Opening a Federal Reserve Account

To open bank accounts, new customers provide personal information and make a deposit. Within a few minutes (or perhaps a few days), new customers get access to payment services. For many years, the process financial institutions used to open accounts at Federal Reserve Banks was similar. Eligible banks filled out a one-page form and within a week received an account allowing them access to the Federal Reserve’s payment systems. Recently, however, Federal Reserve Banks have spent years considering account requests from novel banks.

This Article examines the Federal Reserve’s process for evaluating requests for accounts. Using interviews, court documents, and other sources, it analyzes recent account requests from a cannabis credit union, a narrow bank, a public bank, a cryptocurrency custody bank, and a trust company. These requests reveal a lack of transparency and consistency. Most district Federal Reserve Banks do not explain how institutions should apply for accounts. It is not clear who decides whether to open the account. While the Federal Reserve Banks all evaluate risk associated with accounts and payments, the twelve Reserve Banks may not have the same risk tolerances. Decisions may be inconsistent. Even getting a decision can take years. Unfortunately, the Federal Reserve’s recently adopted guidelines, which consist primarily of a risk identification framework, do not fix these problems.

Congress should require that the Federal Reserve adopt public procedures describing how account applications are received and processed. These procedures should clarify the roles of the Reserve Banks and the Federal Reserve Board. To ensure that applicants are treated fairly and consistently, the Federal Reserve should publicly disclose information about accountholders, account requests, and account decisions.