ICBA applauds lowering of Community Bank Leverage Ratio

ICBA commended federal regulators for issuing a final rule to lower the Community Bank Leverage Ratio, as ICBA has long advocated.

Details: In a national news release, ICBA President and CEO Rebeca Romero Rainey said reducing the CBLR from 9% to 8% will provide community banks additional room on their balance sheets to meet the credit needs of their communities and support ongoing economic growth.

Regulator Action: Federal banking regulators last week finalized a rule to lower the CBLR to 8%, the lowest permitted by statute. The final rule also extends the grace period from two quarters to four quarters, subject to a limit of eight out of the prior 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. Approximately 40% of qualifying banks have opted into the CBLR framework.

ICBA Advocacy:

• ICBA has advocated setting the CBLR at 8% since the ratio was proposed and adopted in 2019, and it sought an extension of pandemic-era CBLR relief that expired at the end of 2021.

• 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.

• In letters to the banking regulators, ICBA and state banking associations in January urged the agencies to act quickly to finalize the rulemaking.

• ICBA has advocated for this recalibration in a number of forums, including in a recent letter to the federal banking regulators and in a letter to the Federal Reserve last year.

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