CBLR reverts to 9% Jan. 1; two-quarter grace period allowed for qualifying banks

Banks that choose to have their capital requirements determined under the voluntary community bank leverage ratio (CBLR) framework will be subject to a 9% CBLR beginning Jan. 1 to continue to qualify for the framework, federal banking agencies said in a joint statement Tuesday.

Qualifying institutions will have a two-quarter grace period in which to achieve a leverage ratio of greater than 9%, according to the statement from the Federal Deposit Insurance Corp. (FDIC), Federal Reserve Board, and Office of the Comptroller of the Currency (OCC).

The interagency statement points to the temporary relief afforded last year that set the CBLR leverage requirement at more than 8% instead of 9%; that requirement rose to more than 8.5% during 2021, and the requirement reverts to 9% Jan. 1.

The agencies said the two-quarter grace period will be available to institutions that have a leverage ratio exceeding 8% as of Jan. 1. At the end of that period, the institution must, among other things, have total consolidated assets totaling less than $10 billion and a leverage ratio exceeding 9% to continue to qualify for the CBLR framework.

The agencies noted, for example, that a banking organization that reported under the CBLR framework as of Dec. 31, 2021, and met the 8.5% leverage ratio requirement and all other qualifying criteria as of that date would not have to meet the 9% leverage ratio requirement until its Sept. 30, 2022, call report or Form Y-9C submission to remain eligible for the framework.

The regulators last year also issued an interim final rule that permitted banking organizations with less than $10 billion in total consolidated assets as of Dec. 31, 2019, to use asset data as of that date to determine certain regulatory asset thresholds, including eligibility for the CBLR framework during calendar years 2020 and 2021. They noted this interim final rule expires on Dec. 31, 2021. “Starting on January 1, 2022, banking organizations must use total consolidated assets as of the report date to determine eligibility for the community bank leverage ratio framework,” they said.

OCC Bulletin 2021-66

Federal Reserve SR 21-21

FDIC FIL-81-2021