Regulatory Capital Rule: Transition for the Community Bank Leverage Ratio Framework, 22930-22939 [2020-07448]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION
• FEDERAL RESERVE SYSTEM
• Department of Treasury
• Office of the Comptroller of the Currency

[Federal Register Volume 85, Number 79 (Thursday, April 23, 2020)]
[Rules and Regulations]
[Pages 22930-22939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07448]


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DEPARTMENT OF TREASURY

Office of the Comptroller of the Currency

12 CFR Part 3

[Docket ID OCC-2020-0017]
RIN 1557-AE89

FEDERAL RESERVE SYSTEM

12 CFR Part 217

[Regulation Q; Docket No. R-1711]
RIN 7100-AF85

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 324

RIN 3064-AF47


Regulatory Capital Rule: Transition for the Community Bank 
Leverage Ratio Framework

AGENCY: Office of the Comptroller of the Currency, Treasury; the Board 
of Governors of the Federal Reserve System; and the Federal Deposit 
Insurance Corporation.

ACTION: Interim final rule; request for comment.

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SUMMARY: This interim final rule provides a graduated transition to a 
community bank leverage ratio requirement of 9 percent from the 
temporary 8-percent community bank leverage ratio requirement 
(transition interim final rule). When the requirements in the 
transition interim final rule become applicable, the community bank 
leverage ratio will be 8 percent beginning in the second quarter of 
calendar year 2020, 8.5 percent through calendar year 2021, and 9 
percent thereafter. The transition interim final rule also maintains a 
two-quarter grace period for a qualifying community banking 
organization whose leverage ratio falls no more than 1 percentage point 
below the applicable community bank leverage ratio requirement. The 
Office of the Comptroller of the Currency, the Board of Governors of 
the Federal Reserve System, and the Federal Deposit Insurance 
Corporation (together, the agencies) issued concurrently an interim 
final rule that established an 8-percent community bank leverage ratio, 
as mandated under the Coronavirus Aid, Relief, and Economic Security 
Act. The agencies are issuing the transition interim final rule to 
provide community banking organizations with sufficient time and 
clarity to meet the 9 percent leverage ratio requirement under the 
community bank leverage ratio framework while they also focus on 
supporting lending to creditworthy households and businesses given the 
recent strains on the U.S. economy caused by the coronavirus disease 
emergency.

DATES: The interim final rule is effective April 23, 2020. Comments on 
the interim final rule must be received no later than June 8, 2020.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to all of the agencies. Commenters are encouraged to use the 
title ``Regulatory Capital Rule: Transition for the Community Bank 
Leverage Ratio Framework'' to facilitate the organization and 
distribution of comments among the agencies. Commenters are also 
encouraged to identify the number of the specific question for comment 
to which they are responding. Comments should be directed to:
    OCC: You may submit comments to the OCC by any of the methods set 
forth below. Commenters are encouraged to submit comments through the 
Federal eRulemaking Portal or email, if possible. Please use the title 
``Regulatory Capital Rule: Transition for the Community Bank Leverage 
Ratio Framework'' to facilitate the organization and distribution of 
the comments. You may submit comments by any of the following methods:
    Federal eRulemaking Portal--``Regulations.gov Classic or 
Regulations.gov Beta'':
    Regulations.gov Classic: Go to https://www.regulations.gov/. Enter 
``Docket ID OCC-2020-0017'' in the Search Box and click ``Search.'' 
Click on ``Comment Now'' to submit public comments. For help with 
submitting effective comments please click on ``View Commenter's 
Checklist.'' Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting public comments.
    Regulations.gov Beta: Go to https://beta.regulations.gov/ or click 
``Visit New Regulations.gov Site'' from the Regulations.gov Classic 
homepage. Enter ``Docket ID OCC-2020-0017'' in the Search Box and click 
``Search.'' Public comments can be submitted via the ``Comment'' box 
below the displayed document information or by clicking on the document 
title and then clicking the ``Comment'' box on the top-left side of the 
screen. For help with submitting effective comments please click on 
``Commenter's Checklist.'' For assistance with the Regulations.gov Beta 
site, please call (877) 378-5457 (toll free) or (703) 454-9859 Monday-
Friday, 9 a.m.-5 p.m. ET or email [email protected].
     Email: [email protected].
     Mail: Chief Counsel's Office, Office of the Comptroller of 
the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2020-0017'' in your comment. In general, the OCC will 
enter all comments received into the docket and publish the comments on 
the Regulations.gov website without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not include any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically--Regulations.gov Classic 
or Regulations.gov Beta:
    Regulations.gov Classic: Go to https://www.regulations.gov/. Enter 
``Docket ID OCC-2020-0017'' in the Search box and click ``Search.'' 
Click on ``Open Docket Folder'' on the right side of the screen. 
Comments and supporting materials can be viewed and filtered by 
clicking on ``View all documents and comments in this docket'' and then 
using the filtering

[[Page 22931]]

