Federal Reserve System:

Mandated Report on Potential Conflicts of Interest

GAO-01-160: Published: Nov 13, 2000. Publicly Released: Nov 13, 2000.

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The Federal Reserve System plays multiple roles in the payments system by virtue of its status as central bank, banking industry regulator, and payments service provider. Where these roles overlap, conflict, or potentially complement one another inappropriately, the Federal Reserve is faced with the challenge of managing or separating them in such a way as to ensure that it is fulfilling each role without exerting undue influence or giving itself an advantage at the expense of the banking industry or its private sector competitors in providing payment services. GAO found no evidence to suggest that the Federal Reserve has not adequately separated its multiple roles.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: Although it may be too late in the current review of its Private Sector Adjustment Factor (PSAF) methodology for the Federal Reserve to include participants from outside the Federal Reserve throughout the review process, in future reviews the Board should solicit input input from individuals from outside Federal Reserve, including academics and industry officials, at an earlier stage in reviews of the PSAF methodology and allow them to participate throughout the review process, perhaps including the evaluations of comments on any proposed PSAF revision, to determine if there are better ways to structure the PSAF.

    Agency Affected: Federal Reserve System: Board of Governors

    Status: Closed - Implemented

    Comments: As part of its 2005 review of its Private Sector Adjustment Factor (PSAF) methodology, the Federal Reserve solicited public comments through a Federal Register notice with request for comments (Federal Reserve System Docket No. OP-1229; 70 Fed. Reg. 29,512; May 23, 2005). The notice included a detailed description of the current process and considered changes to the methodology, but explicitly requested comments on other methodologies. The comment period ended July 22, 2005.

    Recommendation: The Federal Reserve should clarify policies and procedures for introducing new products and product enhancements to the payments industry and make those policies more readily available to its private sector competitors.

    Agency Affected: Federal Reserve System: Board of Governors

    Status: Closed - Implemented

    Comments: The Federal Reserve Board clarified its policies and practices and made them more accessible to the public by posting all of its guidance on its official website. The website includes information on the Federal Reserve's pricing policies, principals, and standards. The Board has also included guidance on how to comment on a priced service.

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