Final Rule on Revisions to the Community Bank Leverage Ratio (CBLR) Framework

Summary:

The Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System (Federal Reserve), and Federal Deposit Insurance Corporation (together, the agencies) are issuing a final rule that modifies the community bank leverage ratio (CBLR) framework, consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, to encourage broader adoption for community banks.

Statement of Applicability: The contents of, and materials referenced in, this FIL apply to qualifying FDIC-supervised financial institutions with less than $10 billion in total consolidated assets that are not advanced approaches banks and elect the CBLR framework.

Highlights:

Specifically, the final rule:

• Lowers the CBLR requirement from 9 percent to 8 percent, which would allow more community banks to qualify for the CBLR framework.
• Extends the grace period from two quarters to four quarters, in order to provide additional time for community banks to either satisfy the definition of a qualifying community banking organization under the CBLR framework, or to achieve compliance with risk-based capital requirements.
• Limits a community bank to using the grace period for a maximum of eight out of the prior twenty quarters.
• Encourages broader adoption of the CBLR framework, while maintaining strong capital standards and enabling banks that opt into the CBLR framework additional capacity to increase lending in their communities.