BPInsights: May 23, 2026

Fed Proposes Skinny Master Account

The Federal Reserve on Wednesday proposed a framework for "payment accounts," often described in public commentary as skinny master accounts, which legally eligible depository institutions could use to clear and settle payments.

• Similar to RFI. The proposed payment account resembles the prototype outlined in the Fed's Request for Information in December - payment account holders would not have access to the discount window or earn interest on balances held at the Fed. They would only have access to payment services with automated controls to prevent overdrafts. The proposed term sheet for the accounts is here.
• But Some Key Differences. The proposal differs in some aspects from the RFI - for example, a proposed set of terms available to Reserve Banks, at their discretion, to mitigate illicit finance risk in connection with the provision of a Payment Account. If requested by the Reserve Bank, an account holder would be required to provide information related to its BSA/AML and OFAC compliance. Importantly, the proposal would not expand or otherwise change legal eligibility for access to accounts or payments services from the Federal Reserve, and affirms that Reserve Banks would expect payment account holders to mitigate illicit finance risks.
• Pressing Pause. The Fed is encouraging Reserve Banks to temporarily pause decisions on access requests from institutions that fall within Tier 3 of the Board's Account Access Guidelines until the Board has completed its policy development process on the payment account proposal. This applicant tier encompasses eligible institutions without federal deposit insurance that lack federal prudential supervision at both the institution and holding company levels.
• BPI's View. BPI has expressed concern about master account access for less regulated firms, including the Federal Reserve Bank of Kansas City's recent approval of a limited purpose master account for Kraken (a Tier 3 institution) in March, while the Board was still reviewing comments on the payment account RFI and determining next steps. To preserve the safety of the payments system, BPI has urged the Fed to subject all payment account holders to strict AML requirements, impose a trial period, monitor for ongoing compliance, not recognize third party interests in the account and prohibit conversion to a full master account for payment account holders without de novo review and transparency into that review process.

Five Key Things

1. White House Issues Executive Orders on Fintech Accounts, Immigration

The White House on Tuesday issued two executive orders - one directing the Treasury Department to advise banks on the risks posed by unauthorized immigrants, and one directing federal financial regulators to consider policy revisions to support innovation.

• Immigration. One executive order directs the Treasury Secretary to issue an advisory to banks identifying signs and patterns tied to payroll tax evasion, concealment of true account ownership, off-the-books wage payments and other red flags that could indicate activity by unauthorized immigrants. The order also directs the CFPB to consider clarifying that deportation and loss of wages is a factor in ability-to-repay standards, and orders Treasury to propose changes to the Bank Secrecy Act to strengthen customer identification program and customer due diligence requirements, including "the authority to obtain additional information when warranted, ensuring institutions can identify the true owners of accounts when necessary to assess risk." Such additional information would include "information relevant to whether account holders possess lawful immigration status and employment authorization in the United States."
• Innovation. The other order directs federal financial regulators to review their regulations, guidance and practices to identify potential updates that would promote innovation in the financial system. Notably, it requests that the Federal Reserve "evaluate the legal, regulatory, and policy frameworks governing access to Reserve Bank payment accounts and payment services by uninsured depository institutions and non-bank financial companies." It asks the Fed to report on its findings on the legal authorities to expand access to payment accounts to uninsured depositories and nonbank fintechs and options for expanding such access. Separately, the Fed this week proposed a framework for payment accounts (Fed accounts with more limited features than full master accounts) - the proposal is covered in more detail above.

2. Agencies Propose Changes to CAMELS Ratings

This week, the Federal Financial Institutions Examination Council, an interagency regulatory body, proposed changes to the Uniform Financial Institutions Rating System, commonly known as the CAMELS rating system. BPI issued the following statement in response to the proposal:

"Today's proposal would align banks' ratings more closely with their financial condition and focus bank supervision on material financial risks. We welcome the direction of these changes and look forward to commenting on the proposal. As the proposal acknowledges, the Management component has had undue weight in determining bank ratings. Improving supervision requires reforming the 'M.'" - Greg Baer, BPI President and CEO

