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Joint Trades Letter on Proposed Guidelines for Evaluating Account & Services Requests
Board of Governors of the Federal Reserve
20th Street and Constitution Ave
Washington, DC 20551
Re: Proposed Guidelines for Evaluating Account and Services Requests (Docket No. OP-1747), 86 FR 25865 (May 11, 2021)
Dear Ms. Misback:
The undersigned group of trade associations representing financial institutions of all charter types and sizes appreciates the opportunity to comment on the Board of Governors of the Federal Reserve System’s (“Board”) proposed guidelines for evaluating account and services requests “Proposed Guidelines”). The proposed Guidelines are intended to facilitate a more transparent and consistent process for evaluation of requests to access Federal Reserve Bank (“Reserve Bank”) accounts and services. The proposed Guidelines set out six principles and identify factors the Board and the Reserve Banks (collectively, “Federal Reserve”) would consider when evaluating an applicant’s eligibility and risk profile.
We support the establishment of clear and consistent guidelines to evaluate requests for a master account or access to Reserve Bank services that would provide an important baseline for safety and soundness standards. We believe the payment system would benefit if the proposed Guidelines were strengthened to address the risks certain entities -- including those that are not federally insured and those that operate a business model not traditionally found in its charter type -- pose to the payment system, the U.S. financial system, and the broader economy. More specifically, the proposed Guidelines offer a broad conceptual framework, but do not provide enough granularity to ensure an entity accessing the payment system is operating in a safe and sound manner, managing risks relative to its risk profile. Moreover, it is unclear how the Reserve Banks would ensure that entities that are neither federally insured or regulated, nor subject to public regulatory reporting, are maintaining ongoing compliance with these standards, or what the consequences are for failing to meet them.
As described below, we urge the Board to outline specific capital, liquidity, risk management and public reporting requirements necessary for master account access, and any additional parameters for eligible entities whose business models may present enhanced risks to the payment system or to the U.S. financial system, but are not subject to the same level of federal regulatory oversight. Given the potential risks they pose, we believe entities that are not subject to such standards and oversight should not have access to the payments system. Additionally, we caution that the banking framework is a starting point: Novel business models that rely on new technologies may pose different risks than those that the bank regulatory framework addresses.
New applicants with novel business models will need enhanced scrutiny and conditions of access.
We recommend the following to support the integrity of the payment systems and mitigate risks to the Reserve Banks and the U.S. financial system. We believe that the Federal Reserve should...