By Bailee Shipman, Financial Institutions Advisor

Effective July 1, 2026, the Community Bank Leverage Ratio (CBLR) will be reduced from 9% to 8%. This change — along with an extended grace period — is designed to expand eligibility for community banks while maintaining strong capital standards and support lending in their communities.

What It Means for Your Institution

The updated framework makes the CBLR framework more practical for a broader group of community banks. Lowering the threshold and extending the compliance grace period provides greater latitude in capital management and can be particularly beneficial for those institutions experiencing growth or short-term capital pressure.

Key Updates

  • Election requirement: Banks must elect the CBLR framework when completing their Call Report.
  • Extended grace period: The grace period has been extended from two quarters to four quarters, giving banks more time to return to compliance if they fall below the required threshold.
  • Grace period limits: The grace period may be used for no more than eight of the prior 20 quarters.

Who Should Consider the CBLR Election?

Banks that meet the following criteria can opt into CBLR and avoid calculating and reporting traditional risk-based capital ratios:

  • Have less than $10 billion in total assets
  • Maintain a CBLR of at least 8%
  • Maintain total off-balance-sheet exposures of 25% or less of total assets
  • Maintain trading assets and trading liabilities of 5% or less of total assets
  • Maintain limited derivatives exposure (generally minimal or non-complex derivatives positions)

For banks that meet these criteria, the CBLR framework offers several advantages:

Potential Benefits for Qualifying Banks

  • Simplified capital framework with reduced calculation complexity
  • Reduced reporting burden and improved operational complexity
  • Greater flexibility for balance sheet growth
  • Enhanced lending capacity through the lower capital threshold, supporting growth and community investment

“The decision to elect CBLR should go beyond eligibility and also consider forward-looking strategies,” said Sandy Sporleder, Pinion’s lead financial institutions advisor. “Banks should take into account their growth plans, capital planning, operational efficiency, and risk profile.”

While the rule takes effect July 1, now is the time to proactively assess if the revised framework aligns with your strategy. Whether you’re evaluating eligibility, modeling impact, or determining the best path forward, Pinion can help guide you through the process. Contact an advisor today to discuss your needs and what’s top of mind.

To read the full version of the CBLR Ruling, visit: Final Rule on Revisions to the Community Bank Leverage Ratio (CBLR) Framework | FDIC.gov