United States

FDIC announces changes to community bank leverage ratio

FINANCIAL REPORTING INSIGHTS  | 

On April 6, 2020, the Federal Deposit Insurance Corporation (FDIC) announced changes to the community bank leverage ratio framework to provide temporary relief to community banks pursuant to section 4102 of the Coronavirus Aid, Relief, and Economic Security Act. 

The changes modify the framework in the following manner:

  • Beginning the second quarter of 2020 until the end of the calendar year, the leverage ratio requirement will be 8 percent or greater for community banks that meet certain other criteria as defined in the initial regulatory rule change discussed in our September 27, 2019 article, FDIC finalizes community bank leverage ratio framework.
  • Community banks will have until January 1, 2022 to re-establish a leverage ratio greater than 9 percent. The leverage ratio requirement will be 8 percent for the second through fourth quarters of calendar year 2020, greater than 8.5 percent for calendar year 2021, and greater than 9 percent thereafter. 
  • Qualifying community banks also will have a two-quarter grace period if their leverage ratio falls no more than 1 percent below the applicable leverage ratio.

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