(2) Deposits from other persons. An Edge Corporation may receive in the United States demand, savings, and time deposits (including negotiable certificates of deposits) if such deposits:

(i) Are to be transmitted abroad;

(ii) Consist of collateral or funds to be used for payment of obligations to the Edge Corporation;

(iii) Consist of the proceeds of collections abroad that are to be used to pay for exported or imported goods or for other costs of exporting or importing or that are to be periodically transferred to the depositor's account at another financial institution;

(iv) Consist of the proceeds of extensions of credit by the Edge Corporation; or

(v) Represent compensation to the Edge Corporation for extensions of credit or services to the customer.

(3) Use of funds in the United States. Funds of an Edge Corporation not currently employed in its international or foreign business, if held or invested in the United States, shall be in the form of cash, deposits with banks, and money market instruments such as bankers' acceptances, obligations of or fully guaranteed by Federal, State, and local governments and their instrumentalities, repurchase agree

ments, Federal funds sold, and commercial paper.

(4) General activities. Subject to the limitations of section 25(a) of the FRA and § 211.6, an Edge Corporation may engage in the following activities to the extent consistent with sound banking practices:

(i) Issue obligations to domestic offices of other banks (including pruchases of Federal funds) or to the United States or any of its agencies;

(ii) Incur indebtedness from a transfer of direct obligations of, or obligations that are fully guaranteed as to principal and interest by, the United States or any agency thereof that the Edge Corporation is obligated to repurchase;

(iii) Issue long-term subordinated debt that does not qualify as a "deposit" under Part 204 of this Chapter (Regulation D);

(iv) Finance the following: (A) Contracts, projects, or activities performed substantially abroad; (B) the importation into or exportation from the United States of goods, whether direct or through brokers or other intermediaries; (C) the domestic shipment or temporary storage of goods being imported or exported (or accumulated for export); and (D) the assembly or repackaging of goods imported or to be exported;

(v) Finance the costs of production of goods and services for which export orders have been received or which are identifiable as being directly for export;

(vi) Assume or acquire participations in extensions of credit, or acquire obligations arising from transactions the Edge Corporation could have financed;

(vii) Guarantee a customer's debts or otherwise agree for the customer's benefit to make payments on the occurrence of readily ascertainable

events,3 if the guarantee or agreement specifies the maximum monetary liability thereunder and is related to a type of transaction described in paragraphs (e)(4)(iv) and (4)(v) of this section;

(viii) Receive checks, bills, drafts, acceptances, notes, bonds, coupons, and other securities for collection abroad, and collect such instruments in the United States for a customer abroad;

(ix) Hold securities in safekeeping for, or buy and sell securities upon the order and for the account and risk of a person;

(x) Act as paying agent for securities issued by foreign governments or other entities organized under foreign law;

(xi) Act as trustee, registrar, conversion agent, or paying agent with respect to any class of securities issued to finance foreign activities and dis

"Readily ascertainable events" include, but are not limited to, events such as nonpayment of taxes, rentals, customs duties, or costs of transport and loss or nonconformance of shipping documents.

tributed solely outside the United States;

(xii) Make private placements of participations in its investments and extensions of credit; however, except to the extent permissible for member banks under section 5136 of the Revised Statutes (12 U.S.C. 24), no Edge Corporation may otherwise engage in the business of selling or distributing securities in the United States; and

(xiii) Buy and sell spot and forward foreign exchange.

(5) Other permissible activities. An Edge Corporation that is of the opinion that other activities in the United States would be incidental to its international or foreign business may apply to the Board for such a determination.

(f) Agreement Corporations. 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 part.

[44 FR 36007, June 20, 1979, as amended at 45 FR 19221, Mar. 25, 1980]

§ 211.5 Investments in other organizations.

