US regulators to offer capital relief to community banks

Federal banking regulators are preparing to introduce a proposal to lower the community bank leverage ratio from 9% to 8%, the minimum level permitted by law. The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency are expected to jointly release the plan and seek public comment.

The initiative is intended to ease capital requirements for small banks and encourage increased lending in local communities. Officials believe that lowering the threshold could allow more community banks to adopt the framework while expanding their balance sheet capacity to better support local economies.

Federal Reserve Vice Chair for Supervision Michelle Bowman has emphasized that revisiting the community bank leverage ratio could provide regulatory relief and align more closely with congressional intent. Treasury Secretary Scott Bessent recently noted that Bowman has long supported this change and that the effort is nearing completion.

Comptroller of the Currency Jonathan Gould has also stated that regulators plan to focus first on community banks as they tailor capital rules under the 2018 Economic Growth Act. He added that the OCC is working to update its examination practices for community banks, adjusting its approach to reflect the lower risks associated with their activities.