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Has any relief been provided related to the Community Bank Leverage Ratio (CBLR) framework?

Has any relief been provided related to the Community Bank Leverage Ratio (CBLR) framework?

Yes. Section 4012 of the CARES Act requires the federal banking agencies to temporarily lower the CBLR to 8 percent until the earlier of December 31, 2020 or the date on which the national emergency declaration related to coronavirus is terminated. It also required the agencies to provide for a reasonable grace period if a community bank’s CBLR falls below the prescribed level.

On April 6, 2020, the agencies issued two interim final rules. The first rule provides that, as of the second quarter 2020, a banking organization with a leverage ratio of 8 percent or greater that meets the other existing qualifying criteria may elect to use the CBLR framework. It also establishes a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls below the 8-percent CBLR requirement, so long as the banking organization maintains a leverage ratio of 7 percent or greater.

Interim Final Rule – Regulatory Capital: Temporary Changes to the Community Bank Leverage Ratio Framework https://www.fdic.gov/news/news/press/2020/pr20048a.pdf

The second rule provides a transition from the temporary 8-percent CBLR requirement to a 9-percent CBLR requirement. The requirements in this rule become applicable as of the earlier of December 31, 2020 or the date on which the national emergency declaration related to coronavirus is terminated. When this rule becomes applicable, the CBLR requirement will be greater than 8 percent for the second through fourth quarters of calendar year 2020, greater than 8.5 percent for calendar year 2021, and greater than 9 percent thereafter. It also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 100 basis points below the applicable CBLR requirement.

On August 26, 2020, the agencies adopted these interim final rules with no changes, effective
October 1, 2020. Highlights of the final rule include:

  • The CBLR will remain 8 percent through calendar year 2020, will be 8.5 percent through calendar year 2021, and will be 9 percent thereafter.
  • The final rule maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1 percentage point below the applicable CBLR requirement.
  • The 8 percent CBLR remains available under the interim final rule effective as of June 30, 2020.

Modifications to the Community Bank Leverage Ratio Framework
FDIC FIL-82-2020 https://www.fdic.gov/news/financial-institution-letters/2020/fil20082.html

Final Rule - Regulatory Capital: Temporary Changes to and Transition for the Community Bank
Leverage Ratio Framework https://www.fdic.gov/news/board/2020/2020-08-21-notational-fr-g.pdf