(a) Community
bank leverage ratio framework.
(1) Notwithstanding any other provision
in this part, a qualifying community banking organization that has
made an election to use the community bank leverage ratio framework
under paragraph (a)(3) of this section shall be considered to have
met the minimum capital requirements under section 217.10, the capital
ratio requirements for the well capitalized capital category under
section 208.43(b)(1) of this chapter, and any other capital or leverage
requirements to which the qualifying community banking organization
is subject, if it has a leverage ratio greater than 9 percent.
(2) For purposes of this section,
a qualifying community banking organization means a Board-regulated
institution that is not an advanced approaches Board-regulated institution
and that satisfies all of the following criteria:
(i) Has a leverage ratio of greater
than 9 percent;
(ii) Has total
consolidated assets of less than $10 billion, calculated in accordance
with the reporting instructions to the Call Report or to Form FR Y-9C,
as applicable, as of the end of the most recent calendar quarter;
(iii) Has off-balance sheet exposures
of 25 percent or less of its total consolidated assets as of the end
of the most recent calendar quarter, calculated as the sum of the
notional amounts of the exposures listed in paragraphs (a)(2)(iii)(A)
through (I) of this section, divided by total consolidated assets,
each as of the end of the most recent calendar quarter:
(A) The unused portion of commitments
(except for unconditionally cancellable commitments);
(B) Self-liquidating, trade-related contingent
items that arise from the movement of goods;
(C) Transaction-related contingent items, including performance bonds,
bid bonds, warranties, and performance standby letters of credit;
(D) Sold credit protection through guarantees
and credit derivatives;
(E) Credit-enhancing
representations and warranties;
(F)
Securities lent and borrowed, calculated in accordance with the reporting
instructions to the Call Report or to Form FR Y-9C, as applicable;
(G) Financial standby letters of credit;
(H) Forward agreements that are not derivative
contracts; and
(I) Off-balance sheet
securitization exposures; and
(iv) Has total trading assets and trading
liabilities, calculated in accordance with the reporting instructions
to the Call Report or to Form FR Y-9C, as applicable, of 5 percent
or less of the Board-regulated institution’s total consolidated assets,
each as of the end of the most recent calendar quarter.
(3) (i) A qualifying
community banking organization may elect to use the community bank
leverage ratio framework if it makes an opt-in election under this
paragraph (a)(3).
(ii) For purposes
of this paragraph (a)(3), a qualifying community banking organization
makes an election to use the community bank leverage ratio framework
by completing the applicable reporting requirements of its Call Report
or of its Form FR Y-9C, as applicable.
(iii) (A) A qualifying community banking
organization that has elected to use the community bank leverage ratio
framework may opt out of the community bank leverage ratio framework
by completing the applicable risk-based and leverage ratio reporting
requirements necessary to demonstrate compliance with section 217.10(a)(1)
in its Call Report or its Form FR Y-9C, as applicable, or by otherwise
providing the information to the Board.
(B) A qualifying community banking organization that opts out of
the community bank leverage ratio framework pursuant to paragraph
(a)(3)(iii)(A) of this section must comply with section 217.10(a)(1)
immediately.
(4) Temporary
relief for 2020 and 2021.
(i) Except as provided in paragraph
(a)(4)(ii) of this section, from December 2, 2020, through December
31, 2021, for purposes of determining whether a Board-regulated institution
satisfies the criterion in paragraph (a)(2)(ii) of this section, the
total consolidated assets of a Board-regulated institution for purposes
of paragraph (a)(2)(ii) of this section shall be determined based
on the lesser of:
(A)
The total consolidated assets reported by the institution in the Call
Report, FR Y-9C, or FR Y-9SP, as applicable, as of December 31, 2019;
and
(B) The total consolidated assets
calculated in accordance with the reporting instructions to the Call
Report or to Form FR Y-9C, as applicable, as of the end of the most
recent calendar quarter.
(ii) The relief provided under this
paragraph (a)(4)(i) does not apply to a Board-regulated institution
if the Board determines that permitting the Board-regulated institution
to determine its assets in accordance with that paragraph would not
be commensurate with the risk profile of the Board-regulated institution.
When making this determination, the Board will consider all relevant
factors, including the extent of asset growth of the Board-regulated
institution since December 31, 2019; the causes of such growth, including
whether growth occurred as a result of mergers or acquisitions; whether
such growth is likely to be temporary or permanent; whether the Board-regulated
institution has become involved in any additional activities since
December 31, 2019; the asset size of any parent companies; and the
type of assets held by the Board-regulated institution. In making
a determination pursuant to this paragraph (a)(4)(ii), the Board will
apply notice and response procedures in the same manner and to the
same extent as the notice and response procedures in 12 CFR 263.202.
(b) Calculation
of the leverage ratio. A qualifying community banking organization’s
leverage ratio is calculated in accordance with section 217.10(b)(4),
except that a qualifying community banking organization is not required
to:
(1) Make adjustments
and deductions from tier 2 capital for purposes of section 217.22(c);
or
(2) Calculate and deduct from
tier 1 capital an amount resulting from insufficient tier 2 capital
under section 217.22(f).
(c) Treatment when ceasing to meet the qualifying community banking organization
requirements.
(1)
Except as provided in paragraphs (c)(5) and (6) of this section, if
an Board-regulated institution ceases to meet the definition of a
qualifying community banking organization, the Board-regulated institution
has two reporting periods under its Call Report or Form FR Y-9C, as
applicable (grace period) either to satisfy the requirements to be
a qualifying community banking organization or to comply with section
217.10(a)(1) and report the required capital measures under section
217.10(a)(1) on its Call Report or its Form FR Y-9C, as applicable.
(2) The grace period begins as of
the end of the calendar quarter in which the Board- regulated institution
ceases to satisfy the criteria to be a qualifying community banking
organization provided in paragraph (a)(2) of this section. The grace
period ends on the last day of the second consecutive calendar quarter
following the beginning of the grace period.
(3) During the grace period, the Board-regulated
institution continues to be treated as a qualifying community banking
organization for the purpose of this part and must continue calculating
and reporting its leverage ratio under this section unless the Board-regulated
institution has opted out of using the community bank leverage ratio
framework under paragraph (a)(3) of this section.
(4) During the grace period, the qualifying
community banking organization continues to be considered to have
met the minimum capital requirements under section 217.10(a)(1), the
capital ratio requirements for the well capitalized capital category
under section 208.43(b)(1)(i)(A) through (D) of this chapter, and
any other capital or leverage requirements to which the qualifying
community banking organization is subject, and must continue calculating
and reporting its leverage ratio under this section.
(5) Notwithstanding paragraphs (c)(1) through
(4) of this section, a Board-regulated institution that no longer
meets the definition of a qualifying community banking organization
as a result of a merger or acquisition has no grace period and immediately
ceases to be a qualifying community banking organization. Such a Board-regulated
institution must comply with the minimum capital requirements under
section 217.10(a)(1) and must report the required capital measures
under section 217.10(a)(1) for the quarter in which it ceases to be
a qualifying community banking organization.
(6) Notwithstanding paragraphs (c)(1) through
(4) of this section, a Board-regulated institution that has a leverage
ratio of 8 percent or less does not have a grace period and must comply
with the minimum capital requirements under section 217.10(a)(1) and
must report the required capital measures under section 217.10(a)(1)
for the quarter in which it reports a leverage ratio of 8 percent
or less.