tools on the left side of the screen. Click on the ``Help'' tab on the 
Regulations.gov home page to get information on using Regulations.gov. 
The docket may be viewed after the close of the comment period in the 
same manner as during the comment period.
    Regulations.gov Beta: Go to https://beta.regulations.gov/ or click 
``Visit New Regulations.gov Site'' from the Regulations.gov Classic 
homepage. Enter ``Docket ID OCC-2020-0017'' in the Search Box and click 
``Search.'' Click on the ``Comments'' tab. Comments can be viewed and 
filtered by clicking on the ``Sort By'' drop-down on the right side of 
the screen or the ``Refine Results'' options on the left side of the 
screen. Supporting materials can be viewed by clicking on the 
``Documents'' tab and filtered by clicking on the ``Sort By'' drop-down 
on the right side of the screen or the ``Refine Results'' options on 
the left side of the screen. For assistance with the Regulations.gov 
Beta site, please call (877) 378-5457 (toll free) or (703) 454-9859 
Monday-Friday, 9 a.m.-5 p.m. ET or email 
[email protected].
    The docket may be viewed after the close of the comment period in 
the same manner as during the comment period.
    Board: You may submit comments, identified by Docket No. R-1711 and 
RIN 7100-AF85, by any of the following methods:
     Agency website: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Email: [email protected]. Include docket 
and RIN numbers in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.
    All public comments will be made available on the Board's website 
at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons or to remove sensitive 
personally identifiable information at the commenter's request. Public 
comments may also be viewed electronically or in paper form in Room 
146, 1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m. 
and 5:00 p.m. on weekdays. For security reasons, the Board requires 
that visitors make an appointment to inspect comments. You may do so by 
calling (202) 452-3684.
    FDIC: You may submit comments, identified by RIN 3064-AF47, by any 
of the following methods:
     Agency website: https://www.FDIC.gov/regulations/laws/Federal/. Follow the instructions for submitting comments on the Agency 
website.
     Email: [email protected]. Include the RIN 3064-AF47 in the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street NW, Washington, DC 20429.
     Hand Delivery/Courier: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street NW, Building 
(located on F Street) on business days between 7:00 a.m. and 5:00 p.m.
    Instructions: Comments submitted must include ``FDIC'' and ``RIN 
3064-AF47.'' Comments received will be posted without change to https://www.FDIC.gov/regulations/laws/Federal/, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT:
    OCC: Margot Schwadron, Director, or Benjamin Pegg, Risk Expert, 
Capital and Regulatory Policy, (202) 649-6370; Carl Kaminski, Special 
Counsel, or Daniel Perez, Senior Attorney, Chief Counsel's Office, 
(202) 649-5490, for persons who are deaf or hearing impaired, TTY, 
(202) 649-5597, Office of the Comptroller of the Currency, 400 7th 
Street SW, Washington, DC 20219.
    Board: Constance M. Horsley, Deputy Associate Director, (202) 452-
5239; Elizabeth MacDonald, Manager, (202) 872-7526; Christopher Appel, 
Senior Financial Institution Policy Analyst II, (202) 973-6862; or 
Brendan Rowan, Senior Financial Institution Policy Analyst I, (202) 
475-6685, Division of Supervision and Regulation; or Benjamin W. 
McDonough, Assistant General Counsel, (202) 452-2036; Mark Buresh, 
Senior Counsel, (202) 452-2877; Andrew Hartlage, Counsel, (202) 452-
6483; or Jonah Kind, Senior Attorney, (202) 452-2045, Legal Division, 
Board of Governors of the Federal Reserve System, 20th Street and 
Constitution Avenue NW, Washington, DC 20551. Users of 
Telecommunication Device for the Deaf (TDD) only, call (202) 263-4869.
    FDIC: Bobby R. Bean, Associate Director, [email protected]; Benedetto 
Bosco, Chief, Capital Policy Section, [email protected]; Noah Cuttler, 
Senior Policy Analyst, [email protected]; [email protected]; 
Capital Markets Branch, Division of Risk Management Supervision, (202) 
898-6888; or Michael Phillips, Counsel, [email protected]; Catherine 
Wood, Counsel, [email protected]; Supervision and Legislation Branch, 
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street 
NW, Washington, DC 20429. For the hearing impaired only, 
Telecommunication Device for the Deaf (TDD), (800) 925-4618.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background on the Community Bank Leverage Ratio Framework
II. Statutory Interim Final Rule
III. Transition Interim Final Rule
IV. Effective Date of the Transition Interim Final Rule
V. Administrative Law Matters
    A. Administrative Procedure Act
    B. Congressional Review Act
    C. Paperwork Reduction Act
    D. Regulatory Flexibility Act
    E. Riegle Community Development and Regulatory Improvement Act 
of 1994
    F. Use of Plain Language
    G. Unfunded Mandates Act

I. Background on the Community Bank Leverage Ratio Framework

    The community bank leverage ratio framework provides a simple 
measure of capital adequacy for community banking organizations that 
meet certain qualifying criteria. The community bank leverage ratio 
framework implements section 201 of the Economic Growth, Regulatory 
Relief, and Consumer Protection Act (EGRRCPA), which requires the 
Office of the Comptroller of the Currency (OCC), the Board of Governors 
of the Federal Reserve System (Board), and the Federal Deposit 
Insurance Corporation (FDIC) (collectively, the agencies) to establish 
a community bank leverage ratio of not less than 8 percent and not more 
than 10 percent for a qualifying community banking organization.\1\ 
Under section 201(c) of EGRRCPA, a qualifying community banking 
organization whose leverage ratio exceeds the community

[[Page 22932]]

bank leverage ratio, as established by the agencies, shall be 
considered to have met the generally applicable risk-based and leverage 
capital requirements in the capital rule (generally applicable rule), 
any other applicable capital or leverage requirements, and, if 
applicable, the ``well capitalized'' ratio requirements for purposes of 
section 38 of the Federal Deposit Insurance Act. Section 201(b) of 
EGRRCPA also requires the agencies to establish procedures for the 
treatment of a qualifying community banking organization whose leverage 
ratio falls below the community bank leverage ratio requirement as 
established by the agencies.
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    \1\ Public Law 115-174, 132 Stat. 1296, 1306-07 (2018) (codified 
at 12 U.S.C. 5371 note). The authorizing statues use the term 
``qualifying community bank,'' whereas the regulation implementing 
the statues uses the term ``qualifying community banking 
organization.'' The terms generally have the same meaning. Section 
201(a)(3) of EGRRCPA provides that a qualifying community banking 
organization is a depository institution or depository institution 
holding company with total consolidated assets of less than $10 
billion that satisfies such other factors, based on the banking 
organization's risk profile, that the agencies determine are 
appropriate. This determination shall be based on consideration of 
off-balance sheet exposures, trading assets and liabilities, total 
notional derivatives exposures, and any such factors that the 
agencies determine appropriate.
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    In 2019, the agencies issued a final rule establishing the 
community bank leverage ratio framework, which became effective January 
1, 2020 (2019 final rule).\2\ Under the 2019 final rule, the agencies 
established a community bank leverage ratio of 9 percent using the 
existing leverage ratio. A qualifying community banking organization 
that maintains a leverage ratio of greater than 9 percent and elects to 
use the community bank leverage ratio framework will be considered to 
have satisfied the generally applicable rule and any other applicable 
capital or leverage requirements, and, if applicable, will be 
considered to be well capitalized.\3\
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    \2\ 84 FR 61776 (November 13, 2019).
    \3\ Under existing PCA requirements applicable to insured 
depository institutions, to be considered ``well capitalized'' a 
banking organization must demonstrate that it is not subject to any 
written agreement, order, capital directive, or as applicable, 
prompt corrective action directive, to meet and maintain a specific 
capital level for any capital measure. See 12 CFR 6.4(b)(1)(iv) 
(OCC); 12 CFR 208.43(b)(1)(v) (Board); 12 CFR 324.403(b)(1)(v) 
(FDIC). The same legal requirements continue to apply under the 
community bank leverage ratio framework.
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    Under the 2019 final rule, a qualifying community banking 
organization is any depository institution or depository institution 
holding company that has less than $10 billion in total consolidated 
assets, off-balance sheet exposures (excluding derivatives other than 
sold credit derivatives and unconditionally cancelable commitments) of 
25 percent or less of total consolidated assets, and trading assets and 
liabilities of 5 percent or less of total consolidated assets. The 
banking organization also cannot be an advanced approaches banking 
organization.\4\
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    \4\ A banking organization is an advanced approaches banking 
organization if it (1) is a global systemically important bank 
holding company, (2) is a Category II banking organization, (3) has 
elected to be an advanced approached banking organization, (4) is a 
subsidiary of a company that is an advanced approaches banking 
organization, or (5) has a subsidiary depository institution that is 
an advanced approaches banking organization. See 12 CFR 3.100 (OCC); 
12 CFR 217.100 (Board); 12 CFR 324.100 (FDIC).
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    In addition, the 2019 final rule established a two-quarter grace 
period during which a qualifying community banking organization that 
temporarily fails to meet any of the qualifying criteria, including the 
greater-than-9-percent leverage ratio requirement, generally would 
still be considered well capitalized so long as the banking 
organization maintains a leverage ratio of greater than 8 percent. A 
banking organization that either fails to meet all the qualifying 
criteria within the grace period or fails to maintain a leverage ratio 
of greater than 8 percent is required to comply with the generally 
applicable rule and file the appropriate regulatory reports.

