Proposed Rule2026-10377
Regulation D: Reserve Requirements of Depository Institutions
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
May 26, 2026
Issuing agencies
Federal Reserve System
Abstract
The Board of Governors of the Federal Reserve System (Board) proposes to amend its Regulation D (Reserve Requirements of Depository Institutions) to differentiate between master accounts and a proposed new category of special-purpose payment accounts (Payment Accounts). The proposed amendments would exclude Payment Accounts from Regulation D's provisions directing Federal Reserve Banks (Reserve Banks) to pay interest on balances maintained at a Reserve Bank. As a result, the Reserve Banks would not pay interest on balances maintained in Payment Accounts. The proposal would not affect reserve requirement ratios, which would remain zero.
Full Text
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<title>Federal Register, Volume 91 Issue 100 (Tuesday, May 26, 2026)</title>
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[Federal Register Volume 91, Number 100 (Tuesday, May 26, 2026)]
[Proposed Rules]
[Pages 30503-30511]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-10377]
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FEDERAL RESERVE SYSTEM
12 CFR Part 204
[Docket No. R-1893]
RIN 7100-AH25
Regulation D: Reserve Requirements of Depository Institutions
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
proposes to amend its Regulation D (Reserve Requirements of Depository
Institutions) to differentiate between master accounts and a proposed
new category of special-purpose payment accounts (Payment Accounts).
The proposed amendments would exclude Payment Accounts from Regulation
D's provisions directing Federal Reserve Banks (Reserve Banks) to pay
interest on balances maintained at a Reserve Bank. As a result, the
Reserve Banks would not pay interest on balances maintained in Payment
Accounts. The proposal would not affect reserve requirement ratios,
which would remain zero.
DATES: Comments must be received on or before July 27, 2026.
ADDRESSES: You may submit comments, identified by Docket No. R-1893 and
RIN 7100-AH25, by any of the following methods:
<bullet> Agency Website: <a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a>. Follow the instructions for submitting comments, including
attachments. Preferred Method.
<bullet> Mail: Benjamin W. McDonough, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
<bullet> Hand Delivery/Courier: Same as mailing address.
<bullet> Other Means: <a href="/cdn-cgi/l/email-protection#5e2e2b3c32373d3d3133333b302a2d1e382c3c70393128"><span class="__cf_email__" data-cfemail="69191c0b05000a0a0604040c071d1a290f1b0b470e061f">[email protected]</span></a>. You must include the
docket number in the subject line of the message.
Comments received are subject to public disclosure. In general,
comments received will be made available on the Board's website at
<a href="https://www.federalreserve.gov/apps/proposals/">https://www.federalreserve.gov/apps/proposals/</a> without change and will
not be modified to remove personal or business information including
confidential, contact, or other identifying information. Comments
should not include any information such as confidential information
that would be not appropriate for public disclosure. Public comments
may also be viewed electronically or in person in
[[Page 30504]]
Room M-4365A, 2001 C St. NW, Washington, DC 20551, between 9 a.m. and 5
p.m. during Federal business weekdays.
FOR FURTHER INFORMATION CONTACT: Benjamin Snodgrass, Special Counsel
(202-263-4877), Legal Division, or Kristen Payne, Lead Financial
Institution and Policy Analyst (202-306-9573), or Mary-Frances
Styczynski, Chief (202-617-7674), Division of Monetary Affairs. For
users of TTY-TRS, please call 711 from any telephone, anywhere in the
United States or (202) 263-4869.
SUPPLEMENTARY INFORMATION:
I. Overview
As described elsewhere in today's Federal Register, the Board is
requesting comment on proposed updates to (1) the Federal Reserve's
Policy on Payment System Risk (PSR Policy) and (2) the Board's
guidelines for Reserve Banks to utilize in evaluating requests for
access to Reserve Bank accounts and services (the Account Access
Guidelines), to accommodate Payment Accounts. That request for comment
(the Payment Account Notice) follows a request for information (RFI)
previously published by the Board.\1\ The Payment Account would be a
new, optional way for institutions to request access to accounts and
services. As proposed in the Payment Account Notice, the Payment
Account would have a standard set of risk-mitigating terms designed to
create a lower residual risk profile than a master account.\2\ The
Board explains in the Payment Account Notice that the terms of the
proposed Payment Account would permit a more streamlined review of
requests for such accounts.\3\
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\1\ 90 FR 60096 (Dec. 23, 2025).
\2\ As used herein, the phrase ``Payment Account terms'' (and
similar phrases) refers to the standard set of parameters of the
Payment Account as proposed by the Board in proposed revisions to
Regulation A, Regulation D, the Account Access Guidelines, and the
PSR Policy and as would be implemented by the Reserve Banks through
their Operating Circulars and other agreements.
\3\ Proposed revisions to the PSR Policy would provide that an
institution generally may only maintain one account with a Reserve
Bank, either a Payment Account or a master account.
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In this notice of proposed rulemaking (NPR), the Board proposes to
amend Regulation D to specify that Reserve Banks would not pay interest
on balances maintained in Payment Accounts. As described in more detail
below, the proposal is designed to control the size of Payment Account
balances on the Federal Reserve's balance sheet and align with the
purpose of the Payment Account as a special-purpose account for
clearing and settling payments. Relatedly, the Board is proposing in
the Payment Account Notice to revise the PSR Policy to, among other
things, establish a limit on balances that may be maintained in a
Payment Account at the Federal Reserve's daily close of business (a
Closing Balance Limit).\4\ The amendments to Regulation D and the PSR
Policy are both intended to control the size of Payment Account
balances.
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\4\ The business day of Federal Reserve Financial Services is
defined in Part II of the PSR Policy. It is the 24-hour period that
begins immediately after the regularly scheduled close of business
of the Fedwire[supreg] Funds Service (on days when the Fedwire Funds
Service is open) and the FedNow[supreg] Service on all other days,
including weekends and holidays (which, in both cases, is generally
7:00 p.m. ET). For the purposes of the Closing Balance Limit, the
open of the Federal Reserve business day is the open of the FedNow
Service Funds Transfer Business Day (generally 7:01 p.m. ET).
