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Additional Regulatory Relief Announced for Qualifying Community Banking Organizations


The FDIC passed a final rule in September providing qualifying community banking organizations the ability to opt in to the new community bank leverage ratio (CBLR) framework, which simplifies regulatory capital adequacy burden by removing certain risk-based capital requirements. In 2018, President Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act, the first legislatively enacted regulatory relief bill since the 2008 recession, which rolled back various provisions of the Dodd-Frank Act.

To qualify for utilizing the CBLR framework, a community banking organization must have less than $10 billion in total consolidated assets, a tier 1 leverage ratio of greater than 9 percent, hold 25 percent or less of assets with off-balance sheet exposure and 5 percent or less of trading assets plus trading liabilities to total consolidated assets. For institutions that fall below the 9 percent capital requirement but remain above 8 percent, the final rule establishes a two-quarter grace period to either meet the qualifying criteria again or comply with the generally applicable capital rule. The CBLR framework will be available for banks to use in their March 31, 2020 Call Reports. The FDIC also plans to release an accompanying compliance guide to accompany the rule.

The FDIC also finalized a rule that permits non-advanced approaches banking organizations to use the simpler regulatory capital requirements for mortgage-servicing assets, certain deferred tax assets arising from temporary differences, investments in the capital of unconsolidated financial institutions and minority interest when measuring their tier 1 capital as of January 1, 2020.

Additionally, the FDIC finalized a rule that makes technical changes to incorporate the CBLR framework into the deposit insurance assessment system. Banks that utilize the CBLR framework will not have any changes to how their assessment rates are calculated.

For additional background on the Volcker Rule and the provisions of the simplified rules for smaller lending institutions, read our previous update.

For more questions about these regulatory changes and how they may provide planning opportunities for your financial institution, contact Lincoln Gray, Financial Services Industry Group Leader, at or 314.983.1235.


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