Agencies adjust credit concentration calculations

Federal regulators said they are jointly adjusting their calculation for credit concentration ratios used in the supervisory process. The adjustment responds to changes in capital information available after the implementation of the Community Bank Leverage Ratio rule.

Effective today, examiners will calculate credit concentration ratios using tier 1 capital plus the appropriate allowance for loan and lease losses or the allowance for credit losses attributed to loans and leases (as applicable) for the denominator.

Qualifying community banking organizations that elect the CBLR framework are not required to report tier 2 capital, which historically has been a part of the denominator used in calculating credit concentration ratios for supervisory processes. Read more from the agencies.