US bank regulators lower community bank leverage ratio to 8%
Community banks must meet an 8% leverage ratio to use the simplified capital framework
Change
The FDIC, Federal Reserve Board and OCC finalized a rule lowering the community bank leverage ratio from 9% to 8% and extending the temporary noncompliance grace period from two quarters to four quarters, effective 2026-07-01.
Why it matters
The rule changes the entry threshold for community banks that want to use the simplified leverage-ratio capital framework instead of calculating and reporting risk-based capital ratios. It also gives qualifying banks a longer grace period when they temporarily fall below the framework’s requirements.
Implications
- — Community banks opting into the simplified capital framework must meet the new 8% leverage-ratio threshold from 2026-07-01 — banks below that level remain outside the framework.
- — Community bank finance and compliance teams must update capital monitoring for the four-quarter grace period — temporary breaches must be tracked against the extended compliance window.
Who is affected
- — Community banks using or considering the simplified leverage-ratio framework
- — Community bank finance and compliance teams
- — Community bank boards overseeing capital adequacy
What to watch
- — Effective: 2026-07-01 — 8% leverage-ratio threshold and four-quarter grace period take effect.