Guidelines for Evaluating Account and Services Requests, 51099-51110 [2022-17885]
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Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices
Exempt ESBT Trust, John Ross, as
trustee, the Sandra K. Ross 2021 GSTExempt ESBT Trust, Sandra Stinson, as
trustee, John W. Ross and Missy Ross,
James Szopinski, Community National
Bank f/b/o Jeffrey Stinson IRA, all of
Milan, Tennessee; and Barry Jones,
Trenton, Tennessee; a group acting in
concert to acquire and retain voting
shares of Hometown Bancorp, Inc., and
thereby indirectly acquire and retain
voting shares of The Bank of Milan, both
of Milan, Tennessee.
Board of Governors of the Federal Reserve
System.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
[FR Doc. 2022–17824 Filed 8–18–22; 8:45 am]
BILLING CODE P
FEDERAL RESERVE SYSTEM
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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 September 6, 2022.
A. Federal Reserve Bank of Chicago
(Colette A. Fried, Assistant Vice
President) 230 South LaSalle Street,
Chicago, Illinois 60690–1414:
1. The Revocable Trust Agreement
No. 060134, James O. Beavers, trustee,
both of Taylorville, Illinois; to retain
voting shares of First Bancorp of
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18:26 Aug 18, 2022
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Taylorville, Inc., and thereby indirectly
retain voting shares of First National
Bank in Taylorville, both of Taylorville,
Illinois.
B. Federal Reserve Bank of
Minneapolis (Chris P. Wangen,
Assistant Vice President), 90 Hennepin
Avenue, Minneapolis, Minnesota
55480–0291. Comments can also be sent
electronically to MA@mpls.frb.org:
1. Tyler Engstrom, Westhope, North
Dakota; to acquire voting shares of
Peoples State Holding Company
(Company), and thereby indirectly
acquire voting shares of Peoples State
Bank (Bank), both of Westhope, North
Dakota. Additionally, Tyler Engstrom;
Curtis Moum, Westhope, North Dakota;
and Darin Bohl, Bottineau, North
Dakota, as a group acting in concert, to
acquire voting shares of Company and
thereby indirectly acquire voting shares
of Bank.
Board of Governors of the Federal Reserve
System.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
[FR Doc. 2022–17925 Filed 8–18–22; 8:45 am]
BILLING CODE P
FEDERAL RESERVE SYSTEM
[Docket No. OP–1747]
Guidelines for Evaluating Account and
Services Requests
Board of Governors of the
Federal Reserve System.
ACTION: Final guidance.
AGENCY:
The Board of Governors of the
Federal Reserve System (Board) has
approved final guidelines (Account
Access Guidelines) for Federal Reserve
Banks (Reserve Banks) to utilize in
evaluating requests for access to Reserve
Bank master accounts and services
(accounts and services).
DATES: Implementation Date is August
19, 2022.
FOR FURTHER INFORMATION CONTACT:
Jason Hinkle, Assistant Director (202–
912–7805), Division of Reserve Bank
Operations and Payment Systems, or
Gavin Smith, Senior Counsel (202–452–
3474), Legal Division, Board of
Governors of the Federal Reserve
System. For users of TTY–TRS, please
call 711 from any telephone, anywhere
in the United States.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
The payments landscape is evolving
rapidly as technological progress and
other factors are leading both to the
introduction of new financial products
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51099
and services and to different ways of
providing traditional banking services.
Relatedly, there has been a recent uptick
in novel charter types being authorized
or considered by federal and state
banking authorities across the country.
As a result, the Reserve Banks are
receiving an increasing number of
inquiries and access requests from
institutions that have obtained, or are
considering obtaining, such novel
charter types.
A. Summary of May 2021 Proposed
Account Access Guidelines
On May 5, 2021, the Board requested
comment on proposed guidelines to be
used by Reserve Banks in evaluating
requests for accounts and services
(Original Proposal or Proposed
Guidelines).1 2 The Original 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
Original Proposal was also intended to
ensure that Reserve Banks apply a
transparent and consistent set of factors
when reviewing requests for access to
accounts and services (access requests).3
The Original Proposal consisted of the
following six principles:
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 Reserve Bank and
receive Federal Reserve services and should
have a well-founded, clear, transparent, and
enforceable legal basis for its operations.
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.
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.
4. Provision of an account and services to
an institution should not create undue risk to
the stability of the U.S. financial system.
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.
1 86
FR 25865 (May 11, 2021).
Proposed Guidelines are designed to be
applied to both new and pending access requests as
well as cases where the Reserve Bank determines
to reevaluate the risk of existing accounts. This
broad application is intended to ensure that risks
are identified and mitigated and that institutions
are treated in a fair and equitable manner.
3 In developing the Account Access Guidelines,
the Board sought to incorporate as much as possible
existing Reserve Bank risk management practices.
2 The
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6. Provision of an account and services to
an institution should not adversely affect the
Federal Reserve’s ability to implement
monetary policy.
The first principle specified that only
institutions that are legally eligible for
access to Reserve Bank accounts and
services would be considered for access.
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).4 For each of
these five principles, the Original
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). The
identified factors are commonly used in
the regulation and supervision of
federally-insured institutions and many
of the factors are utilized in existing
Reserve Bank risk management
practices. The Original Proposal noted
that requests from non-federally-insured
institutions would generally be subject
to a greater level of review. In addition,
the Board noted that, when applying the
Account Access Guidelines, the Reserve
Bank reviewing the access request
should integrate to the extent possible
the assessments of the requesting
institution by its state and/or federal
supervisors into the Reserve Bank’s own
independent assessment of the
institution’s risk profile.
The Board intended for the Original
Proposal to support consistency in
evaluating account access requests
across Reserve Banks, while
maintaining the discretion granted to
the Reserve Banks under the Federal
Reserve Act to grant or deny access
requests. The Board noted in the
Original Proposal that a consistent
framework across Reserve Banks would
reduce the potential that one Reserve
Bank might be considered to be more
likely to grant access requests than
another Reserve Bank and would
mitigate the risk that an individual
access request decision by one Reserve
Bank could create de facto Federal
Reserve System policy regarding access
requests for a particular business model
or risk profile.
The Original Proposal was based on a
foundation of risk management and
mitigation. In developing the Original
Proposal, the Board considered the risks
that may arise when an institution gains
4 The six principles were designed primarily as a
risk management framework and, as such, focused
on risks an institution’s access could pose. The
Board notes, however, that granting an access
request could also have net benefits to the financial
system.
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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 Original Proposal would
prompt the Reserve Bank to evaluate an
eligible institution’s risk profile and
identify risk-mitigation strategies
adopted by the eligible institution
(including capital, risk management
frameworks, compliance with
regulations, and supervision) as well as
potential risk mitigants that could be
implemented by the Reserve Bank
(including account agreement
provisions, restrictions on financial
services accessed, and account risk
controls).
In the Original Proposal, the Board
expressed the Federal Reserve’s broad
policy goals in providing accounts and
services. In addition, the Board stated
that, while the Proposed Guidelines
would be intended primarily to apply to
new access requests, Reserve Banks
would also apply them to existing
account and services relationships
where appropriate, such as when a
Reserve Bank becomes aware of a
significant increase in the risks that an
account holder presents due to changes
in the nature of, for example, its
principal business activities or
condition.
The Board requested comment on all
aspects of the Original Proposal,
including whether the scope and
application of the Proposed Guidelines
was sufficiently clear and appropriate to
achieve their intended purpose. The
Board also requested comment on
whether other criteria or information
might be relevant when Reserve Banks
evaluate access requests. The Board
further sought comment specifically on
the following aspects of the Original
Proposal:
1. Do the Proposed 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 Guidelines support
responsible financial innovation?
Finally, the Board sought comment on
whether the Board or the Reserve Banks
should consider other steps or actions to
facilitate the review of access requests
in a consistent and equitable manner.
B. Summary of March 2022
Supplemental Notice
On March 1, 2022, the Board
published a second notice (the
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Supplemental Notice),5 which proposed
to incorporate into the Account Access
Guidelines a tiered review framework to
provide additional clarity on the level of
due diligence and scrutiny that Reserve
Banks would apply to different types of
institutions when applying the six riskbased principles.
In the Original Proposal, the
introductory text to the Account Access
Guidelines noted that the application of
the Guidelines to requests by federallyinsured institutions should be fairly
straightforward, while requests from
non-federally-insured institutions may
necessitate more extensive due
diligence. The Supplemental Notice
proposed a three-tiered review
framework—which would become
Section 2 of the Account Access
Guidelines—to provide additional
clarity regarding the minimum level of
review for different types of institutions.
Under the Supplemental Notice,
proposed Tier 1 would consist of
eligible institutions that are federallyinsured. These institutions are already
subject to a homogeneous and
comprehensive set of federal banking
regulations, and, in most cases, detailed
regulatory and financial information
about these firms would be readily
available to Reserve Banks. Accordingly,
the Supplemental Notice stated that
access requests by Tier 1 institutions
would generally be subject to a less
intensive and more streamlined review.6
In the Supplemental Notice, proposed
Tier 2 would consist of eligible
institutions that are not federallyinsured but that are subject to federal
prudential supervision at the institution
and, if applicable, at the holding
company level.7 The Supplemental
Notice explained that Tier 2 institutions
are subject to similar but not identical
regulations as federally-insured
institutions, and as a result, may present
greater risks than Tier 1 institutions.
Additionally, detailed regulatory and
financial information regarding Tier 2
institutions is less likely to be available
and may not be available in public form.
Accordingly, the Supplemental Notice
stated that access requests by Tier 2
institutions would generally receive an
intermediate level of review.
In the Supplemental Notice, proposed
Tier 3 would consist of eligible
5 87
FR 12957 (March 8, 2022).
Supplemental Notice stated that, in cases
where the application of the Guidelines to a Tier
1 institution identifies a potentially higher risk
profile, the institution would receive additional
attention.
7 The Supplemental Notice noted the Board
would expect holding companies of Tier 2
institutions to comply with similar requirements as
holding companies subject to the Bank Holding
Company Act.
6 The
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institutions that are not federally
insured and not subject to prudential
supervision by a federal banking agency
at the institution or holding company
level. The Supplemental Notice stated
that Tier 3 institutions may be subject
to a supervisory or regulatory
framework that is substantially different
from, and possibly weaker than, the
supervisory and regulatory framework
that applies to federally-insured
institutions, and as a result may pose
the highest level of risk. Detailed
regulatory and financial information
regarding Tier 3 institutions may not
exist or may be unavailable.
Accordingly, the Supplemental Notice
stated that access requests by Tier 3
institutions would generally receive the
strictest level of review.
The Board sought comment on all
aspects of the proposed three-tiered
review framework.
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II. Discussion
The Board is adopting final Account
Access Guidelines. Section 1 of the final
Account Access Guidelines is
substantially the same as the Original
Proposal with minor changes to improve
clarity in response to comments
received. As described further below,
the Board has made certain changes in
Section 2 of the final Account Access
Guidelines to provide more comparable
treatment between non-federallyinsured institutions chartered under
state and federal law. Specifically, the
Board has revised Tier 2 to include a
narrower set of non-federally-insured
national banks than the definition
proposed in the Supplemental Notice.8
Under the revised Tier 2, non-federallyinsured institutions that are chartered
under federal law will only be
considered in Tier 2 if the institution
has a holding company that is subject to
Federal Reserve oversight. In addition,
the Board is updating the Section 2
tiering framework to emphasize that the
review of institutions’ requests will be
completed on a case-by-case, riskfocused basis within each of the three
tiers.9 For example, Reserve Banks may
8 These revisions to Tier 2 apply only to nonfederally-insured institutions chartered under
federal law. Under the final Account Access
Guidelines, a non-federally-insured institution
chartered under state law will (consistent with the
Supplemental Notice) be considered in Tier 2 if (i)
the institution is subject to prudential supervision
by a federal banking agency, and (ii) to the extent
the institution has a holding company, that holding
company is subject to Federal Reserve oversight.
9 As described further below, the Board is making
some other minor updates to Section 2 of the
Account Access Guidelines, including clarifying
that Edge and Agreement Corporations and U.S.
branches and agencies of foreign banks would fall
under a Tier 2 level of review due to Federal
Reserve oversight over these institutions.
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take comparatively longer to review
access requests by institutions that
engage in novel activities for which
authorities are still developing
appropriate supervisory and regulatory
frameworks.
By adopting the final Account Access
Guidelines, the Board would establish a
transparent and equitable framework for
Reserve Banks to apply consistently to
access requests. To promote
consistency, the Reserve Banks are
working together, in consultation with
the Board, to expeditiously develop an
implementation plan for the final
Guidelines.
