Brokered Deposits Back in Focus
Brokered Deposits Back in Focus
Brokered deposits are back on the radar in Washington. In September 2025, the House Financial Services Committee advanced two bipartisan bills aimed at reshaping how these deposits are defined and regulated. If enacted, the measures would loosen restrictions on certain types of deposits that community banks and fintech-partner banks rely on. If changes are made, it may have an impact on Schedules RC-E and RC-O.
What’s Changing
- Expanding Reciprocal Deposit Exemptions
- A bill from Majority Whip Tom Emmer (R-Minn.) expands the amount of reciprocal deposits banks can hold without triggering brokered deposit treatment.
- The proposal uses a tiered “waterfall” by bank size, ultimately giving institutions more room to classify reciprocal deposits as core funding.
- Supporters argue this is a needed fix, especially after the Silicon Valley Bank collapse in 2023, when reciprocal deposits became a key tool for banks to shore up insured funding.
- The measure passed unanimously.
- Excluding Qualified Custodial Deposits
- A second bill excludes some custodial deposits from brokered treatment.
- Custodial deposits are often tied to banking-as-a-service (BaaS) partnerships between banks and fintechs—an area under scrutiny after the 2024 collapse of middleware provider Synapse and questions about its partner Evolve Bank.
- The measure passed with overwhelming support, 49–2.
Why It Matters
Brokered deposits—funds gathered through third parties and placed in bulk—have long been seen by regulators as risky, sometimes labeled “hot money.” In past crises, these deposits fled banks quickly in search of higher yields, worsening instability. For example, this occurred during the savings and loan crisis of the 1980s.
Because of this history, regulators traditionally imposed strict guardrails:
- Restricting use by undercapitalized banks,
- Requiring higher liquidity buffers, and
- Charging higher deposit insurance premiums.
The FDIC softened brokered deposit rules in 2020 with new “primary purpose” exceptions, but many bankers argue reciprocal and custodial deposits still face overly rigid treatment. Bankers argue that these behave more like stable, relationship-driven funding. Proponents for the change advocate that reciprocal deposits that spread customer funds across banks to maximize FDIC insurance are not “hot money” and should not be treated as such.
Political Dynamics
- The reciprocal deposit bill drew rare unanimous support across party lines.
- Ranking Member Maxine Waters (D-Calif.) backed the compromise after hearing from CDFI and minority depository institution leaders, who emphasized how expanded exemptions could strengthen their deposit-gathering capacity.
- The Senate companion bill from Sens. Mike Rounds (R-S.D.) and Mark Warner (D-Va.) includes added incentives for banks over $250 billion in assets. By contrast, the House version excludes mega-banks from the carve-out.
What Banks Should Watch
- All Banks: Might see changes in call reporting categories.
- Community Banks: Expanded reciprocal deposit exemptions could ease funding pressures and broaden options for stable deposit growth.
- BaaS Banks: Custodial deposit relief could lower compliance burdens, though expect supervisors to keep scrutinizing fintech-partnership deposit flows.
- Regulatory Lens: Even if deposits lose the “brokered” label, examiners are unlikely to relax oversight of liquidity and concentration risks.
Conclusion
The bipartisan momentum reflects a shift in thinking: not all brokered deposits pose the same risks. By carving out reciprocal and custodial deposits, lawmakers aim to modernize outdated rules while supporting community banks and fintech-partner institutions.
For bankers, the takeaway is clear—watch developments closely in both chambers and be ready to adjust call reporting, as well as funding and compliance strategies if these changes become law.
