What are Grandfathered Activities
Grandfathered activities are non-bank operations allowed for holding companies and foreign banks in the U.S. if commenced prior to regulatory changes. Non-bank activities, are normally not permissible for bank holding companies and foreign banks in the United States. However, if these non-bank businesses were acquired or engaged in before a particular date, such activities may be continued under the "grandfather" clauses of the Bank Holding Company Act of 1956 and the International Banking Act of 1978. New or revised laws and regulations often have grandfather clauses allowing prior rules to apply to existing situations and the new rules to apply to all futures situations. To grandfather is to grant such an exemption.
BREAKING DOWN Grandfathered Activities
The Federal Reserve Board (FED) defines "foreign bank" as any U.S. operation of a banking organization headquartered outside the United States. The FED defines a bank holding company as owning or having a controlling interest in one or more U.S. banks or another bank holding company with these attributes. Financial holding companies (FHC), unlike ordinary bank holding companies, are allowed to engage in insurance underwriting, securities dealing, merchant banking, securities underwriting, and investment advisory services. Both bank holding companies (BHC) and foreign bank organizations (FBO) can elect to be approved as FHCs.