Community banks will have “greater flexibility to use a simpler measure of capital adequacy and reduce regulatory burden” under a final rule issued Thursday by federal banking regulators.
According to the agencies, the rule modifies the so-called community bank leverage ratio (CBLR) “consistent with existing statutory authority” by taking into account “the unique business models and risk profiles of community banks.”
The new rule takes effect on July 1, the agencies said. It is unchanged from the proposal made last fall.
The rule lowers from 9% to 8% the CBLR, but would continue to require a level of capital that is consistent with ensuring the safety and soundness of community banks and comparable to–or higher than–the amount required under the risk-based capital framework.”
The agencies contend that the new rule will “provide more flexibility for community banks to opt into” the risk-based capital framework.
They also said the final rule extends the grace period from two quarters to four quarters for a community bank that temporarily falls out of compliance.
“The framework continues to simplify regulatory capital requirements for community banks by allowing them to adopt a relatively simple leverage ratio to measure capital adequacy, rather than calculating and reporting risk-based capital ratios,” the agencies said.
Agencies finalize changes to enhance community bank leverage ratio
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