Community Bank Leverage Ratio (CBLR) Framework Changes Effective July 1, 2026

Big news for community banks: the regulatory landscape just shifted in a way that could open doors for growth, flexibility, and simpler capital compliance.

 On April 23, 2026, federal banking agencies finalized revisions to the CBLR framework, see FIL-19-2026.  These changes encourage broader adoption of the CBLR framework, while maintaining strong capital standards and enabling banks that opt into the CBLR framework additional capacity to increase lending in their communities.

 What’s Changing?

1.  Reduction in the Leverage Ratio Requirement

• The CBLR requirement has been reduced from 9% to 8%, allowing more community banks to qualify for the CBLR framework. For qualifying banks, the CBLR framework offers a simplified approach: maintain a sufficient leverage ratio, and you’re considered “well capitalized” for prompt corrective action purposes.

  More Breathing Room with an Extended Grace Period

• Previously, banks that fell out of compliance had just two quarters to get back on track. Now, that window has been extended to four quarters provided the bank maintains a leverage ratio above 7%. A bank whose leverage ratio falls below 7% is required to fully comply with the risk-based capital framework requirements for the quarter in which it reports a leverage ratio below 7%, which means completion of Schedule RC-R Part II.

 Banks can only use the grace period for up to eight quarters within the previous twenty quarters. The grace period is a temporary buffer period that allows qualifying banks to continue using the CBLR framework even if the bank temporarily falls out of compliance with the qualifying criteria. That limitation prevents repeated reliance on the buffer and reinforces that the CBLR is intended for consistently well-capitalized institutions, not those operating near the edge long-term.

 Who Qualifies?

As of July 1, 2026 to opt into the CBLR framework, a bank must meet the following requirements:

 Have less than $10 billion in total consolidated assets

1. Maintain a leverage ratio of 8%
2. Maintain trading activity of 5% or less of total consolidated assets
3. Off-balance sheet exposures are limited to 25% of total consolidated assets
4. Not be an advanced approaches institution

Encouraging Growth Without Sacrificing Strength
One of the biggest takeaways from these changes is the intent behind them. Regulators are encouraging broader adoption of the CBLR framework, giving community banks more capacity to lend and support their local economies. At the same time, the framework continues to uphold strong capital standards, ensuring safety and soundness remain front and center in financial institutions.

Mark Your Calendar
These changes take effect on July 1, 2026, giving institutions time to evaluate whether opting into, or staying within, the CBLR framework makes strategic sense.

Bottom Line

The revised CBLR framework is a clear signal, regulators are listening to community banks and making adjustments that promote both simplicity and growth.  If your institution is already opted into the CBLR framework, continue with business as usual. If your institution has been on the fence about CBLR, now is the time to take another look. And if you decide to opt in, be sure to document at the Board level.