Guidelines for Evaluating Account and Services Requests, 87 FR 51099, FR Doc 2022-17885
Document text
Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices 51099
Exempt ESBT Trust, John Ross, as Taylorville, Inc., and thereby indirectly and services and to different ways of
trustee, the Sandra K. Ross 2021 GST- retain voting shares of First National providing traditional banking services.
Exempt ESBT Trust, Sandra Stinson, as Bank in Taylorville, both of Taylorville, Relatedly, there has been a recent uptick
trustee, John W. Ross and Missy Ross, Illinois. in novel charter types being authorized
James Szopinski, Community National B. Federal Reserve Bank of or considered by federal and state
Bank f/b/o Jeffrey Stinson IRA, all of Minneapolis (Chris P. Wangen, banking authorities across the country.
Milan, Tennessee; and Barry Jones, Assistant Vice President), 90 Hennepin As a result, the Reserve Banks are
Trenton, Tennessee; a group acting in Avenue, Minneapolis, Minnesota receiving an increasing number of
concert to acquire and retain voting 55480–0291. Comments can also be sent inquiries and access requests from
shares of Hometown Bancorp, Inc., and electronically to [email protected]: institutions that have obtained, or are
thereby indirectly acquire and retain 1. Tyler Engstrom, Westhope, North considering obtaining, such novel
voting shares of The Bank of Milan, both Dakota; to acquire voting shares of charter types.
of Milan, Tennessee. Peoples State Holding Company
A. Summary of May 2021 Proposed
Board of Governors of the Federal Reserve (Company), and thereby indirectly
Account Access Guidelines
System. acquire voting shares of Peoples State
Michele Taylor Fennell, Bank (Bank), both of Westhope, North On May 5, 2021, the Board requested
Dakota. Additionally, Tyler Engstrom; comment on proposed guidelines to be
Deputy Associate Secretary of the Board.
Curtis Moum, Westhope, North Dakota; used by Reserve Banks in evaluating
[FR Doc. 2022–17824 Filed 8–18–22; 8:45 am]
and Darin Bohl, Bottineau, North requests for accounts and services
BILLING CODE P
Dakota, as a group acting in concert, to (Original Proposal or Proposed
acquire voting shares of Company and Guidelines).1 2 The Original Proposal
thereby indirectly acquire voting shares reflected the Board’s policy goals of (1)
FEDERAL RESERVE SYSTEM
of Bank. ensuring the safety and soundness of the
Change in Bank Control Notices; banking system, (2) effectively
Board of Governors of the Federal Reserve
Acquisitions of Shares of a Bank or System. implementing monetary policy, (3)
Bank Holding Company promoting financial stability, (4)
Michele Taylor Fennell,
protecting consumers, and (5)
The notificants listed below have Deputy Associate Secretary of the Board.
promoting a safe, efficient, inclusive,
applied under the Change in Bank [FR Doc. 2022–17925 Filed 8–18–22; 8:45 am] and innovative payment system. The
Control Act (Act) (12 U.S.C. 1817(j)) and BILLING CODE P Original Proposal was also intended to
§ 225.41 of the Board’s Regulation Y (12 ensure that Reserve Banks apply a
CFR 225.41) to acquire shares of a bank transparent and consistent set of factors
or bank holding company. The factors FEDERAL RESERVE SYSTEM when reviewing requests for access to
that are considered in acting on the [Docket No. OP–1747] accounts and services (access requests).3
applications are set forth in paragraph 7 The Original Proposal consisted of the
of the Act (12 U.S.C. 1817(j)(7)). Guidelines for Evaluating Account and following six principles:
The public portions of the Services Requests 1. Each institution requesting an account or
applications listed below, as well as services must be eligible under the Federal
other related filings required by the AGENCY: Board of Governors of the
Federal Reserve System. Reserve Act or other federal statute to
Board, if any, are available for maintain an account at a Reserve Bank and
immediate inspection at the Federal ACTION: Final guidance. receive Federal Reserve services and should
Reserve Bank(s) indicated below and at have a well-founded, clear, transparent, and
SUMMARY: The Board of Governors of the enforceable legal basis for its operations.
the offices of the Board of Governors.
Federal Reserve System (Board) has 2. Provision of an account and services to
This information may also be obtained
approved final guidelines (Account an institution should not present or create
on an expedited basis, upon request, by
Access Guidelines) for Federal Reserve undue credit, operational, settlement, cyber
contacting the appropriate Federal or other risks to the Reserve Bank.
Banks (Reserve Banks) to utilize in
Reserve Bank and from the Board’s 3. Provision of an account and services to
evaluating requests for access to Reserve
Freedom of Information Office at an institution should not present or create
Bank master accounts and services
https://www.federalreserve.gov/foia/ undue credit, liquidity, operational,
(accounts and services). settlement, cyber or other risks to the overall
request.htm. Interested persons may
DATES: Implementation Date is August payment system.
express their views in writing on the
standards enumerated in paragraph 7 of 19, 2022. 4. Provision of an account and services to
FOR FURTHER INFORMATION CONTACT: an institution should not create undue risk to
the Act. the stability of the U.S. financial system.
Comments regarding each of these Jason Hinkle, Assistant Director (202–
5. Provision of an account and services to
applications must be received at the 912–7805), Division of Reserve Bank an institution should not create undue risk to
Reserve Bank indicated or the offices of Operations and Payment Systems, or the overall economy by facilitating activities
the Board of Governors, Ann E. Gavin Smith, Senior Counsel (202–452– such as money laundering, terrorism
Misback, Secretary of the Board, 20th 3474), Legal Division, Board of financing, fraud, cybercrimes, or other illicit
Street and Constitution Avenue NW, Governors of the Federal Reserve activity.
Washington, DC 20551–0001, not later System. For users of TTY–TRS, please
1 86 FR 25865 (May 11, 2021).
than September 6, 2022. call 711 from any telephone, anywhere
2 The Proposed Guidelines are designed to be
A. Federal Reserve Bank of Chicago in the United States.
applied to both new and pending access requests as
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(Colette A. Fried, Assistant Vice SUPPLEMENTARY INFORMATION: well as cases where the Reserve Bank determines
President) 230 South LaSalle Street, to reevaluate the risk of existing accounts. This
Chicago, Illinois 60690–1414: I. Background broad application is intended to ensure that risks
1. The Revocable Trust Agreement The payments landscape is evolving are identified and mitigated and that institutions
are treated in a fair and equitable manner.
No. 060134, James O. Beavers, trustee, rapidly as technological progress and 3 In developing the Account Access Guidelines,
both of Taylorville, Illinois; to retain other factors are leading both to the the Board sought to incorporate as much as possible
voting shares of First Bancorp of introduction of new financial products existing Reserve Bank risk management practices.
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51100 Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices
6. Provision of an account and services to access to accounts and services. These Supplemental Notice),5 which proposed
an institution should not adversely affect the risks include, among others, risks to the to incorporate into the Account Access
Federal Reserve’s ability to implement Reserve Banks, to the payment system, Guidelines a tiered review framework to
monetary policy.
to the financial system, and to the provide additional clarity on the level of
The first principle specified that only effective implementation of monetary due diligence and scrutiny that Reserve
institutions that are legally eligible for policy. The Original Proposal would Banks would apply to different types of
access to Reserve Bank accounts and prompt the Reserve Bank to evaluate an institutions when applying the six risk-
services would be considered for access. eligible institution’s risk profile and based principles.
The remaining five principles addressed identify risk-mitigation strategies In the Original Proposal, the
specific risks, ranging from narrow risks adopted by the eligible institution introductory text to the Account Access
(such as risk to an individual Reserve (including capital, risk management Guidelines noted that the application of
Bank) to broader risks (such as risk to frameworks, compliance with the Guidelines to requests by federally-
the U.S. financial system).4 For each of regulations, and supervision) as well as insured institutions should be fairly
these five principles, the Original potential risk mitigants that could be straightforward, while requests from
Proposal set forth factors that Reserve implemented by the Reserve Bank non-federally-insured institutions may
Banks should consider when evaluating (including account agreement necessitate more extensive due
an institution’s access request against provisions, restrictions on financial diligence. The Supplemental Notice
the specific risk targeted by the services accessed, and account risk proposed a three-tiered review
principle (several factors are pertinent controls). framework—which would become
to more than one principle). The Section 2 of the Account Access
identified factors are commonly used in In the Original Proposal, the Board Guidelines—to provide additional
the regulation and supervision of expressed the Federal Reserve’s broad clarity regarding the minimum level of
federally-insured institutions and many policy goals in providing accounts and review for different types of institutions.
