The Federal Reserve today released a formal proposal to create “payment accounts” – also known as “skinny” master accounts – for payment services.
Federal Reserve Governor Christopher Waller has proposed that the Fed create a payment account category that certain financial institutions could use for the limited purpose of clearing and settling payments. After previously seeking public input on the idea, the Fed issued a formal proposal for establishing payment accounts and will seek further comment.
Payment account holders would not have access to intraday credit or the discount window, would not earn interest on balances held at a Reserve Bank, and would only have access to payment services with automated controls to prevent overdrafts, according to the Fed. They would also be required to provide information to demonstrate compliance with Bank Secrecy Act and anti-money laundering regulations and sanctions requirements.
The Fed board is also encouraging Reserve Banks to temporarily pause decisions on access requests from institutions that fall within Tier 3 of its Account Access Guidelines until a decision is made on the proposal. Last year, the Kansas City Fed granted Kraken Financial a one-year, limited-purpose account with restrictions and limitations tailored to the company’s cryptocurrency business model. The American Bankers Association was among several groups that criticized the decision, noting that the Fed was still considering whether to create payment accounts for firms like Kraken.
The Fed’s announcement comes a day after President Trump signed an executive order asking the Fed to consider allowing nonbank financial institutions to access to its payment accounts and payment services. Also, Fed Governor Michael Barr said he would not support the proposal “because it does not provide sufficiently specific and robust safeguards to protect against the accounts being used for money laundering and terrorist financing by institutions we do not supervise.”