(a) General policy. Activities of investors abroad, whether conducted directly or indirectly, shall be confined to those of a banking or financial nature and those that are necessary to carry on such activities. In doing so, investors shall at all times act in accordance with high standards of banking or financial prudence, having due regard for diversification of risks, suitable liquidity, and adequacy of capital. Subject to these considerations and the other provisions of this section, it is the Board's policy to allow activities abroad to be organized and operated as best meets corporate policies.

(b) Investment limitations. (1) An investor, in accordance with the investment procedures described in paragraph (c) of this section, may directly or indirectly:

(i) Invest in a subsidiary that engages solely in listed activities or in such other activities as the Board has

determined in the circumstances of a particular case are permissible;

(ii) Invest in a joint venture provided that, unless otherwise permitted by the Board, not more than 10 percent of the joint venture's consolidated assets or revenues shall be attributable to activities that would not be permissible for a subsidiary;

(iii) Make portfolio investments (including securities held in trading or dealing accounts) in an organization if the total direct and indirect portfolio investments in organizations engaged in activities that are not permissible for joint ventures does not at any time exceed 100 per cent of the investor's capital and surplus.1

(2) A member bank's direct investments under section 25 of the FRA shall be limited to foreign banks and to foreign organizations formed for the sole purpose of either holding shares of a foreign bank or performing nominee, fiduciary, or other banking services incidental to the activities of a foreign branch or foreign bank affiliate of the member bank.

(3) A subsidiary (other than a member bank or an Edge Corporation) may establish a foreign branch with prior approval of the Board. Unless otherwise advised by the Board:

(i) A subsidiary (other than a member bank or an Edge Corporation ) whose affiliates have offices (other than representative offices) in two or more foreign countries may establish initial branches in additional foreign countries after 60 days' notice to the Board;

(ii) A foreign bank subsidiary may, without prior approval or prior notice, establish additional branches in any country in which it operates one or more offices (other than representative offices); and

(iii) Without prior approval or prior notice, any subsidiary (other than a foreign bank, member bank, or Edge Corporation) may establish additional branches in any foreign country in which any affiliate operates one or more offices (other than representative offices). Authority to establish

For this purpose, a direct subsidiary of a member bank is deemed to be an investor.

90-035 0-82--22

branches through prior approval or prior notice shall expire one year from the earliest date on which that authority could have been exercised, unless extended by the Board. An investor shall inform the Board within 30 days of the opening, closing, or relocation of a branch and the address of a new or relocated foreign branch.

(4) In computing the amount that may be invested in any organization under this section there shall be included any unpaid amount for which the investor is liable and any investments by affiliates.

(5) An investor shall dispose of an investment promptly (unless the Board authorizes retention) if:

(i) The organization invested in (A) engages in the business of underwriting, selling or distributing securities in the United States; (B) engages in the general business of buying or selling goods, wares, merchandise, or commodities in the United States; or (C) transacts business in the United States that is not incidental to its international or foreign business;

(ii) In the case of a subsidiary, it engages in an activity other than that which the Board has determined to be permissible; or in the case of joint venture, it engages in an impermissible activity beyond that described in paragraph (b)(1)(ii) of this section; or

(iii) After notice and opportunity for hearing, the investor is advised by the Board that its investment is inappropriate under the FRA, the BHCA, or this Part.

(c) Investment procedures. Direct and indirect investments shall be made in accordance with the general consent, notice, or specific consent procedures contained in this section. The Board may at any time, upon notice, suspend the general consent and notification procedures with respect to any investor or with respect to the acquisition of shares of companies engaged in particular kinds of activities. An investor must receive prior specific consent of the Board for in

5 When necessary, the general consent and prior notification provisions of this section constitute the Board's approval under the eighth paragraph of section 25(a) of the FRA for investments in excess of the limitations therein based on capital and surplus.

vestment in its first subsidiary, its first joint venture, and its first portfolio investment unless an affiliate has made such investments. Authority to make investments under prior notice or prior consent shall expire one year from the earliest date on which it Icould have been exercised, unless extended by the Board.

