Members of the Federal Reserve’s Community Depository Institution Advisory Council urged the Fed to “be cautious in its approach to allowing non-traditional banks direct access to the payment system” during a recent meeting, flagging recent attempts by several non-bank entities to obtain state or national banking charters that would allow them to circumvent FDIC supervision and Community Reinvestment Act requirements.
“These non-traditional banks share one common traditional desire: to have direct access to a master account at the Federal Reserve,” council members said. “The Council is concerned about apparent uneven levels of oversight for these entities and the increased risks they may pose. Council members called for a “public and transparent process to determine a safe and secure threshold that applicants must meet to be granted access” to the payment system.
The council also addressed current banking and economic conditions, community banks’ response to challenges facing customers, the COVID-19 pandemic and examination practices.