Tenth Circuit Signals (Absent En Banc Review) That Federal Reserve Banks May Deny Master Accounts in Their Discretion, Limiting Mandamus Relief for Eligible State-Chartered Banks

Case: Custodia Bank, Inc. v. Federal Reserve Board of Governors, et al., No. 24-8024 (10th Cir.)
Date: March 13, 2026
Posture: Order denying rehearing en banc; separate dissent from denial by Judge Tymkovich, joined by Judge Eid.

1. Introduction

This published order reflects the Tenth Circuit’s decision not to rehear en banc a panel disposition arising from Custodia Bank’s effort to obtain a Federal Reserve “master account.” Custodia Bank, a Wyoming-chartered Special Purpose Depository Institution (SPDI), sought direct access to Federal Reserve Bank services—particularly the wire and electronic transfer systems that are effectively essential to modern banking operations.

The dispute centers on a high-stakes question of statutory structure and institutional power: whether Congress has granted Federal Reserve Banks discretion to deny a master account application from an institution that is otherwise eligible under federal banking definitions. In the panel decision (described by the dissent), Custodia’s claims failed because (i) its Administrative Procedure Act claim lacked “final agency action,” and (ii) mandamus relief was unavailable because the Reserve Bank allegedly retains discretion over master accounts.

The en banc denial leaves the panel ruling intact, while Judge Tymkovich’s dissent frames the case as implicating (a) the state-federal “dual banking” system and (b) potential constitutional concerns if private or quasi-private Federal Reserve Bank officials exercise unreviewable executive authority.

2. Summary of the Opinion (Order and Dissent)

Order (Per Curiam)

  • Granted Custodia’s motion to file a reply in support of rehearing en banc.
  • Granted pending motions to file amicus briefs related to en banc consideration.
  • Denied rehearing en banc after a poll of non-recused active judges did not carry.
  • Noted Judges Hartz, Tymkovich, and Eid voted to grant rehearing en banc; Judge Tymkovich filed a dissent joined by Judge Eid.

Dissent from Denial of Rehearing En Banc (Tymkovich, J.)

  • Characterizes the panel majority as holding Reserve Banks have “unreviewable discretion” to deny a state-chartered bank’s master account application.
  • Argues a master account is “indispensable,” and denial is “akin to a death sentence” for a bank.
  • Contends the governing statutes compel access to services—and because access requires a master account, eligible institutions are entitled to master accounts.
  • Rejects the majority’s reliance on contextual interpretation of the Federal Reserve Act and its reading of 12 U.S.C. § 342 as conferring broad discretion.
  • Invokes the canon of constitutional avoidance, warning that unreviewable discretion may transform Reserve Bank presidents into unconstitutional “officers of the United States” given their appointment/removal structure.
  • Disputes the notion that correspondent banking arrangements satisfy the statutory “access” mandate, noting practical uncertainty and explicit service limits.

3. Analysis

A. Precedents Cited

1) Fourth Corner Credit Union v. Fed. Rsrv. Bank of Kansas City, 861 F.3d 1052 (10th Cir. 2017)

The dissent treats Fourth Corner as both factual and doctrinal groundwork for the “indispensability” of a master account. It quotes the case for two propositions: (1) the functional necessity of a master account for core payment services (wire/electronic transfers), and (2) the practical reality that denial can be existential for a depository institution. By invoking both the “opinion of Moritz, J.” and the “opinion of Bacharach, J.,” the dissent signals that even within a fractured prior decision, there is substantial judicial recognition that master-account access is not a trivial benefit but a gatekeeping mechanism to the national payments system.

2) King v. Burwell, 576 U.S. 473 (2015)

Used for the baseline interpretive claim: when statutory language is plain, courts must enforce it according to its terms. The dissent uses King to support a text-forward reading of 12 U.S.C. § 248a(c)(2), emphasizing the statutory phrase that Reserve Bank services “shall be available” to nonmember depository institutions.

3) Farmers' & Merchants' Bank of Monroe v. Fed. Rsrv. Bank of Richmond, 262 U.S. 649 (1923)

Central to rebutting the panel majority’s premise that 12 U.S.C. § 342 grants broad discretion. The dissent leans on this case’s description of statutory language as “words of authorization merely,” arguing § 342 is primarily an enabling provision (authority to receive deposits), not a capacious delegation to refuse deposits (or accounts) without constraint.

