Notice2022-04897
Guidelines for Evaluating Account and Services Requests
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 8, 2022
Issuing agencies
Federal Reserve System
Abstract
The Board of Governors of the Federal Reserve System (Board) is issuing a supplemental notice and request for comment on updates to its proposed guidelines (Account Access Guidelines) for Federal Reserve Banks (Reserve Banks) to utilize in evaluating requests for access to Reserve Bank master accounts and services (accounts and services). The supplemental notice includes a new section of the proposed Account Access Guidelines that would establish a tiered-review framework to provide additional clarity on the level of due diligence and scrutiny to be applied to requests for Reserve Bank accounts and services.
Full Text
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<title>Federal Register, Volume 87 Issue 45 (Tuesday, March 8, 2022)</title>
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[Federal Register Volume 87, Number 45 (Tuesday, March 8, 2022)]
[Notices]
[Pages 12957-12962]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-04897]
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FEDERAL RESERVE SYSTEM
[Docket No. OP-1747]
Guidelines for Evaluating Account and Services Requests
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Supplemental notice and request for comment.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is issuing a supplemental notice and request for comment on updates to
its proposed guidelines (Account Access Guidelines) for Federal Reserve
Banks (Reserve Banks) to utilize in evaluating requests for access to
Reserve Bank master accounts and services (accounts and services). The
supplemental notice includes a new section of the proposed Account
Access Guidelines that would establish a tiered-review framework to
provide additional clarity on the level of due diligence and scrutiny
to be applied to requests for Reserve Bank accounts and services.
DATES: Comments must be received on or before April 22, 2022.
FOR FURTHER INFORMATION CONTACT: Jason Hinkle, Assistant Director (202-
912-7805), Division of Reserve Bank Operations and Payment Systems, or
Sophia H. Allison, Senior Special Counsel (202-452-3565) or Gavin
Smith, Senior Counsel (202-872-7578), Legal Division, Board of
Governors of the Federal Reserve System. For users of TTY-TRS, please
call 711 from any telephone, anywhere in the United States.
ADDRESSES: You may submit comments, identified by Docket No. OP-1765,
by any of the following methods:
Agency Website: <a href="http://www.federalreserve.gov">http://www.federalreserve.gov</a>. Follow the
instructions for submitting comments at <a href="http://www.federalreserve.gov/apps/foia/proposedregs.aspx">http://www.federalreserve.gov/apps/foia/proposedregs.aspx</a>.
Email: <a href="/cdn-cgi/l/email-protection#a2d0c7c5d18cc1cdcfcfc7ccd6d1e2c4c7c6c7d0c3ced0c7d1c7d0d4c78cc5cdd4"><span class="__cf_email__" data-cfemail="3d4f585a4e135e5250505853494e7d5b5859584f5c514f584e584f4b58135a524b">[email protected]</span></a>. Include docket number in
the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the Federal
Reserve System, 20th Street and Constitution Avenue NW, Washington, DC
20551.
All public comments are available from the Board's website at
<a href="http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm">http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm</a> as
submitted, unless modified for technical reasons or to remove
personally identifiable information at the commenter's request.
Accordingly, comments will not be edited to remove any identifying or
contact information. Public comments may also be viewed in-person in
Room M-4365A, 2001 C St. NW, Washington, DC 20551, between 9:00 a.m.
and 5:00 p.m. during federal business weekdays.
SUPPLEMENTARY INFORMATION:
I. Background
On May 5, 2021, the Board requested comment on proposed guidelines
to be used by Reserve Banks in evaluating requests for accounts and
services (Original Proposal).\1\ The Original Proposal reflected the
Board's policy goals of (1) ensuring the safety and soundness of the
banking system, (2) effectively implementing monetary policy, (3)
promoting financial stability, (4) protecting consumers, and (5)
promoting a safe, efficient, inclusive,
[[Page 12958]]
and innovative payment system. The Original Proposal was also intended
to ensure that Reserve Banks apply a transparent and consistent set of
factors when reviewing requests for accounts and services (access
requests).
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\1\ 86 FR 25865 (May 11, 2021).
