An 8% leverage ratio requirement for community banks – down from 9% — is the key component of an updated compliance guide for the ratio’s framework, released Thursday by federal banking regulators.
The lowered requirement for the community bank leverage ratio (CBLR) is the result of changes made to the ratio’s framework in a final rule published in April, the three agencies said. The CBLR framework applies to banks with less than $10 billion in total consolidated assets that are not advanced approaches banks and elect the framework, according to the agencies.
“The CBLR framework provides a simple measure of capital adequacy for qualifying community banking organizations, consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act,” the Office of the Comptroller of the Currency (OCC) said in a release. “Depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a tier 1 leverage ratio of greater than 8%, are considered qualifying community banking organizations and are eligible to opt into the CBLR framework.”
In addition to lowering the CBLR, the guide also extends the grace period from two quarters to four quarters required for a community bank to achieve additional time to either satisfy the definition of a qualifying community banking organization under the CBLR framework, or to achieve compliance with risk-based capital requirements, the agencies said.
The compliance guide also limits a community bank to using the grace period for a maximum of eight out of the prior 20 quarters, the agencies said.
The OCC noted that the compliance guide summarizes the CBLR framework, but it does not carry the effect of law or regulation.
FDIC: Community Bank Leverage Ratio Framework: Community Bank Compliance Guide Update
OCC: Community Bank Leverage Ratio: Updated Community Bank Compliance Guide
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