Proposed Guidelines for Evaluating Account and Services Requests, 25865-25870 [2021-09873]
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Federal Register / Vol. 86, No. 89 / Tuesday, May 11, 2021 / Notices
proper disposal. Persons other than
registrants will generally be allowed to
sell, distribute, or use existing stocks
until such stocks are exhausted,
provided that such sale, distribution, or
use is consistent with the terms of the
previously approved labeling on, or that
accompanied, the canceled products.
Authority: 7 U.S.C. 136 et seq.
Dated: May 4, 2021.
Marietta Echeverria,
Acting Director, Registration Division, Office
of Pesticide Programs.
[FR Doc. 2021–09938 Filed 5–10–21; 8:45 am]
BILLING CODE 6560–50–P
FEDERAL RESERVE SYSTEM
Change in Bank Control Notices;
Acquisitions of Shares of a Bank or
Bank Holding Company
The notificants listed below have
applied under the Change in Bank
Control Act (Act) (12 U.S.C. 1817(j)) and
§ 225.41 of the Board’s Regulation Y (12
CFR 225.41) to acquire shares of a bank
or bank holding company. The factors
that are considered in acting on the
applications are set forth in paragraph 7
of the Act (12 U.S.C. 1817(j)(7)).
The public portions of the
applications listed below, as well as
other related filings required by the
Board, if any, are available for
immediate inspection at the Federal
Reserve Bank(s) indicated below and at
the offices of the Board of Governors.
This information may also be obtained
on an expedited basis, upon request, by
contacting the appropriate Federal
Reserve Bank and from the Board’s
Freedom of Information Office at
https://www.federalreserve.gov/foia/
request.htm. Interested persons may
express their views in writing on the
standards enumerated in paragraph 7 of
the Act.
Comments regarding each of these
applications must be received at the
Reserve Bank indicated or the offices of
the Board of Governors, Ann E.
Misback, Secretary of the Board, 20th
Street and Constitution Avenue NW,
Washington DC 20551–0001, not later
than May 26, 2021.
A. Federal Reserve Bank of Chicago
(Colette A. Fried, Assistant Vice
President) 230 South LaSalle Street,
Chicago, Illinois 60690–1414:
1. The Vanguard Group, Inc.,
Malvern, Pennsylvania; on behalf of
itself, its subsidiaries and affiliates,
including investment companies
registered under the Investment
Company Act of 1940, other pooled
investment vehicles, and institutional
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accounts that are sponsored, managed,
or advised by Vanguard; to acquire
additional voting shares of First
Midwest Bancorp, Inc., and thereby
indirectly acquire additional voting
shares of First Midwest Bank, both of
Chicago, Illinois.
2. The Cheryl Foote Groenendyke
Trust No. 1, Cheryl Foote Groenendyke,
as trustee, Inky Investments, L.C., Cheryl
Foote Groenendyke, as manager, the
Richard A. Groenendyke, Jr. Revocable
Trust, and Richard A. Groenendyke Jr.,
as trustee, all of Tulsa, Oklahoma; the
Shingleton Family Limited Partnership,
Bradford Shingleton and Barbara Foote
Shingleton, as general partners, and
Rebecca Shingleton, all of Boston,
Massachusetts; the Donkersloot-Foote
Family Trust, Darci Foote and John
Donkersloot, as co-trustees, all of
Brighton, Michigan; the Foote
Shingleton 2004 Irrevocable Trust,
Kenneth J. Foote, as trustee, the Kenneth
J. Foote Trust No. 1, Kenneth J. Foote,
as trustee, Alexander Kirby Foote, Lark
Allison Foote, Juliet Ann Foote, and
Blythe Esther Foote, all of Okemos,
Michigan; Foote Capital, LLC, Susan
Foote and Stephen L. Feinberg, as comanagers, all of El Paso, Texas, and
Kenneth J. Foote, also a co-manager,
Okemos, Michigan; the Kenneth J. Foote
Trust No. 2, Amy A. Payne, as cotrustee, both of Okemos, Michigan, and
Iris Foote, Howell, Michigan, and
Charlotte Fitzpatrick, Souderton,
Pennsylvania, both co-trustees of the
aforementioned trust; the BFS 2020
Delaware Trust, First Republic Bank of
Delaware, as trustee, both of
Wilmington, Delaware, and Barbara
Foote Shingleton, Investment Direction
Adviser, Boston, Massachusetts; the
Rhonda Foote Judy Michigan Asset
Trust, Rhonda Foote Judy, as trustee,
both of Houston, Texas; the Mamie M.
Foote Trust No. 1, Mamie M. Foote, as
trustee, both of Golden Oaks, Florida;
Charlotte Lynne Fitzpatrick, Souderton,
Pennsylvania; Benjamin Aaron Foote,
Chicago, Illinois; Jennifer Ewing,
Chestnut Hill, Massachusetts; Iris Foote,
Howell, Michigan, and Elizabeth
Glomsrud, Rancho Santa Fe, California;
all to become members of the Foote
Family Control Group, a group acting in
concert, to retain the voting shares of
First National Bancshares, Inc., and
thereby indirectly retain voting shares of
First National Bank of America, both
East Lansing, Michigan.
25865
FEDERAL RESERVE SYSTEM
[Docket No. OP–1747]
Proposed Guidelines for Evaluating
Account and Services Requests
Board of Governors of the
Federal Reserve System.
ACTION: Notice; request for comment.
AGENCY:
The Board of Governors of the
Federal Reserve System (Board) is
requesting comment on proposed
guidelines (Account Access Guidelines)
to evaluate requests for accounts and
services at Federal Reserve Banks
(Reserve Banks).
DATES: Comments on the proposed
changes must be received on or before
July 12, 2021.
ADDRESSES: You may submit comments,
identified by Docket No. OP–1747, by
any of the following methods:
• Agency Website: https://www.federal
reserve.gov. Follow the instructions for
submitting comments at https://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm.
• Email: regs.comments@
federalreserve.gov. Include docket
number in the subject line of the
message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Ann E. Misback, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551.
All public comments are available
from the Board’s website at
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons or
to remove personally identifiable
information at the commenter’s request.
Accordingly, comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper in Room 146, 1709 New York
Avenue NW, Washington, DC 20006,
between 9:00 a.m. and 5:00 p.m. on
weekdays.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
[FR Doc. 2021–09944 Filed 5–10–21; 8:45 am]
Jason Hinkle, Assistant Director (202–
912–7805), Division of Reserve Bank
Operations and Payment Systems, or
Sophia Allison, Senior Special Counsel
(202–452–3565) or Gavin Smith, Senior
Counsel (202–872–7578), Legal
Division, Board of Governors of the
Federal Reserve System. For users of
Telecommunications Device for the Deaf
(TDD) only, please contact 202–263–
4869.
BILLING CODE P
SUPPLEMENTARY INFORMATION:
Board of Governors of the Federal Reserve
System, May 6, 2021.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
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Federal Register / Vol. 86, No. 89 / Tuesday, May 11, 2021 / Notices
I. Background
The Board of Governors of the Federal
Reserve System (Board) is considering
adopting guidelines (Account Access
Guidelines) to be used by Federal
Reserve Banks (Reserve Banks) in
evaluating requests for master accounts
and/or access to Federal Reserve Bank
financial services (accounts and
services). The Board’s approach to this
proposal reflects its analysis of 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
Board’s proposed guidelines are also
intended to ensure that Reserve Banks
evaluate a transparent and consistent set
of factors when reviewing requests for
accounts and services (access requests).
The payments landscape is evolving
rapidly as technological progress and
other factors are leading to both the
introduction of new financial products
and services and to different ways of
providing traditional banking services
(i.e., payments, deposit-taking, and
lending). Relatedly, there has been a
recent uptick in novel charter types
being authorized or considered across
the country and, as a result, the Reserve
Banks are receiving an increasing
number of inquiries and requests for
access to accounts and services from
novel institutions.
