Related Organizations

Economies of Scale

The holding company structure can provide significant economies of scale in such areas as centralized information processing and risk management systems, such as internal audit. Despite the operating efficiencies that may be a result of centralized functions and processes, the bank should never relinquish total control of a bank function to the holding company. Such activities should be monitored closely and overseen by the bank’s board of directors and management to ensure that the best interests of the bank are being properly protected. Examiners should review the functions and services that are outsourced to the holding company to ensure that controls are appropriate and that fees paid to the holding company are reasonable. OCC Bulletin 2001-47, "Third-Party Relationships," explains how a bank should oversee its relationship with its holding company and other related organizations that provide services for the bank or its customers.

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