WASHINGTON—Federal banking regulators have finalized a rule lowering the community bank leverage ratio to 8% from 9%, giving qualifying banks under $10 billion in assets more flexibility to use the simplified capital framework and easing a key regulatory threshold for smaller institutions.
The rule, adopted without change from a November 2025 proposal, was jointly approved by the Federal Reserve, FDIC and Office of the Comptroller of the Currency.
The agencies also extended the grace period for banks that temporarily fall out of compliance to four quarters from two, allowing more time either to regain eligibility under the Community Bank Leverage Ratio framework or shift back to risk-based capital requirements. Regulators said the changes are intended to reduce burden while still preserving safety and soundness for community banks that opt into the simplified regime. The final rule takes effect July 1.
The Community Bank Leverage Ratio framework applies to qualifying community banks with less than $10 billion in total consolidated assets that meet other prudential criteria and elect to use the simpler standard instead of calculating and reporting multiple risk-based capital ratios. The agencies said lowering the threshold should make the framework available to more institutions and encourage broader use of the streamlined approach.
American Banker reported the move will reduce the threshold to 8% and extend the grace period, giving smaller banks additional flexibility as regulators continue a broader push to soften capital rules and trim compliance burdens. OCC Comptroller Jonathan Gould separately said the change provides “meaningful and necessary regulatory flexibility” for community banks and reflects the agency’s continued focus on targeted relief for smaller institutions.