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Community Bank Capital Simplification

ABA Position

On September 17, 2019, the FDIC approved a joint agency final rule implementing Section 201 of the S. 2155 regulatory reform law. Under the final rule, banks with less than $10 billion in assets may elect the community bank leverage ratio (CBLR) framework if they meet the 9 percent ratio and if they hold 25 or less percent of assets in off-balance sheet exposures, and 5 percent or less of assets in trading assets and liabilities. For institutions that fall below the 9% capital requirement but remain above 8%, the final rule establishes a 2 quarter grace period to either meet the qualifying criteria again or comply with the generally applicable capital rule.

ABA President and CEO Rob Nichols welcomed the action from FDIC. “We applaud the FDIC for approving a Community Bank Leverage Ratio that recognizes the fact that the vast majority of community banks already meet or exceed risk-based capital requirements,” Nichols said. “We also appreciate the FDIC’s emphasis that the CBLR is an optional alternative to the risk-based capital framework.”

He added, however, that ABA continues to support an 8% community bank leverage ratio, “which the law provided for and which would allow hundreds of additional banks to qualify for the capital framework . . . We hope that as the FDIC becomes more comfortable with the CBLR, it will reassess this rule and allow community banks with ample capital to use an 8% ratio.”

Read the final rule.

ABA President and CEO Rob Nichols welcomed the action from FDIC. “We applaud the FDIC for approving a Community Bank Leverage Ratio that recognizes the fact that the vast majority of community banks already meet or exceed risk-based capital requirements,” Nichols said. “We also appreciate the FDIC’s emphasis that the CBLR is an optional alternative to the risk-based capital framework.”

He added, however, that ABA continues to support an 8% community bank leverage ratio, “which the law provided for and which would allow hundreds of additional banks to qualify for the capital framework . . . We hope that as the FDIC becomes more comfortable with the CBLR, it will reassess this rule and allow community banks with ample capital to use an 8% ratio.”

Read the final rule.

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