HR5276-119

What This Bill Does

This bill loosens and reviews the community bank leverage ratio framework. It raises the asset ceiling for a qualifying community bank from $10 billion to $15 billion and lowers the community bank leverage ratio range from 8 to 10 percent to 6 to 8 percent. The practical effect is that more community banks can qualify for the simplified leverage-ratio framework and can do so at a lower capital ratio.

The bill also directs the Federal Reserve Board, OCC, and FDIC to review the community bank leverage ratio framework with the goal of encouraging additional qualifying community banks to opt in. The agencies must focus on smaller banks and on reducing regulatory compliance burden through simpler rules. Within 150 days, they must report to the House Financial Services Committee and Senate Banking Committee on the numerator and denominator, asset classes and exposures, qualifying-bank definition and criteria, opt-in and opt-out procedures, grace period, and any statutory changes needed. The agencies then must propose rules within 180 days after the report and finalize implementing rules within one year.

Who Benefits and How

Community banks under $15 billion in assets benefit because more institutions can use the simplified leverage-ratio framework instead of risk-weighted capital requirements. Smaller community banks benefit from a required agency review focused on compliance burden relief. Bank compliance officers benefit if opt-in, opt-out, grace-period, and calculation rules become simpler to apply. Community bank investors benefit if lower capital-ratio thresholds free balance-sheet capacity. Borrowers served by qualifying community banks may benefit from expanded lending capacity if banks choose the simplified framework.

Who Bears the Burden and How

Federal Reserve Board staff, OCC staff, and FDIC staff must conduct the review, write a congressional report within 150 days, propose rules, and finalize regulations within one year. Bank supervisors must monitor a larger group of institutions using a simpler leverage-ratio framework. House Financial Services Committee and Senate Banking Committee staff must evaluate agency findings and recommendations. Consumer and financial-stability advocates bear oversight burden because lower capital thresholds could reduce loss buffers at qualifying community banks.

Key Provisions

• Raises the qualifying community bank asset cap from $10 billion to $15 billion.
• Lowers the community bank leverage ratio range from 8 to 10 percent to 6 to 8 percent.
• Requires the Federal Reserve Board, OCC, and FDIC to review how to increase opt-in use by qualifying community banks.
• Requires a congressional report within 150 days on calculations, criteria, procedures, grace periods, and statutory recommendations.
• Directs the banking agencies to propose rules within 180 days after the report and finalize rules within one year.