Keeping Deposits Local Act
Keeping Deposits Local Act
Plain Language Summary
# Keeping Deposits Local Act Summary **What the Bill Does:** The Keeping Deposits Local Act would allow banks and credit unions to accept more money from depositors through a system called "reciprocal deposits." Currently, there are limits on how much of these deposits institutions can hold. The bill would increase those limits based on each bank's size, allowing larger institutions to accept more reciprocal deposits. It would also relax the financial health requirements—banks with lower safety ratings (1, 2, or 3 on the CAMELS scale, which measures capital, assets, management, earnings, liquidity, and risk) could participate, rather than just the strongest-performing institutions. **Who It Affects:** This primarily affects banks, credit unions, and their customers.
Depositors could potentially have greater access to federal deposit insurance (which currently protects up to $250,000 per account). Community and smaller regional banks might see increased competition for deposits, while the institutions that can offer reciprocal deposits may gain access to more funding. **Current Status:** The bill is currently in committee and has not yet been voted on by the full House of Representatives. It was introduced by Republican Representative Tom Emmer of Minnesota in the 119th Congress.
CRS Official Summary
This bill increases the amount insured depository institutions may accept as reciprocal deposits. (Reciprocal deposits are used by institutions to increase the availability of deposit insurance by splitting large deposits using a reciprocal network of institutions.) The bill creates a tiered system so that the allowable amount is based on the institution's total liabilities.Additionally, the bill changes certain qualifications insured depository institutions may be required to have to accept reciprocal deposits. Under current law, institutions may qualify by having a composite rating of outstanding or good, among other requirements. The bill allows institutions with a 1, 2, or 3 rating under the CAMELS scale to qualify. (The Uniform Financial Institutions Rating System uses the characteristics of capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk (i.e., CAMELS ratings) to rate the health of financial institutions, with a 1 indicating the highest rating and least degree of supervisory concern and a 5 indicating the lowest rating and highest degree of supervisory concern.)
Latest Action
Placed on the Union Calendar, Calendar No. 314.