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    US Agencies Correct Error in Capital Simplification Rule for Banks

    February 26, 2020

    US Agencies (FDIC, FED, and OCC) published a notice in the Federal Register to correct an erroneous amendatory instruction in the final regulatory capital rule that was published in November 2019; this rule provided for a simple measure of capital adequacy for certain community banking organizations, under the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act. The amendment refers to the amendatory instruction 13 on page 61794, in § 6.4, in the second column, beginning on the 21st line.

    Under the final rule that was published in November 2019, depository institutions and depository institution holding companies that have less than USD 10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of greater than 9%, will be eligible to opt into the community bank leverage ratio, or CBLR, framework. The rule on CBLR includes a two-quarter grace period, during which a qualifying community banking organization that temporarily fails to meet any of the qualifying criteria, including the greater than 9% leverage ratio requirement, generally, would still be deemed well-capitalized as long as the banking organization maintains a leverage ratio greater than 8%. 

     

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    Keywords: Americas, US, Banking, Capital Simplification Rule, EGRRCP Act, Community Banks, Regulatory Capital, CBLR Framework, US Agencies

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