What is an Article XII Company?

Article XII Company refers to an investment company that is responsible for facilitating international banking transactions. Article XII companies are often established by foreign banks but are chartered under Article XII of the New York State Banking Law. These investment companies execute foreign transactions, offer lending to foreign borrowers, issue letters of credits, and facilitate other transactions.

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How Does an Article XII Company Work?

Although Article XII companies are licensed to carry out international banking activities, there are some transactions they are not allowed to do. For instance, Article XII companies don't buy equities and they are not allowed to accept deposits in the State of New York. They can, however, accept deposits outside the state given the authorization of the New York State Banking Board

History of Article XII Companies

The law that established Article XII companies as investment companies can be traced to the 1980s. These companies, however, became Chartered in 1919 which saw Banque Nationale de Paris become the largest bank in France. In the New York State, Articles XII companies are chartered under Article XII of the New York State Banking Law. These companies were often created by foreign banks as permitted by the New York state's Banking Department. Popular Article XII companies include Sterling Banking Corp, French-American corp and others.

Article XII Companies Today

Between 1950 and 1975, the establishment of Article XII companies was no longer allowed by the New York State Banking Department and the Federal Reserve Board. However, in the late 1970s, the Department commenced chartering these investment companies again, but this time, foreign banks seeking to create Article XII companies are required to take a branch status to allow stringent monitoring of their activities by the Federal Reserve.