Final answer:
The main motivation for forming a bank holding company is to broaden the scope of products the bank can offer, allowing it to operate beyond restrictions that limit traditional banks. This involves venturing into different financial services and geographic regions, under the supervision of the Federal Reserve.
Step-by-step explanation:
The primary motivation behind forming a bank holding company today is to broaden the scope of products the bank can offer. This expansion allows banks to avoid certain regulations that apply to traditional banks, such as restrictions on branching and the types of investments they can make. Holding companies can engage in a wider array of financial services, which may include insurance, securities, and other non-banking activities, and they can also operate in a more diverse geographical range.
While the option to reduce competition or to increase deposit concentration might be ancillary benefits, these are not typically viewed as primary drivers behind the formation of bank holding companies. Instead, they are more focused on circumventing regulations that restrict their growth and product offerings, thereby increasing their competitiveness in the financial services market. The Federal Reserve oversees these conglomerates to ensure that they do not pose excessive risk to the financial system.