On May 20, the Federal Reserve Board issued a proposal (following a December 2025 Request for Information) to create a new, special-purpose “payment account” that eligible financial institutions could use solely to clear and settle payments. At the same time, the Board signaled that Federal Reserve Banks should temporarily pause decisions on certain master account applications from higher-risk institutions while this policy work proceeds.
If adopted, the new account type would be implemented through coordinated changes to the Federal Reserve’s Payment System Risk (PSR) Policy (including a new Part IV on accounts and services), the Account Access Guidelines, Regulation A, and Regulation D.
What Is a Payment Account?
The proposed payment account is designed as a constrained alternative to a traditional master account, aimed especially at uninsured depository institutions and other nontraditional firms seeking direct access to the Fed’s payment rails. The core concept is to allow these institutions to clear and settle payments at the Federal Reserve, while sharply limiting risk to the Reserve Banks, the payment system, and monetary policy.
Under the proposal:
- A payment account would be limited to clearing and settling the holder’s payment activity, not general-purpose banking.
- The account would be available only to institutions that are already legally eligible under the Federal Reserve Act or other federal statutes to maintain an account at a Reserve Bank.
- Reserve Banks would continue to apply the Account Access Guidelines, but the Fed anticipates that payment account requests could receive a more streamlined review than master account requests from the same institution, given the tighter terms and lower residual risk.
Key Structural Limits:
To mitigate risk to the Federal Reserve and the broader system, the proposal imposes several important constraints:
- No discount window or intraday credit.
Payment account holders would be ineligible for discount window credit under Regulation A and could not incur daylight overdrafts. Only services with automated controls to reject overdrafts (currently Fedwire Funds, FedNow, the National Settlement Service, and the Fedwire Securities Service for transfers free of payment) could settle through a payment account. FedACH and certain other services would not be available. - No interest on balances.
Regulation D would be amended so that payment account balances do not earn interest. This is intended to keep the account from functioning as a store of value and to limit effects on the Fed’s balance sheet and monetary policy implementation. - Closing balance limits tied to payment activity.
Each Reserve Bank would set a closing balance limit for an institution’s payment account — based on expected payment flows rather than total assets and capped at $1 billion. There would be no formal intraday balance cap. The Fed would also bar payment account holders from participating in Excess Balance Accounts (EBAs), to prevent circumvention of the zero-interest and balance-limit structure.
Restrictions on Correspondent Relationships and Illicit Finance Controls
The Fed is also proposing terms to reduce complexity and address illicit finance risk:
- No correspondent/respondent role under OC 1.
Payment account holders would not be permitted to act as “Correspondents” or “Respondents” under Operating Circular 1. That is, they could not use their payment accounts to settle other institutions’ activity, nor settle their own payments through another institution’s master account. Those types of correspondent relationships would remain in the realm of traditional master accounts subject to full review. - Targeted illicit finance expectations.
While Reserve Banks already can require bank secrecy act (BSA), anti-money laundering (AML), and Office of Foreign Asset Control (OFAC)-related information from account holders, the Fed proposes to make clear that they may:- Require independent third-party assessments of BSA/AML and OFAC programs.
- Request attestations of compliance, audit reports, and other risk-relevant information.
- Require notice of events that materially change an institution’s illicit finance risk profile.
The proposal also invites public comment on whether Reserve Banks should apply specific illicit finance requirements to payment account holders that are not federally insured.
Review Timelines and a Temporary Pause for Tier 3 Applicants
The proposal would modify the Account Access Guidelines to set expectations for review timing:
- Reserve Banks would generally be expected to complete reviews of payment account requests within 90 days of receiving all requested documentation.
- For Tier 1 institutions (federally insured institutions and certain affiliated entities), Reserve Banks would be expected to complete reviews of any account and services requests (master or payment accounts) within 45 days of a complete submission.
At the same time, the Board is encouraging Reserve Banks to temporarily pause decisions on access requests from Tier 3 institutions (non‑federally insured institutions without Federal Reserve–regulated holding companies) while the payment account proposal is finalized. The pause is intended to promote transparency and consistency as the Board develops its policy framework. Staff currently recommends that the pause end on or before December 31, 2026, though the ultimate timing will depend on the Board’s rulemaking process.
The Board’s proposal will be open for public comment for 60 days after publication in the Federal Register.