Regulators propose lowering Community Bank Leverage Ratio 

The federal banking regulators issued a proposed rule to reduce the Community Bank Leverage Ratio from 9% to 8%, as long advocated by ICBA. 

ICBA Response: In a national news release after the FDIC advanced the proposal at Tuesday’s board meeting, ICBA President and CEO Rebeca Romero Rainey said reducing the CBLR will provide community banks additional room on their balance sheets to meet the credit needs of local communities. 

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 in to the CBLR framework. 

More: In addition to lowering the CBLR, 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. 

ICBA View: 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. 

Latest ICBA Advocacy: Most recently, ICBA advocated lowering the CBLR to 8% in a recent letter to the federal banking regulators and in a letter to the Federal Reserve earlier this year. In recent remarks, FDIC Acting Chairman Travis Hill, Comptroller of the Currency Jonathan Gould, and Fed Vice Chair for Supervision Michelle Bowman have expressed support for revising the CBLR. 

Next Steps: Comments on the proposed rule are due 60 days after publication in the Federal Register. ICBA is reviewing the proposal and will submit comments to the agencies. 

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