of the factors are utilized in existing services. In addition, the Board stated Under the Supplemental Notice,
Reserve Bank risk management that, while the Proposed Guidelines proposed Tier 1 would consist of
practices. The Original Proposal noted would be intended primarily to apply to eligible institutions that are federally-
that requests from non-federally-insured new access requests, Reserve Banks insured. These institutions are already
institutions would generally be subject would also apply them to existing subject to a homogeneous and
to a greater level of review. In addition, account and services relationships comprehensive set of federal banking
the Board noted that, when applying the where appropriate, such as when a regulations, and, in most cases, detailed
Account Access Guidelines, the Reserve Reserve Bank becomes aware of a regulatory and financial information
Bank reviewing the access request significant increase in the risks that an about these firms would be readily
should integrate to the extent possible account holder presents due to changes available to Reserve Banks. Accordingly,
the assessments of the requesting in the nature of, for example, its the Supplemental Notice stated that
institution by its state and/or federal principal business activities or access requests by Tier 1 institutions
supervisors into the Reserve Bank’s own condition. would generally be subject to a less
independent assessment of the The Board requested comment on all intensive and more streamlined review.6
institution’s risk profile. aspects of the Original Proposal, In the Supplemental Notice, proposed
The Board intended for the Original including whether the scope and Tier 2 would consist of eligible
Proposal to support consistency in application of the Proposed Guidelines institutions that are not federally-
evaluating account access requests was sufficiently clear and appropriate to insured but that are subject to federal
across Reserve Banks, while achieve their intended purpose. The prudential supervision at the institution
maintaining the discretion granted to Board also requested comment on and, if applicable, at the holding
the Reserve Banks under the Federal whether other criteria or information company level.7 The Supplemental
Reserve Act to grant or deny access might be relevant when Reserve Banks Notice explained that Tier 2 institutions
requests. The Board noted in the evaluate access requests. The Board are subject to similar but not identical
Original Proposal that a consistent further sought comment specifically on regulations as federally-insured
framework across Reserve Banks would the following aspects of the Original institutions, and as a result, may present
reduce the potential that one Reserve Proposal: greater risks than Tier 1 institutions.
Bank might be considered to be more Additionally, detailed regulatory and
1. Do the Proposed Guidelines address all financial information regarding Tier 2
likely to grant access requests than
the risks that would be relevant to the
another Reserve Bank and would Federal Reserve’s policy goals?
institutions is less likely to be available
mitigate the risk that an individual 2. Does the level of specificity in each and may not be available in public form.
access request decision by one Reserve principle provide sufficient clarity and Accordingly, the Supplemental Notice
Bank could create de facto Federal transparency about how the Reserve Banks stated that access requests by Tier 2
Reserve System policy regarding access will evaluate requests? institutions would generally receive an
requests for a particular business model 3. Do the Proposed Guidelines support intermediate level of review.
or risk profile. responsible financial innovation? In the Supplemental Notice, proposed
The Original Proposal was based on a Tier 3 would consist of eligible
foundation of risk management and Finally, the Board sought comment on
mitigation. In developing the Original whether the Board or the Reserve Banks 5 87 FR 12957 (March 8, 2022).
Proposal, the Board considered the risks should consider other steps or actions to 6 The Supplemental Notice stated that, in cases
facilitate the review of access requests where the application of the Guidelines to a Tier
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that may arise when an institution gains 1 institution identifies a potentially higher risk
in a consistent and equitable manner.
profile, the institution would receive additional
4 The six principles were designed primarily as a
B. Summary of March 2022 attention.
risk management framework and, as such, focused Supplemental Notice
7 The Supplemental Notice noted the Board
on risks an institution’s access could pose. The would expect holding companies of Tier 2
Board notes, however, that granting an access institutions to comply with similar requirements as
request could also have net benefits to the financial
On March 1, 2022, the Board holding companies subject to the Bank Holding
system. published a second notice (the Company Act.
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Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices 51101
institutions that are not federally take comparatively longer to review stated policy goals. These
insured and not subject to prudential access requests by institutions that recommendations to amend the
supervision by a federal banking agency engage in novel activities for which Proposed Guidelines were often
at the institution or holding company authorities are still developing conflicting.
level. The Supplemental Notice stated appropriate supervisory and regulatory Many commenters made
that Tier 3 institutions may be subject frameworks. recommendations that would, in their
to a supervisory or regulatory By adopting the final Account Access view, provide an easier path for
framework that is substantially different Guidelines, the Board would establish a institutions, particularly those with
from, and possibly weaker than, the transparent and equitable framework for novel charters, to successfully gain
supervisory and regulatory framework Reserve Banks to apply consistently to access to accounts and services. Some of
that applies to federally-insured access requests. To promote these commenters recommended that
institutions, and as a result may pose consistency, the Reserve Banks are the Board provide more specific
the highest level of risk. Detailed working together, in consultation with requirements for access requests, so that
regulatory and financial information the Board, to expeditiously develop an requesting institutions, chartering
regarding Tier 3 institutions may not implementation plan for the final authorities, and other banking regulators
exist or may be unavailable. Guidelines. would have more clarity on what is
Accordingly, the Supplemental Notice required for obtaining access to
A. Comments on the Original Proposal
stated that access requests by Tier 3 accounts and services. Other
institutions would generally receive the The Board received 46 individual commenters stated that the Proposed
strictest level of review. comment letters and 281 duplicate form Guidelines may be ineffective if they are
The Board sought comment on all letters in response to the Original implemented in a way that subjects
aspects of the proposed three-tiered Proposal. Nearly all of the comment institutions with novel charters to
review framework. letters expressed general support for the restrictions that resemble regulatory
Proposed Guidelines, and most letters requirements that do not fit their
II. Discussion also made recommendations for business models. While some
The Board is adopting final Account improvements. Commenters represented commenters generally stated that
Access Guidelines. Section 1 of the final several types of institutions, including requirements for access to accounts and
Account Access Guidelines is (1) institutions with traditional charters, services should accommodate
substantially the same as the Original such as banks and credit unions, and institutions that have different levels of
Proposal with minor changes to improve their trade associations; (2) institutions regulatory oversight, others suggested
clarity in response to comments with novel charters, such as that the Board establish charter-specific
received. As described further below, cryptocurrency custody banks, and their requirements for account access. Some
the Board has made certain changes in trade associations; and (3) think tanks commenters expressed concern about
Section 2 of the final Account Access and non-profit advocacy groups. The the statement in the Original Proposal
Guidelines to provide more comparable views expressed by the first category of that ‘‘access requests from non-
treatment between non-federally- commenters often conflicted with the federally-insured institutions may
insured institutions chartered under views expressed by the second category require more extensive due diligence,’’
state and federal law. Specifically, the of commenters. The duplicate form suggesting that this position would stifle
Board has revised Tier 2 to include a letters included recommendations that innovation to the extent that it would
narrower set of non-federally-insured mirrored those submitted by trade impose stricter requirements on state-
national banks than the definition associations for institutions with chartered institutions without federal
proposed in the Supplemental Notice.8 traditional charters, which opposed deposit insurance. Finally, some
Under the revised Tier 2, non-federally- greater account access for institutions commenters recommended that the
insured institutions that are chartered with novel charters. Board could mitigate the risks posed by
under federal law will only be Many commenters provided general institutions with certain novel banking
considered in Tier 2 if the institution comments on the Original Proposal that charters by allowing such institutions to
has a holding company that is subject to addressed one or more of three high- maintain limited-access accounts that
Federal Reserve oversight. In addition, level themes: (1) policy requirements to would provide a subset of services
the Board is updating the Section 2 gain access to accounts and services; (2) offered by Reserve Banks.
tiering framework to emphasize that the implementation of the Proposed Many commenters, on the other hand,
review of institutions’ requests will be Guidelines; and (3) legal eligibility for recommended that the Proposed
completed on a case-by-case, risk- Reserve Bank accounts. Some Guidelines should provide a more
focused basis within each of the three commenters made recommendations challenging path for institutions with
tiers.9 For example, Reserve Banks may related to the Proposed Guidelines that novel charters to gain access to accounts
did not fit into these themes and are and services. Many of these commenters
8 These revisions to Tier 2 apply only to non-
also described below. Lastly, some argued that the Proposed Guidelines
federally-insured institutions chartered under commenters provided responses to the should subject non-federally-insured
federal law. Under the final Account Access
Guidelines, a non-federally-insured institution specific questions posed in the Original institutions to the same types of
chartered under state law will (consistent with the Proposal as well as comments on requirements as apply to federally-
Supplemental Notice) be considered in Tier 2 if (i) specific principles in the Proposed insured depository institutions,
the institution is subject to prudential supervision Guidelines. regardless of the institution’s business
by a federal banking agency, and (ii) to the extent
the institution has a holding company, that holding
model. These commenters generally
1. Policy Requirements To Gain Access
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company is subject to Federal Reserve oversight. argued that institutions with novel
9 As described further below, the Board is making
to Accounts and Services charters are not subject to the same
some other minor updates to Section 2 of the Most commenters, while supporting strict and costly regulations or to the
Account Access Guidelines, including clarifying the Proposed Guidelines, provided same rigorous reviews as apply to
that Edge and Agreement Corporations and U.S.
branches and agencies of foreign banks would fall
recommendations for improvements to traditional institutions, providing such
under a Tier 2 level of review due to Federal the Guidelines that, in their view, institutions with unfair advantages over
Reserve oversight over these institutions. would assist the Board in achieving its institutions with traditional charters.
