Sponsors (12)
The bill makes deposit funding and supervisory rules clearer and expands funding flexibility for well-rated agent banks—potentially boosting lending and liquidity—while increasing systemic risk and competitive pressure on smaller or lower-rated banks and adding administrative responsibilities for regulators.
Qualifying agent banks can count a larger formula-based share of reciprocal deposits as non-brokered, letting those banks avoid brokered-deposit restrictions, preserve liquidity management, and potentially increase lending to households and small businesses.
Well-rated banks (CAMELS 1–3) retain formal eligibility to act as agent institutions and the bill clarifies the CAMELS criterion, reducing regulatory uncertainty and making application of section 29(i) more predictable for banks and regulators.
The mandated FDIC/Fed study will provide up-to-date evidence on how reciprocal deposits behaved since 2018, giving regulators, banks, and end users clearer data on risk characteristics and best practices that can improve oversight and guidance.
Taxpayers and depositors could face greater systemic liquidity and resolution risk because treating more reciprocal deposits as non-brokered may let volatile funding be counted as stable, increasing the chance of sudden outflows and taxpayer exposure in a crisis.
Smaller banks and non-agent institutions will be competitively disadvantaged if agent institutions gain a structural funding edge, which could concentrate deposits and reduce community lending and credit availability for local borrowers.
Insured depository institutions with CAMELS 4–5 risk losing eligibility to act as agents, limiting their access to reciprocal/brokered deposits, raising their funding costs, and potentially reducing credit to local customers.
Based on analysis of 5 sections of legislative text.
Creates a tiered exclusion for reciprocal deposits from the brokered‑deposit definition, narrows qualifying agent institutions to CAMELS 1–3, mandates an FDIC study, and lowers a Fed surplus cap by $28M effective 2036.
Changes how reciprocal deposits are treated for brokered‑deposit rules by creating a tiered formula that excludes larger portions of such deposits from the brokered‑deposit definition depending on an agent bank’s size, and narrows the supervisory rating that qualifies an institution as an "agent institution." Requires the FDIC (with the Fed) to study reciprocal deposits and report to Congress within six months. Also reduces a long‑term statutory cap on Federal Reserve banks’ aggregate surplus funds by $28 million effective September 1, 2036. The bill mainly affects banks that place or receive reciprocal deposits, the FDIC and Federal Reserve (for reporting and statutory number change), and end‑user depositors such as municipalities and businesses that use reciprocal deposit services. It alters regulatory treatment intended to encourage keeping deposits at local banks while adding a mandated agency study of the practice and modestly lowering a dollar cap in the Federal Reserve Act decades from now.
Official title: Keeping Deposits Local Act
Introduced May 7, 2025 by Thomas Earl Emmer · Last progress May 21, 2026