II. Statutory Interim Final Rule

    On March 27, 2020, the Coronavirus Aid, Relief, and Economic 
Security Act (CARES Act) was signed into law.\5\ Section 4012 of the 
CARES Act directs the agencies to issue an interim final rule that 
provides that, for purposes of section 201 of EGRRCPA, the community 
bank leverage ratio shall be 8 percent and that a qualifying community 
banking organization whose leverage ratio falls below the community 
bank leverage ratio requirement established under the CARES Act shall 
have a reasonable grace period to satisfy that requirement. The interim 
final rule required under section 4012 of the CARES Act is effective 
during the period beginning on the date on which the agencies issue the 
interim final rule and ending on the sooner of the termination date of 
the national emergency concerning the coronavirus disease (COVID-19) 
outbreak declared by the President on March 13, 2020, under the 
National Emergencies Act, or December 31, 2020 (termination date).
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    \5\ Coronavirus Aid, Relief, and Economic Security Act, Public 
Law 116-136, 134 Stat. 281.
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    Accordingly, the agencies issued concurrently an interim final rule 
that implements a temporary 8-percent community bank leverage ratio 
requirement, as mandated under section 4012 of the CARES Act (statutory 
interim final rule). The statutory interim final rule also establishes 
a two-quarter grace period for a qualifying community banking 
organization whose leverage ratio falls below the 8-percent community 
bank leverage ratio requirement. The provisions in this transition 
interim final rule will become effective upon the termination date of 
the statutory interim final rule.

III. Transition Interim Final Rule

    Pursuant to section 201(b) of EGRRCPA, this interim final rule 
(transition interim final rule) provides a graduated transition from 
the temporary 8-percent community bank leverage ratio requirement, as 
mandated under the CARES Act, to the 9-percent community bank leverage 
ratio requirement as established under the 2019 final rule. 
Specifically, the transition interim final rule provides that the 
community bank leverage ratio will be 8 percent in the second quarter 
through fourth quarter of calendar year 2020, 8.5 percent in calendar 
year 2021, and 9 percent thereafter. The transition interim final rule 
also modifies the two-quarter grace period for a qualifying community 
banking organization to take into account the graduated increase in the 
community bank leverage ratio requirement. The transition interim final 
rule does not make any changes to the other qualifying criteria in the 
community bank leverage ratio framework.
    The transition interim final rule extends the 8-percent community 
bank leverage ratio requirement through December 31, 2020, in the event 
the statutory interim final rule terminates before December 31, 2020. 
Thus, even if the statutory interim final rule terminates prior to 
December 31, 2020, the community bank leverage ratio will continue to 
be set at 8 percent for the remainder of 2020. Section 201 of EGRRCPA 
requires a qualifying community banking organization exceed the 
community bank leverage ratio established by the agencies in order to 
be considered to have met the generally applicable rule, any other 
applicable capital or leverage requirements, and, if applicable, the 
``well capitalized'' capital ratio requirements, whereas section 4012 
of the CARES Act requires that a qualifying community banking 
organization meet or exceed an 8 percent community bank leverage ratio 
to be considered the same.
    In the 2019 final rule, the agencies previously adopted a 9-percent 
community bank leverage ratio requirement on the basis that this 
threshold, with complementary qualifying criteria, generally maintains 
the current level of regulatory capital held by qualifying banking 
organizations and supports the agencies' goals of reducing regulatory 
burden while maintaining safety and soundness. The agencies intend for 
the graduated approach under this transition interim final rule to 
provide community banking organizations with sufficient time to meet a 
9-percent

[[Page 22933]]

community bank leverage ratio requirement while they also focus on 
supporting lending to creditworthy households and businesses. This 
latter goal is particularly critical given the recent strains on the 
U.S. economy caused by COVID-19.
    The graduated approach also provides clarity to a qualifying 
community banking organization that is planning to elect to use the 
community bank leverage ratio framework because, under section 4012 of 
the CARES Act, the statutory interim final rule could cease to be 
effective at any time before December 31, 2020. The transition interim 
final rule is consistent with the agencies' authority under section 201 
of EGRRCPA (which mandates a community bank leverage ratio of not less 
than 8 percent and not more than 10 percent).
    Based on reported data as of December 31, 2019, there are 5,258 
banking organizations with less than $10 billion in total consolidated 
assets. The agencies estimate that approximately 95 percent of these 
banking organizations would qualify to use the community bank leverage 
ratio framework under the 8 percent calibration and other qualifying 
criteria. The agencies estimate that approximately 91 percent of such 
banking organizations would qualify to use the community bank leverage 
ratio framework under the 8.5 percent calibration and other qualifying 
criteria.
    Consistent with section 201(c) of EGRRCPA, under the transition 
interim final rule, a qualifying community banking organization that 
temporarily fails to meet any of the qualifying criteria, including the 
applicable community bank leverage ratio requirement, generally would 
still be deemed well capitalized during a two-quarter grace period so 
long as the banking organization maintains a leverage ratio of the 
following: Greater than 7 percent in the second quarter through fourth 
quarter of calendar year 2020, greater than 7.5 percent in calendar 
year 2021, and greater than 8 percent thereafter.\6\ A banking 
organization that fails to meet the qualifying criteria after the end 
of the grace period or reports a leverage ratio of equal to or less 
than 7 percent in the second through fourth quarters of calendar year 
2020, equal to or less than 7.5 percent in calendar year 2021, or equal 
to or less than 8 percent thereafter, will be required to comply 
immediately with the generally applicable rule and file the appropriate 
regulatory reports.\7\
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    \6\ While the statutory interim final rule is in effect, a 
qualifying community banking organization that temporarily fails to 
meet any of the qualifying criteria, including the applicable 
community bank leverage ratio requirement, generally would still be 
deemed well capitalized so long as the banking organization 
maintains a leverage ratio of 7 percent or greater during a two-
quarter grace period. Similarly, while the statutory interim final 
rule is in effect, a banking organization that fails to meet the 
qualifying criteria after the end of the grace period or reports a 
leverage ratio of less than 7 percent must comply with the generally 
applicable rule and file the appropriate regulatory reports.
    \7\ In addition, consistent with the 2019 final rule, a banking 
organization that ceases to satisfy the qualifying criteria as a 
result of a business combination also will receive no grace period 
and will be required to comply with the generally applicable rule.
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    The agencies adopted in the 2019 final rule a two-quarter grace 
period with a leverage ratio requirement that is 1 percentage point 
below the community bank leverage ratio on the basis that these 
requirements appropriately mitigate potential volatility in capital and 
associated regulatory reporting requirements based on temporary changes 
in a banking organization's risk profile from quarter to quarter, while 
capturing more permanent changes in a banking organization's risk 
profile. The agencies continue to believe that this approach is 
appropriate and provides a qualifying community banking organization 
whose leverage ratio falls below the applicable community bank leverage 
ratio requirement a reasonable amount of time to once again satisfy 
that requirement. This approach is consistent with section 201(b)(2) of 
EGRRCPA, which directs the agencies to establish procedures for the 
treatment of a qualifying community bank whose leverage ratio falls 
below the community bank leverage ratio requirement as established by 
the agencies.

