Federal Banking Regulators to Propose Lowering Community Bank Leverage Ratio

Federal banking regulators are reportedly preparing to propose a plan that would reduce the community bank leverage ratio from the current 9% to 8%, which is the lowest amount allowed by law.

The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency will propose the change and request public comment, Bloomberg reported Wednesday (Oct. 15), citing unnamed sources.

Reached by PYMNTS, the FDIC and the OCC declined to comment on the report.

The Fed did not immediately reply to PYMNTS’ request for comment.

According to the Bloomberg report, the regulators aim to ease these capital requirements to encourage small banks to lend more.

Federal Reserve Vice Chair for Supervision Michelle Bowman said in an Aug. 9 speech that it is time to consider modifications to the community bank leverage ratio framework that will encourage more banks to adopt it and to consider whether the framework fulfills the congressional intent to achieve regulatory relief.

“For example, reducing the CBLR requirement from 9 percent to 8 percent could not only allow more community banks to adopt the framework but also increase balance sheet capacity for all CBLR firms, facilitating additional support for local economies through lending,” Bowman said.

Treasury Secretary Scott Bessent said in an Oct. 9 speech delivered before the Fed Community Bank Conference that Bowman “has long advocated for revisiting the community bank leverage ratio.”

“I expect that effort will soon culminate in a proposed reduction in the community bank leverage ratio,” Bessent said.

Comptroller of the Currency Jonathan V. Gould said Sept. 10, in remarks to the Financial Stability Oversight Council, that the OCC would focus first on community banks, including the community bank leverage ratio framework, as it tailors regulations to be consistent with the 2018 Economic Growth Act.

Gould said the OCC is working to revise its examination approaches to community banks for certain areas, including capital, “with an eye to adjusting such approaches to reflect the low risks posed by community banking activities.”

When the OCC announced some actions to reduce regulatory burden for community banks on Oct. 6, it said the community bank leverage ratio framework is on its agenda.

“The OCC will continue to prioritize reforms targeted to community banks ahead of broader reforms for the industry,” the regulator said in an Oct. 6 press release. “Ongoing work includes adjusting the community bank leverage ratio framework and a simplified strategic plan process for community banks to comply with the Community Reinvestment Act.”

PYMNTS reported Thursday (Oct. 9) that Bessent, Bowman and Fed Governor Michael S. Barr, while speaking at the Federal Reserve’s 2025 Community Bank Conference, said technology, transparency and tailored regulation can help community banks compete and thrive.