HR 5317: Community Bank Deposit Access Act of 2025

HR 5317 in plain English: This bill changes how certain custodial deposits are classified under federal banking rules. Specifically, custodial deposits at insured banks with less than $10 billion in total assets would no longer be counted as brokered deposits—provided those deposits do not exceed 20% of the institution's liabilities and the bank meets soundness requirements. This would reduce some regulatory oversight currently applied to community banks that accept such deposits.

Stated purpose

This bill aims to make it easier for community banks to accept certain custodial deposits by exempting those deposits from being classified as 'brokered deposits,' which currently triggers extra regulatory oversight. It seeks to expand deposit access at smaller, well-run banks.

Key points

• Exempts custodial deposits from brokered deposit classification at banks with less than $10 billion in total assets
• Exemption applies only if custodial deposits do not exceed 20% of the institution's liabilities
• Banks must be well-capitalized and meet a minimum soundness rating, or obtain an FDIC waiver
• Applies existing interest rate limits to institutions that accept custodial deposits but are not well-capitalized

Arguments supporters make

• Community banks are unfairly penalized by brokered deposit rules when handling custodial funds they did not actively solicit, and this fix lets sound, well-capitalized banks compete more fairly for deposits.
• Expanding deposit options at community banks keeps more money in local institutions, which tend to lend to small businesses and rural areas that larger banks often overlook.
• The bill includes meaningful safeguards — the bank must be well-capitalized, have a solid regulatory rating, and stay under a 20% cap — so it is not a blanket loosening of oversight.

Arguments opponents make

• Brokered deposit rules exist because institutions that rely on outside-sourced funds have historically been more vulnerable to instability; loosening these rules, even for smaller banks, could increase risk to the deposit insurance fund.
• The 20% cap and rating requirements may not be strong enough guardrails, especially if a bank's financial condition deteriorates after it has already taken on large custodial deposit balances.
• Critics may argue the bill benefits financial intermediaries and custodians as much as ordinary depositors, and that the regulatory relief primarily serves institutional interests rather than everyday community banking customers.

Tradeoffs

The bill reduces regulatory constraints on community banks, which may help them grow and serve local markets, but loosening brokered deposit rules trades away some of the oversight designed to protect the broader banking system and the FDIC insurance fund from concentrated funding risk.

Current status in Congress: Passed House.

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