     Table 1--Schedule of Community Bank Leverage Ratio Requirements
------------------------------------------------------------------------
                                                         Leverage ratio
                                       Community bank       under the
            Calendar year              leverage ratio   applicable grace
                                          (percent)     period (percent)
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2020................................               8                 7
2021................................               8.5               7.5
2022................................               9                 8
------------------------------------------------------------------------

    The agencies are maintaining the 2019 final rule's requirement that 
the grace period will begin as of the end of the calendar quarter in 
which the electing banking organization ceases to satisfy any of the 
qualifying criteria (so long as the banking organization maintains a 
leverage ratio of greater than the requirement for the applicable 
period) and will end after two consecutive calendar quarters. For 
example, if the electing banking organization, which had met all 
qualifying criteria as of March 31, 2020, no longer meets one of the 
qualifying criteria as of May 15, 2020, and still does not meet the 
criteria as of the end of that quarter, the grace period for such a 
banking organization will begin as of the end of the quarter ending 
June 30, 2020. The banking organization may continue to use the 
community bank leverage ratio framework as of September 30, 2020, but 
will need to comply fully with the generally applicable rule (including 
the associated reporting requirements) as of December 31, 2020, unless 
the banking organization once again meets all qualifying criteria by 
that date.
    If an electing banking organization is in the grace period when the 
required community bank leverage ratio increases, the banking 
organization would be subject, as of that change, to both the higher 
community bank leverage ratio requirement and higher grace period 
leverage ratio requirement. For example, if the electing banking 
organization that had met all qualifying criteria as of September 30, 
2020, has a 7.2 percent community bank leverage ratio (but meets all 
the other qualifying criteria) as of the end of December 31, 2020, the 
grace period for such a banking organization will begin as of the end 
of the fourth quarter. The banking organization may continue to use the 
community bank leverage ratio framework as of March 31, 2021, if the 
banking organization has a leverage ratio of greater than 7.5 percent, 
and will need to comply fully with the generally applicable rule 
(including the associated reporting requirements) as of June 30, 2021, 
unless the banking organization has a leverage ratio of greater than 
8.5 percent (and meets all the other qualifying criteria) by that date. 
In this example, if the banking organization has a leverage ratio equal 
to or less than 7.5 percent as of March 31, 2021, it would not be 
eligible to use the community bank leverage ratio framework and would 
be subject immediately to the requirements of the generally applicable 
rule.
    As mentioned above, the grace period for an electing community 
banking organization is limited to two consecutive calendar quarters. 
For example, if the electing banking organization that had met all 
qualifying criteria as of June 30, 2021, has an 8.3 percent community 
bank leverage ratio (but meets all the other qualifying criteria) as of 
the end of September 30, 2021, the grace period for such a

[[Page 22934]]

banking organization will begin as of the end of the third quarter. The 
banking organization may continue to use the community bank leverage 
ratio framework as of December 31, 2021, if the banking organization 
has a leverage ratio of greater than 7.5 percent, and will need to 
comply fully with the generally applicable rule (including the 
associated reporting requirements) as of March 31, 2022, unless the 
banking organization has a leverage ratio of greater than 9.0 percent 
(and meets all the other qualifying criteria) by that date.

IV. Effective Date of the Transition Interim Final Rule

    The transition interim final rule is effective immediately upon 
publication in the Federal Register. Banking organizations are subject 
to the requirements under the transition interim final rule for 
purposes of filing their Call Report or Form FR Y-9C, as applicable, 
beginning in the quarter in which the statutory interim final rule is 
no longer in effect. A banking organization's compliance with capital 
requirements for a quarter prior to the transition interim final rule's 
effective date shall be determined according to the generally 
applicable rule unless the banking organization has filed their Call 
Report Form or FR Y-9C, as applicable, for the prior quarter and has 
indicated that it has elected to use the community bank leverage ratio.
    Question 1: The agencies invite comment on the proposed graduated 
increase under the transition interim final rule. What alternatives, if 
any, should the banking agencies consider to provide sufficient time 
for a banking organization to meet a 9-percent community bank leverage 
ratio requirement and why?

V. Administrative Law Matters

A. Administrative Procedure Act

    The agencies are issuing this transition interim final rule without 
prior notice and the opportunity for public comment and the 30-day 
delayed effective date ordinarily prescribed by the Administrative 
Procedure Act (APA).\8\ Pursuant to section 553(b)(B) of the APA, 
general notice and the opportunity for public comment are not required 
with respect to a rulemaking when an ``agency for good cause finds (and 
incorporates the finding and a brief statement of reasons therefor in 
the rules issued) that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.'' \9\
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    \8\ 5 U.S.C. 553.
    \9\ 5 U.S.C. 553(b)(B).
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    The agencies believe that the public interest is best served by 
implementing the transition interim final rule as soon as possible. As 
discussed above, section 4012 of the CARES Act directs the agencies to 
issue an interim final rule that provides that, for purposes of section 
201 of EGRRCPA, the community bank leverage ratio shall be 8 percent 
and that a qualifying community banking organization whose leverage 
ratio falls below the community bank leverage ratio requirement 
established under the CARES Act shall have a reasonable grace period to 
satisfy that requirement. A qualifying community banking organization 
to which the grace period applies may continue to be treated as a 
qualifying community banking organization and shall be presumed to 
satisfy the capital and leverage requirements described in section 
201(c) of EGRRCPA. The agencies are issuing this interim final rule 
immediately, and concurrently with the interim final rule mandated by 
section 4012 of the CARES Act, in order to provide community banking 
organizations with sufficient time to meet the leverage ratio 
requirement and to provide clarity to a qualifying community banking 
organization that is planning to elect to use the community bank 
leverage ratio framework, because, under section 4012 of the CARES Act, 
the statutory interim final rule could cease to be effective at any 
time before December 31, 2020.
    The APA also requires a 30-day delayed effective date, except for 
(1) substantive rules, which grant or recognize an exemption or relieve 
a restriction; (2) interpretative rules and statements of policy; or 
(3) as otherwise provided by the agency for good cause.\10\ Because the 
rules relieve a restriction, the transition interim final rule is 
exempt from the APA's delayed effective date requirement.\11\ 
Additionally, the agencies find good cause to publish the transition 
interim final rule with an immediate effective date for the same 
reasons set forth above under the discussion of section 553(b)(B) of 
the APA.
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    \10\ 5 U.S.C. 553(d).
    \11\ 5 U.S.C. 553(d)(1).
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    While the agencies believe there is good cause to issue the 
transition interim final rule without advance notice and comment and 
with an immediate effective date as of the date of Federal Register 
publication, the agencies are interested in the views of the public and 
request comment on all aspects of the interim final rule.

