Business Glossary

branches of U.S. banks in foreign countries or branches of foreign banks in the United States. By reciprocal agreement among central banks, foreign branches are subject to the banking laws and regulations in their host country. The International Banking Act of 1978, for example, requires U.S. offices of foreign banks to maintain reserve accounts with a Federal Reserve Bank, choose a home state as their U.S. base of operations, and meet federal regulations covering bank holding companies.

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.