Keeping Deposits Local Act
This bill amends the Federal Deposit Insurance Act to change how certain reciprocal deposits are treated for purposes related to brokered deposits. Specifically, it creates a tiered schedule that determines what portion of reciprocal deposits held by an agent institution will not be counted as “funds obtained by or through a deposit broker.” The aim appears to shift the regulatory treatment of reciprocal deposits, potentially altering how much funding from reciprocal deposits can be used without triggering brokered-deposit restrictions. The bill also tightens who can qualify as an “agent institution” by requiring that, at the most recent exam, the institution received a CAMELS rating of 1, 2, or 3. In short, the bill lowers or raises the brokered-deposit exemption depending on the size of an institution’s liabilities and narrows which institutions can serve as funding agents based on safety and soundness ratings.
Key Points
- 1New exemption schedule for reciprocal deposits not considered brokered:
- 2- 50% exemption for the portion up to $1,000,000,000 of total liabilities.
- 3- 40% exemption for the portion above $1,000,000,000 up to $10,000,000,000.
- 4- 30% exemption for the portion above $10,000,000,000 up to $250,000,000,000.
- 5- 20% exemption for the portion above $250,000,000,000 up to $1,000,000,000,000.
- 6- 2% exemption for the portion above $1,000,000,000,000.
- 7Section 29(i) of the FDIA is amended to implement the new exemption formula, altering how much reciprocal funding is treated as non-brokered.
- 8Definition of “agent institution” is tightened: an institution can be an agent only if, at its most recent exam under section 10(d), it was rated CAMELS 1, 2, or 3 (best-to-satisfactory ratings). This narrows which banks can serve as agents for reciprocal deposits.
- 9The changes affect how brokered-deposit restrictions apply to funded reciprocal deposits, potentially altering funding strategies for insured depository institutions based on size and risk assessment.