Edge Act Corporation

An Edge Act corporation is a subsidiary of a U.S. or foreign bank that engages in foreign banking operations; these subsidiaries are named after the 1919 Edge Act, which authorized them.

Prior to the Edge Act, U.S. banks were not allowed to own foreign banks. The legislation – which was sponsored by the Senator Walter Evans Edge, a New Jersey Republican – amended the Federal Reserve Act to allow them to do so, subject to approval by the Federal Reserve Board. The Edge Act also exempts banks' foreign subsidiaries from state laws, as the Fed is in charge of monitoring and regulating Edge Act corporations. Since 1978, foreign banks have been allowed to own Edge Act corporations.  

There are two types of Edge Act corporation: banking Edge corporations, which take deposits from and make loans to companies doing business internationally; and investment Edge corporations, which make investment in foreign companies. Edge Act corporations may do some business domestically, but only if it is related to their international business: for example, financing imports and exports.

A similar vehicle, an Agreement corporation, is essentially a state-chartered Edge Act corporation.