Fed Deadline Passes as Payment Access Debate Continues
For payments firms, direct access to the Federal Reserve can remove an intermediary from the chain between a transaction and settlement. For banks, expanding that access raises another question: Which firms should be allowed to connect directly to central bank infrastructure, and under what regulatory conditions? Those questions are now sitting with Washington. A May […] The post Fed Deadline…
A May 19 executive order tasked the Federal Reserve with examining access to payment accounts and services for nonbank financial companies and uninsured depository institutions. The 120-day deadline for a report expired on September 16, and it remains unclear if the Fed submitted its findings. Direct access to the Federal Reserve can remove the need for intermediaries in transactions, but the debate over which institutions should be granted such access continues.
The Fed's current policy allows access to member banks, depository institutions, and foreign banks' U.S. branches and agencies. However, expanding access to uninsured depository institutions and nonbank financial companies would require legislative action from Congress. The Fed has already released guidelines for account access, which vary based on factors such as federal insurance and prudential supervision.
Institutions seeking access to the Fed's payment services must still go through intermediaries, while the proposed special-purpose Payment Account would offer limited services without interest on balances or overdraft protections.
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