45-day comment period to open on temporary rule lowering CBLR

The comment period opens Thursday for 45 days on an interim final rule (IFR) making temporary changes to the community bank leverage ratio (CBLR), according to filings made by federal banking agencies Wednesday.

The IFR was issued earlier this month and was effective then. However, the agencies still wanted to receive comments on the provision.

Under the IFR issued April 6, community banking organizations that have leverage ratios of 8% or more – and which meet certain other conditions – may begin using the CBLR framework beginning in the second quarter of 2020 and through year’s end; they will have until the start of 2022 to take advantage of the framework before the ratio gradually reverts to 9%.

Issued by the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC), the IFR states that the CBLR will be 8% beginning in the second quarter and for the remainder of calendar year 2020, 8.5% for calendar year 2021, and 9% thereafter.

The IFR maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1% below the applicable community bank leverage ratio.

The rule implements provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted March 27, which requires the agencies to temporarily lower the community bank leverage ratio to 8%.

Regulatory Capital Rule: Temporary Changes to the Community Bank Leverage Ratio Framework