• Proposed Changes. The proposal includes changes that would:
  • Focus component and composite ratings on factors that materially affect an institution's financial condition and risk profile.
  • Make changes to the Management rating, including removing certain subjective evaluation factors and removing a directive that it be given "special consideration" when assigning a composite rating.
  • Provide that an institution receive a Management rating of "3" or worse only when risk management practices result in material financial risk to the institution.
  • Revise the composite and component ratings definitions to emphasize material financial risk. For example, the proposal would change the composite "3" definition to state that such a rating should only be given to financial institutions that exhibit less than satisfactory financial performance, inadequate risk management practices that result in material financial risk or significant noncompliance with laws and regulations.
• Broader Context. The CAMELS proposal follows the Federal Reserve's overhaul of its Large Financial Institution ratings framework and aligns with the banking agencies' overall push to refocus supervision on material financial risk.
• Officials' Views. Vice Chair for Supervision Michelle Bowman, who chairs the FFIEC, said the proposal "marks a decisive shift toward transparency, quantitative factors, and predictability of supervisory oversight." FDIC Chairman Travis Hill noted that the proposal would "shift the emphasis away from a bank's process for managing risks and towards factors and risks that materially impact a bank's financial condition" and would "reduce the influence of the Management component rating on the overall composite rating." Comptroller Jonathan Gould said "While I support the direction of this proposal, I remain concerned that the revisions do not sufficiently address 'double counting' within the Management, or M, component. For the CAMELS framework to function effectively, each component must provide distinct, incremental value. Historically, the Management rating has reflected deficiencies already captured in other components. To maintain the integrity and transparency of the CAMELS system, it is vital that the Management rating serve as a standalone assessment rather than a secondary reflection of other components."

3. BPI's John Court Testifies at House Hearing on BSA Modernization

BPI EVP, General Counsel and Chief Operating Officer John Court testified Thursday before the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions at a hearing titled "Modernizing the BSA for Financial Crime in the 21st Century." Court discussed the importance of modernizing the Bank Secrecy Act and emphasized the need to transition to a more effective, risk-based system that leverages technological innovation and focuses resources on core national security and law enforcement priorities.

Court's testimony centered on four interconnected themes.

• Shifting from a compliance-heavy framework to a risk-based AML regime.
  • "We have a once-in-a-generation opportunity to rationalize this system and refocus tens of thousands of bank employees on identifying serious criminal activity rather than checking boxes."
• Modernizing reporting thresholds to eliminate low-value data noise.
  • "We need to modernize SAR and CTR requirements so banks can spend less time on low-value, highly manual reporting and more time producing actionable intelligence for law enforcement."
• Removing regulatory barriers to technical innovation and automation.
  • "Institutions that adopt advanced monitoring technologies should not be required to operate legacy systems in parallel absent a clear, risk-based justification."
• Centering FinCEN's role to align BSA activities with national security priorities.
  • "Examinations continue to emphasize exhaustive documentation and zero-error tolerance… We encourage a much more active role for FinCEN and the Treasury Department to have oversight about what the bank examiners are doing."

To learn more, click here.

4. The Crypto Ledger

Here's what's new in crypto.

• Blunt Rochester on Kraken. Sen. Lisa Blunt Rochester (D-DE), a member of the Banking Committee, sought details on the Fed's recent decision to grant a limited purpose master account to crypto firm Kraken. In a letter this week, Blunt Rochester said the approval "appears to have occurred before the Federal Reserve Board finalized a policy framework governing these accounts. This raises questions about the process by which the decision was made, the role of the Board of Governors in overseeing Reserve Bank account approvals, and the standards and risk assessments applied in evaluating this application. The decision also raises questions about how the Board ensures consistent policy implementation across the Federal Reserve Banks when the governing policy framework remains under development." Read more in the letter here.
• Gould on Stablecoins, Charters. As the OCC implements the GENIUS Act, the OCC is developing a supervisory framework appropriate for applicable regulatory requirements, OCC Comptroller Jonathan Gould said in an interview with Semafor's Eleanor Mueller this week. He said the OCC is trying to use technology like real-time blockchain analytics to "actually help us do our jobs better on the supervisory side." On charters, Gould downplayed the notion of a sea change under his leadership, which has overseen several approvals of trust charters for crypto and fintech companies - he framed the current environment as a return to normalcy after very few charter applications in the years following the Global Financial Crisis. "The statute hasn't changed. Our licensing manual … that hasn't changed," he said. "What we are doing at the OCC is actually restoring regular working order in doing our jobs on the timeframes that we've established and consistent with the statutory factors that Congress has given us. We don't have a zero risk tolerance anymore."
• Warren Flags Concerns on Crypto Trust Charters. Sen. Elizabeth Warren (D-MA), ranking member of the Banking Committee, said the OCC's decision to grant national trust charters to nine crypto firms appears to violate federal law. In a letter Monday, Warren demanded documents and communications related to the approvals. She said the firms' business plans wade into traditional banking activities not covered by trust charters and "go far beyond the narrow set of activities permitted by law." "These companies are effectively crypto banks that want to evade the fundamental safeguards and obligations that come with being a bank," Warren wrote in the letter addressed to Comptroller Jonathan Gould. "Your decision to facilitate this regulatory arbitrage not only conflicts with federal law, it also poses serious risks to consumers, the safety and soundness of the banking system, and the separation of banking and commerce."