``Fedwire'' and ``FedNow'' are service marks of the Federal Reserve
Banks. A list of marks related to financial services products that
are offered to financial institutions by the Federal Reserve Banks
is available at <a href="http://FRBservices.org">FRBservices.org</a>[supreg].
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The Board also proposes to amend Regulation D to provide that
Payment Account holders would not be able to participate in excess
balance accounts (EBAs), which allow eligible institutions to maintain
balances that are not being used for payments purposes in a limited-
purpose account that pays interest. Permitting Payment Account holders
to participate in EBAs could allow them to circumvent the zero interest
rate on balances maintained in the Payment Account and the Closing
Balance Limit.
This Supplementary Information comprises six sections. Section I
provides a high-level overview of the proposal. Section II discusses
the RFI and summarizes comments to the RFI germane to this NPR. Section
III provides statutory and regulatory background. Section IV discusses
the rationale for the proposal and describes the revisions the Board
proposes to make to Regulation D. Section V solicits feedback on the
proposal broadly and on questions regarding specific aspects of the
proposal. Section VI addresses several administrative law matters.
II. Payment Account RFI and Comments Received
The RFI, published in the Federal Register on December 23, 2025,
sought public input on a prototype Payment Account and potential
updates to the Account Access Guidelines. The prototype Payment Account
described in the RFI would be designed for the purpose of clearing and
settling the Payment Account holder's payment activity. The Board
explained that Payment Accounts would have a standard set of risk-
mitigating terms. These terms included not receiving interest on
balances maintained at a Reserve Bank and a limit on overnight
balances. The Board invited comments on the benefits and drawbacks of
not paying interest on overnight balances in a Payment Account.
The Board received 72 comments on the RFI. Commenters discussing
the payment of interest included traditional banks and credit unions,
money transmitters, non-traditional banking institutions, trade
associations, academics, and others.
Of the commenters that addressed the payment of interest, many
supported the Board's proposal in the RFI to pay zero interest on
balances maintained in Payment Accounts. Some of these commenters noted
that paying zero interest on Payment Account balances would be
consistent with the limited purpose of Payment Accounts and discourage
use of Payment Accounts as a store of value or investment. A number of
commenters stated that paying zero interest would limit risks to
monetary policy implementation and financial stability. Some of these
commenters noted concerns about the banking sector, stating that
institutions likely to seek Payment Accounts would not engage in
traditional deposit taking and lending and that paying interest on
Payment Account balances could draw deposits away from commercial
banks, increase commercial banks' funding costs, and raise the cost of
credit for the real economy. Commenters also suggested that paying zero
interest could reduce inflows to and outflows from Payment Accounts
during periods of stress and could reduce the effect of Payment
Accounts on the Federal Reserve's balance sheet. Another commenter
argued that paying zero interest was a way to preserve the Federal
Reserve's financial and institutional independence. This commenter
explained that, to the extent dollar-based stablecoins are widely
adopted, stablecoins would be likely to displace non-interest-bearing
physical U.S. currency and erode the Federal Reserve's low-cost funding
base. Two commenters noted that not paying interest would align with
how similar accounts are handled by other central banks.
Other commenters, while not necessarily opposed to paying zero
interest, raised concerns. One commenter noted that, while the absence
of interest would keep the use of Payment Accounts in line with their
purpose, the proposed Closing Balance
[[Page 30505]]
Limit for each Payment Account holder would address this objective
substantially on its own. Another commenter noted that paying zero
interest could increase end-of-day balance minimization activity,
adding operational complexity. A commenter also suggested that the
absence of interest on Payment Account balances could introduce
behavior that shifts activity to Payment Accounts in low-rate periods
and away from Payment Accounts during high-rate periods.
A third set of commenters favored paying interest on balances held
in Payment Accounts. Some of these commenters questioned the rationale
supporting the disparate treatment of master account holders and
Payment Account holders. Two commenters suggested that not paying
interest could create an incentive for Payment Account holders to
maintain insufficient balances in Payment Accounts. Commenters also
argued in favor of paying interest on Payment Account balances to
promote broader adoption of Payment Accounts and make them more
economically feasible and attractive. A number of commenters discussed
the payment of interest on balances maintained by stablecoin issuers,
citing competition between differently organized issuers, opportunity
costs for maintaining liquid reserves, and the potential for pass-
through of interest by stablecoin issuers to establish a more direct
link between monetary policy and household interest rates. Finally, a
number of commenters suggested methods for the payment of interest on
Payment Account balances. These included paying interest up to a
threshold, phasing in interest after a Payment Account had been open
for a year, and imposing targeted constraints rather than a blanket
prohibition.
III. Statutory and Regulatory Background
Section 19(b)(12) of the Federal Reserve Act (FRA) provides that
Reserve Banks may pay interest on balances maintained by or on behalf
of certain institutions in an account at a Reserve Bank at a rate or
rates of interest not to exceed the general level of short-term
interest rates.\5\ Institutions that are eligible to receive interest
on their balances held at Reserve Banks (eligible institutions) include
``depository institutions,'' as defined in FRA section 19(b)(1), as
well as any trust company, any corporation organized under FRA section
25A or having an agreement with the Board under FRA section 25, or any
branch or agency of a foreign bank.\6\ This authority does not extend
to all balances maintained at Reserve Banks, such as balances of the
Federal Home Loan Banks and of certain other non-eligible
institutions.\7\ There is no requirement in the statute that interest
be paid to any eligible institution, nor is there any requirement that
the same interest rate or rates be paid to all eligible institutions or
on all balances of eligible institutions.
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\5\ 12 U.S.C. 461(b)(12).
\6\ See 12 U.S.C. 461(b)(12)(C); see also 12 CFR 204.2(y)
(defining ``eligible institution'').
\7\ 12 U.S.C. 1435 (Federal Home Loan Banks); see, e.g., 12
U.S.C. 1452(d) (Federal Home Loan Mortgage Corporation) and 22
U.S.C. 285d (Asian Development Bank).
