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Joseph Reece

Abstract

Board of Governors v. Dimension Financial Corporation is of major significance because it is the first Supreme Court case addressing the issue of whether "nonbank banks" should be regulated under the Bank Holding Company Act of 1956 (BHCA). In rendering the Dimension Financial decision, the Supreme Court may have taken a major step in diffusing the controversy between financial institutions, the Federal Reserve Board, and Congress by determining when a bank is a "bank" for purposes of regulation under the BHCA.

In analyzing the issue before it, the Dimension Court reviewed applicable statutes, relevant case law, and legislative history and intent in determining whether Dimension Financial Corporation was a "bank" under the BHCA. In basing a major portion of it's opinion on legislative intent and the plain purpose of the BHCA, the Supreme Court found that Dimension Financial Corporation did not meet the definition of "bank" under the BHCA and, as such, it was not subject to regulation by the Federal Reserve Board. By holding in favor of Dimension, the Supreme Court may have opened the door for Dimension, as well as other nonbank banks, to receive all of the privileges that normal banks do without suffering many of the regulatory constraints.

This Note will first review the facts of Dimension Financial and will present an overview of the revised Regulation Y, which prompted the litigation. Second, an overview of the purpose and policies behind the BHCA will be presented. The next section will review the changing definition of "bank" and the relevant case law. Finally, the conclusion will attempt to highlight some of the potential ramifications this decision will have on the banking industry.

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