A. Comments on the Original Proposal
The Board received 46 individual
comment letters and 281 duplicate form
letters in response to the Original
Proposal. Nearly all of the comment
letters expressed general support for the
Proposed Guidelines, and most letters
also made recommendations for
improvements. Commenters represented
several types of institutions, including
(1) institutions with traditional charters,
such as banks and credit unions, and
their trade associations; (2) institutions
with novel charters, such as
cryptocurrency custody banks, and their
trade associations; and (3) think tanks
and non-profit advocacy groups. The
views expressed by the first category of
commenters often conflicted with the
views expressed by the second category
of commenters. The duplicate form
letters included recommendations that
mirrored those submitted by trade
associations for institutions with
traditional charters, which opposed
greater account access for institutions
with novel charters.
Many commenters provided general
comments on the Original Proposal that
addressed one or more of three highlevel themes: (1) policy requirements to
gain access to accounts and services; (2)
implementation of the Proposed
Guidelines; and (3) legal eligibility for
Reserve Bank accounts. Some
commenters made recommendations
related to the Proposed Guidelines that
did not fit into these themes and are
also described below. Lastly, some
commenters provided responses to the
specific questions posed in the Original
Proposal as well as comments on
specific principles in the Proposed
Guidelines.
1. Policy Requirements To Gain Access
to Accounts and Services
Most commenters, while supporting
the Proposed Guidelines, provided
recommendations for improvements to
the Guidelines that, in their view,
would assist the Board in achieving its
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stated policy goals. These
recommendations to amend the
Proposed Guidelines were often
conflicting.
Many commenters made
recommendations that would, in their
view, provide an easier path for
institutions, particularly those with
novel charters, to successfully gain
access to accounts and services. Some of
these commenters recommended that
the Board provide more specific
requirements for access requests, so that
requesting institutions, chartering
authorities, and other banking regulators
would have more clarity on what is
required for obtaining access to
accounts and services. Other
commenters stated that the Proposed
Guidelines may be ineffective if they are
implemented in a way that subjects
institutions with novel charters to
restrictions that resemble regulatory
requirements that do not fit their
business models. While some
commenters generally stated that
requirements for access to accounts and
services should accommodate
institutions that have different levels of
regulatory oversight, others suggested
that the Board establish charter-specific
requirements for account access. Some
commenters expressed concern about
the statement in the Original Proposal
that ‘‘access requests from nonfederally-insured institutions may
require more extensive due diligence,’’
suggesting that this position would stifle
innovation to the extent that it would
impose stricter requirements on statechartered institutions without federal
deposit insurance. Finally, some
commenters recommended that the
Board could mitigate the risks posed by
institutions with certain novel banking
charters by allowing such institutions to
maintain limited-access accounts that
would provide a subset of services
offered by Reserve Banks.
Many commenters, on the other hand,
recommended that the Proposed
Guidelines should provide a more
challenging path for institutions with
novel charters to gain access to accounts
and services. Many of these commenters
argued that the Proposed Guidelines
should subject non-federally-insured
institutions to the same types of
requirements as apply to federallyinsured depository institutions,
regardless of the institution’s business
model. These commenters generally
argued that institutions with novel
charters are not subject to the same
strict and costly regulations or to the
same rigorous reviews as apply to
traditional institutions, providing such
institutions with unfair advantages over
institutions with traditional charters.
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Some commenters recommended that
the Proposed Guidelines include more
granular and strict standards, such as
explicit capital and liquidity
requirements. Others recommended
additional requirements for account
access, such as compliance with the
Community Reinvestment Act and
consumer protection laws, or that
Reserve Banks consider the risks from
an institution’s affiliate relationships
and subject an institution’s holding
company to the Bank Holding Company
Act. Still other commenters suggested
that the Proposed Guidelines should
require all accountholders that do not
file call reports to publicly provide
periodic audited financial reports so
that payment system participants are
better able to assess counterparty risk.
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Board Response
The Board believes that the final
Account Access Guidelines provide a
framework that will effectively support
responsible innovation and prudent risk
management. The Account Access
Guidelines establish a consistent,
comprehensive, and transparent
framework for Reserve Banks to analyze
access requests on a case-by-case, riskfocused basis reflecting the institution’s
full risk profile (including its business
model, size, complexity, and regulatory
framework) and to mitigate, to the
extent possible, the risks identified.
Furthermore, as noted in the Original
Proposal, each requesting institution’s
risk management and governance
infrastructure is expected both to meet
existing regulatory and supervisory
requirements and to be sufficiently
tailored to the institution’s business, in
the Reserve Bank’s assessment, to
mitigate the risks identified by the
Account Access Guidelines.
As noted in the final Account Access
Guidelines, a Reserve Bank may
implement risk mitigants including
imposing conditions or restrictions on
an institution’s access to accounts and
services if necessary to mitigate risks set
forth in the Account Access Guidelines.
Reserve Banks also retain the discretion
to deny a request for access to accounts
and services where, in the Reserve
Bank’s assessment, granting access to
the institution would pose risks that
cannot be sufficiently mitigated.
2. Implementation of the Account
Access Guidelines
Many commenters provided
recommendations related to how the
Proposed Guidelines will be
implemented and how to promote
consistency in their application by
Reserve Banks. Some of these
commenters asked the Board to specify
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the mechanism(s) by which such
consistency would be achieved. Other
commenters went further, suggesting
that the Board should give consent and
non-objection to Reserve Bank accessrequest determinations, or that the
Board should form a centralized (i.e.,
Board-led) evaluation committee to
consider access requests. Further,
several commenters suggested various
avenues for increased communication
from Reserve Banks about their
decisions to grant or deny account
requests, including publishing decisions
on access requests (including any
supporting analysis), maintaining an upto-date list of all institutions that have
been granted access, and formally
communicating with state regulators
about how the Federal Reserve views
particular state charters. In addition,
many commenters recommended that
the Board establish timelines within
which Reserve Banks must grant or
deny access requests, arguing that such
timeliness would provide greater
transparency and give requesting
institutions more clarity on the
resources and time needed for the
evaluation process. One commenter
further argued that expectations of a
lengthy review process could discourage
institutions with novel charters from
requesting accounts and thus discourage
innovation.
Commenters expressed differing
opinions on whether a Reserve Bank
should conduct an independent
assessment of a requestor’s risk profile.
Some commenters suggested that a
Reserve Bank’s assessment of a
requestor’s risk profile should defer to
the primary regulator’s assessment of
the risks posed by the institution, while
others said the Board should ensure that
a Reserve Bank conduct an independent
risk assessment separate from that of the
institution’s primary regulator.
Additionally, a few commenters
suggested that the Board remove
language from the Proposed Guidelines
that recognizes the authority granted to
Reserve Banks under the Federal
Reserve Act to exercise discretion in
granting or denying requests for
accounts and services.
Many commenters argued that the
Proposed Guidelines should require
ongoing review of non-federally-insured
institutions, so as to appropriately
monitor the risks that such institutions,
and especially those with novel
charters, could pose after obtaining
access to accounts and services. Some
commenters singled out cyber risk as a
specific area for ongoing review.
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Board Response
In the final Account Access
Guidelines, the Board’s primary goal is
to establish a transparent and consistent
framework for all access requests across
Reserve Banks from both risk and policy
perspectives. To emphasize this goal,
the Board has incorporated in the
introduction to the final Account Access
Guidelines the expectation that Reserve
Banks engage in consultation with the
other Reserve Banks and the Board, as
appropriate, to support consistent
implementation of the Account Access
Guidelines. In further support of this
goal and as explained further below, the
Board has adopted a new Section 2 of
the Account Access Guidelines
establishing a tiered review framework
that provides additional guidance on the
level of due diligence and scrutiny to be
applied to access requests. Additionally,
as noted previously, the Reserve Banks
are working together, in consultation
with the Board, to expeditiously
develop an implementation plan for the
final Guidelines.
Regarding comments to disclose
information on particular requests, the
Board notes that when evaluating access
requests, Reserve Banks communicate
directly with the requestor and, in some
cases, with the institution’s primary
regulator, including by requesting
additional information, clarifying the
status of the request, and
communicating any controls or
limitations that might be placed on the
account and services. However, the
identity of institutions that maintain
accounts at Reserve Banks, or that
request access to accounts and services,
is considered confidential business
information and, as such, public
disclosure of account status by the
Reserve Banks would not be
appropriate.10
The Board has also considered
whether the final Account Access
Guidelines should include a timeline for
completing reviews of access requests
by Reserve Banks. The Board believes
that the nature of relevant variables in
access requests—including the variety
of charter types, business models,
regulatory regimes, and risk profiles—
precludes specification of a single
timeline. The Reserve Banks face
challenges in balancing the desire by
requestors for a specific timeline with
Reserve Banks’ need to perform
thorough reviews of requestors with
novel, complex, or high-risk business
plans, along with requestors that are
subject to novel regulatory regimes.
10 The Board notes that institutions may choose
to self-publicize their account and service requests
and status.
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Setting a specific timeline could result
in an increased number of premature or
unnecessary denials of access requests
in cases where the specified timeline
does not allow the Reserve Banks
sufficient time to understand the
intricacies of the requesting institutions’
risk profiles. Accordingly, the Board has
not adopted a timeline expectation in
the final Account Access Guidelines,
but the Board has added language to
emphasize the Board’s expectations for
Reserve Banks to coordinate in focusing
on both timeliness and consistency in
evaluating access requests.
The Board believes it is important that
Reserve Banks evaluate both the
potential risks posed by an eligible
institution’s access request and the
potential actions to mitigate such risks.
The final Account Access Guidelines
emphasize that a Reserve Bank should
integrate, to the extent possible, the
assessments of an institution by state
and/or federal supervisors into the
Reserve Bank’s independent assessment
of the institution’s risk profile. This
integration will ensure that Reserve
Banks use all relevant data in pursuing
the goal of prudent risk management.
The Board has also added language in
the final Account Access Guidelines
that clarifies the respective roles of the
Board (Reserve Bank oversight) and the
Reserve Banks (discretion in decision
making) with respect to evaluating
access requests.
With regard to the recommendation
for ongoing review of the risks posed by
non-federally-insured institutions’
access to accounts and services once an
access request has been granted, the
Board notes that the introduction to the
Account Access Guidelines includes
language discussing existing condition
monitoring practices. The Board
believes that the Reserve Banks’ existing
risk-management practices sufficiently
address the risks identified by these
comments without the need for an
explicit expectation in the Account
Access Guidelines for ongoing review of
non-federally-insured institutions.
3. Legal Eligibility
Some commenters requested that the
Guidelines more specifically address
legal eligibility for access to accounts
and services. Others presented
arguments about what entities are, or
should be, legally eligible for access to
accounts and services. Other
commenters suggested that the Board
should issue a moratorium on granting
access requests made by institutions
with novel charters until the Board
clarifies legal eligibility, that the Board
should publish a list of charter types
already deemed to be legally eligible, or
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that the Board should study account
access decisions by other central banks.
One commenter argued that the Board
should interpret the definition of a
‘‘depository institution’’ eligible for
access to accounts and services as
broadly as possible to support expanded
access to accounts and services, which
the commenter argued would support
financial innovation.
Several commenters recommended
that the Board should ensure that its
interpretation of legal eligibility
supports responsible financial
innovation as stated as a policy goal of
the Board. Some of these commenters
recommended that the Board review
legal eligibility broadly to support
innovation and expand eligibility. One
commenter recommended that the
Board decouple legal eligibility for a
Reserve Bank account from eligibility
for direct access to Federal Reserve
financial services. The commenter
argued that decoupling direct access to
services from eligibility for accounts
would have benefits for consumers and
pointed to other countries which have
taken such action.
Board Response
As the Board noted in the Original
Proposal, it has been considering
whether it may be useful to clarify the
interpretation of legal eligibility under
the Federal Reserve Act for access to
accounts and services. After a careful
analysis of this issue, the Board has
determined it is not necessary to do so
at this time. The Account Access
Guidelines do not establish a legal
eligibility standard, but the first
principle clearly states that institutions
must be eligible under the Federal
Reserve Act or other federal statute to
maintain an account at a Reserve Bank.
The Board believes this provides
sufficient clarity on what entities may
legally request access to account and
services, and the Reserve Banks will
continue to assess an institution’s legal
eligibility under Principle 1 on a caseby-case basis to ensure that only entities
that are legally eligible may request to
obtain such access.11
The Board notes that the purpose of
the Account Access Guidelines is to
ensure that Reserve Banks evaluate a
transparent and consistent set of riskfocused factors when reviewing account
requests. The Board is not expanding (or
limiting) the types of institutions that
11 While Reserve Banks exercise decision-making
authority with respect to access requests, the Board
has interpretive authority with respect to the
Federal Reserve Act and thus is responsible for
interpreting the provisions of the Act concerning
legal eligibility.
