Bank Acquisitions
Under the Bank Holding Company Act, a firm that seeks to become a bank
holding company must first obtain approval from the Federal Reserve. The act
defines a bank holding company as any company that directly or indirectly owns,
controls, or has the power to vote 25 percent or more of any class of the voting
shares of a bank; controls in any manner the election of a majority of the
directors or trustees of a bank; or is found to exercise a controlling influence
over the management or policies of a bank. A bank holding company must obtain
the approval of the Federal Reserve before acquiring more than 5 percent of the
shares of an additional bank or bank holding company. All bank holding
companies must file certain reports with the Federal Reserve System.
When considering applications to acquire a bank or a bank holding
company, the Federal Reserve is required to take into account the likely
effects of the acquisition on competition, the convenience and needs of the
communities to be served, the financial and managerial resources and future
prospects of the companies and banks involved, and the effectiveness of the
company’s policies to combat money laundering. In the case of an interstate bank
acquisition, the Federal Reserve also must consider certain other factors and
may not approve the acquisition if the resulting organization would control more
than 10 percent of all deposits held by insured depository institutions. When a
foreign bank seeks to acquire a U.S. bank, the Federal Reserve also must consider whether the foreign
banking organization is subject to comprehensive supervision or regulation on a
consolidated basis by its home country supervisor.