COLORADO SPRINGS, Colo.–A member of the Federal Reserve Board believes it’s time to rethink the Community Bank Leverage Ratio, and America’s Credit Unions said in response that if any changes are being made for banks, there also needs to be parity for credit unions.
In remarks to the Kansas Bankers Association 2025 CEO & Senior Management Summit, the Fed’s vice chair for supervision, Michelle W. Bowman, covered a range of issues, including her views on the economy, saying she believes the Fed’s recent decision to hold rates steady was “appropriate” but that its time to begin “moving our moderately restrictive policy stance toward a neutral setting” as inflation has gotten closer to the Fed’s 2% annual target.
“My summary of economic projections includes three cuts for this year, which has been consistent with my forecast since last December, and the latest labor market data reinforce my view,” Bowman said. “I want to reiterate, though, that monetary policy is not on a preset course.
Community Bank Leverage Ratio
Meanwhile, Bowman called the Community Bank Leverage Ratio (CBLR) an “example of a well-intentioned measure that underachieved in providing regulatory relief. The CBLR is an optional framework that was designed as an alternative to risk-based capital measures for community banks. A community bank that complies with the CBLR is deemed to comply with risk-based capital requirements.”
The CBLR was set at 9% in 2018, which she noted is double the standard leverage ratio capital requirement of 4%. While there were 4,022 community banks as of the first quarter of 2025, only 1,662 had opted into the CBLR, she noted, including just over half of community banks below $1 billion in assets.
‘Time to Consider’
“In my view, it is time to consider modifications to the CBLR framework that make it a more attractive framework and will encourage more banks to adopt it,” Bowman told the meeting. “We should also consider whether it was appropriately designed and calibrated to fulfill the congressional intent to achieve regulatory relief. For example, reducing the CBLR requirement from 9 percent to 8 percent could not only allow more community banks to adopt the framework but also increase balance sheet capacity for all CBLR firms, facilitating additional support for local economies through lending.”
In the wake of Bowman’s remarks, America’s Credit Unions said it also plans to work with the Fed governor about similar potential relief for credit unions.
“America’s Credit Unions has strongly supported parity for credit union capital should the Fed and banking regulators go in that direction, so certainly it’s something we will be watching and working on,” said Carrie Hunt, chief advocacy officer with the trade group.
Discussions Around Fraud
In addition, during her remarks Bowman also discussed risks presented by fraud, noting the Fed intends to host a conference on the subject in the Fall, and Hunt said America’s Credit Unions’ Fraud Task Force “will be engaged with all of the Fed’s fraud activities.”
“We expect in the upcoming weeks to release some recommendations from our Fraud Task Force on areas where we need to work on the policy front to combat fraud,” added Hunt. “Fraud continues to be the number-one issue we hear from credit unions on the operations side.”
Bowman’s full remarks can be found here.