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FDIC board approves notice proposing recalibration of Community Bank Leverage Ratio
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Summary
The FDIC board voted to publish a joint interagency notice of proposed rulemaking to lower the Community Bank Leverage Ratio (CBLR) threshold from 9% to 8%, extend the grace period to four quarters with a 7% interim threshold, and limit repeated use of the extended grace period; staff said roughly 475 additional community banks would become eligible and the comment period will run 60 days from Federal Register publication.
The Federal Deposit Insurance Corporation (FDIC) Board of Directors voted to approve a notice of proposed rulemaking to recalibrate the Community Bank Leverage Ratio (CBLR), a voluntary framework that allows qualifying community banks to meet capital requirements using a simple leverage measure rather than full risk-based calculations.
FDIC staff, identified on the agenda as Ben Bosco and Catherine Wood, said the proposal would lower the CBLR threshold from 9% to 8%, extend the current two-quarter grace period to four quarters (during which a bank would need to maintain a leverage ratio above 7%), and include a limitation on how often a bank may use the longer grace period. Staff said the recalibration would make about 475 additional community banks eligible for the CBLR framework and that the comment period would close 60 days after the rule is published in the Federal Register.
The proposal is presented as regulatory-burden relief: the CBLR exempts qualifying community banks from calculating and reporting risk-based capital ratios, requiring only the leverage measure for regulatory compliance. FDIC staff told the board the framework was adopted in 2019 and that adoption since implementation has been limited, with roughly 40% of eligible banks electing the CBLR.
An FDIC board member read a prepared statement saying they have long supported the CBLR concept — including from work on the enabling statute — and described the package as intended to promote wider adoption while preserving safety and soundness. Director Gould also voiced support, saying community banks ‘‘play a critical role in our local economies’’ and that the proposal is consistent with efforts to tailor regulation for community-bank business models.
The board moved to approve publication of the interagency notice of proposed rulemaking; the chair called a roll vote in which board members voted in favor, including Jeff Gradler voting by proxy for Director Russell Vogt. The motion was adopted.
Next steps: the agencies will publish the notice in the Federal Register and accept public comments for 60 days from publication. The board encouraged stakeholders to submit comments during that period.
