Fed Proposes Tiered Review Framework for Payments System Access

The Federal Reserve today published for comment updates to the proposed guidelines it will use when evaluating requests for master accounts with the Fed or access to the agency’s financial services. The Fed originally issued its proposal in May 2021, amid growing requests from fintech firms and other providers to gain access to the financial system.

In the supplemental notice, the Fed re-proposed its principles for evaluating requests for accounts and services. In addition, the Fed also proposed to establish a three-tiered review framework to provide additional clarity regarding the review process for different types of institutions. Tier 1 would consist of eligible, federally insured institution, and would be “subject to a less intensive and more streamlined review.” Tier 2 would consist of eligible institutions that are not federally-insured but are subject (by statute) to prudential supervision by a federal banking agency; and any holding company of which would be subject to Federal Reserve oversight (by statute or by commitments). These institutions would generally receive an “intermediate” level of review, the Fed said.

Tier 3 would consist of eligible institutions that are not federally insured and not subject to prudential supervision by a federal banking agency at the institution or holding company level, and “would be subject to the strictest level of review.”

As the Fed considers which institutions can access to the payments system, the American Bankers Association remains concerned that some lightly regulated chartered entities may introduce undue risk to the payments system if they are given direct access.