5. Iran Moved Billions Through Binance

An Iranian "antisanction" operator built a payment network with Binance at its core to keep money flowing, the Wall Street Journal reported this week. The article describes how Babak Zanjani spearheaded a secret payment network using Binance as a key financial artery for illicit financing. "Even after multiple internal flags on the activity, the main account continued to operate over a period of at least 15 months and was open as of January, according to the Binance reports," the WSJ article says. Billions of dollars in Iran-linked transactions have flowed through the crypto exchange, the article reports.

• Red Flags. The network run by Zanjani made $850 million in transactions over two years on Binance, mostly on a single trading account, internal Binance compliance reports show. Zanjani allies, including a sister, a romantic partner and a director of his company, ran additional accounts, all accessed from the same devices-a pattern the Binance investigators flagged as evidence the group was evading U.S. sanctions on Iran, the WSJ reported.
• The Numbers. The $850 million in Zanjani transactions likely means about $425 million moved through Binance to finance Iran's military, according to experts cited in the article. Other large Iran-linked transfers on the exchange include $107 million in crypto moved by Iran's central bank; $260 million between Binance accounts and digital wallets linked to Iranian terrorist financiers and sanctioned entities; and roughly $1.7 billion that moved through Binance to an illicit Iranian network, reported by the WSJ in February. "Binance forced out several internal investigators who raised concerns about accounts associated with a Binance business partner that they concluded moved around $1.2 billion of that amount through the platform in 2024 and '25," the Journal reported.
• After Guilty Plea. "The movement of funds to IRGC-connected entities continued after Binance pleaded guilty in 2023 to federal anti-money laundering and sanctions violations, according to the foreign law-enforcement officials, compliance reports and blockchain data," the article says.

In Case You Missed It

Warner, Kennedy Introduce Discount Window Bill

Sens. Mark Warner (D-VA) and John Kennedy (R-LA) this week introduced legislation to require bank regulators to reflect banks' ability to use the Fed's discount window in their liquidity evaluations, a crucial reform that would encourage banks to use the window for its intended purpose. The senators highlighted the Silicon Valley and Signature Bank failures of 2023 as evidence that the discount window needs urgent reform - namely, to be more usable. "Our bipartisan legislation will implement key reforms to make sure that banks can actually use the discount window, reduce the unnecessary stigma associated with that use, and improve the window's operations to meet the challenges of the digital age," Warner said in a statement.

• What's in the Bill. In addition to enshrining discount window capacity in liquidity assessments, the bill would mandate discount window test borrowing, require the Fed to modernize window operations, require the Fed to simplify and harmonize collateral processes with the Federal Home Loan Bank system and require bank risk committees or equivalents to review and approve liquidity contingency plans, among other key reforms.
• BPI Support. BPI expressed support for the legislation, which would "ensure banks are operationally ready to borrow from the discount window to meet liquidity needs while also reflecting that readiness in corresponding liquidity regulations and requirements."

House Panel Examines China-Linked Scams

The House Select Committee on China held a hearing this week examining China-affiliated scam networks threatening U.S. security. Witnesses included Harvard University's Jacob Sims, Jason Tower of the Global Initiative Against Transnational Organized Crime and Erin West of Operation Shamrock, a global nonprofit focused on combating transnational organized crime and crypto scams. The hearing explored the industrial-scale transnational scam ecosystem targeting Americans, exploiting trafficked workers and threatening U.S. national security interests. The panel released a bipartisan investigative report finding that China-linked scam centers have drained Americans of at least $10 billion a year.

