MBA voices support for proposed cut to community banks’ leverage ratio

Late last month, federal banking regulators proposed lowering the Community Bank Leverage Ratio (CBLR) for qualifying community banks and bank holding companies from 9% to 8% while extending the timeframe for certain banks to remain in the program.

The Office of the Comptroller of the Currency (OCC), the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) said the changes align the CBLR framework with the threshold established in the 2018 Economic Growth, Regulatory Relief and Consumer Protection Act.

The proposal, outlined in the Federal Register, would also extend from two to four quarters the period that banks can remain in the CBLR framework without meeting all qualifying criteria. Comments on the proposed rule are due Jan. 30, 2026.

In its latest advocacy update, released on Monday, the Mortgage Bankers Association noted that it has long supported the CBLR, arguing that it provides regulatory relief for banks that opt in by removing the need to calculate and report risk-based capital ratios.

MBA wrote in a comment letter in October that the ratio should be lowered to 8%, and that banks should have a longer grace period to regain compliance or exit the framework.

Adopted in 2019, the CBLR allows banks that opt in to avoid calculating and reporting more complex risk-based capital ratios.

The agencies said in the Federal Register announcement that the proposed adjustments “provide community banks with enhanced options to manage their regulatory obligations while maintaining their ability to serve their communities.”