The Federal Reserve Board is taking a fresh look at how financial firms get coveted access to the U.S. central bank’s payment system — a controversial question that’s weighing on President Joe Biden’s pick to be Wall Street’s top bank regulator.
The Fed on Tuesday proposed a plan that it said would help ensure the fairness of the process for evaluating new requests. The framework, which builds on a proposal from last May, would set up a tiered system that’d make it easier for federally-insured lenders, while asks from entities not already supervised by Washington regulators would face more scrutiny.
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“With technology driving rapid change in the payments landscape, the proposed guidelines would ensure novel requests for access to Federal Reserve accounts and payment services are evaluated consistently and transparently to ensure a safe and innovative payment system,” Fed Governor Lael Brainard said in statement.
Access to the Fed’s payment system, particularly for non-traditional financial firms, through so-called master accounts has morphed from a weedy financial regulatory question to a political lightning rod during Sarah Bloom Raskin’s bid to become the central bank’s new vice chair for supervision.
Raskin has faced dogged opposition from Republicans, who most recently have questioned her previous role as a director of Reserve Trust, a fintech company that obtained access to the payment system.
Wyoming Republican Cynthia Lummis has been particularly critical, questioning during a Senate Banking Committee hearing last month whether Raskin used her influence to help the firm. For her part, Raskin has said she’s confident her communications satisfied all applicable ethics rules and would agree to recuse herself for longer than required to avoid any potential conflicts.
The Fed said it would take public comments on the proposal for 45 days.
