Washington, DC – U.S. Representative Charlie Crist (D-St. Petersburg) introduced the Community Bank Deposit Access Act (H.R. 4384), legislation that would increase the ability of community and midsized banks to provide more small business loans and mortgages – loans that working families and small businesses are too often denied by larger banks. Rep. French Hill (AR-02) is the bill’s Republican co-lead.
“As banks have grown larger, access to capital has grown smaller for working families and small businesses,” Crist said. “People in the neighborhood know that community banks and credit unions are usually the ones that say 'yes' when the big banks say 'no'. Because community banks are losing out to the big banks on large retail deposits, we need to do more to level the playing field. The Community Bank Deposit Access Act makes it safe and easy for big banks to ‘spread the wealth’ by divvying up large deposits into smaller chunks that can flow to smaller banks, pumping capital back into Pinellas and communities across the nation.”
“Having spent two decades in community banking in Arkansas, I understand the importance of being able to extend credit to consumers and small businesses,” Hill said. “I’ve seen firsthand how custodial deposits empower community banks to attract and retain valuable local customer relationships that serve the needs of communities like mine in central Arkansas. This is especially important for spreading capital to underserved communities where access to credit is historically limited. I am pleased to work with Congressman Crist to take this critical step in improving our community banks’ ability to lend.”
Community Bank Deposit Access Act Background:
During the Savings and Loans Crisis of the 1980’s and 90’s, troubled banks used brokered deposits, in which a bank pays a broker to find deposits, in order to cook their books during regulatory exams. As a result, the Federal Deposit Insurance Commission (FDIC) required banks to mitigate against the additional risk of brokered deposits. Since then, regulatory uncertainty and inconsistent interpretation has left many banks reluctant to accept deposits from third parties like escrow accounts or custodial deposits, in which large deposits that exceed the FDIC insurance limit of $250,000 are spread throughout hundreds of community banks.
This bill codifies existing FDIC policy that under safe circumstances, well-capitalized banks can accept custodial deposits without facing additional requirements or heightened scrutiny. As a direct result, more deposits will arrive at community banks, and these dollars will become loans in their rural and lower-income communities, where deposits may be harder to come by. Community banks represent 17% of the total assets of the U.S. banking industry, yet extend over 53% of all small business loans. The Community Bank Deposit Access Act will mean more loans for lower-income borrowers, rural communities, and small businesses, including women- and minority-owned businesses.
