H.R. 3234 — Keeping Deposits Local Act of 2025, as amended
Executive Summary
The 'Keeping Deposits Local Act' (H.R. 3234) amends the Federal Deposit Insurance Act to expand the amount of reciprocal deposits that banks can hold without them being classified as 'brokered deposits.' Currently, brokered deposits carry higher regulatory scrutiny and insurance assessments. By creating a tiered exemption system based on bank size (up to $250 billion in liabilities) and expanding the definition of eligible 'agent institutions' to include those with a CAMELS rating of 3, the bill allows community and mid-sized banks to retain larger local deposits while maintaining FDIC insurance limits. It also mandates an FDIC and Federal Reserve study on reciprocal deposits and offsets costs by reducing the Federal Reserve's Discretionary Surplus Fund by $28 million in 2036.
Arguments For
- Economic Growth & Local Lending: By exempting more reciprocal deposits from the 'brokered' classification, community and mid-sized banks can attract larger municipal and business deposits without facing punitive regulatory costs, keeping capital in local communities.
- Bipartisan Appeal: The bill addresses a technical but highly impactful banking regulation, offering a clear win for community banking advocates across the aisle, as evidenced by its bipartisan original cosponsors.
Likely Supporters
Arguments Against
- Systemic Risk Concerns: Expanding the exemption to banks with up to $250 billion in liabilities and lowering the health threshold to a CAMELS rating of 3 could allow riskier, less stable institutions to rely on flight-prone deposit networks.
- Regulatory Pushback: The FDIC has historically been wary of expanding brokered deposit exemptions, arguing that heavy reliance on reciprocal deposits can mask underlying liquidity issues during periods of financial stress.
Likely Opponents
📋 Key Provisions
- Establishes a tiered exemption for reciprocal deposits from being classified as brokered deposits: 50% for liabilities up to $1 billion, 40% for $1 billion to $10 billion, and 30% for $10 billion to $250 billion.
- Expands the definition of an eligible 'agent institution' to include banks assigned a CAMELS rating of 1, 2, or 3.
- Directs the FDIC and Federal Reserve to conduct a comprehensive study on the performance, usage, and risks of reciprocal deposits since 2018, with a report due to Congress within 6 months.
- Reduces the Federal Reserve's Discretionary Surplus Fund by $28 million effective September 1, 2036, serving as a budgetary offset.
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Exempts 50 percent of reciprocal deposits for institutions with liabilities under $1 billion.
"An amount equal to 50 percent"
Expands eligible agent institutions to those with a CAMELS rating of 1, 2, or 3.
"a CAMELS rating of 1, 2, or 3"
Reduces the Federal Reserve's Discretionary Surplus Fund by $28 million.
"is reduced by $28,000,000"