Fed issues final guidelines for payments system access

The Federal Reserve today announced final guidelines that it will use when evaluating requests for master accounts with the Fed or access to the agency’s financial services. The finalized guidelines are substantially similar to those first proposed by the Fed in 2021, which came amid growing requests from fintech firms and entities with novel bank charters to gain access to the payments system.

According to the Fed, the guidelines include a tiered review framework to provide additional clarity on the level of scrutiny that Reserve Banks will apply to different types of institutions with varying degrees of risk. For example, institutions with federal deposit insurance would be subject to a more streamlined level of review, while institutions that engage in novel activities and for which authorities are still developing appropriate supervisory and regulatory frameworks would undergo a more extensive review.

In a statement, Fed Vice Chair Lael Brainard said the guidelines “provide a consistent and transparent process to evaluate requests for Federal Reserve accounts and access to payment services in order to support a safe, inclusive and innovative payment system.” However, in separate remarks, Fed Gov. Michelle Bowman said the guidelines are only a first step and that more work needed to be completed to implement them. “There is a risk that this publication could set the expectation that reviews will now be completed on an accelerated timeline,” she said.

ABA has called on the Fed to establish standards for access to the payments system. In joint comments submitted with two other trade groups in 2021, ABA said the proposed guidelines needed to be strengthened to address the risks certain entities post to the payments system, including those entities that are not federally insured and that operate with non-traditional business models. ABA President and CEO Rob Nichols said today that the association hopes the final guidelines provide much-needed clarity and consistency to master account eligibility and approval.

“As we indicated in our comment letters, we embrace financial innovation, but we should not do anything to undermine the strength and resiliency of our banking system,” Nichols said. “Allowing new financial players to access the Federal Reserve system without requiring them to meet the same high standards as banks poses real risks. We will watch carefully to ensure that these new guidelines, particularly the tiering requirements, recognize those risks, and we look forward to seeing the Board and the Reserve Banks apply these guidelines fairly but rigorously.”