Federal Reserve Board issues policy statement to promote a level playing field for all banks with a federal supervisor, regardless of deposit insurance status

The Board of Governors of the Federal Reserve System (FED) has published a press release to inform of an upcoming new Policy as regards the engagement of FED-supervised banks in „novel“ financial services and products (e.g. custody services for crypto-assets). Specifically, in its new Policy Statement the FED is using its powers under Section 9(13) of the Federal Reserve Act to determine that banks – regardless of their level of Federal Deposit Insurance – may engage in new financial products and services so long as:
1. they have adequate policies and procedures in place to adequately manage the risks associated with such activities;
2. the risks taken on through the additional activities are commensurate with their scope, size, and risk tolerance; and
3. the activities are also permitted for national banks that are supervised by the Office of the Comptroller of the Currency (OCC).
The new policy thereby eliminates the differential treatment of FED-supervised insured and non-insured institutions and aligns permissible activities of FED-supervised institutions with those of banks supervised by the OCC. According to the Board of Governors, this alignment shall ensure a level playing field of all banks and shall reduce regulatory arbitrage.
The new Policy which will be implemented in new § 208.112 under Statutory Instrument 12 CFR 208 as regards Membership of State Banking Institutions in the Federal Reserve System will come into force upon publication in the Federal Register.