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51102 Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices
Some commenters recommended that the mechanism(s) by which such Board Response
the Proposed Guidelines include more consistency would be achieved. Other In the final Account Access
granular and strict standards, such as commenters went further, suggesting Guidelines, the Board’s primary goal is
explicit capital and liquidity that the Board should give consent and to establish a transparent and consistent
requirements. Others recommended non-objection to Reserve Bank access- framework for all access requests across
additional requirements for account request determinations, or that the Reserve Banks from both risk and policy
access, such as compliance with the Board should form a centralized (i.e., perspectives. To emphasize this goal,
Community Reinvestment Act and Board-led) evaluation committee to the Board has incorporated in the
consumer protection laws, or that consider access requests. Further, introduction to the final Account Access
Reserve Banks consider the risks from several commenters suggested various Guidelines the expectation that Reserve
an institution’s affiliate relationships avenues for increased communication Banks engage in consultation with the
and subject an institution’s holding from Reserve Banks about their other Reserve Banks and the Board, as
company to the Bank Holding Company appropriate, to support consistent
decisions to grant or deny account
Act. Still other commenters suggested implementation of the Account Access
requests, including publishing decisions
that the Proposed Guidelines should Guidelines. In further support of this
require all accountholders that do not on access requests (including any
supporting analysis), maintaining an up- goal and as explained further below, the
file call reports to publicly provide Board has adopted a new Section 2 of
periodic audited financial reports so to-date list of all institutions that have
been granted access, and formally the Account Access Guidelines
that payment system participants are establishing a tiered review framework
better able to assess counterparty risk. communicating with state regulators
about how the Federal Reserve views that provides additional guidance on the
Board Response level of due diligence and scrutiny to be
particular state charters. In addition,
applied to access requests. Additionally,
The Board believes that the final many commenters recommended that
as noted previously, the Reserve Banks
Account Access Guidelines provide a the Board establish timelines within are working together, in consultation
framework that will effectively support which Reserve Banks must grant or with the Board, to expeditiously
responsible innovation and prudent risk deny access requests, arguing that such develop an implementation plan for the
management. The Account Access timeliness would provide greater final Guidelines.
Guidelines establish a consistent, transparency and give requesting Regarding comments to disclose
comprehensive, and transparent institutions more clarity on the information on particular requests, the
framework for Reserve Banks to analyze resources and time needed for the Board notes that when evaluating access
access requests on a case-by-case, risk- evaluation process. One commenter requests, Reserve Banks communicate
focused basis reflecting the institution’s further argued that expectations of a directly with the requestor and, in some
full risk profile (including its business lengthy review process could discourage cases, with the institution’s primary
model, size, complexity, and regulatory institutions with novel charters from regulator, including by requesting
framework) and to mitigate, to the additional information, clarifying the
requesting accounts and thus discourage
extent possible, the risks identified. status of the request, and
innovation.
Furthermore, as noted in the Original communicating any controls or
Proposal, each requesting institution’s Commenters expressed differing
opinions on whether a Reserve Bank limitations that might be placed on the
risk management and governance account and services. However, the
infrastructure is expected both to meet should conduct an independent
identity of institutions that maintain
existing regulatory and supervisory assessment of a requestor’s risk profile.
accounts at Reserve Banks, or that
requirements and to be sufficiently Some commenters suggested that a
request access to accounts and services,
tailored to the institution’s business, in Reserve Bank’s assessment of a is considered confidential business
the Reserve Bank’s assessment, to requestor’s risk profile should defer to information and, as such, public
mitigate the risks identified by the the primary regulator’s assessment of disclosure of account status by the
Account Access Guidelines. the risks posed by the institution, while Reserve Banks would not be
As noted in the final Account Access others said the Board should ensure that appropriate.10
Guidelines, a Reserve Bank may a Reserve Bank conduct an independent The Board has also considered
implement risk mitigants including risk assessment separate from that of the whether the final Account Access
imposing conditions or restrictions on institution’s primary regulator. Guidelines should include a timeline for
an institution’s access to accounts and Additionally, a few commenters completing reviews of access requests
services if necessary to mitigate risks set suggested that the Board remove by Reserve Banks. The Board believes
forth in the Account Access Guidelines. language from the Proposed Guidelines that the nature of relevant variables in
Reserve Banks also retain the discretion that recognizes the authority granted to access requests—including the variety
to deny a request for access to accounts Reserve Banks under the Federal of charter types, business models,
and services where, in the Reserve Reserve Act to exercise discretion in regulatory regimes, and risk profiles—
Bank’s assessment, granting access to granting or denying requests for precludes specification of a single
the institution would pose risks that accounts and services. timeline. The Reserve Banks face
cannot be sufficiently mitigated. challenges in balancing the desire by
Many commenters argued that the
2. Implementation of the Account Proposed Guidelines should require requestors for a specific timeline with
Access Guidelines ongoing review of non-federally-insured Reserve Banks’ need to perform
institutions, so as to appropriately thorough reviews of requestors with
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Many commenters provided
monitor the risks that such institutions, novel, complex, or high-risk business
recommendations related to how the
and especially those with novel plans, along with requestors that are
Proposed Guidelines will be
subject to novel regulatory regimes.
implemented and how to promote charters, could pose after obtaining
consistency in their application by access to accounts and services. Some 10 The Board notes that institutions may choose
Reserve Banks. Some of these commenters singled out cyber risk as a to self-publicize their account and service requests
commenters asked the Board to specify specific area for ongoing review. and status.
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Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices 51103
Setting a specific timeline could result that the Board should study account legally may request access to Reserve
in an increased number of premature or access decisions by other central banks. Bank accounts and services.
unnecessary denials of access requests One commenter argued that the Board
4. Additional Comments
in cases where the specified timeline should interpret the definition of a
does not allow the Reserve Banks ‘‘depository institution’’ eligible for A. Comments Supporting a Ban on
sufficient time to understand the access to accounts and services as Novel Charter Account Access
intricacies of the requesting institutions’ broadly as possible to support expanded Some commenters suggested that
risk profiles. Accordingly, the Board has access to accounts and services, which novel charters mix commercial and
not adopted a timeline expectation in the commenter argued would support financial activities and provide a ‘‘back
the final Account Access Guidelines, financial innovation. door entry’’ into banking for commercial
but the Board has added language to Several commenters recommended entities. These commenters
emphasize the Board’s expectations for that the Board should ensure that its recommended that the Federal Reserve
Reserve Banks to coordinate in focusing interpretation of legal eligibility not grant access requests from
on both timeliness and consistency in supports responsible financial institutions with novel charters.
evaluating access requests. innovation as stated as a policy goal of
The Board believes it is important that the Board. Some of these commenters Board Response
Reserve Banks evaluate both the recommended that the Board review The Board does not believe that it is
potential risks posed by an eligible legal eligibility broadly to support appropriate to categorically exclude all
institution’s access request and the innovation and expand eligibility. One novel charters from access to accounts
potential actions to mitigate such risks. commenter recommended that the and services. The Account Access
The final Account Access Guidelines Board decouple legal eligibility for a Guidelines as adopted are intended to
emphasize that a Reserve Bank should Reserve Bank account from eligibility be applied by Reserve Banks to access
integrate, to the extent possible, the for direct access to Federal Reserve requests from eligible institutions with
assessments of an institution by state financial services. The commenter both novel and more traditional
and/or federal supervisors into the argued that decoupling direct access to charters. The Board believes that the
Reserve Bank’s independent assessment services from eligibility for accounts final Account Access Guidelines will
of the institution’s risk profile. This would have benefits for consumers and provide a robust framework for
integration will ensure that Reserve pointed to other countries which have analyzing and mitigating risks.