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The Original Proposal consisted of six principles. The first
principle specified that only institutions that are legally eligible
for access to Reserve Bank accounts and services would be considered
for access. The remaining five principles addressed specific risks,
ranging from narrow risks (such as risk to an individual Reserve Bank)
to broader risks (such as risk to the U.S. financial system).\2\ For
each of these five principles, the Original Proposal set forth factors
that Reserve Banks should consider when evaluating an institution's
access request against the specific risk targeted by the principle. The
identified factors are commonly used in the regulation and supervision
of federally-insured institutions. The Board notes that, when applying
the proposed Account Access Guidelines, the Reserve Bank would
integrate to the extent possible the assessments of an institution by
its state and/or federal supervisors into the Reserve Bank's own
independent assessment of the institution's risk profile.
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\2\ The Account Access Guidelines were designed primarily as a
risk management framework and, as such, focus on risks an
institution's access could pose. The Board notes, however, that
granting an access request could also have net benefits to the
financial system, although these are not a focus of the Account
Access Guidelines.
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The Original Proposal noted that the application of the Guidelines
to requests by federally-insured institutions should be fairly
straightforward, while requests from non-federally insured institutions
may require more extensive due diligence. This supplemental notice
(Updated Proposal) includes the Original Proposal substantially as
proposed but includes a new section 2 of the Account Access Guidelines
that would incorporate a tiering framework based on an institution's
characteristics. The three tiers would provide additional clarity on
how the Reserve Banks would apply the principles in section 1 of the
Account Access Guidelines to different types of institutions.
II. Overview of Comments on Original Proposal
The Board received 46 individual comment letters and 281 duplicate
form letters in response to the Original Proposal. Nearly all the
comment letters expressed general support for the proposed Account
Access Guidelines, and most letters also made recommendations for
improvements. Commenters represented several types of institutions,
including (1) institutions with traditional charters, such as banks and
credit unions, and their trade associations; (2) institutions with
novel charters, such as cryptocurrency custody banks, and their trade
associations; and (3) think tanks and non-profit advocacy groups. The
views expressed by the first category of commenters often conflicted
with the views expressed by the second category of commenters.\3\ The
duplicate form letters included recommendations that mirrored those
submitted by trade associations for institutions with traditional
charters.
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\3\ For example, many commenters in the first category suggested
that institutions with novel charters should face a more challenging
path to access accounts and services, while many commenters in the
second category suggested that institutions with novel charters
should face an easier path to access accounts and service.
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III. Updated Proposal
The Account Access Guidelines listed in this Updated Proposal
consist of two sections. Proposed section 1--which describes the six
principles that the Reserve Banks would use in evaluating requests for
accounts and services--is substantially the same as the Account Access
Guidelines described in the Original Proposal.\4\
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\4\ The Updated Proposal incorporates certain technical changes
to Section 1. For example, some commenters read Principle 6 to
suggest that Reserve Banks, rather than the Board, have the
authority to establish the interest on reserve balances (IORB) rate.
The Updated Proposal deletes the language that commenters read to
suggest that Reserve Banks have the authority to establish the IORB
rate.
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The Original Proposal noted that the application of the Account
Access Guidelines to requests by federally-insured institutions should
be fairly straightforward, while requests from non-federally insured
institutions may require more extensive due diligence. The Updated
Proposal includes a new section 2 of the Account Access Guidelines,
which would establish a three-tiered review framework to provide
additional clarity regarding the review process for different types of
institutions.
Tier 1 would consist of eligible institutions that are federally-
insured. These institutions are already subject to a comprehensive set
of federal banking regulations, and, in most cases, detailed regulatory
and financial information about these firms would be readily available.
Accordingly, access requests by Tier 1 institutions would generally be
subject to a less intensive and more streamlined review. In cases where
the application of the Guidelines to Tier 1 institutions identifies
potentially higher risk profiles, the institutions would receive
additional attention.
Tier 2 would consist of eligible institutions that are not
federally-insured but (i) are subject (by statute) to prudential
supervision by a federal banking agency; and (ii) any holding company
of which would be subject to Federal Reserve oversight (by statute or
by commitments).\5\ Tier 2 institutions would be subject to similar but
not identical regulations as federally-insured institutions, and as a
result, may present greater risks than Tier 1 institutions.
Additionally, detailed regulatory and financial information regarding
Tier 2 institutions is less likely to be available and may not be
available in public form. Accordingly, access requests by Tier 2
institutions would generally receive an intermediate level of review.
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\5\ The Board would expect holding companies of Tier 2 entities
to comply with similar requirements as holding companies subject to
the Bank Holding Company Act.
