Economic Insights — During the pandemic the banks that took advantage of the Community Bank Leverage Ratio (CBLR) acted quite differently than those that did not.
In the first quarter of 2020, while the economy was being shocked by an unprecedented pandemic, a new banking regulation took effect. This new regulation, the CBLR, which was formulated long before COVID, permitted community banks to elect to use a single, simplified capital requirement in exchange for a higher minimum capital ratio. This article contrasts the subsequent behavior of those banks that elected to use the CBLR with those that didn't. The results show that in 2020 and 2021, CBLR-compliant banks experienced faster asset and loan growth than banks that did not participate, and they also reported more consistent dividend payments.
This article appeared in the Third & Fourth Quarters 2022 issue of Economic Insights. Download and read the full issue.
