Board to consider final decision on CBLR, proposal on swap margin requirements

A final decision on the proposed Community Bank Leverage Ratio (CBLR) and a proposal on swap margin requirements are on the discussion agenda for the board of the Federal Deposit Insurance Corp. (FDIC) when it meets Sept. 17, the agency said Tuesday.

In a notice, the FDIC said the capital rule would address capital simplification for qualifying community banking organizations. Under the proposal, made in November of last year, a simple measure of capital adequacy for certain community banking organizations (known as the Community Bank Leverage Ratio, or CBLR, and consistent with last year’s regulatory relief legislation – the Economic Growth, Regulatory Relief, and Consumer Protection Act [EGRRCPA, S. 2155]) would be provided for.

Under the proposal, most depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets, that meet risk-based qualifying criteria, and that have a CBLR (as defined in the proposal) of greater than 9% would be eligible to opt into a CBLR framework.

The proposal has not been without its critics: In June, a group of Republican senators sent a joint letter to the FDIC and other federal banking agencies, urging all of the regulators to rethink the proposal. “Indeed, the CBLR (community bank leverage ratio) framework as proposed will present new challenges for community banks that prove no less complex than the current capital framework,” wrote the senators, seven of whom are members of the Senate Banking Committee, including committee Chairman Mike Crapo (R-Idaho). The Senate Banking Committee has oversight of the banking agencies.

The senators wrote they “encourage” the agencies to rethink the proposal’s changes to the PCA framework (including reducing the proposed CBLR level from 9% to 8%), citing heightened liquidity and capital pitfalls community banks could encounter. “If left unaltered, community banks may choose to forego opting in to the proposed CBLR framework, and the CBLR will fail to achieve the regulatory capital relief envisioned by Congress,” they asserted.

The FDIC Board will also consider a notice of proposed rulemaking on swap margin requirements.

Among the non-discussion items (on the board’s consent agenda) are:

  • Memorandum and resolution re: Final Rule to Apply CBLR Framework to Deposit Insurance Assessment System.
  • Memorandum and resolution re: Regulatory Capital Rule: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996; Revised Effective Date.

The board meeting gets underway at 1 p.m. ET, according to the FDIC notice.

FDIC Sunshine Act Meeting