Summary of HR 3234: Keeping Deposits Local Act

Purpose and Intent

The Keeping Deposits Local Act (HR 3234) aims to amend the Federal Deposit Insurance Act to adjust the classification of certain reciprocal deposits held by insured depository institutions. The bill seeks to provide a more favorable regulatory framework for these deposits, which are often considered less stable due to their association with deposit brokers. By modifying how these deposits are treated, the legislation intends to enhance the stability and liquidity of local banks and promote community banking.

Key Provisions

1. Modification of Reciprocal Deposits:

   • The bill introduces a tiered system for determining the amount of reciprocal deposits that are not classified as brokered deposits. This is based on the total liabilities of the institution:
     • 50% of total liabilities up to $1 billion.
     • 40% of total liabilities between $1 billion and $10 billion.
     • 30% of total liabilities between $10 billion and $250 billion.
     • Additional tiers for liabilities exceeding $250 billion are also included but were truncated in the provided text.

2. Eligibility Criteria:

   • Institutions must have received a CAMELS rating of 1, 2, or 3 during their most recent examination to qualify for this treatment. This rating indicates a satisfactory financial condition.

3. Study on Reciprocal Deposits:

   • The bill mandates the Federal Deposit Insurance Corporation (FDIC), in consultation with the Board of Governors of the Federal Reserve System, to conduct a study on reciprocal deposits. This study will analyze their performance, usage, and risks since 2018, and will include a report to Congress within six months of the bill's enactment.

Affected Parties

• Insured Depository Institutions: Banks and credit unions that meet the criteria will benefit from the modified treatment of reciprocal deposits, potentially leading to increased liquidity and stability.
• Municipalities, Businesses, and Non-Profits: These end-users of deposit products may see improved access to banking services as local institutions become more competitive.
• Regulatory Bodies: The FDIC and Federal Reserve will be involved in the study and oversight of the changes.

Legislative Timeline

• Introduced: May 7, 2025
• Reported (Amended): November 4, 2025, by the Committee on Financial Services (H. Rept. 119-362).
• Placed on Union Calendar: November 4, 2025
• Committee Consideration: The bill was ordered to be reported with a unanimous vote of 51-0 on September 16, 2025.

Conclusion

HR 3234, the Keeping Deposits Local Act, represents a significant shift in how reciprocal deposits are treated under federal law, aiming to bolster the financial health of local banks and enhance community banking. By providing a clearer framework for these deposits, the bill seeks to promote stability in the banking sector and improve access to financial services for local communities.