Fed Finalizes 'Master Accounts' Guidance

Source: American Banker

The Federal Reserve Board has finalized its guidance for novel financial companies to access master accounts, which allow institutions to transfer money directly to other account holders in a network that underpins the global financial system.

The move could encourage fintechs that struggled to get access to master accounts and have sought more clarity on the process. With the new guidance, special-purpose depository institutions such as Custodia and Kraken, which have applied for master accounts, might not need intermediary banks to access the payment rails. 

The finalized guidelines are "substantially similar" to the guidelines posted by the Fed Board in May 2021 and later in March 2022, the agency said. 

The guidelines will create a tiered review system whereby companies that don't have federal deposit insurance and aren't overseen by banking regulators will receive the greatest scrutiny, while firms with deposit insurance and enhanced supervision will receive the greatest degree of deference. Bank trade associations said in their public comments on the proposal that the Fed should include greater clarity about what kind of supervisory obligations might be placed on institutions that are granted master accounts under the revised guidelines.

Federal Reserve Vice Chair Lael Brainard said that the final guidance would go a long way toward providing consistency and transparency around its master account granting process.