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Rules and Regulations
Federal Register Vol. 86, No. 205
Wednesday, October 27, 2021

This section of the FEDERAL REGISTER
contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.

FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 365
RIN 3064AF72

Real Estate Lending Standards Federal Deposit Insurance Corporation FDIC.
ACTION: Final rule.
AGENCY:

The FDIC is issuing a final rule to amend Interagency Guidelines for Real Estate Lending Policies Real Estate Lending Standards. The purpose of the final rule is to incorporate consideration of the community bank leverage ratio CBLR rule, which does not require electing institutions to calculate tier 2 capital or total capital, into the Real Estate Lending Standards.
The final rule allows a consistent approach for calculating the ratio of loans in excess of the supervisory loanto-value limits LTV Limits at all FDICsupervised institutions, using a methodology that approximates the historical methodology the FDIC has followed for calculating this measurement without requiring institutions to calculate tier 2 capital.
The final rule also avoids any regulatory burden that could arise if an FDICsupervised institution subsequently decides to switch between different capital frameworks.
DATES: The final rule is effective on November 26, 2021.
FOR FURTHER INFORMATION CONTACT:
Alicia R. Marks, Examination Specialist, Division of Risk Management and Supervision, 202 8986660, AMarks@
FDIC.gov; Navid K. Choudhury, Counsel, 202 8986526, or Catherine S. Wood, Counsel, 202 8983788, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC
20429. For the hearing impaired only, TDD users may contact 202 9254618.
SUPPLEMENTARY INFORMATION:

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SUMMARY:

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I. Policy Objectives The policy objective of the final rule is to provide consistent calculations of the ratios of loans in excess of the supervisory LTV Limits between banking organizations that elect, and those that do not elect, to adopt the CBLR framework, while not including capital ratios that some institutions are not required to compute or report. The final rule amends the Real Estate Lending Standards set forth in appendix A of 12 CFR part 365.
Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act EGRRCPA directs the FDIC, the Board of Governors of the Federal Reserve System FRB, and the Office of the Comptroller of the Currency OCC collectively, the agencies to develop a community bank leverage ratio for qualifying community banking organizations. The CBLR
framework is intended to simplify regulatory capital requirements and provide material regulatory compliance burden relief to the qualifying community banking organizations that opt into it. In particular, banking organizations that opt into the CBLR
framework do not have to calculate the metrics associated with the applicable risk-based capital requirements in the agencies capital rules generally applicable rule, including total capital.
The Real Estate Lending Standards set forth in appendix A of 12 CFR part 365, as they apply to FDIC-supervised banks, contain a tier 1 capital threshold for institutions electing to adopt the CBLR
and a total capital threshold for other banks. As described in more detail below in Section III, the final rule provides a consistent treatment for all FDIC-supervised banks without requiring the computation of total capital.
II. Background The Real Estate Lending Standards, which were issued pursuant to section 304 of the Federal Deposit Insurance Corporation Improvement Act of 1991, 12 U.S.C. 1828o, prescribe standards for real estate lending to be used by FDIC-supervised institutions in adopting internal real estate lending policies. Section 201 of the EGRRCPA
amended provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act relative to the capital rules administered by the agencies. The
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CBLR rule was issued by the agencies to implement section 201 of the EGRRCPA, and it provides a simple measure of capital adequacy for community banking organizations that meet certain qualifying criteria.1 Qualifying community banking organizations 2 that elect to use the CBLR framework Electing CBOs may calculate their CBLR without calculating tier 2 capital, and are therefore not required to calculate or report tier 2 capital or total capital.3 As described in more detail below, the FDIC proposed a revision to the Real Estate Lending Standards to allow a consistent approach for calculating loans in excess of the supervisory LTV Limits without having to calculate tier 2 or total capital as currently provided in part 365 and its appendix.
The final rule ensures that the FDICs regulation regarding supervisory LTV
Limits is consistent with how examiners are calculating credit concentrations, as provided by a statement issued by the agencies on March 30, 2020. The statement provided that the agencies examiners will use tier 1 capital plus the appropriate allowance for credit losses as the denominator when calculating credit concentrations.4
III. Proposal On June 25, 2021, the FDIC published a notice of proposed rulemaking NPR
or proposal to amend part 365 in response to changes in the type of capital information available after the implementation of the CBLR rule.5 The FDIC proposed to amend the Real Estate Lending Standards so that all FDICsupervised institutions, both Electing CBOs and other insured financial institutions, would calculate the ratio of loans in excess of the supervisory LTV
Limits using tier 1 capital plus the 1 85

FR 64003 Oct. 9, 2020.
FDICs CBLR rule defines qualifying community banking organizations as an FDICsupervised institution that is not an advanced approaches FDIC-supervised institution with less than $10 billion in total consolidated assets that meet other qualifying criteria, including a leverage ratio equal to tier 1 capital divided by average total consolidated assets of greater than 9 percent. 12
CFR 324.12a2.
3 Total capital is defined as the sum of tier 1
capital and tier 2 capital. See 12 CFR 324.2.
4 See the Joint Statement on Adjustment to the Calculation for Credit Concentration Ratios FIL
312020.
5 86 FR 33570 June 25, 2021.
2 The
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