Bowman says Fed continues work to improve community bank capital standards 

Federal Reserve Vice Chair for Supervision Michelle Bowman said her agency continues working on changes to help community banks lend to households and businesses.

Details: Speaking at the Federal Reserve Bank of Atlanta, Bowman said the Fed:

• Is in the process of reviewing comments on proposed changes to the Community Bank Leverage Ratio that would provide greater flexibility to banks that opt in while maintaining strict capital standards.

• Will soon revisit the mutual bank capital framework to ensure that it provides flexibility while ensuring safety and soundness.

Recent ICBA Advocacy: ICBA and 45 state banking associations this month said they strongly support the federal banking agencies’ proposal to recalibrate the CBLR and adjust the grace period.

Proposal: The federal banking regulators in November issued a proposed rule to reduce the CBLR from 9% to 8%, as long advocated by ICBA. The proposal would also extend the length of time that covered institutions can remain in the CBLR framework while not meeting all of the framework’s qualifying criteria from two quarters to four quarters, subject to a limit of eight quarters in any five-year period.

Background: The CBLR simplifies regulatory capital requirements for community banks that choose to adopt it, replacing risk-based capital ratios with a relatively simple leverage ratio. The CBLR is available for eligible banks with assets below $10 billion, and approximately 40% of qualifying banks have opted in to the CBLR framework.

ICBA View: ICBA has advocated setting the CBLR at 8%, the lowest level permitted by law, since the ratio was proposed and adopted in 2019. ICBA also supports Rep. Young Kim’s (R-Calif.) House Financial Services Committee-passed Community Bank LIFT Act (H.R. 5276), which would lower the CBLR to a range of 6%-8% and authorize its use by banks with up to $15 billion in assets.