Technical corrections only. The changes between v3 and v4 primarily involve updating the attestation information to include the Clerk's name and reflecting the bill's procedural status as referred to the Senate. No substantive policy changes were made to the bill's text.
Community Bank Deposit Access Act of 2025
- Sponsor
- Rep. Hill, J. French [R-AR-2]
- Committees
- Banking, Housing, and Urban Affairs Committee (primary)
- Last action
- May 21, 2026
Bottom line
The bill provides regulatory relief for smaller, well-capitalized banks by easing restrictions on how they can accept certain custodial deposits, aiming to provide more stable funding, and includes a minor, delayed reduction to the Federal Reserve's surplus fund.
What it actually does
This bill amends the Federal Deposit Insurance Act (FDIA) to create a limited exception for certain 'custodial deposits' held by 'eligible institutions' (defined as well-capitalized insured depository institutions with less than $10 billion in assets) from being classified as 'brokered deposits.' This exemption applies up to 20 percent of the institution's total liabilities. It also imposes interest rate restrictions on these custodial deposits if an eligible institution ceases to be well-capitalized. Additionally, the bill includes a provision to reduce the Federal Reserve's discretionary surplus fund by $4,000,000, effective September 1, 2036.
Proponents argue
Proponents argue that this legislation will help community banks by providing them with greater access to stable, insured deposits from fiduciaries without triggering the stricter regulatory burdens associated with brokered deposits. This, they contend, will enhance community banks' ability to compete with larger institutions, support local economies, and strengthen the overall financial system by diversifying funding sources for smaller banks.
Opponents contend
Opponents might argue that any relaxation of brokered deposit rules, even with safeguards, could potentially introduce new risks into the financial system or create loopholes that could be exploited. Some may also contend that the provision to reduce the Federal Reserve's surplus fund is an unrelated policy rider that should be debated independently, potentially impacting the Fed's financial flexibility.
The bill is short and focused, making it accessible for an informed reader to evaluate its provisions and implications within a reasonable timeframe.
Section 2(a) of the bill, amending Section 29 of the Federal Deposit Insurance Act (12 U.S.C. 1831f) by adding subsection (j).
Limited Exception for Custodial Deposits
This provision exempts certain 'custodial deposits' of 'eligible institutions' from being classified as 'brokered deposits' under the Federal Deposit Insurance Act, up to 20% of the institution's total liabilities. An 'eligible institution' is defined as an insured depository institution with less than $10 billion in total assets that is well-capitalized or has a satisfactory rating and is well-capitalized. Custodial deposits are those held by fiduciaries (like other banks, trust entities, plan administrators) for the benefit of a third party to provide deposit insurance.
Supporters argue
Supporters argue this provision provides crucial regulatory relief for community banks, enabling them to better serve their local communities and compete effectively with larger financial institutions. By expanding their stable funding base with low-risk, insured deposits, community banks can enhance their lending capacity and contribute more robustly to economic growth.
Critics contend
Critics might express concern that any loosening of brokered deposit rules, even with limitations, could potentially introduce unforeseen risks into the financial system. They may argue that the existing regulations are vital for maintaining financial stability and preventing institutions from relying on less stable funding sources, even if the current exception is for well-capitalized entities.
Tradeoffs
This provision navigates the tradeoff between providing regulatory flexibility to community banks to enhance their funding stability and maintaining strict oversight of deposit sources to prevent excessive risk-taking, a core principle behind brokered deposit regulations.
Section 2(b) of the bill, further amending Section 29 of the Federal Deposit Insurance Act (12 U.S.C. 1831f) by adding subsection (k).
Restriction on Interest Rate Paid on Certain Custodial Deposits
This provision imposes an interest rate cap on custodial deposits for 'covered insured depository institutions,' which are defined as eligible institutions that are *not* well-capitalized. Such institutions are prohibited from paying a rate of interest on these deposits that significantly exceeds the prevailing rate in their normal market area or the national rate for comparable deposits, as established by the FDIC. This serves as a safeguard to prevent financially weaker institutions from attracting deposits by offering unsustainably high interest rates.
This section reduces the dollar amount specified under section 7(a)(3)(A) of the Federal Reserve Act (12 U.S.C. 289(a)(3)(A)) by $4,000,000. This reduction takes effect on September 1, 2036.
Section 3
Why it matters:This provision appears to be a legislative rider, a measure included in a bill that is largely unrelated to the bill's main purpose. It might have been included to secure broader support for the bill or to pass a measure that might face more scrutiny if introduced independently.
Case for: Supporters might argue that this is a responsible measure to return excess funds from the Federal Reserve's discretionary surplus to the Treasury, potentially reducing the national debt or freeing up funds for other government priorities without impacting the Fed's operational independence in the near term.
Case against: Critics could argue that this provision is an unrelated policy rider, which can obscure legislative intent and bypass proper debate. They might also contend that reducing the Fed's surplus, even by a small amount and with a delayed effect, could set a precedent that limits the Federal Reserve's financial flexibility in unforeseen future economic circumstances.
Estimated impact: A $4 million reduction in the Federal Reserve's discretionary surplus fund, effective September 1, 2036. This is a relatively minor fiscal adjustment in the context of federal finances.