NEW YORK — A Connecticut de novo bank focused on banknote distribution is on track to become the first
Greenwich-based Numisma Bank received conditional approval for a so-called master account and cash services through the Federal Reserve Bank of New York in March, a company spokesman confirmed Thursday.
Once the conditions are met, it would become the first "Tier 3" applicant to secure a master account under the Fed's three-tiered evaluation framework, a development that has
Michele Alt, a partner at the consulting firm Klaros Group, said the public is owed an explanation about how the New York Fed arrived at its decision. She added that Numisma's affiliation with former Fed Vice Chair for Supervision Randal Quarles — whose private equity firm Cynosure Group owns a share of the bank — is further cause for transparency.
"This is a bad look for the Fed," Alt said. "I think there is pressure to share the distinguishing features of the Numisma application and I also think there will be significant pressure on the Fed to approve other Tier 3s that meet whatever criteria the Fed found persuasive about Numisma's applications."
Alt noted that the approval harkens back to 2018, when the Federal Reserve Bank of Kansas City
"The market value of Fed former governors has gone way up as a result of all this," Alt said.
The New York Fed declined to comment on the decision to grant Numisma a master account.
Reached by email Thursday, Quarles said he has no role in the operations of Numisma and his involvement "consists solely of a modest investment in the firm." He added that he was not involved in the master account application process.
Rich Myers, a spokesperson for Numisma, said Quarles's investment in the bank had no bearing on its master account application or approval.
"Mr. Quarles had no contact with the Federal Reserve regarding Numisma Bank or its application," Myers said in a written statement. "Mr. Quarles had no formal or informal role in Numisma Bank's Federal Reserve master account application process, which occurred after his departure from the Federal Reserve. Mr. Quarles' name was never mentioned during any discussion between Numisma Bank and the Federal Reserve during the application process."
Master accounts are granted by the Fed's 12 reserve banks, but in 2022, the Federal Reserve Board of Governors issued guidance on how the regional reserves should evaluate applicants. The framework consists of three tiers, with Tier 1 — federally supervised and insured banks — having the easiest path to approval and Tier 3 — state-chartered banks without deposit insurance — receiving the most scrutiny.
Recent analysis by the Klaros Group shows that Tier 3 applications have taken more than 11 times longer than Tier 1 requests. Applicants insured through the Federal Deposit Insurance Corp. or the National Credit Union Administration have an answer within an average of roughly 60 days, the firm found, compared to approximately 680 days for uninsured groups.
"If an institution has not been approved within 90 days, it is very unlikely to ever be approved," Alt said. "There's no reason an institution should be told that they may be eligible for a Fed master account, and then made to wait years to find out they really aren't. Even an unqualified applicant is entitled to a timely regulatory response."
According to a
Reserve banks have rejected uninsured applicants citing concerns about risk management, the transmission of monetary policy and the resolution processes they would undergo should they fail. Several
Unlike other applicants that have been denied master accounts in recent years, including Wyoming-chartered
Myers said Numisma is a "single-purpose bank, focused solely on the distribution of physical sovereign banknotes around the world."
Numisma has a temporary operating approval under Connecticut's uninsured banking charter, which permits banks to do business without deposit insurance so long as they do not accept retail deposits. The special purpose charter is meant to cater to wholesale and merchant banks. Quarles was one of five co-signers on Currency Reserve's charter application last year.
The bank needs to have a final charter in order to be eligible for a master account. In an email, Connecticut Banking Commissioner Jorge L. Perez said his office is in the "tail end" of the approval process. If all goes in Numisma's favor, he said the official charter could be issued as soon as next week.
Formerly known as Currency Reserve, the bank was founded in late 2022 by Vivek Tyagi, a former managing director at Goldman Sachs, and Matthew Hurlock, who was previously a partner at the law firm Case & White.
During a public hearing in front of the Connecticut Department of Banking last year, Tyagi said his firm bolsters the primacy of the U.S. dollar as the world's reserve currency. He also touted the deep experience and expertise within the operation, which he said would help it protect the safety and soundness of the banking system and manage against financial crime threats and other risks.
"We believe Currency Reserve will satisfy the Federal Reserve's six key principles for master account and cash services access without creating adverse precedents that might hinder the Federal Reserve's policy objectives," Tyagi said during the hearing.
