Financial Holding Companies


The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (GLB) removed many of the Depression-era barriers that restricted affiliations between banks, securities firms and insurance companies. The arrangement that provided the major impetus for the passage of GLB, Citigroup’s merger with Travelers Insurance Group, was short lived, with Citigroup selling off its Travelers property/casualty insurance and life insurance units in 2002 and 2005, respectively. However, the convergence of financial products has continued as companies look for innovative ways to tap the market for financial products. This has generally taken place without the mega-mergers envisioned by GLB. Banks have tended to concentrate on distributing insurance products by buying existing agencies and brokers rather than by setting up their own agencies or purchasing insurers. For their part, insurance companies have set up thrift or banking divisions rather than buying existing banks.

The economic downturn and subsequent regulatory changes have prompted some structural changes in the financial services industry. In 2008 securities giants Goldman Sachs and Morgan Stanley converted to bank holding companies and eventually gained financial holding company status (see below). In 2011 MetLife and Allstate announced plans to sell their banking units.


Gramm-Leach-Bliley permits banks, securities firms and insurance companies to affiliate with each other through the financial holding company (FHC) structure. The first step in electing FHC status is to become a bank holding company (BHC), a company that owns one or more banks. BHCs must meet certain eligibility requirements in terms of capital, management and community investment to become an FHC.

GLB also allows banks owned by BHCs to expand into financial services activities by creating financial subsidiaries. The activities permitted by these subsidiaries are not as broad as those of the FHCs. The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in July 2010, increases regulation of large bank holding companies and expands the authority of the Federal Reserve to regulate subsidiaries of BHCs.


  2007 2008 2009 2010 2011
Number of domestic FHCs (2) 597 557 479 430 417
Number of foreign FHCs (3) 43 45 46 43 40
Total number of FHCs 640 602 525 473 457

(1) Only the top-tier bank holding company in a multi-tier organization is included to avoid double counting.
(2) Bank holding company whose ultimate parent is incorporated in the United States.
(3) Bank holding company whose ultimate parent is a foreign bank or other organization chartered outside the United States.

Source: Board of Governors of the Federal Reserve System.

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  • In 2011, 36 domestic financial holding companies had consolidated assets of $15 billion or more.