Agencies lower community bank leverage ratio to 8 percent
The Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation have finalized a rule lowering the community bank leverage ratio (CBLR) requirement from 9 percent to 8 percent. The final rule is effective July 1, 2026.
CBLR requirement reduced, grace period extended
The agencies are adopting a final rule that lowers the community bank leverage ratio (CBLR) requirement from 9 percent to 8 percent.
This adjustment aligns with the lower bound specified in section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.
Additionally, the rule extends the duration for certain depository institutions and holding companies to remain within the CBLR framework, even if they temporarily do not meet all qualifying criteria.
This grace period is extended from two consecutive quarters to four consecutive quarters, subject to a maximum of eight quarters within any previous five-year period.
The agencies confirmed that the proposal is being finalized without revision after reviewing comments received.
Evolution of the CBLR framework
The CBLR framework, established in 2019, initially set a requirement of greater than 9 percent for qualifying community banking organizations.
These organizations typically have less than $10 billion in total consolidated assets and meet specific criteria regarding off-balance sheet exposures and trading assets.
In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily lowered the CBLR requirement to 8 percent.
This temporary reduction was followed by a graduated transition back to the 9 percent requirement.
The current final rule makes the 8 percent requirement permanent, reflecting a long-term adjustment to the framework.
Targeted relief for community banks
This final rule provides targeted regulatory relief, easing capital requirements for qualifying community banks.
The extended grace period offers greater flexibility, preventing premature exits from the simplified framework.
While maintaining safety and soundness, these adjustments streamline compliance for smaller institutions.