By Maria Volkova, American Banker
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The Federal Reserve’s proposed “skinny” master account for fintechs and other nontraditional financial companies may move quickly towards finalization at the central bank, but experts say implementation will very likely be stalled by legal challenges from the banking industry or the challenger institutions.
Todd Baker, senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University, said lawsuits from either banking or fintech groups are foreseeable, especially in light of the Supreme Court’s 2024 decision to overturn Chevron deference, which reduced the level of judicial deference historically afforded to federal agencies.
“The question is who sues and why, and are they successful in getting a stay on implementation of the regulation until full review by the court,” Baker said. “The way the law has changed is the court doesn’t care what the Fed thinks anymore. The court is going to look at the words of the statute, which don’t provide a lot of clarity.
“It’s very unlikely that [the proposal] will be actually put into effect right away, even if the regulation becomes final,” Baker concluded.
Graham Steele, a former assistant secretary for financial institutions at the Treasury Department and academic fellow at the Rock Center for Corporate Governance at Stanford Law echoed similar sentiments, noting the Fed will face criticism or litigation from stakeholders regardless of how it proceeds.