B. Congressional Review Act

    For purposes of Congressional Review Act, the OMB makes a 
determination as to whether a final rule constitutes a ``major'' 
rule.\12\ If a rule is deemed a ``major rule'' by the Office of 
Management and Budget (OMB), the Congressional Review Act generally 
provides that the rule may not take effect until at least 60 days 
following its publication.\13\
---------------------------------------------------------------------------

    \12\ 5 U.S.C. 801 et seq.
    \13\ 5 U.S.C. 801(a)(3).
---------------------------------------------------------------------------

    The Congressional Review Act defines a ``major rule'' as any rule 
that the Administrator of the Office of Information and Regulatory 
Affairs of the OMB finds has resulted in or is likely to result in (A) 
an annual effect on the economy of $100,000,000 or more; (B) a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies or geographic regions, or 
(C) significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets.\14\
---------------------------------------------------------------------------

    \14\ 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    For the same reasons set forth above, the agencies are adopting the 
transition interim final rule without the delayed effective date 
generally prescribed under the Congressional Review Act. The delayed 
effective date required by the Congressional Review Act does not apply 
to any rule for which an agency for good cause finds (and incorporates 
the finding and a brief statement of reasons therefor in the rule 
issued) that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.\15\ In light of 
section 4012 of the CARES Act, and the reasons described above for 
immediately providing a transition period to the temporary change 
mandated by section 4012, the agencies believe that delaying the 
effective date of the transition interim final rule would be contrary 
to the public interest.
---------------------------------------------------------------------------

    \15\ 5 U.S.C. 808.
---------------------------------------------------------------------------

    As required by the Congressional Review Act, the agencies will 
submit the transition interim final rule and other appropriate reports 
to Congress and the Government Accountability Office for review.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA) 
states that

[[Page 22935]]

no agency may conduct or sponsor, nor is the respondent required to 
respond to, an information collection unless it displays a currently 
valid OMB control number. The transition interim final rule affects the 
agencies' current information collections for the Call Reports (OCC OMB 
Control No. 1557-0081; Board OMB Control No. 7100-0036; and FDIC OMB 
Control No. 3064-0052). The Board has reviewed the transition interim 
final rule pursuant to authority delegated by the OMB.
    While the transition interim final rule contains no information 
collection requirements, the agencies have determined that there are 
changes that should be made to the Call Reports as a result of this 
rulemaking. Although there may be a substantive change resulting from 
changes to the community bank leverage ratio framework for purposes of 
the Call Reports, the change should be minimal and result in a zero net 
change in hourly burden under the agencies' information collections. 
Submissions will, however, be made by the agencies to OMB. The changes 
to the Call Reports and their related instructions will be addressed in 
a separate Federal Register notice.
    In addition, the Board has temporarily revised the Financial 
Statements for Holding Companies (FR Y-9 reports; OMB No. 7100-0128) to 
accurately reflect aspects of the statutory interim final rule and the 
transition interim final rule. On June 15, 1984, OMB delegated to the 
Board authority under the PRA to approve a temporary revision to a 
collection of information without providing opportunity for public 
comment if the Board determines that a change in an existing collection 
must be instituted quickly and that public participation in the 
approval process would defeat the purpose of the collection or 
substantially interfere with the Board's ability to perform its 
statutory obligation.
    The Board's delegated authority requires that the Board, after 
temporarily approving a collection, publish a notice soliciting public 
comment. Therefore, the Board is inviting comment on a proposal to 
extend each of these information collections for three years, with the 
revisions discussed below.
    The Board invites public comment on the following information 
collections, which are being reviewed under authority delegated by the 
OMB under the PRA. Comments must be submitted on or before June 22, 
2020. Comments are invited on the following:
    a. Whether the collection of information is necessary for the 
proper performance of the Board's functions, including whether the 
information has practical utility;
    b. The accuracy of the Board's estimate of the burden of the 
information collections, including the validity of the methodology and 
assumptions used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    d. Ways to minimize the burden of information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    e. Estimates of capital or startup costs and costs of operation, 
maintenance, and purchase of services to provide information.
    At the end of the comment period, the comments and recommendations 
received will be analyzed to determine the extent to which the Board 
should modify the proposal.
Final Approval Under OMB Delegated Authority of the Temporary Revision 
of, and Solicitation of Comment To Extend for Three Years, With 
Revision, of the Following Information Collection
    Report Title: Financial Statements for Holding Companies.
    Agency form number: FR Y-9C, FR Y-9LP, FR Y-9SP, FR Y-9ES, and FR 
Y-9CS.
    OMB control number: 7100-0128.
    Effective Date: June 30, 2020.
    Frequency: Quarterly, semiannually, and annually.
    Respondents: Bank holding companies, savings and loan holding 
companies,\16\ securities holding companies, and U.S. intermediate 
holding companies (collectively, HCs).
---------------------------------------------------------------------------

    \16\ An SLHC must file one or more of the FR Y-9 series of 
reports unless it is: (1) A grandfathered unitary SLHC with 
primarily commercial assets and thrifts that make up less than 5 
percent of its consolidated assets; or (2) a SLHC that primarily 
holds insurance-related assets and does not otherwise submit 
financial reports with the SEC pursuant to section 13 or 15(d) of 
the Securities Exchange Act of 1934.
---------------------------------------------------------------------------

    Estimated number of respondents: FR Y-9C (non-advanced approaches 
community bank leverage ratio (CBLR) HCs with less than $5 billion in 
total assets): 71; FR Y-9C (non-advanced approaches CBLR HCs with $5 
billion or more in total assets): 35; FR Y-9C (non-advanced approaches, 
non CBLR, HCs with less than $5 billion in total assets): 84; FR Y-9C 
(non-advanced approaches, non CBLR HCs, with $5 billion or more in 
total assets): 154; FR Y-9C (advanced approaches HCs): 19; FR Y-9LP: 
434; FR Y-9SP: 3,960; FR Y-9ES: 83; FR Y-9CS: 236.
    Estimated average hours per response:
Reporting
    FR Y-9C (non-advanced approaches CBLR HCs with less than $5 billion 
in total assets): 29.14 hours; FR Y-9C (non-advanced approaches CBLR 
HCs with $5 billion or more in total assets): 35.11; FR Y-9C (non-
advanced approaches, non CBLR HCs, with less than $5 billion in total 
assets): 40.98; FR Y-9C (non-advanced approaches, non CBLR, HCs with $5 
billion or more in total assets): 46.95 hours; FR Y-9C (advanced 
approaches HCs): 48.59 hours; FR Y-9LP: 5.27 hours; FR Y-9SP: 5.40 
hours; FR Y-9ES: 0.50 hours; FR Y-9CS: 0.50 hours.
Recordkeeping
    FR Y-9C (non-advanced approaches HCs with less than $5 billion in 
total assets), FR Y-9C (non-advanced approaches HCs with $5 billion or 
more in total assets), FR Y-9C (advanced approaches HCs), and FR Y-9LP: 
1.00 hour; FR Y-9SP, FR Y-9ES, and FR Y-9CS: 0.50 hours.

