Insider Activities

Holding Companies and Other Affiliates

The board of directors and management of a bank often include many of the same people on the board and management team of the bank’s parent company. It is not uncommon for the board and management of a bank subsidiary of a one-bank holding company to be the same as that of the holding company, particularly in community bank situations. Similarly, the directors and officers of a multi-bank holding company with centralized operations (or the directors and officers of the lead bank) often head each of the holding company’s bank subsidiaries. The holding company or lead bank usually controls such activities as investment portfolio management, budgeting, tax planning, personnel management, correspondent banking, loan participations, and asset-liability management. While such structures can benefit the bank, persons who serve in dual capacities can develop conflicting loyalties.

Corporate governance policies should recognize this potential for divided loyalties, and should provide guidance for preventing and resolving such conflicts of interest. The overriding principle must be that the bank subsidiary is not disadvantaged by a transaction with its holding company, any other affiliate, or any insider. Certain transactions with affiliates are subject to legal limitations. See the "Related Organizations" booklet of the Comptroller’s Handbook for further discussion of this issue.

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