Government Lowers Bank Capital Rules: Small Lenders Get Breathing Room
Published Date: 12/1/2025
Proposed Rule
Summary
The government wants to make it easier for small banks to stay in a special low-risk capital program by lowering the required leverage ratio from 9% to 8%. They’re also giving banks more time—up to four quarters instead of two—to fix any issues without losing their spot. Banks and bank holding companies should weigh in by January 30, 2026, as these changes could save them money and reduce red tape.
Analyzed Economic Effects
4 provisions identified: 3 benefits, 1 costs, 0 mixed.
CBLR Threshold Lowered to 8%
The agencies propose lowering the Community Bank Leverage Ratio (CBLR) requirement from 9 percent to 8 percent for qualifying depository institutions and depository institution holding companies. This change would expand eligibility (the agencies estimate an additional 475 community banking organizations would qualify, bringing total qualifying organizations to about 95 percent) and is meant to reduce regulatory burden for institutions with less than $10 billion in total consolidated assets that meet other qualifying criteria.
Grace Period Extended to Four Quarters
The proposal would extend the grace period for institutions that opt into the CBLR framework from two reporting quarters to four reporting quarters. While using the four-quarter grace period, a banking organization must maintain a leverage ratio above 7 percent to continue using the CBLR framework.
Could Free Up Lending Capacity Locally
The agencies state that lowering the CBLR to 8 percent could provide additional balance-sheet capacity for community banking organizations that participate in the framework, which may support more lending to agricultural and commercial borrowers and to rural communities. The proposal links the recalibration to potential increases in lending activity by community banks.
Cap on Grace-Period Usage: 8 of 20 Quarters
Under the proposal, a qualifying community banking organization may use the grace period for up to four consecutive quarters, but it would not be permitted to have used the grace period for more than eight of the prior twenty quarters (eight quarters in any five-year period). If a bank has used the grace period for eight of the prior twenty quarters and then again ceases to meet qualifying criteria, it must immediately comply with minimum risk-based capital requirements.
Your PRIA Score
Personalized for You
How does this regulation affect your finances?
Sign up for a PRIA Policy Scan to see your personalized alignment score for this federal register document and every other regulation we track. We analyze your financial profile against policy provisions to show you exactly what matters to your wallet.
Key Dates
Department and Agencies
Related Federal Register Documents
2025-21626 — Regulatory Capital Rule: Modifications to the Enhanced Supplementary Leverage Ratio Standards for U.S. Global Systemically Important Bank Holding Companies and Their Subsidiary Depository Institutions; Total Loss-Absorbing Capacity and Long-Term Debt Requirements for U.S. Global Systemically Important Bank Holding Companies
Big U.S. banks that are super important to the economy are getting new rules to keep them safer and stronger. These changes tweak how much money they must keep on hand and how they handle long-term debt, helping prevent financial trouble. The new rules kick in soon and could affect how these banks manage billions in assets and debt.
2026-05960 — Regulatory Capital Rules: Regulatory Capital and Standardized Approach for Risk-Weighted Assets
Big banks and community banks are getting new rules to better measure the risks in their loans and investments. The changes update how banks count certain assets and income when figuring out their safety net money, called regulatory capital. These updates aim to make banks safer and smarter with their money, with some rules kicking in soon and affecting how much capital banks need to hold.
2026-05958 — Proposed Agency Information Collection Activities; Comment Request
The Treasury, Federal Reserve, and FDIC want your thoughts on updating rules about how banks report their money and risks. These changes affect banks of all sizes, especially those with big trading activities, and aim to keep things clear and fair for the next three years. You’ve got until May 26, 2026, to share your ideas—no extra costs for banks, just smarter paperwork!
2025-22481 — Proposed Agency Information Collection Activities; Comment Request
The Treasury, Federal Reserve, and FDIC are updating important bank reports called Call Reports, which big banks use to share financial info. These changes, starting June 30, 2026, tweak how banks report certain capital rules to keep things clear and fair. If you have thoughts, you’ve got until January 12, 2026, to speak up—no cost to respond, but your input matters!
2025-06748 — Temporary Exceptions to FIRREA Appraisal Requirements in Los Angeles County as Affected by California Wildfires and Straight-Line Winds
If you’re dealing with real estate loans or sales in Los Angeles County after the recent wildfires and strong winds, good news! The usual strict property appraisal rules are temporarily relaxed to help speed things up. These special rules last until January 8, 2028, giving banks and buyers more flexibility during recovery.
2026-05959 — Regulatory Capital Rule: Category I and II Banking Organizations, Banking Organizations With Significant Trading Activity, and Optional Adoption for Other Banking Organizations
Big banks and those with lots of trading will see new rules to make sure they keep enough money safe and sound. These changes make the rules clearer, fairer, and better at handling risks, helping banks lend money steadily even when the economy wobbles. Banks and holding companies should get ready to comment by June 18, 2026, as these updates could affect how they manage their money.
Previous / Next Documents
Previous: 2025-21620 — Build America: Eliminating Barriers to Wireless Deployments
The FCC wants to make it easier and faster to build wireless towers and other equipment by cutting through red tape that slows things down. This change will help companies and communities get better wireless service without unnecessary delays or extra costs. People and businesses should share their thoughts by December 31, 2025, to help shape these new rules.
Next: 2025-21670 — Drawbridge Operation Regulation; Passaic River, Between the City of Newark and Town of Kearny, NJ
The Coast Guard wants to update how the Point No Point Railroad Bridge between Newark and Kearny, NJ, operates. Instead of needing a four-hour heads-up, the bridge will open right away when a boat signals, thanks to remote control from Mount Laurel, NJ. This change helps boaters and trains move more smoothly without extra waiting, and folks can share their thoughts by December 31, 2025.
Take It Personal
Get Your Personalized Policy View
Start a Free Government Policy Watch to see how policy affects your household, then upgrade to PRIA Full Coverage for year-round monitoring.
Already have an account? Sign in