ABA Presses for an Optional Community Bank Leverage Ratio of 8%

The American Bankers Association today filed a comment letter on the federal banking agencies’ proposal to set a community bank leverage ratio at 9%. Under the proposal, banks that meet or exceed the CBLR would be deemed in compliance with Basel III capital requirements and would be exempt from risk-based capital rules that have long been a poor fit for community banks.

The agencies proposed to set the CBLR at the midpoint of the 8% to 10% range authorized last year in the S. 2155 bipartisan regulatory reform bill, which required the creation of the CBLR. In its response, ABA emphasized that setting the CBLR at 8% would be more appropriate. “By ABA’s calculations, every single qualifying community bank that has an 8% CBLR is already meeting the well capitalized risk-based capital ratios,” the association said.

ABA also urged the agencies to “reinforce the optionality” envisioned in the proposal to ensure that banks are never harmed or trapped by the CBLR’s prompt corrective action regime.