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The bill helps small, well-capitalized banks retain and grow custodial deposits and reduces regulatory uncertainty, but it increases supervisory and FDIC concentration risks and limits options for undercapitalized banks and some depositors.
Smaller, well-capitalized banks (under $10 billion in assets) can accept custodial deposits up to 20% of liabilities without being treated as brokered deposits, enabling them to retain customer funds and grow stable deposit funding.
Banks, trust entities, and retirement plan administrators receive clearer statutory definitions (e.g., custodial deposit, eligible institution, plan administrator, well-capitalized), reducing regulatory uncertainty and compliance risk.
Expanding the exception to brokered-deposit treatment increases supervisory complexity and could concentrate custodial deposits at certain institutions, raising FDIC exposure and taxpayer risk if supervision or resolution is strained.
Undercapitalized banks that accept custodial deposits face caps on the interest they may offer, which limits their ability to attract liquidity when they are most in need and can weaken resilience.
Depositors and retirement plans may have fewer choices or slightly lower yields on custodial deposits if undercapitalized institutions are effectively priced out of competing for those funds.
Based on analysis of 2 sections of legislative text.
Allows certain custodial deposits at qualifying smaller banks to be treated as non-brokered up to 20% of liabilities and caps interest paid by undercapitalized banks to set benchmarks.
Introduced September 11, 2025 by French Hill · Last progress September 11, 2025
Creates a narrow exception to federal brokered-deposit rules so that certain custodial deposits held at qualifying smaller banks are not treated as "brokered" if they stay at or below 20% of the bank's total liabilities. It also defines key terms and limits the interest rates that undercapitalized banks may pay on those custodial deposits so they do not "significantly exceed" a local or FDIC-established national comparable-maturity rate.