Rounds, Warner Introduce Legislation to Support Financial Resilience

WASHINGTON – U.S. Senators Mike Rounds (R-S.D.) and Mark Warner (D-Va.) today introduced the Keeping Deposits Local Act, bipartisan legislation to modernize outdated rules on reciprocal deposits. Reciprocal deposits allow community banks to offer customers full FDIC insurance while keeping those dollars working in local communities. This legislation updates current statutory thresholds to make it easier for community and regional banks to receive non-brokered treatment for reciprocal deposits. Majority Whip Rep Tom Emmer (R-Minn.) and Rep. Joyce Beatty (D-Ohio) lead the companion legislation in the House.

“Reciprocal deposits provide a stable and low-cost source of funds for lending and investment in South Dakota communities,” said Rounds. “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 By tailoring the rules, this legislation removes the outdated cap on reciprocal deposits for community banks.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.”

“This bipartisan bill helps ensure community and regional banks can keep more capital working in their local economies,” said Warner. “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.”

Under the bill, reciprocal deposits would be eligible for non-brokered status based on the following thresholds:

• 50% of a bank’s first $1 billion of liabilities
• 40% of a bank’s liabilities above $1 billion but not above $10 billion
• 30% of a bank’s liabilities above $10 billion but not above $250 billion
• 20% of a bank’s liabilities above $250 billion but not above $1 trillion
• 2% of a bank’s liabilities above $1 trillion

The bill would also stipulate that CAMELS 3-rated banks are eligible for full use of non-brokered treatment for reciprocal deposits as long as they are well-capitalized.

This legislation is supported by the National Bankers Association (NBA) and the Community Development Bankers Association (CDBA).

Read the full text of the bill HERE.

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