(a) Board Authority. The Board shall have the authority to approve—
(1) the establishment of Edge corporations;
(2) investments in agreement corporations;
and
(3) a member bank’s proposal
to invest more than 10 percent of its capital and surplus in the aggregate
amount of stock held in all Edge and agreement corporations.
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(b) Organization of an Edge corporation.
(1) Permit. A proposed Edge corporation shall become a body corporate
when the Board issues a permit approving its proposed name, articles
of association, and organization certificate.
(2) Name. The name of the Edge corporation shall include international, foreign, overseas, or a similar word, but may not
resemble the name of another organization to an extent that might
mislead or deceive the public.
(3) Federal Register notice. The Board shall
publish in the Federal Register notice of any proposal to organize
an Edge corporation and shall give interested persons an opportunity
to express their views on the proposal.
(4) Factors considered
by Board. The factors considered by the Board in acting on a
proposal to organize an Edge corporation include—
(i) the financial condition and
history of the applicant;
(ii)
the general character of its management;
(iii) the convenience and needs of the
community to be served with respect to international banking and financing
services; and
(iv) the effects
of the proposal on competition.
(5) Authority
to commence business. After the Board issues a permit, the Edge
corporation may elect officers and otherwise complete its organization,
invest in obligations of the U.S. government, and maintain deposits
with depository institutions, but it 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.
(6) Expiration of unexercised authority. Unexercised
authority to commence business as an Edge corporation shall expire
one year after issuance of the permit, unless the Board extends the
period.
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(c) Other provisions
regarding Edge corporations.
(1) Amendments
to articles of association. No amendment to the articles of association
shall become effective until approved by the Board.
(2) Shareholders’
meeting. An Edge corporation shall provide in its bylaws that—
(i) a shareholders’
meeting shall be convened at the request of the Board within five
business days after the Board gives notice of the request to the Edge
corporation;
(ii) any shareholder
or group of shareholders that owns or controls 25 percent or more
of the shares of the Edge corporation shall attend such a meeting
in person or by proxy; and
(iii)
failure by a shareholder or authorized representative to attend such
meeting in person or by proxy may result in removal or barring of
the shareholder or representative from further participation in the
management or affairs of the Edge corporation.
(3) Nature and
ownership of shares.
(i) Shares. Shares of stock in an Edge corporation may not include no-par-value
shares and shall be issued and transferred only on its books and in
compliance with section 25A of the FRA (12 U.S.C. 611 et seq.) and this paragraph (c).
(ii) Contents of share certificates. The share
certificates of an Edge corporation shall—
(A) name and describe each class of shares,
indicating its character and any unusual attributes, such as preferred
status or lack of voting rights; and
(B) conspicuously set forth the substance of—
(1)
any limitations on the rights of ownership and transfer of shares
imposed by section 25A of the FRA (12 U.S.C. 611 et seq.);
and
(2) any rules that the
Edge corporation prescribes in its bylaws to ensure compliance with
this paragraph.
(4) Change in
status of shareholder. Any change in status of a shareholder
that causes a violation of section 25A of the FRA (12 U.S.C. 611 et seq.) shall be reported to the Board as soon as possible,
and the Edge corporation shall take such action as the Board may direct.
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(d) Ownership of Edge corporations by
foreign institutions.
(1) Prior Board approval. One or more
foreign or foreign-controlled domestic institutions referred to in
section 25A(11) of the FRA (12 U.S.C. 619) may apply for the Board’s
prior approval to acquire, directly or indirectly, a majority of the
shares of the capital stock of an Edge corporation.
(2) Conditions
and requirements. Such an institution shall—
(i) provide the Board with information
related to its financial condition and activities and such other information
as the Board may require;
(ii)
ensure that any transaction by an Edge corporation with an affiliate
2 is on
substantially
the same terms, including interest rates and collateral, as those
prevailing at the same time for comparable transactions by the Edge
corporation with nonaffiliated persons, and does not involve more
than the normal risk of repayment or present other unfavorable features;
(iii) ensure that the Edge corporation
will not provide funding on a continual or substantial basis to any
affiliate or office of the foreign institution through transactions
that would be inconsistent with the international and foreign business
purposes for which Edge corporations are organized; and
(iv) comply with the limitation on aggregate
investments in all Edge and agreement corporations set forth in paragraph
(h) of this section.
(3) Foreign institutions not subject to
the BHC Act. In the case of a foreign institution not subject
to section 4 of the BHC Act (12 U.S.C. 1843), that institution shall—
(i) comply with any
conditions that the Board may impose that are necessary to prevent
undue concentration of resources, decreased or unfair competition,
conflicts of interest, or unsound banking practices in the United
States; and
(ii) give the Board
30 days’ prior written notice before engaging in any nonbanking
activity in the United States, or making any initial or additional
investments in another organization, that would require prior Board
approval or notice by an organization subject to section 4 of the
BHC Act (12 U.S.C. 1843); in connection with such notice, the Board
may impose conditions necessary to prevent adverse effects that may
result from such activity or investment.
3-516
(e) Change in control of an Edge corporation.
(1) Prior notice.
(i) Any person shall give the Board
60 days’ prior written notice before acquiring, directly or
indirectly, 25 percent or more of the voting shares, or otherwise
acquiring control, of an Edge corporation.
(ii) The Board may extend the 60-day
period for an additional 30 days by notifying the acquiring party.
