As required by Section 4012 the CARES Act, the federal banking agencies today temporarily lowered the community bank leverage ratio, issuing two interim final rules to set the CLBR at 8% and then gradually re-establish it at 9%.
Under the interim final rules, the CBLR will be set at 8% beginning in the second quarter of 2020 through the end of the year. Community banks that have a leverage ratio of 8% or greater and meet certain other criteria may elect to use the CBLR framework. Beginning in 2021, the CBLR will increase to 8.5% for the calendar year. Community banks will have until Jan. 1, 2022, before the leverage ratio requirement to use the CBLR framework will return to 9%.
“The agencies are providing community banking organizations with a clear and gradual transition back to the 9 percent leverage ratio requirement previously established by the agencies,” regulators said in a joint press release. “This transition will allow community banking organizations to focus on supporting lending to creditworthy households and businesses given the recent strains on the U.S. economy caused by the coronavirus.”
