On December 19, 2025, the US Federal Reserve Board formally invited public comment on a proposal that could reshape access to the central bank’s payment and settlement infrastructure. The proposal outlines the creation of a new category of “payment accounts,” often referred to as “skinny master accounts,” designed to give eligible financial institutions limited, tightly controlled access to Federal Reserve payment services without the full privileges attached to a traditional master account.
The initiative reflects the Fed’s ongoing effort to modernize the US payments system while maintaining financial stability. Traditional master accounts grant institutions broad access to the Fed’s services, including interest on reserves, credit facilities such as the Discount Window, and daylight overdraft privileges. While these accounts are central to the functioning of the banking system, they also expose the Fed to credit, liquidity, and operational risks, particularly when extended to newer or less conventional financial institutions.
Under the proposed framework, payment accounts would serve a narrow and clearly defined purpose: clearing and settling payment transactions. Account holders would be excluded from interest earnings on overnight balances and barred entirely from accessing Federal Reserve credit facilities. This means no borrowing through the Discount Window and no daylight overdrafts, removing a major source of risk that accompanies traditional accounts.
To further limit exposure, the Fed proposes strict caps on overnight balances held in these accounts. While final thresholds would be subject to feedback, the central bank has suggested limits set at the lower of $500 million or 10 percent of an institution’s total assets. By constraining balances in this way, the Fed aims to ensure that payment accounts function as transactional conduits rather than as reserve-holding vehicles.
A key element of the proposal is a streamlined application and review process. Because payment accounts would lack credit access and interest-bearing features, the Fed views them as posing lower systemic risk. As a result, applications could be reviewed more quickly than standard master account requests, which in recent years have faced increased scrutiny amid concerns about novel banking models and regulatory arbitrage.
Eligibility for the new accounts would be limited to institutions already legally entitled to apply for a master account. This includes federally insured depository institutions, certain chartered fintech firms, and eligible foreign banks operating in the United States. However, the Fed emphasizes that payment accounts are not intended to replace traditional master accounts but to complement them where full-service access is unnecessary.
One of the clearest signals in the proposal is the Fed’s recognition of changing financial innovation. Digital payments, fintech platforms, and some digital-asset-related business models increasingly rely on fast, direct access to settlement infrastructure. By offering limited-purpose accounts, the Fed hopes to support innovation while avoiding the risks associated with granting full central bank privileges to firms with untested or highly specialized operations.
At the same time, the proposal underscores the Fed’s cautious approach. The exclusion of interest payments and credit access reflects lessons learned from past financial disruptions, where liquidity support and reserve remuneration amplified risks during periods of stress. By separating payment functionality from balance-sheet support, the Fed is attempting to draw a clear boundary between operational access and financial backstopping.
The comment period for the proposal will remain open for 45 days following publication in the Federal Register. Feedback from banks, fintech companies, industry groups, and the public will inform whether and how the framework is finalized. If adopted, the payment account model could mark a significant shift in how the Federal Reserve balances innovation, access, and systemic safety in the evolving US financial landscape.
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