4) Burrage v. United States, 571 U.S. 204 (2014) (quoting Comm'r v. Lundy, 516 U.S. 235 (1996))

These cases appear as a caution against policy-driven interpretation. The dissent cites them to argue that efficiency or prudential concerns—e.g., the burden of “scrutinize every deposit”—cannot justify reading discretion into statutory silence.

5) Clark v. Martinez, 543 U.S. 371 (2005)

Provides the dissent’s constitutional-avoidance framework. Clark is invoked for the proposition that courts “must consider the necessary consequences” of interpretive choices and avoid constructions that create constitutional problems. Importantly, the dissent argues avoidance is not optional simply because a party “waived” a standalone constitutional claim; the canon remains relevant to choosing among competing readings.

6) Edmond v. United States, 520 U.S. 651 (1997)

This anchors the dissent’s Appointments Clause anxiety: if Reserve Bank presidents wield “significant authority pursuant to the laws of the United States,” they may be “officers of the United States.” The dissent contends that the Reserve Banks’ governance structure (involving private member banks and directors) sits uneasily with Article II appointment/removal requirements if the underlying statutory regime is read to confer unreviewable executive power over master-account access.

B. Legal Reasoning

1) The competing syllogisms: “access to services” versus “discretion to deny accounts”

Judge Tymkovich frames the case as a straightforward textual chain under the Depository Institutions Deregulatory and Monetary Control Act of 1980 (MCA):

  • 12 U.S.C. § 248a(c)(2) commands that covered Federal Reserve Bank services “shall be available” to nonmember depository institutions at the same fee schedule.
  • Access to those services (notably payment rails) requires a master account as the operational prerequisite.
  • Therefore, an eligible nonmember depository institution is entitled to a master account.

On eligibility, the dissent points to § 248a’s adoption of the “depository institution” definition in 12 U.S.C. § 461(b)(1), and asserts Custodia fits under § 461(b)(1)(A)(i) as FDIA-eligible, further supported by Wyoming SPDI statutes and definitions (e.g., 12 U.S.C. § 1312(2)(A)-(B); Wyo. Stat. Ann. § 13-12-103(b)(vii)(E) (2025)).

2) The majority’s contextual reading (as described by the dissent)

The dissent recounts the panel majority’s interpretive chain as follows:

  • 12 U.S.C. § 342 historically gave Reserve Banks discretion over “accepting deposits.”
  • Discretion over deposits implies discretion over deposit accounts.
  • The MCA did not clearly revoke that discretion (invoking an “elephant in a mousehole” concern about reading a major structural change into a pricing-and-fees provision).
  • Constitutional concerns were not reached because the argument was deemed waived.

3) The dissent’s rebuttal: text, chronology, and institutional design

The dissent attacks each step:

  • On § 342: It does not explicitly speak in discretionary terms, and Farmers' & Merchants' Bank of Monroe v. Fed. Rsrv. Bank of Richmond is used to characterize it as enabling authority.
  • On “deposits” vs. “accounts”: Even if deposit acceptance can be discretionary, it does not follow that account issuance is discretionary—particularly where later legislation mandates services be “available.”
  • On the MCA as later-in-time: If there is conflict, the MCA’s § 248a(c)(2) would constrain earlier discretion; Congress can and has modified Reserve Bank authority (the dissent cites the 1916 amendments as an example of Congress altering Reserve Bank deposit powers).
  • On the Toomey Amendment (12 U.S.C. § 248c): The dissent reads the “approved, rejected, pending, or withdrawn” tracking database as a transparency measure, not an implicit ratification of broad discretion; “rejection” can simply reflect ineligibility.
  • On constitutional avoidance: The dissent argues the court should avoid an interpretation that risks Appointments Clause infirmities, even if litigants did not perfectly preserve a freestanding constitutional challenge.

4) Remedy framing: why mandamus matters

The dissent’s practical-through-doctrinal point is that if the statute imposes a nondiscretionary duty (“shall be available”), then mandamus under 28 U.S.C. § 1361 becomes plausible as a mechanism to compel performance. Conversely, if Reserve Banks have discretion, mandamus fails—leaving institutions functionally excluded from the payment system with limited judicial recourse. This helps explain why the dissent emphasizes the systemic consequences of treating master-account access as review-proof.