Banks use all relevant data in pursuing taken such action.
the goal of prudent risk management. B. Comments Opposing the Proposed
The Board has also added language in Board Response Guidelines
the final Account Access Guidelines As the Board noted in the Original While most commenters supported
that clarifies the respective roles of the Proposal, it has been considering the Original Proposal, three commenters
Board (Reserve Bank oversight) and the whether it may be useful to clarify the opposed the Proposed Guidelines
Reserve Banks (discretion in decision interpretation of legal eligibility under entirely. One of these commenters
making) with respect to evaluating argued the Guidelines created opacity in
the Federal Reserve Act for access to
access requests. the master account process, not clarity.
accounts and services. After a careful
With regard to the recommendation
analysis of this issue, the Board has Two other commenters opposed the
for ongoing review of the risks posed by
determined it is not necessary to do so Proposal because, in their view, the
non-federally-insured institutions’
at this time. The Account Access Proposed Guidelines would expand
access to accounts and services once an
access request has been granted, the Guidelines do not establish a legal access to accounts and services to
Board notes that the introduction to the eligibility standard, but the first institutions with novel business models
Account Access Guidelines includes principle clearly states that institutions that pose high levels of risk to the
language discussing existing condition must be eligible under the Federal payments and banking system.12
monitoring practices. The Board Reserve Act or other federal statute to
Board Response
believes that the Reserve Banks’ existing maintain an account at a Reserve Bank.
The Board believes this provides The Board believes that the final
risk-management practices sufficiently
sufficient clarity on what entities may Account Access Guidelines provide
address the risks identified by these
legally request access to account and greater transparency and clarity than
comments without the need for an
services, and the Reserve Banks will currently exist on the factors that
explicit expectation in the Account
continue to assess an institution’s legal Reserve Banks should consider in
Access Guidelines for ongoing review of
eligibility under Principle 1 on a case- evaluating access requests. The Board
non-federally-insured institutions.
by-case basis to ensure that only entities also believes that the final Account
3. Legal Eligibility that are legally eligible may request to Access Guidelines strike an appropriate
Some commenters requested that the obtain such access.11 balance between providing transparency
Guidelines more specifically address The Board notes that the purpose of and allowing for implementation of the
legal eligibility for access to accounts the Account Access Guidelines is to Guidelines across a variety of potential
and services. Others presented ensure that Reserve Banks evaluate a institutions that may request accounts
arguments about what entities are, or transparent and consistent set of risk- (e.g., institutions with differing charter
should be, legally eligible for access to focused factors when reviewing account types, business models, or regulatory
accounts and services. Other requests. The Board is not expanding (or regimes). The Board believes that the
final Account Access Guidelines create
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commenters suggested that the Board limiting) the types of institutions that
should issue a moratorium on granting a structured and sufficiently transparent
access requests made by institutions 11 While Reserve Banks exercise decision-making framework that will help to foster a
with novel charters until the Board authority with respect to access requests, the Board
has interpretive authority with respect to the 12 Many of these commenters pointed to ‘‘fintech’’
clarifies legal eligibility, that the Board Federal Reserve Act and thus is responsible for related business models and other novel special
should publish a list of charter types interpreting the provisions of the Act concerning purpose charters as posing heightened risk to the
already deemed to be legally eligible, or legal eligibility. payment system and financial markets.
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51104 Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices
consistent evaluation of access requests adequately mitigate those risks. The additional guidance on the level of due
across all twelve Reserve Banks and will Board also recognizes that some smaller diligence expected by Reserve Banks for
benefit the financial system broadly. institutions with traditional charters requests from institutions that are not
In response to the comments related would likely not create risks to financial subject to regulatory and supervisory
to expansion of eligibility, the Board stability or monetary policy oversight similar to that applied to
emphasizes that, as noted previously, implementation. Nevertheless, the federally-insured institutions.
the Account Access Guidelines do not Board has determined that both the b. Question 2
establish legal eligibility standards but financial stability principle and the
instead establish a risk-focused monetary policy principle should The Board asked whether the level of
framework for evaluating access remain in the final Account Access specificity in each principle provides
requests from legally eligible Guidelines, because they provide full sufficient clarity and transparency about
institutions under federal law. transparency to the public on the types how the Reserve Banks will evaluate
of factors Reserve Banks should requests. Many commenters addressing
C. Comments on Individual Principles Question 2 recommended that the Board
consider in evaluating access requests.
The Board received some comments In addition, the Board has amended a add more detail to the Proposed
on individual principles in the Original footnote in the Account Access Guidelines to increase the level of
Proposal. Several commenters, while on Guidelines to delete the language that a clarity and transparency.
net supportive of Principle 4 (Financial few commenters interpreted to suggest Board Response
Stability) and Principle 6 (Monetary that Reserve Banks have the authority to
Policy Implementation), suggested some establish the IORB rate. The Board’s response to these
refinements, including a specification comments is described in Section II.A.
that most ‘‘traditional’’ institutions, due D. Comments on Specific Questions
c. Question 3
to their business model and size, would As noted previously, the Original
not create risks to financial stability Proposal posed three specific questions The Board asked whether the
and/or monetary policy and an additional open-ended question principles support responsible financial
implementation. Other commenters to the public. innovation. Several commenters stated
interpreted Principle 6 to suggest that a. Question 1 that the Proposed Guidelines achieve a
Reserve Banks, rather than the Board, The Board asked whether the balance between supporting responsible
have the authority to establish the rate principles in the Proposed Guidelines financial innovation and managing the
of interest on reserve balances (IORB). A address all the risks that would be identified risks by allowing for
few commenters expressed concern that relevant to the Federal Reserve’s policy flexibility to accommodate different
these principles would be challenging to goals. Commenters generally agreed that business models. Other commenters
assess. Within this group, one the risks identified in the Proposed expressed concern, however, that the
commenter opined that the Board Guidelines are relevant for the Reserve implementation of the Proposed
should adapt its monetary policy Banks to consider when evaluating Guidelines could stifle innovation if
practices to the economic reality created access requests. Many commenters institutions were forced to comply with
by a competitive market rather than raised concerns, however, regarding the rules and regulations that do not make
embed a monetary policy principle in ability of Reserve Banks to mitigate sense for their business model, size, or
the Guidelines. Finally, many these risks in the case of institutions complexity.
commenters commended the Board for with novel charters that are not subject Board Response
addressing these topics in the to regulatory and supervisory oversight
Guidelines; some of these commenters that is similar to that applied to The Board believes the final Account
asked the Board to expand its federally-insured institutions. Some Access Guidelines support risk-focused,
discussion of the potential negative commenters suggested that the Proposed case-by-case review by Reserve Banks of
effects that granting account access to Guidelines should put greater emphasis access requests. As such, the Board
institutions with novel charters could on consumer protection, particularly believes the Account Access Guidelines
have on financial stability and monetary consumer privacy, and on cybersecurity support responsible innovation by
policy implementation. risks. balancing the provision of accounts and
Board Response Board Response services to a wide range of institutions
on the one hand and managing risks
The Board recognizes the concerns The Board notes that cybersecurity related to such access on the other. This
raised by commenters that the risk is included in Principle 2 (Risk to is discussed in more detail in Section
principles focused on financial stability the Reserve Bank) and Principle 3 (Risk II.A.
and monetary policy implementation to the Payment System) of the final
Account Access Guidelines as a factor d. Question 4
deal with complex topics requiring
levels of analysis and precision that may that Reserve Banks should consider in The Board also requested comment on
be challenging to address. For instance, their review of account requests. The whether the Board or the Reserve Banks
it will be difficult to forecast how Board also notes that, while the Account should consider other steps or actions to
granting account access to a requesting Access Guidelines do not specify facilitate the review of access requests
institution would affect the level and consumer protection as an account- in a consistent and equitable manner.
variability of the demand for and supply related risk, Principle 1 (Legal As noted previously, commenters
of reserves balances—which is Eligibility) provides that Reserve Banks provided a wide range of comments that
recommended potential improvements
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important to monetary policy should assess the extent to which an
implementation. However, the Federal institution’s activities and services to the Account Access Guidelines to
Reserve is able to estimate the potential comply with applicable laws and enhance their effectiveness.
risk posed by a requestor (such as the regulations, including those that address Board Response
risk that an institution might have large, consumer protection. Lastly, Section 2
unpredictable swings in its account of the final Account Access Guidelines The Board addressed these comments
balance) and whether existing tools can (discussed further below) provides in Section II.A–C.
