4000 - Advisory Opinions
Edge Corporation Engaged in General Business of Equipment Leasing Need Not Obtain FDIC's Prior Approval to Invest in Special Purpose Leasing Corporations
February 1, 1993
JoAnna A. Gekas, Senior Attorney
This is in response to your letter of December 11, 1992 to Deputy Regional Counsel Joseph Sano requesting an opinion concerning the FDIC's general policy with respect to regulatory approval of foreign transactional subsidiaries.
As you are aware, section 18(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. 1828(1), provides that insured state nonmember banks may acquire and hold stock in banks or other entities organized under the laws of a foreign country with the prior written consent of the FDIC if such an acquisition is authorized under state law.
The Federal Reserve Board similarly imposes a prior approval requirement for the acquisition of foreign banks or entities. See section 25A, paragraph 8 of the Federal Reserve Act, 12 U.S.C. 615(c). As you have pointed out, the Federal Reserve Board issued an opinion in 1973 which relieves Edge Act corporations from the prior approval requirement where the investee foreign entity is merely an investment vehicle required by tax, foreign corporate, or other reasons to form a part of individual transactions such as aircraft leases. As a result, under this ruling, an Edge corporation engaged in the general business of equipment leasing need not obtain the Federal Reserve Board's prior approval of investments in special purpose leasing corporations formed as vehicles for specific, single customer leases. 1973 Fed. Res. Bull. 104.
In general, we concur with the Federal Reserve Board's policy for the following reasons. First, due to the fact that special purpose leasing corporations represent credit facilities provided by their leasing company parents, these entities should not be regarded as investments requiring regulatory approval. Second, no regulatory purpose under section 18(1) of the Act would be served by having the FDIC review each transaction in advance.
Please be advised that the opinions expressed herein represent the current thinking of the FDIC Legal Division staff and are not, in any way, binding upon the FDIC or its Board of Directors. In addition, the opinions expressed herein relate to the specific factual context in which they were given and thus should not be applied in other factual contexts.