Board of Governors of the Federal Reserve System

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (collectively, the agencies) today issued a statement to provide information on the use of the two-quarter grace period under the optional community bank leverage ratio framework. The community bank leverage ratio framework provides qualifying community banking organizations the option to calculate only a simple leverage ratio, rather than both risk-based and leverage-based measures of capital adequacy. Following the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the agencies temporarily lowered the framework’s community bank leverage ratio requirement to better allow community banking organizations to support households and businesses during the COVID-19 pandemic.

The statement notes that beginning in the first quarter of 2022, the community bank leverage ratio requirement will revert to its original level of 9 percent. In addition, the statement discusses the availability of a two-quarter grace period that generally allows banking organizations additional time to build capital and manage their balance sheets to either remain in the framework or prepare to comply with risk-based capital requirements. The statement from the agencies does not alter any existing agency rules or regulations.

Reserve Banks are asked to distribute this letter to the supervised organizations in their districts and to appropriate supervisory staff. Questions may be sent via the Board’s public website.¹

Notes: