Bank Holding Company Law and Legal Definition

Under the Bank Holding Company Act of 1956, administered by the Federal Deposit Insurance Corporation (FDIC), a bank holding company is defined as " any company which has control over any bank or over any company that is or becomes a bank holding company by virtue of this Act.

    (2)  Any company has control over a bank or over any company if--

a. the company directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company;

b. the company controls in any manner the election of a majority of the directors or trustees of the bank or company; or

c. the Board determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company."

The Bank Holding Company Act of 1956 was implemented in response to banks forming bank holding companies in order to own both banking and non-banking businesses.  This Act, among other things, generally prohibited a bank holding company from engaging in most non-banking activities or acquiring voting securities of certain companies that are not banks.A company that owns two or more banks. Bank holding companies are required to register with the governors of the Federal Reserve System.