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51103
legally may request access to Reserve
Bank accounts and services.
4. Additional Comments
A. Comments Supporting a Ban on
Novel Charter Account Access
Some commenters suggested that
novel charters mix commercial and
financial activities and provide a ‘‘back
door entry’’ into banking for commercial
entities. These commenters
recommended that the Federal Reserve
not grant access requests from
institutions with novel charters.
Board Response
The Board does not believe that it is
appropriate to categorically exclude all
novel charters from access to accounts
and services. The Account Access
Guidelines as adopted are intended to
be applied by Reserve Banks to access
requests from eligible institutions with
both novel and more traditional
charters. The Board believes that the
final Account Access Guidelines will
provide a robust framework for
analyzing and mitigating risks.
B. Comments Opposing the Proposed
Guidelines
While most commenters supported
the Original Proposal, three commenters
opposed the Proposed Guidelines
entirely. One of these commenters
argued the Guidelines created opacity in
the master account process, not clarity.
Two other commenters opposed the
Proposal because, in their view, the
Proposed Guidelines would expand
access to accounts and services to
institutions with novel business models
that pose high levels of risk to the
payments and banking system.12
Board Response
The Board believes that the final
Account Access Guidelines provide
greater transparency and clarity than
currently exist on the factors that
Reserve Banks should consider in
evaluating access requests. The Board
also believes that the final Account
Access Guidelines strike an appropriate
balance between providing transparency
and allowing for implementation of the
Guidelines across a variety of potential
institutions that may request accounts
(e.g., institutions with differing charter
types, business models, or regulatory
regimes). The Board believes that the
final Account Access Guidelines create
a structured and sufficiently transparent
framework that will help to foster a
12 Many of these commenters pointed to ‘‘fintech’’
related business models and other novel special
purpose charters as posing heightened risk to the
payment system and financial markets.
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consistent evaluation of access requests
across all twelve Reserve Banks and will
benefit the financial system broadly.
In response to the comments related
to expansion of eligibility, the Board
emphasizes that, as noted previously,
the Account Access Guidelines do not
establish legal eligibility standards but
instead establish a risk-focused
framework for evaluating access
requests from legally eligible
institutions under federal law.
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C. Comments on Individual Principles
The Board received some comments
on individual principles in the Original
Proposal. Several commenters, while on
net supportive of Principle 4 (Financial
Stability) and Principle 6 (Monetary
Policy Implementation), suggested some
refinements, including a specification
that most ‘‘traditional’’ institutions, due
to their business model and size, would
not create risks to financial stability
and/or monetary policy
implementation. Other commenters
interpreted Principle 6 to suggest that
Reserve Banks, rather than the Board,
have the authority to establish the rate
of interest on reserve balances (IORB). A
few commenters expressed concern that
these principles would be challenging to
assess. Within this group, one
commenter opined that the Board
should adapt its monetary policy
practices to the economic reality created
by a competitive market rather than
embed a monetary policy principle in
the Guidelines. Finally, many
commenters commended the Board for
addressing these topics in the
Guidelines; some of these commenters
asked the Board to expand its
discussion of the potential negative
effects that granting account access to
institutions with novel charters could
have on financial stability and monetary
policy implementation.
Board Response
The Board recognizes the concerns
raised by commenters that the
principles focused on financial stability
and monetary policy implementation
deal with complex topics requiring
levels of analysis and precision that may
be challenging to address. For instance,
it will be difficult to forecast how
granting account access to a requesting
institution would affect the level and
variability of the demand for and supply
of reserves balances—which is
important to monetary policy
implementation. However, the Federal
Reserve is able to estimate the potential
risk posed by a requestor (such as the
risk that an institution might have large,
unpredictable swings in its account
balance) and whether existing tools can
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adequately mitigate those risks. The
Board also recognizes that some smaller
institutions with traditional charters
would likely not create risks to financial
stability or monetary policy
implementation. Nevertheless, the
Board has determined that both the
financial stability principle and the
monetary policy principle should
remain in the final Account Access
Guidelines, because they provide full
transparency to the public on the types
of factors Reserve Banks should
consider in evaluating access requests.
In addition, the Board has amended a
footnote in the Account Access
Guidelines to delete the language that a
few commenters interpreted to suggest
that Reserve Banks have the authority to
establish the IORB rate.
D. Comments on Specific Questions
As noted previously, the Original
Proposal posed three specific questions
and an additional open-ended question
to the public.
a. Question 1
The Board asked whether the
principles in the Proposed Guidelines
address all the risks that would be
relevant to the Federal Reserve’s policy
goals. Commenters generally agreed that
the risks identified in the Proposed
Guidelines are relevant for the Reserve
Banks to consider when evaluating
access requests. Many commenters
raised concerns, however, regarding the
ability of Reserve Banks to mitigate
these risks in the case of institutions
with novel charters that are not subject
to regulatory and supervisory oversight
that is similar to that applied to
federally-insured institutions. Some
commenters suggested that the Proposed
Guidelines should put greater emphasis
on consumer protection, particularly
consumer privacy, and on cybersecurity
risks.
Board Response
The Board notes that cybersecurity
risk is included in Principle 2 (Risk to
the Reserve Bank) and Principle 3 (Risk
to the Payment System) of the final
Account Access Guidelines as a factor
that Reserve Banks should consider in
their review of account requests. The
Board also notes that, while the Account
Access Guidelines do not specify
consumer protection as an accountrelated risk, Principle 1 (Legal
Eligibility) provides that Reserve Banks
should assess the extent to which an
institution’s activities and services
comply with applicable laws and
regulations, including those that address
consumer protection. Lastly, Section 2
of the final Account Access Guidelines
(discussed further below) provides
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additional guidance on the level of due
diligence expected by Reserve Banks for
requests from institutions that are not
subject to regulatory and supervisory
oversight similar to that applied to
federally-insured institutions.
b. Question 2
The Board asked whether the level of
specificity in each principle provides
sufficient clarity and transparency about
how the Reserve Banks will evaluate
requests. Many commenters addressing
Question 2 recommended that the Board
add more detail to the Proposed
Guidelines to increase the level of
clarity and transparency.
Board Response
The Board’s response to these
comments is described in Section II.A.
c. Question 3
The Board asked whether the
principles support responsible financial
innovation. Several commenters stated
that the Proposed Guidelines achieve a
balance between supporting responsible
financial innovation and managing the
identified risks by allowing for
flexibility to accommodate different
business models. Other commenters
expressed concern, however, that the
implementation of the Proposed
Guidelines could stifle innovation if
institutions were forced to comply with
rules and regulations that do not make
sense for their business model, size, or
complexity.
Board Response
The Board believes the final Account
Access Guidelines support risk-focused,
case-by-case review by Reserve Banks of
access requests. As such, the Board
believes the Account Access Guidelines
support responsible innovation by
balancing the provision of accounts and
services to a wide range of institutions
on the one hand and managing risks
related to such access on the other. This
is discussed in more detail in Section
II.A.
d. Question 4
The Board also requested comment on
whether the Board or the Reserve Banks
should consider other steps or actions to
facilitate the review of access requests
in a consistent and equitable manner.
As noted previously, commenters
provided a wide range of comments that
recommended potential improvements
to the Account Access Guidelines to
enhance their effectiveness.
Board Response
The Board addressed these comments
in Section II.A–C.
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E. Technical Changes
Principle 5 in the Account Access
Guidelines addresses the risks to the
overall economy. While the Board did
not receive specific comments on
Principle 5, it has made minor technical
changes to the language to ensure the
clarity and accuracy of the discussions
of institutions’ Bank Secrecy Act/AntiMoney Laundering (BSA/AML) and
Office of Foreign Assets Control (OFAC)
requirements and compliance programs.
The Board has also made other minor
technical edits to enhance the clarity of
the Guidelines (e.g., replacing the term
‘‘factors’’ with ‘‘principles’’ for
consistency and clarifying the risk-free
nature of Reserve Bank balances).
B. Comments on the Supplemental
Notice
The Board received 24 comment
letters on the Supplemental Notice.
While most commenters generally
expressed support for the proposed
tiering framework, four commenters
objected to the manner in which the
proposed tiering framework would treat
certain state-chartered institutions. A
different group of commenters
supported the tiering framework and
called for heightened scrutiny of nonfederally-insured depository institutions
that request Reserve Bank accounts.
Many commenters reiterated the
comments that they previously
submitted on the Original Proposal.13 In
particular, a number of commenters
recommended that non-federallyinsured institutions, particularly those
in Tier 3, not be granted access to
Reserve Bank accounts and services.
Additionally, one commenter, who
supported the tiering framework
generally, objected to Reserve Banks
subjecting institutions with existing
accounts to what the commenter termed
‘‘new standards’’ once the Board’s
Proposed Guidelines are made final.
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1. Treatment of State-Chartered
Institutions
Four commenters objected to the
manner in which the proposed tiering
framework would treat certain statechartered institutions. These
commenters principally argued that the
proposed tiering framework would (1)
result in disparate treatment of nonfederally-insured institutions with state
13 For example, many commenters restated
comments relating to legal eligibility for accounts
and services, while other commenters restated their
comment suggesting that non-federally-insured
institutions should receive accounts and services
only if they are subject to the same regulatory
framework as federally-insured institutions. The
Board addressed these comments in Section II.A,
supra.
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charters as compared to those with
federal charters; (2) undermine the dual
banking system; and (3) ignore the
strong prudential regulation that some
states have in place for non-federallyinsured institutions.
Broadly, this group of commenters
focused their concerns on the placement
of depository institutions in proposed
Tier 2 and Tier 3 while noting that they
viewed Tier 1 as proposed as equitable
and non-problematic. In particular,
these commenters expressed concerns
that non-federally-insured national trust
banks (NTBs) chartered by the Office of
the Comptroller of the Currency (OCC)
would receive preferential treatment
under the proposed guidelines and
asserted that many state-chartered trusts
are subject to robust prudential
regulations. They further argued that the
tiering framework erroneously implies
that NTBs are subject to a similar set of
regulations as federally-insured
institutions. Two of the commenters
further stated that their respective statechartered trust banks are subject to
robust regulation and supervision and
suggested that these institutions should
be subject to a less strict level of review
than the Board proposed.
Relatedly, these commenters argued
that the proposed tiering framework
would introduce a bias in favor of
federally-chartered institutions
compared to state-chartered institutions.
They argued that the tiering framework
as proposed would result in an uneven
playing field that would undermine the
dual banking system. One of the
commenters recommended that the
Board revise the Proposed Guidelines to
ensure that access to Reserve Bank
accounts and services be afforded to
eligible institutions on an equitable and
impartial basis, regardless of whether
they are state-chartered or federallychartered.
Lastly, these commenters objected to
language in proposed Tier 3 that might
imply that state banking authorities’
supervision is weaker than that of
federal banking authorities. These
commenters point to the robust
regulatory standards and close
supervision that states have had in place
for many years for non-federally-insured
institutions. One of the commenters also
noted that state regulators work closely
with their Reserve Bank on the
supervision of state member banks.
One of the commenters recommended
that the Account Access Guidelines
should not have a tiering framework
but, alternatively, that Reserve Banks
should review access requests by
applying an activity and risk lens to
access requests. A different commenter
recommended that the tiering
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51105
framework should focus on an
institution’s past performance as a key
criterion for determining whether it is
included in Tier 2 or Tier 3.
Other commenters on the
Supplemental Notice supported the
tiering framework as proposed, noting
that it provides additional transparency
and clarity on the level of review an
access request would receive based on
key characteristics. One commenter
noted that the tiering framework would
help an institution requesting access
understand Reserve Bank expectations
and take steps to demonstrate that
appropriate risk management policies
and safeguards are in place.
Board Response
The Board has reviewed the
comments provided and revised its
approach to Tiers 2 and 3 in the final
Account Access Guidelines.
Specifically, the Board has made certain
changes in Section 2 of the final
Account Access Guidelines to provide
more comparable treatment between
non-federally-insured institutions
chartered under state and federal law.
As discussed above, the Board has
modified Tier 2 to include a narrower
set of non-federally-insured national
banks than proposed in the
Supplemental Notice. Under the revised
Tier 2, a non-federally-insured
institution chartered under federal law
will be considered in Tier 2 only if the
institution has a holding company that
is subject to Federal Reserve oversight.