• Social Media Accountability. Witnesses described how social media platforms act as a hub for scam activity, allowing it to scale rapidly. Erin West said scams "don't get to our victims without going through Meta," describing a victim contacted via Facebook who lost 90% of his retirement. The fake profile used to scam him remains active today despite repeated reports, with Meta saying it didn't violate community standards, she said.
• Scam Ad Revenue. Citing a Reuters investigative report on Meta scam-ad revenue, Jacob Sims blamed Section 230 for such harms, calling it an "all-purpose liability shield for internet platforms regardless of the harm" and saying current liability structure doesn't push platforms to divest from scam revenue. He noted that recent litigation seeks to hold Meta accountable for knowingly facilitating and profiting from scam ads.
• Crypto. In addition to social media, crypto is another core component of scam infrastructure, allowing illicit proceeds to move rapidly across borders while evading scrutiny. Witnesses recommended actions to trace and mitigate crypto-enabled fraud and scams, such as a single, centralized reporting system, bringing together local law enforcement and improving law enforcement training for crypto-enabled fraud cases.
• Legislation. Committee Chairman John Moolenaar (R-MI) urged passage of a bill to create a State Department-led interagency task force to coordinate a federal response to foreign scam syndicates. The bill was advanced by the House Foreign Affairs Committee in December.

Geopolitics, AI on Fed's Radar in Financial Stability Report

The Federal Reserve recently released its May 2026 Financial Stability Report. The Fed highlights that banks maintain high levels of regulatory capital, with strong credit quality and a continued decline in fair value losses and exposure to interest rate risk. Responses to a survey concerning salient risks to financial stability flagged geopolitical risks, prolonged disruptions to oil supply, the financing of artificial intelligence and deteriorations in private credit.

Traversing the Pond

Here's the latest in international banking policy.

• MiCA. The EU sought input this week on its major crypto regulatory framework, Markets in Crypto-Assets (MiCA). The European Commission sought comment on topics such as the future role of stablecoins in retail and wholesale payments; capital, reserve and liquidity requirements for stablecoins; how to define "fully decentralized" in the DeFi landscape; and use cases for tokenized deposits. Comments on the consultation are due by Aug. 31, 2026.
• BCBS Meeting. At a meeting this week, the Basel Committee on Banking Supervision agreed to publish a report on information and communication technology risk management next month and to consult later this year on whether to embed the treatment of cross-border exposures with the European banking union into the GSIB framework.
• EU-U.S. Trade Agreement. This week, the European Parliament, Council and Commission reached a provisional interinstitutional agreement on the regulation implementing the EU-U.S. "Turnberry" trade arrangement. Trade Commissioner Maroš Šefčovič confirmed the breakthrough in a public statement, describing the talks as "an intensive night" and underlining that the agreement "fully respects" the broader EU-US Joint Statement.
• BoE, FCA Lay Out Shared Vision on Tokenization, Distributed Ledger Technology. The Bank of England and Financial Conduct Authority laid out a shared vision this week for the future of UK tokenization and distributed ledger technology. The principles aim to "give industry the clarity it needs to engage, invest and innovate with confidence."

Member News

Fifth Third Surprises New Parents With $1,053 College Savings Gift for Babies Born on Fifth Third Day

At hospitals in Chicago, Cincinnati, Detroit, Nashville, and Orlando, Fifth Third Bank welcomed the new "Fifth Third Babies" and their parents with care packages that included a $1,053 gift card for a 529 college savings plan. Now in its ninth year, Fifth Third Babies is part of a broader national celebration associated with "Fifth Third Day," or 5/3 on the calendar.

Upcoming Events

• 5/31/2026: Fed Governor Christopher Waller remarks on stablecoins at the 32nd Dubrovnik Economic Conference
• 6/2/2026: Brookings Institution event with Janet Yellen: "The Powell years at the Fed: a retrospective"
• 6/4/2026: House Financial Services Committee hearing: Oversight of Prudential Regulators
• 6/9/2026: HFSC Subcommittee on Oversight and Investigations hearing: "Converging Criminal Enterprises: Chinese Money Laundering Networks and Cartel Financing in the U.S. Financial System"
• 6/12/2026: HFSC Task Force on Monetary Policy, Treasury Market Resilience and Economic Prosperity field hearing on examining the structure of the Federal Reserve system
• 6/24/2026: HFSC hearing: Future of Payments: Promoting Innovation and Fair Markets