According to the Federal Reserve Board, the payments landscape is evolving rapidly as technological progress has led to novel ways of providing traditional banking services and the introduction of new financial products and services. They note that there has been a recent uptick in novel charter types being authorized or considered by federal and state banking authorities across the country and as a result, the Reserve Banks are receiving an increasing number of inquiries and access requests from institutions that have obtained novel charters.
On May 5, 2021, the Board requested comment on proposed guidelines to be used by Reserve Banks in evaluating requests for accounts and services to ensure that Reserve Banks apply a transparent and consistent set of factors when reviewing access requests. The Board’s original proposal reflected the goals of (1) ensuring the safety and soundness of the banking system, (2) effectively implementing monetary policy, (3) promoting financial stability, (4) protecting consumers, and (5) promoting a safe, efficient, inclusive, and innovative payment system. On March 1, 2022, the Board requested public comment on a second, supplemental notice that built upon the original proposal by adding a three-tiered review framework to provide additional clarity.
Based on comments to the original and supplemental proposals, the Federal Reserve Board announced final guidelines that establish a transparent, risk-based, and consistent set of factors for Reserve Banks to use in reviewing requests to access Federal Reserve accounts and payment services. According to the release, the final guidelines are substantially similar to those proposed by the Board in its May 2021 proposal and March 2022 supplemental proposal.
The new guidelines include a tiered review framework to provide additional clarity on the level of due diligence and scrutiny that Reserve Banks will apply to different types of institutions with varying degrees of risk. Institutions with federal deposit insurance would be subject to a more streamlined level of review, while institutions that engage in novel activities and for which authorities are still developing appropriate supervisory and regulatory frameworks would undergo a more extensive review. The new guidelines will be effective upon publication in the Federal Register.
Learn more from the Federal Reserve Board press release.