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Section 19(b)(12)(B) of the FRA also provides that the Board may
prescribe regulations concerning the payment of interest. Specifically,
the Board may prescribe regulations concerning (1) the payment of
earnings in accordance with section 19(b)(12); (2) the distribution of
such earnings to eligible institutions; and (3) the responsibilities of
eligible institutions, Federal Home Loan Banks, and the National Credit
Union Administration Central Liquidity Facility with respect to the
crediting and distribution of earnings attributable to balances
maintained in a Reserve Bank by any such entity on behalf of eligible
institutions.\8\
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\8\ See 12 U.S.C. 461(b)(12)(B).
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Regulation D Sec. 204.10(a) provides that interest on balances
maintained at Reserve Banks by or on behalf of an eligible institution
shall be established by the Board, at a rate or rates not to exceed the
general level of short-term interest rates.\9\ That section defines the
terms ``balance'' and ``short-term interest rates'' and further
provides that the payment of interest on balances under Sec. 204.10(b)
shall be subject to such other terms and conditions as the Board may
prescribe. For balances maintained in an eligible institution's master
account, Sec. 204.10(b)(1) provides that interest is the amount equal
to the interest on reserve balances (IORB) rate on a day multiplied by
the total balances maintained on that day.\10\ For purposes of IORB,
Sec. 204.10(b)(3) defines the term ``master account.'' \11\ The
definition excludes any term deposit, EBA, or any deposit account
maintained with a Reserve Bank governed by an agreement that states the
account is not a master account.\12\
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\9\ 12 CFR 204.10.
\10\ 12 CFR 204.10(b)(1).
\11\ For additional detail on the definition of master account,
see Section IV.B.1 below.
\12\ 12 CFR 204.10(b)(3).
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Paragraphs (c), (d), and (e) of Sec. 204.10 apply to pass-through
balances, EBAs, and term deposits, respectively. Regulation D provides
for pass-through arrangements to permit institutions to satisfy reserve
requirements through a correspondent.\13\ Section 204.10(c) provides
that a correspondent that is an eligible institution may pass back to
its respondent interest paid on balances maintained to satisfy a
reserve balance requirement of that respondent.\14\ It also provides
that, with respect to a correspondent that is not an eligible
institution, a Reserve Bank may pay interest only on the balances
maintained to satisfy a reserve balance requirement of one or more
respondents and that the correspondent must pass back to its
respondents interest on balances paid in the correspondent's
account.\15\ Since March 2020, all reserve requirement ratios have been
set at zero percent.\16\
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\13\ See 12 CFR 204.2(l) and 204.5(d). In a correspondent-
respondent relationship, the correspondent bank provides banking
services on behalf of the respondent bank. This often includes the
correspondent bank executing payments on behalf of the respondent
bank and its customers. A respondent bank typically maintains an
account with its correspondent bank.
\14\ Regulation D defines ``balance maintained to satisfy a
reserve balance requirement'' as the average balance held in an
account at a Reserve Bank by or on behalf of an institution over a
reserve maintenance period to satisfy a reserve balance requirement
under Regulation D. 12 CFR 204.2(bb).
\15\ 12 CFR 204.10(c).
\16\ See 85 FR 16525 (Mar. 24, 2020) (interim final rule); 86 FR
8853 (Feb. 10, 2021) (final rule).
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Paragraph (d) of Sec. 204.10 provides for EBAs.\17\ The Board
authorized the creation of EBAs in 2009 to alleviate certain pressures
on correspondent-respondent business relationships related to the
difference between the federal funds rate and the interest rate paid at
the time on excess reserves.\18\ An EBA is a limited-purpose account at
a Reserve Bank managed by an agent and established for maintaining the
balances of one or more institutions (participants) eligible to earn
interest on balances held
[[Page 30506]]
at a Reserve Bank.\19\ In an EBA arrangement, participants authorize an
agent to transfer balances in and out of the EBA, and the balances held
in the EBA are liabilities of the relevant Reserve Bank directly to the
participants. As provided in paragraph (d)(3), balances maintained in
an EBA may not be used for general payments or other activities.
Pursuant to paragraph (d)(4), balances of eligible institutions
maintained in an EBA earn interest at the IORB rate. Requests to be an
EBA agent or participant are evaluated under the Account Access
Guidelines as requests for master accounts, and, as described in the
Payment Account Notice, the Board does not propose to change that
treatment going forward.\20\
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\17\ 12 CFR 204.10(d).
\18\ See 89 FR 100495, 100495 (Dec. 12, 2024) (citing 74 FR
5628, 5629 (Jan. 30, 2009)). When the Board authorized the creation
of EBAs in 2009, balances maintained by depository institutions at a
Reserve Bank were divided into required reserves (balances held to
satisfy a reserve requirement) and excess reserves (balances
maintained in excess of required reserves). Eligible institutions
that were respondents of a pass-through correspondent could maintain
excess balances as deposits with their correspondent or,
alternatively, could instruct their correspondent to sweep their
deposits into overnight investments in the federal funds market.
Correspondents typically preferred the latter because it helped
limit the size of their balance sheet and boosted their regulatory
capital ratios. However, when the market rate of interest on federal
funds was below the rate paid by Reserve Banks on excess balances,
respondents had an incentive to shift the investment of their
surplus funds away from the sale of federal funds (through their
correspondents) and toward holding those funds directly as excess
balances with the Reserve Banks, potentially disrupting established
correspondent-respondent relationships.
\19\ See id. at 100496. After the Board set all reserve
requirement ratios to zero percent in 2020, eliminating reserve
requirements, the Board amended Sec. 204.10(d) to specify that
balances maintained in EBAs were no longer limited to ``excess
balances,'' see 86 FR 29937, 29938 (June 4, 2021), but the Board
retained the name ``excess balance account.''
\20\ In 2024, the Board clarified that such requests would be
evaluated under the Account Access Guidelines. See id. at 100495.
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Paragraph (e) of Sec. 204.10 addresses term deposits. A Reserve
Bank may accept term deposits from eligible institutions subject to
such terms and conditions as the Board may establish from time to time.
Section 204.10(e) provides that term deposits will not satisfy any
institution's reserve balance requirement and may not be used for
general payments or settlement activities. Reserve Banks currently do
not accept term deposits.\21\
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\21\ 12 CFR 204.10(e).
