Not Required Corporate Practice for Bank Holding Companies
Question
Which of the following is NOT a corporate practice required of bank holding companies?
Answers
Explanations
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A. B. C. D.A
Bank holding companies (BHCs) are corporations that own or control one or more banks. The Federal Reserve System (Fed) regulates BHCs and requires them to adhere to certain corporate practices to ensure safety and soundness in the banking system.
A. Each bank subsidiary must file a notice with the Federal Reserve before offering a new product. This is a corporate practice required of BHCs. Bank subsidiaries must provide prior notice to the Federal Reserve before offering any new product or service to the public. This allows the Fed to review the new product or service to ensure that it complies with applicable laws and regulations and does not pose undue risk to the subsidiary or the BHC.
B. Each bank subsidiary must conduct its operations in a safe and sound manner. This is a corporate practice required of BHCs. Each bank subsidiary must operate in a safe and sound manner, which includes maintaining adequate capital, establishing effective risk management processes, and ensuring compliance with applicable laws and regulations. This practice is intended to promote the safety and soundness of the subsidiary and the overall banking system.
C. Each bank subsidiary must be insured by the FDIC. This is not a corporate practice required of BHCs. While most bank subsidiaries are insured by the Federal Deposit Insurance Corporation (FDIC), it is not a requirement for BHCs to have their subsidiaries insured. However, being FDIC-insured can provide certain benefits to the bank and its customers, such as protection of deposits and increased customer confidence.
D. Each bank subsidiary must file a notice with the Federal Reserve before purchasing any of its own securities. This is a corporate practice required of BHCs. Each bank subsidiary must provide prior notice to the Federal Reserve before purchasing any of its own securities. This allows the Fed to review the proposed transaction to ensure that it complies with applicable laws and regulations and does not pose undue risk to the subsidiary or the BHC.
In summary, the answer to the question is C. Each bank subsidiary is not required to be insured by the FDIC. However, the other practices listed (A, B, and D) are required of BHCs.
