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true or false ? If a bank establishes a "financial holding company" it can use that...

true or false ? If a bank establishes a "financial holding company" it can use that company to buy an insurance company, but, under rules established by the Federal Reserve, that insurance company can only sell new policies to depositors of the bank

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Answer #1

False.

By creating a holding company bank is trying to create an entity that can buy and own shares in some other company in which they hold control. Over here the "financial holding company" is created to buy shares in Insurance company. But according to FED even when the holding company gets the control they cant ask the insurance company to just sell new policies to the depositors of the bank. The rule is that the depositors of the bank should be sold the policies but it does not stop the insurance company to sell to other people. Aftera;; they have to expand there customer base which can only be posible by serving all.

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