Federal banking agencies today finalized interagency rulemaking to expand the eligibility criteria for the community bank leverage ratio, adopting changes first proposed last year without further revisions.
The finalized rule lowers the CBLR requirement from 9% to 8%, which will expand the number of community banks that can opt into the framework, according to the agencies. It also expands the time banks can remain in the CBLR framework without meeting the qualifying criteria, from two quarters to four quarters.
The FDIC, Federal Reserve and the Office of the Comptroller of the Currency proposed revising the CBLR framework last year to encourage more community banks to use it. The changes will take effect on July 1.
The American Bankers Association in January urged the agencies to adopt the changes, pointing to concerns raised by community banks that the current calibration and short grace period have limited the CBLR’s effectiveness in reducing regulatory burden. In a statement today, ABA President and CEO Rob Nichols said the new rule “makes meaningful adjustments to the CBLR framework while preserving the strong capital foundation of the banking system.”
“Regulators’ decision to lower the ratio to 8% and extend the grace period for qualifying community banks will help ensure the simplified framework works as intended,” Nichols said. “This will allow community banks to do even more to serve customers, strengthen local economies, and support small businesses, farmers, and families — while maintaining safety and soundness.”
