Broadening access to Reserve Bank accounts raises concern

CUNA submitted a letter to the Secretary for the Board of Governors of the Federal Reserve Ann Misback on Friday in response to the Board’s proposed guidelines for evaluating account and services requests.

CUNA raised concerns that the Federal Reserve Bank broadening access to accounts without consistent guidelines could introduce unnecessary risks to the payment system.

The Board requested comments to a similar request back in 2021. While CUNA continues to support the Board’s efforts to establish clear and consistent guidelines to evaluate requests, the new proposed guidelines do not address how the Reserve Banks would ensure that new applicants for accounts and services that are not subject to the rigorous regulations and supervision would demonstrate adequate standards for ensuring the safe operation of the payments system. 

While the current system for determining account access eligibility has worked well, the Board’s guidelines need to implement proper safeguards for novel business model entities that are not subject to the stringent regulations and examinations of banks and credit unions, the letter notes. CUNA’s concern is that the Reserve Banks could apply the guidelines inconsistently from entity to entity, which could lead to different outcomes for applications and possibly differences in how entities are supervised for ongoing compliance. The letter suggested that the Board and the Reserve Banks should create a uniform evaluation policy and procedures so that the guidelines are consistent.

“For eligible entities, access would be conditioned on meeting the requirements in the Guidelines, which allows the Board and Reserve Banks to ensure entities given Federal Reserve accounts do not add risk to the payments system,” the letter reads. “The Board’s goal should be to apply a similar level of requirements with processes to ensure compliance, as is in place for a federal or state regulated credit union or bank. Any entity not meeting these requirements should be denied access to the payments system.”

CUNA recognizes the proposed guidelines appear to be developed from the regulatory framework for depository institutions and also agrees that this framework should be the foundation of the guidelines. These guidelines also adequately address risk by credit unions. However, for monitoring compliance the Board should develop a process to monitor entities granted Reserve Bank access on an ongoing basis and include an assessment for cybersecurity risks.