Keeping Capital Local for Underserved Communities Act of 2017

To amend the Federal Deposit Insurance Act to ensure that the reciprocal deposits of an insured depository institution are not considered to be funds obtained by or through a deposit broker, and for other purposes. 1. Short title This Act may be cited as the Keeping Capital Local for Underserved Communities Act of 2017 2. Limited exception for reciprocal deposits (a) In general Section 29 of the Federal Deposit Insurance Act ( 12 U.S.C. 1831f (i) Limited exception for reciprocal deposits (1) In general Reciprocal deposits of an agent institution shall not be considered to be funds obtained, directly or indirectly, by or through a deposit broker to the extent that the total amount of such reciprocal deposits does not exceed the lesser of— (A) $10,000,000,000; or (B) an amount equal to 20 percent of the total liabilities of the agent institution. (2) Definitions In this subsection: (A) Agent institution The term agent institution (i) (I) when most recently examined under section 10(d) was found to have a composite condition of outstanding or good; and (II) is well capitalized (as defined in section 38(b)(1)); (ii) has obtained a waiver pursuant to subsection (c) of this section; or (iii) does not receive an amount of reciprocal deposits that causes the total amount of reciprocal deposits held by the agent institution to be greater than the average of the total amount of reciprocal deposits held by the agent institution on the last day of each of the 4 calendar quarters preceding the calendar quarter in which the agent institution was found not to have a composite condition of outstanding or good or was determined to be not well capitalized. (B) Covered deposit The term covered deposit (i) is submitted for placement through a deposit placement network by an agent institution; and (ii) does not consist of funds that were obtained for the agent institution, directly or indirectly, by or through a deposit broker before submission for placement through a deposit placement network. (C) Deposit placement network The term deposit placement network (D) Network member bank The term network member bank (E) Reciprocal deposits The term reciprocal deposits . (b) Interest rate restriction Section 29 of the Federal Deposit Insurance Act ( 12 U.S.C. 1831f (e) Restriction on interest rate paid (1) Definition In this subsection, the term covered insured depository institution (A) under subsection (c) or (d), accepts funds obtained, directly or indirectly, by or through a deposit broker; or (B) while acting as an agent institution under subsection (i), accepts reciprocal deposits (as defined in such subsection) while not well capitalized (as defined in section 38(b)(1)). (2) Prohibition A covered insured depository institution may not pay a rate of interest on funds or reciprocal deposits described in paragraph (1) that, at the time that the funds or reciprocal deposits are accepted, significantly exceeds the limit set forth in paragraph (3). (3) Limit on interest rates The limit on the rate of interest referred to in paragraph (2) shall be— (A) the rate paid on deposits of similar maturity in the normal market area of the covered insured depository institution for deposits accepted in the normal market area of the covered insured depository institution; or (B) the national rate paid on deposits of comparable maturity, as established by the Corporation, for deposits accepted outside the normal market area of the covered insured depository institution. .

Summary: Keeping Capital Local for Underserved Communities Act of 2017 This bill specifies that certain reciprocal deposits shall not be considered to be brokered deposits. (Brokered deposits are subject to additional regulatory requirements, including those related to liquidity.)