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IV. Proposed Revisions
The Board proposes to revise Sec. 204.10 of Regulation D to
specify that balances maintained in Payment Accounts would not receive
interest and that Payment Account holders would not be able to
participate in an EBA. As discussed in the Payment Account Notice, the
Board also proposes therein to establish a Closing Balance Limit.
A. Rationale for Proposed Revisions
As explained in the Payment Account Notice, the Board has continued
to monitor developments in the payments ecosystem since the Board
issued the Account Access Guidelines, including the development of new
financial products and technologies. Since then, the types of
institutions seeking Federal Reserve accounts and services have
continued to evolve. Several institutions focused on payments
innovation have explained that they are interested in direct access to
accounts and services, as opposed to having to rely on third-party
intermediaries to access services, to reduce costs to their customers
and reduce risks while increasing payment processing speed. The Board
is proposing to create a Payment Account as a new, optional way for
institutions to request access to accounts and services to support
private-sector payments innovation while prudently managing the risks
identified in the Account Access Guidelines. To control the size of
accounts on the Federal Reserve's balance sheet, Payment Accounts would
not earn interest on balances and, as discussed in the Payment Account
Notice, would be subject to a Closing Balance Limit.
The Board has considered the effects of paying zero interest on
Payment Account balances on monetary policy implementation. The
establishment of Payment Accounts may affect the overall size and
composition of the consolidated balance sheet of Reserve Banks and
thereby may affect the implementation of monetary policy. By paying
zero interest, Payment Account balances should generally remain
relatively small at the end of the business day and, therefore, should
not account for a significant portion of the Federal Reserve's balance
sheet. Minimizing the size of Payment Accounts would help ensure that
their direct effect on Federal Reserve liabilities is modest and that
the Federal Reserve would not have to expand its balance sheet
significantly beyond what would otherwise be needed to efficiently and
effectively implement monetary policy. However, the indirect effects of
Payment Accounts on other Federal Reserve liabilities is difficult to
assess and would depend on several factors, including: the
characteristics of the Payment Account holders (i.e., their balance
sheet composition and business models), the source of funds that flow
into Payment Accounts (e.g., deposits at depository institutions,
physical currency), and the amount of sweeping activity of Payment
Account holders from commercial bank deposits to support higher
intraday balances in Payment Accounts.
The Board believes that paying zero interest and establishing a
Closing Balance Limit would support the goal of limiting balances in
Payment Accounts. During non-stress periods, it is likely that a zero
interest rate will incentivize Payment Account holders to minimize
Payment Account balances--potentially below the level of the Closing
Balance Limit. During periods of general market stress, Payment Account
holders may prefer to hold higher precautionary Payment Account
balances than during non-stress periods, regardless of the interest
rate paid on the Payment Account. In addition, there may be periods
where the Payment Account holder has idiosyncratic incentives to hold
higher balances at a Reserve Bank. In these periods, the Closing
Balance Limit will further support minimizing balances in these
accounts. Together, these two Payment Account terms--paying zero
interest and the Closing Balance Limit--support the Board's goal of
minimizing the direct effects of Payment Accounts on the Federal
Reserve balance sheet to only what is needed for efficient and
effective implementation of monetary policy.
The Board has also considered the alternative of paying interest on
balances in a Payment Account up to the Closing Balance Limit, either
at the IORB rate or at the Federal Reserve's overnight reverse
repurchase operations (ON RRP) rate. The main rationale for paying
interest would be to support control of the federal funds rate within
the target range. The Board, however, believes that the risk to rate
control of paying zero interest on Payment Account balances would be
minimal. Additionally, to be consistent with the underlying purpose of
the Payment Account to support the clearing and settling of payment
activity rather than serving as a store of value, the Board believes it
would be appropriate not to pay interest on the account balances.
The proposed revisions to Regulation D have been informed by
comments received in response to the RFI. As summarized in Section II
above, the views expressed differed among the commenters that discussed
interest. A significant number of commenters supported the Board's
zero-interest proposal in the RFI, citing both the purpose of Payment
Accounts and potential effects on monetary policy and financial
stability. Consistent with points raised by these commenters, the Board
believes that paying zero interest, along with Closing Balance Limits,
would (i) encourage Payment Account holders to not use Payment Accounts
as a store of value or investment and (ii) allow the Federal Reserve to
control the size of Payment Accounts on the Federal Reserve's balance
sheet during both stress and non-stress periods.
The Board recognizes that many commenters recommended that the
Board pay interest on all or a portion of balances maintained in
Payment Accounts. Commenters raised a number of reasons for paying
interest, including to: promote adoption of Payment Accounts; create
parity between Payment Accounts and master accounts; and reduce an
incentive for Payment
[[Page 30507]]
Account holders to maintain insufficient balances to support
settlement, liquidity management, and payment operations.
The Board believes that zero-interest Payment Accounts should be
attractive as an option for accessing Federal Reserve accounts and
services by uninsured depository institutions. Relatedly, in light of
the limited purpose of Payment Accounts and the broader set of terms
that will differentiate Payment Accounts and master accounts, the Board
does not believe it is necessary to treat Payment Accounts and master
accounts equivalently for purposes of interest.
With respect to the sufficiency of balances maintained in Payment
Accounts, the Board believes that Payment Account holders--which would
not have access to daylight overdrafts--will have a strong incentive to
maintain sufficient balances in their accounts at the close of the
Federal Reserve's business day in order to avoid having their payment
orders rejected at the beginning of the next Federal Reserve business
day. At the same time, paying zero interest should incentivize Payment
Account holders to limit balances in Payment Accounts to those
necessary for payments.
B. Proposed Revisions to Sec. 204.10 (Payment of Interest on Balances)
As described in more detail below, the Board proposes to amend
Sec. 204.10(b)(3) of Regulation D by revising the definition of
``master account'' to exclude Payment Accounts and adding a new
definition of ``payment account.'' By virtue of this definitional
change, balances maintained in Payment Accounts would not receive
interest. The Board also proposes to amend Sec. 204.10(d) to specify
that Payment Account holders may not be EBA participants. Although the
Board considered whether relevant amendments should be made to the
provisions in Sec. 204.10 regarding the payment of interest on pass-
through balances and term deposits, the Board does not believe that any
amendments are necessary.
