On July 1, 2026, the revised Community Bank Leverage Ratio (CBLR) framework took effect. The federal banking agencies—the Federal Reserve, FDIC, and OCC—finalized the changes in April 2026 to encourage broader adoption of this simpler capital framework while preserving safety-and-soundness standards.
The framework remains optional and is still limited to qualifying community banking organizations with less than $10 billion in average total consolidated assets. For institutions in that size range, the 2026 revisions deliver meaningful incremental relief without rewriting the core eligibility rules or the fundamental simplicity of the approach.
What Actually Changed
Two primary modifications drive the practical impact:
- Lower leverage ratio requirement — The required ratio dropped from greater than 9 percent to greater than 8 percent (tier 1 capital divided by average total consolidated assets).
- Longer, but capped, grace period — Banks that temporarily fail one or more qualifying criteria (while still holding a leverage ratio above 7 percent) now receive up to four quarters to regain full compliance or transition back to the risk-based capital framework. Usage is limited: an institution that has spent eight or more of the previous twenty quarters in a grace period may not use the grace period in the current quarter. Falling to 7 percent or below still forces immediate exit from the CBLR framework.
These adjustments were calibrated to the statutory floor set by the Economic Growth, Regulatory Relief, and Consumer Protection Act and were adopted without change from the late-2025 proposal.
What Did Not Change for Banks Under $10 Billion
- The $10 billion asset ceiling remains the hard size limit.
- Off-balance-sheet exposures must still be 25 percent or less of total consolidated assets (with the same exclusions for most derivatives and unconditionally cancelable commitments).
- Trading assets plus trading liabilities remain capped at 5 percent or less of total consolidated assets.
- GSIBs, Category II banking organizations, and their subsidiaries stay ineligible.
- The calculation itself is unchanged: tier 1 capital over average total consolidated assets. Because the framework has no total-capital requirement, electing banks continue to avoid tier 2 calculations and related deductions.
- Opt-in and opt-out mechanics are the same—simply complete the relevant Call Report or FR Y-9C line items (or provide risk-based ratios to the primary regulator between reporting periods). Banks can still re-enter later if they again meet the criteria.
In short, the framework is still a pure leverage-ratio alternative that eliminates the need to calculate and report risk-based capital ratios. The revisions simply make that alternative available to a larger slice of the under-$10 billion population and give participating banks a longer runway when conditions temporarily slip.
Practical Implications for Banks Under $10 Billion
The lower 8 percent threshold expands the pool of eligible institutions. Agencies estimated that the change would bring roughly 475 additional community banking organizations into eligibility, raising the share of under-$10 billion institutions that qualify to approximately 95 percent. Banks that previously hovered just below the old 9 percent mark now have a clearer path to opt in and shed the operational cost of risk-based reporting.
For banks already in (or newly entering) the framework, the four-quarter grace period reduces the risk of an abrupt, forced return to the more complex risk-based regime after a temporary dip in the leverage ratio or a short-term spike in off-balance-sheet activity. The eight-in-twenty-quarter usage limit prevents serial reliance on the grace period, but the net effect is still greater operational flexibility.
Because the CBLR requirement remains significantly higher than the generally applicable leverage ratio, the agencies view the framework as continuing to support strong capital levels. The additional headroom created by the lower threshold can, in practice, free balance-sheet capacity that community banks can deploy into local lending.
Remaining Considerations
The off-balance-sheet and trading-asset thresholds continue to require monitoring and can still pose calculation friction for some institutions. Banks contemplating growth through acquisition should remember that a merger that pushes them out of the qualifying criteria generally eliminates the grace period in the quarter the transaction closes.
Overall, the July 2026 revisions do not transform the CBLR framework into something fundamentally different for banks under $10 billion. They lower the entry barrier, lengthen the recovery window, and modestly expand the set of institutions that can benefit from simplified capital reporting—while leaving the size limit, the core risk constraints, and the optional nature of the regime intact. For many community banks, that combination of modest but targeted relief is precisely the point.
