Federal Register: Federal Reserve Board, FDIC and OCC Modify Community Bank Leverage Ratio

Two interim final rules jointly adopted by the Federal Reserve Board, FDIC and OCC, which modify the community bank leverage ratio to provide temporary relief to community banks, were published (see here and here) in the Federal Register. The rule went into effect immediately (i.e., April 23, 2020) and comments must be submitted by June 8, 2020.

The interim final rules were implemented in accordance with Section 4012 of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") (see previous coverage).

According to the Agencies, the first interim final rule:

• allows community banking organizations that have a leverage ratio of 8 percent or more, and that meet certain other criteria, to use the community bank leverage ratio framework in the second quarter of 2020; and

• implements a two-quarter grace period for certain community banking organizations that have a leverage ratio of less than 8 percent but maintain one of no less than 7 percent.

Under the second interim final rule:

• the community bank leverage ratio will transition from 8 percent at the beginning of the second quarter of 2020 to 8.5 percent through calendar year 2021 and then to 9 percent afterward; and

• a qualifying community banking organization will continue to be provided with a two-quarter grace period if its leverage ratio falls no more than 1 percent below a given ratio requirement.