ABA, groups: more clarity needed on Fed payments system access proposal

As the Federal Reserve continues to consider which entities may become eligible for access to its payments systems, ABA and a coalition of trade groups called for the Fed to clarify how it will address problems of institutions with novel charters—such as state-chartered non-depository banks and crypto firms—seeking access.

Specifically, ABA and the groups called on the Fed to clarify which institutions are legally eligible to apply for Federal Reserve Bank accounts and services; to explain how applications will be scrutinized (and what conditions and limitations may be imposed in connection with approval, at each tier; to explain how Reserve Banks will oversee and monitor institutions in any given access tier on an ongoing basis; and to clarify that decisions about Tier 2 and Tier 3 applicants be subject the Federal Reserve Board of Governors’ approval or non-objection.

“Given the privileges afforded by access to accounts and services and the risks that could be posed to the payment system, the U.S. financial system and the overall economy, the guidelines should ensure that all institutions with access are held to an equally high standard of supervision and oversight to ensure their safety and soundness and compliance with other relevant laws regardless of charter type or business model,” the groups said. “Particularly because access to Reserve Bank accounts and services comes with the extraordinary benefit of being able to clear and settle private transactions in central banks without concern about liquidity and credit risk, such access serves as a linchpin to a safe and stable payments system.”