Fed moves forward on ‘payment account’ by issuing proposal; aims at ‘supporting innovation’

Clearing and settling of payments is the aim of a proposed “payment account” by the Federal Reserve, which would be used by legally eligible financial institutions, the agency said late Wednesday.

According to the Fed, under the proposal (which is “substantially similar” to a prototype issued by the agency in December), Payment account holders would not have access to intraday credit or the discount window, would not earn interest on balances held at a Reserve Bank, and would only have access to payment services with automated controls to prevent overdrafts.

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Federal Reserve Board requests public comment on a proposal to establish a “payment account,” which legally eligible financial institutions could use for the specific purpose of clearing and settling their payments