THE HOUSING ACT’S NEW RECIPROCAL DEPOSIT LEGISLATION What It Means for U.S. Banks By Joe Hooker, Chief Sales Officer, IntraFi The recently enacted 21st Century ROAD to Housing Act marks a significant shift in how U.S. banks can use reciprocal deposits — an established but increasingly important tool for deposit growth and local lending. What the Law Changes The new law amends the Federal Deposit Insurance Act to expand the amount of a bank’s reciprocal deposits that can be classified as “nonbrokered,” a designation that generally reflects more stable, relationship-based funding. Under the previous framework, reciprocal deposits counted as nonbrokered were capped at the lesser of 20% of a bank’s total liabilities or $5 billion. This one-size-fits-all limit often constrained banks’ ability to fully leverage reciprocal deposits, even when those funds were tied to long-term customer relationships. The 21st Century ROAD to Housing Act replaces that flat cap with a cumulative, tiered model based on the amount of a bank’s liabilities. Under the new formula, reciprocal deposits can be excluded from brokered deposit treatment up to: • 50% of the first $1 billion in liabilities, plus • 40% of liabilities between $1 billion and $10 billion, plus • 30% of liabilities over $10 billion. The total amount that can be counted as nonbrokered is now capped at $30 billion. 12
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