Although the Reserve Banks have
received such inquiries on an
exceptional basis in the past, the Board
now believes, given the increase in the
number and novelty of such inquiries,
that a more transparent and consistent
approach to such requests should be
adopted by the Reserve Banks. Given
that access decisions made by
individual Reserve Banks can have
implications for a wide array of Federal
Reserve System (Federal Reserve)
policies and objectives, a structured,
transparent, and detailed framework for
evaluating access requests would benefit
the financial system broadly. Such a
framework would also help foster
consistent evaluation of access requests,
from both risk and policy perspectives,
across all twelve Reserve Banks.
To help achieve the goal of applying
a transparent and consistent process for
all access requests, the Board is
proposing guidelines for the Reserve
Banks to evaluate such requests. The
proposed account access guidelines
contain six principles that would
support consistency in approach and
decision-making across Reserve Banks
while maintaining Reserve Bank
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discretionary authority to grant or deny
requests. Accordingly, the proposed
guidelines would reduce the potential
for forum shopping across Reserve
Banks and mitigate the risk that
individual decisions by Reserve Banks
could create de facto System policy for
a particular business model or risk
profile. These risk-focused guidelines
would also promote more consistent
implementation for eligible institutions
with similar risk profiles.
The proposed account access
guidelines are centered on a foundation
of risk management and mitigation. In
developing the proposed guidelines, the
Board considered the risks that may
arise when an institution gains access to
accounts and services. These risks
include, among others, risks to the
Reserve Banks, to the payment system,
to the financial system, and to the
effective implementation of monetary
policy.
The introduction to the proposed
guidelines discusses the Federal
Reserve’s broad policy goals when
providing accounts and services as well
as the reasons for proposing to issue the
account access guidelines. In addition,
the introduction provides that while the
guidelines are designed primarily for
new access requests, Reserve Banks
should also apply the guidelines to
existing account and services
relationships when a Reserve Bank
becomes aware of a significant change
in the risks that the account holder
presents due to changes in the nature of
its principal business activities,
condition, etc.
The proposed account access
guidelines identify potential risks and
prompt the Reserve Bank to identify risk
mitigation strategies adopted by the
institution (including capital, risk
frameworks, compliance with
regulations, and supervision) and by the
Reserve Bank (including account
agreement provisions, restrictions on
financial services accessed, account risk
controls, and denial of access requests).
The first principle specifies that only
institutions that are legally eligible for
accounts and services are in scope, and
the remaining five principles are
designed to address 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).1 The Board is
considering whether it may in the future
1 The proposed guidelines are designed as a risk
management framework and, as such, the principles
focus on risks an institution’s access could pose.
The Board notes, however, that an institution’s
access could have net benefits to the financial
system that are not a focus of the risk management
framework.
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be useful to clarify the interpretation of
legal eligibility under the Federal
Reserve Act for a Federal Reserve
account and services.
For each of these principles, the
proposed guidelines identify factors that
Reserve Banks should consider when
evaluating an institution against the
specific risk targeted by the pringciple
(several factors are pertinent to more
than one principle). The identified
factors are commonly used in the
regulation and supervision of federallyinsured institutions. When applying the
account access guidelines the Reserve
Bank should incorporate, to the extent
possible, the assessments of an
institution by state and/or federal
supervisors into its independent
assessment of the institution’s risk
profile. Given that the proposed
guidelines utilize factors broadly
applied to federally-insured institutions,
the Board anticipates the application of
the guidelines to access requests by
federally-insured institutions would be
fairly straightforward in most cases.
Reserve Bank assessments of access
requests from non-federally-insured
institutions, however, may require more
extensive due diligence.
Currently, Reserve Bank risk
management practices include
monitoring the condition of institutions
with accounts and services on an
ongoing basis using supervisory ratings,
capitalization data, and other
supplementary information. Reserve
Banks use this process to determine
whether risk controls or other
restrictions should be placed on an
institution’s account. For example, the
process is used to determine if an
institution continues to remain eligible
for primary credit. The Board
anticipates that, if the proposed
guidelines are adopted, Reserve Banks
would use the guidelines to re-evaluate
the risks posed by an institution in cases
where these condition-monitoring
activities indicate potential changes in
the institution’s risk profile.
II. Proposed Guidelines
Guidelines Covering Access to Accounts
and Services at Federal Reserve Banks
(Account Access Guidelines)
The Board of Governors of the Federal
Reserve System (Board) has adopted
account access guidelines comprised of
six principles to be used by Federal
Reserve Banks (Reserve Banks) in
evaluating requests for master accounts
and access to Federal Reserve Bank
financial services (access requests).2 3
2 As discussed in the Federal Reserve’s Operating
Circular No. 1, an institution has the option to settle
its Federal Reserve financial services transactions in
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The account access guidelines apply to
requests from all institutions that are
legally eligible to receive an account or
services, as discussed in more detail in
the first principle.4
The Federal Reserve System’s
(Federal Reserve) approach to providing
institutions with accounts and services
depends on, among other things,
whether the institution is legally eligible
to obtain an account and on the Federal
Reserve’s policy goals of ensuring the
safety and soundness of the banking
system, effectively implementing
monetary policy, promoting financial
stability, protecting consumers, and
promoting a safe, effective, efficient,
accessible and innovative payment
system. The Board believes it is
important to make clear that legal
eligibility does not bestow a right to
obtain an account and services. While
decisions regarding individual access
requests remain at the discretion of the
individual Reserve Banks, the Board
believes it is important that the Reserve
Banks apply a consistent set of
guidelines when reviewing such access
requests to promote consistent outcomes
across Reserve Banks and to facilitate
equitable treatment across institutions.
These account access guidelines also
serve to inform requestors of the factors
that a Reserve Bank will review in any
access request and thereby allow
requestors to make any enhancements to
its risk management, documentation, or
other practices, as the case may be, to
attempt to demonstrate how it meets
each of these factors for review.
These guidelines broadly outline
considerations for evaluating access
requests but are not intended to provide
assurance that any specific institution
will be granted an account and services.
The individual Reserve Bank will
evaluate each access request on a caseby-case basis. When applying these
account access guidelines, the Reserve
Bank should incorporate to the extent
possible the assessments of an
institution by state and/or federal
its master account with a Reserve Bank or in the
master account of another institution that has
agreed to act as its Correspondent. These principles
apply to requests for either arrangement.
3 Reserve Bank financial services mean all
services subject to Federal Reserve Act, section 11A
(‘‘priced services’’) and Reserve Bank cash services.
Financial services do not include transactions
conducted as part of the Federal Reserve’s open
market operations or administration of the Reserve
Banks’ Discount Window.
4 These principles would not apply to accounts
provided under fiscal agency authority or to
accounts authorized pursuant to the Board’s
Regulation N (12 CFR 214), joint account requests,
or account requests from designated financial
market utilities, since existing rules or policies
already set out the considerations involved in
granting these types of accounts.
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supervisors into its independent
analysis of the institution’s risk profile.
The evaluation of an institution’s access
request should also consider whether
the request has the potential to set a
precedent that could affect the Federal
Reserve’s ability to achieve its policy
goals now or in the future.
