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Connecticut bank sues New York Fed over master-account delays

TNB USA Inc., a Connecticut-based state-chartered bank, has filed a lawsuit against the Federal Reserve Bank of New York, asking a judge to order the New York Fed to open a master account.

TNB's sole business will be to accept deposits from the "most financially secure institutions" and place them into the bank's master account at the New York Fed, enabling depositors to earn higher interest rates than are currently available to nonfinancial companies and consumers, the bank said in its complaint filed in the U.S. District Court for the Southern District of New York.

The State of Connecticut Department of Banking has already granted a temporary certificate of authority to allow TNB to operate on a permanent basis. But it still needs to open a master account with the New York Fed to carry out its business.

TNB began the process to open the master account in August 2017. While the Fed has not denied a master account outright, it repeatedly refused either to permit TNB to open the account or to say that it will ultimately do so, the bank alleged. The lawsuit further claimed that the the New York Fed was prepared to open the account, but the Federal Reserve System's board of governors in Washington prevented the New York Fed from opening TNB's account due to unspecified policy concerns.

TNB's temporary certificate of authority expires by its terms in early 2019, according to the lawsuit.

TNB Chairman and CEO James McAndrews was executive vice president and head of the research and statistics group at the New York Fed from 2010 through early 2016.