ICBA and other groups expressed support for banking regulators’ continued work to reexamine and repropose a revised Basel III Endgame rule.
Details: In a letter to the FDIC, Federal Reserve, and OCC, ICBA and the other groups:
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Said this effort provides an opportunity to improve mortgage market stability and housing affordability while encouraging greater bank participation in the mortgage market.
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Expressed support for regulatory capital requirements that are appropriately calibrated to the risk posed.
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Offered aligned perspectives on the capital rule changes that will best support housing finance markets.
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Urged the agencies to move expeditiously to notice and comment.
Fed Focus: Fed Vice Chair for Supervision Michelle Bowman last week said the agency continues working on changes to help community banks lend to households and businesses, including changes to the Community Bank Leverage Ratio.
Background: The CBLR simplifies regulatory capital requirements for community banks that choose to adopt it, replacing risk-based capital ratios with a relatively simple leverage ratio. The CBLR is available for eligible banks with assets below $10 billion, and approximately 40% of qualifying banks have opted in to the CBLR framework.
Proposal: The federal banking regulators in November issued a proposed rule to reduce the CBLR from 9% to 8%, as long advocated by ICBA. The proposal would also extend the length of time that covered institutions can remain in the CBLR framework while not meeting all of the framework’s qualifying criteria from two quarters to four quarters, subject to a limit of eight quarters in any five-year period.
Recent ICBA Advocacy:
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ICBA and 45 state banking associations this month said they strongly support the federal banking agencies’ proposal to recalibrate the CBLR and adjust the grace period.
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ICBA has advocated setting the CBLR at 8%, the lowest level permitted by law, since the ratio was proposed and adopted in 2019.
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ICBA supports Rep. Young Kim’s (R-Calif.) House Financial Services Committee-passed Community Bank LIFT Act (H.R. 5276), which would lower the CBLR to a range of 6%-8% and authorize its use by banks with up to $15 billion in assets.