(1) General consent. The Board grants its general consent for the following:

(i) Any investment in a joint venture or subsidiary, and any portfolio investment, if:

(A) The organization is not engaged in business in the United States; and

(B) The total amount invested does not exceed the lesser of (1) $2 million or (2) five per cent of the investor's capital and surplus in the case of a member bank, bank holding company, or Edge Corporation engaged in banking, or 25 per cent of the investor's capital and surplus in the case of an Edge Corporation not engaged in banking;

(ii) Any additional investment in an organization in any calendar year so long as (A) the investment does not cause the organization to be a direct or indirect subsidiary or joint venture of the investor; (B) the total amount invested in that calendar year does not exceed 10 per cent of investor's capital and surplus; and, (C) the total amount invested under Part 211 in the current calendar year does not exceed cash dividends reinvested pursuant to paragraph (iii) below plus the greater of (1) 10 per cent of the investor's direct and indirect historical cost in such

"The "historical cost" of an investment consists of the actual amounts paid for shares or otherwise contributed to the capital accounts, as measured in dollars at the exchange rate in effect at the time each investment was made. It does not include subordinated debt or unpaid commitments to invest even though these may be considered investments for other purposes of this Part. For investments acquired indirectly as a result of acquiring a subsidiary, the historical cost to the investor is measured as of the date of acquisition of the subsidiary; at the net asset value of the equity interest in the case of subsidiaries and joint ventures, and in the case of portfolio investments, at the book carrying value.

organization, or (2) 50 per cent of the investor's direct and indirect historical cost in that organization less any amounts invested in that organization during the previous four calendar years (excluding dividends reinvested pursuant to paragraph (iii) below); or

(iii) Any additional investment in an organization in an amount equal to cash dividends received from that organization during the preceding 12 calendar months so long as such investment does not cause the organization to be a direct or indirect subsidiary or joint venture of the investor; or

(iv) Any investment that is acquired from an affiliate at net asset value.

(2) Prior notification. An investment in a subsidiary or joint venture that does not qualify under the general consent procedure, may be made after the investor has given 60 days' prior written notice to the Board, unless the Board waives such period because it finds immediate action by the investor is required by the circumstances presented, if the total amount to be invested does not exceed 10 per cent of the investor's capital and surplus. The notification period shall commence at the time the notice is accepted. The Board may, during the notification period, disapprove the investment, suspend the period, or require that an application be filed by the investor for the Board's specific consent.

(3) Specific consent. Any investment that does not qualify for either the general consent or the prior notification procedure shall not be consummated without the specific consent of the Board.

(d) Listed activities. The Board has determined that the following activities are usual in connection with the transaction of banking or other financial operations abroad:

(1) Commercial banking;

(2) Financing, including commercial financing, consumer financing, mortgage banking, and factoring;

(3) Leasing real or personal property if the lease serves as the functional equivalent of an extension of credit to the lessee of the property;

(4) Acting as fiduciary;

(5) Underwriting credit life insurance and credit accident and health in

surance related to extensions of credit by the investor or its affiliates;

(6) Performing services for other direct or indirect operations of a United States banking organization, including representative functions, sale of long term debt, name saving, and holding assets acquired to prevent loss on a debt previously contracted in good faith;

(7) Holding the premises of a branch of an Edge Corporation or member bank or the premises of a direct or indirect subsidiary;

(8) Providing investment, financial or economic advisory services;

(9) General insurance brokerage; (10) Data processing;

(11) Managing a mutual fund if the fund's shares are not sold or distributed in the United States or to United States residents and the fund does not exercise managerial control over the firms in which it invests;

(12) Performing management consulting services provided that such services when rendered with respect to the United States market shall be restricted to the initial entry;

(13) Underwriting, distributing, and dealing in debt and equity securities outside the United States, provided that no underwriting commitment by a subsidiary of an investor for shares of an issuer may exceed $2 million or represent 20 per cent of the capital and surplus or voting stock of an issuer unless the underwriter is covered by binding commitments from subunderwriters or other purchasers;

(14) Engaging in other activities that the Board has determined by regulation or order are closely related to banking under section 4(c)(8) of the ВНСА.