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E. Technical Changes charters as compared to those with framework should focus on an
Principle 5 in the Account Access federal charters; (2) undermine the dual institution’s past performance as a key
Guidelines addresses the risks to the banking system; and (3) ignore the criterion for determining whether it is
overall economy. While the Board did strong prudential regulation that some included in Tier 2 or Tier 3.
not receive specific comments on states have in place for non-federally- Other commenters on the
Principle 5, it has made minor technical insured institutions. Supplemental Notice supported the
changes to the language to ensure the Broadly, this group of commenters tiering framework as proposed, noting
clarity and accuracy of the discussions focused their concerns on the placement that it provides additional transparency
of institutions’ Bank Secrecy Act/Anti- of depository institutions in proposed and clarity on the level of review an
Money Laundering (BSA/AML) and Tier 2 and Tier 3 while noting that they access request would receive based on
Office of Foreign Assets Control (OFAC) viewed Tier 1 as proposed as equitable key characteristics. One commenter
requirements and compliance programs. and non-problematic. In particular, noted that the tiering framework would
The Board has also made other minor these commenters expressed concerns help an institution requesting access
that non-federally-insured national trust understand Reserve Bank expectations
technical edits to enhance the clarity of
banks (NTBs) chartered by the Office of and take steps to demonstrate that
the Guidelines (e.g., replacing the term
the Comptroller of the Currency (OCC) appropriate risk management policies
‘‘factors’’ with ‘‘principles’’ for
would receive preferential treatment and safeguards are in place.
consistency and clarifying the risk-free
under the proposed guidelines and
nature of Reserve Bank balances). Board Response
asserted that many state-chartered trusts
B. Comments on the Supplemental are subject to robust prudential The Board has reviewed the
Notice regulations. They further argued that the comments provided and revised its
The Board received 24 comment tiering framework erroneously implies approach to Tiers 2 and 3 in the final
letters on the Supplemental Notice. that NTBs are subject to a similar set of Account Access Guidelines.
While most commenters generally regulations as federally-insured Specifically, the Board has made certain
expressed support for the proposed institutions. Two of the commenters changes in Section 2 of the final
tiering framework, four commenters further stated that their respective state- Account Access Guidelines to provide
objected to the manner in which the chartered trust banks are subject to more comparable treatment between
proposed tiering framework would treat robust regulation and supervision and non-federally-insured institutions
certain state-chartered institutions. A suggested that these institutions should chartered under state and federal law.
different group of commenters be subject to a less strict level of review As discussed above, the Board has
supported the tiering framework and than the Board proposed. modified Tier 2 to include a narrower
Relatedly, these commenters argued set of non-federally-insured national
called for heightened scrutiny of non-
that the proposed tiering framework banks than proposed in the
federally-insured depository institutions
would introduce a bias in favor of Supplemental Notice. Under the revised
that request Reserve Bank accounts.
federally-chartered institutions Tier 2, a non-federally-insured
Many commenters reiterated the
compared to state-chartered institutions. institution chartered under federal law
comments that they previously They argued that the tiering framework
submitted on the Original Proposal.13 In will be considered in Tier 2 only if the
as proposed would result in an uneven institution has a holding company that
particular, a number of commenters playing field that would undermine the
recommended that non-federally- is subject to Federal Reserve oversight.
dual banking system. One of the In addition, a non-federally-insured
insured institutions, particularly those commenters recommended that the
in Tier 3, not be granted access to institution chartered under state law
Board revise the Proposed Guidelines to will (as proposed in the Supplemental
Reserve Bank accounts and services. ensure that access to Reserve Bank
Additionally, one commenter, who Notice) be considered in Tier 2 if (i) the
accounts and services be afforded to
supported the tiering framework institution is subject (by statute) to
eligible institutions on an equitable and
generally, objected to Reserve Banks prudential supervision by a federal
impartial basis, regardless of whether
subjecting institutions with existing banking agency, and (ii) to the extent
they are state-chartered or federally-
accounts to what the commenter termed the institution has a holding company,
chartered.
‘‘new standards’’ once the Board’s Lastly, these commenters objected to that holding company is subject to
Proposed Guidelines are made final. language in proposed Tier 3 that might Federal Reserve oversight (by statute or
imply that state banking authorities’ commitments).14
1. Treatment of State-Chartered The Board believes it is appropriate to
Institutions supervision is weaker than that of
federal banking authorities. These subject non-federally-insured
Four commenters objected to the commenters point to the robust institutions that the Federal Reserve
manner in which the proposed tiering regulatory standards and close supervises to an intermediate level of
framework would treat certain state- supervision that states have had in place review under Tier 2, as the Reserve
chartered institutions. These for many years for non-federally-insured Banks already have supervisory
commenters principally argued that the institutions. One of the commenters also information about, as well as regulatory
proposed tiering framework would (1) noted that state regulators work closely authority over, such institutions and
result in disparate treatment of non- with their Reserve Bank on the understands their risk profiles. Tier 3
federally-insured institutions with state supervision of state member banks. will contain all other non-federally-
One of the commenters recommended insured institutions.
13 For example, many commenters restated
In addition, the Board has made
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comments relating to legal eligibility for accounts
that the Account Access Guidelines
should not have a tiering framework minor updates to the proposed tiering
and services, while other commenters restated their
comment suggesting that non-federally-insured but, alternatively, that Reserve Banks framework to emphasize that the review
institutions should receive accounts and services should review access requests by
only if they are subject to the same regulatory 14 In practice, non-federally-insured institutions
framework as federally-insured institutions. The
applying an activity and risk lens to that are chartered under state law are subject to
Board addressed these comments in Section II.A, access requests. A different commenter prudential supervision by the Board if they become
supra. recommended that the tiering members of the Federal Reserve System.
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51106 Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices
of institutions’ requests would be access to Reserve Bank accounts and the first principle.3 The Board expects
completed on a case-by-case, risk- services. As noted above, the Proposed the Reserve Banks to engage in
focused basis within the three tiers, Guidelines are informed by and consultation with each other and the
meaning that, within each tier, incorporate, where possible, existing Board, as appropriate, on reviews of
institutions with high-risk business Reserve Bank risk-management account and service requests, as well as
models should be subject to more practices. As a result, the Board views ongoing monitoring of accountholders,
intensive review than those with lower- the final Account Access Guidelines as to ensure that the guidelines are
risk business models. an evolution of existing practices rather implemented in a consistent and timely
Lastly, in response to concerns raised than the creation of ‘‘new standards.’’ manner. The Board believes it is
by some comments that the language in Additionally, the Board believes that in important to make clear that legal
the description of Tier 3 implies that order for the Proposed Guidelines to be eligibility does not bestow a right to
supervision conducted by state banking an effective risk-mitigation tool they obtain an account and services. While
authorities is broadly weaker than should be applied broadly including to decisions regarding individual access
federal supervision, the Board has existing accounts. This view is requests remain at the discretion of the
removed references to ‘‘supervisory’’ supported by public comments on the individual Reserve Banks, the Board
differences in the description of Tier 3. Original Proposal discussed above. The believes it is important that the Reserve
Board expects that any Reserve Bank Banks apply a consistent set of
2. Non-Federally-Insured Institutions
reevaluation of the risk of an guidelines when reviewing such access
Several commenters expressed views institution’s existing account will requests to promote consistency across
that non-federally-insured institutions include discussions with the institution Reserve Banks and to facilitate equitable
as a class pose an unacceptable level of and its regulators. treatment across institutions.
risk to the payment system and financial These Account Access Guidelines
markets. While some of these III. Conclusion also serve to inform requestors of the
commenters directed their comments For the reasons set forth above, the factors that a Reserve Bank will review
towards institutions in both Tiers 2 and Board is adopting final Account Access in any access request and thereby allow
3, some focused solely on institutions in Guidelines. a requestor to make any enhancements
Tier 3. These commenters expressed a to its risk management, documentation,
view that these institutions are not [This item will not publish in the
or other practices to attempt to
subject to sufficient regulation and as a Code of Federal Regulations]
demonstrate how it meets each of the
result the Reserve Banks should not IV. Account Access Guidelines principles.
provide access to Tier 3 institutions or These guidelines broadly outline
to non-federally-insured institutions Guidelines Covering Access to Accounts considerations for evaluating access
more broadly. and Services at Federal Reserve Banks requests but are not intended to provide
(Account Access Guidelines) assurance that any specific institution
Board Response
Section 1: Principles will be granted an account and services.
