International Operations of U.S. Banking Organizations - Establishing Edge or Agreement Corporations and Investments Therein

Section 211.5 of Regulation K

Who must file?

Any person or company must file an application for the specific consent of the Federal Reserve under section 211.5 of Regulation K in order to establish an Edge or agreement corporation. A member bank must file an application for specific consent to invest in excess of 10 percent of its capital and surplus in the capital stock of Edge and agreement corporations.

Publication requirements--newspaper/Federal Register

The Federal Reserve will publish notice of a proposal to establish an Edge corporation in the Federal Register. No publication notice is required to invest in an agreement corporation.

Required form

The information required in Form FR K-1 must be submitted. For the establishment of Edge corporations, model Articles of Association and an Organization Certificate are provided in Attachments D and E of Form FR K-1 respectively. Note that a response should be provided for all report items. Please enter “not applicable” or “N/A,” where appropriate.

Processing time frames

The Federal Reserve normally acts on an application for specific consent within 60 calendar days after receipt unless the Federal Reserve notifies the applicant that the 60-day period is being extended.

Factors reviewed

For proposals by U.S. organizations to establish an Edge or agreement corporation, the Federal Reserve considers the factors in section 211.5(b)(4) of Regulation K.

For proposals by a member bank to invest in excess of 10 percent of its capital and surplus in the capital stock of Edge and agreement corporations, the Federal Reserve considers the factors in section 211.5(h)(2) of Regulation K.

For proposals by foreign organizations to acquire a majority of the shares of an Edge or agreement corporation under section 211.5(d), the Federal Reserve considers the factors in section 211.5(b)(4) of Regulation K.

Consummation period

Agreement corporations may commence business immediately upon approval. An Edge corporation may elect officers and otherwise complete its organization, invest in obligations of the U.S. government, and maintain deposits with depository institutions. However, the Edge corporation may not exercise any other powers until at least 25 percent of the authorized capital stock specified in the articles of association has been paid in cash, and each shareholder has paid in cash at least 25 percent of that shareholder's stock subscription. Unexercised authority to commence business as an Edge corporation shall expire one year after issuance of the permit, unless the Board extends the period.