    Estimated annual burden hours:
Reporting
    FR Y-9C (non-advanced approaches CBLR HCs with less than $5 billion 
in total assets): 8,276 hours; FR Y-9C (non-advanced approaches CBLR 
HCs with $5 billion or more in total assets): 4,915; FR Y-9C (non-
advanced approaches non CBLR HCs with less than $5 billion in total 
assets): 13,769; FR Y-9C (non-advanced approaches non CBLR HCs with $5 
billion or more in total assets): 28,921 hours; FR Y-9C (advanced 
approaches HCs): 3,693 hours; FR Y-9LP: 9,149 hours; FR Y-9SP: 42,768 
hours; FR Y-9ES: 42 hours; FR Y-9CS: 472 hours.
Recordkeeping
    FR Y-9C (non-advanced approaches HCs with less than $5 billion in 
total assets): 620 hours; FR Y-9C (non-advanced approaches HCs with $5 
billion or more in total assets): 756 hours; FR Y-9C (advanced 
approaches HCs): 76 hours; FR Y-9LP: 1,736 hours; FR Y-9SP: 3,960 
hours; FR Y-9ES: 42 hours; FR Y-9CS: 472 hours.
    General description of report: The FR Y-9 family of reporting forms 
continues to be the primary source of financial data on holding 
companies that examiners rely on in the intervals between on-site 
inspections. Financial data from these reporting forms are used to 
detect emerging financial problems, to review performance and conduct 
pre-inspection analysis, to monitor and evaluate capital adequacy, to 
evaluate holding company mergers and acquisitions, and to analyze a 
holding

[[Page 22936]]

company's overall financial condition to ensure the safety and 
soundness of its operations. The FR Y-9C, FR Y-9LP, and FR Y-9SP serve 
as standardized financial statements for the consolidated holding 
company. The Board requires HCs to provide standardized financial 
statements to fulfill the Board's statutory obligation to supervise 
these organizations. The FR Y-9ES is a financial statement for HCs that 
are Employee Stock Ownership Plans. The Board uses the voluntary FR Y-
9CS (a free-form supplement) to collect additional information deemed 
to be critical and needed in an expedited manner. HCs file the FR Y-9C 
on a quarterly basis, the FR Y-9LP quarterly, the FR Y-9SP 
semiannually, the FR Y-9ES annually, and the FR Y-9CS on a schedule 
that is determined when this supplement is used.
    Legal authorization and confidentiality: The Board has the 
authority to impose the reporting and recordkeeping requirements 
associated with the Y-9 family of reports on bank holding companies 
(``BHCs'') pursuant to section 5 of the Bank Holding Company Act (``BHC 
Act''), (12 U.S.C. 1844); on savings and loan holding companies 
pursuant to section 10(b)(2) and (3) of the Home Owners' Loan Act, (12 
U.S.C. 1467a(b)(2) and (3)); on U.S. intermediate holding companies 
(``U.S. IHCs'') pursuant to section 5 of the BHC Act, (12 U.S.C 1844), 
as well as pursuant to sections 102(a)(1) and 165 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act''), 
(12 U.S.C. 511(a)(1) and 5365); and on securities holding companies 
pursuant to section 618 of the Dodd-Frank Act, (12 U.S.C. 
1850a(c)(1)(A)). The FR Y-9 series of reports, and the recordkeeping 
requirements set forth in the respective instructions to each report, 
are mandatory, except for the FR Y-9CS, which is voluntary.
    With respect to the FR Y-9C, Schedule HI's memoranda item 7(g), 
Schedule HC-P's item 7(a), and Schedule HC-P's item 7(b) are considered 
confidential commercial and financial information under exemption 4 of 
the Freedom of Information Act (``FOIA''), (5 U.S.C. 552(b)(4)), as is 
Schedule HC's memorandum item 2.b. for both the FR Y-9C and FR Y-9SP 
reports.
    Such treatment is appropriate under exemption 4 of the Freedom of 
Information Act (FOIA) (5 U.S.C. 552(b)(4)) because these data items 
reflect commercial and financial information that is both customarily 
and actually treated as private by the submitter, and which the Board 
has previously assured submitters will be treated as confidential. It 
also appears that disclosing these data items may reveal confidential 
examination and supervisory information, and in such instances, this 
information would also be withheld pursuant to exemption 8 of the FOIA 
(5 U.S.C. 552(b)(8)), which protects information related to the 
supervision or examination of a regulated financial institution.
    In addition, for both the FR Y-9C report and the FR Y-9SP report, 
Schedule HC's memorandum item 2.b., the name and email address of the 
external auditing firm's engagement partner, is considered confidential 
commercial information and protected by exemption 4 of the FOIA (5 
U.S.C. 552(b)(4)) if the identity of the engagement partner is treated 
as private information by HCs. The Board has assured respondents that 
this information will be treated as confidential since the collection 
of this data item was proposed in 2004.
    Aside from the data items described above, the remaining data items 
on the FR Y-9 report and the FR Y-9SP report are generally not accorded 
confidential treatment. The data items collected on FR Y-9LP, FR Y-9ES, 
and FR Y-9CS reports, are also generally not accorded confidential 
treatment. As provided in the Board's Rules Regarding Availability of 
Information (12 CFR part 261), however, a respondent may request 
confidential treatment for any data items the respondent believes 
should be withheld pursuant to a FOIA exemption. The Board will review 
any such request to determine if confidential treatment is appropriate, 
and will inform the respondent if the request for confidential 
treatment has been denied.
    To the extent that the instructions, to the FR Y-9C, FR Y-9LP, FR 
Y-9SP, and FR Y-9ES reports each respectively direct a financial 
institution to retain the workpapers and related materials used in 
preparation of each report, such material would only be obtained by the 
Board as part of the examination or supervision of the financial 
institution. Accordingly, such information may be considered 
confidential pursuant to exemption 8 of the FOIA (5 U.S.C. 552(b)(8)). 
In addition, the financial institution's workpapers and related 
materials may also be protected by exemption 4 of the FOIA, to the 
extent such financial information is treated as confidential by the 
respondent (5 U.S.C. 552(b)(4)).
    Current Actions: The Board has temporarily revised the instructions 
to the FR Y-9C report to accurately reflect the transition provision as 
modified by the statutory interim final rule and the transition interim 
final rule. Specifically, the Board has temporarily revised the FR Y-9C 
general instructions on the FR Y-9C, Schedule HC-R, Part I, to reflect 
a HC's eligibility to opt-in to the CBLR framework to 8 percent, and 
allow a two-quarter grace period for an HC that falls below the 8-
percent CBLR requirement. In addition, the revised general instructions 
provide a transition for the to be 8 percent in the second through 
fourth quarters of calendar year 2020, 8.5 percent in calendar year 
2021, and 9 percent in calendar year 2022. HCs report their leverage 
ratio in Schedule HC-R, Part I, line item 31. A qualifying HC can opt 
into CBLR by electing in HC-R, Part I, line item 31.a. and must report 
the qualifying criteria for using the CBLR framework in lines 32 
through 3.
    The Board has determined that the revisions to the FR Y-9C 
described above must be instituted quickly and that public 
participation in the approval process would defeat the purpose of the 
collection of information, as delaying the revisions would result in 
the collection of inaccurate information, and would interfere with the 
Board's ability to perform its statutory duties. The Board also invites 
comment to extend the FR Y-9 for three years, with the revisions 
described above.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \17\ requires an agency to 
consider whether the rules it proposes will have a significant economic 
impact on a substantial number of small entities.\18\ The RFA applies 
only to rules for which an agency publishes a general notice of 
proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed 
previously, consistent with section 553(b)(B) of the APA, the agencies 
have determined for good cause that general notice and opportunity for 
public comment is impracticable and contrary to the public's interest, 
and therefore the agencies are not issuing a notice of proposed 
rulemaking. Accordingly, the agencies have concluded that the RFA's 
requirements relating to initial and final regulatory flexibility 
analysis do not apply. Nevertheless, the agencies are interested in 
receiving feedback on ways that they could reduce any potential burden 
of the transition interim final rule on small entities.
---------------------------------------------------------------------------

    \17\ 5 U.S.C. 601 et seq.
    \18\ Under regulations issued by the Small Business 
Administration, a small entity includes a depository institution, 
bank holding company, or savings and loan holding company with total 
assets of $600 million or less and trust companies with total assets 
of $41.5 million or less. See 13 CFR 121.201.

