FDIC Issues Compliance Guide to Community Bank Leverage Ratio

After finalizing the community bank leverage ratio earlier this fall, the FDIC has released a compliance guide for community banks.

The guide is intended to help community banks understand the new framework, which allows institutions with a leverage capital ratio of at least 9% to be exempt from the complex Basel III capital requirements.

Under the final rule, banks with less than $10 billion in assets may elect the community bank leverage ratio framework if they meet the 9 percent ratio and if they hold 25% or less of assets in off-balance sheet exposures, and 5% 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 two-quarter grace period to either meet the qualifying criteria again or comply with the generally applicable capital rule.

The guide summarizes the framework and describes how community banks may opt into and out of the CBLR. It also describes the “grace period” outlined in the final rule for institutions that may fail to satisfy one or more of the qualifying criteria but still maintain a leverage ratio of 8%. The FDIC noted that the guide does not carry the effect of law or regulation.

View the guide.