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Tier 3 would consist of eligible institutions that are not
federally insured and not subject to prudential supervision by a
federal banking agency at the institution or holding company level.
Tier 3 institutions may be subject to a supervisory or regulatory
framework that is substantially different from, and possibly weaker
than, the supervisory and regulatory framework that applies to
federally-insured institutions, and as a result may pose the highest
level of risk. Detailed regulatory and financial information regarding
Tier 3 institutions may not exist or may be unavailable. Accordingly,
access requests by Tier 3 institutions would generally receive the
strictest level of review.
The Board seeks comment on all aspects of the Updated Proposal.
[[Page 12959]]
IV. Updated Account Access Guidelines
Guidelines Covering Access to Accounts and Services at Federal Reserve
Banks (Account Access Guidelines)
Section 1: Principles
The Board of Governors of the Federal Reserve System (Board) is
adopting account access guidelines comprised of six principles to be
used by Federal Reserve Banks (Reserve Banks) in evaluating requests
for master accounts and access to Federal Reserve Bank financial
services (access requests).<SUP>1 2</SUP> The account access guidelines
apply to requests from all institutions that are legally eligible to
receive an account or services, as discussed in more detail in the
first principle.\3\ The Board expects the Reserve Banks to collaborate
on reviews of account and service requests, as well as ongoing
monitoring of accountholders, to ensure that the guidelines are
implemented in a consistent and timely manner.
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\1\ As discussed in the Federal Reserve's Operating Circular No.
1, an institution has the option to settle its Federal Reserve
financial services transactions in its master account with a Reserve
Bank or in the master account of another institution that has agreed
to act as its correspondent. These principles apply to requests for
either arrangement.
\2\ Reserve Bank financial services mean all services subject to
Federal Reserve Act, section 11A (``priced services'') and Reserve
Bank cash services. Financial services do not include transactions
conducted as part of the Federal Reserve's open market operations or
administration of the Reserve Banks' Discount Window.
\3\ These principles would not apply to accounts provided under
fiscal agency authority or to accounts authorized pursuant to the
Board's Regulation N (12 CFR 214), joint account requests, or
account requests from designated financial market utilities, since
existing rules or policies already set out the considerations
involved in granting these types of accounts.
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The Federal Reserve System's (Federal Reserve) approach to
providing institutions with accounts and services depends on, among
other things, whether the institution is legally eligible to obtain an
account and on the Federal Reserve's policy goals of ensuring the
safety and soundness of the banking system, effectively implementing
monetary policy, promoting financial stability, protecting consumers,
and promoting a safe, effective, efficient, accessible, and innovative
payment system. The Board believes it is important to make clear that
legal eligibility does not bestow a right to obtain an account and
services. While decisions regarding individual access requests remain
at the discretion of the individual Reserve Banks, the Board believes
it is important that the Reserve Banks apply a consistent set of
guidelines when reviewing such access requests to promote consistent
outcomes across Reserve Banks and to facilitate equitable treatment
across institutions.\4\
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\4\ The Board has issued these account access guidelines under
its general supervision authority over the operations of the Reserve
Banks, 12 U.S.C 248(j). Decisions on access to accounts and services
are made by the Reserve Bank in whose District the requestor is
located.
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These account access guidelines also serve to inform requestors of
the factors that a Reserve Bank will review in any access request and
thereby allow a requestor to make any enhancements to its risk
management, documentation, or other practices to attempt to demonstrate
how it meets each of the principles.
These guidelines broadly outline considerations for evaluating
access requests but are not intended to provide assurance that any
specific institution will be granted an account and services. The
individual Reserve Bank will evaluate each access request on a case-by-
case basis. When applying these account access guidelines, the Reserve
Bank should consider, to the extent possible, the assessments of an
institution by state and/or federal supervisors into its independent
analysis of the institution's risk profile. The evaluation of an
institution's access request should also consider whether the request
has the potential to set a precedent that could affect the Federal
Reserve's ability to achieve its policy goals now or in the future.
