Federal Reserve Opens Consultation on Access to the Payments System

The US Federal Reserve Board has proposed guidelines to evaluate requests for accounts and payment services at Federal Reserve Banks. In a public statement, the Fed said the introduction of new financial products, such as products introduced by Fintechs including novel types of banking charters, has compelled the central bank to review legacy payment operations.

The Fed said that to facilitate these activities, some such institutions have requested access to the payments system offered by Federal Reserve Banks. The central bank said that in order to achieve the goal of applying a transparent and consistent process for all access requests, as well as considering the ramifications for the broader financial system, the Board is proposing Account Access Guidelines for the Reserve Banks to evaluate such requests.

To quote the affiliated Memo accompanying the consultation, the Fed explains:

“There has been a recent uptick in non-traditional federal and state charter types being authorized or considered across the country. The Reserve Banks are receiving an increasing number of inquiries and access requests from institutions with such non-traditional charter types, which raise important interpretive and policy issues for the Federal Reserve regarding whether these non-traditional charters would become Federal Reserve members or should have access to Federal Reserve accounts and services. In letters to policymakers at the Reserve Banks and the Board, as well as other public channels, some industry stakeholders have raised questions about the potential risks if entities holding non-traditional charters obtain Federal Reserve accounts and services. Some stakeholders have requested that the Board adopt a transparent and uniform policy across the System that sets forth appropriate criteria for evaluating requests for Federal Reserve accounts and services.”

The proposed guidelines are said to be consistent with the Fed’s policy goals of promoting the safety and soundness of the banking system; implementing monetary policy; promoting financial stability; protecting consumers; and promoting a safe, effective, efficient, inclusive and innovative payment system.

Federal Reserve Board Governor Lael Brainard issued the following statement on the proposal:

“With technology driving rapid change in the payments landscape, the proposed Account Access Guidelines would ensure requests for access to the Federal Reserve payments system from novel institutions are evaluated in a consistent and transparent manner that promotes a safe, efficient, inclusive, and innovative payment system, consumer protection, and the safety and soundness of the banking system.”

Following the news that the Fed was considering changes to the payments system, the minority leader of the House Financial Services Committee, Representative Patrick McHenry, issued the following statement:

“I’m glad that the Fed is seeking comment on how best to include financial technology firms in their payment systems. Institutions are finding new and creative ways for technology to help traditionally underserved communities and consumers gain access to capital. Today’s announcement by the Fed is a welcome step that recognizes the important role innovation is playing in the way Americans access, utilize, and interact with the financial system. I look forward to working with regulators and stakeholders to ensure our regulatory structure continues to support this kind of growth, rather than suppresses it.”

In the past year, multiple Fintechs have been approved for national bank charters. In January, digital asset-focused firm Anchorage became the first-ever entity of its kind to receive conditional approval from the Office of the Comptroller of the Currency to operate as a federally chartered bank.

Comments on the proposed guidelines will be accepted for 60 days after publication in the Federal Register.

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