Prohibiting certain high-risk investment activities by banks and bank holding companies

hearing before the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred Eleventh Congress, second session, on examining recent restrictions placed on commercial banks and bank holding companies" high-risk investment activities, February 2, 2010 by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs.

Publisher: U.S. G.P.O., Publisher: For sale by the Supt. of Docs., U.S. G.P.O. in Washington

Written in English
Published: Pages: 71 Downloads: 715
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Subjects:

  • Financial risk,
  • Banks and banking,
  • Bank holding companies,
  • Investments,
  • State supervision

Edition Notes

Shipping list no.: 2011-0184-P.

(8) to subscribe to, buy and own stock in one or more small business investment companies in Kansas as otherwise authorized by federal law, except that in no event shall any bank acquire shares in any small business investment company if, upon the acquisition, the aggregate amount of shares in small business investment companies then held by the bank would exceed 5% of the bank's capital and. The Board is seeking comment on a proposal to adopt additional limitations on physical commodity trading activities conducted by financial holding companies under complementary authority granted pursuant to section 4(k) of the Bank Holding Company Act and clarify certain existing limitations on those activities; amend the Board's risk-based. well-managed, and have at least a satisfactory CRA rating. Section limits non-electing bank holding companies to only those activities that the Federal Reserve had approved for bank holding companies prior to enactment of the legislation. Management Tip: In Senate debate on November 3, Senator Gramm (R. Tex.), the. affiliating (or sharing employees) with companies involved in such activities; Conversely, Glass–Steagall prevented securities firms and investment banks from taking deposits. The law gave banks one year after the law was passed on J to decide whether they would be a commercial bank or an investment bank.

  In addition to trading on behalf of customers, banks and their affiliates have conducted proprietary trading, using their own funds to profit from short-term price changes in asset markets. To restrain risk-taking and reduce the potential for federal support for banking entities, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the act) prohibits banking entities from engaging in. (BHCs), 2) bank holding companies with section subsidiaries (S20s), and 3) investment banks (IBs). After the passage of the Act, there are five types of banks: 1) bank holding companies which do not expand their business into investment banking activities (BHC_BHC), 2) bank holding companies which expand their business into investment.   J.G. Gallo et al./Journal of Banking & Finance 20 () Table 2 Bank holding company sample This table presents the bank holding companies included in the analysis. Bank holding companies are divided into money center, superregional, and regional bank groups. Rather, it prohibited certain financial activities in a way that hurt smaller banks the most. [universal] bank holding companies couldn’t compete.” while “outside” would be investment banking activities including derivatives, debt and equity underwriting, and investing and trading in securities.

Bank regulations can restrict the extent to which banks can hold risky assets such as real estate and common stocks, thus directly limiting the extent to which bank managers can engage in high-risk activities. Such restrictions were imposed on U.S. banks and thrifts until the early s. The Volcker Rule, which prohibits "banking entities" from certain proprietary trading and from having certain relationships with "covered funds," was originally set forth in Section of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which amended the Bank Holding Company Act of to add Section The.   For reasons that are mystifying, the idea of separating investment banks from commercial banks — once the law of the land for more than 60 years — is again the rage among certain politicians.   Investment banking is a specific division of banking related to the creation of capital for other companies, governments, and other entities. more Lehman Formula.

Prohibiting certain high-risk investment activities by banks and bank holding companies by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Download PDF EPUB FB2

The Official website of The United States Committee on Banking, Housing, and Urban Affairs Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies Date: Tuesday, February 2, Time: PM Open in New Window Open in.

8 Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies before the S. Comm. on Banking, Housing & Urban Affairs, th Cong. 5 () (testimony of the Honorable Paul Volcker, Chairman, President‘s Economic Recovery Advisory Board).

2 Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies: Hearing Before the S. Comm. on Banking, Housing, & Urban Affairs, th Cong. 44 () (Testimony of Paul A. Volcker, Former Chairman of the Board of Governors of.

state-chartered commercial banks • Activities “so closely related to banking as to be properly incident thereto” (“4(c) Activities”) • Owning 5% or less of the outstanding shares of any class of voting securities of a company (including commercial companies) BHC Permitted Activities 4File Size: KB.

Please refer to Annex A for an overview of the Custodian Banks. 3 See Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies befor the S.

Comm. on Banking, Housing & Urban Affairs, th Cong. 2 (February 2, ) (testimony of the Honorable Paul Volcker, Chairman President', s Economic Recover Advisory Board)y. for an overview of the Custodian Banks. 3 See Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies before the S.

Comm. on Banking, Housing & Urban Affairs, th Cong. 2 (February 2, ) (testimony of the Honorable Paul Volcker, Chairman, President’s Economic Recovery Advisory Board). Kansas Banking Law Book _____ Statutes – Page 1 KANSAS STATUTES Chapter 9 – BANKS AND BANKING; TRUST COMPANIES Article 5 – MISCELLANEOUS PROVISIONS K.S.A.

Bank holding companies; definitions. Congress extended the Glass-Steagall Act in with the passage of the Bank Holding Company Act, which barred commercial banks and the companies that own them from engaging in non-banking activities, notably insurance.

Lawmakers felt that banks should be walled off from the risks inherent in underwriting insurance. See Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies: Hearing Before the S.

Banking, Hous. and Urban Affairs Comm., th Cong. (LEXIS) () [hereinafter Prohibiting] (statement of Paul Volcker, Chairman of the President's Economic Recovery Advisory Board and.

