Community Bank Deposit Access Act of 2025
The Community Bank Deposit Access Act of 2025 would amend the Federal Deposit Insurance Act to create a limited exemption for custodial deposits from being treated as “funds obtained,” directly or indirectly, through a deposit broker. Specifically, custodial deposits would not count toward that determination if they stay at or below 20% of the host institution’s total liabilities and if the institution qualifies as an “eligible institution” (generally well capitalized insured depository institutions with specific size or supervisory conditions, or those with a waiver). The bill also adds an interest-rate restriction on funds obtained via deposit brokers or custodial deposits accepted by institutions not well capitalized, requiring rates to be in line with market rates for deposits of comparable maturity and location. The overall aim is to give well-capitalized community banks more flexibility to access custodial deposits while limiting risk and ensuring deposits are priced competitively. In practical terms, the act would allow certain custodial deposits—when kept within the 20% cap and the institution meets eligibility criteria—to be treated similarly to other insured sources of funding, potentially easing liquidity management for smaller, well-capitalized banks. At the same time, it imposes a market-rate cap on rates paid for funds obtained via brokers or custodial deposits accepted when not well capitalized, to curb excessive pricing or funding obtained through broker channels.
Key Points
- 1Limited exception for custodial deposits: Custodial deposits would not be considered funds obtained via a deposit broker up to 20% of an eligible institution’s total liabilities.
- 2Definitions and scope: The bill defines custodial deposit, eligible institution, plan administrator, and well capitalized. Eligible institutions are generally well-capitalized insured depository institutions that meet size/supervisory criteria or have a waiver.
- 3Eligibility criteria: Eligible institutions include smaller banks (<$10B in assets) that are well capitalized and have a favorable supervisory rating, or those with a waiver under the bill’s provisions.
- 4Interest rate restriction: For funds obtained via deposit brokers or custodial deposits accepted when not well capitalized, institutions may not pay interest rates significantly above market rates. The cap is based on rates for similar-maturity deposits in the institution’s normal market area or the national rate for deposits outside the normal market area, as determined by the FDIC.
- 5Structural change to FDIC Act: The bill amends Section 29 of the Federal Deposit Insurance Act, adding the custodial deposits framework and adjusting how interest rates on broker-derived or custodial funds can be set.