On May 20, the Fed issued, and requested public comment on, proposed amendments to Regulation A, Regulation D, and its Policy on Payment System Risk (PSR) to formally establish the “payment account” prototype. The regulatory package consists of three coordinated notices: (i) proposed revisions to the PSR Policy, including a new “Part IV” outlining the payment account’s standard terms — such as the closing balance limit, service restrictions, and discretionary illicit finance mitigants — along with updates to the Account Access Guidelines to accommodate payment account requests; (ii) a proposed amendment to Regulation A specifying that payment account holders would not be eligible for discount window credit; and (iii) a proposed amendment to Regulation D excluding payment account balances from interest-on-reserves provisions and barring payment account holders from participating in excess balance accounts. Comments on the three proposed rules must be submitted 60 days following publication in the Federal Register.

The formal proposal largely retains the structure outlined in the December 2025 RFI (previously covered by InfoBytes here) but makes several revisions in response to comments received. Most significantly, the closing balance limit shifted from the lesser of $500 million or 10 percent of total assets to an activity-based limit set by the Reserve Bank based on expected payment flows, not to exceed $1 billion. The proposal continues to restrict payment accounts to services with automated overdraft prevention (the Fedwire Funds Service, FedNow Service, National Settlement Service, and Fedwire Securities Service for transfers free of payment), excludes FedACH, pays no interest on balances, and bars access to both intraday credit and the discount window. The Fed also encouraged Reserve Banks to temporarily pause decisions on access requests from Tier 3 institutions (i.e., those not federally insured and not subject to federal prudential banking supervision) until the policy development process is complete, with the pause expected to end no later than December 31. The proposal also introduces a 90-day expected review timeline for payment account requests from Tier 2 and Tier 3 institutions, with Reserve Banks expected to consult Board staff before extending that period.

The proposal follows a White House executive order (covered here) directing federal financial regulators to streamline regulations and promote fintech collaboration. The proposal also follows the Kansas City Fed’s approval of the first-ever limited-purpose account for a digital asset bank in March (covered by InfoBytes here).