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.

  1. Holding Company

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

    The interest rate charged to commercial banks and other depository ...
  3. Investment Bank - IB

    A financial intermediary that performs a variety of services. ...
  4. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  5. Super Regional Bank

    A mid-sized bank that has a significant presence in a geographical ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible ...
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