Permissible Non-Bank Activities

DEFINITION of 'Permissible Non-Bank Activities'

Financial business that can be conducted by bank holding companies because they are deemed close enough to banking to be permissible by the Federal Reserve. Bank holding companies can either engage in the businesses directly or through subsidiary firms. Common examples are ownership or operation in the finance and mortgage banking sectors.

The Federal Reserve looks at whether such practices are in the public's interest before making decisions about what lines of business banks can conduct.

BREAKING DOWN 'Permissible Non-Bank Activities'

Most of the large multi-national banks operating in the U.S. and abroad have expanded into financial management, mortgage banking and investment banking as a way of diversifying cash flows and offering more services to their clients. Economies of scale also become a large factor in defining the expansion and diversification strategies of companies like Citigroup, JP Morgan Chase and Bank of America.

The Federal Reserve continues to monitor large financial holding companies to ensure that proper competition still exists, and that no conflicts of interest arise within different operational units.

RELATED TERMS
  1. Regulation Y

    Federal Reserve action regulating corporate bank holding company ...
  2. National Bank

    In the United States, a commercial bank chartered by the comptroller ...
  3. Free Reserves

    A measurement of a bank's reserves that is equal to the difference ...
  4. Business Banking

    A company's financial dealings with an institution that provides ...
  5. Bank Reserve

    Bank reserves are the currency deposits which are not lent out ...
  6. Double Leverage

    When a bank holding company conducts a debt offering to acquire ...
Related Articles
  1. Managing Wealth

    Retail Banking Vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers.
  2. Markets

    Regional Banks Give The Fed A National Perspective

    We all know that the Federal Reserve utilizes monetary policy to control the economy, but what do the 12 regional Federal Reserve Banks do?
  3. Markets

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
  4. Markets

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.
  5. Markets

    Who Are Wells Fargo’s Main Competitors?

    Explore information on the main competitors of Wells Fargo, the other three of the "big four" U.S. banks of Citigroup, JPMorgan Chase and Bank of America.
  6. Markets

    Why the Fed Says Banking Functions Are Too Complex (JPM, BAC)

    Discover why the Federal Reserve may raise capital requirements for America's largest banks or move to limit complex derivative contracts.
  7. Investing

    What's a Holding Company?

    A holding company is a corporation that owns enough voting stock in another company to control its management and policies.
  8. Managing Wealth

    Top 4 Companies Owned by JPMorgan (JPM)

    Read about JPMorgan Chase & Company's main operating subsidiaries, including its retail and investment banking operations and its global asset management firm.
  9. Markets

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
  10. Managing Wealth

    Bank of America Stock: A Dividend Analysis (BAC)

    Learn about Bank of America, one of the largest U.S. financial institutions, its dividend policy, dividend yield, dividend safety and future prospects.
RELATED FAQS
  1. What do banks do to control the bank reserve?

    Understand what the Federal Reserve does in order to expand or contract the economy. Learn what depository institutions can ... Read Answer >>
  2. How are bank reserve requirements determined and how does this affect shareholders?

    Learn how bank reserve requirements are determined and how bank reserves affect shareholders through improved bank stability ... 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 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 >>
  5. 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 >>
  6. What impact does the Federal Reserve have on a bank's profitability?

    Learn how the Federal Reserve impacts a bank's profitability with its influence on the discount rate, federal funds rate ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center