Community Banks to Face Increasing Problems from Deposits, Study Finds

Coronavirus Relief Bill Lowers Community Bank Leverage Ratio, Delays CECL for All Banks

The final version of the $2.2 trillion coronavirus relief bill passed by the U.S. Senate would make life easier for community banks this year. The bill temporarily lowers the community bank leverage ratio to 8 percent and postpones the new accounting standards known as CECL.

The 880-page Coronavirus Aid, Relief, and Economic Security (CARES) Act must still be approved by the House and signed by the president.

The bill also loosens requirements for troubled debt restructurings and loan modifications for borrowers affected by the coronavirus economic crisis.

The community bank relief provisions would last until the president terminates the national emergency or on December 31, 2020.

No bank will have to comply with any provision of the current expected credit loss standard during that time. FDIC Chair Jelena McWilliams had previously urged the Financial Accounting Standards Board to postpone CECL during the crisis.

Community banks have lobbied to lower the community bank leverage ratio to 8 percent ever since regulators came out with their 9 percent rulemaking. Banks that chose to opt into the new capital framework would have done so on their March 31 Call Reports.

While the bill gives only temporary relief to community banks on these issues, many industry observers expect fierce lobbying to extend the provisions, perhaps permanently.