One-Bank Holding Company

A one-bank holding company is a corporate entity that owns a controlling interest in a single commercial bank. Unlike a bank, the holding company does not itself provide banking services; it exists to control, manage, and hold the bank as a subsidiary.

What is a bank holding company?

A bank holding company (BHC) is a corporation that owns a controlling share in one or more banks. Holding companies:

• Do not perform retail banking operations directly.
• Exercise control over management, strategy, and policies of their bank subsidiaries.
• Can hold diverse assets—such as subsidiaries, real estate, securities, patents, and partnerships—allowing them to spread legal and financial risk across entities.

Examples of holding companies in the broader economy include Berkshire Hathaway (a nonbank holding company that owns stakes in many businesses) and large financial groups like Bank of America Corporation, which owns numerous banking and financial subsidiaries.

The one-bank holding company: origins and purpose

The one-bank holding company emerged in the late 1960s to give independent banks many of the flexibility and strategic benefits of multi-bank holding companies while remaining centered on a single bank. Key features:

• Typically defined as a corporation that owns at least 25% of the voting stock of a commercial bank.
• Allowed independent banks to expand beyond traditional deposit-taking into other activities—such as lending, commercial paper issuance, and other financial operations—without converting to a multi-bank holding structure.
• Enabled banks to access capital markets more easily; issuing commercial paper was a notable priority because it provides a quick, low-cost source of short-term funding.

How they operate and are regulated

• Regulation: Bank holding companies are regulated primarily by the Federal Reserve Board. Banks not owned by holding companies are often regulated by the Office of the Comptroller of the Currency (OCC). U.S. banking regulation also involves multiple federal agencies depending on the institution and activity.
• Structure: A holding company can shift assets among subsidiaries, isolate liabilities, and centralize strategic functions (e.g., treasury, risk management).
• Funding and activities: One-bank holding companies permit their bank subsidiaries to engage in expanded financial activities and to access different funding sources (e.g., commercial paper, interbank markets).

Commercial paper (common funding tool):
* A short-term unsecured debt instrument, typically maturing in up to 270 days.
* Issued at a discount to face value rather than paying periodic interest.
* Used to meet short-term liabilities and finance working capital.

Benefits and risks

Benefits:
* Risk isolation—liabilities can be compartmentalized within subsidiaries.
* Strategic flexibility—ability to pursue nonbank activities and optimize capital allocation across entities.
* Easier access to capital markets for short-term funding.

Risks and considerations:
* Regulatory oversight—holding companies and their banks face supervision and capital requirements.
* Complexity—corporate structuring and asset shifting can create operational and compliance challenges.
* Market and credit risk—holding companies remain exposed to the financial performance of their banking subsidiaries and other assets.

Examples

• Bank of America Corporation is an example of a bank holding company with multiple banking and financial subsidiaries.
• Berkshire Hathaway is a well-known example of a nonbank holding company that owns many operating businesses across industries.

FAQs

Q: Is Goldman Sachs a bank holding company?
A: Yes. Goldman Sachs converted to a bank holding company structure and is regulated by the Federal Reserve.

Q: What advantages does a bank holding company provide?
A: It enables risk segmentation, centralized control, diversified asset holdings, and access to broader financial activities and capital sources.

Q: Why form a one-bank holding company instead of a traditional bank?
A: To gain the strategic and financial flexibility of a holding company while remaining focused on a single bank, often to access capital markets and diversify operations without full merger/expansion into multiple banks.

Key takeaways

• A one-bank holding company owns and controls at least one commercial bank but does not offer banking services itself.
• It provides independent banks with operational flexibility, risk management options, and access to broader financial activities and funding sources.
• Bank holding companies are primarily regulated by the Federal Reserve, and their structure can create both strategic advantages and additional regulatory and operational complexity.

Bottom line: One-bank holding companies are a corporate structure that lets a single bank expand its capabilities and funding options while centralizing control and shielding risks through a parent-subsidiary arrangement.