If the Reserve Bank decides to grant an access request, it may
impose (at the time of account opening, granting access to service, or
any time thereafter) obligations relating to, or conditions or
limitations on, use of the account or services as necessary to limit
operational, credit, legal, or other risks posed to the Reserve Banks,
the payment system, financial stability or the implementation of
monetary policy or to address other considerations.\5\ The account-
holding Reserve Bank may, at its discretion, decide to place additional
risk management controls on the account and services, such as real-time
monitoring of account balances, as it may deem necessary to mitigate
risks. If the obligations, limitations, or controls are ineffective in
mitigating the risks identified or if the obligations, limitations, or
controls are breached, the account-holding Reserve Bank may further
restrict the institution's use of accounts and services or may close
the account. Establishment of an account and provision of services by a
Reserve Bank under these guidelines is not an endorsement or approval
by the Federal Reserve of the institution. Nothing in the Board's
guidelines relieves any institution from compliance with obligations
imposed by the institution's supervisors and regulators.
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\5\ The conditions imposed could include, for example,
establishing a cap on the amount of balances held in the account. In
addition, the Board may authorize a Reserve Bank to pay a different
rate of interest on balances held in the account or may limit the
amount of balances in the account that receive interest.
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Accordingly, Reserve Banks should evaluate how each institution
requesting access to an account and services will meet the following
principles.\6\ Each principle identifies factors that Reserve Banks
should consider when evaluating an institution against the specific
risk targeted by the principle (several factors are pertinent to more
than one principle). The identified factors are commonly used in the
regulation and supervision of federally-insured institutions. As a
result, the Board anticipates the application of the account access
guidelines to access requests by federally-insured institutions will be
fairly straightforward in most cases. However, Reserve Bank assessments
of access requests from non-federally insured institutions may require
more extensive due diligence. Reserve Banks monitor and analyze the
condition of institutions with access to accounts and services on an
ongoing basis. Reserve Banks should use the guidelines to re-evaluate
the risks posed by an institution in cases where its condition
monitoring and analysis indicate potential changes in the risk profile
of an institution, including a significant change to the institution's
business model.
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\6\ The principles are designed to address risks posed by an
institution having access to an account and services, ranging from
narrow risks (e.g., to an individual Reserve Bank) to broader risks
(e.g., to the overall economy). Review activities performed by the
Reserve Bank may address several principles at once.
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1. Each institution requesting an account or services must be
eligible under the Federal Reserve Act or other federal statute to
maintain an account at a Federal Reserve Bank (Reserve Bank) and
receive Federal Reserve services and should have a well-founded, clear,
transparent, and enforceable legal basis for its operations.\7\
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\7\ These principles do not apply to accounts and services
provided by a Reserve Bank (i) as depository and fiscal agent, such
as those provided for the Treasury and for certain government-
sponsored entities (12 U.S.C. 391, 393-95, 1823, 1435), (ii) to
certain international organizations (22 U.S.C. 285d, 286d, 290o-3,
290i-5, 290l-3), (iii) to designated financial market utilities (12
U.S.C. 5465), (iv) pursuant to the Board's Regulation N (12 CFR
214), or (v) pursuant to the Board's Guidelines for Evaluating Joint
Account Requests.
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a. Unless otherwise specified by federal statute, only those
entities that are member banks or meet the definition of a depository
institution under section
[[Page 12960]]
19(b) of the Federal Reserve Act are legally eligible to obtain Federal
Reserve accounts and financial services.\8\
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\8\ Unless otherwise expressly excluded under the previous
footnote, these principles apply to account requests from all
institutions, including member banks or other entities that meet the
definition of a depository institution under section 19(b), as well
as Edge and Agreement corporations (12 U.S.C. 601-604a, 611-631),
and U.S. branches and agencies of foreign banks (12 U.S.C. 347d).
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b. The Reserve Bank should assess the consistency of the
institution's activities and services with applicable laws and
regulations, such as Article 4A of the Uniform Commercial Code and the
Electronic Fund Transfer Act. The Reserve Bank should also consider
whether the design of the institution's services would impede
compliance by the institution's customers with U.S. sanctions programs,
Bank Secrecy Act (BSA) and anti-money-laundering (AML) requirements or
regulations, or consumer protection laws and regulations.
