Utilizing the Bank Holding Company

The use of the bank holding company as an organizational form for owning and controlling commercial banks is neither a new device nor a recent one. In fact, it dates back to around 1900. At that time, the bank holding company provided a device for owning several banks at a time when branching was prohibited, or severely limited, in every state. To this day, restrictive branching laws have remained one of the primary reasons for embracing the holding company organizational form as banks have sought to approach the geographic mobility of their customers. Multibank holding companies tend to be most important in those states with highly restrictive branching laws and to be relatively unimportant in those states that allow statewide branching. In states that prohibit multibank holding companies, chain or group banking has flourished. What distinguishes bank holding companies from chain banking organizations is the fact that bank holding companies are formally organized and are generally chartered as corporations.