If the Reserve Bank decides to grant
an access request, it may impose (at the
time of account opening, granting access
to service, or any time thereafter)
obligations relating to, or conditions or
limitations on, use of the account or
services as necessary to limit
operational, credit, legal, or other risks
posed to the Reserve Banks, the
payment system, financial stability or
the implementation of monetary policy
or to address other considerations.5 The
account-holding Reserve Bank may, at
its discretion, decide to place additional
risk management controls on the
account and services, such as real-time
monitoring of account balances, as it
may deem necessary to mitigate risks. If
the obligations, limitations, or controls
are ineffective in mitigating the risks
identified or if the obligations,
limitations, or controls are breached, the
account-holding Reserve Bank may
further restrict the institution’s use of
accounts and services or may close the
account. Establishment of an account
and provision of services by a Reserve
Bank under these guidelines is not an
endorsement or approval by the Federal
Reserve of the institution. Nothing in
the Board’s guidelines relieves any
institution from compliance with
obligations imposed by the institution’s
supervisors and regulators.
Accordingly, Reserve Banks should
evaluate how each institution requesting
an account and services will meet the
following principles.6 Each principle
identifies factors that Reserve Banks
should consider when evaluating an
institution against the specific risk
targeted by the principle (several factors
are pertinent to more than one
principle). The identified factors are
commonly used in the regulation and
supervision of federally-insured
institutions. As a result, the Board
anticipates the application of the
account access guidelines to access
5 The conditions imposed could include, but are
not limited to, paying a different rate of interest on
balances held in the account, limiting the amount
of balances on which interest is paid, or
establishing a cap on the amount of balances held
in the account.
6 The principles are designed to address risks
posed by an institution having access to an account
and services, ranging from narrow risks (e.g., to an
individual Reserve Bank) to broader risks (e.g., to
the overall economy). Review activities performed
by the Reserve Bank may address several principles
at once.
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requests by federally-insured
institutions will be fairly
straightforward in most cases. However,
Reserve Bank assessments of access
requests from non-federally insured
institutions may require more extensive
due diligence.
Reserve Banks monitor and analyze
the condition of institutions with
accounts and services on an ongoing
basis. Reserve Banks should use the
guidelines to re-evaluate the risks posed
by an institution in cases where its
condition monitoring and analysis
indicate potential changes in the risk
profile of an institution, including a
significant change to the institution’s
business model.
1. Each institution requesting an
account or services must be eligible
under the Federal Reserve Act or other
federal statute to maintain an account at
a Federal Reserve Bank (Reserve Bank)
and receive Federal Reserve services
and should have a well-founded, clear,
transparent, and enforceable legal basis
for its operations.7
a. Unless otherwise specified by
federal statute, only those entities that
are member banks or meet the definition
of a depository institution under section
19(b) of the Federal Reserve Act are
legally eligible to obtain Federal Reserve
accounts and financial services.8
b. The Reserve Bank should assess the
consistency of the institution’s activities
and services with applicable laws and
regulations, such as Article 4A of the
Uniform Commercial Code and the
Electronic Fund Transfer Act. The
Reserve Bank should also consider
whether the design of the institution’s
services would impede compliance by
the institution’s customers with U.S.
sanction programs, Bank Secrecy Act
(BSA) and anti-money-laundering
(AML) requirements or regulations, or
consumer protection laws and
regulations.
2. Provision of an account and
services to an institution should not
present or create undue credit,
operational, settlement, cyber or other
risks to the Reserve Bank.
7 These principles do not apply to accounts
provided by a Reserve Bank as depository and fiscal
agent for the Treasury and for certain governmentsponsored entities (12 U.S.C. 391, 393–95, 1823,
1435) as well as to accounts provided to certain
international organizations (22 U.S.C. 285d, 286d,
290o-3, 290i-5, 290l-3), to designated financial
market utilities (12 U.S.C. 5465), pursuant to the
Board’s Regulation N (12 CFR 214), or to the
Board’s Guidelines for Evaluating Joint Account
Requests.
8 These principles apply to account requests from
member banks or other entities that meet the
definition of a depository institution under section
19(b), as well as Edge and Agreement corporations
(12 U.S.C. 601–604a, 611–631), and branches and
agencies of foreign banks (12 U.S.C. 347d).
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a. The Reserve Bank should
incorporate, to the extent possible, the
assessments of an institution by state
and/or federal supervisors into its
independent assessment of the
institution’s risk profile.
b. The Reserve Bank should confirm
that the institution has an effective risk
management framework and governance
arrangements to ensure that the
institution operates in a safe and sound
manner, during both normal conditions
and periods of idiosyncratic and market
stress.
i. For these purposes, effective risk
management includes having a robust
framework, including policies,
procedures, systems, and qualified staff,
to manage applicable risks. The
framework should at a minimum
identify, measure, and control the
particular risks posed by the
institution’s business lines, products
and services. The effectiveness of the
framework should be further supported
by internal testing and internal audit
reviews.
ii. The framework should be subject to
oversight by a board of directors (or
similar body) as well as oversight by
state and/or federal banking
supervisor(s).
iii. The framework should clearly
identify all risks that may arise related
to the institution’s business (e.g., legal,
credit, liquidity, operational, custody,
investment) as well as objectives
regarding the risk tolerances for the
management of such risks.
c. The Reserve Bank should confirm
that the institution is in substantial
compliance with its supervisory
agency’s regulatory and supervisory
requirements.
d. The institution must, in the Reserve
Bank’s judgment:
i. Demonstrate an ability to comply,
were it to obtain a master account, with
Board orders and policies, Reserve Bank
agreements and operating circulars, and
other applicable Federal Reserve
requirements.
ii. Be in sound financial condition,
including maintaining adequate capital
to continue as a going concern and to
meet its current and projected operating
expenses under a range of scenarios.
iii. Demonstrate the ability, on an
ongoing basis (including during periods
of idiosyncratic or market stress), to
meet all of its obligations in order to
remain a going concern and comply
with its agreement for a Reserve Bank
account and services, including by
maintaining:
A. Sufficient liquid resources to meet
its obligations to the Reserve Bank
under applicable agreements, operating
circulars, and Board policies;
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B. The operational capacity to ensure
that such liquid resources are available
to satisfy all such obligations to the
Reserve Bank on a timely basis; and
C. Settlement processes designed to
appropriately monitor balances in its
Reserve Bank account on an intraday
basis, to process transactions through its
account in an orderly manner and
maintain/achieve a positive account
balance before the end of the business
day.
iv. Have in place an operational risk
framework designed to ensure
operational resiliency against events
associated with processes, people, and
systems that may impair the
institution’s use and settlement of
Reserve Bank services. This framework
should consider internal and external
factors, including operational risks
inherent in the institution’s business
model, risks that might arise in
connection with its use of any Reserve
Bank account and services, and cyberrelated risks. At a minimum, the
operational risk framework should:
A. Identify the range of operational
risks presented by the institution’s
business model (e.g., cyber
vulnerability, operational failure,
resiliency of service providers), and
establish sound operational risk
management objectives to address such
risks;
B. Establish sound governance
arrangements, rules, and procedures to
oversee and implement the operational
risk management framework;
C. Establish clear and appropriate
rules and procedures to carry out the
risk management objectives;
D. Employ the resources necessary to
achieve its risk management objectives
and implement effectively its rules and
procedures, including, but not limited
to, sound processes for physical and
information security, internal controls,
compliance, program management,
incident management, business
continuity, audit, and well-qualified
personnel; and
E. Support compliance with the
electronic access requirements,
including security measures, outlined in
the Reserve Banks’ Operating Circular 5
and its supporting documentation.
3. Provision of an account and
services to an institution should not
present or create undue credit, liquidity,
operational, settlement, cyber or other
risks to the overall payment system.
a. The Reserve Bank should
incorporate, to the extent possible, the
assessments of an institution by state
and/or federal supervisors into its
independent assessment of the
institution’s risk profile.