2. Provision of an account and services to an institution should
not present or create undue credit, operational, settlement, cyber or
other risks to the Reserve Bank.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should confirm that the institution has an
effective risk management framework and governance arrangements to
ensure that the institution operates in a safe and sound manner, during
both normal conditions and periods of idiosyncratic and market stress.
i. For these purposes, effective risk management includes having a
robust framework, including policies, procedures, systems, and
qualified staff, to manage applicable risks. The framework should at a
minimum identify, measure, and control the particular risks posed by
the institution's business lines, products and services. The
effectiveness of the framework should be further supported by internal
testing and internal audit reviews.
ii. The framework should be subject to oversight by a board of
directors (or similar body) as well as oversight by state and/or
federal banking supervisor(s).
iii. The framework should clearly identify all risks that may arise
related to the institution's business (e.g., legal, credit, liquidity,
operational, custody, investment) as well as objectives regarding the
risk tolerances for the management of such risks.
c. The Reserve Bank should confirm that the institution is in
substantial compliance with its supervisory agency's regulatory and
supervisory requirements.
d. The institution must, in the Reserve Bank's judgment:
i. Demonstrate an ability to comply, were it to obtain a master
account, with Board orders and policies, Reserve Bank agreements and
operating circulars, and other applicable Federal Reserve requirements.
ii. Be in sound financial condition, including maintaining adequate
capital to continue as a going concern and to meet its current and
projected operating expenses under a range of scenarios.
iii. Demonstrate the ability, on an ongoing basis (including during
periods of idiosyncratic or market stress), to meet all of its
obligations in order to remain a going concern and comply with its
agreement for a Reserve Bank account and services, including by
maintaining:
A. Sufficient liquid resources to meet its obligations to the
Reserve Bank under applicable agreements, operating circulars, and
Board policies;
B. The operational capacity to ensure that such liquid resources
are available to satisfy all such obligations to the Reserve Bank on a
timely basis; and
C. Settlement processes designed to appropriately monitor balances
in its Reserve Bank account on an intraday basis, to process
transactions through its account in an orderly manner and maintain/
achieve a positive account balance before the end of the business day.
iv. Have in place an operational risk framework designed to ensure
operational resiliency against events associated with processes,
people, and systems that may impair the institution's use and
settlement of Reserve Bank services. This framework should consider
internal and external factors, including operational risks inherent in
the institution's business model, risks that might arise in connection
with its use of any Reserve Bank account and services, and cyber-
related risks. At a minimum, the operational risk framework should:
A. Identify the range of operational risks presented by the
institution's business model (e.g., cyber vulnerability, operational
failure, resiliency of service providers), and establish sound
operational risk management objectives to address such risks;
B. Establish sound governance arrangements, rules, and procedures
to oversee and implement the operational risk management framework;
C. Establish clear and appropriate rules and procedures to carry
out the risk management objectives;
D. Employ the resources necessary to achieve its risk management
objectives and implement effectively its rules and procedures,
including, but not limited to, sound processes for physical and
information security, internal controls, compliance, program
management, incident management, business continuity, audit, and well-
qualified personnel; and
E. Support compliance with the electronic access requirements,
including security measures, outlined in the Reserve Banks' Operating
Circular 5 and its supporting documentation.
3. Provision of an account and services to an institution should
not present or create undue credit, liquidity, operational, settlement,
cyber or other risks to the overall payment system.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should confirm that the institution has an
effective risk management framework and governance arrangements to
limit the impact that idiosyncratic stress, disruptions, outages, cyber
incidents, or other incidents at the institution might have on other
institutions and the payment system broadly. The framework should
include:
i. Clearly defined operational reliability objectives and policies
and procedures in place to achieve those objectives.
ii. A business continuity plan that addresses events that have the
potential to disrupt operations and a resiliency objective to ensure
the institution can resume services in a reasonable timeframe.
iii. Policies and procedures for identifying risks that external
parties may pose to sound operations, including interdependencies with
affiliates, service providers, and others.
c. The Reserve Bank should identify actual and potential
interactions between the institution's use of a Reserve Bank account
and services and (other parts of) the payment system.
i. The extent to which the institution's use of a Reserve Bank
account and services might restrict funds from being available to
support the liquidity needs of other institutions should also be
considered.
d. The institution must, in the Reserve Bank's judgment:
[[Page 12961]]
i. Be in sound financial condition, including maintaining adequate
capital to continue as a going concern and to meet its current and
projected operating expenses under a range of scenarios.
ii. Demonstrate the ability, on an ongoing basis (including during
periods of idiosyncratic or market stress), to meet all of its
obligations in order to remain a going concern and comply with its
agreement for a Reserve Bank account and services, including by
maintaining:
A. Sufficient liquid resources to meet its obligations to the
Reserve Bank under applicable agreements, Operating Circulars, and
Board policies;
B. The operational capacity to ensure that such liquid resources
are available to satisfy all such obligations to the Reserve Bank on a
timely basis; and
C. Settlement processes designed to appropriately monitor balances
in its Reserve Bank account on an intraday basis, to process
transactions through its account in an orderly manner and maintain/
achieve a positive account balance before the end of the business day.
