By Pete Schroeder
WASHINGTON (Reuters) -The U.S. Federal Reserve said on Monday it had finalized guidelines for how it will review requests by banks, fintechs and other firms to access the central bank's master accounts and payment systems.
The final product, which is substantially similar to proposals the Fed floated in May 2021 and March 2022, creates a tiered review system that reserves the closest scrutiny for companies that lack federal deposit insurance and are not traditionally overseen by bank regulators.
The new guidelines are aimed at creating a transparent, consistent and risk-based process for reviewing applications for "master accounts," the Fed said in a statement.
The guidelines come as a number of new nontraditional financial institutions, broadly known as fintechs, have emerged and begun seeking access to payment and account services that the Fed typically provided to banks as a way to quickly route and store money. Some firms had complained that the process for obtaining such an account was opaque and subjective.
The process came under heightened scrutiny earlier this year, as Republicans accused Sarah Bloom Raskin, a nominee to serve as the Fed's top bank regulator, of helping a fintech on whose board she served to obtain such an account. Raskin, who previously had served on the Fed's board of governors, maintained she followed all ethics requirements, but withdrew after failing to garner sufficient Senate support for her confirmation.
The new guidelines from the Fed direct regional Fed banks, which process master account applications, to conduct a streamlined review of traditional banks that provide deposit insurance and are already monitored by regulators. Firms that engage in "novel activities" that fall outside the traditional banking system and oversight, including many fintechs, would face more rigorous review of any applications.