On April 6, 2020, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System (collectively, the “federal banking agencies”) announced the issuance of two interim final rules to provide temporary relief to community banks.  The federal banking agencies acted to implement Section 4012 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which requires the federal banking agencies to temporarily lower the community bank leverage ratio (“CBLR”) to eight percent (8%).

The two rules will modify the CBLR framework so that:

• beginning in the second quarter 2020 and until the end of the year, a qualifying community bank that has a leverage ratio of eight percent (8%) or greater and meets certain other criteria may elect to use the CBLR framework; and

• qualifying community banks will have until January 1, 2022, before the CBLR is re-established at nine percent (9%).

These interim final rules apply to qualifying community banks with less than $10 billion in total consolidated assets that meet other prudential criteria and choose to opt into the CBLR framework.

In a joint press release, the federal banking agencies stated that the temporary relief “will allow community banking organizations to focus on supporting lending to creditworthy households and businesses given the recent strains on the U.S. economy caused by the coronavirus.”

Further information about the newly issued rules is available here.