Fed General Counsel: FedNow Not Open to Nonbanks

Nonbanks should not expect direct access to FedNow, the 24/7/365 payments system the Federal Reserve is developing, according to a top staffer.

“Congress has more or less clarified who can have an account at the Fed,” said Federal Reserve Board of Governors General Counsel Mark Van Der Weide at the Clearing House/Bank Policy Institute annual conference today. “It’s depository institutions as defined in the Federal Reserve Act, and we will follow that law.” Under the Fed’s proposal, FedNow transactions would be funded directly from depository institution master accounts.

In its comments on FedNow, the American Bankers Association cautioned that the Fed’s proposal for FedNow “does not address the additional risks that nonbank agents bring to this faster payments system,” adding that the Fed “must do so to ensure that all participants in FedNow, direct or indirect, meet similar robust prudential, security, and consumer protection standards.”