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b. The Reserve Bank should confirm
that the institution has an effective risk
management framework and governance
arrangements to limit the impact that
idiosyncratic stress, disruptions,
outages, cyber incidents or other
incidents at the institution might have
on other institutions and the payment
system broadly. The framework should
include:
i. Clearly defined operational
reliability objectives and policies and
procedures in place to achieve those
objectives.
ii. A business continuity plan that
addresses events that have the potential
to disrupt operations and a resiliency
objective to ensure the institution can
resume services in a reasonable
timeframe.
iii. Policies and procedures for
identifying risks that external parties
may pose to sound operations,
including interdependencies with
affiliates, service providers, and others.
c. The Reserve Bank should identify
actual and potential interactions
between the institution’s use of a
Reserve Bank account and services and
(other parts of) the payment system.
i. The extent to which the institution’s
use of a Reserve Bank account and
services might restrict funds from being
available to support the liquidity needs
of other institutions should also be
considered.
d. The institution must, in the Reserve
Bank’s judgment:
i. Be in sound financial condition,
including maintaining adequate capital
to continue as a going concern and to
meet its current and projected operating
expenses under a range of scenarios.
ii. Demonstrate the ability, on an
ongoing basis (including during periods
of idiosyncratic or market stress), to
meet all of its obligations in order to
remain a going concern and comply
with its agreement for a Reserve Bank
account and services, including by
maintaining:
A. Sufficient liquid resources to meet
its obligations to the Reserve Bank
under applicable agreements, Operating
Circulars, and Board policies;
B. The operational capacity to ensure
that such liquid resources are available
to satisfy all such obligations to the
Reserve Bank on a timely basis; and
C. Settlement processes designed to
appropriately monitor balances in its
Reserve Bank account on an intraday
basis, to process transactions through its
account in an orderly manner and
maintain/achieve a positive account
balance before the end of the business
day.
iii. Have in place an operational risk
framework designed to ensure
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operational resiliency against events
associated with processes, people, and
systems that may impair the
institution’s payment system activities.
This framework should consider
internal and external factors, including
operational risk inherent in the
institution’s business model, risk that
might arise in connection with its use of
the payment system, and cyber-related
risks. At a minimum, the framework
should:
A. Identify the range of operational
risks presented by the institution’s
business model (e.g., cyber
vulnerability, operational failure,
resiliency of service providers), and
establish sound operational riskmanagement objectives;
B. Establish sound governance
arrangements, rules, and procedures to
oversee the operational risk
management framework;
C. Establish clear and appropriate
rules and procedures to carry out the
risk management objectives;
D. Employ the resources necessary to
achieve its risk management objectives
and implement effectively its rules and
procedures, including, but not limited
to, sound processes for physical and
information security, internal controls,
compliance, program management,
incident management, business
continuity, audit, and well-qualified
personnel.
4. Provision of an account and
services to an institution should not
create undue risk to the stability of the
U.S. financial system.
a. The Reserve Bank should
incorporate, to the extent possible, the
assessments of an institution by state
and/or federal supervisors into its
independent assessment of the
institution’s risk profile.
b. The Reserve Bank should
determine, in coordination with the
other Reserve Banks and Board, whether
the access to an account and services by
an institution itself or a group of like
institutions could introduce financial
stability risk to the U.S. financial
system.
c. The Reserve Bank should confirm
that the institution has an effective risk
management framework and governance
arrangements for managing liquidity,
credit, and other risks that may arise in
times of financial or economic stress.
d. The Reserve Bank should consider
the extent to which, especially in times
of financial or economic stress, liquidity
or other strains at the institution may be
transmitted to other segments of the
financial system.
e. The Reserve Bank should consider
the extent to which, especially during
times of financial or economic stress,
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Jkt 253001
access to an account and services by an
institution itself (or a group of like
institutions) could affect deposit
balances across U.S. financial
institutions more broadly and whether
any resulting movements in deposit
balances could have a deleterious effect
on U.S. financial stability.
i. Balances held in Reserve Bank
accounts are high-quality liquid assets,
making them very attractive in times of
financial or economic stress. For
example, in times of stress, investors
that would otherwise provide short-term
funding to nonfinancial firms, financial
firms, and state and local governments
could rapidly withdraw that funding
and instead deposit their funds with an
institution holding mostly central bank
balances. If the institution is not subject
to capital requirements similar to a
federally-insured institution, the
potential for sudden and significant
deposit inflows into that institution is
particularly large, which could
disintermediate other parts of the
financial system, greatly amplifying
stress.
5. Provision of an account and
services to an institution should not
create undue risk to the overall
economy by facilitating activities such
as money laundering, terrorism
financing, fraud, cybercrimes, or other
illicit activity.
a. The Reserve Bank should
incorporate, to the extent possible, the
assessments of an institution by state
and/or federal supervisors into its
independent assessment of the
institution’s risk profile.
b. The Reserve Bank should confirm
that the institution has an anti-moneylaundering program consistent with the
requirements in 31 CFR 1020.210(b) and
complies with the Office of Foreign
Asset Control (OFAC) regulations at 31
CFR Chapter V.
i. For these purposes, the Reserve
Bank should confirm that these
compliance programs contain the
following elements:
A. A system of internal controls,
including policies and procedures, to
ensure ongoing BSA/AML and OFAC
compliance, including regular written
risk assessments to identify, analyze and
address the risks the institution faces,
policies, procedures, and an effective
transaction-monitoring system;
B. Independent audit and testing of
BSA/AML and OFAC compliance;
C. Senior management commitment to
BSA/AML and OFAC compliance,
including, at a minimum: (a) The
designation of a specific person or
persons responsible for managing BSA/
AML and OFAC compliance, including
the employment of an experienced BSA/
PO 00000
Frm 00033
Fmt 4703
Sfmt 4703
25869
AML and OFAC compliance officer; (b)
senior management review and approval
of the institution’s BSA/AML and OFAC
compliance programs; (c) the
institution’s compliance staff has
sufficient authority and autonomy to
deploy policies and procedures in a
manner that effectively controls the
institution’s BSA/AML and OFAC risk;
and (d) senior management taking, and
demonstrating that it will continue to
take, steps to ensure that the
institution’s compliance unit receives
adequate resources;
D. Ongoing training for appropriate
personnel with a scope that is
appropriate for the products and
services the institution offers; and
E. Processes that allow for a riskbased classification of its customer base,
including risk-based procedures for
conducting ongoing customer due
diligence.
6. Provision of an account and
services to an institution should not
adversely affect the Federal Reserve’s
ability to implement monetary policy.
a. The Reserve Bank should
incorporate, to the extent possible, the
assessments of an institution by state
and/or federal supervisors into its
independent assessment of the
institution’s risk profile.
b. The Reserve Bank should
determine, in coordination with the
other Reserve Banks and the Board,
whether access to an account and
services by an institution itself or a
group of like institutions could have an
effect on the implementation of
monetary policy.
c. The Reserve Bank should consider,
among other things, whether access to a
Reserve Bank account and services by
the institution could affect the level and
variability of the demand for and supply
of reserves, the level and volatility of
key policy interest rates, the structure of
key short-term funding markets, and on
the overall size of the consolidated
balance sheet of the Reserve Banks. The
Reserve Bank should consider the
implications of providing an account to
the institution in normal times as well
as in times of stress. This consideration
should occur regardless of the current
monetary policy implementation
framework in place.
III. Request for Comment
The Board requests comment on all
aspects of the proposed account access
guidelines, including: (1) Whether the
scope and application of the proposed
guidance are sufficiently clear and
appropriate to achieve their intended
purpose; and (2) suggesting/identifying
other criteria or information that
commenters believe may be relevant to
E:\FR\FM\11MYN1.SGM
11MYN1
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Federal Register / Vol. 86, No. 89 / Tuesday, May 11, 2021 / Notices
evaluate accounts and services requests
under the proposed guidance. The
Board further seeks comment
specifically on the following aspects of
the proposed guidance:
1. Do the proposed account access
guidelines address all the risks that
would be relevant to the Federal
Reserve’s policy goals?
