Bank Holding Company

By Deane Barker

This is a company that owns banks, but doesn’t necessarily do banking itself.

There are a lot of laws and regulation around banking. A bank holding company – a “bancorp” – operates under different rules than banks, which can make it easier for them to borrow money.

Why I Looked It Up

I was reading Too Big to Fail about the 2008 financial crisis. Several investment banks converted to bank holding companies as they ran out of money and needed to borrow from the Federal Reserve.

Wikipedia notes:

As a result of the global financial crisis of 2008, many traditional investment banks and finance corporations such as Goldman Sachs, Morgan Stanley, American Express, CIT Group and GMAC (now Ally Financial)[4] converted to bank holding companies in order to gain access to the Federal Reserve’s credit facilities.

The next day, the New York Times noted it was:

[…] a blunt acknowledgment that their model if finance and investing had become too risky

Weirdly, I used to have a client literally called “The Bancorp.” To my knowledge, they were not a bank holding company? They dealt in prepaid credit cards, but I have learned that many credit card issuers are owned by other banks (they have to be “underwritten” by one), so perhaps this might have been true behind-the-scenes.

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