1. Definitions of Master Account and Payment Account
Currently, Sec. 204.10(b) provides for the payment of IORB only on
balances maintained in ``master accounts.'' Paragraph (b)(2) defines
master account using both a broad definition and a set of exceptions.
The term master account means, for purposes of Sec. 204.10(b), the
record maintained by a Reserve Bank of the debtor-creditor relationship
between the Reserve Bank and a single eligible institution with respect
to deposit balances of the eligible institution that are maintained
with the Reserve Bank. The term does not include a term deposit, an
EBA, a joint account, or any deposit account maintained with a Reserve
Bank governed by an agreement that states the account is not a master
account.
A Payment Account would be a master account under the current
definition, unless a Payment Account were governed by an agreement that
states the account is not a master account. Given the existing ability
to agree that an account is not a master account, it is not strictly
necessary for purposes of IORB to amend Regulation D to expressly
exclude Payment Accounts from the definition of master account.
However, the Board believes that adding a specific exclusion for
Payment Accounts would be clearer than relying on a general exclusion
that makes no reference to Payment Accounts. Accordingly, the Board
proposes to revise Sec. 204.10(b)(3) to specifically exclude Payment
Accounts from the definition of master account. The Board does not
believe that it is necessary to make further revisions to Sec.
204.10(b). The only accounts eligible for IORB under paragraph (b) are
master accounts, and excluding Payment Accounts from the definition of
master account will exclude them from IORB eligibility thereunder.
The Board proposes to define the term ``payment account'' in new
Sec. 204.10(b)(4). Specifically, the Board proposes to define a
Payment Account as the record maintained by a Federal Reserve Bank of
the debtor-creditor relationship between the Reserve Bank and a single
eligible institution with respect to deposit balances of the eligible
institution that are maintained with the Reserve Bank and which is
governed by an agreement that states the account is a Payment Account.
The Board believes that tying the status of a Payment Account to an
agreement between a Reserve Bank and a Payment Account holder draws a
simple and clear-cut difference between master accounts and Payment
Accounts.\22\
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\22\ In the Payment Account Notice, published elsewhere in
today's Federal Register, the Board describes a Payment Account as a
special purpose account designed for the purpose of clearing and
settling payments activity of an institution, its depositors, and
its other customers. For purposes of Regulation D, the Board does
not believe it is necessary to describe the functions of a Payment
Account and that an agreement-based definition will be easy to
administer by the Reserve Banks.
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2. EBAs
As described in Section III above, paragraph (d) of Sec. 204.10
pertains to EBAs, which permit participants to hold excess balances in
a limited-purpose account managed by an agent. Balances maintained in
EBAs may not be used for general payments or other activities, but
participants may ask their agents to transfer EBA balances to another
account (such as that of a correspondent) for purposes of making
payments. Section 204.10 does not set a limit on balances that may be
maintained in an EBA and specifies that interest is paid on EBA
balances at the IORB rate.
In connection with the Board's proposal to amend Regulation D to
provide for zero interest on Payment Account balances and in connection
with the Closing Balance Limit discussed in the Payment Account Notice,
the Board also proposes to add a new subparagraph (d)(6) to Sec.
204.10 to specify that a Payment Account holder would not be able to
participate in an EBA.\23\ As discussed above, the proposals to pay
zero interest and to establish a Closing Balance Limit are designed to
control the size of Payment Account balances on the Federal Reserve's
balance sheet and to align the terms of the Payment Account with its
nature as a special-purpose account for clearing and settling payments.
If a Reserve Bank were able to approve a Payment Account holder as an
EBA participant, the Payment Account holder may be able to circumvent
these two terms of the Payment Account. For example, an EBA participant
could instruct its agent to sweep large balances from the EBA into the
Payment Account holder's Payment Account at the beginning of a Federal
Reserve business day and sweep balances into the EBA at the end of the
Federal Reserve business day. Since EBA balances are direct liabilities
of a Reserve Bank to EBA participants, the entire EBA balance would
constitute reserves. If this were to occur at scale, it could expand
the Federal Reserve's balance sheet beyond what would otherwise be
needed to efficiently and effectively implement monetary policy.
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\23\ An institution must have a master account to be an EBA
agent. See 12 CFR 204.10(d). In connection with the Board's proposal
to define the term Payment Account and revise the term master
account, the Board proposes to make a technical change to clarify
that the term master account as used in Sec. 204.10(d) has the same
meaning as it does in Sec. 204.10(b).
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3. Pass-Through Balances and Term Deposits
As described in Section III above, paragraphs (c) and (e) of Sec.
204.10 pertain to interest on pass-through balances and term deposits.
The Board
[[Page 30508]]
does not believe any changes to those paragraphs are necessary with
respect to Payment Accounts, for the reasons set forth below.
First, the Board does not believe that changes are needed to the
treatment of pass-through balances in an environment in which reserve
requirement ratios are zero. Section 204.10 of Regulation D provides
that a pass-through correspondent that is an eligible institution under
Regulation D may, but is not required to, pass back interest paid on
balances maintained to satisfy a reserve balance requirement of its
respondent. When the Board adopted a final rule regarding pass-through
balances, the Board noted that requiring eligible institutions to pass
back interest could interfere with existing correspondent-respondent
relationships and that reserve deficiency charges were charged to
correspondents regardless of whether the deficiency was attributable to
a respondent.\24\ The Board continues to believe that a correspondent
and respondent should be able to negotiate the interest rate on
balances maintained at the correspondent by the respondent. A pass-
through correspondent must pass back interest if the correspondent is
not an eligible institution. However, a Reserve Bank may pay interest
only on balances maintained at a non-eligible institution to satisfy a
reserve balance requirement of one or more respondents. All reserve
requirement ratios are now zero, and no interest is paid to
correspondents that are not eligible institutions.
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\24\ 74 FR 25620, 25623-4 (May 29, 2009). Because all reserve
requirement ratios are zero, no deficiency charges are imposed.
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Second, the Board does not believe changes are needed with respect
to term deposits. The Reserve Banks do not currently accept term
deposits. In addition, as described in Section III above, any term
deposits are subject to such terms and conditions as the Board may
establish from time to time. Accordingly, were term deposits to be
accepted by Reserve Banks in the future, the Board could establish
terms and conditions with respect to acceptance of term deposits by
institutions that also have Payment Accounts.
