Community Banks Support Proposed Cut to Leverage Ratio

The Mortgage Bankers Association has voiced support for a proposed cut to community banks' leverage ratio, as outlined in the Federal Register. The proposal seeks to extend from two to four quarters the period that banks can remain in the Community Bank Leverage Ratio framework without meeting all qualifying criteria.

Comments on the proposed rule are due by January 30, 2026. The MBA noted in its advocacy update that it has long supported the Community Bank Leverage Ratio, arguing it provides regulatory relief by eliminating the need for banks to calculate and report risk-based capital ratios.

In a comment letter from October, the MBA recommended lowering the ratio to eight percent and extending the grace period for banks to regain compliance or exit the framework. The Community Bank Leverage Ratio, adopted in 2019, allows banks that opt in to avoid the complexity of reporting risk-based capital ratios.

According to the agencies, the proposed adjustments aim to give community banks enhanced options to manage their regulatory obligations while continuing to serve their communities.