Report on the Condition of the U.S. Banking Industry: Third Quarter, 2003

Beginning with this issue, the Federal Reserve Bulletin will include a new quarterly report summarizing the condition of the banking industry from its broadest perspective, that of the bank holding company. The report presents financial and nonfmancial data drawn primarily from regulatory filings

Bank holding companies gained prominence after the passage of the Bank Holding Company Act of 1956 and have helped enhance the efficiency of the U.S. banking system in a manner consistent with protecting the federal safety net and the financial system. The specific opportunities and restrictions faced by bank holding companies have evolved considerably over the years, largely in response to changing market forces. By owning banks, and in some cases nonbanking subsidiaries, bank holding companies have long been able to conduct a broad range of banking and nonbanking activities in a broad range of geographic markets. They currently control 97 percent of commercial banking assets in the United States-roughly $7.0 trillion. Increasingly, bank holding companies have responded to the growing integration of markets for financial services by linking banking and nonbanking activities into larger and more diverse financial enterprises. As a result, bank holding companies now control another $2.0 trillion in nonbanking financial services assets. Net of intercompany claims, bank holding company assets totaled $8.7 trillion at the end of September 2003. With nearly $700 billion in equity, bank holding companies are able to mobilize capital in financial markets to support both banking and nonbanking operations. The bank holding company structure has also allowed institutions to call upon a broad array of deposit and nondeposit funding sources.