C. Impact

1) Banking federalism and the “veto” concern

The dissent’s most far-reaching claim is structural: if Reserve Banks can deny master accounts to state-chartered institutions at will, they effectively acquire a veto over state chartering decisions. That would recalibrate the state-federal balance in the dual banking system by shifting the practical ability to operate from state chartering authorities to Federal Reserve Banks.

2) Digital-asset and special-purpose banking

Because Custodia’s stated mission involves “digital asset companies” and bridging to the U.S. dollar payment system, the opinion’s practical reach is likely concentrated in innovative or nontraditional banking models. If master accounts can be denied on discretionary, nontransparent, or unreviewable grounds, new entrant banks—particularly those perceived as novel-risk institutions—may face heightened barriers regardless of state authorization.

3) Administrative law and accountability gaps

The panel disposition (as summarized by the dissent) also highlights a potential accountability gap: an APA claim fails for lack of “final agency action,” while mandamus fails due to discretion. If both pathways are blocked, the effective regulator becomes a Reserve Bank decision-maker whose determinations may evade merits review.

4) Constitutional litigation pressure

By foregrounding Edmond v. United States and the Reserve Bank governance structure (12 U.S.C. §§ 304-05, 341), the dissent invites future litigants to frame master-account denials as raising Appointments Clause and separation-of-powers issues—particularly if discretionary denial is coupled with limited judicial review. Even if not resolved here (due to posture and waiver debates), the dissent signals a roadmap for future constitutional challenges.

4. Complex Concepts Simplified

  • Master account: A bank account at a Federal Reserve Bank that is the operational gateway to key payment services (e.g., wire transfers). Without it, a bank may be unable to function competitively—or at all—in modern payments.
  • Nonmember depository institution: A state-chartered or otherwise eligible institution that is not a member bank of the Federal Reserve System but may still be entitled by statute to Federal Reserve services.
  • Mandamus (28 U.S.C. § 1361): An extraordinary court order compelling a federal officer/entity to perform a clear, nondiscretionary duty. If the duty is discretionary, mandamus generally is unavailable.
  • Final agency action (APA): Under the Administrative Procedure Act, courts typically can review only actions that mark the consummation of an agency’s decision-making process and determine rights/obligations. If the conduct is not “final,” judicial review is commonly barred.
  • Canon of constitutional avoidance: If a statute can reasonably be read two ways, courts prefer the interpretation that avoids serious constitutional problems.
  • Appointments Clause / “officers of the United States”: Officials exercising significant federal authority must generally be appointed and removable in constitutionally prescribed ways. The dissent suggests unreviewable master-account discretion could trigger this doctrine for Reserve Bank leadership.
  • “Elephant in a mousehole”: A principle (invoked here by the panel majority as described by the dissent) cautioning against reading major policy changes into modest or indirect statutory language.
  • Correspondent banking relationship: An arrangement where one institution accesses payment services indirectly through another institution’s account. The dissent argues this is not a statutory substitute for direct access and may not provide full service coverage.

5. Conclusion

The March 13, 2026 en banc denial in Custodia Bank, Inc. v. Federal Reserve Board of Governors, et al. leaves standing a panel outcome (as characterized by the dissent) that treats Federal Reserve Banks as possessing discretion to deny master accounts—thereby foreclosing mandamus and, in this case, leaving Custodia without a direct judicially enforceable pathway to obtain the account it argues is essential to operating.

Judge Tymkovich’s dissent presents a competing textual framework grounded in 12 U.S.C. § 248a(c)(2): if Federal Reserve services “shall be available” to eligible nonmember depository institutions, and a master account is the necessary mechanism to access those services, then eligible institutions must be granted accounts. The dissent further argues that constitutional avoidance should steer interpretation away from a regime of unreviewable discretion that could raise Appointments Clause concerns.

Doctrinally, the case is poised at the intersection of statutory interpretation, remedies (APA finality and mandamus), financial-system governance, and separation-of-powers constraints—making the dissent’s warning salient: master-account access may function as a structural “gate” that determines whether state-chartered banking authority has practical effect in a Federal Reserve-centered payments economy.