V. Request for Comment
The Board invites comment on all aspects of the proposed revisions.
In addition, the Board invites feedback on the following specific
questions related to the proposal:
1. Has the Board appropriately identified and considered the
potential effects of Payment Accounts on monetary policy
implementation, or are there additional effects on monetary policy
implementation that the Board should consider?
2. The proposed revisions would provide that balances maintained in
Payment Accounts would not earn interest.
a. Would the payment of zero interest effectively mitigate the
impact of Payment Account balances on the Federal Reserve's balance
sheet?
b. Are there effects of paying zero interest that the Board has not
identified?
c. Should the Board instead provide for the payment of interest on
Payment Account balances? If so, why and at what rate (the IORB rate,
ON RRP rate, or another rate)? What effects would a different rate have
on the Reserve Banks' combined balance sheet and the implementation of
monetary policy?
d. The Board has proposed to revise paragraph (d) of Sec. 204.10
to provide that a Payment Account holder would not be able to be an EBA
participant. Is this revision appropriate or should the Board consider
alternatives (which could include leaving paragraph (d) unchanged)?
e. The Board has proposed not to revise paragraphs (c) or (e) of
Sec. 204.10, which pertain to the payment of interest on pass-through
balances and term deposits, respectively. Are revisions to those
provisions necessary with respect to Payment Accounts?
3. In the Payment Account Notice, the Board has proposed to add new
Part IV to the PSR Policy, which would outline some of the different
types of accounts that Reserve Banks provide to legally eligible
institutions, and the standard terms under which these accounts would
be provided. Among other things, proposed Part IV would establish a
Closing Balance Limit. A Payment Account holder would be expected to
achieve an account balance at or below the Closing Balance Limit at the
Federal Reserve's close of business.\25\ The Closing Balance Limit
would be set by the Reserve Bank based on expected payment activity,
not to exceed $1 billion.\26\ A Closing Balance Limit and paying zero
interest on Payment Accounts both serve to minimize the balances held
in Payment Account and the direct impact Payment Accounts have on the
Federal Reserve balance sheet. A Closing Balance Limit and paying zero
interest could have important interactions whereby a change in one of
the terms could affect the efficacy of the other.
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\25\ See note 4 above.
\26\ Payment account holders would be permitted to maintain
balances in the account at the Federal Reserve's close of business
only to provide sufficient liquidity for payment activity at the
beginning of the next Federal Reserve business day. In setting the
closing balance for an individual Payment Account, the Reserve Bank
would analyze internal Reserve Bank data on the Payment Account
holder's payment flows (if available), in particular at the
beginning of the Federal Reserve's business day, and take into
consideration periods of time when external sources of liquidity may
be limited, such as during weekends and holidays. When setting the
initial Closing Balance Limit for a Payment Account, internal
Reserve Bank data may not be available, and the Reserve Bank would
rely on information obtained by the Reserve Bank during its review
of the institution's Payment Account request to conduct its analysis
to set the initial Closing Balance Limit. In addition, the Payment
Account holder would be able to provide the Reserve Bank forecasts
and additional information related to expected daily variations in
payments and growth in payments over time. The Reserve Bank would
review an individual Payment Account's Closing Balance Limit at
least annually, using Reserve Bank data and any forecasts and
additional information provided by the Payment Account holder, to
ensure the limit remains appropriately sized to support the Payment
Account holder's payments at the open of the Federal Reserve
business day. Notwithstanding the foregoing, an individual Payment
Account's Closing Balance Limit would not exceed $1 billion. As
further set forth in the Payment Account Notice, in unusual
circumstances, a Reserve Bank would be able to permit, on a case-by-
case basis, a Payment Account holder to temporarily exceed its
Closing Balance Limit (such temporary balance, a Temporary Closing
Amount). The Reserve Bank would consult with the Board before
permitting a Payment Account's Temporary Closing Amount to exceed $1
billion. The Reserve Bank would consult with the Board if it
permitted a Payment Account's Temporary Closing Amount to be equal
to or less than $1 billion (but, for the avoidance of doubt, more
than the relevant Payment Account's Closing Balance Limit) for two
Federal Reserve business days.
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a. Given that paying zero interest and limiting closing balances on
Payment Accounts both serve a similar purpose and have important
interactions, should the Board consider codifying the Closing Balance
Limit in Regulation D? Why or why not?
b. Are there important interactions between limiting closing
balances and paying zero interest on Payment Accounts that the Board
has not identified?
VI. Administrative Law Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA),
requires an agency to consider the impact of its rules on small
entities.\27\ In connection with a proposed rule, the RFA generally
[[Page 30509]]
requires an agency to prepare an Initial Regulatory Flexibility
Analysis (IRFA) describing the impact of the rule on small entities,
unless the head of the agency certifies that the proposal will not have
a significant economic impact on a substantial number of small entities
and publishes such certification along with a statement providing the
factual basis for such certification in the Federal Register. An IRFA
must contain (i) a description of the reasons why action by the agency
is being considered; (ii) a succinct statement of the objectives of,
and legal basis for, the proposal; (iii) a description of, and, where
feasible, an estimate of the number of small entities to which the
proposal will apply; (iv) a description of the projected reporting,
recordkeeping, and other compliance requirements of the proposal,
including an estimate of the classes of small entities that will be
subject to the requirement and the type of professional skills
necessary for preparation of the report or record; (v) an
identification, to the extent practicable, of all relevant Federal
rules that may duplicate, overlap with, or conflict with the proposal;
and (vi) a description of any significant alternatives to the proposal
that accomplish its stated objectives and minimize any significant
economic impact of the proposed rule on small entities.\28\
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\27\ Under regulations issued by the U.S. Small Business
Administration (SBA), a small entity includes a depository
institution, bank holding company, or savings and loan holding
company with total assets of $850 million or less. See 13 CFR
121.201. Consistent with the SBA's General Principles of
Affiliation, the Board includes the assets of all domestic and
foreign affiliates toward the applicable size threshold when
determining whether to classify a particular entity as a small
entity. See 13 CFR 121.103.
