Introduction to Finance

One-bank holding companies (OBHCs)
own only one bank. 
Multibank holding companies 
(MBHCs)
own and control two or more banks. Both OBHCs and MBHCs may also own 
other businesses permitted by law. The policies of banks controlled by a holding company 
are determined by the parent company and coordinated for the purposes of that organization. 
The holding company itself may or may not engage in direct banking activities. The banks 
controlled by the holding company may operate branches.
There was little control over bank holding companies until the Depression years of the 
early 1930s. Bank holding companies did not come under the jurisdiction of either state or 
federal control unless they also engaged directly in banking operations themselves. The Bank-
ing Act of 1933 and the Securities Acts of 1933 and 1934 imposed limited control on bank 
holding companies, but it remained for the 
Bank Holding Company Act of 1956 
to establish 
clear authority over these operations.
The Bank Holding Company Act defi ned a bank holding company as one that directly or 
indirectly owns, controls, or holds the power to vote 25 percent or more of the voting shares of 
each of two or more banks. Thus, the act of 1956 regulated MBHCs, but not OBHCs. MBHCs 
were not permitted to engage in nonfi nancial activities, and fi nancial activities were restricted 
primarily to direct banking activities. As a result, during the 1960s, while the MBHCs were 
heavily restricted in terms of their nonbanking activities, the OBHCs diversifi ed widely into 
nonfi nancial areas, including manufacturing, retailing, and transportation.
The Bank Holding Company Amendments of 1970 allowed bank holding companies to acquire 
companies with activities closely related to banking, such as credit card operations, insurance, and 
data processing services. The 1970 amendments also brought the OBHCs under the provisions 
of the 1956 act. Thus, while MBHCs were granted more fl exibility in terms of banking-related 
activities, OBHCs had to divest their nonfi nancial holdings. Today, bank holding companies 
control over three-fourths of the banks in the United States and most of the banking assets.
The liberalization of regulations relating to interstate banking is as signifi cant as the liber-
alization of branch banking within states. All states currently permit the acquisition of banks 
by out-of-state bank holding companies. In contrast, only one state permitted interstate bank-
ing before 1982. However, while some state laws still limit entry to banking organizations 
from nearby states, called regional reciprocal, states are increasingly permitting entry on a 
nationwide basis, known as national reciprocal or open entry. Today, nationwide banking sys-
tems are common in the United States.
3.7
The Bank Balance Sheet
A balance sheet indicates an organization’s fi nancial position at a particular point. In other 
words, the balance sheet represents a “snapshot” of its assets, liabilities, and stockholders’ 
equity. Assets are the fi nancial and physical items owned by the bank. Liabilities are the