Master account
Custodia Bank v. Federal Reserve Board of Governors and Federal Reserve Bank of Kansas City
Date: March 13, 2026
Issue: Whether en banc review was warranted for a Tenth Circuit decision ruling that Federal Reserve banks may reject master account requests from otherwise legally eligible entities.
Case Summary: On a 7-3 decision, the full Tenth Circuit denied rehearing of a three-judge panel decision ruling Federal Reserve banks may reject master account requests from otherwise legally eligible entities and that Reserve banks retain discretion over whether to grant such accounts.
Custodia sued the Federal Reserve Board of Governors and Federal Reserve Bank of Kansas City (the agencies), alleging they unlawfully refused to act on its master account application. Custodia claimed it submitted a valid application for a master account to the Kansas City Fed, but the agencies illegally delayed the application process. According to Custodia, the agencies must take final action on an application within one year under 12 U.S.C. § 4807. However, the district court ruled that the Kansas City Fed was not required to grant Custodia’s request for a master account, even though it was legally eligible, and that Custodia lacked standing because it did not challenge a final agency action under the Administrative Procedure Act.
On appeal, ABA filed a coalition amicus brief urging the Tenth Circuit to affirm, arguing the Fed and the Reserve banks have clear statutory discretion to grant or deny master account requests. ABA emphasized that Congress gave this authority to the Reserve Banks and warned that removing this discretion would endanger the safety and integrity of Fed services and the wider financial system.
In a 2-1 decision, a Tenth Circuit panel affirmed, ruling that Federal Reserve banks may deny master account requests from legally eligible applicants. The majority observed that the statutes and the Fed’s Guidelines give Reserve banks — not the Fed — the power to grant or deny master account requests. The majority also rejected Custodia’s argument that it had a statutory right to a master account. It explained that Section 342 of the Federal Reserve Act gives Reserve banks discretion to receive deposits, which includes the power to deny master account requests.
In December 2025, Custodia filed a petition for rehearing en banc. Custodia argued that the panel’s interpretation was incorrect because it misread the Monetary Control Act and ignored its clear command that the Fed must provide master accounts to eligible nonmember depository institutions. Custodia also argued the decision broke from the Fed’s longstanding practice and gave it unchecked discretion over access to master accounts. However, the full Tenth Circuit denied the petition without further commentary. In dissent, Judge Timothy Tymkovich warned that by endorsing unreviewable discretion to deny accounts, the panel “effectively handed the Reserve banks a veto over states’ chartering power.”
Bottom Line: The Tenth Circuit’s decision confirms that Federal Reserve banks have broad discretion to deny master account access.