\28\ 5 U.S.C. 603(b)-(c).
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The Board is providing an IRFA with respect to the proposal. The
Board believes that the proposal will not have a significant economic
impact on a substantial number of small entities. First, Payment
Accounts would be a new, optional way for institutions to request
access to Reserve Bank accounts and services, and therefore no existing
account holders would be affected. Second, institutions would retain
the option of requesting a master account or not requesting any
account. It is possible that a small entity could become an EBA
participant and subsequently request a Payment Account. Under the
proposed amendments, the small entity would become ineligible to
participate in an EBA upon becoming a Payment Account holder. However,
as discussed above, Payment Accounts are optional and small entities
could decide to access Federal Reserve services through a
correspondent. The proposed changes to Regulation D, therefore, would
not impose mandatory requirements on any small entities. The Board
invites comment on all aspects of this IRFA.
In addition, as discussed in Section I above, the Board is
proposing in the Payment Account Notice to revise the PSR Policy to,
among other things, establish a Closing Balance Limit. In this NPR, the
Board is requesting comment on whether the Board should consider
codifying the Closing Balance Limit in Regulation D. See Section V
above (Question 3). As discussed in the Payment Account Notice, the
Board believes that inclusion of the Closing Balance Limit in the PSR
Policy would not have a significant economic impact on a substantial
number of small entities. Codifying the Closing Balance Limit in
Regulation D would not affect the Board's view, for the reasons
discussed above.
1. Reasons Action Is Being Considered
As discussed in this SUPPLEMENTARY INFORMATION, the Board is
proposing to amend Sec. 204.10 of Regulation D in connection with the
Board's proposal to update the PSR Policy and Account Access
Guidelines. The Board is also requesting public comment on whether to
codify the Closing Balance Limit in Regulation D
2. Objectives of and Legal Basis for the Proposal
As discussed in this SUPPLEMENTARY INFORMATION, the proposed
revisions to Regulation D relate to proposed amendments to the PSR
Policy and Account Access Guidelines to accommodate Payment Accounts
and would implement a proposed standard term applicable to all Payment
Accounts. Section 19(b)(12)(B) of the FRA provides that the Board may
prescribe regulations concerning the payment of interest on balances
maintained by or on behalf of an eligible institution at a Reserve
Bank.
With respect to the Closing Balance Limit, section 11(j) of the FRA
authorizes the Board to exercise general supervision over the Reserve
Banks, including their provision of accounts and services.\29\ The
Closing Balance Limit, whether in the PSR Policy or Regulation D, would
support the Board's objective to foster the safety and efficiency of
payment, clearing, settlement, and recording systems and to promote
financial stability, more broadly.
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\29\ 12 U.S.C. 248(j).
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3. Description and Estimate of the Number of Small Entities
The SBA has adopted size standards for determining whether a
particular entity is a ``small entity'' for purposes of the RFA. The
Board believes that the most appropriate SBA size standard to apply in
determining whether a member bank, depository institution, or branch or
agency of a foreign bank is a small entity is the SBA size standard for
``commercial banking.'' Under this standard, an entity engaged in
commercial banking is considered a small entity if it has total assets
of $850 million or less.\30\
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\30\ See 13 CFR 121.201.
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The population of relevant commercial banks could potentially
include all institutions that (1) are legally eligible for a Payment
Account, (2) are eligible institutions as defined in Regulation D, and
(3) do not have a master account or settle transactions in a
correspondent's master account.\31\ With respect to the Closing Balance
Limit, the population of relevant commercial banks could potentially
include all institutions that (1) are legally eligible for a Payment
Account and (2) do not have a master account or settle transactions in
a correspondent's master account.
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\31\ The Board is making the simplifying assumption that Payment
Account holders would be eligible institutions.
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In both cases, the Board estimates that, as of the end of 2025,
there are approximately 7,000 small entities, of which 6,800 already
have a master account or access to financial services.\32\ Accordingly,
the Board estimates that there are approximately 200 small entities
that the proposed amendments to Regulation D and the Closing Balance
Limit might affect, were these small entities to decide to request
Payment Accounts.
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\32\ The Board assumes that small entities that currently have
master accounts or settle transactions in a correspondent's master
account would not request a Payment Account.
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4. Description of Compliance Requirements
The proposed amendments to Sec. 204.10 would not impose reporting,
recordkeeping, or other compliance requirements.
An individual Payment Account's Closing Balance Limit would be
based on the Reserve Bank's analysis of the Payment Account holder's
payment flows, using internal Reserve Bank data and any forecasts and
additional information provided by the Payment Account holder.\33\
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\33\ See note 34 below for the estimated annual burden hours
associated with setting the Closing Balance Limit.
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5. Duplicative, Overlapping, and Conflicting Rules
The Board is not aware of any federal rules that may duplicate,
overlap with, or conflict with the proposal.
[[Page 30510]]
6. Significant Alternatives Considered
As discussed in Section IV.A above, the Board considered proposing
the payment of interest on balances up to the Closing Balance Limit
discussed in the Payment Account Notice at the IORB or ON RRP rate. As
discussed in the Payment Account Notice, the Board considered
alternatives with respect to the Closing Balance Limit, such as setting
the Closing Balance Limit to zero and calculating the Closing Balance
Limit in a different manner.
The Board does not believe that any of these alternatives
considered by the Board would have affected the economic impact on
small entities, because the Payment Account would be a new, optional
way for institutions to request access to Reserve Bank accounts and
services, and the proposed changes would not impose mandatory
requirements on any small entities.
Therefore, the Board believes that neither the proposed revisions
to Regulation D nor the provisions of the PSR Policy regarding the
Closing Balance Limit will have a significant economic impact on a
substantial number of small entities supervised by the Board.
The Board welcomes comment on all aspects of its analysis. In
particular, the Board requests that commenters describe the nature of
any impact on small entities and provide empirical data to illustrate
and support the extent of the impact.
B. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (PRA) of 1995 (44
U.S.C. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the proposed
rule under the authority delegated to the Board by the Office of
Management and Budget (OMB). The proposed revisions contain no
requirements subject to the PRA.
