Two banking industry organizations, the Bank Policy Institute (BPI) and Independent Community Bankers of America (ICBA), are urging the Federal Reserve to strengthen proposed guidelines for evaluating account and services requests.
In a joint letter to the Federal Reserve, BPI and ICBA officials called upon the Federal Reserve to establish a uniform set of standards that each of the 12 Federal Reserve Banks must apply as they evaluate requests for access to the payment system.
They added that the standards should be rigorously applied, particularly for firms that hold novel charters — like financial technology (fintech) companies — due to the lack of oversight of these firms by federal banking regulators.
“The question of which institutions should be permitted to open master accounts with a Federal Reserve Bank and obtain related services is a critical one, particularly in light of the increase in the availability of novel charters,” BPI Associate General Counsel Dafina Stewart and ICBA Senior Vice President of Payments and Technology Policy Deborah Matthews Phillips wrote I the joint comment letter. “Reserve Bank accounts and services stand at the center of our payments and monetary ecosystem, and both the resilience and the risk management of institutions that hold such accounts is a linchpin to the safety and effectiveness of the U.S. payments system.”
Specifically, the banking organizations said the final guidelines should ensure the safety and soundness of the nation’s payment system and appropriately mitigate the risks posed by firms with novel charters that may obtain Reserve Bank accounts and services. Further, they added that the Federal Reserve should clearly identify which institutions are legally eligible to apply for Reserve Bank accounts and services. Also, it should explain how it will monitor whether novel charter holders meet the application standards and ensure all decisions regarding novel charters involve the Federal Reserve’s Board of Governors. Finally, they said that the guidelines should account for relationships between an applicant with a novel charter and its affiliates and not delegate to the Reserve Banks decisions on the interest rate they pay on reserve balances.
The Bank Policy Institute is a nonpartisan public policy, research, and advocacy group, while ICBA is an organization that represents the interests of the community banking industry.