2. Does the level of specificity in each
principle provide sufficient clarity and
transparency about how the Reserve
Banks will evaluate requests?
3. Do the proposed account access
guidelines support responsible financial
innovation?
Finally, the Board also seeks comment
on whether the Board or the Reserve
Banks should consider other steps or
actions to facilitate the review of
requests for accounts and services in a
consistent and equitable manner.
By order of the Board of Governors of the
Federal Reserve System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2021–09873 Filed 5–10–21; 8:45 am]
BILLING CODE P
FEDERAL RESERVE SYSTEM
Change in Bank Control Notices;
Acquisitions of Shares of a Bank or
Bank Holding Company
The notificants listed below have
applied under the Change in Bank
Control Act (Act) (12 U.S.C. 1817(j)) and
§ 225.41 of the Board’s Regulation Y (12
CFR 225.41) to acquire shares of a bank
or bank holding company. The factors
that are considered in acting on the
applications are set forth in paragraph 7
of the Act (12 U.S.C. 1817(j)(7)).
The public portions of the
applications listed below, as well as
other related filings required by the
Board, if any, are available for
immediate inspection at the Federal
Reserve Bank(s) indicated below and at
the offices of the Board of Governors.
This information may also be obtained
on an expedited basis, upon request, by
contacting the appropriate Federal
Reserve Bank and from the Board’s
Freedom of Information Office at
https://www.federalreserve.gov/foia/
request.htm. Interested persons may
express their views in writing on the
standards enumerated in paragraph 7 of
the Act.
Comments regarding each of these
applications must be received at the
Reserve Bank indicated or the offices of
the Board of Governors, Ann E.
Misback, Secretary of the Board, 20th
Street and Constitution Avenue NW,
VerDate Sep<11>2014
17:13 May 10, 2021
Jkt 253001
Washington DC 20551–0001, not later
than May 26, 2021.
A. Federal Reserve Bank of Dallas
(Karen Smith, Director, Applications)
2200 North Pearl Street, Dallas, Texas
75201–2272:
1. The Vanguard Group, Inc.,
Malvern, Pennsylvania; on behalf of
itself, its subsidiaries and affiliates,
including investment companies
registered under the Investment
Company Act of 1940, other pooled
investment vehicles, and institutional
accounts that are sponsored, managed,
or advised by Vanguard; to acquire
additional voting shares of Prosperity
Bancshares, Inc., Houston, Texas, and
thereby indirectly acquire additional
voting shares of Prosperity Bank, El
Campo, Texas.
B. Federal Reserve Bank of New York
(Ivan Hurwitz, Senior Vice President) 33
Liberty Street, New York, New York
10045–0001. Comments can also be sent
electronically to
Comments.applications@ny.frb.org:
1. The Vanguard Group, Inc.,
Malvern, Pennsylvania; on behalf of
itself, its subsidiaries and affiliates,
including investment companies
registered under the Investment
Company Act of 1940, other pooled
investment vehicles, and institutional
accounts that are sponsored, managed,
or advised by Vanguard; to acquire
additional voting shares of Community
Bank System, Inc., DeWitt, New York,
and thereby indirectly acquire
additional voting shares of Community
Bank, National Association, Canton,
New York.
C. Federal Reserve Bank of San
Francisco (Sebastian Astrada, Director,
Applications) 101 Market Street, San
Francisco, California 94105–1579:
1. The Vanguard Group, Inc.,
Malvern, Pennsylvania; on behalf of
itself, its subsidiaries and affiliates,
including investment companies
registered under the Investment
Company Act of 1940, other pooled
investment vehicles, and institutional
accounts that are sponsored, managed,
or advised by Vanguard; to acquire
additional voting shares of Westamerica
Bancorporation, and thereby indirectly
acquire voting shares of Westamerica
Bank, both of San Rafael, California.
D. Federal Reserve Bank of Kansas
City (Jeffrey Imgarten, Assistant Vice
President) 1 Memorial Drive, Kansas
City, Missouri 64198–0001:
1. The Frank L. Bruning
Nonqualifying Trust Share (‘‘FL Bruning
Trust’’), Fred D. Bruning, Bruning,
Nebraska, and Jane A. Tonniges,
Omaha, Nebraska, as co-trustees, and
the Mary B. Bruning Revocable Trust
(‘‘MB Bruning Trust’’), Mary B. Bruning,
PO 00000
Frm 00034
Fmt 4703
Sfmt 4703
as co-trustee, both of Bruning, Nebraska;
to retain voting shares of Bruning
Bancshares, Inc., and indirectly retain
voting shares of Bruning Bank, both of
Bruning, Nebraska. Additionally, the
Jane A. Tonniges Revocable Trust, Jane
A Tonniges, as trustee, and Christopher
Tonniges, all of Omaha, Nebraska; the
Fred D. Bruning 2020 Irrevocable Trust,
Penni J. Bruning, trustee, both of
Bruning, Nebraska, and Dennis C. Stara,
special purpose trustee, Lincoln,
Nebraska; Adam F. Bruning, Hebron,
Nebraska; Reiss L. Bruning, Bruning,
Nebraska; and Dennis C. Stara, Lincoln,
Nebraska; with the FL Bruning Trust
and the MB Bruning Trust, to join the
Bruning Family Group, a group acting in
concert, to retain voting shares of
Bruning Bancshares, Inc., and indirectly
retain voting shares of Bruning Bank.
Board of Governors of the Federal Reserve
System, May 5, 2021.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
[FR Doc. 2021–09880 Filed 5–10–21; 8:45 am]
BILLING CODE P
FEDERAL TRADE COMMISSION
Agency Information Collection
Activities; Submission for OMB
Review; Comment Request
AGENCY:
Federal Trade Commission
(FTC).
ACTION:
Notice and request for comment.
The FTC requests that the
Office of Management and Budget
(OMB) extend for three years the current
Paperwork Reduction Act (PRA)
clearance for information collection
requirements contained in the
Commission’s rules and regulations
under the Textile Fiber Products
Identification Act (Textile Rules). That
clearance expires on May 31, 2021.
DATES: Comments must be received by
June 10, 2021.
ADDRESSES: Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to www.reginfo.gov/public/do/
PRAMain. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. The reginfo.gov web
link is a United States Government
website produced by OMB and the
General Services Administration (GSA).
Under PRA requirements, OMB’s Office
of Information and Regulatory Affairs
(OIRA) reviews Federal information
collections.
SUMMARY:
E:\FR\FM\11MYN1.SGM
11MYN1
]]>Agencies
[Federal Register Volume 86, Number 89 (Tuesday, May 11, 2021)]
[Notices]
[Pages 25865-25870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09873]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
[Docket No. OP-1747]
Proposed Guidelines for Evaluating Account and Services Requests
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice; request for comment.
-----------------------------------------------------------------------
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is requesting comment on proposed guidelines (Account Access
Guidelines) to evaluate requests for accounts and services at Federal
Reserve Banks (Reserve Banks).
DATES: Comments on the proposed changes must be received on or before
July 12, 2021.
ADDRESSES: You may submit comments, identified by Docket No. OP-1747,
by any of the following methods:
Agency Website: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Email: [email protected]. Include docket
number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
All public comments are available from the Board's website at
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons or to remove personally
identifiable information at the commenter's request. Accordingly,
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper in Room 146, 1709 New York Avenue NW, Washington, DC 20006,
between 9:00 a.m. and 5:00 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Jason Hinkle, Assistant Director (202-
912-7805), Division of Reserve Bank Operations and Payment Systems, or
Sophia Allison, Senior Special Counsel (202-452-3565) or Gavin Smith,
Senior Counsel (202-872-7578), Legal Division, Board of Governors of
the Federal Reserve System. For users of Telecommunications Device for
the Deaf (TDD) only, please contact 202-263-4869.
