U.S. community banks would be better positioned to meet the credit needs of families, workers and the local small businesses they serve under bipartisan legislation introduced last week by U.S. Senator Tim Scott (R-SC).
“This bipartisan bill allows small local banks to compete with large banks for deposits,” Senator Scott said.
The Minority Deposit Institution and Community Bank Deposit Access Act, S. 3562, which Sen. Scott sponsored Feb. 2 alongside U.S. Sen. Maggie Hassan (D-NH), would amend the Federal Deposit Insurance Act to ensure that certain deposits of Well-capitalized insured depository institutions are not considered funds obtained by or through depository brokers, according to the summary of the congressional bill.
The bill would clarify the Federal Deposit Insurance Corporation’s (FDIC) existing policy to state that in safe circumstances, well-capitalized community banks, minority deposit-taking institutions, and community development financial institutions may accept custodial deposits. without facing additional regulatory requirements or scrutiny, according to a summary. provided by Senator Scott’s staff.
By resolving this regulatory uncertainty, S. 3562 would encourage more third-party deposits in smaller community financial institutions, allowing them to be reinvested in underserved communities, the executive summary says, and allow minority credit unions to access the National Credit Union Administration Revolving Community Development. Loan funds.
“As we have seen throughout the pandemic, rural and minority business owners have faced particularly difficult challenges in finding loan options,” Senator Scott said. “Improving access to capital at local banks that serve low-income borrowers and rural communities will help expand financial opportunities for hard-working families, farmers and small business owners who live there. .”