United States

FDIC finalizes community bank leverage ratio framework

FINANCIAL REPORTING INSIGHTS  | 

On September 17, 2019, the Federal Deposit Insurance Corporation (FDIC) issued a final rule that creates the community bank leverage ratio (CBLR) framework. This is an optional framework designed to remove the calculation and reporting requirements related to risk-based capital ratios for qualifying community banking organizations that opt into the framework. Under the final rule, qualifying community banking organizations would be considered to have met the well-capitalized ratio requirements of section 38 of the Federal Deposit Insurance Act if they meet the following criteria:

  • Opt into the CBLR framework
  • Maintain a leverage ratio (Tier 1 capital/average total consolidated assets) of greater than 9 percent
  • Have less than $10 billion in average total consolidated assets
  • Have off-balance-sheet exposures of 25 percent or less of total consolidated assets
  • Have trading assets plus trading liabilities of 5 percent or less of total consolidated assets
  • Not be an advanced approaches banking organization (generally defined as having at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposures, as well as subsidiaries of these institutions)

The final rule is effective January 1, 2020 and would be reflected in call reports as of March 31, 2020.

A fact sheet summarizes the applicability and requirements of the CBLR framework, as well as what to do when the institution does not meet the requirements in a given period