Banks get looser rules on brokered deposits; FDIC study comes too late

What it does

This bill increases the amount of reciprocal deposits (deposits placed through intermediaries at other banks) that small and mid-sized banks can hold without triggering deposit-broker regulations. Banks under $1 billion in liabilities can now exclude 50% of reciprocal deposits from broker-deposit limits; those $1–10 billion can exclude 40%; those $10–250 billion can exclude 30%. The bill also requires the FDIC to study reciprocal deposits and reduces the Federal Reserve's discretionary surplus fund by $28 million, effective 2036.

Why we flagged it

The bill's operative mechanism is a tiered exemption from deposit-broker regulations for reciprocal deposits held by insured depository institutions. This is a deregulatory measure that benefits banks by allowing them to hold larger volumes of brokered deposits without triggering oversight constraints.

• Section 5 reduces the Federal Reserve's discretionary surplus fund by $28M, effective 2036. Unrelated to reciprocal deposits; appears to be a budget offset or separate policy objective.

What the text implies

• Reciprocal deposits are often used by smaller banks to attract large institutional depositors (municipalities, nonprofits, businesses) who exceed FDIC insurance limits at a single bank. Loosening broker-deposit rules may increase systemic reliance on these networks, creating contagion risk if a major reciprocal-deposit intermediary fails.
• The tiered exemption (50%/40%/30%) creates incentives for banks to stay below size thresholds to maximize the exemption percentage, potentially fragmenting the banking system and reducing economies of scale.
• The FDIC study (due in 6 months) is advisory only and does not constrain the bill's immediate effect. If the study identifies risks, there is no mechanism to roll back the exemption.
• Smaller banks (under $1B in liabilities) gain the largest exemption (50%), which may help them compete for deposits but also concentrates reciprocal-deposit risk in institutions with less capital and regulatory oversight.
• The $28M reduction to the Federal Reserve's discretionary surplus fund is a separate fiscal measure that may constrain the Fed's ability to absorb losses or fund emergency operations, though the 2036 effective date delays impact.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill may help smaller banks compete for deposits and serve local businesses and municipalities that rely on reciprocal-deposit networks, potentially supporting credit availability in underserved areas. However, it loosens deposit-broker regulations designed to prevent excessive concentration risk and protect the deposit-insurance fund, creating potential systemic fragility if reciprocal deposits grow unchecked during stress periods.

Who stands to gain

• community banks and regional banks (under $250B in liabilities)
• reciprocal-deposit intermediaries and networks
• deposit-broker platforms serving institutional depositors

Named in the bill

Federal Deposit Insurance Corporation (FDIC), Board of Governors of the Federal Reserve System, insured depository institutions, deposit brokers, reciprocal deposits, CAMELS rating system, Uniform Financial Institutions Rating System

Where it stands

11 cosponsors: 8 Republicans, 3 Democrats.

• May 7, 2025 — Introduced · Congress.gov: “Introduced in House”
• May 7, 2025 — Referred to House Committee on Financial Services and Senate Committee on Banking, Housing, and Urban Affairs · Congress.gov: “Referred to the House Committee on Financial Services”
• Sep 16, 2025 — Markup held in committee · Congress.gov: “Committee Consideration and Mark-up Session Held”
• Sep 16, 2025 — Reported out of committee · Congress.gov: “Ordered to be Reported (Amended) by the Yeas and Nays: 51 - 0”
• May 19, 2026 — Floor vote scheduled · Congress.gov: “Mr. Hill (AR) moved to suspend the rules and pass the bill, as amended”
• May 20, 2026 — Passed the House · Congress.gov: “On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required)…”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

6 lobbying clients named this bill on 7 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $3,770,000 in lobbying spend. A filing names 9 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 82% of bills with at least one filing.

Tom Emmer, the sponsor, reported $2,391,750 in PAC receipts in the 2026 cycle. $20,000 of that came from 2 PACs tied to these lobbying clients.

• Independent Community Bankers of America — $2,170,000 on 1 filing
• Jpmorgan Chase Holdings LLC — $1,190,000 on 1 filing
• Huntington Bancshares Incorporated — $170,000 on 1 filing
• Western Alliance Bancorporation — $150,000 on 1 filing
• New York Bankers Association — $90,000 on 2 filings

Lobbying Disclosure Act filings through Jul 21, 2026. A filing shows who paid to lobby on a bill it names, not what changed.