Bill Summary
The "Keeping Deposits Local Act" is a proposed amendment to the Federal Deposit Insurance Act aimed at modifying how certain reciprocal deposits are categorized in relation to deposit brokers. The legislation specifies that certain amounts of reciprocal deposits held by an "agent institution" will not be classified as funds obtained through a deposit broker, which can have implications for how these institutions manage their liabilities and attract deposits.
Key provisions include:
1. **Reciprocal Deposits Exemption**: The bill establishes a tiered system to determine the percentage of total liabilities that can be excluded from being classified as brokered deposits based on the size of the institution. For example:
- 50% of liabilities up to $1 billion.
- Decreasing percentages for larger total liabilities, down to 2% for liabilities over $1 trillion.
2. **Agent Institution Definition**: The legislation updates the definition of an "agent institution" by changing the criteria for financial health from a vague composite condition to a more specific CAMELS rating of 1, 2, or 3, which assesses various aspects of a bank's condition.
Overall, this act seeks to provide greater flexibility for financial institutions in managing their deposits, thereby encouraging local banking and potentially enhancing the stability of smaller banks by allowing them to accept more deposits without incurring additional regulatory burdens associated with brokered deposits.
Possible Impacts
Here are three examples of how the "Keeping Deposits Local Act" could affect people:
1. **Increased Stability for Local Banks**: By allowing a greater amount of reciprocal deposits to be considered outside the regulation of deposit brokers, local banks may have more access to stable funding. This could enhance their lending capacity, leading to more loans for local businesses and individuals. Consequently, this might stimulate local economic growth and job creation, benefiting the community at large.
2. **Consumer Confidence in Depository Institutions**: As the legislation modifies the definition and treatment of reciprocal deposits, individuals might feel more secure depositing their money with insured depository institutions that qualify. This could lead to increased consumer confidence in local banks, as people may perceive them as safer and more reliable options compared to larger, national banks.
3. **Potential for Increased Competition**: The bill could lead to greater competition among banks, especially those that are categorized as agent institutions. With modified regulations, smaller banks might be able to attract more deposits without the constraints associated with deposit brokers. This increased competition may result in better interest rates and lower fees for consumers, enhancing the overall banking experience for individuals and small businesses.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2757 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 2757
To amend the Federal Deposit Insurance Act to modify the amount of
reciprocal deposits of an insured depository institution that are not
considered to be funds obtained by or through a deposit broker, and for
other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 10, 2025
Mr. Rounds (for himself and Mr. Warner) introduced the following bill;
which was read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
A BILL
To amend the Federal Deposit Insurance Act to modify the amount of
reciprocal deposits of an insured depository institution that are not
considered to be funds obtained by or through a deposit broker, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Keeping Deposits Local Act''.
SEC. 2. AMOUNT OF RECIPROCAL DEPOSITS THAT ARE NOT CONSIDERED TO BE
FUNDS OBTAINED BY OR THROUGH A DEPOSIT BROKER.
Section 29(i) of the Federal Deposit Insurance Act (12 U.S.C.
1831f(i)) is amended by striking paragraph (1) and inserting the
following:
``(1) In general.--The sum of the following amounts of
reciprocal deposits of an agent institution shall not be
considered to be funds obtained, directly or indirectly, by or
through a deposit broker:
``(A) An amount equal to 50 percent of the portion
of the total liabilities of the agent institution that
is not more than $1,000,000,000.
``(B) An amount equal to 40 percent of the portion,
if any, of the total liabilities of the agent
institution that is more than $1,000,000,000, but not
more than $10,000,000,000.
``(C) An amount equal to 30 percent of the portion,
if any, of the total liabilities of the agent
institution that is more than $10,000,000,000, but not
more than $250,000,000,000.
``(D) An amount equal to 20 percent of the portion,
if any, of the total liabilities of the agent
institution that is more than $250,000,000,000, but not
more than $1,000,000,000,000.
``(E) An amount equal to 2 percent of the portion,
if any, of the total liabilities of the agent
institution that is more than $1,000,000,000,000.''.
SEC. 3. DEFINITION OF AGENT INSTITUTION.
Section 29(i)(2)(A)(i)(I) of the Federal Deposit Insurance Act (12
U.S.C. 1831f(i)(2)(A)(i)(I)) is amended by striking ``found to have a
composite condition of outstanding or good'' and inserting ``assigned a
CAMELS rating of 1, 2, or 3''.
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