CBAI Urges Regulators to Provide Maximum Capital Relief and Simplification for Community Banks

In an April 5, 2019 comment letter to the OCC, Federal Reserve, and the FDIC, the CBAI urged regulators to provide the maximum capital relief and simplification for community banks. The Regulators proposed a Community Bank Leverage Ratio (CBLR) of 9%, which is permissible under recently enacted legislation (a range of between 8% and 10% ). However, that level will deny approximately 600 additional community banks from the maximum allowable regulatory relief. CBAI urged the Regulators to decrease the proposed CBLR from 9% to 8% which will more closely align it with the current regulatory capital requirements for “well capitalized” banks.

In addition, the Regulators proposed a new Prompt Corrective Action (PCA) framework for the treatment of qualifying community banks that fall below the CBLR. CBAI believes these thresholds are unnecessary, will have harmful unintended consequences, and run counter to Congressional intent. In the unfortunate event the proposed PCA framework is implemented, CBAI recommended that, before being downgraded to “adequately capitalized”, qualifying community banks (which have opted-in to the CBLR) should receive assistance and reasonable time to either 1) return to being “well capitalized” under the new framework; 2) demonstrate that they are “well capitalized” under the current framework; or 3) opt-out and go back to complying with the more complicated risk-based capital requirements under the current framework. Read CBAI Comment Letter.