In addition, a non-federally-insured
institution chartered under state law
will (as proposed in the Supplemental
Notice) be considered in Tier 2 if (i) the
institution is subject (by statute) to
prudential supervision by a federal
banking agency, and (ii) to the extent
the institution has a holding company,
that holding company is subject to
Federal Reserve oversight (by statute or
commitments).14
The Board believes it is appropriate to
subject non-federally-insured
institutions that the Federal Reserve
supervises to an intermediate level of
review under Tier 2, as the Reserve
Banks already have supervisory
information about, as well as regulatory
authority over, such institutions and
understands their risk profiles. Tier 3
will contain all other non-federallyinsured institutions.
In addition, the Board has made
minor updates to the proposed tiering
framework to emphasize that the review
14 In practice, non-federally-insured institutions
that are chartered under state law are subject to
prudential supervision by the Board if they become
members of the Federal Reserve System.
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of institutions’ requests would be
completed on a case-by-case, riskfocused basis within the three tiers,
meaning that, within each tier,
institutions with high-risk business
models should be subject to more
intensive review than those with lowerrisk business models.
Lastly, in response to concerns raised
by some comments that the language in
the description of Tier 3 implies that
supervision conducted by state banking
authorities is broadly weaker than
federal supervision, the Board has
removed references to ‘‘supervisory’’
differences in the description of Tier 3.
2. Non-Federally-Insured Institutions
Several commenters expressed views
that non-federally-insured institutions
as a class pose an unacceptable level of
risk to the payment system and financial
markets. While some of these
commenters directed their comments
towards institutions in both Tiers 2 and
3, some focused solely on institutions in
Tier 3. These commenters expressed a
view that these institutions are not
subject to sufficient regulation and as a
result the Reserve Banks should not
provide access to Tier 3 institutions or
to non-federally-insured institutions
more broadly.
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Board Response
The Board does not believe that it is
appropriate to categorically exclude all
Tier 3 or non-federally-insured
institutions from access to accounts and
services. The Board believes that Tier 2
and 3 institutions represent a wide
range of risk profiles (based on business
model, size, complexity, regulatory
framework, and other factors), and
therefore a single response to account
requests from this heterogenous group
would not be appropriate. The Account
Access Guidelines as adopted are
intended to be applied by Reserve Banks
to access requests from eligible
institutions and the Board believes that
the final Account Access Guidelines
will provide a robust framework for
analyzing and mitigating risks.
3. New standards
One commenter objected to Reserve
Banks subjecting institutions with
existing accounts to what the
commenter termed ‘‘new standards’’
once the Board’s Proposed Guidelines
are made final.
Board Response
The Board has developed the
Proposed Guidelines, in part, to increase
the level of transparency and
consistency of the process used by
Reserve Banks to evaluate institutions’
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access to Reserve Bank accounts and
services. As noted above, the Proposed
Guidelines are informed by and
incorporate, where possible, existing
Reserve Bank risk-management
practices. As a result, the Board views
the final Account Access Guidelines as
an evolution of existing practices rather
than the creation of ‘‘new standards.’’
Additionally, the Board believes that in
order for the Proposed Guidelines to be
an effective risk-mitigation tool they
should be applied broadly including to
existing accounts. This view is
supported by public comments on the
Original Proposal discussed above. The
Board expects that any Reserve Bank
reevaluation of the risk of an
institution’s existing account will
include discussions with the institution
and its regulators.
III. Conclusion
For the reasons set forth above, the
Board is adopting final Account Access
Guidelines.
[This item will not publish in the
Code of Federal Regulations]
IV. Account Access Guidelines
Guidelines Covering Access to Accounts
and Services at Federal Reserve Banks
(Account Access Guidelines)
Section 1: Principles
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 Reserve Bank financial
services (access requests).1,2 The Board
has issued these account access
guidelines under its general supervision
authority over the operations of the
Reserve Banks, 12 U.S.C. 248(j).
Decisions on individual requests for
access to accounts and services are
made by the Reserve Bank in whose
District the requestor is located.
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
1 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.
2 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.
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the first principle.3 The Board expects
the Reserve Banks to engage in
consultation with each other and the
Board, as appropriate, on reviews of
account and service requests, as well as
ongoing monitoring of accountholders,
to ensure that the guidelines are
implemented in a consistent and timely
manner. 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 consistency 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
a requestor to make any enhancements
to its risk management, documentation,
or other practices to attempt to
demonstrate how it meets each of the
principles.
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 factor, 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
3 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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or to address other considerations.4 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
access to an account and services will
meet the following principles.5 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
which is consistent with Section 2 of
these Guidelines. 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 access to 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,
4 The conditions imposed could include, for
example, establishing a cap on the amount of
balances held in the account. In addition, the Board
may authorize a Reserve Bank to pay a different rate
of interest on balances held in the account or may
limit the amount of balances in the account that
receive interest.
5 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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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.6
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.7
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 (15 U.S.C.
1693 et seq). 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. sanctions
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.
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
6 These principles do not apply to accounts and
services provided by a Reserve Bank (i) as
depository and fiscal agent, such as those provided
for the Treasury and for certain governmentsponsored entities (12 U.S.C. 391, 393–95, 1823,
1435), (ii) to certain international organizations (22
U.S.C. 285d, 286d, 290o–3, 290i–5, 290l–3), (iii) to
designated financial market utilities (12 U.S.C.
5465), (iv) pursuant to the Board’s Regulation N (12
CFR 214), or (v) pursuant to the Board’s Guidelines
for Evaluating Joint Account Requests.
7 Unless otherwise expressly excluded under the
previous footnote, these principles apply to account
requests from all institutions, including member
banks or other entities that meet the definition of
a depository institution under section 19(b) (12
U.S.C. 461(b)(1)(A)), as well as Edge and Agreement
Corporations (12 U.S.C. 601–604a, 611–631), and
U.S. branches and agencies of foreign banks (12
U.S.C. 347d).
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51107
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.
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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.
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
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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
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:
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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 consultation with the
other Reserve Banks and Board as
appropriate, 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 present no credit or liquidity
risk, making them very attractive in
times of financial or economic stress. As
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a result, 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, it can
more easily expand its balance sheet
during times of stress; as a result, 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, economic
or trade sanctions violations, 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 a BSA/AML
compliance program consisting of the
components set out below and in
relevant regulations.8
i. For these purposes, the Reserve
Bank should confirm that the
institution’s BSA/AML compliance
program contains the following
elements.9
A. A system of internal controls,
including policies and procedures, to
ensure ongoing BSA/AML compliance;
B. Independent audit and testing of
BSA/AML compliance to be conducted
by bank personnel or by an outside
party;
C. Designation of an individual or
individuals responsible for coordinating
and monitoring day-to-day compliance
(BSA compliance officer);
D. Ongoing training for appropriate
personnel, tailored to each individual’s
specific responsibilities, as appropriate;
E. Appropriate risk-based procedures
for conducting ongoing customer due
diligence to include, but not limited to,
8 Refer to 12 CFR 208.62 and 63, 12 CFR 211.5(k),
5(m), 24(f), and 24(j), and 12 CFR 225.4(f) (Federal
Reserve); 12 CFR 326.8 and 12 CFR part 353 (FDIC);
12 CFR 748.1–2 (NCUA); 12 CFR 21.11, and 21, and
12 CFR 163.180 (OCC); and 31 CFR 1020.210(a) and
(b), and 31 CFR 1020.320 (FinCEN), which are
controlling.
9 Reserve Banks may reference the FFIEC BSA/
AML Manual. These guidelines may be updated to
reflect any changes to relevant regulations.
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understanding the nature and purpose
of customer relationships for the
purpose of developing a customer risk
profile and conducting ongoing
monitoring to identify and report
suspicious transactions and, on a risk
basis, to maintain and update customer
information;
c. The Reserve Bank should confirm
that the institution has a compliance
program designed to support its
compliance with the Office of Foreign
Assets Control (OFAC) regulations at 31
CFR Chapter V.10
i. For these purposes, the Reserve
Bank may review the institution’s
written OFAC compliance program,
provided one has been created, and
confirm that it is commensurate with
the institution’s OFAC risk profile. An
OFAC compliance program should
identify higher-risk areas, provide for
appropriate internal controls for
screening and reporting, establish
independent testing for compliance,
designate a bank employee or
employees as responsible for OFAC
compliance, and create a training
program for appropriate personnel in all
relevant areas of the institution.
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 consultation with the
other Reserve Banks and the Board as
appropriate, 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 or group of like
institutions 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
10 Reserve Banks may reference the OFAC section
of the FFIEC BSA/AML Manual. These guidelines
may be updated to reflect any changes to relevant
regulations.
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51109
monetary policy implementation
framework in place.
Section 2: Tiered Review Framework
The tiered review framework in this
section is meant to serve as a guide to
the level of due diligence and scrutiny
to be applied by Reserve Banks to
different types of institutions. Although
institutions in a higher tier will on
average face greater due diligence and
scrutiny than institutions in a lower tier,
a Reserve Bank has the authority to
grant or deny an access request by an
institution in any of the three proposed
tiers, based on the Reserve Bank’s
application of the Account Access
Guidelines in Section 1 to that
particular institution. As discussed
above, an institution’s access request
will be reviewed on a case-by-case, riskfocused basis and the tiers are designed
to provide additional transparency into
the expected review process based on
key characteristics.
1. Tier 1: Eligible institutions that are
federally insured.11
a. As federally-insured depository
institutions, Tier 1 institutions are
already subject to a standard, strict, and
comprehensive set of federal banking
regulations.
b. In addition, for most Tier 1
institutions, detailed regulatory and
financial information would in most
cases be readily available, often in
public form.
c. Accordingly, access requests by
Tier 1 institutions will generally be
subject to a less intensive and more
streamlined review.
d. In cases where the application of
the Guidelines to Tier 1 institutions
identifies potentially higher risk
profiles, the institutions will receive
additional attention.
2. Tier 2: Eligible institutions that are
not federally insured but are subject (by
statute) to prudential supervision by a
federal banking agency.12 In addition, (i)
if such an institution is chartered under
federal law, it has a holding company
that is subject to Federal Reserve
oversight (by statute or commitments);
and (ii) if such an institution is
11 See 12 U.S.C. 1813(c)(2) (defining ‘‘insured
depository institution’’ for purposes of the Federal
Deposit Insurance Act) and 12 U.S.C. 1752(7)
(defining ‘‘insured credit union’’ for purposes of the
Federal Credit Union Act).
12 The federal banking agencies include the
Board, the Office of the Comptroller of the Currency
(OCC), the Federal Deposit Insurance Corporation,
and the National Credit Union Administration.
Non-federally-insured institutions that are
chartered under federal law are subject to
prudential supervision by the OCC. Non-federallyinsured institutions that are chartered under state
law are subject to prudential supervision by the
Board if they become members of the Federal
Reserve System.
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chartered under state law and has a
holding company, that holding
company is subject to Federal Reserve
oversight (by statute or commitments).13
a. Tier 2 institutions are subject to a
similar, but not identical, set of
regulations as federally-insured
institutions. As a result, Tier 2
institutions may still present greater
risks than Tier 1 institutions.
b. Reserve Banks will have significant
supervisory information about, as well
as some level of regulatory authority
over, Tier 2 institutions.
c. Accordingly, account access
requests by Tier 2 institutions will
generally receive an intermediate level
of review.
3. Tier 3: Eligible institutions that are
not federally insured and are not
considered in Tier 2.
a. Non-federally-insured institutions
that are chartered under federal law but
do not have a holding company subject
to Federal Reserve oversight would be
considered in Tier 3.
b. Non-federally-insured institutions
that are chartered under state law and
are not subject (by statute) to prudential
supervision by a federal banking agency,
or have a holding company that is not
subject to Federal Reserve oversight,
would be considered in Tier 3.
c. Tier 3 institutions may be subject
to a regulatory framework that is
substantially different from the
regulatory framework that applies to
federally-insured institutions.
d. In addition, detailed regulatory and
financial information regarding Tier 3
institutions may not exist or may be
unavailable.
e. Accordingly, Tier 3 institutions will
generally receive the strictest level of
review.
-EndBy order of the Board of Governors of the
Federal Reserve System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2022–17885 Filed 8–18–22; 8:45 am]
225), and all other applicable statutes
and regulations to become a bank
holding company and/or to acquire the
assets or the ownership of, control of, or
the power to vote shares of a bank or
bank holding company and all of the
banks and nonbanking companies
owned by the bank holding company,
including the companies listed below.
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 the BHC Act
(12 U.S.C. 1842(c)).
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 September 19, 2022.
A. Federal Reserve Bank of
Minneapolis (Chris P. Wangen,
Assistant Vice President), 90 Hennepin
Avenue, Minneapolis, Minnesota
55480–0291. Comments can also be sent
electronically to MA@mpls.frb.org:
1. Luminate Capital Corporation,
Minnetonka, Minnesota; to become a
bank holding company by acquiring
Luminate Bank, also of Minnetonka,
Minnesota.
