The Federal Reserve on Wednesday unveiled a proposal to establish a new, limited form of account for firms such as fintech companies that would enable them to move funds through the Fed's payment system but with narrower protections than conventional bank accounts.
Under the Fed's proposal, these streamlined accounts would be structured so that holders would not have access to intraday credit facilities and would be excluded from the Fed's discount window. In addition, firms maintaining funds in these accounts would not earn interest on reserves held at the central bank, the Fed said in a statement.
The move follows prior work by the central bank that examined such simplified account arrangements as part of an effort to broaden access to its payments infrastructure while trying to contain potential risks to the financial system. The Fed framed the proposal as a way to expand participation in its payment rails without extending the full set of protections and backstops that apply to traditional depository institutions.
Importantly, the proposal does not alter the legal standards that determine which entities are eligible to hold accounts at the Federal Reserve. The central bank said the plan would not expand or change statutory eligibility requirements for Fed account access.
At the same time, the Fed is encouraging Federal Reserve Banks to pause ongoing decisions on whether to grant accounts to nontraditional firms until the central bank completes work on the new policy. That guidance is intended to let the Fed finish its policy development before Reserve Banks proceed with additional account approvals.
The proposal outlines a narrowly tailored account type that would allow eligible nonbank firms to use Federal Reserve payment services while explicitly limiting credit privileges and the accrual of interest. The central bank described the effort as continuing prior research and policy design around access to the Fed's payment infrastructure and as seeking to balance expanded access with risk containment.
Clear summary
The Fed proposed a new, limited payment account option for fintechs and other nonbank firms to access its payment system. The accounts would omit intraday credit, discount window access, and interest on reserves. Legal eligibility rules would not change, and Reserve Banks are being asked to pause new nontraditional account approvals until the policy is finalized.