SUPPLEMENTARY INFORMATION:
[[Page 25866]]
I. Background
The Board of Governors of the Federal Reserve System (Board) is
considering adopting guidelines (Account Access Guidelines) to be used
by Federal Reserve Banks (Reserve Banks) in evaluating requests for
master accounts and/or access to Federal Reserve Bank financial
services (accounts and services). The Board's approach to this proposal
reflects its analysis of 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 Board's proposed guidelines are also
intended to ensure that Reserve Banks evaluate a transparent and
consistent set of factors when reviewing requests for accounts and
services (access requests).
The payments landscape is evolving rapidly as technological
progress and other factors are leading to both the introduction of new
financial products and services and to different ways of providing
traditional banking services (i.e., payments, deposit-taking, and
lending). Relatedly, there has been a recent uptick in novel charter
types being authorized or considered across the country and, as a
result, the Reserve Banks are receiving an increasing number of
inquiries and requests for access to accounts and services from novel
institutions.
Although the Reserve Banks have received such inquiries on an
exceptional basis in the past, the Board now believes, given the
increase in the number and novelty of such inquiries, that a more
transparent and consistent approach to such requests should be adopted
by the Reserve Banks. Given that access decisions made by individual
Reserve Banks can have implications for a wide array of Federal Reserve
System (Federal Reserve) policies and objectives, a structured,
transparent, and detailed framework for evaluating access requests
would benefit the financial system broadly. Such a framework would also
help foster consistent evaluation of access requests, from both risk
and policy perspectives, across all twelve Reserve Banks.
To help achieve the goal of applying a transparent and consistent
process for all access requests, the Board is proposing guidelines for
the Reserve Banks to evaluate such requests. The proposed account
access guidelines contain six principles that would support consistency
in approach and decision-making across Reserve Banks while maintaining
Reserve Bank discretionary authority to grant or deny requests.
Accordingly, the proposed guidelines would reduce the potential for
forum shopping across Reserve Banks and mitigate the risk that
individual decisions by Reserve Banks could create de facto System
policy for a particular business model or risk profile. These risk-
focused guidelines would also promote more consistent implementation
for eligible institutions with similar risk profiles.
The proposed account access guidelines are centered on a foundation
of risk management and mitigation. In developing the proposed
guidelines, the Board considered the risks that may arise when an
institution gains access to accounts and services. These risks include,
among others, risks to the Reserve Banks, to the payment system, to the
financial system, and to the effective implementation of monetary
policy.
The introduction to the proposed guidelines discusses the Federal
Reserve's broad policy goals when providing accounts and services as
well as the reasons for proposing to issue the account access
guidelines. In addition, the introduction provides that while the
guidelines are designed primarily for new access requests, Reserve
Banks should also apply the guidelines to existing account and services
relationships when a Reserve Bank becomes aware of a significant change
in the risks that the account holder presents due to changes in the
nature of its principal business activities, condition, etc.
The proposed account access guidelines identify potential risks and
prompt the Reserve Bank to identify risk mitigation strategies adopted
by the institution (including capital, risk frameworks, compliance with
regulations, and supervision) and by the Reserve Bank (including
account agreement provisions, restrictions on financial services
accessed, account risk controls, and denial of access requests). The
first principle specifies that only institutions that are legally
eligible for accounts and services are in scope, and the remaining five
principles are designed to address 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).\1\ The Board is
considering whether it may in the future be useful to clarify the
interpretation of legal eligibility under the Federal Reserve Act for a
Federal Reserve account and services.
---------------------------------------------------------------------------
\1\ The proposed guidelines are designed as a risk management
framework and, as such, the principles focus on risks an
institution's access could pose. The Board notes, however, that an
institution's access could have net benefits to the financial system
that are not a focus of the risk management framework.
---------------------------------------------------------------------------
For each of these principles, the proposed guidelines identify
factors that Reserve Banks should consider when evaluating an
institution against the specific risk targeted by the pringciple
(several factors are pertinent to more than one principle). The
identified factors are commonly used in the regulation and supervision
of federally-insured institutions. When applying the account access
guidelines the Reserve Bank should incorporate, to the extent possible,
the assessments of an institution by state and/or federal supervisors
into its independent assessment of the institution's risk profile.
Given that the proposed guidelines utilize factors broadly applied to
federally-insured institutions, the Board anticipates the application
of the guidelines to access requests by federally-insured institutions
would be fairly straightforward in most cases. Reserve Bank assessments
of access requests from non-federally-insured institutions, however,
may require more extensive due diligence.
Currently, Reserve Bank risk management practices include
monitoring the condition of institutions with accounts and services on
an ongoing basis using supervisory ratings, capitalization data, and
other supplementary information. Reserve Banks use this process to
determine whether risk controls or other restrictions should be placed
on an institution's account. For example, the process is used to
determine if an institution continues to remain eligible for primary
credit. The Board anticipates that, if the proposed guidelines are
adopted, Reserve Banks would use the guidelines to re-evaluate the
risks posed by an institution in cases where these condition-monitoring
activities indicate potential changes in the institution's risk
profile.
II. Proposed Guidelines
Guidelines Covering Access to Accounts and Services at Federal Reserve
Banks (Account Access Guidelines)
The Board of Governors of the Federal Reserve System (Board) has
adopted account access guidelines comprised of six principles to be
used by Federal Reserve Banks (Reserve Banks) in evaluating requests
for master accounts and access to Federal Reserve Bank financial
services (access requests).2 3
[[Page 25867]]
The account access guidelines apply to requests from all institutions
that are legally eligible to receive an account or services, as
discussed in more detail in the first principle.\4\
---------------------------------------------------------------------------
\2\ As discussed in the Federal Reserve's Operating Circular No.
1, an institution has the option to settle its Federal Reserve
financial services transactions in its master account with a Reserve
Bank or in the master account of another institution that has agreed
to act as its Correspondent. These principles apply to requests for
either arrangement.
\3\ Reserve Bank financial services mean all services subject to
Federal Reserve Act, section 11A (``priced services'') and Reserve
Bank cash services. Financial services do not include transactions
conducted as part of the Federal Reserve's open market operations or
administration of the Reserve Banks' Discount Window.
\4\ These principles would not apply to accounts provided under
fiscal agency authority or to accounts authorized pursuant to the
Board's Regulation N (12 CFR 214), joint account requests, or
account requests from designated financial market utilities, since
existing rules or policies already set out the considerations
involved in granting these types of accounts.
---------------------------------------------------------------------------
The Federal Reserve System's (Federal Reserve) approach to
providing institutions with accounts and services depends on, among
other things, whether the institution is legally eligible to obtain an
account and on the Federal Reserve's policy goals of ensuring the
safety and soundness of the banking system, effectively implementing
monetary policy, promoting financial stability, protecting consumers,
and promoting a safe, effective, efficient, accessible and innovative
payment system. The Board believes it is important to make clear that
legal eligibility does not bestow a right to obtain an account and
services. While decisions regarding individual access requests remain
at the discretion of the individual Reserve Banks, the Board believes
it is important that the Reserve Banks apply a consistent set of
guidelines when reviewing such access requests to promote consistent
outcomes across Reserve Banks and to facilitate equitable treatment
across institutions.
These account access guidelines also serve to inform requestors of
the factors that a Reserve Bank will review in any access request and
thereby allow requestors to make any enhancements to its risk
management, documentation, or other practices, as the case may be, to
attempt to demonstrate how it meets each of these factors for review.
