Keeping Deposits Local Act
- Bill Number
- S. 2757
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2025-09-10: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- Last Updated
- 2026-02-04T05:06:16Z
AI-Generated Summary
Purpose
The "Keeping Deposits Local Act" (S. 2757) aims to revise rules under the Federal Deposit Insurance Act (FDIA) governing reciprocal deposits—funds exchanged between banks to keep them local while ensuring federal insurance coverage. The goal is to allow more such deposits for certain banks without classifying them as brokered deposits, which face stricter regulations, thereby supporting local banking and deposit retention.
Key Provisions
- Exemption Thresholds for Reciprocal Deposits: Establishes a tiered system based on an "agent institution's" (a participating bank's) total liabilities, exempting specific percentages of reciprocal deposits from being treated as funds obtained through a deposit broker:
- 50% of liabilities up to $1 billion.
- 40% of liabilities between $1 billion and $10 billion.
- 30% of liabilities between $10 billion and $250 billion.
- 20% of liabilities between $250 billion and $1 trillion.
- 2% of liabilities over $1 trillion.
- Definition of Eligible Agent Institution: Updates eligibility criteria to banks assigned a CAMELS rating of 1, 2, or 3 (CAMELS is a supervisory rating system evaluating banks' capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk; ratings 1-3 indicate strong to satisfactory performance).
Significant Changes to Existing Law
- Replaces the previous flat exemption (which capped reciprocal deposits at $5 billion or 20% of liabilities, whichever was smaller, for well-rated banks) with a graduated, size-based formula that generally allows larger exemptions for smaller banks.
- Shifts the eligibility standard for agent institutions from a vague "composite condition of outstanding or good" to the more precise CAMELS ratings 1-3, potentially broadening or clarifying access for qualifying banks.
Potential Impacts
- On Government Agencies: The Federal Deposit Insurance Corporation (FDIC), which oversees bank insurance and brokered deposit rules, may see reduced regulatory burdens in monitoring exemptions for smaller banks, but could face increased oversight needs for risk management in reciprocal deposit programs.
- On Citizens: Local depositors and communities may benefit from easier access to insured, locally held deposits, potentially stabilizing regional banking and reducing reliance on out-of-state brokers.
- On International Relations: Minimal direct impact, as the bill focuses on domestic U.S. banking regulations.
Main Stakeholders Affected
- Insured Depository Institutions: Primarily community, regional, and mid-sized banks using reciprocal deposit networks (e.g., via services like CDARS), which gain flexibility in attracting and retaining deposits without brokered status restrictions.
- Depositors and Customers: Individuals and businesses with accounts at these institutions, who may experience more stable local banking options.
- Regulators: FDIC and banking committees in Congress, responsible for enforcing and interpreting the updated rules.
Notable Legal, Constitutional, or Political Implications
- Legal: Clarifies and expands FDIA Section 29(i) to promote competitive equity for smaller banks against larger ones, potentially reducing litigation over deposit classifications; however, it may invite challenges if perceived as favoring certain bank sizes.
- Constitutional: No direct implications, as it involves standard congressional authority over banking regulation under the Commerce Clause.
- Political: Supports bipartisan efforts (introduced by Sens. Rounds and Warner) to bolster community banking amid concerns over consolidation and regulatory burdens post-2008 financial crisis, but could spark debate on balancing innovation with systemic risk.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (4)
Sen. Warner, Mark R. [D-VA], Sen. Britt, Katie Boyd [R-AL], Sen. Van Hollen, Chris [D-MD], Sen. Moreno, Bernie [R-OH]
Recent Actions
- 2025-09-10: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- 2025-09-10: Introduced in Senate
Bill Versions
- Keeping Deposits Local Act — issued 2025-09-10 — PDF (3 pages)