FRB Policy Limiting State Member Banks' Activities Becomes Effective

A Federal Reserve Board ("FRB") policy that states that the FRB will exercise its discretion under Federal Reserve Act Section 9(13) (12 U.S.C. 330) to limit state member banks to engaging as principal in only those activities that are permissible for national banks became effective on February 7, 2023. The Notice was published in the Federal Register.

As previously covered, the FRB said that it plans to exercise its discretion to limit the activity of both insured and uninsured state member banks ("SMBs"), including with respect to novel banking activities such as crypto asset-related activities. The FRB said that it will presume, subject to rebuttal, that an SMB is prohibited from engaging in such activity as principal if it is impermissible for national banks to engage in such activity. The FRB said that activities that are permissible for state banks under federal statute or Part 362 of the FDIC's regulations ("Activities of Insured State Banks and Insured Savings Associations") will continue to be permissible under the new guidance.