The House Financial Services Committee (FSC) voted to advance five legislative pieces supported by community banking advocates prior to a Sept. 16 markup session. Some of the measures passed with strong bipartisan support while others proved more contentious.
The House voted unanimously (51-0) to pass H.R. 3234, the “Keeping Deposits Local Act,” sponsored by Rep. Tom Emmer (R-Minn.). The American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) have noted the potential benefits of the bill’s proposed reforms to deposit insurance thresholds for reciprocal deposits that may be held by a bank without being considered brokered deposits.
“Insured deposits are critical to community banks’ ability to support local credit needs. Reciprocal deposits are one tool to help secure greater insured deposits,” ICBA wrote in a letter to lawmakers ahead of the markup. “Raising the percentage of reciprocal deposits allowed would assist banks approaching the current-law threshold and support lending needs. ICBA looks forward to working with the committee on the broader, comprehensive deposit insurance coverage level debate and ensuring more small businesses can have important protection for their deposits.”
Another bill pertaining to deposit thresholds also received strong support from community banking advocates – H.R. 5317, the “Community Bank Deposit Access Act of 2025,” sponsored by FSC Chair French Hill (R-Ark.) – which passed 49-2 out of committee. If enacted, the measure would allow custodial deposits to be held by community banks without being considered brokered deposits, provided the custodial deposits do not exceed 20 percent of the banks’ total liabilities.
“The more favorable treatment allowed by H.R. 5317 would only be available to banks of less than $10 billion in assets with a strong composite rating (‘outstanding’ or ‘good’) and that are well-capitalized or that have obtained a waiver from the FDIC. H.R. 5317 will help community banks maintain lower funding costs, expand lending opportunities, and serve their communities by attracting stable, low-cost funding,” ICBA wrote.
The FSC proved much more divided over H.R. 5262, the “Bank Competition Modernization Act,” sponsored by Rep. Scott Fitzgerald (R-Wis.). Advancing by a slim 28-24 out of committee, the measure would permit banking agencies to conduct competitive analyses of bank merger and acquisition applications that would result in institutions with less than $10 billion in total assets without input from the U.S. Department of Justice (DOJ).
“Importantly, ABA urges Congress to include language to expand the competitive factors considered by the Attorney General and federal financial regulators in reviewing bank mergers and acquisitions,” ABA wrote to lawmakers before the markup. “In order to fully assess competition in the market, the evaluation of merger applications should include financial products and services, including loans and deposits, offered by not only other banks but also credit unions, Farm Credit institutions, and nonbank financial companies.”
Sticking with the theme of modernization, H.R. 5291, the “Merchant Banking Modernization Act,” sponsored by Rep. Roger Williams (R-Texas), passed 35-17 out of committee. If implemented, the measure would amend the Federal Deposit Insurance Act and the Bank Holding Company Act to stipulate that merchant banking investments made through a bank holding company’s affiliate may generally be held for a period of not less than 15 years.
H.R. 5276, the “Community Bank Leverage Improvement and Flexibility for Transparency (LIFT) Act,” sponsored by Rep. Kim Young (R-Calif.), passed by a 33-19 vote and would reduce the Community Bank Leverage Ratio from 8-10 percent to 6-8 percent. It also would allow banks with up to $15 billion in assets to use the Community Bank Leverage Ratio (CBLR) – an optional, simplified capital framework created for qualifying community banks to use instead of more complex risk-based capital rules to reduce regulatory burdens for smaller banks while maintaining safety and soundness.
“Under current law, qualifying community banks that opt in to the CBLR framework are considered to have met the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules, the well-capitalized ratio requirements in the agencies’ prompt corrective action regulations, and any other capital or leverage requirements,” ABA wrote. “Opting into the CBLR framework not only facilitates compliance with the agencies’ capital rules but also alleviates the burdens of periodically calculating and reporting risk-weighted measures of capital, allowing an organization to devote more resources to customer-serving products and initiatives.”
A few days after the House markup session, the Senate Banking Committee held a hearing discussing the pros and cons of proposals for reforming the deposit insurance framework with respect to the Senate version of the “Keeping Deposits Local Act.”