Community Bank Deposit Access Act of 2025

The bill would amend Section 29 of the Federal Deposit Insurance Act to establish that custodial deposits at eligible insured depository institutions are not treated as brokered deposits, provided those deposits do not exceed 20% of the institution's total liabilities. To qualify, the institution must have less than $10 billion in total assets, be well-capitalized, and have received a composite examination rating of 1, 2, or 3 under the Uniform Financial Institutions Rating System — or hold a waiver from the FDIC. "Custodial deposits" are defined as deposits placed by an insured depository institution, a state-chartered trust company, or a plan administrator acting in a formal fiduciary or custodial role, for the purpose of providing deposit insurance to a third-party beneficiary, without the institution paying fees to a third party for placement.

The bill would also impose interest-rate restrictions on institutions that accept custodial deposits while they are not well-capitalized, mirroring existing limits that apply to undercapitalized institutions more broadly. A separate provision would reduce the Federal Reserve's Discretionary Surplus Fund by $4 million, effective September 1, 2036, which functions as a budget offset.

Community banks and other insured depository institutions with less than $10 billion in assets that currently accept or wish to accept custodial deposits. State-chartered trust companies, plan administrators, and investment advisors acting as fiduciaries who place deposits on behalf of clients would also be affected, as would the third-party beneficiaries — including retirement plan participants — whose funds flow through these arrangements.

Being classified as a brokered-deposit recipient subjects a bank to stricter oversight, interest-rate ceilings, and limits on deposit-taking if its capital adequacy declines. The exemption would let qualifying community banks accept a broader pool of custodial funds without those deposits automatically triggering heightened regulatory scrutiny, potentially improving their funding flexibility and competitive position relative to larger institutions.

The exemption is largely self-executing for institutions that meet the statutory criteria: banks would track whether custodial deposits remain below 20% of total liabilities, confirm well-capitalized status each quarter via Call Report data, and verify their most recent examination rating. Institutions that fail the capital or rating thresholds but still accept custodial deposits could apply for an FDIC waiver under existing authority. The FDIC would also continue setting the national rate benchmark used to cap interest on custodial deposits accepted by institutions not currently well-capitalized. No new rulemaking is explicitly required, though the FDIC may issue guidance.