Federal Banking Agencies Propose Lower Community Bank Leverage Ratio Requirements

The federal banking agencies—the Federal Reserve, OCC, and FDIC—have issued a joint proposed rule to lower the community bank leverage ratio (CBLR) from greater than 9% to greater than 8%. The proposal would also extend the grace period for falling below the threshold by two quarters. If adopted, more banks could opt into the simplified capital framework—a simple leverage ratio of tier 1 capital to average total consolidated assets—and redeploy balance-sheet capacity to loans rather than regulatory capital.

The move is the latest deregulatory action by the Trump Administration. The agencies estimate approximately $64 billion in estimated additional lending capacity would follow. Forty-eight percent of eligible community banks have adopted the current CBLR framework. As proposed, at least 2,000 other community banks would be eligible to adopt the framework.