Question

The largest five banks in the United States account for more than 75% of all bank assets. The commercial banks have combined assets in excess of $15 trillion. Many banks are owned by holding companies that own other financial services firms. The holding company must own at least 10% of the bank’s stock. Discuss the advantages of a holding company has for a bank. Please do not plagiarize.

Answer 1

There are various advantages of a holding company for a bank:

1: Holding companies can issue debt which can then be used for the benefit of the bank.

2: They can purchase problem assets of the banks to improve their financial position.

3: The holding company can claim tax deduction on Interest payments on debt contributed to the subsidiary bank to reap an overall tax reduction.

4: There is flexibility of conducting a merger of an acquired bank with a subsidiary bank.

5: This structure allows transfer of acquired assets/ activities to the holding company.