Community Banks Get Easier Leverage Ratio Rules from July 2026
Published Date: 4/29/2026
Rule
Summary
Starting July 1, 2026, small community banks can meet a lower leverage ratio of 8% instead of 9%, making it easier to qualify for a simpler capital rule. Plus, banks now have more time—up to four straight quarters instead of two—to stay in this easier framework even if they don’t meet all the rules, helping them manage their money better without rushing. This change helps community banks save time and money while keeping things safe and sound.
Analyzed Economic Effects
5 provisions identified: 2 benefits, 3 costs, 0 mixed.
CBLR lowered from 9% to 8%
Starting July 1, 2026, the community bank leverage ratio (CBLR) requirement is reduced from 9 percent to 8 percent. The agencies estimate an additional 477 community banking organizations would qualify and that about 95 percent of community banking organizations (those with less than $10 billion in assets) would be eligible at the 8 percent level.
Grace period extended to four quarters
Beginning July 1, 2026, a community banking organization that has opted into the CBLR framework and then fails to meet one or more qualifying criteria may remain in the CBLR framework for up to four consecutive quarters. Use of the four-quarter grace period is limited so a bank cannot use the grace period in the current quarter if it used the grace period for eight or more of the previous twenty quarters.
7% minimum to remain in grace period
Under the final rule, a bank may use the grace period only if it maintains a leverage ratio above 7 percent; if its leverage ratio is 7 percent or less, it must comply fully with the risk-based capital framework for the quarter in which it reports 7 percent or less. This 7 percent threshold is the floor for staying in the CBLR grace period.
Lookback and merger rules for grace use
The rule limits grace period usage by counting prior quarters: a bank that used the grace period for eight of the prior twenty quarters cannot use it in the current quarter. For mergers, the surviving bank calculates the lookback using the surviving entity's historical usage; quarters of grace usage by an acquired bank are disregarded for the surviving entity's limit.
$10 billion asset cap retained
The agencies are retaining the statutory eligibility cutoff that limits CBLR participation to banking organizations with total consolidated assets of less than $10 billion. Banks with $10 billion or more in consolidated assets remain ineligible for the CBLR framework.
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Key Dates
Department and Agencies
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