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[[Page 22937]]

E. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\19\ in determining the effective 
date and administrative compliance requirements for new regulations 
that impose additional reporting, disclosure, or other requirements on 
insured depository institutions (IDIs), each Federal banking agency 
must consider, consistent with the principle of safety and soundness 
and the public interest, any administrative burdens that such 
regulations would place on depository institutions, including small 
depository institutions, and customers of depository institutions, as 
well as the benefits of such regulations. In addition, section 302(b) 
of RCDRIA requires new regulations and amendments to regulations that 
impose additional reporting, disclosures, or other new requirements on 
IDIs generally to take effect on the first day of a calendar quarter 
that begins on or after the date on which the regulations are published 
in final form, with certain exceptions, including for good cause.\20\ 
For the reasons described above, the agencies find good cause exists 
under section 302 of RCDRIA to publish the transition interim final 
rule with an immediate effective date.
---------------------------------------------------------------------------

    \19\ 12 U.S.C. 4802(a).
    \20\ 12 U.S.C. 4802.
---------------------------------------------------------------------------

F. Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \21\ requires the Federal 
banking agencies to use ``plain language'' in all proposed and final 
rules published after January 1, 2000. In light of this requirement, 
the agencies have sought to present the transition interim final rule 
in a simple and straightforward manner. The agencies invite comments on 
whether there are additional steps they could take to make the rule 
easier to understand. For example:
---------------------------------------------------------------------------

    \21\ 12 U.S.C. 4809.
---------------------------------------------------------------------------

     Have we organized the material to suit your needs? If not, 
how could this material be better organized?
     Are the requirements in the regulation clearly stated? If 
not, how could the regulation be more clearly stated?
     Does the regulation contain language or jargon that is not 
clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes to the format would make the regulation 
easier to understand?
     What else could we do to make the regulation easier to 
understand?

G. Unfunded Mandates Act

    As a general matter, the Unfunded Mandates Act of 1995 (UMRA), 2 
U.S.C. 1531 et seq., requires the preparation of a budgetary impact 
statement before promulgating a rule that includes a Federal mandate 
that may result in the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. However, the UMRA does not apply to 
final rules for which a general notice of proposed rulemaking was not 
published. See 2 U.S.C. 1532(a). Therefore, because the OCC has found 
good cause to dispense with notice and comment for the transition 
interim final rule, the OCC concludes that the requirements of UMRA do 
not apply to this transition interim final rule.

List of Subjects

12 CFR Part 3

    Administrative practice and procedure, Capital, Federal savings 
associations, National banks, Risk.

12 CFR Part 217

    Administrative practice and procedure, Banks, Banking, Capital, 
Federal Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Risk, Securities.

12 CFR Part 324

    Administrative practice and procedure, Banks, banking, Reporting 
and recordkeeping requirements, Savings associations, State non-member 
banks.

DEPARTMENT OF THE TREASURY

12 CFR Chapter I

Office of the Comptroller of the Currency

Authority and Issuance

    For the reasons set forth in the preamble, the OCC amends chapter I 
of Title 12 of the Code of Federal Regulations as follows:

PART 3--CAPITAL ADEQUACY STANDARDS

0
1. The authority citation for part 3 continues to read as follows:

    Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B); 
and Pub. L. 116-136, 134 Stat. 281.


0
2. Amend Sec.  3.303 by adding paragraph (d) to read as follows:


Sec.  3.303  Temporary changes to the community bank leverage ratio 
framework.

* * * * *
    (d) Upon the termination of the requirements in paragraphs (a) and 
(b) of this section as provided in paragraph (c) of this section, a 
qualifying community banking organization, as defined in Sec.  
3.12(a)(2), is subject to the following:
    (1) Through December 31, 2020:
    (i) A national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association and 
that meets all the criteria to be a qualifying community banking 
organization under Sec.  3.12(a)(2) but for Sec.  3.12(a)(2)(i) is a 
qualifying banking organization if it has a leverage ratio greater than 
8 percent.
    (ii) Notwithstanding Sec.  3.12(a)(1), a qualifying community 
banking organization that has made an election to use the community 
bank leverage ratio framework under Sec.  3.12(a)(3) shall be 
considered to have met the minimum capital requirements under Sec.  
3.10, the capital ratio requirements for the well capitalized capital 
category under Sec.  6.4(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 8 
percent.
    (iii) Notwithstanding Sec.  3.12(c)(6) and subject to Sec.  
3.12(c)(5), a qualifying community banking organization that has a 
leverage ratio of greater than 7 percent has the grace period described 
in Sec.  3.12(c)(1) through (4). A national bank or Federal savings 
association that has a leverage ratio of 7 percent or less does not 
have a grace period and must comply with the minimum capital 
requirements under Sec.  3.10(a)(1) and must report the required 
capital measures under Sec.  3.10(a)(1) for the quarter in which it 
reports a leverage ratio of 7 percent or less.
    (2) From January 1, 2021, through December 31, 2021:
    (i) A national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association and 
that meets all the criteria to be a qualifying community banking 
organization under Sec.  3.12(a)(2) but for Sec.  3.12(a)(2)(i) is a 
qualifying banking organization if it has a leverage ratio greater than 
8.5 percent.
    (ii) Notwithstanding Sec.  3.12(a)(1), a qualifying community 
banking organization that has made an election to use the community 
bank leverage ratio framework under Sec.  3.12(a)(3) shall be 
considered to have met the minimum capital requirements under Sec.  
3.10, the capital ratio requirements for the well capitalized capital 
category under

[[Page 22938]]

Sec.  6.4(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 8.5 percent.
    (iii) Notwithstanding Sec.  3.12(c)(6) and subject to Sec.  
3.12(c)(5), a qualifying community banking organization that has a 
leverage ratio of greater than 7.5 percent has the grace period 
described in Sec.  3.12(c)(1) through (4). A national bank or Federal 
savings association that has a leverage ratio of 7.5 percent or less 
does not have a grace period and must comply with the minimum capital 
requirements under Sec.  3.10(a)(1) and must report the required 
capital measures under Sec.  3.10(a)(1) for the quarter in which it 
reports a leverage ratio of 7.5 percent or less.
* * * * *

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

12 CFR Chapter II

Authority and Issuance

    For the reasons stated in the joint preamble, the Board of 
Governors of the Federal Reserve System amends 12 CFR chapter II as 
follows:

PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND 
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)

0
3. The authority citation for part 217 continues to read as follows:

    Authority: 12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a, 
1818, 1828, 1831n, 1831o, 1831p-1, 1831w, 1835, 1844(b), 1851, 3904, 
3906-3909, 4808, 5365, 5368, 5371, 5371 note, and sec. 4012, Pub. L. 
116-136, 134 Stat. 281.

