Affiliations: Financial Holding Companies *RULE: FHC is a BHC that meets special rules (really easy to satisfy). Gramm-Leach-Bliley. each FDIC sub must be well-capitalized and well-managed (the in CAMELS) “M” satisfactory exam under CRA file declaration of intent to become FHC *RULE: An FHC may engage in financial activities (plus anything or “incidental” “complementary”) *BUT: as long as no risk to S&S of depository institutions or the financial system generally” “substantial *RULE: either FHC or a sub can engage in financial activities *RULE: corp that becomes an FHC can nonfinancial activities indefinitely continue *RULE: FHC can own nonbank subs, but the FHC’s bank subs are controlled by NBA: no non-banking activities. *NB: insider loan prohibitions still apply to covered transactions among affiliates w/i the FHC *RULE: Activities under G-L-B: “Financial” Lend/transfer/exchange $; invest $ for others; transfer securities; safeguard $ or securities Securities Powers: Underwriting, brokering, or selling any kind of insurance, guarantee or indemnity Insurance Powers: financial/investment/economic, including managing a mutual fund portfolio Advice: Securitizing loans or other assets a bank could hold directly ABS: Underwriting/dealing/market-making of securities Securities Powers: Anything related” (grandfathers in stuff Fed approved under BHCA) Grandfather: “closely Can do domestically anything Fed previously said was OK abroad (mgmt consulting, travel agency, etc.) Int’l Playing Field: : Acquiring shares in a nonbank OK if conditions (see Merchant Banking (PE) Investing through an insurance company (similar limits as merchant banking) *RULE: are quasi-financial: Lending/transferring etc. assets other than money or securities Providing device for transferring financial assets Arranging/effecting/facilitating financial transactions for 3d parties *RULE: Reasons why Fed can change definition of “financial” Purpose of the statutes (G-L-B; BHC Act; Nat’l Bank Act) Anticipated changes in market for FHCs Anticipated changes in technology Whether service is or appropriate” for FHC to compete “necessary FHCs: Merchant Banking and The Between Banking and Commerce “Wall” *RULE: FHC cannot engage in nonfinancial activities.
Affiliations: Financial Holding Companies *RULE: FHC is a BHC that meets special rules (really easy to satisfy). Gramm-Leach-Bliley. each FDIC sub must be well-capitalized and well-managed (the “M” in CAMELS) satisfactory exam under CRA file declaration of intent to become FHC *RULE: An FHC may engage in financial activities (plus anything “incidental” or “complementary”) *BUT: as long as no “substantial risk to S&S of depository institutions or the financial system generally” *RULE: either FHC or a sub can engage in financial activities *RULE: corp that becomes an FHC can continue nonfinancial activities indefinitely *RULE: FHC can own nonbank subs, but the FHC’s bank subs are controlled by NBA: no non-banking activities. *NB: insider loan prohibitions still apply to covered transactions among affiliates w/i the FHC *RULE: “Financial” Activities under G-L-B: Securities Powers: Lend/transfer/exchange $; invest $ for others; transfer securities; safeguard $ or securities Insurance Powers: Underwriting, brokering, or selling any kind of insurance, guarantee or indemnity Advice: financial/investment/economic, including managing a mutual fund portfolio ABS: Securitizing loans or other assets a bank could hold directly Securities Powers: Underwriting/dealing/market-making of securities Grandfather: Anything “closely related” (grandfathers in stuff Fed approved under BHCA) Int’l Playing Field: Can do domestically anything Fed previously said was OK abroad (mgmt consulting, travel agency, etc.) Merchant Banking (PE) : Acquiring shares in a nonbank OK if conditions (see Investing through an insurance company (similar limits as merchant banking) *RULE: are quasi-financial: Lending/transferring etc. assets other than money or securities Providing device for transferring financial assets Arranging/effecting/facilitating financial transactions for 3d parties *RULE: Reasons why Fed can change definition of “financial” Purpose of the statutes (G-L-B; BHC Act; Nat’l Bank Act) Anticipated changes in market for FHCs Anticipated changes in technology Whether service is “necessary or appropriate” for FHC to compete FHCs: Merchant Banking and The “Wall” Between Banking and Commerce *RULE: FHC cannot engage in nonfinancial activities.