Edge Act Corporation

A banking institution with a special charter from the U.S. Federal Reserve to conduct international banking operations and certain other forms of business without complying with state-by-state banking laws. By setting up or investing in Edge Act corporations, U.S. banks are able to gain portfolio exposure to financial investing operations not available under standard banking laws.

Investopedia Says:
Edge Act corporations have gone through structural changes since they were first implemented in 1919. Economies, and therefore financial institutions, are much more international today, and many of the restrictions once in place limiting foreign banking activity have since been relaxed. Edge Act revisions in 1984 allowed companies engaged in international business, such as trading and shipping firms, and international airlines, to provide full banking services, including taking deposits and granting loans. The Federal Reserve retains the right to monitor ownership of these corporations and their future investment and business activities.

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Banking corporation financing international commerce, chartered by the Federal Reserve Board under a 1919 amendment to the Federal Reserve Act. These corporations, owned by state chartered or national banks, may operate interstate branches, accept deposits outside the United States, and invest in non-U.S. Firms. A nonbanking Edge Act corporation makes equity investments under Federal Reserve Regulation K in foreign corporations, such as merchant banks or finance companies. A banking Edge corporation buys and sells notes, drafts, and bills of exchange, and basically complements the international banking activities of its parent bank. The International Banking Act of 1978 approved ownership of Edge corporations by foreign banks. See alsoAgreement Corporation; Export Trading Company.

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An Edge Act Corporation is a corporation chartered by the Federal Reserve of the United States under the Edge Act to engage in international banking operations. The Federal Reserve Board acts upon applications by U.S. and foreign banking organizations to establish Edge corporations. The board also examines Edge corporations and their subsidiaries. These corporations can accept deposits as well as provide loans, so long as these functions are specifically related to international transactions.

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