iii. Have in place an operational risk framework designed to ensure
operational resiliency against events associated with processes,
people, and systems that may impair the institution's payment system
activities. This framework should consider internal and external
factors, including operational risk inherent in the institution's
business model, risk that might arise in connection with its use of the
payment system, and cyber-related risks. At a minimum, the framework
should:
A. Identify the range of operational risks presented by the
institution's business model (e.g., cyber vulnerability, operational
failure, resiliency of service providers), and establish sound
operational risk-management objectives;
B. Establish sound governance arrangements, rules, and procedures
to oversee the operational risk management framework;
C. Establish clear and appropriate rules and procedures to carry
out the risk management objectives;
D. Employ the resources necessary to achieve its risk management
objectives and implement effectively its rules and procedures,
including, but not limited to, sound processes for physical and
information security, internal controls, compliance, program
management, incident management, business continuity, audit, and well-
qualified personnel.
4. Provision of an account and services to an institution should
not create undue risk to the stability of the U.S. financial system.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should determine, in coordination with the
other Reserve Banks and Board, whether the access to an account and
services by an institution itself or a group of like institutions could
introduce financial stability risk to the U.S. financial system.
c. The Reserve Bank should confirm that the institution has an
effective risk management framework and governance arrangements for
managing liquidity, credit, and other risks that may arise in times of
financial or economic stress.
d. The Reserve Bank should consider the extent to which, especially
in times of financial or economic stress, liquidity or other strains at
the institution may be transmitted to other segments of the financial
system.
e. The Reserve Bank should consider the extent to which, especially
during times of financial or economic stress, access to an account and
services by an institution itself (or a group of like institutions)
could affect deposit balances across U.S. financial institutions more
broadly and whether any resulting movements in deposit balances could
have a deleterious effect on U.S. financial stability.
i. Balances held in Reserve Bank accounts are high-quality liquid
assets, making them very attractive in times of financial or economic
stress. For example, in times of stress, investors that would otherwise
provide short-term funding to nonfinancial firms, financial firms, and
state and local governments could rapidly withdraw that funding and
instead deposit their funds with an institution holding mostly central
bank balances. If the institution is not subject to capital
requirements similar to a federally-insured institution, it can more
easily expand its balance sheet during times of stress; as a result,
the potential for sudden and significant deposit inflows into that
institution is particularly large, which could disintermediate other
parts of the financial system, greatly amplifying stress.
5. Provision of an account and services to an institution should
not create undue risk to the overall economy by facilitating activities
such as money laundering, terrorism financing, fraud, cybercrimes,
economic or trade sanctions violations, or other illicit activity.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should confirm that the institution has a BSA/
AML compliance program consisting of the components set out below and
in relevant regulations.\9\
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\9\ Refer to 12 CFR 208.62 and 63, 12 CFR 211.5(k), 5(m), 24(f),
and 24(j), and 12 CFR 225.4(f) (Federal Reserve); 12 CFR 326.8 and
12 CFR part 353 (FDIC); 12 CFR 748.1-2 (NCUA); 12 CFR 21.11, and 21,
and 12 CFR 163.180 (OCC); and 31 CFR 1020.210(a) and (b), and 31 CFR
1020.320 (FinCEN), which are controlling.
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i. For these purposes, the Reserve Bank should confirm that the
institution's BSA/AML compliance program contains the following
elements: \10\
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\10\ Reserve Banks may reference the FFIEC BSA/AML Manual. These
guidelines may be updated to reflect any changes to relevant
regulations.
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A. A system of internal controls, including policies and
procedures, to ensure ongoing BSA/AML compliance;
B. Independent audit and testing of BSA/AML compliance to be
conducted by bank personnel or by an outside party;
C. Designation of an individual or individuals responsible for
coordinating and monitoring day-to-day compliance (BSA compliance
officer);
D. Ongoing training for appropriate personnel, tailored to each
individual's specific responsibilities, as appropriate;
E. Appropriate risk-based procedures for conducting ongoing
customer due diligence to include, but not limited to, understanding
the nature and purpose of customer relationships for the purpose of
developing a customer risk profile and conducting ongoing monitoring to
identify and report suspicious transactions and, on a risk basis, to
maintain and update customer information;
c. The Reserve Bank should confirm that the institution has a
compliance program designed to support its compliance with the Office
of Foreign Assets Control (OFAC) regulations at 31 CFR Chapter V.\11\
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\11\ Reserve Banks may reference the OFAC section of the FFIEC
BSA/AML Manual. These guidelines may be updated to reflect any
changes to relevant regulations.
