Keeping Deposits Local Act

The Keeping Deposits Local Act would modify how banks can use reciprocal deposits, a mechanism that allows financial institutions to increase deposit insurance coverage by sharing large deposits across a network of banks. Currently, banks are limited in how much they can accept through this system. If enacted, this bill would increase those limits based on each institution's size, allowing larger banks to participate more extensively in reciprocal deposit networks.

The bill would also change the financial health standards that banks must meet to participate in reciprocal deposits. Under current rules, banks need strong ratings to qualify. The proposal would allow banks with lower health ratings to participate, expanding access to this deposit-sharing tool to a broader range of institutions. This could make it easier for smaller or less financially robust banks to attract deposits and manage their capital.

The bill has been approved by the House Financial Services Committee and is eligible for a floor vote. If passed by the House and Senate and signed by the President, these changes could affect how banks manage deposits and potentially influence deposit availability and competition in local banking markets.