Board of Governors of the Federal Reserve
System.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
[FR Doc. 2022–17808 Filed 8–18–22; 8:45 am]
BILLING CODE P
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BILLING CODE 6210–01–P
FEDERAL RESERVE SYSTEM
GENERAL SERVICES
ADMINISTRATION
Formations of, Acquisitions by, and
Mergers of Bank Holding Companies
[Notice–PBS–2022–04; Docket No. 2022–
0002; Sequence No. 18]
The companies listed in this notice
have applied to the Board for approval,
pursuant to the Bank Holding Company
Act of 1956 (12 U.S.C. 1841 et seq.)
(BHC Act), Regulation Y (12 CFR part
Notice of Availability for the Draft
Environmental Assessment for the
Calexico West Land Port of Entry
Temporary Pedestrian Process Facility
Calexico, California
13 Edge and Agreement Corporations and U.S.
branches and agencies of foreign banks would fall
under a Tier 2 level of review because of Federal
Reserve oversight over these institutions.
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Public Buildings Service (PBS),
General Services Administration (GSA).
ACTION: Notice.
AGENCY:
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This notice announces the
availability, and opportunity for public
review and comment of a Draft
Environmental Assessment (EA), which
examines the potential impacts of a
proposal by GSA for construction of a
temporary pedestrian processing facility
adjacent to the Historic Customs House,
and interior renovation of the Historic
Customs House at 340 East 1st Street,
Calexico, California. The facility and
structures will be used by the United
States Customs and Border Protection.
The Draft EA describes the purpose and
need for the proposed project; the
alternatives considered; the potential
impacts of the alternatives on the
existing environment; and the proposed
avoidance, minimization, and/or
mitigation measures associated to these
alternatives and resources.
DATES: Agencies and the public are
encouraged to provide written
comments on the Draft EA. The 30-day
public comment period for the Draft EA
ends on Monday, September 26, 2022. A
virtual public meeting will be held on
Tuesday, August 23, 2022, 4 p.m. to 5
p.m. Pacific standard time at: https://
teams.microsoft.com/l/meetup-join/
19%3ameeting_ODlmYmFiOWMtM2E
wOS00MTVlLWJhY2EtYWZiMWJiZGY
xNDdl%40thread.v2/0?context=
%7b%22Tid%22%3a%228aec2bf004af-4841-bcf6-bac6a58dd4
ef%22%2c%22Oid%22%3
a%221894920d-2cd7-4a1a-aa780ebeddc5bdf6%22%7d.
ADDRESSES: Further information,
including an electronic copy of the Draft
EA may be found online on the
following website: https://www.gsa.gov/
about-us/regions/welcome-to-thepacific-rim-region-9/land-ports-of-entry/
calexico-west-land-port-of-entry.
Questions or comments concerning
the Draft EA should be directed to
Osmahn Kadri, EPA Program Manager,
General Services Administration via
email: osmahn.kadri@gsa.gov or Ms.
Bianca Rivera, 355 South Euclid
Avenue, Suite 107, Tucson, AZ 85719
via postal mail/commercial delivery.
FOR FURTHER INFORMATION CONTACT: Mr.
Osmahn A. Kadri, NEPA Program
Manager, General Services
Administration, Pacific Rim Region, at
415–522–3617 or email osmahn.kadri@
gsa.gov. Please call this number if
special assistance is needed to attend
and participate in the public meeting.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
The Project is located adjacent to the
Historic Customs House at 340 East 1st
Street, Calexico, California. The Project
is proposed to provide a temporary
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[Federal Register Volume 87, Number 160 (Friday, August 19, 2022)]
[Notices]
[Pages 51099-51110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17885]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
[Docket No. OP-1747]
Guidelines for Evaluating Account and Services Requests
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final guidance.
-----------------------------------------------------------------------
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
has approved final guidelines (Account Access Guidelines) for Federal
Reserve Banks (Reserve Banks) to utilize in evaluating requests for
access to Reserve Bank master accounts and services (accounts and
services).
DATES: Implementation Date is August 19, 2022.
FOR FURTHER INFORMATION CONTACT: Jason Hinkle, Assistant Director (202-
912-7805), Division of Reserve Bank Operations and Payment Systems, or
Gavin Smith, Senior Counsel (202-452-3474), Legal Division, Board of
Governors of the Federal Reserve System. For users of TTY-TRS, please
call 711 from any telephone, anywhere in the United States.
SUPPLEMENTARY INFORMATION:
I. Background
The payments landscape is evolving rapidly as technological
progress and other factors are leading both to the introduction of new
financial products and services and to different ways of providing
traditional banking services. Relatedly, there has been a recent uptick
in novel charter types being authorized or considered by federal and
state banking authorities across the country. As a result, the Reserve
Banks are receiving an increasing number of inquiries and access
requests from institutions that have obtained, or are considering
obtaining, such novel charter types.
A. Summary of May 2021 Proposed Account Access Guidelines
On May 5, 2021, the Board requested comment on proposed guidelines
to be used by Reserve Banks in evaluating requests for accounts and
services (Original Proposal or Proposed Guidelines).1 2 The
Original 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 Original Proposal was also intended
to ensure that Reserve Banks apply a transparent and consistent set of
factors when reviewing requests for access to accounts and services
(access requests).\3\
---------------------------------------------------------------------------
\1\ 86 FR 25865 (May 11, 2021).
\2\ The Proposed Guidelines are designed to be applied to both
new and pending access requests as well as cases where the Reserve
Bank determines to reevaluate the risk of existing accounts. This
broad application is intended to ensure that risks are identified
and mitigated and that institutions are treated in a fair and
equitable manner.
\3\ In developing the Account Access Guidelines, the Board
sought to incorporate as much as possible existing Reserve Bank risk
management practices.
---------------------------------------------------------------------------
The Original Proposal consisted of the following six principles:
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 Reserve Bank and receive Federal Reserve
services and should have a well-founded, clear, transparent, and
enforceable legal basis for its operations.
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.
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.
4. Provision of an account and services to an institution should
not create undue risk to the stability of the U.S. financial system.
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.
[[Page 51100]]
6. Provision of an account and services to an institution should
not adversely affect the Federal Reserve's ability to implement
monetary policy.
The first principle specified that only institutions that are
legally eligible for access to Reserve Bank accounts and services would
be considered for access. 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).\4\ For each of these five principles, the Original
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). The identified factors are commonly used in the
regulation and supervision of federally-insured institutions and many
of the factors are utilized in existing Reserve Bank risk management
practices. The Original Proposal noted that requests from non-
federally-insured institutions would generally be subject to a greater
level of review. In addition, the Board noted that, when applying the
Account Access Guidelines, the Reserve Bank reviewing the access
request should integrate to the extent possible the assessments of the
requesting institution by its state and/or federal supervisors into the
Reserve Bank's own independent assessment of the institution's risk
profile.
---------------------------------------------------------------------------
\4\ The six principles were designed primarily as a risk
management framework and, as such, focused on risks an institution's
access could pose. The Board notes, however, that granting an access
request could also have net benefits to the financial system.
---------------------------------------------------------------------------
The Board intended for the Original Proposal to support consistency
in evaluating account access requests across Reserve Banks, while
maintaining the discretion granted to the Reserve Banks under the
Federal Reserve Act to grant or deny access requests. The Board noted
in the Original Proposal that a consistent framework across Reserve
Banks would reduce the potential that one Reserve Bank might be
considered to be more likely to grant access requests than another
Reserve Bank and would mitigate the risk that an individual access
request decision by one Reserve Bank could create de facto Federal
Reserve System policy regarding access requests for a particular
business model or risk profile.
The Original Proposal was based on a foundation of risk management
and mitigation. In developing the Original Proposal, 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 Original Proposal
would prompt the Reserve Bank to evaluate an eligible institution's
risk profile and identify risk-mitigation strategies adopted by the
eligible institution (including capital, risk management frameworks,
compliance with regulations, and supervision) as well as potential risk
mitigants that could be implemented by the Reserve Bank (including
account agreement provisions, restrictions on financial services
accessed, and account risk controls).
In the Original Proposal, the Board expressed the Federal Reserve's
broad policy goals in providing accounts and services. In addition, the
Board stated that, while the Proposed Guidelines would be intended
primarily to apply to new access requests, Reserve Banks would also
apply them to existing account and services relationships where
appropriate, such as when a Reserve Bank becomes aware of a significant
increase in the risks that an account holder presents due to changes in
the nature of, for example, its principal business activities or
condition.
The Board requested comment on all aspects of the Original
Proposal, including whether the scope and application of the Proposed
Guidelines was sufficiently clear and appropriate to achieve their
intended purpose. The Board also requested comment on whether other
criteria or information might be relevant when Reserve Banks evaluate
access requests. The Board further sought comment specifically on the
following aspects of the Original Proposal:
1. Do the Proposed 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 Guidelines support responsible financial
innovation?
Finally, the Board sought comment on whether the Board or the
Reserve Banks should consider other steps or actions to facilitate the
review of access requests in a consistent and equitable manner.
B. Summary of March 2022 Supplemental Notice
On March 1, 2022, the Board published a second notice (the
Supplemental Notice),\5\ which proposed to incorporate into the Account
Access Guidelines a tiered review framework to provide additional
clarity on the level of due diligence and scrutiny that Reserve Banks
would apply to different types of institutions when applying the six
risk-based principles.
---------------------------------------------------------------------------
\5\ 87 FR 12957 (March 8, 2022).
---------------------------------------------------------------------------
In the Original Proposal, the introductory text to the Account
Access Guidelines noted that the application of the Guidelines to
requests by federally-insured institutions should be fairly
straightforward, while requests from non-federally-insured institutions
may necessitate more extensive due diligence. The Supplemental Notice
proposed a three-tiered review framework--which would become Section 2
of the Account Access Guidelines--to provide additional clarity
regarding the minimum level of review for different types of
institutions.
Under the Supplemental Notice, proposed Tier 1 would consist of
eligible institutions that are federally-insured. These institutions
are already subject to a homogeneous and comprehensive set of federal
banking regulations, and, in most cases, detailed regulatory and
financial information about these firms would be readily available to
Reserve Banks. Accordingly, the Supplemental Notice stated that access
requests by Tier 1 institutions would generally be subject to a less
intensive and more streamlined review.\6\
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\6\ The Supplemental Notice stated that, in cases where the
application of the Guidelines to a Tier 1 institution identifies a
potentially higher risk profile, the institution would receive
additional attention.
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In the Supplemental Notice, proposed Tier 2 would consist of
eligible institutions that are not federally-insured but that are
subject to federal prudential supervision at the institution and, if
applicable, at the holding company level.\7\ The Supplemental Notice
explained that Tier 2 institutions are subject to similar but not
identical regulations as federally-insured institutions, and as a
result, may present greater risks than Tier 1 institutions.
Additionally, detailed regulatory and financial information regarding
Tier 2 institutions is less likely to be available and may not be
available in public form. Accordingly, the Supplemental Notice stated
that access requests by Tier 2 institutions would generally receive an
intermediate level of review.
---------------------------------------------------------------------------
\7\ The Supplemental Notice noted the Board would expect holding
companies of Tier 2 institutions to comply with similar requirements
as holding companies subject to the Bank Holding Company Act.
---------------------------------------------------------------------------
In the Supplemental Notice, proposed Tier 3 would consist of
eligible
[[Page 51101]]
institutions that are not federally insured and not subject to
prudential supervision by a federal banking agency at the institution
or holding company level. The Supplemental Notice stated that Tier 3
institutions may be subject to a supervisory or regulatory framework
that is substantially different from, and possibly weaker than, the
supervisory and regulatory framework that applies to federally-insured
institutions, and as a result may pose the highest level of risk.
Detailed regulatory and financial information regarding Tier 3
institutions may not exist or may be unavailable. Accordingly, the
Supplemental Notice stated that access requests by Tier 3 institutions
would generally receive the strictest level of review.
The Board sought comment on all aspects of the proposed three-
tiered review framework.
II. Discussion
The Board is adopting final Account Access Guidelines. Section 1 of
the final Account Access Guidelines is substantially the same as the
Original Proposal with minor changes to improve clarity in response to
comments received. As described further below, the Board has made
certain changes in Section 2 of the final Account Access Guidelines to
provide more comparable treatment between non-federally-insured
institutions chartered under state and federal law. Specifically, the
Board has revised Tier 2 to include a narrower set of non-federally-
insured national banks than the definition proposed in the Supplemental
Notice.\8\ Under the revised Tier 2, non-federally-insured institutions
that are chartered under federal law will only be considered in Tier 2
if the institution has a holding company that is subject to Federal
Reserve oversight. In addition, the Board is updating the Section 2
tiering framework to emphasize that the review of institutions'
requests will be completed on a case-by-case, risk-focused basis within
each of the three tiers.\9\ For example, Reserve Banks may take
comparatively longer to review access requests by institutions that
engage in novel activities for which authorities are still developing
appropriate supervisory and regulatory frameworks.
