CBLR Rule Lowers Required Community Bank Leverage Ratio

In under a minute

• On April 23, 2026, the Federal Deposit Insurance Corp., Federal Reserve Board, and Office of the Comptroller of the Currency (agencies) finalized a rule to modify the community bank leverage ratio (CBLR).
• The rule lowers the required ratio from 9% to 8% and extends the out-of-compliance grace period from two quarters to four.
• Changes outlined in the rule go into effect July 1, 2026.

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Key takeaways

The agencies are lowering the CBLR requirement from 9% to 8%. This means more qualifying community banking organizations with less than $10 billion in assets may opt into the simplified CBLR framework instead of using the generally applicable risk-based capital rules. The agencies estimate that 477 additional community banking organizations will qualify, bringing total eligibility to about 95% of community banking organizations.

The rule also extends the CBLR grace period from two quarters to four quarters for institutions that fall out of compliance with one or more qualifying criteria, provided those institutions maintain a leverage ratio above 7%. If the ratio falls to 7% or below, the institution must comply with the risk-based capital framework for that quarter. The extended grace period is capped: Institutions may use it for up to four consecutive quarters, subject to a limit of eight quarters in the prior five years.

Expected impact

According to the rule, the agencies expect more institutions to adopt the simplified framework. In addition, the agencies estimate that approximately 300 more institutions will adopt the CBLR framework, bringing the total number of community banks using the CBLR framework to more than 2,000.

The agencies also estimate the lower requirement could give current CBLR participants capacity to expand balance sheets by about $64 billion, or 8.1% of participating community banks’ assets, potentially supporting additional lending, although it’s unknown whether banks will use that capacity fully.

The final rule is effective July 1, 2026.