The Federal Reserve’s proposed payment account framework is a prudent approach to responsible innovation if additional safeguards are adopted to protect the safety, soundness and integrity of the U.S. payments system, the American Bankers Association and Consumer Bankers Association said today in a joint letter.
Fed Governor Christopher Waller has proposed that the Fed create a “skinny” master 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 in May issued a formal proposal to establish payment accounts.
ABA and CBA said the proposal represents a measured approach to expanding payment system access but stressed that any framework must be accompanied by strong risk management requirements, direct federal oversight and transparent application standards.
In the letter, the associations urged the Fed to:
- Maintain key safeguards included in the proposal, including prohibitions on interest payments, daylight credit, discount window access and FedACH access.
- Require clear, transparent and publicly available eligibility and review criteria for all payment account applicants.
- Condition access on demonstrated capabilities in governance, independent risk management, BSA/AML/CFT compliance, sanctions compliance, cybersecurity and operational resilience.
- Require all payment account participants to be subject to direct federal banking agency supervision as a condition of access.
- Adopt a conservative, phased implementation approach that increases activity only after institutions demonstrate sustained compliance and effective controls.
- Prohibit “nesting” arrangements and other activities that could allow third parties to circumvent payment account limitations.
- Develop meaningful enforcement, recovery and resolution expectations for account holders.
- Preserve the distinction between payment accounts and master accounts, with master account access remaining limited to federally supervised institutions with federally insured deposits.
The associations said legal eligibility alone should not guarantee access to a payment account and emphasized that the Fed must continue to evaluate applicants’ risk profiles, governance structures and supervisory oversight.
ABA and CBA also noted that the proposal’s core guardrails, including prefunding requirements, no overdrafts, no interest and no access to Fed credit, are essential components of a framework that appropriately balances innovation and risk management.
