The Fed has an account at the ECB.

And while banks can have accounts at the ECB, they are not currently segregated from the bank’s balance sheets.
In other words, if you have a euro deposit with a US bank, and the bank fails, you become a general creditor and could lose all of your euro.

This proposal would work as follows:

The Fed would act as agent for its member banks,
allowing them to open euro accounts at the Fed,
with the Fed keeping those euro in its euro account at the ECB.

These accounts would be segregated from the member bank’s balance sheet, so that any bank insolvencies
would not be a factor with regard to these segregated euro deposits.

The member bank must deposit all of these client euro deposits at the Fed.

Functionally, it would be as if the bank’s euro depositors had direct access to the Fed’s euro account at the ECB.

Therefore there need be no capital requirements associated with these accounts.

These accounts would allow global investors access to ‘risk free’ euro deposits.

Currently they must hold deposits in euro banks, national govt. debt, corporate debt, or actual euro cash.

This will help stabilize the euro financial structure and provide a bit of income from service fees for US member banks.