WASHINGTON–New “payment accounts” that are also being described as “skinny master accounts” are being considered by the Federal Reserve as a means of responding to the anticipated influx of digital assets and other pressures on payment systems, according to a Fed governor.
Speaking to the Fed-sponsored Payments Innovation Conference, Fed Board Gov. Christopher J. Waller said the new “payments accounts” would be available to all financial institutions that are “legally eligible for an account and could be beneficial for those focused primarily on payments innovations.”
Waller said he has asked Fed staff to explore the concept of such accounts, which would be targeted to provide basic Fed payment services to FIs that now handle payment services primarily through a third-party bank that has a full-fledged master account.
Market for Accounts
“There are many eligible firms engaged in substantial payments activities that may not want or need all the bells and whistles of a master account, or access to the full suite of Federal Reserve financial services, to successfully innovate and provide services to their customers,” Waller said during his remarks. “The idea is to tailor the services of these new accounts to the needs of these firms and the risks they present to the Federal Reserve Banks and the payment system. Accordingly, and importantly, these lower-risk payment accounts would have a streamlined timeline for review. Payments innovation moves fast, and the Federal Reserve needs to keep up.”
Waller described a prototype account—he coined the nickname “skinny master”–that would offer access to the Fed “payment rails” while controlling for various risks to the Federal Reserve and the payment system.
How Size of Accounts Would be Controlled
“To control the size of the accounts and associated impacts on the Fed’s balance sheet, the Reserve Banks would not pay interest on balances in a payment account, and balance caps may be imposed,” he said. “These accounts would not have daylight overdraft privileges—if the balance hits zero, payments will be rejected. They would not be eligible for discount window borrowing or have access to all Federal Reserve payment services for which the Reserve Banks cannot control the risk of daylight overdrafts.”
