We are riding for the brand — always | Wyoming Bankers Association

The Wyoming Bankers Association recently faced criticism during a legislative select committee meeting, where some members claimed the Association was not "riding for the brand." The WBA, however, strongly refutes this claim, asserting that such a claim is unfounded and misplaced.

Your Wyoming community bankers ride for the Wyoming brand, ALWAYS. Wyoming community bankers ride for the State of Wyoming, the communities in which they do business and the customers they serve. While very few of us in Wyoming welcome federal intervention in our lives, we should all recognize the importance of federal standards to ensure the safety and soundness of our national financial system. The United States' financial system is the envy of the world!

The controversy arose after the WBA filed an amicus brief (a "friend of the court" statement) with the U.S. 10th Circuit Court of Appeals in a case involving one of Wyoming's Special Purpose Depository Institutions (SPDIs) and the Federal Reserve Bank of Kansas City. The case revolved around a SPDI suing the Federal Reserve for access to a federal master account, which would give it access to the Federal Reserve's premier payment system.

For those unfamiliar with federal master accounts, these accounts provide financial institutions access to the Federal Reserve's financial payment systems — they are also known in the industry as bank accounts for banks. The Federal Reserve System's Board of Governors sets guidelines for master accounts and the Federal Reserve Bank of Kansas City is the branch that oversees Wyoming banks. The SPDI claimed the Federal Reserve Bank of Kansas City did not have discretion regarding federal master accounts, but rather was obligated to grant the SPDI such an account because the State of Wyoming granted the SPDI a charter.

In an earlier ruling, Federal District Court Judge Skavdahl sided with the Federal Reserve, stating the Federal Reserve has the discretion to deny a master account to institutions like SPDIs. The SPDI appealed this decision, which led to multiple organizations, including the WBA, submitting amicus briefs, either supporting the SPDI claim that issuing master accounts should be obligatory, or backing the Federal Reserve's authority to exercise discretion in these matters.

Supporters of SPDIs reasoned that since the Wyoming Division of Banking has approved these institutions, they should also automatically receive a federal master account. The WBA, however, points out that obtaining a state charter and the granting of a federal master account are separate issues. While the Wyoming State Banking Board approves SPDIs based on state law, it does not have authority over federal matters governed by the Federal Reserve.

The WBA supports the Federal Reserve's right to assess whether financial institutions receive a federal master account based on safety and soundness considerations for the U.S. banking system. While Wyoming law allows SPDIs to operate, the WBA believes this authority to operate should not automatically entitle them to federal privileges such as master account.

The WBA stresses that such decisions are the responsibility of the Federal Reserve as SPDIs often are not subject to the stringent rules and regulations imposed by the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and others which traditional banks must follow and are designed to ensure the safety and soundness of our banking system.

It is shortsighted for someone to assume that just because Wyoming's SPDI statutes, rules and regulations are sufficient for state purposes, the issuance of a federal master account is automatic and something of which the Federal Reserve Bank has no discretion. Not every state may take the time or make the effort to ensure its laws, rules and regulations comply with the federal rules and regulations designed to protect the safety and soundness of our banking system.

Hence the comment by Federal District Court Judge Skavdahl that "... one can readily foresee a 'race to the bottom' among states and politicians, to attract business by reducing state chartering burdens through lax legislation, allowing minimally regulated institutions to gain ready access to the central bank's balance sheet and Federal Reserve services." A financial institution that is closely regulated and subject to strict federal standards helps protect the entire financial system from potential risks.

Federal oversight, therefore, is necessary to prevent a "race to the bottom," where states might lower banking standards in the name of economic development or economic diversity, potentially undermining the safety of the U.S. financial system.

During the Sept. 17 Wyoming Legislature's Select Committee on Blockchain, Financial Technology, and Digital Innovation Technology meeting, critics voiced concerns that the WBA's stance contradicted the State Banking Board's approval of SPDI charters. Again, the State Banking Board ensures applicants have met Wyoming's statutory requirements for a state charter. Federal oversight, however, involves different safety and soundness criteria which the Federal Reserve must independently assess.

Part of the discussion centered on a claim by critics that the Independent Community Bankers of America (ICBA) and the American Bankers Association (ABA), who also filed an amicus brief, pressured and influenced the WBA to file an amicus brief to support the position of outside interests. I wished the WBA carried that kind of influence.

The fact is the WBA Board of Directors made the determination to file an amicus brief to advocate for the protection of the safety and soundness of the banking system in Wyoming and nationwide long before knowing of any involvement by the ICBA and the ABA. As such, any claim the WBA is carrying water for anyone other than our communities, community banks and customers is careless.

Wyoming community bankers support their communities and the local businesses in those communities and constantly strive to provide the services their customers want and need. Those services include financial technology. They do so, however, while at the same time trying to protect the safety and soundness of the banking system itself.

While SPDIs represent a new, novel, and evolving sector, the WBA believes the Federal Reserve must maintain its discretion to deny federal master accounts to institutions that do not meet the rigorous safety and soundness standards imposed on other financial institutions by the Federal Reserve, the OCC, the FDIC, and others.

The WBA's involvement in the SPDI case reflects its commitment to balancing state interests with the broader need for banking safety and soundness. This helps all Wyoming banks provide access to credit and banking services that help our communities thrive and grow. The member banks of the WBA have been partners with Wyoming families, businesses, and communities for decades and some for over a century.

If that is not "Riding for the Brand," I am not sure what it would be. We are proud of that partnership and believe the State of Wyoming should be as well.