As discussed in Section I above, the Board is proposing in the
Payment Account Notice to revise the PSR Policy and the Account Access
Guidelines to accommodate Payment Accounts. The proposed revisions to
the PSR Policy would, among other things, establish the Closing Balance
Limit. In this NPR, the Board is requesting comment on whether the
Board should consider codifying the Closing Balance Limit in Regulation
D. See Section V above (Question 3).
Certain provisions of the Account Access Guidelines and PSR Policy
contain ``collections of information'' within the meaning of the PRA
subject to the PRA. The Board proposes in the Payment Account Notice to
implement for three years the Disclosure Provisions Associated with the
Payment System Risk Policy and Account Access Guidelines (FR 4103; OMB
No. 7100-NEW) to account for these proposed revisions, as well as
certain other information collections. Were the Board to codify the
Closing Balance Limit in Regulation D, certain proposed revisions to
the PSR Policy that contain collections of information may codified in
Regulation D.\34\ To account for that possibility, the Board is
inviting comments on those collections of information in this NPR, in
addition to the request for comment in the Payment Account Notice.
Comments are invited on:
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\34\ Pursuant to the Board's proposed revisions to the PSR
Policy, Payment Accounts would be subject to a Closing Balance
Limit, which would be set by the Reserve Banks and reviewed at least
annually. In order to initially set the Closing Balance Limit, a
Reserve Bank would rely on information obtained by the Reserve Bank
during its review of the institution's Payment Account request under
the Account Access Guidelines. Payment Account holders would have an
ongoing ability to submit additional data and information to support
the Reserve Bank's determination of the individual Payment Account's
Closing Balance Limit. The disclosure of this additional data and
information would be voluntary. With respect to this ongoing ability
to submit data and information, the Board estimates in the Payment
Account Notice a total number of 34 respondents per year and an
average of one hour per response, with responses occurring on an
event-generated basis. Were the Closing Balance Limit to be codified
in Regulation D, the ongoing ability to submit data and information
may be set forth in Regulation D rather than the PSR Policy. The
Board expects that information necessary to set an institution's
initial Closing Balance Limit would continue to be obtained by a
Reserve Bank during its review of the institution's Payment Account
request under the Account Access Guidelines. In the Payment Account
Notice, the Board provides estimates regarding the review of new
access requests, which apply to requests for both master accounts
and Payment Accounts. Specifically, the Board estimates a total
number of 34 respondents per year and an average of 20 hours per
response, with responses occurring on an event-generated basis.
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(a) whether the collection of information is necessary for the
proper performance of the Board's functions, including whether the
information has practical utility;
(b) the accuracy of the estimates of the burden of the information
collection, including the validity of the methodology and assumptions
used;
(c) ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information
Comments on aspects of this document that may affect reporting,
recordkeeping, or disclosure requirements and burden estimates should
be sent to the addresses listed in the ADDRESSES section. A copy of the
comments may also be submitted to the OMB desk officer for the
Agencies: By mail to U.S. Office of Management and Budget, 725 17th
Street NW, #10235, Washington, DC 20503 or by facsimile to (202) 395-
5806, Attention, Federal Banking Agency Desk Officer.
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113
Stat. 1338, 1471, 12 U.S.C. 4809) requires the federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. The Board has sought to present the proposal in a
simple and straightforward manner and invites comment on the use of
plain language and whether any part of the proposal could be more
clearly stated.
D. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 (5
U.S.C. 553(b)(4)) requires that a NPR include the internet address of a
summary of not more than 100 words in length of the proposed rule, in
plain language, that shall be posted on the internet website under
section 206(d) of the E-Government Act of 2002 (44 U.S.C. 3501 note).
In summary, the Board proposes to amend its Regulation D (Reserve
Requirements of Depository Institutions) to differentiate between
master accounts and a proposed new category of special-purpose payment
accounts (Payment Accounts). The proposed amendments would exclude
Payment Accounts from Regulation D's provisions directing Federal
Reserve Banks (Reserve Banks) to pay interest on balances maintained at
a Reserve Bank. As a result, the Reserve Banks would not pay interest
on balances maintained in Payment Accounts.
The proposal and such a summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a> and <a href="https://www.federalreserve.gov/supervisionreg/reglisting.htm">https://www.federalreserve.gov/supervisionreg/reglisting.htm</a>.
List of Subjects in 12 CFR Part 204
Banks, Banking, Reporting and recordkeeping requirements.
Authority and Issuance
For the reasons set forth in the preamble, the Board proposes to
amend
[[Page 30511]]
Regulation D, 12 CFR part 204, as follows:
PART 204--RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS
(REGULATION D)
0
1. The authority citation for part 204 continues to read as follows:
Authority: 12 U.S.C. 248(a), 248(c), 461, 601, 611, and 3105.
0
2. Amend Sec. 204.10 by:
0
a. Revising paragraph (b)(3);
0
b. Adding paragraph (b)(4); and
0
c. Adding paragraph (d)(6).
The revision and additions read as follows:
Sec. 204.10 Payment of interest on balances.
* * * * *
(b) * * *
(3) For purposes of Sec. 204.10(b) and (d), a ``master account''
is the record maintained by a Federal Reserve Bank of the debtor-
creditor relationship between the Federal Reserve Bank and a single
eligible institution with respect to deposit balances of the eligible
institution that are maintained with the Federal Reserve Bank. A
``master account'' is not a ``term deposit,'' an ``excess balance
account,'' a ``joint account,'' a ``payment account,'' or any deposit
account maintained with a Federal Reserve Bank governed by an agreement
that states the account is not a master account.
(4) For purposes of Sec. 204.10(b) and (d), a ``payment account''
is the record maintained by a Federal Reserve Bank of the debtor-
creditor relationship between the Federal Reserve Bank and a single
eligible institution with respect to deposit balances of the eligible
institution that are maintained with the Federal Reserve Bank and which
is governed by an agreement that states the account is a payment
account.
* * * * *
(d) * * *
(6) A holder of a payment account may not participate in an excess
balance account.
* * * * *
By order of the Board of Governors of the Federal Reserve
System.
Benjamin W. McDonough,
Secretary of the Board.
[FR Doc. 2026-10377 Filed 5-22-26; 8:45 am]
BILLING CODE 6210-01-P
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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.