These guidelines broadly outline considerations for evaluating
access requests but are not intended to provide assurance that any
specific institution will be granted an account and services. The
individual Reserve Bank will evaluate each access request on a case-by-
case basis. When applying these account access guidelines, the Reserve
Bank should incorporate to the extent possible the assessments of an
institution by state and/or federal supervisors into its independent
analysis of the institution's risk profile. The evaluation of an
institution's access request should also consider whether the request
has the potential to set a precedent that could affect the Federal
Reserve's ability to achieve its policy goals now or in the future.
If the Reserve Bank decides to grant an access request, it may
impose (at the time of account opening, granting access to service, or
any time thereafter) obligations relating to, or conditions or
limitations on, use of the account or services as necessary to limit
operational, credit, legal, or other risks posed to the Reserve Banks,
the payment system, financial stability or the implementation of
monetary policy or to address other considerations.\5\ The account-
holding Reserve Bank may, at its discretion, decide to place additional
risk management controls on the account and services, such as real-time
monitoring of account balances, as it may deem necessary to mitigate
risks. If the obligations, limitations, or controls are ineffective in
mitigating the risks identified or if the obligations, limitations, or
controls are breached, the account-holding Reserve Bank may further
restrict the institution's use of accounts and services or may close
the account. Establishment of an account and provision of services by a
Reserve Bank under these guidelines is not an endorsement or approval
by the Federal Reserve of the institution. Nothing in the Board's
guidelines relieves any institution from compliance with obligations
imposed by the institution's supervisors and regulators.
---------------------------------------------------------------------------
\5\ The conditions imposed could include, but are not limited
to, paying a different rate of interest on balances held in the
account, limiting the amount of balances on which interest is paid,
or establishing a cap on the amount of balances held in the account.
---------------------------------------------------------------------------
Accordingly, Reserve Banks should evaluate how each institution
requesting an account and services will meet the following
principles.\6\ Each principle identifies factors that Reserve Banks
should consider when evaluating an institution against the specific
risk targeted by the principle (several factors are pertinent to more
than one principle). The identified factors are commonly used in the
regulation and supervision of federally-insured institutions. As a
result, the Board anticipates the application of the account access
guidelines to access requests by federally-insured institutions will be
fairly straightforward in most cases. However, Reserve Bank assessments
of access requests from non-federally insured institutions may require
more extensive due diligence.
---------------------------------------------------------------------------
\6\ The principles are designed to address risks posed by an
institution having access to an account and services, ranging from
narrow risks (e.g., to an individual Reserve Bank) to broader risks
(e.g., to the overall economy). Review activities performed by the
Reserve Bank may address several principles at once.
---------------------------------------------------------------------------
Reserve Banks monitor and analyze the condition of institutions
with accounts and services on an ongoing basis. Reserve Banks should
use the guidelines to re-evaluate the risks posed by an institution in
cases where its condition monitoring and analysis indicate potential
changes in the risk profile of an institution, including a significant
change to the institution's business model.
1. Each institution requesting an account or services must be
eligible under the Federal Reserve Act or other federal statute to
maintain an account at a Federal Reserve Bank (Reserve Bank) and
receive Federal Reserve services and should have a well-founded, clear,
transparent, and enforceable legal basis for its operations.\7\
---------------------------------------------------------------------------
\7\ These principles do not apply to accounts provided by a
Reserve Bank as depository and fiscal agent for the Treasury and for
certain government-sponsored entities (12 U.S.C. 391, 393-95, 1823,
1435) as well as to accounts provided to certain international
organizations (22 U.S.C. 285d, 286d, 290o-3, 290i-5, 290l-3), to
designated financial market utilities (12 U.S.C. 5465), pursuant to
the Board's Regulation N (12 CFR 214), or to the Board's Guidelines
for Evaluating Joint Account Requests.
---------------------------------------------------------------------------
a. Unless otherwise specified by federal statute, only those
entities that are member banks or meet the definition of a depository
institution under section 19(b) of the Federal Reserve Act are legally
eligible to obtain Federal Reserve accounts and financial services.\8\
---------------------------------------------------------------------------
\8\ These principles apply to account requests from member banks
or other entities that meet the definition of a depository
institution under section 19(b), as well as Edge and Agreement
corporations (12 U.S.C. 601-604a, 611-631), and branches and
agencies of foreign banks (12 U.S.C. 347d).
---------------------------------------------------------------------------
b. The Reserve Bank should assess the consistency of the
institution's activities and services with applicable laws and
regulations, such as Article 4A of the Uniform Commercial Code and the
Electronic Fund Transfer Act. The Reserve Bank should also consider
whether the design of the institution's services would impede
compliance by the institution's customers with U.S. sanction programs,
Bank Secrecy Act (BSA) and anti-money-laundering (AML) requirements or
regulations, or consumer protection laws and regulations.
2. Provision of an account and services to an institution should
not present or create undue credit, operational, settlement, cyber or
other risks to the Reserve Bank.
[[Page 25868]]
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should confirm that the institution has an
effective risk management framework and governance arrangements to
ensure that the institution operates in a safe and sound manner, during
both normal conditions and periods of idiosyncratic and market stress.
i. For these purposes, effective risk management includes having a
robust framework, including policies, procedures, systems, and
qualified staff, to manage applicable risks. The framework should at a
minimum identify, measure, and control the particular risks posed by
the institution's business lines, products and services. The
effectiveness of the framework should be further supported by internal
testing and internal audit reviews.
ii. The framework should be subject to oversight by a board of
directors (or similar body) as well as oversight by state and/or
federal banking supervisor(s).
iii. The framework should clearly identify all risks that may arise
related to the institution's business (e.g., legal, credit, liquidity,
operational, custody, investment) as well as objectives regarding the
risk tolerances for the management of such risks.
c. The Reserve Bank should confirm that the institution is in
substantial compliance with its supervisory agency's regulatory and
supervisory requirements.
d. The institution must, in the Reserve Bank's judgment:
i. Demonstrate an ability to comply, were it to obtain a master
account, with Board orders and policies, Reserve Bank agreements and
operating circulars, and other applicable Federal Reserve requirements.
ii. Be in sound financial condition, including maintaining adequate
capital to continue as a going concern and to meet its current and
projected operating expenses under a range of scenarios.
iii. Demonstrate the ability, on an ongoing basis (including during
periods of idiosyncratic or market stress), to meet all of its
obligations in order to remain a going concern and comply with its
agreement for a Reserve Bank account and services, including by
maintaining:
A. Sufficient liquid resources to meet its obligations to the
Reserve Bank under applicable agreements, operating circulars, and
Board policies;
B. The operational capacity to ensure that such liquid resources
are available to satisfy all such obligations to the Reserve Bank on a
timely basis; and
C. Settlement processes designed to appropriately monitor balances
in its Reserve Bank account on an intraday basis, to process
transactions through its account in an orderly manner and maintain/
achieve a positive account balance before the end of the business day.
iv. Have in place an operational risk framework designed to ensure
operational resiliency against events associated with processes,
people, and systems that may impair the institution's use and
settlement of Reserve Bank services. This framework should consider
internal and external factors, including operational risks inherent in
the institution's business model, risks that might arise in connection
with its use of any Reserve Bank account and services, and cyber-
related risks. At a minimum, the operational risk framework should:
A. Identify the range of operational risks presented by the
institution's business model (e.g., cyber vulnerability, operational
failure, resiliency of service providers), and establish sound
operational risk management objectives to address such risks;
B. Establish sound governance arrangements, rules, and procedures
to oversee and implement the operational risk management framework;
C. Establish clear and appropriate rules and procedures to carry
out the risk management objectives;
D. Employ the resources necessary to achieve its risk management
objectives and implement effectively its rules and procedures,
including, but not limited to, sound processes for physical and
information security, internal controls, compliance, program
management, incident management, business continuity, audit, and well-
qualified personnel; and
E. Support compliance with the electronic access requirements,
including security measures, outlined in the Reserve Banks' Operating
Circular 5 and its supporting documentation.
