Custodia Bank Loses Lawsuit Challenging Fed Rejection of Master Account Application

Custodia Bank, based in Wyoming, has lost a lawsuit challenging the Federal Reserve’s rejection of its application for a master account. In a ruling by Judge Scott Skavdahl in the District of Wyoming, it was determined that federal laws do not mandate the provision of a master account to all eligible depository institutions, nor was there evidence of the Federal Reserve Board of Governors influencing the decision. Custodia Bank had sued the Fed in 2022, alleging that the Federal Reserve Bank of Kansas City was taking too long to process its application. While the law does not require the Fed to grant master account access, Custodia argued that the board unlawfully directed the rejection. The ruling emphasized the importance of preventing minimally regulated institutions from gaining access to the central bank’s balances and services through lax legislation. Custodia Bank is now considering its options, including a possible appeal.