The Board of Governors of the Federal Reserve System (the Board) recently issued a supplemental notice and request for comment to the guidelines proposed in May 2021 for use by Federal Reserve Banks (Reserve Banks) in evaluating requests to access Federal Reserve accounts and payment services, in an effort to ensure that Reserve Banks use a transparent and consistent set of factors when reviewing such requests. Institutions with federal deposit insurance would be subject to a more streamlined level of review; those without insurance that are supervised by a federal banking agency would undergo an intermediate level of review; and those without insurance, and not supervised by a federal bank regulatory agency, would be subject to a stricter level review.

The May 2021 proposal reflected the Board’s policy 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. The intention was also to ensure that Reserve Banks apply a transparent and consistent set of factors when reviewing access requests. The original guidelines contained six principles. The first principle specified that access requests will only be considered from institutions that are legally eligible for access to Reserve Bank accounts and services. The remaining five principles addressed specific risks, ranging from narrow risks (such as risk to an individual Reserve Bank) to broader risks (such as risk to the U.S. financial system). For each of these five principles, the May 2021 proposal set forth factors that Reserve Banks should consider when evaluating an institution’s access request, against the specific risk targeted by the principle (several factors are pertinent to more than one principle).

While Section 1 of the proposed guidelines regarding the six principles remains substantially the same, Section 2 would establish a three-tier framework to provide additional clarity regarding the review process for different types of institutions.

  • Tier 1 would consist of eligible institutions that are federally insured. These institutions would generally be subject to a less intensive and more streamlined review.
  • Tier 2 would consist of eligible institutions that are not federally insured but (i) are subject (by statute) to prudential supervision by a federal banking agency; and (ii) any holding company of which would be subject to Federal Reserve oversight (by statute or by commitments). These institutions would generally receive an intermediate level of review.
  • Tier 3 would consist of eligible institutions that are not federally insured and not subject to prudential supervision by a federal banking agency at the institution or holding company level. These institutions would generally receive the strictest level of review.

“With technology driving rapid change in the payments landscape, the proposed guidelines would ensure novel requests for access to Federal Reserve accounts and payment services are evaluated consistently and transparently to ensure a safe and innovative payment system,” said Governor Lael Brainard.

Photo of Ethan G. Ostroff Ethan G. Ostroff

Ethan’s practice focuses on financial services litigation and compliance counseling, as well as digital assets and blockchain technology. With a long track record of successful litigation results across the U.S., both bank and non-bank clients rely on him for comprehensive advice throughout their

Ethan’s practice focuses on financial services litigation and compliance counseling, as well as digital assets and blockchain technology. With a long track record of successful litigation results across the U.S., both bank and non-bank clients rely on him for comprehensive advice throughout their business cycle.

Photo of Kalama Lui-Kwan Kalama Lui-Kwan

Kalama represents parties in complex commercial disputes arising out of M&A deals. He also has a national litigation practice representing consumer-facing companies in class actions and regulatory investigations.

Photo of Carlin McCrory Carlin McCrory

A seasoned regulatory and compliance attorney, Carlin brings extensive experience representing financial institutions, fintechs, lenders, payment processors, neobanks, virtual currency companies, and mortgage servicers.

Photo of Keith J. Barnett Keith J. Barnett

Keith’s experience representing clients in the financial services industry as a litigation, compliance, regulatory, investigations (internal and regulatory), and enforcement attorney spans 20 years. Keith represents clients against government regulators (CFPB, FTC, SEC, CFTC), industry regulators (FINRA), and private litigants in federal courts…

Keith’s experience representing clients in the financial services industry as a litigation, compliance, regulatory, investigations (internal and regulatory), and enforcement attorney spans 20 years. Keith represents clients against government regulators (CFPB, FTC, SEC, CFTC), industry regulators (FINRA), and private litigants in federal courts, state courts, and before arbitration and administrative law panels in the financial services industry.