Affiliated banks are the banks whose stocks have been acquired by a bank holding company. These banks are also known as affiliate banks.
According to the lawinsider.com dictionary, “Affiliated Bank or “affiliated” shall mean that the banks are under common ownership, direction, or control. For the purposes hereof, affiliation shall be deemed to exist if the same person, entity or group owns or controls not less than twenty-five percent (25%) of the shares of any class of outstanding voting stock of the two or more banks entering into an agency relationship, exclusive of shares held in a fiduciary capacity.”
The appropriate definition of an affiliate relationship indicates that a company or person is related to another company or person via a minor stock in the latter entity. For instance, a small bank would be a big bank’s affiliated bank if the big bank has 49% or smaller stocks in the small bank. The power and sway that the big bank has, mainly depends on the percentage of stocks it has with the affiliate bank. A small percentage may only indicate a friendly investing relationship. A larger percentage indicates that the controlling company may possess the power of making major decisions.
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