An Agreement Corporation is a state chartered corporation allowed to engage in international business – in agreement to the terms of the Edge Act.
An Agreement Corporation enters into an “agreement” with the Fed’s Board of Governors to limit its activities to those of an Edge Act Corporation.
According to the New York Fed, the Edge Act was chartered by the Federal Reserve under Section 25A of the Federal Reserve Act, as amended in 1916 and 1919, to authorize banks with capital and surplus of over $1 million to invest (singly or jointly), up to 10 percent of its capital and surplus in a corporation charted under Federal or state law to “conduct international or foreign banking” activities.
In 1919 Congress passed a law that added section 25(a) to the Federal Reserve Act, a section that authorized the Board of Governors to charter corporations “for the purpose of engaging in international or foreign banking or other international or foreign operations… either directly or through agency, ownership, or control of local institutions in foreign countries”.
Essentially what this means is that an Agreement Corporation is allowed to receive deposits (without Federal Deposit Insurance Corporation coverage) from, and make loans to, companies engaging in international business.
This structure is what gives American banks the ability to own and operate foreign branches.
An agreement corporation functions under the same regulations as Edge Corporations, however, it is chartered by a state.
According to the Nasdaq Business Glossary, an agreement corporation is a:
“Corporation chartered by a state to engage in international banking: so named because the corporation enters into an “agreement” with the Fed’s Board of Governors that it will limit its activities to those permitted by an Edge Act Corporation.”