Legal Definitions - bank holding company

A Bank Holding Company (BHC) is a parent corporation that owns or controls one or more banks. Its primary purpose is to manage and oversee the operations of its banking subsidiaries. Typically, owning 25% or more of a bank's voting shares is considered sufficient to establish control for regulatory purposes, making the owning entity a bank holding company. This structure allows for centralized management and often enables the parent company to offer a broader range of financial services beyond traditional banking.

• Example 1: Diversified Financial Group
  Imagine "Global Financial Group Inc." is a large corporation. It doesn't operate as a bank itself, but it owns 100% of "National Trust Bank," 75% of "Regional Savings & Loan," and 50% of "Investment Capital Bank."

  How it illustrates the term: Because Global Financial Group Inc. owns and controls multiple distinct banking institutions, it is classified as a Bank Holding Company. This structure allows it to manage diverse banking operations under one corporate umbrella, benefiting from economies of scale and diversified service offerings.

• Example 2: Community Bank Consolidation
  Consider "Midwest Community Bancorp." This company was formed by a group of investors to acquire and manage three smaller, independent community banks located in different towns across a state. Midwest Community Bancorp now owns 100% of each of these banks.

  How it illustrates the term: Midwest Community Bancorp acts as the parent company for these individual banks, providing centralized administrative and strategic support. By owning and controlling these banks, it fits the definition of a Bank Holding Company, even though its focus is regional and community-oriented rather than national or international.

• Example 3: Strategic Investment
  "Apex Investments LLC," a private equity firm, decides to make a significant strategic investment in "Citywide Bank." Apex Investments acquires 30% of Citywide Bank's voting stock and gains several seats on its board of directors, giving it substantial influence over the bank's operations.

  How it illustrates the term: Even though Apex Investments LLC doesn't own 100% of Citywide Bank, its 30% ownership stake and board representation typically constitute "control" under banking regulations. Therefore, Apex Investments LLC would be considered a Bank Holding Company because it now controls a regulated bank, even if it's not the sole owner.