July 12, 2021

VIA ELECTRONIC SUBMISSION

Ann E. Misback
Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC 20551

Re: SIFMA Comment on Proposed Guidelines for Evaluating Account and Services Requests (Docket No. OP–1747)

Dear Sirs and Madams:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to submit this letter to the Board of Governors of the Federal Reserve System (the “Board”) on the notice regarding proposed guidelines (“Proposed Guidelines”) to evaluate requests for accounts and services at Federal Reserve Banks (“Reserve Banks”).2

SIFMA welcomes the Proposed Guidelines and the Board’s efforts to increase transparency and consistency in evaluating requests for master accounts and access to Reserve Banks’ financial services. Consistent with SIFMA’s membership and organizational focus, our comments in this letter focus on the capital markets issues presented by the Proposed Guidelines and, in particular, the potential negative effects that migration of deposits to Reserve Bank balances could have on core funding and capital markets activities and on the Board’s ability to effectively implement monetary policy. As we describe below, pass-through investment entities (“PTIEs”), at present, appear to pose these risks most acutely, although other novel and special purpose charter types also may raise similar concerns.

The Proposed Guidelines raise a number of other important concerns regarding the provision of payment system access to novel and special purpose charters. In fact, allowing new, less-regulated institutions access to the Federal Reserve’s payments system has been a long-standing concern of Congress as well as the Board.3

1 SIFMA is the leading trade association for broker-dealers, investment banks, and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate on legislation, regulation, and business policy affecting retail and institutional investors, equity and fixed income markets, and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (“GFMA”).

2 86 Fed. Reg. 25865 (May 11, 2021).

3 For example, one of Congress’s primary motives for passing the Competitive Equality Banking Act of 1987 was protecting the payments system from certain types of non-traditional banks because such institutions could be less creditworthy and less able to make qualified credit assessments of their customers than traditional banks. See S. Rep. 100-19, 100th Cong., 1st Sess. 10-11 (Mar. 19, 1987) (“The payments system (which involves wire transfers, book-entry securities transfers, automated clearing house services, and check-collection services, among other things) is highly complex and interdependent, and its effective functioning requires a high degree of trust among the participants. … These cash and securities transfers create multi-billion dollar overdrafts (which, so long as they are settled before the end of the day, are known as ‘daylight overdrafts’). The main safeguard against the rippling effects of a default are the creditworthiness of the bank making the transfer and its willingness to make an independent credit judgment about its customers.”).