An investor that is of the opinion that other activities are usual in connection with the transaction of the business of banking or other financial operations abroad and are consistent with the FRA or the BHCA may apply to the Board for such a determination.

(e) Debts previously contracted. Shares of stock or other evidences of ownership acquired to prevent a loss upon a debt previously contracted in good faith shall not be subject to the limitations or procedures of this sec

tion; however, the shares or evidences of ownership shall be disposed of promptly, but in no event later than two years after their acquisition unless the Board authorizes retention for a longer period.

(Secs. 25 and 25a, 12 U.S.C. 601, 615; Sec. 4(c)(13), 12 U.S.C. 1843(c)(13))

[44 FR 36007, June 20, 1979, as amended at 44 FR 70708, Dec. 10, 1979; 45 FR 76095, Nov. 18, 1980; 46 FR 2027, Jan. 8, 1981]

§ 211.6 Lending limits and capital requirements.

(a) Acceptances of Edge Corporations. An Edge Corporation shall be and remain fully secured for (1) all acceptances outstanding in excess of twice its capital and surplus; and (2) all acceptances outstanding for any one person in excess of 10 per cent of its capital and surplus. These limitations shall not apply (i) if the excess represents the international shipment of goods and the Edge Corporation is fully covered by primary obligations to reimburse it that are also guaranteed by banks or bankers, or (ii) if the Edge Corporation is covered by participation agreements from other banks.

(b) Liabilities of one person. (1) Except as the Board may otherwise specify:

(i) The liabilities of any person to an Edge Corporation engaged in banking and to its direct or indirect subsidiaries shall not exceed 10 per cent of the Edge Corporation's capital and surplus;

(ii) The total liabilities of any person to a majority owned foreign bank or Edge Corporation subsidiary of a member bank, and to majority owned subsidiaries of such foreign bank or Edge Corporation when combined with liabilities of the same person to the member bank and its majority owned subsidiaries, shall not exceed the member bank's limitation on loans to one person.

(2) "Liabilities" includes: Ineligible acceptances outstanding; obligations for money borrowed; investments in another organization (valued at original cost) except where that organization is a direct or indirect subsidiary; unsecured obligations resulting from the issuance of guarantees or similar agreements; underwriting commit

ments to an issuer of securities; in the case of a partnership or firm, obligations of its members, in the case of a corporation, obligations incurred for its benefit by other corporations that it controls; and in the case of a foreign government, the liabilities of its departments or agencies deriving their current funds principally from general tax revenues.

(3) The limitations of this paragraph do not apply to:

(i) Deposits of banks and Federal funds purchased;

(ii) Bills or drafts drawn in good faith against actual goods and on which two or more parties are liable;

(iii) Any acceptance that has not matured and is not held by the acceptor; (iv) Obligations to the extent secured by cash collateral; or

(v) Obligations to the extent supported by the full faith and credit of the following:

(A) The United States or any of its departments, agencies, establishments, or wholly-owned corporations (including obligations to the extent insured against foreign political and credit risks by the Export-Import Bank of the United States or the Foreign Credit Insurance Association), the International Bank for Reconstruction and Development, the International Finance Corporation, the International Development Association, the InterAmerican Development Bank, or the Asian Development Bank;

(B) Any organization if at least 25 per cent of such an obligation or of the total credit is also supported by the full faith and credit of, or participated in by any institution designated in paragraph (b)(3)(v)(A) of this section in such manner that default to the lender will necessarily include default to that entity. The total liabilities of such person shall at no time exceed 100 per cent of the capital and surplus of the lender or the parent Edge Corporation.

(c) Loans to foreign banks. A member bank that holds directly or indirectly shares in a foreign bank may make loans to that foreign bank without regard to section 23A of the FRA. (d) Capitalization. An Edge Corporation shall at all times be capitalized in an amount that is adequate in rela