November 18, 2019

To our clients and friends:

On October 29, 2019, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (the “Federal Agencies”) adopted a final rule to simplify the regulatory capital requirements for eligible community banks and holding companies that opt into the community bank leverage ratio framework (“CBLR framework”), as required by Section 201 of the Economic Growth, Relief and Consumer Protection Act of 2018.  The final rule will be effective as of January 1, 2020.

Under the final rule, community banks and holding companies that satisfy certain qualifying criteria, including having less than $10 billion in average total consolidated assets and a leverage ratio (referred to as the “community bank leverage ratio”) of greater than 9%, would be eligible to opt into the CBLR  framework.  If this election is made, the qualifying community bank or holding company would satisfy its regulatory capital standards by calculating and reporting the community bank leverage ratio instead of the risk-weighted capital ratios and minimum leverage ratio currently required and would be deemed “well-capitalized” under the Federal Agencies’ prompt corrective action rules so long as it continues to satisfy the qualifying criteria of the CBLR framework.

Our Alert, which summarizes the key provisions of the final rule, is available here.

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