(iii) A notice under this paragraph
(e) need not be filed where a change in control is effected through
a transaction requiring the Board’s approval under section 3
of the BHC Act (12 U.S.C. 1842).
(2) Board review. In reviewing a notice filed under this paragraph (e), the Board
shall consider the factors set forth in paragraph (b)(4) of this section,
and may disapprove a notice or impose any conditions that it finds
necessary to assure the safe and sound operation of the Edge corporation,
to assure the international character of its operation, and to prevent
adverse effects, such as decreased or unfair competition, conflicts
of interest, or undue concentration of resources.
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(f) Domestic branching by Edge corporations.
(1) Prior notice.
(i) An Edge corporation may establish
branches in the United States 30 days after the Edge corporation has
given written notice of its intention to do so to its Reserve Bank,
unless the Edge corporation is notified to the contrary within that
time.
(ii) The notice to the
Reserve Bank shall include a copy of the notice of the proposal published
in a newspaper of general circulation in the communities to be served
by the branch.
(iii) The newspaper
notice may appear no earlier than 90 calendar days prior to submission
of notice of the proposal to the Reserve Bank. The newspaper notice
shall provide an opportunity for the public to give written comment
on the proposal to the appropriate Federal Reserve Bank for at least
30 days after the date of publication.
(2) Factors considered. The factors considered in acting upon a proposal to establish a
branch are enumerated in paragraph (b)(4) of this section.
(3) Expiration
of authority. Authority to establish a branch under prior notice
shall expire one year from the earliest date on which that authority
could have been exercised, unless the Board extends the period.
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(g) Agreement corporations.
(1) General. With the prior approval of the Board, a member bank
or bank holding company may invest in a federally or state-chartered
corporation that has entered into an agreement or undertaking with
the Board that it will not exercise any power that is impermissible
for an Edge corporation under this subpart.
(2) Factors considered
by Board. The factors considered in acting upon a proposal to
establish an agreement corporation are enumerated in paragraph (b)(4)
of this section.
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(h) (1) Limitation on investment in Edge and agreement corporations. A member bank may invest up to 10 percent of its capital and surplus
in the capital stock of Edge and agreement corporations or, with the
prior approval of the Board, up to 20 percent of its capital and surplus
in such stock.
(2) Factors considered by Board. The factors
considered by the Board in acting on a proposal under paragraph (h)(1)
of this section shall include—
(i) the composition of the assets of
the bank’s Edge and agreement corporations;
(ii) the total capital invested by the
bank in its Edge and agreement corporations when combined with retained
earnings of the Edge and agreement corporations (including amounts
invested in retained earnings of any foreign bank subsidiaries) as
a percentage of the bank’s capital;
(iii) whether the bank, bank holding
company, and Edge and agreement corporations are well-capitalized
and well-managed;
(iv) whether
the bank is adequately capitalized after deconsolidating and deducting
the aggregate investment in and assets of all Edge or agreement corporations
and all foreign bank subsidiaries; and
(v) any other factor the Board deems
relevant to the safety and soundness of the member bank.
3-520
(i)
Reserve requirements and interest-rate
limitations. The deposits of an Edge or agreement corporation
are subject to Regulations D and Q (12 CFR 204 and 217)
* in the same manner
and to the same extent as if the Edge or agreement corporation were
a member bank.
(j) Liquid funds. Funds of an Edge or agreement corporation that are not currently
employed in its international or foreign business, if held or invested
in the United States, shall be in the form of—
(1) cash;
(2) deposits with depository institutions,
as described in Regulation D (12 CFR 204), and other Edge and agreement
corporations;
(3) money market instruments
(including repurchase agreements with respect to such instruments),
such as banker’s acceptances, federal funds sold, and commercial
paper; and
(4) short- or long-term
obligations of, or fully guaranteed by, federal, state, and local
governments and their instrumentalities.
3-521
(k) Reports by Edge and agreement corporations of
crimes and suspected crimes. An Edge or agreement corporation,
or any branch or subsidiary thereof, shall file a suspicious-activity
report in accordance with the provisions of section 208.62 of Regulation
H (12 CFR 208.62).
(
l)
Protection
of customer information. An Edge or agreement corporation shall
comply with the Interagency Guidelines Establishing Information Security
Standards prescribed pursuant to sections 501 and 505 of the Gramm-Leach-Bliley
Act (15 U.S.C. 6801 and 6805), and, with respect to the proper disposal
of
consumer
information, section 216 of the Fair and Accurate Credit Transactions
Act of 2003 (15 U.S.C. 1681w), set forth in appendix D-2 to part 208
of this chapter [at
3-1571].
(m) Procedures for monitoring Bank Secrecy Act compliance.
(1) Establishment of compliance program. Each
Edge corporation and each agreement corporation shall, in accordance
with the provisions of section 208.63 of the Board’s Regulation
H, 12 CFR 208.63, develop and provide for the continued administration
of a program reasonably designed to assure and monitor compliance
with the provisions of subchapter II of chapter 53 of title 31, United
States Code, the Bank Secrecy Act, and the implementing regulations
promulgated thereunder by the Department of the Treasury at 31 CFR
103. The compliance program shall be reduced to writing, approved
by the board of directors, and noted in the minutes.
(2)
Customer
identification program. Each Edge or agreement corporation is
subject to the requirements of 31 U.S.C. 5318(
l) and the implementing
regulation jointly promulgated by the Board and the Department of
the Treasury at 31 CFR 103.121, which require a customer identification
program.
*
