ABA Urges Strong Guardrails to Protect U.S. Payments System in Response to Fed's Payment Account Proposal

In new comments filed today in response to the Federal Reserve's Request for Information on a potential Payment Account prototype, the American Bankers Association reiterated its strong view that any steps to broaden access to the Fed's payment services must be carefully designed to protect the integrity and resilience of the U.S. payments system.

In its comment letter, ABA emphasized that full-service Master Accounts must remain reserved for institutions with federal banking supervision, federally insured deposits, and established safety and soundness frameworks. The association noted that while new entrants and evolving business models are exploring participation in the payment system, they must be subject to stringent regulation and oversight to ensure all participants are protected.

ABA stressed that "careful design and robust risk mitigants are essential to uphold the integrity of the payments system and to protect the public interest." The association also reaffirmed that "Master Account access should be limited to Tier 1 institutions that are supervised by federal banking agencies and hold federally insured deposits."

While the Federal Reserve's risk-based approach including the ban on overdrafts, no interest on reserve balances, a cap on reserve balances held overnight, and no access to ACH or check services is prudent, the letter also outlined several additional measures necessary to ensure the responsible operation of any Payment Account framework, including:

• Direct federal supervision of Payment Account holders for BSA/AML/CFT, sanctions, operational, and cybersecurity compliance
• No correspondent or "nesting" arrangements to prevent indirect or unauthorized access to the payment system by third parties
• Low transaction limits that could only expand after strong and consistent performance, following a phased "crawl, walk, run" approach
• Financial assurances, such as surety bonds sized to the applicant's activity and risk

ABA also underscored the importance of preserving a separate and distinct application process for Master Accounts, emphasizing that "the process to obtain a Master Account should remain rigorous and must remain separate from the Payment Account application process," and that the Board "should not allow any Payment Account holders to 'bootstrap' themselves into a Master Account without going through a formal application process."

ABA concluded by expressing appreciation for the Board's cautious approach and noted that with the safeguards outlined in the letter, a Payment Account framework could "promote orderly participation by eligible institutions while preserving the safety, soundness, and integrity of the U.S. payments system."

Read the full letter.

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About the American Bankers Association

The American Bankers Association is the voice of the nation's $25.1 trillion banking industry, which is composed of small, regional and large banks that together employ over 2 million people, safeguard $19.7 trillion in deposits and extend $13.2 trillion in loans.