Better Markets has filed a Comment Letter in response to the Federal Reserve’s proposed guidelines for approving access to Federal Reserve accounts and services.
Why It Matters. Federal Reserve accounts and services provide institutions that have access with many advantages, such as access to the Fed’s payment systems for large-scale money transfers and interest paid on balances held with the Fed. However, access to Fed accounts and services by any institution, even those that are federally insured and subject to supervision and regulation by federal banking agencies, introduces risk to the Reserve Banks, the Fed’s payment system, other financial institutions, the economy, and ultimately the taxpayer.
What We Said. While the guidelines represent a positive step in bringing consistency among Reserve Banks in their evaluation of requests for access to accounts and services, they fail to ensure an appropriate level of rigor that is transparent and consistent for the riskiest institutions. Considering that robust standards for risk management and federal supervisory oversight are yet to be established for them, the guidelines should have a presumption of rejection of access until a robust standards and oversight frameworks have been established for each institution type.
Bottom Line. Better Markets supports consistency and transparency in the process to assess access to Fed accounts and services as well as efforts to reduce risk to the Federal Reserve system, the financial system, and the economy, but the proposed guidelines fail to do that. We urge the Fed to incorporate the enhancements we propose in our Comment Letter.
Read our full Comment Letter here or click the button below.