Permissible Non-Bank Activities

AAA

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.

INVESTOPEDIA EXPLAINS '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. 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 ...
RELATED FAQS
  1. How do open market operations affect the U.S. money supply?

    Formulating a country's monetary policy is extremely important when it comes to promoting sustainable economic growth. More ... Read Full Answer >>
  2. What is the Federal Reserve Board's market risk capital rule?

    The Federal Reserve Board’s market risk capital rule, or MRR, sets forth the capital requirements for banking organizations ... Read Full Answer >>
  3. How does the law of supply and demand affect monetary policy in the United States?

    The law of supply and demand affects monetary policy in the United States through the adjustment of interest rates. Interest ... Read Full Answer >>
  4. What is the theory of asymmetric information in economics?

    The theory of asymmetric information was developed in the 1970s and 1980s as a plausible explanation for common phenomena ... Read Full Answer >>
  5. How does market risk differ from specific risk?

    Market risk and specific risk are two different forms of risk that affect assets. All investment assets can be separated ... Read Full Answer >>
  6. How is perpetuity used in the Dividend Discount Model?

    The basic dividend discount model (DDM) creates an estimate of the constant growth rate, in perpetuity, expected for dividends ... Read Full Answer >>
Related Articles
  1. Economics

    The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.
  2. Fundamental Analysis

    Analyzing A Bank's Financial Statements

    A careful review of a bank's financial statements can help you identify key factors in a potential investment.
  3. Forex Education

    Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.
  4. Economics

    Will The US Economy Rebound In The 2nd Quarter?

    Most investors know that U.S. 1st quarter growth numbers aren’t pretty. Economic statistics have been missing expectations by the largest margin since 2009
  5. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  6. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  7. Economics

    The U.S. Economy May Be Stronger Than You Think

    While the economic performance in the U.S. broadly disappointed in the first quarter, temporary factors presented one-off events that depressed output.
  8. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  9. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.
  10. Investing

    Pockets Of Value In The Stock Market

    U.S. stocks benefited from signs the Fed’s path toward higher interest rates, as well as from continued merger-and-acquisition activity on of low rates.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center