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\8\ These revisions to Tier 2 apply only to non-federally-
insured institutions chartered under federal law. Under the final
Account Access Guidelines, a non-federally-insured institution
chartered under state law will (consistent with the Supplemental
Notice) be considered in Tier 2 if (i) the institution is subject to
prudential supervision by a federal banking agency, and (ii) to the
extent the institution has a holding company, that holding company
is subject to Federal Reserve oversight.
\9\ As described further below, the Board is making some other
minor updates to Section 2 of the Account Access Guidelines,
including clarifying that Edge and Agreement Corporations and U.S.
branches and agencies of foreign banks would fall under a Tier 2
level of review due to Federal Reserve oversight over these
institutions.
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By adopting the final Account Access Guidelines, the Board would
establish a transparent and equitable framework for Reserve Banks to
apply consistently to access requests. To promote consistency, the
Reserve Banks are working together, in consultation with the Board, to
expeditiously develop an implementation plan for the final Guidelines.
A. Comments on the Original Proposal
The Board received 46 individual comment letters and 281 duplicate
form letters in response to the Original Proposal. Nearly all of the
comment letters expressed general support for the Proposed Guidelines,
and most letters also made recommendations for improvements. Commenters
represented several types of institutions, including (1) institutions
with traditional charters, such as banks and credit unions, and their
trade associations; (2) institutions with novel charters, such as
cryptocurrency custody banks, and their trade associations; and (3)
think tanks and non-profit advocacy groups. The views expressed by the
first category of commenters often conflicted with the views expressed
by the second category of commenters. The duplicate form letters
included recommendations that mirrored those submitted by trade
associations for institutions with traditional charters, which opposed
greater account access for institutions with novel charters.
Many commenters provided general comments on the Original Proposal
that addressed one or more of three high-level themes: (1) policy
requirements to gain access to accounts and services; (2)
implementation of the Proposed Guidelines; and (3) legal eligibility
for Reserve Bank accounts. Some commenters made recommendations related
to the Proposed Guidelines that did not fit into these themes and are
also described below. Lastly, some commenters provided responses to the
specific questions posed in the Original Proposal as well as comments
on specific principles in the Proposed Guidelines.
1. Policy Requirements To Gain Access to Accounts and Services
Most commenters, while supporting the Proposed Guidelines, provided
recommendations for improvements to the Guidelines that, in their view,
would assist the Board in achieving its stated policy goals. These
recommendations to amend the Proposed Guidelines were often
conflicting.
Many commenters made recommendations that would, in their view,
provide an easier path for institutions, particularly those with novel
charters, to successfully gain access to accounts and services. Some of
these commenters recommended that the Board provide more specific
requirements for access requests, so that requesting institutions,
chartering authorities, and other banking regulators would have more
clarity on what is required for obtaining access to accounts and
services. Other commenters stated that the Proposed Guidelines may be
ineffective if they are implemented in a way that subjects institutions
with novel charters to restrictions that resemble regulatory
requirements that do not fit their business models. While some
commenters generally stated that requirements for access to accounts
and services should accommodate institutions that have different levels
of regulatory oversight, others suggested that the Board establish
charter-specific requirements for account access. Some commenters
expressed concern about the statement in the Original Proposal that
``access requests from non-federally-insured institutions may require
more extensive due diligence,'' suggesting that this position would
stifle innovation to the extent that it would impose stricter
requirements on state-chartered institutions without federal deposit
insurance. Finally, some commenters recommended that the Board could
mitigate the risks posed by institutions with certain novel banking
charters by allowing such institutions to maintain limited-access
accounts that would provide a subset of services offered by Reserve
Banks.
Many commenters, on the other hand, recommended that the Proposed
Guidelines should provide a more challenging path for institutions with
novel charters to gain access to accounts and services. Many of these
commenters argued that the Proposed Guidelines should subject non-
federally-insured institutions to the same types of requirements as
apply to federally-insured depository institutions, regardless of the
institution's business model. These commenters generally argued that
institutions with novel charters are not subject to the same strict and
costly regulations or to the same rigorous reviews as apply to
traditional institutions, providing such institutions with unfair
advantages over institutions with traditional charters.
[[Page 51102]]
Some commenters recommended that the Proposed Guidelines include more
granular and strict standards, such as explicit capital and liquidity
requirements. Others recommended additional requirements for account
access, such as compliance with the Community Reinvestment Act and
consumer protection laws, or that Reserve Banks consider the risks from
an institution's affiliate relationships and subject an institution's
holding company to the Bank Holding Company Act. Still other commenters
suggested that the Proposed Guidelines should require all
accountholders that do not file call reports to publicly provide
periodic audited financial reports so that payment system participants
are better able to assess counterparty risk.
Board Response
The Board believes that the final Account Access Guidelines provide
a framework that will effectively support responsible innovation and
prudent risk management. The Account Access Guidelines establish a
consistent, comprehensive, and transparent framework for Reserve Banks
to analyze access requests on a case-by-case, risk-focused basis
reflecting the institution's full risk profile (including its business
model, size, complexity, and regulatory framework) and to mitigate, to
the extent possible, the risks identified. Furthermore, as noted in the
Original Proposal, each requesting institution's risk management and
governance infrastructure is expected both to meet existing regulatory
and supervisory requirements and to be sufficiently tailored to the
institution's business, in the Reserve Bank's assessment, to mitigate
the risks identified by the Account Access Guidelines.
As noted in the final Account Access Guidelines, a Reserve Bank may
implement risk mitigants including imposing conditions or restrictions
on an institution's access to accounts and services if necessary to
mitigate risks set forth in the Account Access Guidelines. Reserve
Banks also retain the discretion to deny a request for access to
accounts and services where, in the Reserve Bank's assessment, granting
access to the institution would pose risks that cannot be sufficiently
mitigated.
2. Implementation of the Account Access Guidelines
Many commenters provided recommendations related to how the
Proposed Guidelines will be implemented and how to promote consistency
in their application by Reserve Banks. Some of these commenters asked
the Board to specify the mechanism(s) by which such consistency would
be achieved. Other commenters went further, suggesting that the Board
should give consent and non-objection to Reserve Bank access-request
determinations, or that the Board should form a centralized (i.e.,
Board-led) evaluation committee to consider access requests. Further,
several commenters suggested various avenues for increased
communication from Reserve Banks about their decisions to grant or deny
account requests, including publishing decisions on access requests
(including any supporting analysis), maintaining an up-to-date list of
all institutions that have been granted access, and formally
communicating with state regulators about how the Federal Reserve views
particular state charters. In addition, many commenters recommended
that the Board establish timelines within which Reserve Banks must
grant or deny access requests, arguing that such timeliness would
provide greater transparency and give requesting institutions more
clarity on the resources and time needed for the evaluation process.
One commenter further argued that expectations of a lengthy review
process could discourage institutions with novel charters from
requesting accounts and thus discourage innovation.
Commenters expressed differing opinions on whether a Reserve Bank
should conduct an independent assessment of a requestor's risk profile.
Some commenters suggested that a Reserve Bank's assessment of a
requestor's risk profile should defer to the primary regulator's
assessment of the risks posed by the institution, while others said the
Board should ensure that a Reserve Bank conduct an independent risk
assessment separate from that of the institution's primary regulator.
Additionally, a few commenters suggested that the Board remove language
from the Proposed Guidelines that recognizes the authority granted to
Reserve Banks under the Federal Reserve Act to exercise discretion in
granting or denying requests for accounts and services.
Many commenters argued that the Proposed Guidelines should require
ongoing review of non-federally-insured institutions, so as to
appropriately monitor the risks that such institutions, and especially
those with novel charters, could pose after obtaining access to
accounts and services. Some commenters singled out cyber risk as a
specific area for ongoing review.
Board Response
In the final Account Access Guidelines, the Board's primary goal is
to establish a transparent and consistent framework for all access
requests across Reserve Banks from both risk and policy perspectives.
To emphasize this goal, the Board has incorporated in the introduction
to the final Account Access Guidelines the expectation that Reserve
Banks engage in consultation with the other Reserve Banks and the
Board, as appropriate, to support consistent implementation of the
Account Access Guidelines. In further support of this goal and as
explained further below, the Board has adopted a new Section 2 of the
Account Access Guidelines establishing a tiered review framework that
provides additional guidance on the level of due diligence and scrutiny
to be applied to access requests. Additionally, as noted previously,
the Reserve Banks are working together, in consultation with the Board,
to expeditiously develop an implementation plan for the final
Guidelines.
Regarding comments to disclose information on particular requests,
the Board notes that when evaluating access requests, Reserve Banks
communicate directly with the requestor and, in some cases, with the
institution's primary regulator, including by requesting additional
information, clarifying the status of the request, and communicating
any controls or limitations that might be placed on the account and
services. However, the identity of institutions that maintain accounts
at Reserve Banks, or that request access to accounts and services, is
considered confidential business information and, as such, public
disclosure of account status by the Reserve Banks would not be
appropriate.\10\
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\10\ The Board notes that institutions may choose to self-
publicize their account and service requests and status.
---------------------------------------------------------------------------
The Board has also considered whether the final Account Access
Guidelines should include a timeline for completing reviews of access
requests by Reserve Banks. The Board believes that the nature of
relevant variables in access requests--including the variety of charter
types, business models, regulatory regimes, and risk profiles--
precludes specification of a single timeline. The Reserve Banks face
challenges in balancing the desire by requestors for a specific
timeline with Reserve Banks' need to perform thorough reviews of
requestors with novel, complex, or high-risk business plans, along with
requestors that are subject to novel regulatory regimes.
[[Page 51103]]
Setting a specific timeline could result in an increased number of
premature or unnecessary denials of access requests in cases where the
specified timeline does not allow the Reserve Banks sufficient time to
understand the intricacies of the requesting institutions' risk
profiles. Accordingly, the Board has not adopted a timeline expectation
in the final Account Access Guidelines, but the Board has added
language to emphasize the Board's expectations for Reserve Banks to
coordinate in focusing on both timeliness and consistency in evaluating
access requests.
The Board believes it is important that Reserve Banks evaluate both
the potential risks posed by an eligible institution's access request
and the potential actions to mitigate such risks. The final Account
Access Guidelines emphasize that a Reserve Bank should integrate, to
the extent possible, the assessments of an institution by state and/or
federal supervisors into the Reserve Bank's independent assessment of
the institution's risk profile. This integration will ensure that
Reserve Banks use all relevant data in pursuing the goal of prudent
risk management. The Board has also added language in the final Account
Access Guidelines that clarifies the respective roles of the Board
(Reserve Bank oversight) and the Reserve Banks (discretion in decision
making) with respect to evaluating access requests.
With regard to the recommendation for ongoing review of the risks
posed by non-federally-insured institutions' access to accounts and
services once an access request has been granted, the Board notes that
the introduction to the Account Access Guidelines includes language
discussing existing condition monitoring practices. The Board believes
that the Reserve Banks' existing risk-management practices sufficiently
address the risks identified by these comments without the need for an
explicit expectation in the Account Access Guidelines for ongoing
review of non-federally-insured institutions.
3. Legal Eligibility
Some commenters requested that the Guidelines more specifically
address legal eligibility for access to accounts and services. Others
presented arguments about what entities are, or should be, legally
eligible for access to accounts and services. Other commenters
suggested that the Board should issue a moratorium on granting access
requests made by institutions with novel charters until the Board
clarifies legal eligibility, that the Board should publish a list of
charter types already deemed to be legally eligible, or that the Board
should study account access decisions by other central banks. One
commenter argued that the Board should interpret the definition of a
``depository institution'' eligible for access to accounts and services
as broadly as possible to support expanded access to accounts and
services, which the commenter argued would support financial
innovation.
Several commenters recommended that the Board should ensure that
its interpretation of legal eligibility supports responsible financial
innovation as stated as a policy goal of the Board. Some of these
commenters recommended that the Board review legal eligibility broadly
to support innovation and expand eligibility. One commenter recommended
that the Board decouple legal eligibility for a Reserve Bank account
from eligibility for direct access to Federal Reserve financial
services. The commenter argued that decoupling direct access to
services from eligibility for accounts would have benefits for
consumers and pointed to other countries which have taken such action.
