonbank Banks

    Financial institutions that are not considered full-scale banks ...
  6. Regulation Y

    Federal Reserve action regulating corporate bank holding company ...
Related Articles
  1. Insights

    The World's Top 10 Banks

    Learn more about the world's largest banks and how more financial power shifts eastward as China is home to four of the world's largest banks.
  2. Investing

    What's a Correspondent Bank?

    A correspondent bank is a bank that acts on behalf of another bank, usually a foreign bank.
  3. Personal Finance

    Banking Has Changed: What Does It Mean For Consumers?

    Banks have long been leading spenders on technological innovations. Learn the key changes in the banking industry and what institution is right for you.
  4. Tech

    The Pros And Cons Of Internet Banks

    Learn how internet banking services stack up against those of their brick-and-mortar peers.
  5. Insights

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  6. Insights

    How Online Banking Is Overtaking Traditional Banking

    Is traditional banking doomed to be surpassed by online banking?
RELATED FAQS
  1. What is the average profit margin for a company in the banking sector?

    Learn what the average profit margin is for companies in the banking sector, along with other evaluation metrics often used ... Read Answer >>
  2. How does investment banking differ from commercial banking?

    Discover how investment banking differs from commercial banking, the responsibilities of each and how the two can be combined ... Read Answer >>
  3. What factors are the primary drivers of banks' share prices?

    Find out which factors are most important when determining the share price of banks and other lending institutions in the ... Read Answer >>
  4. How do investment banks help the economy?

    Learn more about the functions of investment banks in a modern economy and how investment banks have been treated differently ... Read Answer >>
  5. How are investment banks regulated in the United States?

    Read about the extensive regulations placed on investment banks in the United States, beginning with the Glass-Steagall Act ... Read Answer >>
  6. Is the banking sector appropriate for a growth investor?

    Explore the suitability of bank stocks as a sector appropriate for growth investors to consider including in their investment ... Read Answer >>
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  3. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  6. Indirect Tax

    A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An ...
Trading Center