Summary

Creates a limited rule letting small, eligible banks treat certain custodial deposits as not brokered up to 20% of their total liabilities, and limits how much interest undercapitalized banks may pay on those custodial deposits. It defines who counts as an eligible institution, what counts as a custodial deposit, and sets a cap on interest for institutions that accept such deposits while not well capitalized. The change aims to preserve community bank access to insured deposits held for third parties (custodial deposits) while preventing weakly capitalized banks from attracting deposits with unusually high interest. The FDIC’s comparable-maturity national rate or an institution’s normal market rate are used to set allowable interest limits for those deposits accepted outside or inside the normal market area, respectively.

• Allows certain custodial deposits to be treated as non-brokered up to 20% of an eligible bank’s liabilities.
• Applies only to eligible institutions with under $10 billion in assets that meet exam-rating or waiver criteria.
• Creates a new restriction: undercapitalized eligible institutions cannot pay interest on custodial deposits that significantly exceeds market rates.
• Interest caps reference either the institution’s normal market area rate or the FDIC’s national comparable-maturity rate for out-of-area deposits.
• Defines key terms (custodial deposit, eligible institution, plan, plan administrator, well capitalized) to implement the exception.
• Aims to protect community bank access to insured custodial deposits while limiting incentives for weak banks to chase deposits with high rates.
• Does not supply a numeric definition of "significantly exceeds" or new enforcement funding—reliance on existing supervisory mechanisms.
• No changes to tax law, appropriations, or broad programs; narrowly focused on deposit classification and interest limits.