Board Response
As the Board noted in the Original Proposal, it has been
considering whether it may be useful to clarify the interpretation of
legal eligibility under the Federal Reserve Act for access to accounts
and services. After a careful analysis of this issue, the Board has
determined it is not necessary to do so at this time. The Account
Access Guidelines do not establish a legal eligibility standard, but
the first principle clearly states that institutions must be eligible
under the Federal Reserve Act or other federal statute to maintain an
account at a Reserve Bank. The Board believes this provides sufficient
clarity on what entities may legally request access to account and
services, and the Reserve Banks will continue to assess an
institution's legal eligibility under Principle 1 on a case-by-case
basis to ensure that only entities that are legally eligible may
request to obtain such access.\11\
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\11\ While Reserve Banks exercise decision-making authority with
respect to access requests, the Board has interpretive authority
with respect to the Federal Reserve Act and thus is responsible for
interpreting the provisions of the Act concerning legal eligibility.
---------------------------------------------------------------------------
The Board notes that the purpose of the Account Access Guidelines
is to ensure that Reserve Banks evaluate a transparent and consistent
set of risk-focused factors when reviewing account requests. The Board
is not expanding (or limiting) the types of institutions that legally
may request access to Reserve Bank accounts and services.
4. Additional Comments
A. Comments Supporting a Ban on Novel Charter Account Access
Some commenters suggested that novel charters mix commercial and
financial activities and provide a ``back door entry'' into banking for
commercial entities. These commenters recommended that the Federal
Reserve not grant access requests from institutions with novel
charters.
Board Response
The Board does not believe that it is appropriate to categorically
exclude all novel charters from access to accounts and services. The
Account Access Guidelines as adopted are intended to be applied by
Reserve Banks to access requests from eligible institutions with both
novel and more traditional charters. The Board believes that the final
Account Access Guidelines will provide a robust framework for analyzing
and mitigating risks.
B. Comments Opposing the Proposed Guidelines
While most commenters supported the Original Proposal, three
commenters opposed the Proposed Guidelines entirely. One of these
commenters argued the Guidelines created opacity in the master account
process, not clarity. Two other commenters opposed the Proposal
because, in their view, the Proposed Guidelines would expand access to
accounts and services to institutions with novel business models that
pose high levels of risk to the payments and banking system.\12\
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\12\ Many of these commenters pointed to ``fintech'' related
business models and other novel special purpose charters as posing
heightened risk to the payment system and financial markets.
---------------------------------------------------------------------------
Board Response
The Board believes that the final Account Access Guidelines provide
greater transparency and clarity than currently exist on the factors
that Reserve Banks should consider in evaluating access requests. The
Board also believes that the final Account Access Guidelines strike an
appropriate balance between providing transparency and allowing for
implementation of the Guidelines across a variety of potential
institutions that may request accounts (e.g., institutions with
differing charter types, business models, or regulatory regimes). The
Board believes that the final Account Access Guidelines create a
structured and sufficiently transparent framework that will help to
foster a
[[Page 51104]]
consistent evaluation of access requests across all twelve Reserve
Banks and will benefit the financial system broadly.
In response to the comments related to expansion of eligibility,
the Board emphasizes that, as noted previously, the Account Access
Guidelines do not establish legal eligibility standards but instead
establish a risk-focused framework for evaluating access requests from
legally eligible institutions under federal law.
C. Comments on Individual Principles
The Board received some comments on individual principles in the
Original Proposal. Several commenters, while on net supportive of
Principle 4 (Financial Stability) and Principle 6 (Monetary Policy
Implementation), suggested some refinements, including a specification
that most ``traditional'' institutions, due to their business model and
size, would not create risks to financial stability and/or monetary
policy implementation. Other commenters interpreted Principle 6 to
suggest that Reserve Banks, rather than the Board, have the authority
to establish the rate of interest on reserve balances (IORB). A few
commenters expressed concern that these principles would be challenging
to assess. Within this group, one commenter opined that the Board
should adapt its monetary policy practices to the economic reality
created by a competitive market rather than embed a monetary policy
principle in the Guidelines. Finally, many commenters commended the
Board for addressing these topics in the Guidelines; some of these
commenters asked the Board to expand its discussion of the potential
negative effects that granting account access to institutions with
novel charters could have on financial stability and monetary policy
implementation.
Board Response
The Board recognizes the concerns raised by commenters that the
principles focused on financial stability and monetary policy
implementation deal with complex topics requiring levels of analysis
and precision that may be challenging to address. For instance, it will
be difficult to forecast how granting account access to a requesting
institution would affect the level and variability of the demand for
and supply of reserves balances--which is important to monetary policy
implementation. However, the Federal Reserve is able to estimate the
potential risk posed by a requestor (such as the risk that an
institution might have large, unpredictable swings in its account
balance) and whether existing tools can adequately mitigate those
risks. The Board also recognizes that some smaller institutions with
traditional charters would likely not create risks to financial
stability or monetary policy implementation. Nevertheless, the Board
has determined that both the financial stability principle and the
monetary policy principle should remain in the final Account Access
Guidelines, because they provide full transparency to the public on the
types of factors Reserve Banks should consider in evaluating access
requests. In addition, the Board has amended a footnote in the Account
Access Guidelines to delete the language that a few commenters
interpreted to suggest that Reserve Banks have the authority to
establish the IORB rate.
D. Comments on Specific Questions
As noted previously, the Original Proposal posed three specific
questions and an additional open-ended question to the public.
a. Question 1
The Board asked whether the principles in the Proposed Guidelines
address all the risks that would be relevant to the Federal Reserve's
policy goals. Commenters generally agreed that the risks identified in
the Proposed Guidelines are relevant for the Reserve Banks to consider
when evaluating access requests. Many commenters raised concerns,
however, regarding the ability of Reserve Banks to mitigate these risks
in the case of institutions with novel charters that are not subject to
regulatory and supervisory oversight that is similar to that applied to
federally-insured institutions. Some commenters suggested that the
Proposed Guidelines should put greater emphasis on consumer protection,
particularly consumer privacy, and on cybersecurity risks.
Board Response
The Board notes that cybersecurity risk is included in Principle 2
(Risk to the Reserve Bank) and Principle 3 (Risk to the Payment System)
of the final Account Access Guidelines as a factor that Reserve Banks
should consider in their review of account requests. The Board also
notes that, while the Account Access Guidelines do not specify consumer
protection as an account-related risk, Principle 1 (Legal Eligibility)
provides that Reserve Banks should assess the extent to which an
institution's activities and services comply with applicable laws and
regulations, including those that address consumer protection. Lastly,
Section 2 of the final Account Access Guidelines (discussed further
below) provides additional guidance on the level of due diligence
expected by Reserve Banks for requests from institutions that are not
subject to regulatory and supervisory oversight similar to that applied
to federally-insured institutions.
b. Question 2
The Board asked whether the level of specificity in each principle
provides sufficient clarity and transparency about how the Reserve
Banks will evaluate requests. Many commenters addressing Question 2
recommended that the Board add more detail to the Proposed Guidelines
to increase the level of clarity and transparency.
Board Response
The Board's response to these comments is described in Section
II.A.
c. Question 3
The Board asked whether the principles support responsible
financial innovation. Several commenters stated that the Proposed
Guidelines achieve a balance between supporting responsible financial
innovation and managing the identified risks by allowing for
flexibility to accommodate different business models. Other commenters
expressed concern, however, that the implementation of the Proposed
Guidelines could stifle innovation if institutions were forced to
comply with rules and regulations that do not make sense for their
business model, size, or complexity.
Board Response
The Board believes the final Account Access Guidelines support
risk-focused, case-by-case review by Reserve Banks of access requests.
As such, the Board believes the Account Access Guidelines support
responsible innovation by balancing the provision of accounts and
services to a wide range of institutions on the one hand and managing
risks related to such access on the other. This is discussed in more
detail in Section II.A.
d. Question 4
The Board also requested comment on whether the Board or the
Reserve Banks should consider other steps or actions to facilitate the
review of access requests in a consistent and equitable manner. As
noted previously, commenters provided a wide range of comments that
recommended potential improvements to the Account Access Guidelines to
enhance their effectiveness.
Board Response
The Board addressed these comments in Section II.A-C.
[[Page 51105]]
E. Technical Changes
Principle 5 in the Account Access Guidelines addresses the risks to
the overall economy. While the Board did not receive specific comments
on Principle 5, it has made minor technical changes to the language to
ensure the clarity and accuracy of the discussions of institutions'
Bank Secrecy Act/Anti-Money Laundering (BSA/AML) and Office of Foreign
Assets Control (OFAC) requirements and compliance programs. The Board
has also made other minor technical edits to enhance the clarity of the
Guidelines (e.g., replacing the term ``factors'' with ``principles''
for consistency and clarifying the risk-free nature of Reserve Bank
balances).
B. Comments on the Supplemental Notice
The Board received 24 comment letters on the Supplemental Notice.
While most commenters generally expressed support for the proposed
tiering framework, four commenters objected to the manner in which the
proposed tiering framework would treat certain state-chartered
institutions. A different group of commenters supported the tiering
framework and called for heightened scrutiny of non-federally-insured
depository institutions that request Reserve Bank accounts. Many
commenters reiterated the comments that they previously submitted on
the Original Proposal.\13\ In particular, a number of commenters
recommended that non-federally-insured institutions, particularly those
in Tier 3, not be granted access to Reserve Bank accounts and services.
Additionally, one commenter, who supported the tiering framework
generally, objected to Reserve Banks subjecting institutions with
existing accounts to what the commenter termed ``new standards'' once
the Board's Proposed Guidelines are made final.
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\13\ For example, many commenters restated comments relating to
legal eligibility for accounts and services, while other commenters
restated their comment suggesting that non-federally-insured
institutions should receive accounts and services only if they are
subject to the same regulatory framework as federally-insured
institutions. The Board addressed these comments in Section II.A,
supra.
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1. Treatment of State-Chartered Institutions
Four commenters objected to the manner in which the proposed
tiering framework would treat certain state-chartered institutions.
These commenters principally argued that the proposed tiering framework
would (1) result in disparate treatment of non-federally-insured
institutions with state charters as compared to those with federal
charters; (2) undermine the dual banking system; and (3) ignore the
strong prudential regulation that some states have in place for non-
federally-insured institutions.
Broadly, this group of commenters focused their concerns on the
placement of depository institutions in proposed Tier 2 and Tier 3
while noting that they viewed Tier 1 as proposed as equitable and non-
problematic. In particular, these commenters expressed concerns that
non-federally-insured national trust banks (NTBs) chartered by the
Office of the Comptroller of the Currency (OCC) would receive
preferential treatment under the proposed guidelines and asserted that
many state-chartered trusts are subject to robust prudential
regulations. They further argued that the tiering framework erroneously
implies that NTBs are subject to a similar set of regulations as
federally-insured institutions. Two of the commenters further stated
that their respective state-chartered trust banks are subject to robust
regulation and supervision and suggested that these institutions should
be subject to a less strict level of review than the Board proposed.
Relatedly, these commenters argued that the proposed tiering
framework would introduce a bias in favor of federally-chartered
institutions compared to state-chartered institutions. They argued that
the tiering framework as proposed would result in an uneven playing
field that would undermine the dual banking system. One of the
commenters recommended that the Board revise the Proposed Guidelines to
ensure that access to Reserve Bank accounts and services be afforded to
eligible institutions on an equitable and impartial basis, regardless
of whether they are state-chartered or federally-chartered.
Lastly, these commenters objected to language in proposed Tier 3
that might imply that state banking authorities' supervision is weaker
than that of federal banking authorities. These commenters point to the
robust regulatory standards and close supervision that states have had
in place for many years for non-federally-insured institutions. One of
the commenters also noted that state regulators work closely with their
Reserve Bank on the supervision of state member banks.
One of the commenters recommended that the Account Access
Guidelines should not have a tiering framework but, alternatively, that
Reserve Banks should review access requests by applying an activity and
risk lens to access requests. A different commenter recommended that
the tiering framework should focus on an institution's past performance
as a key criterion for determining whether it is included in Tier 2 or
Tier 3.
Other commenters on the Supplemental Notice supported the tiering
framework as proposed, noting that it provides additional transparency
and clarity on the level of review an access request would receive
based on key characteristics. One commenter noted that the tiering
framework would help an institution requesting access understand
Reserve Bank expectations and take steps to demonstrate that
appropriate risk management policies and safeguards are in place.
Board Response
The Board has reviewed the comments provided and revised its
approach to Tiers 2 and 3 in the final Account Access Guidelines.
