## Facts

- The Bank Holding Company Act of 1956 (BHCA) defined “bank” as an institution that (1) accepts deposits the depositor has a legal right to withdraw on demand and (2) engages in the business of making commercial loans.
- Firms developed “nonbank banks” that offered bank-like services but structured operations to avoid meeting one of the BHCA’s two statutory prongs.
- The Board of Governors amended Regulation Y to define “bank” more functionally, including institutions that accepted deposits payable on demand “as a matter of practice,” even if depositors lacked a legal right to immediate withdrawal.
- The amended regulation also treated as “commercial loans” any loan other than certain consumer/charitable loans and expressly included purchases of various money-market instruments (e.g., commercial paper, certificates of deposit, bankers’ acceptances).
- Dimension Financial Corporation and related parties challenged the amended regulation.
- The Tenth Circuit set aside the regulation as beyond the Board’s statutory authority; the Supreme Court granted review.

## Issues

1. Whether the Board could treat deposits payable on demand “as a matter of practice” as equivalent to deposits withdrawable on demand by “legal right” under BHCA § 2(c).
2. Whether the Board could interpret “commercial loans” in BHCA § 2(c) to include a broad range of money-market instruments and loan substitutes.
3. Whether the Board’s Regulation Y amendments impermissibly expanded the statutory definition of “bank” rather than interpreting it.

## Decision

- The Court affirmed the Tenth Circuit and held the Board exceeded its statutory authority under the BHCA.
- “Legal right to withdraw on demand” could not be rewritten to mean a right to withdraw on demand “as a matter of practice,” including for accounts such as NOW accounts where the institution could legally require notice.
- “Commercial loans” referred to direct loans from a bank to a business customer for business funding, not money-market transactions the Board labeled “commercial loan substitutes.”
- Policy concerns about regulatory gaps for “nonbank banks” did not permit the agency to broaden clear statutory terms; any expansion required congressional action.
- The judgment was unanimous in result (8–0, with one Justice not participating).

## Legal Principles

- When Congress uses clear, specific statutory terms, an agency may not expand coverage by regulation under the guise of interpretation.
- Statutory text requiring a depositor’s “legal right” to withdraw on demand cannot be satisfied by evidence that withdrawals are typically permitted in practice.
- Undefined statutory terms are interpreted according to their commonly accepted meaning in the relevant field; “commercial loans” do not include general money-market instrument purchases absent statutory indication.
- Agencies may address statutory gaps only within the bounds set by Congress; policy objectives cannot substitute for legislative authorization.

## Conclusion

The Court held that the Federal Reserve Board could not use Regulation Y to broaden the BHCA’s definition of “bank” by substituting “practice” for the statute’s “legal right” requirement or by redefining “commercial loans” to include money-market instruments; closing any resulting regulatory gap was for Congress.


Bd. of Governors of the Fed. Rsrv. Sys. v. Dimension Fin. Corp., 474 U.S. 361 (1986)