The Congressional Research Service ("CRS") provided an overview and analysis of bank data relating to the Community Bank Leverage Ratio ("CBLR").
The CBLR was mandated by Congress under Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 to give banks that (i) hold less than $10 billion in assets and (ii) meet specific risk-profile criteria the choice to opt-out of meeting more complex risk-weighted requirements.
Among other findings, the CRS:
- "estimated that of the 5,352 U.S. depositories, 5,078 (95% of all banks) would have been CBLR compliant provided their capital exceeds the 9% threshold set by regulators. Of those, about 4,440 (83% of all banks) currently exceed that threshold;"
- calculated that if regulators set the threshold as low as 8%, "about 515 additional qualifying banks (10% of all banks) would have exceeded the threshold, and thus been eligible for exemption from risk-based ratio compliance"; and
- found that on average, nonqualifying banks were larger, had greater off-balance-sheet exposures, and "held about a quarter less capital than qualifying banks, as measured by risk-based ratios."
Originally published 18 May 2020
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