Subsidiaries of Banking Companies

Here are the notes on subsidiaries of banking companies, along with some multiple choice questions (MCQs) and answers:

Notes

• A subsidiary of a banking company is a company that is majority-owned by the banking company.
• The banking company is called the parent company.
• The subsidiary can be a domestic company or a foreign company.
• The subsidiary can be engaged in any type of business, but it is typically engaged in a business that is related to the banking business of the parent company.
• For example, a subsidiary of a banking company could be a financial services company, an insurance company, or a real estate company.
• The parent company has control over the subsidiary through its ownership of the majority of the subsidiary’s shares.
• The parent company can appoint the directors of the subsidiary and can decide on the subsidiary’s business strategy.
• The subsidiary is subject to the same regulations as the parent company.

MCQs

1. Which of the following is NOT a subsidiary of a banking company?
   • A financial services company
   • An insurance company
   • A real estate company
   • A car dealership
   • The answer is a car dealership.
2. A banking company can have a subsidiary in any country.
   • True
   • False
   • The answer is false. The banking company can only have a subsidiary in a country where it is licensed to operate.
3. The parent company of a subsidiary has control over the subsidiary through its ownership of the majority of the subsidiary’s shares.
   • True
   • False
   • The answer is true. The parent company can appoint the directors of the subsidiary and can decide on the subsidiary’s business strategy.
4. The subsidiary of a banking company is subject to the same regulations as the parent company.
   • True
   • False
   • The answer is true. The subsidiary is subject to the same regulations as the parent company, including the regulations of the central bank.

Answers

1. (d)
2. (f)
3. (t)
4. (t)