The Board does not believe that it is The individual Reserve Bank will
appropriate to categorically exclude all The Board of Governors of the Federal evaluate each access request on a case-
Tier 3 or non-federally-insured Reserve System (Board) has adopted by-case basis. When applying these
institutions from access to accounts and account access guidelines comprised of account access guidelines, the Reserve
services. The Board believes that Tier 2 six principles to be used by Federal Bank should factor, to the extent
and 3 institutions represent a wide Reserve Banks (Reserve Banks) in possible, the assessments of an
range of risk profiles (based on business evaluating requests for master accounts institution by state and/or federal
model, size, complexity, regulatory and access to Reserve Bank financial supervisors into its independent
framework, and other factors), and services (access requests).1,2 The Board analysis of the institution’s risk profile.
therefore a single response to account has issued these account access The evaluation of an institution’s access
requests from this heterogenous group guidelines under its general supervision request should also consider whether
would not be appropriate. The Account authority over the operations of the the request has the potential to set a
Access Guidelines as adopted are Reserve Banks, 12 U.S.C. 248(j). precedent that could affect the Federal
intended to be applied by Reserve Banks Decisions on individual requests for Reserve’s ability to achieve its policy
to access requests from eligible access to accounts and services are goals now or in the future.
institutions and the Board believes that made by the Reserve Bank in whose If the Reserve Bank decides to grant
the final Account Access Guidelines District the requestor is located. an access request, it may impose (at the
will provide a robust framework for The Account Access Guidelines apply time of account opening, granting access
analyzing and mitigating risks. to requests from all institutions that are to service, or any time thereafter)
legally eligible to receive an account or obligations relating to, or conditions or
3. New standards
services, as discussed in more detail in limitations on, use of the account or
One commenter objected to Reserve services as necessary to limit
Banks subjecting institutions with 1 As discussed in the Federal Reserve’s Operating operational, credit, legal, or other risks
existing accounts to what the Circular No. 1, an institution has the option to settle posed to the Reserve Banks, the
commenter termed ‘‘new standards’’ its Federal Reserve financial services transactions in
payment system, financial stability or
once the Board’s Proposed Guidelines its master account with a Reserve Bank or in the
master account of another institution that has the implementation of monetary policy
are made final. agreed to act as its correspondent. These principles
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apply to requests for either arrangement. 3 These principles would not apply to accounts
Board Response 2 Reserve Bank financial services mean all provided under fiscal agency authority or to
The Board has developed the services subject to Federal Reserve Act section 11A accounts authorized pursuant to the Board’s
Proposed Guidelines, in part, to increase (‘‘priced services’’) and Reserve Bank cash services. Regulation N (12 CFR 214), joint account requests,
Financial services do not include transactions or account requests from designated financial
the level of transparency and conducted as part of the Federal Reserve’s open market utilities, since existing rules or policies
consistency of the process used by market operations or administration of the Reserve already set out the considerations involved in
Reserve Banks to evaluate institutions’ Banks’ Discount Window. granting these types of accounts.
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Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices 51107
or to address other considerations.4 The including a significant change to the and periods of idiosyncratic and market
account-holding Reserve Bank may, at institution’s business model. stress.
its discretion, decide to place additional 1. Each institution requesting an i. For these purposes, effective risk
risk management controls on the account or services must be eligible management includes having a robust
account and services, such as real-time under the Federal Reserve Act or other framework, including policies,
monitoring of account balances, as it federal statute to maintain an account at procedures, systems, and qualified staff,
may deem necessary to mitigate risks. If a Federal Reserve Bank (Reserve Bank) to manage applicable risks. The
the obligations, limitations, or controls and receive Federal Reserve services framework should at a minimum
are ineffective in mitigating the risks and should have a well-founded, clear, identify, measure, and control the
identified or if the obligations, transparent, and enforceable legal basis particular risks posed by the
limitations, or controls are breached, the for its operations.6 institution’s business lines, products
account-holding Reserve Bank may a. Unless otherwise specified by and services. The effectiveness of the
further restrict the institution’s use of federal statute, only those entities that framework should be further supported
accounts and services or may close the are member banks or meet the definition by internal testing and internal audit
account. Establishment of an account of a depository institution under section reviews.
and provision of services by a Reserve 19(b) of the Federal Reserve Act are ii. The framework should be subject to
Bank under these guidelines is not an legally eligible to obtain Federal Reserve oversight by a board of directors (or
endorsement or approval by the Federal accounts and financial services.7 similar body) as well as oversight by
Reserve of the institution. Nothing in b. The Reserve Bank should assess the state and/or federal banking
the Board’s guidelines relieves any consistency of the institution’s activities supervisor(s).
institution from compliance with and services with applicable laws and iii. The framework should clearly
obligations imposed by the institution’s regulations, such as Article 4A of the identify all risks that may arise related
supervisors and regulators. Uniform Commercial Code and the to the institution’s business (e.g., legal,
Electronic Fund Transfer Act (15 U.S.C. credit, liquidity, operational, custody,
Accordingly, Reserve Banks should
1693 et seq). The Reserve Bank should investment) as well as objectives
evaluate how each institution requesting
also consider whether the design of the regarding the risk tolerances for the
access to an account and services will
institution’s services would impede management of such risks.
meet the following principles.5 Each c. The Reserve Bank should confirm
principle identifies factors that Reserve compliance by the institution’s
customers with U.S. sanctions that the institution is in substantial
Banks should consider when evaluating compliance with its supervisory
an institution against the specific risk programs, Bank Secrecy Act (BSA) and
anti-money laundering (AML) agency’s regulatory and supervisory
targeted by the principle (several factors requirements.
are pertinent to more than one requirements or regulations, or
consumer protection laws and d. The institution must, in the Reserve
principle). Bank’s judgment:
regulations.
The identified factors are commonly i. Demonstrate an ability to comply,
2. Provision of an account and
used in the regulation and supervision were it to obtain a master account, with
services to an institution should not
of federally-insured institutions. As a Board orders and policies, Reserve Bank
present or create undue credit,
result, the Board anticipates the agreements and operating circulars, and
operational, settlement, cyber or other
application of the account access other applicable Federal Reserve
risks to the Reserve Bank.
guidelines to access requests by requirements.
a. The Reserve Bank should
federally-insured institutions will be ii. Be in sound financial condition,
incorporate, to the extent possible, the
fairly straightforward in most cases including maintaining adequate capital
assessments of an institution by state
which is consistent with Section 2 of to continue as a going concern and to
and/or federal supervisors into its
these Guidelines. However, Reserve meet its current and projected operating
independent assessment of the
Bank assessments of access requests expenses under a range of scenarios.
institution’s risk profile. iii. Demonstrate the ability, on an
from non-federally-insured institutions b. The Reserve Bank should confirm
may require more extensive due ongoing basis (including during periods
that the institution has an effective risk of idiosyncratic or market stress), to
diligence. Reserve Banks monitor and management framework and governance
analyze the condition of institutions meet all of its obligations in order to
arrangements to ensure that the remain a going concern and comply
with access to accounts and services on institution operates in a safe and sound
an ongoing basis. Reserve Banks should with its agreement for a Reserve Bank
manner, during both normal conditions account and services, including by
use the guidelines to re-evaluate the
risks posed by an institution in cases 6 These principles do not apply to accounts and
maintaining:
where its condition monitoring and services provided by a Reserve Bank (i) as
A. Sufficient liquid resources to meet
analysis indicate potential changes in depository and fiscal agent, such as those provided its obligations to the Reserve Bank
the risk profile of an institution, for the Treasury and for certain government- under applicable agreements, operating
sponsored entities (12 U.S.C. 391, 393–95, 1823, circulars, and Board policies;
1435), (ii) to certain international organizations (22
4 The conditions imposed could include, for U.S.C. 285d, 286d, 290o–3, 290i–5, 290l–3), (iii) to
B. The operational capacity to ensure
example, establishing a cap on the amount of designated financial market utilities (12 U.S.C. that such liquid resources are available
balances held in the account. In addition, the Board 5465), (iv) pursuant to the Board’s Regulation N (12 to satisfy all such obligations to the
may authorize a Reserve Bank to pay a different rate CFR 214), or (v) pursuant to the Board’s Guidelines Reserve Bank on a timely basis; and
of interest on balances held in the account or may for Evaluating Joint Account Requests. C. Settlement processes designed to
limit the amount of balances in the account that 7 Unless otherwise expressly excluded under the
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receive interest. previous footnote, these principles apply to account
appropriately monitor balances in its
5 The principles are designed to address risks requests from all institutions, including member Reserve Bank account on an intraday
posed by an institution having access to an account banks or other entities that meet the definition of basis, to process transactions through its
and services, ranging from narrow risks (e.g., to an a depository institution under section 19(b) (12 account in an orderly manner and
individual Reserve Bank) to broader risks (e.g., to U.S.C. 461(b)(1)(A)), as well as Edge and Agreement
the overall economy). Review activities performed Corporations (12 U.S.C. 601–604a, 611–631), and
maintain/achieve a positive account
by the Reserve Bank may address several principles U.S. branches and agencies of foreign banks (12 balance before the end of the business
at once. U.S.C. 347d). day.
