The bank holding company movement has had a dramatic impact on the U.S. banking industry. Since 1966 approximately 1,100 bank holding companies have been formed; they now account for 64.7 percent of the commercial bank deposits in the country.' There is ample incentive for bank management to form a holding company, since such a formation allows the firm to expand its activities into areas that are restricted to commercial banks. In addition, bank holding companies have considerably greater flexibility in managing their debt/equity position than do individual independent banks. This flexibility of management of bank holding companies with respect to both their assets and liabilities may have led to a more aggressive management of their banking subsidiaries with regards to their capital and risk positions. This paper examines the capital positions of the largest banks in the United States. The hypothesis to be tested is that banks affiliated with