Fed requests comments on payment account proposal

The Federal Reserve Board requested public comment on its proposal to establish a payment account—also known as a "skinny” master account—that eligible financial institutions could use for the limited purpose of clearing and settling their payments on Fed payment services, such as FedNow and Fedwire.

Updates: The Fed said the proposal includes some changes from its December request for information, such as closing balance limits that would be based on an institution's expected payment activity.

Input: The comment period will close 60 days after publication in the Federal Register.

Background:

• The Fed in December requested public comment on the proposed payment account, which eligible financial institutions could use for the limited purpose of clearing and settling their payments on Fed payment services.

• That requestion for information followed Fed Governor Christopher Waller’s October speech previewing the idea of a “skinny” master account that would provide basic Fed payment services to legally eligible institutions.

• Nonbank entities and crypto institutions are trying to obtain access to master accounts—industry settlement accounts that are traditionally limited to insured depository institutions that are highly regulated and pose limited risk to the banking system.

ICBA View:

• In a recent issue brief, ICBA urged policymakers to pause new policies on stablecoins, Federal Reserve master accounts, and OCC national trust charters and holistically assess their combined impact on local communities and the broader economy.

• ICBA this month expressed strong concern after crypto exchange company Payward Inc., operator of Kraken, applied for a national trust bank charter from the OCC following its previously granted access for a Federal Reserve master account.

• Responding to the December RFI on payment accounts, ICBA told policymakers it has significant concerns about expanding direct Federal Reserve account access to institutions that operate outside the traditional banking regulatory framework.

• As reported in Independent Banker magazine, ICBA supports limiting Fed account access to institutions that meet the financial services sector’s highest standards to protect the safety of the U.S. banking system.