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51108 Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices
iv. Have in place an operational risk procedures in place to achieve those A. Identify the range of operational
framework designed to ensure objectives. risks presented by the institution’s
operational resiliency against events ii. A business continuity plan that business model (e.g., cyber
associated with processes, people, and addresses events that have the potential vulnerability, operational failure,
systems that may impair the to disrupt operations and a resiliency resiliency of service providers), and
institution’s use and settlement of objective to ensure the institution can establish sound operational risk
Reserve Bank services. This framework resume services in a reasonable management objectives;
should consider internal and external timeframe. B. Establish sound governance
factors, including operational risks iii. Policies and procedures for arrangements, rules, and procedures to
inherent in the institution’s business identifying risks that external parties oversee the operational risk
model, risks that might arise in may pose to sound operations, management framework;
connection with its use of any Reserve including interdependencies with C. Establish clear and appropriate
Bank account and services, and cyber- affiliates, service providers, and others. rules and procedures to carry out the
related risks. At a minimum, the c. The Reserve Bank should identify risk management objectives;
operational risk framework should: actual and potential interactions D. Employ the resources necessary to
A. Identify the range of operational between the institution’s use of a achieve its risk management objectives
risks presented by the institution’s Reserve Bank account and services and and implement effectively its rules and
business model (e.g., cyber (other parts of) the payment system. procedures, including, but not limited
vulnerability, operational failure, i. The extent to which the institution’s to, sound processes for physical and
resiliency of service providers), and use of a Reserve Bank account and information security, internal controls,
establish sound operational risk services might restrict funds from being compliance, program management,
management objectives to address such available to support the liquidity needs incident management, business
risks; of other institutions should also be continuity, audit, and well-qualified
B. Establish sound governance considered. personnel.
arrangements, rules, and procedures to d. The institution must, in the Reserve 4. Provision of an account and
oversee and implement the operational Bank’s judgment: services to an institution should not
i. Be in sound financial condition, create undue risk to the stability of the
risk management framework;
including maintaining adequate capital U.S. financial system.
C. Establish clear and appropriate
to continue as a going concern and to a. The Reserve Bank should
rules and procedures to carry out the
meet its current and projected operating incorporate, to the extent possible, the
risk management objectives;
expenses under a range of scenarios. assessments of an institution by state
D. Employ the resources necessary to ii. Demonstrate the ability, on an and/or federal supervisors into its
achieve its risk management objectives ongoing basis (including during periods independent assessment of the
and implement effectively its rules and of idiosyncratic or market stress), to institution’s risk profile.
procedures, including, but not limited meet all of its obligations in order to b. The Reserve Bank should
to, sound processes for physical and remain a going concern and comply determine, in consultation with the
information security, internal controls, with its agreement for a Reserve Bank other Reserve Banks and Board as
compliance, program management, account and services, including by appropriate, whether the access to an
incident management, business maintaining: account and services by an institution
continuity, audit, and well-qualified A. Sufficient liquid resources to meet itself or a group of like institutions
personnel; and its obligations to the Reserve Bank could introduce financial stability risk
E. Support compliance with the under applicable agreements, Operating to the U.S. financial system.
electronic access requirements, Circulars, and Board policies; c. The Reserve Bank should confirm
including security measures, outlined in B. The operational capacity to ensure that the institution has an effective risk
the Reserve Banks’ Operating Circular 5 that such liquid resources are available management framework and governance
and its supporting documentation. to satisfy all such obligations to the arrangements for managing liquidity,
3. Provision of an account and Reserve Bank on a timely basis; and credit, and other risks that may arise in
services to an institution should not C. Settlement processes designed to times of financial or economic stress.
present or create undue credit, liquidity, appropriately monitor balances in its d. The Reserve Bank should consider
operational, settlement, cyber or other Reserve Bank account on an intraday the extent to which, especially in times
risks to the overall payment system. basis, to process transactions through its of financial or economic stress, liquidity
a. The Reserve Bank should account in an orderly manner and or other strains at the institution may be
incorporate, to the extent possible, the maintain/achieve a positive account transmitted to other segments of the
assessments of an institution by state balance before the end of the business financial system.
and/or federal supervisors into its day. e. The Reserve Bank should consider
independent assessment of the iii. Have in place an operational risk the extent to which, especially during
institution’s risk profile. framework designed to ensure times of financial or economic stress,
b. The Reserve Bank should confirm operational resiliency against events access to an account and services by an
that the institution has an effective risk associated with processes, people, and institution itself (or a group of like
management framework and governance systems that may impair the institutions) could affect deposit
arrangements to limit the impact that institution’s payment system activities. balances across U.S. financial
idiosyncratic stress, disruptions, This framework should consider institutions more broadly and whether
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outages, cyber incidents, or other internal and external factors, including any resulting movements in deposit
incidents at the institution might have operational risk inherent in the balances could have a deleterious effect
on other institutions and the payment institution’s business model, risk that on U.S. financial stability.
system broadly. The framework should might arise in connection with its use of i. Balances held in Reserve Bank
include: the payment system, and cyber-related accounts present no credit or liquidity
i. Clearly defined operational risks. At a minimum, the framework risk, making them very attractive in
reliability objectives and policies and should: times of financial or economic stress. As
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Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices 51109
a result, in times of stress, investors that understanding the nature and purpose monetary policy implementation
would otherwise provide short- term of customer relationships for the framework in place.
funding to nonfinancial firms, financial purpose of developing a customer risk
Section 2: Tiered Review Framework
firms, and state and local governments profile and conducting ongoing
could rapidly withdraw that funding monitoring to identify and report The tiered review framework in this
and instead deposit their funds with an suspicious transactions and, on a risk section is meant to serve as a guide to
institution holding mostly central bank basis, to maintain and update customer the level of due diligence and scrutiny
balances. If the institution is not subject information; to be applied by Reserve Banks to
to capital requirements similar to a c. The Reserve Bank should confirm different types of institutions. Although
federally-insured institution, it can that the institution has a compliance institutions in a higher tier will on
more easily expand its balance sheet program designed to support its average face greater due diligence and
during times of stress; as a result, the compliance with the Office of Foreign scrutiny than institutions in a lower tier,
potential for sudden and significant Assets Control (OFAC) regulations at 31 a Reserve Bank has the authority to
deposit inflows into that institution is CFR Chapter V.10 grant or deny an access request by an
particularly large, which could i. For these purposes, the Reserve institution in any of the three proposed
disintermediate other parts of the Bank may review the institution’s tiers, based on the Reserve Bank’s
financial system, greatly amplifying written OFAC compliance program, application of the Account Access
stress. provided one has been created, and Guidelines in Section 1 to that
5. Provision of an account and confirm that it is commensurate with particular institution. As discussed
services to an institution should not the institution’s OFAC risk profile. An above, an institution’s access request
create undue risk to the overall OFAC compliance program should will be reviewed on a case-by-case, risk-
economy by facilitating activities such identify higher-risk areas, provide for focused basis and the tiers are designed
as money laundering, terrorism appropriate internal controls for to provide additional transparency into
financing, fraud, cybercrimes, economic screening and reporting, establish the expected review process based on
or trade sanctions violations, or other independent testing for compliance, key characteristics.
designate a bank employee or 1. Tier 1: Eligible institutions that are
illicit activity.
employees as responsible for OFAC federally insured.11
a. The Reserve Bank should
a. As federally-insured depository
incorporate, to the extent possible, the compliance, and create a training
institutions, Tier 1 institutions are
assessments of an institution by state program for appropriate personnel in all
already subject to a standard, strict, and
and/or federal supervisors into its relevant areas of the institution.
6. Provision of an account and comprehensive set of federal banking
independent assessment of the
services to an institution should not regulations.
institution’s risk profile. b. In addition, for most Tier 1
b. The Reserve Bank should confirm adversely affect the Federal Reserve’s
institutions, detailed regulatory and
that the institution has a BSA/AML ability to implement monetary policy.
financial information would in most
compliance program consisting of the a. The Reserve Bank should
cases be readily available, often in
components set out below and in incorporate, to the extent possible, the
public form.
relevant regulations.8 assessments of an institution by state c. Accordingly, access requests by
i. For these purposes, the Reserve and/or federal supervisors into its Tier 1 institutions will generally be
Bank should confirm that the independent assessment of the subject to a less intensive and more
institution’s BSA/AML compliance institution’s risk profile. streamlined review.
program contains the following b. The Reserve Bank should d. In cases where the application of
elements.9 determine, in consultation with the the Guidelines to Tier 1 institutions
A. A system of internal controls, other Reserve Banks and the Board as identifies potentially higher risk
including policies and procedures, to appropriate, whether access to an profiles, the institutions will receive
ensure ongoing BSA/AML compliance; account and services by an institution additional attention.
