Ladies and Gentlemen:
The Bank Policy Institute[1] appreciates the Board of Governors of the Federal Reserve System’s recent efforts to promote transparency regarding access to Federal Reserve master accounts and services, including the adoption of the Board’s final Guidelines for Evaluating Account and Services Requests[2] in August that establish a transparent, risk-based, and consistent set of factors for Reserve Banks to use in reviewing applications for Federal Reserve Bank accounts and/or financial services, and the more recent proposed amendments to those Guidelines, under which the Board proposed to provide for periodic publication of a list of federally-insured and uninsured depository institutions that have access to Reserve Bank accounts and services.[3]
However, after the Board issued its most recent proposal, the National Defense Authorization Act was signed into law on December 23, 2022. Section 5708 in Title LVII of that law provides the following:
The Board shall create and maintain a public, online, and searchable database that contains—
‘‘(A) a list of every entity that currently has access to a reserve bank master account and services, including the date on which the access was granted to the extent the date is knowable; ‘
‘(B) a list of every entity that submits an access request for a reserve bank master account and services after enactment of this section (or that has submitted an access request that is pending on the date of enactment of this section), including whether, and the dates on which, a request—
‘‘(i) was submitted; and
‘‘(ii) was approved, rejected, pending, or with[1]drawn; and
‘‘(C) for each list described in subparagraph (A) or (B), the type of entity that holds or submitted an access request for a reserve bank master account and services, including whether such entity is—
‘‘(i) an insured depository institution, as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
‘‘(ii) an insured credit union, as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752); or
‘‘(iii) a depository institution that is not an insured depository institution or an insured credit union.
‘‘(2) UPDATES.—Not less frequently than once every quarter, the Board shall update the database to add any new information required under paragraph (1).
‘‘(3) DEADLINE.—Not later than 180 days after the date of enactment of this section, the Board shall publish the database with the information required under paragraph (1).’’.
As we have stated previously, determining whether and when institutions should be permitted to open master accounts with a Federal Reserve Bank and obtain related services remains a critical question, particularly in light of the recent increase in the availability of novel charters4 at a federal and state level that may seek such accounts and services and the potential unique risks of their obtaining such accounts and services to the U.S. payments and financial systems.5 While the requirements set forth in the NDAA that the Board must implement represent a positive step towards providing greater transparency into the application process for master accounts and services, in implementing the statute, we respectfully request that the Board go beyond what the statute requires to provide additional public transparency and greater process that important Reserve Bank decisions in this area clearly warrant.
To read the full comment letter, click here, or click on the download button below.
[1] The Bank Policy Institute is a nonpartisan public policy, research, and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks, and the major foreign banks doing business in the U.S. Collectively, they employ almost two million Americans, make nearly half of the nation’s bank-originated small business loans, and are an engine for financial innovation and economic growth.
[2] Board of Governors of the Federal Reserve System, Guidelines for Evaluating Account and Services Requests, Final guidance, 87 Fed. Reg. 51099 (Aug. 19, 2022), available at: https://www.govinfo.gov/content/pkg/FR-2022- 08-19/pdf/2022-17885.pdf.
[3] Board of Governors of the Federal Reserve System, Guidelines for Evaluating Account and Services Requests, Notice and request for comment, 87 Fed. Reg. 68691 (Nov. 16, 2022), available at: https://www.govinfo.gov/content/pkg/FR-2022-11-16/pdf/2022-24929.pdf.
