Introduction to Finance

limited branch banking
permit banks under their jurisdiction to locate offi
ces within 
a geographically defi ned (e.g., within a county) distance of their main offi
ce. 
Statewide 
branch banking
means, as the name implies, that banks can operate offi
ces throughout 
the state. Back in the 1960s, about one-third of the states permitted limited branching and 
about one-third permitted statewide branching. Today, statewide branching is permitted in 
most states.
One of the particular merits of branch banking is that these systems are less likely to fail 
than independent unit banks. In a branch banking system, a wide diversifi cation of invest-
ments can be made. Therefore, the temporary reverses of a single community are not as likely 
to cause the complete failure of an entire banking chain. This is true primarily of those branch 
systems that operate over wide geographical areas rather than in a single metropolitan area.
dual banking system 
allows most 
depository institutions to obtain 
charters either from the federal 
government or a state government
unit banking 
exists when a bank 
can have only one full-service offi
ce
limited branch banking 
allows 
additional banking offi
ces within a 
geographically defi ned distance of a 
bank’s main offi
ce
statewide branch banking 
allows 
banks to operate offi
ces throughout 
a state

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C H A PT E R 3 Banks and Other Financial Institutions
The independent bank cannot rely on other banks to off set local economic problems. It is 
on this point that branch banking operations appear to have their strongest support. The record 
of bank failures in the United States is one of which the banking system as a whole cannot be 
proud. However, opponents of branch banking have pointed out that the failure of a system of 
banks, although less frequent, is far more serious.
There are also confl icting points of view on the pros and cons of branch banking among 
bank customers. The placement of branches in or near shopping centers, airports, and other 
centers of activity is convenient for consumers. The ability to make deposits or to withdraw 
funds at a branch is a special advantage for the elderly. Businesses may satisfy very large bor-
rowing requirements by dealing with a bank that has been able to grow to a substantial size 
through its branch operations.
Bank Holding Companies
A bank may be independently owned by investors, or it may be owned by a holding company. 
As the name suggests, a holding company owns and controls other organizations or fi rms.