B. Independent audit and testing of itself or a group of like institutions 2. Tier 2: Eligible institutions that are
BSA/AML compliance to be conducted could have an effect on the not federally insured but are subject (by
by bank personnel or by an outside implementation of monetary policy. statute) to prudential supervision by a
party; c. The Reserve Bank should consider, federal banking agency.12 In addition, (i)
C. Designation of an individual or among other things, whether access to a if such an institution is chartered under
individuals responsible for coordinating Reserve Bank account and services by federal law, it has a holding company
and monitoring day-to-day compliance the institution or group of like that is subject to Federal Reserve
(BSA compliance officer); institutions could affect the level and oversight (by statute or commitments);
D. Ongoing training for appropriate variability of the demand for and supply and (ii) if such an institution is
personnel, tailored to each individual’s of reserves, the level and volatility of
specific responsibilities, as appropriate; key policy interest rates, the structure of 11 See 12 U.S.C. 1813(c)(2) (defining ‘‘insured
E. Appropriate risk-based procedures key short-term funding markets, and on depository institution’’ for purposes of the Federal
for conducting ongoing customer due the overall size of the consolidated Deposit Insurance Act) and 12 U.S.C. 1752(7)
(defining ‘‘insured credit union’’ for purposes of the
diligence to include, but not limited to, balance sheet of the Reserve Banks. The Federal Credit Union Act).
Reserve Bank should consider the 12 The federal banking agencies include the
8 Refer to 12 CFR 208.62 and 63, 12 CFR 211.5(k), implications of providing an account to Board, the Office of the Comptroller of the Currency
5(m), 24(f), and 24(j), and 12 CFR 225.4(f) (Federal the institution in normal times as well (OCC), the Federal Deposit Insurance Corporation,
lotter on DSK11XQN23PROD with NOTICES1
Reserve); 12 CFR 326.8 and 12 CFR part 353 (FDIC); and the National Credit Union Administration.
12 CFR 748.1–2 (NCUA); 12 CFR 21.11, and 21, and
as in times of stress. This consideration
Non-federally-insured institutions that are
12 CFR 163.180 (OCC); and 31 CFR 1020.210(a) and should occur regardless of the current chartered under federal law are subject to
(b), and 31 CFR 1020.320 (FinCEN), which are prudential supervision by the OCC. Non-federally-
controlling. 10 Reserve Banks may reference the OFAC section insured institutions that are chartered under state
9 Reserve Banks may reference the FFIEC BSA/ of the FFIEC BSA/AML Manual. These guidelines law are subject to prudential supervision by the
AML Manual. These guidelines may be updated to may be updated to reflect any changes to relevant Board if they become members of the Federal
reflect any changes to relevant regulations. regulations. Reserve System.
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51110 Federal Register / Vol. 87, No. 160 / Friday, August 19, 2022 / Notices
chartered under state law and has a 225), and all other applicable statutes SUMMARY: This notice announces the
holding company, that holding and regulations to become a bank availability, and opportunity for public
company is subject to Federal Reserve holding company and/or to acquire the review and comment of a Draft
oversight (by statute or commitments).13 assets or the ownership of, control of, or Environmental Assessment (EA), which
a. Tier 2 institutions are subject to a the power to vote shares of a bank or examines the potential impacts of a
similar, but not identical, set of bank holding company and all of the proposal by GSA for construction of a
regulations as federally-insured banks and nonbanking companies temporary pedestrian processing facility
institutions. As a result, Tier 2 owned by the bank holding company, adjacent to the Historic Customs House,
institutions may still present greater including the companies listed below. and interior renovation of the Historic
risks than Tier 1 institutions. The public portions of the Customs House at 340 East 1st Street,
b. Reserve Banks will have significant applications listed below, as well as Calexico, California. The facility and
supervisory information about, as well other related filings required by the structures will be used by the United
as some level of regulatory authority Board, if any, are available for States Customs and Border Protection.
over, Tier 2 institutions. immediate inspection at the Federal The Draft EA describes the purpose and
c. Accordingly, account access Reserve Bank(s) indicated below and at need for the proposed project; the
requests by Tier 2 institutions will the offices of the Board of Governors. alternatives considered; the potential
generally receive an intermediate level This information may also be obtained impacts of the alternatives on the
of review. on an expedited basis, upon request, by existing environment; and the proposed
3. Tier 3: Eligible institutions that are contacting the appropriate Federal avoidance, minimization, and/or
not federally insured and are not Reserve Bank and from the Board’s mitigation measures associated to these
considered in Tier 2. Freedom of Information Office at alternatives and resources.
a. Non-federally-insured institutions https://www.federalreserve.gov/foia/ DATES: Agencies and the public are
that are chartered under federal law but request.htm. Interested persons may encouraged to provide written
do not have a holding company subject express their views in writing on the comments on the Draft EA. The 30-day
to Federal Reserve oversight would be standards enumerated in the BHC Act public comment period for the Draft EA
considered in Tier 3. (12 U.S.C. 1842(c)). ends on Monday, September 26, 2022. A
b. Non-federally-insured institutions virtual public meeting will be held on
Comments regarding each of these
that are chartered under state law and Tuesday, August 23, 2022, 4 p.m. to 5
applications must be received at the
are not subject (by statute) to prudential p.m. Pacific standard time at: https://
Reserve Bank indicated or the offices of
supervision by a federal banking agency, teams.microsoft.com/l/meetup-join/
the Board of Governors, Ann E.
or have a holding company that is not 19%3ameeting_ODlmYmFiOWMtM2E
Misback, Secretary of the Board, 20th
subject to Federal Reserve oversight, wOS00MTVlLWJhY2EtYWZiMWJiZGY
Street and Constitution Avenue NW,
would be considered in Tier 3. xNDdl%40thread.v2/0?context=
c. Tier 3 institutions may be subject Washington DC 20551–0001, not later
than September 19, 2022. %7b%22Tid%22%3a%228aec2bf0-
to a regulatory framework that is
A. Federal Reserve Bank of 04af-4841-bcf6-bac6a58dd4
substantially different from the
Minneapolis (Chris P. Wangen, ef%22%2c%22Oid%22%3
regulatory framework that applies to
Assistant Vice President), 90 Hennepin a%221894920d-2cd7-4a1a-aa78-
federally-insured institutions.
d. In addition, detailed regulatory and Avenue, Minneapolis, Minnesota 0ebeddc5bdf6%22%7d.
financial information regarding Tier 3 55480–0291. Comments can also be sent ADDRESSES: Further information,
institutions may not exist or may be electronically to [email protected]: including an electronic copy of the Draft
unavailable. 1. Luminate Capital Corporation, EA may be found online on the
e. Accordingly, Tier 3 institutions will Minnetonka, Minnesota; to become a following website: https://www.gsa.gov/
generally receive the strictest level of bank holding company by acquiring about-us/regions/welcome-to-the-
review. Luminate Bank, also of Minnetonka, pacific-rim-region-9/land-ports-of-entry/
Minnesota. calexico-west-land-port-of-entry.
-End- Questions or comments concerning
Board of Governors of the Federal Reserve
By order of the Board of Governors of the System. the Draft EA should be directed to
Federal Reserve System. Michele Taylor Fennell, Osmahn Kadri, EPA Program Manager,
Ann Misback, Deputy Associate Secretary of the Board. General Services Administration via
Secretary of the Board. [FR Doc. 2022–17808 Filed 8–18–22; 8:45 am] email: [email protected] or Ms.
Bianca Rivera, 355 South Euclid
[FR Doc. 2022–17885 Filed 8–18–22; 8:45 am] BILLING CODE P
Avenue, Suite 107, Tucson, AZ 85719
BILLING CODE 6210–01–P
via postal mail/commercial delivery.
FOR FURTHER INFORMATION CONTACT: Mr.
GENERAL SERVICES
FEDERAL RESERVE SYSTEM ADMINISTRATION Osmahn A. Kadri, NEPA Program
Manager, General Services
Formations of, Acquisitions by, and [Notice–PBS–2022–04; Docket No. 2022– Administration, Pacific Rim Region, at
Mergers of Bank Holding Companies 0002; Sequence No. 18] 415–522–3617 or email osmahn.kadri@
gsa.gov. Please call this number if
The companies listed in this notice Notice of Availability for the Draft special assistance is needed to attend
have applied to the Board for approval, Environmental Assessment for the and participate in the public meeting.
pursuant to the Bank Holding Company Calexico West Land Port of Entry
lotter on DSK11XQN23PROD with NOTICES1
SUPPLEMENTARY INFORMATION:
Act of 1956 (12 U.S.C. 1841 et seq.) Temporary Pedestrian Process Facility
(BHC Act), Regulation Y (12 CFR part Calexico, California Background
13 Edge and Agreement Corporations and U.S. AGENCY: Public Buildings Service (PBS), The Project is located adjacent to the
branches and agencies of foreign banks would fall General Services Administration (GSA). Historic Customs House at 340 East 1st
under a Tier 2 level of review because of Federal Street, Calexico, California. The Project
ACTION: Notice.
Reserve oversight over these institutions. is proposed to provide a temporary
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