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i. For these purposes, the Reserve Bank may review the
institution's written OFAC compliance program, provided one has been
created, and confirm that it is commensurate with the institution's
OFAC risk profile. An OFAC compliance program should identify higher-
risk areas, provide for appropriate internal controls for
[[Page 12962]]
screening and reporting, establish independent testing for compliance,
designate a bank employee or employees as responsible for OFAC
compliance, and create a training program for appropriate personnel in
all relevant areas of the institution.
6. Provision of an account and services to an institution should
not adversely affect the Federal Reserve's ability to implement
monetary policy.
a. The Reserve Bank should incorporate, to the extent possible, the
assessments of an institution by state and/or federal supervisors into
its independent assessment of the institution's risk profile.
b. The Reserve Bank should determine, in coordination with the
other Reserve Banks and the Board, whether access to an account and
services by an institution itself or a group of like institutions could
have an effect on the implementation of monetary policy.
c. The Reserve Bank should consider, among other things, whether
access to a Reserve Bank account and services by the institution could
affect the level and variability of the demand for and supply of
reserves, the level and volatility of key policy interest rates, the
structure of key short-term funding markets, and on the overall size of
the consolidated balance sheet of the Reserve Banks. The Reserve Bank
should consider the implications of providing an account to the
institution in normal times as well as in times of stress. This
consideration should occur regardless of the current monetary policy
implementation framework in place.
Section 2: Tiered Review Framework
The tiered review framework in this section is meant to serve as a
guide to the level of due diligence and scrutiny to be applied by
Reserve Banks to different types of institutions. Although institutions
in a higher tier will face greater due diligence and scrutiny than
institutions in a lower tier, a Reserve Bank has the authority to grant
or deny an access request by an institution in any of the three
proposed tiers, based on the Reserve Bank's application of the
Guidelines in Section 1 to that particular institution.
1. Tier 1: Eligible institutions that are federally insured.
a. As federally-insured depository institutions, Tier 1
institutions are already subject to a standard, strict, and
comprehensive set of federal banking regulations.
b. In addition, for most Tier 1 institutions, detailed regulatory
and financial information would in most cases be readily available,
often in public form.
c. Accordingly, access requests by Tier 1 institutions will
generally be subject to a less intensive and more streamlined review.
d. In cases where the application of the Guidelines to Tier 1
institutions identifies potentially higher risk profiles, the
institutions will receive additional attention.
2. Tier 2: Eligible institutions that are not federally insured,
but that are subject to federal prudential supervision at the
institution and, if applicable, at the holding company level.
a. Although not federally insured, Tier 2 institutions are subject
to prudential supervision at the institution level by a federal banking
agency (by statute). In addition, any holding company of a Tier 2
institution would be subject to Federal Reserve oversight (by statute
or by commitments).
b. Tier 2 institutions are subject to a similar, but not identical,
set of regulations as federally-insured institutions. As a result, Tier
2 institutions may still present greater risks than Tier 1
institutions.
c. In addition, detailed regulatory and financial information
regarding such institutions may be less available or may not be
available in public form.
d. Accordingly, account access requests by Tier 2 institutions will
generally receive an intermediate level of review.
3. Tier 3: Eligible institutions that are not federally insured and
that are not subject to federal prudential supervision at the
institution and holding company level.
a. Tier 3 institutions may be subject to a supervisory or
regulatory framework that is substantially different from, and less
rigorous than, the supervisory and regulatory framework that applies to
federally-insured institutions.
b. In addition, detailed regulatory and financial information
regarding Tier 3 institutions may not exist or may be unavailable.
c. Accordingly, Tier 3 institutions will generally receive the
strictest level of review.
By order of the Board of Governors of the Federal Reserve
System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2022-04897 Filed 3-7-22; 8:45 am]
BILLING CODE 6210-01-P
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</html>Indexed from Federal Register on March 8, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.