Subpart G--Transition Provisions

0
4. Amend Sec.  217.304 by adding paragraph (d) to read as follows:


Sec.  217.304  Temporary changes to the community bank leverage ratio 
framework.

* * * * *
    (d) Upon the termination of the requirements in paragraphs (a) and 
(b) of this section as provided in paragraph (c) of this section, a 
Board-regulated institution is subject to the following:
    (1) Through December 31, 2020:
    (i) A Board-regulated institution that is not an advanced 
approaches Board-regulated institution and that meets all the criteria 
to be a qualifying community banking organization under Sec.  
217.12(a)(2) but for Sec.  217.12(a)(2)(i) is a qualifying banking 
organization if it has a leverage ratio greater than 8 percent.
    (ii) Notwithstanding Sec.  217.12(a)(1), a qualifying community 
banking organization that has made an election to use the community 
bank leverage ratio framework under Sec.  217.12(a)(3) shall be 
considered to have met the minimum capital requirements under Sec.  
217.10, the capital ratio requirements for the well capitalized capital 
category under Sec.  208.43(b)(1) of this chapter, if applicable, and 
any other capital or leverage requirements to which the qualifying 
community banking organization is subject, if it has a leverage ratio 
greater than 8 percent.
    (iii) Notwithstanding Sec.  217.12(c)(6) and subject to Sec.  
217.12(c)(5), a Board-regulated institution that has a leverage ratio 
of greater than 7 percent has the grace period described in Sec.  
217.12(c)(1) through (4). A Board-regulated institution that has a 
leverage ratio of 7 percent or less does not have a grace period and 
must comply with the minimum capital requirements under Sec.  
217.10(a)(1) and must report the required capital measures under Sec.  
217.10(a)(1) for the quarter in which it reports a leverage ratio of 7 
percent or less.
    (2) From January 1, 2021, through December 31, 2021:
    (i) A Board-regulated institution that is not an advanced 
approaches Board-regulated institution and that meets all the criteria 
to be a qualifying community banking organization under Sec.  
217.12(a)(2) but for Sec.  217.12(a)(2)(i) is a qualifying banking 
organization if it has a leverage ratio greater than 8.5 percent.
    (ii) Notwithstanding Sec.  217.12(a)(1), a qualifying community 
banking organization that has made an election to use the community 
bank leverage ratio framework under Sec.  217.12(a)(3) shall be 
considered to have met the minimum capital requirements under Sec.  
217.10, the capital ratio requirements for the well capitalized capital 
category under Sec.  208.43(b)(1) of this chapter, if applicable, and 
any other capital or leverage requirements to which the qualifying 
community banking organization is subject, if it has a leverage ratio 
greater than 8.5 percent.
    (iii) Notwithstanding Sec.  217.12(c)(6) and subject to Sec.  
217.12(c)(5), a Board-regulated institution that has a leverage ratio 
of greater than 7.5 percent has the grace period described in Sec.  
217.12(c)(1) through (4). A Board-regulated institution that has a 
leverage ratio of 7.5 percent or less does not have a grace period and 
must comply with the minimum capital requirements under Sec.  
217.10(a)(1) and must report the required capital measures under Sec.  
217.10(a)(1) for the quarter in which it reports a leverage ratio of 
7.5 percent or less.

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Chapter III

Authority and Issuance

    For the reasons stated in the preamble, the Federal Deposit 
Insurance Corporation amends chapter III of Title 12, Code of Federal 
Regulations as follows:

PART 324--CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS

0
5. The authority citation for part 324 is revised to read as follows:

    Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233, 
105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 
105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 
2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, 
as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 
note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note); 
Pub. L. 115-174; Pub. L. 116-136, 134 Stat. 281.


0
6. Amend Sec.  324.303 by adding paragraph (d) to read as follows:


Sec.  324.303   Temporary changes to the community bank leverage ratio 
framework.

* * * * *
    (d) Upon the termination of the requirements in paragraphs (a) and 
(b) of this section as provided in paragraph (c) of this section, a 
qualifying community banking organization, as defined in Sec.  
324.12(a)(2), is subject to the following:
    (1) Through December 31, 2020:
    (i) An FDIC-supervised institution that is not an advanced 
approaches FDIC-supervised institution and that meets all the criteria 
to be a qualifying community banking organization under Sec.  
324.12(a)(2) but for Sec.  324.12(a)(2)(i) is a qualifying banking 
organization if it has a leverage ratio greater than 8 percent.
    (ii) Notwithstanding Sec.  324.12(a)(1), a qualifying community 
banking organization that has made an election to use the community 
bank leverage ratio framework under Sec.  324.12(a)(3) shall be 
considered to have met the minimum capital requirements under Sec.  
324.10, the capital ratio requirements for the well capitalized capital 
category under Sec.  324.403(b)(1) of this part, and any other capital 
or leverage requirements to which the qualifying community banking 
organization is subject, if it has a leverage ratio greater than 8 
percent.

[[Page 22939]]

    (iii) Notwithstanding Sec.  324.12(c)(6) and subject to Sec.  
324.12(c)(5), a qualifying community banking organization that has a 
leverage ratio of greater than 7 percent has the grace period described 
in Sec.  324.12(c)(1) through (4). An FDIC-supervised institution that 
has a leverage ratio of 7 percent or less does not have a grace period 
and must comply with the minimum capital requirements under Sec.  
324.10(a)(1) and must report the required capital measures under Sec.  
324.10(a)(1) for the quarter in which it reports a leverage ratio of 7 
percent or less.
    (2) From January 1, 2021, through December 31, 2021:
    (i) An FDIC-supervised institution that is not an advanced 
approaches FDIC-supervised institution and that meets all the criteria 
to be a qualifying community banking organization under Sec.  
324.12(a)(2) but for Sec.  324.12(a)(2)(i) is a qualifying banking 
organization if it has a leverage ratio greater than 8.5 percent.
    (ii) Notwithstanding Sec.  324.12(a)(1), a qualifying community 
banking organization that has made an election to use the community 
bank leverage ratio framework under Sec.  324.12(a)(3) shall be 
considered to have met the minimum capital requirements under Sec.  
324.10, the capital ratio requirements for the well capitalized capital 
category under Sec.  324.403(b)(1) of this part, and any other capital 
or leverage requirements to which the qualifying community banking 
organization is subject, if it has a leverage ratio greater than 8.5 
percent.
    (iii) Notwithstanding Sec.  324.12(c)(6) and subject to Sec.  
3247.12(c)(5), a qualifying community banking organization that has a 
leverage ratio of greater than 7.5 percent has the grace period 
described in Sec.  324.12(c)(1) through (4). An FDIC-supervised 
institution that has a leverage ratio of 7.5 percent or less does not 
have a grace period and must comply with the minimum capital 
requirements under Sec.  324.10(a)(1) and must report the required 
capital measures under Sec.  324.10(a)(1) for the quarter in which it 
reports a leverage ratio of 7.5 percent or less.

Brian P. Brooks,
First Deputy Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System.
Ann Misback,
Secretary of the Board.

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on or about April 3, 2020.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2020-07448 Filed 4-22-20; 8:45 am]
 BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P