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ADVOCACY UPDATE




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Proposed Community Bank Leverage Ration Would Provide Reg Burden Not Relief

2/22/2019

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By James Cooper
CSBS Senior Vice President of Policy and Supervision


The community bank leverage ratio (CBLR) proposed by federal regulators won’t provide the regulatory relief that Congress intended. Instead, as proposed, the simplified capital framework would result in regulatory burden that exceeds any relief provided.

The problem stems from the creation of a proposed new prompt corrective action (PCA) framework for banks that use the CBLR but there is an easy fix, as we said in a letter this week to the OCC, Federal Reserve and FDIC.

Congress directed the federal agencies to develop the CBLR in Section 201 of the Economic Growth Regulatory Relief and Consumer Protection Act last spring. The goal was to provide qualifying community banks relief from the complexities and burdens of the current risk-based capital rules while ensuring that they maintain a high quality and quantity of capital consistent with requirements of the current rules.

The interagency CBLR proposal, released February 8, allows certain community banks with less than $10 billion in total assets to elect to use the CBLR if they have a CBLR greater than 9 percent. Banks can choose to opt out of the CBLR at any time and return to complying with the current capital requirements. However, if a bank does not opt out and its CBLR falls to 9 percent or below, then the bank would be considered less than well capitalized under the new PCA framework, which would trigger many operational restrictions.

We believe the newly proposed prompt corrective action is unnecessary and unwarranted. Instead, the CBLR framework should require a community bank that falls below the CBLR to begin reporting capital ratios under the current risk-based capital rules.

To make that transition smoother from an operational standpoint, we believe the CBLR should use the current Tier 1 leverage ratio rather than creating a new capital measure, which the proposal refers to as CBLR tangible equity. This would reduce burdens in transitioning into and out of the CBLR framework, reduce the changes that would need to be made to current reporting processes and preserve the ability for supervisors and other stakeholders to compare capital adequacy across institutions in different capital frameworks.

To be clear - state regulators and CSBS are encouraged by the OCC, Fed and FDIC’s efforts. We just want to make sure that the CBLR provides the community banks we regulate regulatory relief that exceeds any new regulatory burdens created in implementing the CBLR.

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    Lori Godfrey
    EVP, Chief of Staff, Government & Regulatory Relations
    View my profile on LinkedIn
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  • HOME
  • ABOUT CBA
    • Board of Directors
    • CBA Committees
    • LEAD Division
    • Office Directions & Hours
    • Our Team
    • Privacy Policy
    • Remembering Julian Hester
  • MEMBERSHIP
    • Member Login
    • Associate Members >
      • Associate Member Benefits & Application
      • Associate Member Directory >
        • Company Listing Update
    • Bank Members >
      • Member Benefits
      • Member Bank Directory >
        • Bank Listing Update
      • Lifetime Service Awards
    • Preferred Service Providers
    • ADVERTISING & SPONSORSHIP OPPORTUNITIES
    • Resources >
      • CBA Legal Hotline
      • CBA Career Center
      • CBA Wellness Solutions
      • April is Community Banking Month
      • Marketing Resources
      • Useful Websites
  • PROFESSIONAL DEVELOPMENT
    • Community Bankers College
    • Programs >
      • Calendar
      • Programs by Functional Category
      • Webinars
      • Banker Regulatory Forum
      • Barret School of Banking
      • Community Bank Leadership Academy
      • Compliance Professionals Package
      • Connect (Convention)
      • Executive Channel
      • HR & Talent Development League
      • WINSPIRE - Women in Banking
    • Resources >
      • Cancellation Policies & Facility Maps
      • Compliance Resources
      • Disaster & Pandemic Support & Preparedness
      • FDIC Regulatory Calendar
      • Financial Literacy
      • Speakers
    • Scholarships/Student Development >
      • Julian & Jan Hester Scholarship
      • McNair Scholarship
      • Walraven Scholarship
      • Rise Up - College Student Development Program
  • PUBLICATIONS
    • Advocacy Update
    • Education Buzz
    • eNewsletter - CBA Today
    • Georgia Communities First Magazine
    • Georgia Financial Directory
    • Innovation Circuit
    • Peachy Posts
    • Swaggin Wagon Adventures
  • ADVOCACY
    • Programs >
      • Clay Shoot
      • TopGolf Tournaments
      • Town Hall Talks
    • Advocacy Fund >
      • T-Shirt Advocacy Fundraiser
      • Corporate Donations
      • Individual Donations
    • Advocacy Update
    • ICBA Plan for Prosperity
    • Locate Your Legislator
    • Priority Legislation SB 157 >
      • SB 157 Survey
    • SBA/PPP Resources >
      • THE CARES ACT & SBA LENDING
      • Paycheck Protection Program
      • PSP & Associate Member Support During Covid-19
    • Silent Auction Items