Specifically, the Board has made certain changes in Section 2 of the
final Account Access Guidelines to provide more comparable treatment
between non-federally-insured institutions chartered under state and
federal law. As discussed above, the Board has modified Tier 2 to
include a narrower set of non-federally-insured national banks than
proposed in the Supplemental Notice. Under the revised Tier 2, a non-
federally-insured institution chartered under federal law will be
considered in Tier 2 only if the institution has a holding company that
is subject to Federal Reserve oversight. In addition, a non-federally-
insured institution chartered under state law will (as proposed in the
Supplemental Notice) be considered in Tier 2 if (i) the institution is
subject (by statute) to prudential supervision by a federal banking
agency, and (ii) to the extent the institution has a holding company,
that holding company is subject to Federal Reserve oversight (by
statute or commitments).\14\
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\14\ In practice, non-federally-insured institutions that are
chartered under state law are subject to prudential supervision by
the Board if they become members of the Federal Reserve System.
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The Board believes it is appropriate to subject non-federally-
insured institutions that the Federal Reserve supervises to an
intermediate level of review under Tier 2, as the Reserve Banks already
have supervisory information about, as well as regulatory authority
over, such institutions and understands their risk profiles. Tier 3
will contain all other non-federally-insured institutions.
In addition, the Board has made minor updates to the proposed
tiering framework to emphasize that the review
[[Page 51106]]
of institutions' requests would be completed on a case-by-case, risk-
focused basis within the three tiers, meaning that, within each tier,
institutions with high-risk business models should be subject to more
intensive review than those with lower-risk business models.
Lastly, in response to concerns raised by some comments that the
language in the description of Tier 3 implies that supervision
conducted by state banking authorities is broadly weaker than federal
supervision, the Board has removed references to ``supervisory''
differences in the description of Tier 3.
2. Non-Federally-Insured Institutions
Several commenters expressed views that non-federally-insured
institutions as a class pose an unacceptable level of risk to the
payment system and financial markets. While some of these commenters
directed their comments towards institutions in both Tiers 2 and 3,
some focused solely on institutions in Tier 3. These commenters
expressed a view that these institutions are not subject to sufficient
regulation and as a result the Reserve Banks should not provide access
to Tier 3 institutions or to non-federally-insured institutions more
broadly.
Board Response
The Board does not believe that it is appropriate to categorically
exclude all Tier 3 or non-federally-insured institutions from access to
accounts and services. The Board believes that Tier 2 and 3
institutions represent a wide range of risk profiles (based on business
model, size, complexity, regulatory framework, and other factors), and
therefore a single response to account requests from this heterogenous
group would not be appropriate. The Account Access Guidelines as
adopted are intended to be applied by Reserve Banks to access requests
from eligible institutions and the Board believes that the final
Account Access Guidelines will provide a robust framework for analyzing
and mitigating risks.
3. New standards
One commenter objected to Reserve Banks subjecting institutions
with existing accounts to what the commenter termed ``new standards''
once the Board's Proposed Guidelines are made final.
Board Response
The Board has developed the Proposed Guidelines, in part, to
increase the level of transparency and consistency of the process used
by Reserve Banks to evaluate institutions' access to Reserve Bank
accounts and services. As noted above, the Proposed Guidelines are
informed by and incorporate, where possible, existing Reserve Bank
risk-management practices. As a result, the Board views the final
Account Access Guidelines as an evolution of existing practices rather
than the creation of ``new standards.'' Additionally, the Board
believes that in order for the Proposed Guidelines to be an effective
risk-mitigation tool they should be applied broadly including to
existing accounts. This view is supported by public comments on the
Original Proposal discussed above. The Board expects that any Reserve
Bank reevaluation of the risk of an institution's existing account will
include discussions with the institution and its regulators.
III. Conclusion
For the reasons set forth above, the Board is adopting final
Account Access Guidelines.
[This item will not publish in the Code of Federal Regulations]
IV. Account Access Guidelines
Guidelines Covering Access to Accounts and Services at Federal Reserve
Banks (Account Access Guidelines)
Section 1: Principles
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 Reserve Bank financial services
(access requests).\1,2\ The Board has issued these account access
guidelines under its general supervision authority over the operations
of the Reserve Banks, 12 U.S.C. 248(j). Decisions on individual
requests for access to accounts and services are made by the Reserve
Bank in whose District the requestor is located.
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\1\ 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.
\2\ 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.
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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.\3\ The
Board expects the Reserve Banks to engage in consultation with each
other and the Board, as appropriate, on reviews of account and service
requests, as well as ongoing monitoring of accountholders, to ensure
that the guidelines are implemented in a consistent and timely manner.
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 consistency across Reserve
Banks and to facilitate equitable treatment across institutions.
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\3\ 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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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 a requestor to make any enhancements to its risk
management, documentation, or other practices to attempt to demonstrate
how it meets each of the principles.
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 factor, 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
[[Page 51107]]
or to address other considerations.\4\ 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.
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\4\ The conditions imposed could include, for example,
establishing a cap on the amount of balances held in the account. In
addition, the Board may authorize a Reserve Bank to pay a different
rate of interest on balances held in the account or may limit the
amount of balances in the account that receive interest.
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Accordingly, Reserve Banks should evaluate how each institution
requesting access to an account and services will meet the following
principles.\5\ 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).
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\5\ 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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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 which is consistent with Section 2 of
these Guidelines. 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 access to 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.\6\
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\6\ These principles do not apply to accounts and services
provided by a Reserve Bank (i) as depository and fiscal agent, such
as those provided for the Treasury and for certain government-
sponsored entities (12 U.S.C. 391, 393-95, 1823, 1435), (ii) to
certain international organizations (22 U.S.C. 285d, 286d, 290o-3,
290i-5, 290l-3), (iii) to designated financial market utilities (12
U.S.C. 5465), (iv) pursuant to the Board's Regulation N (12 CFR
214), or (v) pursuant to the Board's Guidelines for Evaluating Joint
Account Requests.
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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.\7\
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\7\ Unless otherwise expressly excluded under the previous
footnote, these principles apply to account requests from all
institutions, including member banks or other entities that meet the
definition of a depository institution under section 19(b) (12
U.S.C. 461(b)(1)(A)), as well as Edge and Agreement Corporations (12
U.S.C. 601-604a, 611-631), and U.S. branches and agencies of foreign
banks (12 U.S.C. 347d).
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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 (15 U.S.C. 1693 et seq). 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.
sanctions 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.
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.
[[Page 51108]]
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
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 consultation with the
other Reserve Banks and Board as appropriate, 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 present no credit or
liquidity risk, making them very attractive in times of financial or
economic stress. As
[[Page 51109]]
a result, 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, it can more easily expand
its balance sheet during times of stress; as a result, 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,
economic or trade sanctions violations, 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 a BSA/
AML compliance program consisting of the components set out below and
in relevant regulations.\8\
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\8\ Refer to 12 CFR 208.62 and 63, 12 CFR 211.5(k), 5(m), 24(f),
and 24(j), and 12 CFR 225.4(f) (Federal Reserve); 12 CFR 326.8 and
12 CFR part 353 (FDIC); 12 CFR 748.1-2 (NCUA); 12 CFR 21.11, and 21,
and 12 CFR 163.180 (OCC); and 31 CFR 1020.210(a) and (b), and 31 CFR
1020.320 (FinCEN), which are controlling.
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i. For these purposes, the Reserve Bank should confirm that the
institution's BSA/AML compliance program contains the following
elements.\9\
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\9\ Reserve Banks may reference the FFIEC BSA/AML Manual. These
guidelines may be updated to reflect any changes to relevant
regulations.
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A. A system of internal controls, including policies and
procedures, to ensure ongoing BSA/AML compliance;
B. Independent audit and testing of BSA/AML compliance to be
conducted by bank personnel or by an outside party;
C. Designation of an individual or individuals responsible for
coordinating and monitoring day-to-day compliance (BSA compliance
officer);
D. Ongoing training for appropriate personnel, tailored to each
individual's specific responsibilities, as appropriate;
E. Appropriate risk-based procedures for conducting ongoing
customer due diligence to include, but not limited to, understanding
the nature and purpose of customer relationships for the purpose of
developing a customer risk profile and conducting ongoing monitoring to
identify and report suspicious transactions and, on a risk basis, to
maintain and update customer information;
c. The Reserve Bank should confirm that the institution has a
compliance program designed to support its compliance with the Office
of Foreign Assets Control (OFAC) regulations at 31 CFR Chapter V.\10\
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\10\ Reserve Banks may reference the OFAC section of the FFIEC
BSA/AML Manual. These guidelines may be updated to reflect any
changes to relevant regulations.
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i. For these purposes, the Reserve Bank may review the
institution's written OFAC compliance program, provided one has been
created, and confirm that it is commensurate with the institution's
OFAC risk profile. An OFAC compliance program should identify higher-
risk areas, provide for appropriate internal controls for screening and
reporting, establish independent testing for compliance, designate a
bank employee or employees as responsible for OFAC compliance, and
create a training program for appropriate personnel in all relevant
areas of the institution.
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 consultation with the
other Reserve Banks and the Board as appropriate, 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 or
group of like institutions 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.
Section 2: Tiered Review Framework
The tiered review framework in this section is meant to serve as a
guide to the level of due diligence and scrutiny to be applied by
Reserve Banks to different types of institutions. Although institutions
in a higher tier will on average face greater due diligence and
scrutiny than institutions in a lower tier, a Reserve Bank has the
authority to grant or deny an access request by an institution in any
of the three proposed tiers, based on the Reserve Bank's application of
the Account Access Guidelines in Section 1 to that particular
institution. As discussed above, an institution's access request will
be reviewed on a case-by-case, risk-focused basis and the tiers are
designed to provide additional transparency into the expected review
process based on key characteristics.
1. Tier 1: Eligible institutions that are federally insured.\11\
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\11\ See 12 U.S.C. 1813(c)(2) (defining ``insured depository
institution'' for purposes of the Federal Deposit Insurance Act) and
12 U.S.C. 1752(7) (defining ``insured credit union'' for purposes of
the Federal Credit Union Act).
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a. As federally-insured depository institutions, Tier 1
institutions are already subject to a standard, strict, and
comprehensive set of federal banking regulations.
b. In addition, for most Tier 1 institutions, detailed regulatory
and financial information would in most cases be readily available,
often in public form.
c. Accordingly, access requests by Tier 1 institutions will
generally be subject to a less intensive and more streamlined review.
d. In cases where the application of the Guidelines to Tier 1
institutions identifies potentially higher risk profiles, the
institutions will receive additional attention.
2. Tier 2: Eligible institutions that are not federally insured but
are subject (by statute) to prudential supervision by a federal banking
agency.\12\ In addition, (i) if such an institution is chartered under
federal law, it has a holding company that is subject to Federal
Reserve oversight (by statute or commitments); and (ii) if such an
institution is
[[Page 51110]]
chartered under state law and has a holding company, that holding
company is subject to Federal Reserve oversight (by statute or
commitments).\13\
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\12\ The federal banking agencies include the Board, the Office
of the Comptroller of the Currency (OCC), the Federal Deposit
Insurance Corporation, and the National Credit Union Administration.
Non-federally-insured institutions that are chartered under federal
law are subject to prudential supervision by the OCC. Non-federally-
insured institutions that are chartered under state law are subject
to prudential supervision by the Board if they become members of the
Federal Reserve System.
\13\ Edge and Agreement Corporations and U.S. branches and
agencies of foreign banks would fall under a Tier 2 level of review
because of Federal Reserve oversight over these institutions.
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a. Tier 2 institutions are subject to a similar, but not identical,
set of regulations as federally-insured institutions. As a result, Tier
2 institutions may still present greater risks than Tier 1
institutions.
b. Reserve Banks will have significant supervisory information
about, as well as some level of regulatory authority over, Tier 2
institutions.
c. Accordingly, account access requests by Tier 2 institutions will
generally receive an intermediate level of review.
3. Tier 3: Eligible institutions that are not federally insured and
are not considered in Tier 2.
a. Non-federally-insured institutions that are chartered under
federal law but do not have a holding company subject to Federal
Reserve oversight would be considered in Tier 3.
b. Non-federally-insured institutions that are chartered under
state law and are not subject (by statute) to prudential supervision by
a federal banking agency, or have a holding company that is not subject
to Federal Reserve oversight, would be considered in Tier 3.
c. Tier 3 institutions may be subject to a regulatory framework
that is substantially different from the regulatory framework that
applies to federally-insured institutions.
d. In addition, detailed regulatory and financial information
regarding Tier 3 institutions may not exist or may be unavailable.
e. Accordingly, Tier 3 institutions will generally receive the
strictest level of review.
-End-
By order of the Board of Governors of the Federal Reserve
System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2022-17885 Filed 8-18-22; 8:45 am]
BILLING CODE 6210-01-P