3. Provision of an account and services to an institution should
not present or create undue credit, liquidity, operational, settlement,
cyber or other risks to the overall payment system.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should confirm that the institution has an
effective risk management framework and governance arrangements to
limit the impact that idiosyncratic stress, disruptions, outages, cyber
incidents or other incidents at the institution might have on other
institutions and the payment system broadly. The framework should
include:
i. Clearly defined operational reliability objectives and policies
and procedures in place to achieve those objectives.
ii. A business continuity plan that addresses events that have the
potential to disrupt operations and a resiliency objective to ensure
the institution can resume services in a reasonable timeframe.
iii. Policies and procedures for identifying risks that external
parties may pose to sound operations, including interdependencies with
affiliates, service providers, and others.
c. The Reserve Bank should identify actual and potential
interactions between the institution's use of a Reserve Bank account
and services and (other parts of) the payment system.
i. The extent to which the institution's use of a Reserve Bank
account and services might restrict funds from being available to
support the liquidity needs of other institutions should also be
considered.
d. The institution must, in the Reserve Bank's judgment:
i. Be in sound financial condition, including maintaining adequate
capital to continue as a going concern and to meet its current and
projected operating expenses under a range of scenarios.
ii. Demonstrate the ability, on an ongoing basis (including during
periods of idiosyncratic or market stress), to meet all of its
obligations in order to remain a going concern and comply with its
agreement for a Reserve Bank account and services, including by
maintaining:
A. Sufficient liquid resources to meet its obligations to the
Reserve Bank under applicable agreements, Operating Circulars, and
Board policies;
B. The operational capacity to ensure that such liquid resources
are available to satisfy all such obligations to the Reserve Bank on a
timely basis; and
C. Settlement processes designed to appropriately monitor balances
in its Reserve Bank account on an intraday basis, to process
transactions through its account in an orderly manner and maintain/
achieve a positive account balance before the end of the business day.
iii. Have in place an operational risk framework designed to ensure
[[Page 25869]]
operational resiliency against events associated with processes,
people, and systems that may impair the institution's payment system
activities. This framework should consider internal and external
factors, including operational risk inherent in the institution's
business model, risk that might arise in connection with its use of the
payment system, and cyber-related risks. At a minimum, the framework
should:
A. Identify the range of operational risks presented by the
institution's business model (e.g., cyber vulnerability, operational
failure, resiliency of service providers), and establish sound
operational risk-management objectives;
B. Establish sound governance arrangements, rules, and procedures
to oversee the operational risk management framework;
C. Establish clear and appropriate rules and procedures to carry
out the risk management objectives;
D. Employ the resources necessary to achieve its risk management
objectives and implement effectively its rules and procedures,
including, but not limited to, sound processes for physical and
information security, internal controls, compliance, program
management, incident management, business continuity, audit, and well-
qualified personnel.
4. Provision of an account and services to an institution should
not create undue risk to the stability of the U.S. financial system.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should determine, in coordination with the
other Reserve Banks and Board, whether the access to an account and
services by an institution itself or a group of like institutions could
introduce financial stability risk to the U.S. financial system.
c. The Reserve Bank should confirm that the institution has an
effective risk management framework and governance arrangements for
managing liquidity, credit, and other risks that may arise in times of
financial or economic stress.
d. The Reserve Bank should consider the extent to which, especially
in times of financial or economic stress, liquidity or other strains at
the institution may be transmitted to other segments of the financial
system.
e. The Reserve Bank should consider the extent to which, especially
during times of financial or economic stress, access to an account and
services by an institution itself (or a group of like institutions)
could affect deposit balances across U.S. financial institutions more
broadly and whether any resulting movements in deposit balances could
have a deleterious effect on U.S. financial stability.
i. Balances held in Reserve Bank accounts are high-quality liquid
assets, making them very attractive in times of financial or economic
stress. For example, in times of stress, investors that would otherwise
provide short-term funding to nonfinancial firms, financial firms, and
state and local governments could rapidly withdraw that funding and
instead deposit their funds with an institution holding mostly central
bank balances. If the institution is not subject to capital
requirements similar to a federally-insured institution, the potential
for sudden and significant deposit inflows into that institution is
particularly large, which could disintermediate other parts of the
financial system, greatly amplifying stress.
5. Provision of an account and services to an institution should
not create undue risk to the overall economy by facilitating activities
such as money laundering, terrorism financing, fraud, cybercrimes, or
other illicit activity.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should confirm that the institution has an
anti-money-laundering program consistent with the requirements in 31
CFR 1020.210(b) and complies with the Office of Foreign Asset Control
(OFAC) regulations at 31 CFR Chapter V.
i. For these purposes, the Reserve Bank should confirm that these
compliance programs contain the following elements:
A. A system of internal controls, including policies and
procedures, to ensure ongoing BSA/AML and OFAC compliance, including
regular written risk assessments to identify, analyze and address the
risks the institution faces, policies, procedures, and an effective
transaction-monitoring system;
B. Independent audit and testing of BSA/AML and OFAC compliance;
C. Senior management commitment to BSA/AML and OFAC compliance,
including, at a minimum: (a) The designation of a specific person or
persons responsible for managing BSA/AML and OFAC compliance, including
the employment of an experienced BSA/AML and OFAC compliance officer;
(b) senior management review and approval of the institution's BSA/AML
and OFAC compliance programs; (c) the institution's compliance staff
has sufficient authority and autonomy to deploy policies and procedures
in a manner that effectively controls the institution's BSA/AML and
OFAC risk; and (d) senior management taking, and demonstrating that it
will continue to take, steps to ensure that the institution's
compliance unit receives adequate resources;
D. Ongoing training for appropriate personnel with a scope that is
appropriate for the products and services the institution offers; and
E. Processes that allow for a risk-based classification of its
customer base, including risk-based procedures for conducting ongoing
customer due diligence.
6. Provision of an account and services to an institution should
not adversely affect the Federal Reserve's ability to implement
monetary policy.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should determine, in coordination with the
other Reserve Banks and the Board, whether access to an account and
services by an institution itself or a group of like institutions could
have an effect on the implementation of monetary policy.
c. The Reserve Bank should consider, among other things, whether
access to a Reserve Bank account and services by the institution could
affect the level and variability of the demand for and supply of
reserves, the level and volatility of key policy interest rates, the
structure of key short-term funding markets, and on the overall size of
the consolidated balance sheet of the Reserve Banks. The Reserve Bank
should consider the implications of providing an account to the
institution in normal times as well as in times of stress. This
consideration should occur regardless of the current monetary policy
implementation framework in place.
III. Request for Comment
The Board requests comment on all aspects of the proposed account
access guidelines, including: (1) Whether the scope and application of
the proposed guidance are sufficiently clear and appropriate to achieve
their intended purpose; and (2) suggesting/identifying other criteria
or information that commenters believe may be relevant to
[[Page 25870]]
evaluate accounts and services requests under the proposed guidance.
The Board further seeks comment specifically on the following aspects
of the proposed guidance:
1. Do the proposed account access guidelines address all the risks
that would be relevant to the Federal Reserve's policy goals?
2. Does the level of specificity in each principle provide
sufficient clarity and transparency about how the Reserve Banks will
evaluate requests?
3. Do the proposed account access guidelines support responsible
financial innovation?
Finally, the Board also seeks comment on whether the Board or the
Reserve Banks should consider other steps or actions to facilitate the
review of requests for accounts and services in a consistent and
equitable manner.
By order of the Board of Governors of the Federal Reserve
System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2021-09873 Filed 5-10-21; 8:45 am]
BILLING CODE P
