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. Regulation Y

    Federal Reserve action regulating corporate bank holding company ...
  4. Limited Service Bank

    Any type of banking business facility that is located separately ...
  5. Nonbank Banks

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

    A financial institution licensed as a receiver of deposits. There ...
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. Personal Finance

    How Will Bank Regulation Affect British Banks?

    We look at the proposed changes to Britain's banking system, and see whether it will be able to stay competitive.
  5. Insights

    The 4 Biggest Chinese Banks

    Learn how the Chinese banking system is operated and managed, and get information about the top four largest banks in the country.
  6. Investing

    Introduction To The Chinese Banking System

    As China steps into a greater role in the global economic system, their banking system continues to evolve.
  7. Insights

    The Role of Commercial Banks in the Economy

    We interact with commercial banks daily to carry out simple financial tasks. That said, the function and creation of a commercial bank is anything but simple.
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. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
  3. What economic indicators are important to consider when investing in the banking ...

    Find out which economic indicators are most useful for investors in the banking sector, especially those influenced by central ... Read Answer >>
  4. 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 >>
  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. 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 >>
Hot Definitions
  1. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  2. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  3. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  4. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
  5. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, ...
  6. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
Trading Center