Regulators Lower Community Bank Leverage Ratio Requirement

The OCC, the FRB, and the FDIC issued a revised Community Bank Compliance Guide explaining changes to the Community Bank Leverage Ratio framework for qualifying community banking organizations with less than $10 billion in total consolidated assets.

In the guide, the agencies stated that the revised framework, which took effect on July 1, 2026, lowers the minimum leverage ratio requirement for eligibility from greater than 9 percent to greater than 8 percent. The changes implement a final rule the agencies published on April 29, 2026, under the authority of Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Banking organizations that maintain a leverage ratio above 8 percent and meet the other qualifying criteria are deemed to satisfy the agencies' generally applicable risk-based and leverage capital requirements and the well-capitalized standard under the Prompt Corrective Action framework.

The agencies also adjusted the grace period available to banks that temporarily fail to meet qualifying criteria. Under the update, a bank has four quarters to return to compliance, provided it maintains a leverage ratio above 7 percent, and it cannot exceed eight quarters in the grace period within any rolling five-year period. A bank whose leverage ratio falls to 7 percent or below must immediately comply with the applicable risk-based capital standards.