Skip to main content
Menu Icon Menu Icon

InfoBytes Blog

Financial Services Law Insights and Observations


Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • Fed approves establishment of federally-licensed branch of Dutch payment company

    Federal Issues

    On May 24, the Federal Reserve Board announced its approval of the application of a Dutch- based payment company to establish a federally-licensed branch in San Francisco. According to the order, since the company currently does not have a U.S. banking presence, its U.S. payment processing business will rely on third-party banks. Upon establishment of the San Francisco branch, the company’s operations would be transferred to the branch, and it would be eligible to engage in a wide range of payments processing and related banking activities in the U.S., thus reducing its dependence on third-party banks. Through the establishment of the branch, “the company proposes to bring its U.S. activities and operations in line with those conducted under its European Central Bank (ECB) license,” the Fed noted. The order also pointed out that “managerial and other financial resources of the company are considered consistent with approval, and the company appears to have the experience and capacity to support the proposed branch.” In addition, the company has initiated controls and procedures for its proposed branch to guarantee compliance with U.S. law and for its operations in general.

    Federal Issues Fintech Federal Reserve Board Foreign Banks

    Share page with AddThis
  • Brainard provides update on central bank-issued digital currencies

    Federal Issues

    On May 24, Federal Reserve Governor Lael Brainard spoke at the Consensus by CoinDesk 2021 Conference about the Fed’s exploration of central bank digital currencies (CBDCs) and cross-border payments. Brainard noted that a CBDC may address concerns regarding the lack of federal deposit insurance and banking supervision for nonbank issuers of digital assets, and that “new forms of private money may introduce counterparty risk into the payments system in new ways that could lead to consumer protection threats or, at large scale, broader financial stability risks.” She highlighted that “introducing a safe and accessible central bank money to households and businesses in digital payments systems. . .would reduce counterparty risk and the associated consumer protection and financial stability risks.” Brainard noted that a Fed-backed digital currency could cause payment transactions to be cheaper, faster, and more efficient by improving processes for sending and receiving money internationally, encouraging private-sector competition in retail payments, and increasing financial inclusion.

    Brainard discussed how CBDCs could affect central banks’ ability to manage the economy, saying a digital dollar would need to be designed with safeguards to “protect against disintermediation of banks and to preserve monetary policy transmission more broadly.” She cautioned that the design should complement, not replace, existing currency and bank deposits and emphasized the need for regulators to work together “to ensure that banks are appropriately identifying, monitoring, and managing risks associated with digital assets.”

    As previously covered by InfoBytes, last week Chairman Jerome Powell stated that an important step in engaging the public about CBDCs involves “publishing [a] paper this summer to lay out the Fed’s current thinking on digital payments, with a particular focus on the benefits and risks associated with CBDC in the U.S. context.”

    Federal Issues Federal Reserve Board Fintech Central Bank Digital Bank Regulatory Non-bank

    Share page with AddThis
  • Treasury issues emergency capital investment program FAQs

    Agency Rule-Making & Guidance

    On March 30, the U.S. Treasury Department issued frequently asked questions to provide timely guidance concerning all aspects of the Emergency Capital Investment Program (ECIP). The FAQs cover issues regarding:

    • The types of institutions eligible to participate in the ECIP;
    • Submission of an ECIP application and emergency investment lending plan;
    • How Treasury will decide allocation of the available capital among applicants that meet the thresholds for eligibility, including how well an applicant has responded to the needs of communities impacted by the Covid-19 pandemic;
    • Whether an institution can choose to issue preferred stock or subordinated debt in the ECIP; and
    • Compliance and reporting requirements.

    The ECIP was established by the Consolidated Appropriations Act of 2021 (covered by InfoBytes here), and will provide up to $9 billion in capital directly to Community Development Financial Institutions and minority depository institutions to provide, among other things, “loans, grants, and forbearance for small and minority businesses and consumers in low income communities” that may be disproportionately impacted by the Covid-19 pandemic. As previously covered in InfoBytes, on March 22, the OCC, Federal Reserve Board, and the FDIC published an interim final rule (IFR) to facilitate the implementation of the ECIP.

    Agency Rule-Making & Guidance ECIP OCC Federal Reserve Board FDIC Covid-19

    Share page with AddThis