What is a financial holding company?

The financial holding company (FHC) is a company that offers its customers a wide range of financial services. In the United States, financial companies were limited by laws, such as the Glass-Steagall Act until 1999, when the Gramm-Leach-Bliley Act was passed, allowing the creation of financial holding companies. Some critics of the latter legally claimed that financial holding companies contributed to the market conditions that brought a major crisis in 2008 when a mortgage bubble appeared. Historically, activities such as banking and insurance must be separated by law, and when it has changed, several prominent companies merged to offer both financial holding companies both services. Other non -banking activities are also allowed for financial holding companies that are regulated by the Federal Reserve.

In order to become a financial holding company, the company must register and prove that it is well managed and properly capitalized. According to Member Institutions, according to the Reinvesting Act must have assessment of the assessment of satisfactory or higher. This requirement was the bone of the dispute during the negotiations on the passage of the bill of 1999 and was held at the insistence of Clinton's administration. The exact services offered in a financial holding company vary depending on how it is organized and the nature of companies under its umbrella.

companies with more than 85% of their business interests focused on non -banking financial activities may apply to financial holding companies. If adopted, the new financial holding company must sell interests that the most mourage nature within 10 years. Holding companies can merge with other companies to become financial holding companies, as can be seen when banks and insurance companies merges.

The banking industry supporters claimed that the financial holding company was better able to provide many customers. Simplifying a service under a banner of one company could facilitate a wide range of services and possibilities. In addition, industry deregulation was considered beneficial for the financial world as a whole. Critics argued that deregulation had the opposite effect and contributed to commercial practices that led to Non -Non -Non -Loan Procedures and other poor business decisions, which eventually contributed to economic problems.