As a result of the global financial crisis several of the large, free-standing investment banking firms chose to become bank holding companies. This means that they will now be regulated by A) the Federal Reserve. B) the FDIC. C) the state banking authorities. D) the Treasury. Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies, Hearing before the S.

Comm. on Banking, Housing & Urban Affairs, th Cong. 2 (February 2, ) (testimony of the Honorable Paul Volcker, Chairman, President‘s Economic Recovery Advisory Board), atavailable at. These companies have been around since the early s and were created to get around both the laws prohibiting bank branching and the laws preventing banks from offering non-bank financial services.

The number of banks in the U.S. has fallen almost by half in the past twenty years or so. Investment Limits (Bank Holding Companies) Regulations. P.C. Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to sections a, a and a of the Bank Act b, hereby makes the annexed Investment Limits (Bank Holding Companies) Regulations.

By appropriately defining the business of commercial banks we can go a long way toward promoting the combination of competition, innovation, and underlying stability that we seek."Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies before the S.

Comm. on Banking, Housing & Urban Affairs, th Cong. 1 For the purposes of the Volcker Rule, “banking entities” include any depository institution insured by the FDIC, as well as any of the institution’s parents, affiliates and subsidiaries.

This generally includes: (i) FDIC-insured national or state banks; (ii) FDIC-insured savings associations, credit card banks and industrial loan companies; (iii) bank holding companies (“ BHCs.

A potential obstacle to bank holding company acquisitions of securities firms is that some securities firms' activities may be impermissible for bank holding companies. Examples of these impermissible activities include: merchant banking, commodities, insurance, and real estate investments.

See 61 Fed. Reg. Equity Underwriting Spreads at Commercial Bank Holding Companies and Investment Banks 1. Introduction Commercial-banking organizations were prohibited from underwriting equity issues by the Glass-Steagall Act of Inthe Federal Reserve (Fed) reinterpreted the Act and.

The Bank Holding Company Act of (12 U.S.C. §et seq.) is a United States Act of Congress that regulates the actions of bank holding companies. The original law (subsequently amended), specified that the Federal Reserve Board of Governors must approve the establishment of a bank holding company and that bank holding companies headquartered in one state are banned from.

The Banking Act of (the Banking Act) joined together two long-standing Congressional projects: (1) a federal system of bank deposit insurance championed by Representative Steagall and (2) the regulation (or prohibition) of the combination of commercial and investment banking and other restrictions on "speculative" bank activities championed by Senator Glass as part of a general.

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• Bank Holding Company Act, Section 4 – BHCs and their subsidiaries generally prohibited from engaging in, or investing in any company engaged in, any activity other than managing or controlling banks, except pursuant to a specific BHCA exemption.

Bank Holding Company Act, Banks, Financial institutions, Financial regulation, Must comply with the Super 23A limits (as described below) and restrictions prohibiting certain high-risk activities; Foreign Public Funds and Small Business Investment Companies.

appropriate Federal banking agencies shall jointly prohibit sponsoring and investing in hedge funds and private equity funds by an insured depository institution or by a company that years from the effective date of this Act, retain any investment prohibited by this section.

to bank holding companies. The Volcker Rule is a federal regulation that generally prohibits banks from conducting certain investment activities with their 13 of the Bank Holding Company Act of. Section 19(e), 48 Stat.repealed in pertinent part, 80 Stat.prohibited bank holding companies from voting the shares of a bank subsidiary unless the holding company divested itself of any interest in a subsidiary formed for the purpose of or "engaged principally" in the issuance or underwriting of securities.

We believe that the Agencies have the ability, under Section 13(d)(l)(J) of the Bank Holding including large commercial banks and investment banks.

The existence of the exemption allows these Committee Hearing on Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies, as released by the. Banks and bank holding companies generally are prohibited by Section 13 of the Bank Holding Company Act (Volcker Rule) from investing in.

For example, a banking entity that has elected to be treated as a financial holding company may be permitted to make an investment in a venture capital fund pursuant to its merchant banking investment authority, provided the banking entity complies with applicable merchant banking investment requirements.

See 12 C.F.R. PartSubpart J. Listing Prohibited Activities for BHCs Bank Holding Companies and Banks the Glass-Steagall Act of which prohibits commercial banks from engaging in high-risk investment."). The Glass–Steagall legislation was enacted by the United States Congress in as part of the Banking Act, amended as part of the Banking Act, and most of it was repealed in by the Gramm–Leach–Bliley Act (GLBA).

Its protections and restrictions had also been chipped away during most of its existence by lenient regulatory interpretations and use of loopholes. But the Bank Holding Company Act (BHCA) effec- tively closed this loophole by prohibiting parent corporations or companies owning two or more bank subsidiaries from engaging in any business.12 See Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies Before the S.

Comm. on Banking, Hous. & Urban Affairs, th Cong. 5–8, 49–51 (Feb. 2, ) [hereinafter Volcker Testimony] (statement of Hon. Paul A. Volcker, Chairman, President’s Economic Recovery Advisory Board).

13 Id. at 6. 14 Id. In addition, all bank and savings and loan holding companies would be covered banking entities, as well as certain non-financial companies that own ILCs or that own a credit card bank. In addition, any foreign bank with a branch or agency office in the United States or an Edge Act or U.S commercial lending company subsidiary would be a covered.