Regulators propose simplified capital rule, relief for appraisal requirements

Regulators are proposing simplified measures of capital adequacy for community banks. The community bank leverage ratio (CBLR) would provide regulatory relief to community banks of under $10 billion in assets by creating an option to calculate a simple on-balance sheet leverage ratio to measure capital adequacy.

The CBLR would be calculated as the ratio of tangible equity divided by average total consolidated assets. A bank that opts into the CBLR and has a CBLR greater than 9 percent, would not be subject to other capital and leverage requirements, and would be considered to have met the well-capitalized ratio requirements under the prompt corrective action framework and the generally applicable capital requirements.

Regulators also are proposing to raise the threshold for residential real estate transactions requiring an appraisal to $400,000. The current threshold is $250,000. The proposal, issued by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, is expected to provide burden relief from the appraisal requirements without posing a threat to the safety and soundness of financial institutions. The Federal Reserve helped to develop the proposal and is expected to join the proposed rulemaking soon.

Rather than requiring an appraisal, the proposal would require residential real estate transactions exempted by the threshold to obtain an evaluation that would provide an estimate of the market value of real estate but could be less burdensome than appraisals because they do not require preparation by a state licensed or certified appraiser.  

Both proposals are published in the Federal Register as notices of proposed rulemaking and are accepting comments for 60 days.

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