Federal Reserve payment accounts face tighter oversight demands

Industry groups including the Bank Policy Institute, the Financial Services Forum and The Clearing House Association urged the Federal Reserve to impose strong safeguards on its newly proposed payment accounts. They warned that allowing firms without deposit insurance, full AML supervision or other banking protections direct access to the Fed’s payment rails could expose the U.S. financial system to significant risk. The groups recommended rigorous applicant standards, limits on access to FedACH, FedCash and Fed check services, no interest on balances, no discount‑window access, overnight balance caps and compliance with the same BSA/AML and sanctions standards as insured banks.

The Federal Reserve’s own proposal would create an optional, special‑purpose payment account for eligible institutions, mainly Tier 2 and Tier 3 firms, giving them access to Fedwire Funds, FedNow, the National Settlement Service and Fedwire Securities, but not FedACH. The accounts would not provide intraday credit, would earn no interest and would be subject to balance limits of up to $1 billion, with a 45‑day review timeline for Tier 1 requests and 90 days for Tier 2/3. Community banks such as the Bank of Colorado have asked for additional conditions on applicants, citing concerns over regulatory differences.