Senator Mike Rounds, US Senator for South Dakota | Official U.S. Senate headshot
Senator Mike Rounds, US Senator for South Dakota | Official U.S. Senate headshot
U.S. Senators Mike Rounds (R-S.D.) and Mark Warner (D-Va.) have introduced the Keeping Deposits Local Act, a bipartisan effort aimed at updating regulations on reciprocal deposits for community and regional banks. The legislation seeks to modernize statutory thresholds so that these banks can more easily receive non-brokered treatment for reciprocal deposits.
Reciprocal deposits are tools that allow community banks to offer customers full FDIC insurance while keeping those funds available for local lending and investment. According to Senator Rounds, “Reciprocal deposits provide a stable and low-cost source of funds for lending and investment in South Dakota communities. In fact, more than a third of banks headquartered in South Dakota utilize reciprocal deposits. They are relationship-based, core deposits that help our community banks retain local customers. By tailoring the rules, this legislation removes the outdated cap on reciprocal deposits for community banks. That flexibility will help South Dakota banks keep deposits local and strengthens the resilience of our financial system – a lesson reinforced by the bank failures in 2023.”
Senator Warner emphasized the importance of giving local financial institutions more flexibility: “This bipartisan bill helps ensure community and regional banks can keep more capital working in their local economies. By replacing the current one-size-fits-all cap with a tiered system, this legislation gives local banks the flexibility they need to better serve their customers and keep money close to home.”
The bill proposes new eligibility thresholds for non-brokered status based on a percentage of a bank’s liabilities:
- 50% of a bank’s first $1 billion
- 40% above $1 billion up to $10 billion
- 30% above $10 billion up to $250 billion
- 20% above $250 billion up to $1 trillion
- 2% above $1 trillion
Additionally, CAMELS 3-rated banks would be eligible for full use of non-brokered treatment if they are well-capitalized.
Supporters of the legislation include the National Bankers Association (NBA) and the Community Development Bankers Association (CDBA).
Companion legislation is being led in the House by Majority Whip Rep Tom Emmer (R-Minn.) and Rep. Joyce Beatty (D-Ohio).
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