Nonbank Banks

A A A

DEFINITION

Financial institutions that are not considered full-scale banks because they do not offer both lending and depositing services. Nonbank banks can engage in credit card operations or other lending services, provided they do not also accept deposits.

The Bank Holding Company Act of 1956 prohibits nonbank companies from owning banks as subsidiaries, but they may own other nonbank banks.


INVESTOPEDIA EXPLAINS

Many nonbank banks that allow deposits are insured by the FDIC and reserve requirement restrictions will apply to these institutions. Nonbank banking has expanded greatly in recent years, as non-financial institutions such as retail companies and auto makers have entered the lending business.

Because many companies try to stretch the rules on banking rights, the U.S. government has massively restricted new chartering of nonbank banks since the late 1980s.



RELATED TERMS
  1. Non-Banking Financial Company - ...

    Non-banking financial companies, or NBFCs, are financial institutions that provide ...
  2. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank ...
  3. Subsidiary

    A company whose voting stock is more than 50% controlled by another company, ...
  4. Chartered Bank

    A financial institution whose primary roles are to accept and safeguard monetary ...
  5. Niche Banks

    Banks that cater to and serve the needs of a certain demographic segment of ...
  6. Commercial Bank

    A financial institution that provides services, such as accepting deposits, ...
  7. Federal Deposit Insurance Corporation ...

    The U.S. corporation insuring deposits in the U.S. against bank failure. The ...
  8. Depository Trust Company - DTC

    One of the world's largest securities depositories, it holds in excess of US$1 ...
  9. Rotating Credit And Savings Association ...

    A group of individuals that fill the role of an informal financial institution ...
  10. Liquidity Coverage Ratio - LCR

    Highly liquid assets held by financial institutions in order to meet short-term ...
Related Articles
  1. Take Control Of Your Credit Cards
    Credit & Loans

    Take Control Of Your Credit Cards

  2. Understanding Credit Card Interest
    Retirement

    Understanding Credit Card Interest

  3. Your First Checking Account
    Insurance

    Your First Checking Account

  4. How To Break Up With Your Bank
    Options & Futures

    How To Break Up With Your Bank

  5. What Was The Glass-Steagall Act?
    Retirement

    What Was The Glass-Steagall Act?

  6. How New Offshore Bank Rules Will Affect ...
    Taxes

    How New Offshore Bank Rules Will Affect ...

  7. The Future Of Sales Brokers
    Brokers

    The Future Of Sales Brokers

  8. Understanding The Consumer Financial ...
    Personal Finance

    Understanding The Consumer Financial ...

  9. The Pros And Cons Of Internet Banks
    Personal Finance

    The Pros And Cons Of Internet Banks

  10. Financial Institutions: Stretched Too ...
    Mutual Funds & ETFs

    Financial Institutions: Stretched Too ...

comments powered by Disqus
Hot Definitions
  1. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  2. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  3. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  4. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  5. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  6. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
Trading Center