Implementation of the Bank Holding Company Act Amendments of 1970: The Scope of Banking Activities

There has been a continuing conflict between those who wish to allow banks to diversify their operations beyond the traditionally limited scope of the banking business and those who see such an expansion as a threat to the stability of the economy and a license for unfair competition. The most recent in a continuing series of attempts to reconcile this conflict is found in the Bank Holding Company Act Amendments of 1970 and the implementation of these Amendments by the Federal Reserve Board. The original Act, adopted in 1956, was the first major attempt to bring bank holding companies, a device that had been used by banks to diversify into nonbank activities, under regulatory restraints. The original Act covered only those holding companies that controlled at least two banks. The changes made by the 1970 amendments included extending the coverage of the Act to include companies that control only one bank and modifying the standards used to determine which nonbanking activities bank holding companies will be permitted to carry on.

In the two years since the amendments were enacted, the Federal Reserve Board has indicated the course that it will follow in implementing the provisions relating to nonbanking activities. This Comment will survey that course and evaluate it in the light of the intent of Congress in enacting the 1970 amendments.