Joint Release
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
For immediate release October 29, 2019
Federal Bank Regulatory Agencies Issue Final Rule to Simplify Capital
Calculation for Community Banks
WASHINGTON— Federal bank regulatory agencies finalized a rule that simplifies
capital requirements for community banks by allowing them to adopt a simple leverage
ratio to measure capital adequacy. The community bank leverage ratio framework
removes requirements for calculating and reporting risk-based capital ratios for a
qualifying community bank that opts into the framework.
To qualify for the framework, a community bank must have less than $10 billion in total
consolidated assets, limited amounts of off-balance-sheet exposures and trading assets
and liabilities, and a leverage ratio greater than 9 percent.
In response to public comments and outreach, the final rule was modified from the
November 2018 proposal to reduce compliance burden while maintaining safety and
soundness for qualifying community banks. In particular, the community bank leverage
ratio incorporates tier 1 capital as the numerator. In addition, a community bank that
falls out of compliance with the framework will have a two-quarter grace period to come
back into full compliance, provided its leverage ratio remains above 8 percent. A bank
will be deemed well-capitalized during the grace period.
The agencies estimate approximately 85 percent of community banks will qualify for the
community bank leverage ratio framework. The final rule is consistent with the
Economic Growth, Regulatory Relief, and Consumer Protection Act.
The community bank leverage ratio framework will first be available for banking
organizations to use in their March 31, 2020, Call Report or Form FR Y-9C, as
applicable. Banking organizations can opt into or out of the community bank leverage
ratio framework in a subsequent Call Report or Form FR Y-9C, as applicable. The
agencies have prepared a compliance guide to accompany the rule.
In addition, the agencies finalized a rule to allow non-advanced approaches banks,
including community banks, to elect to adopt simplifying changes to the capital rule
beginning on January 1, 2020, a quarter earlier than the mandatory compliance date of
April 1, 2020. The agencies issued the simplifying changes in July 2019.
Attachments:
CBLR Final Rule
CBLR Community Bank Guide
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
For immediate release October 29, 2019
Federal Bank Regulatory Agencies Issue Final Rule to Simplify Capital
Calculation for Community Banks
WASHINGTON— Federal bank regulatory agencies finalized a rule that simplifies
capital requirements for community banks by allowing them to adopt a simple leverage
ratio to measure capital adequacy. The community bank leverage ratio framework
removes requirements for calculating and reporting risk-based capital ratios for a
qualifying community bank that opts into the framework.
To qualify for the framework, a community bank must have less than $10 billion in total
consolidated assets, limited amounts of off-balance-sheet exposures and trading assets
and liabilities, and a leverage ratio greater than 9 percent.
In response to public comments and outreach, the final rule was modified from the
November 2018 proposal to reduce compliance burden while maintaining safety and
soundness for qualifying community banks. In particular, the community bank leverage
ratio incorporates tier 1 capital as the numerator. In addition, a community bank that
falls out of compliance with the framework will have a two-quarter grace period to come
back into full compliance, provided its leverage ratio remains above 8 percent. A bank
will be deemed well-capitalized during the grace period.
The agencies estimate approximately 85 percent of community banks will qualify for the
community bank leverage ratio framework. The final rule is consistent with the
Economic Growth, Regulatory Relief, and Consumer Protection Act.
The community bank leverage ratio framework will first be available for banking
organizations to use in their March 31, 2020, Call Report or Form FR Y-9C, as
applicable. Banking organizations can opt into or out of the community bank leverage
ratio framework in a subsequent Call Report or Form FR Y-9C, as applicable. The
agencies have prepared a compliance guide to accompany the rule.
In addition, the agencies finalized a rule to allow non-advanced approaches banks,
including community banks, to elect to adopt simplifying changes to the capital rule
beginning on January 1, 2020, a quarter earlier than the mandatory compliance date of
April 1, 2020. The agencies issued the simplifying changes in July 2019.
Attachments:
CBLR Final Rule
CBLR Community Bank Guide