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Financial Institution Letter

Adjusting the Calculations for Credit Concentration

March 30, 2020  |  FIL-31-2020


The FDIC, Board of Governors of the Federal Reserve, and Office of the Comptroller of the Currency (the Agencies) are jointly adjusting their calculation for credit concentration ratios used in the supervisory process. The adjustment is in response to changes in the capital information available after the implementation of the Community Bank Leverage Ratio (CBLR) rule. Effective March 31, 2020, for supervisory purposes, examiners will calculate credit concentration ratios using tier 1 capital plus the appropriate allowance for loan and lease losses or the allowance for credit losses attributed to loans and leases (as applicable) for the denominator.

Statement of Applicability to Institutions under $1 Billion in Total Assets: This Financial Institution Letter (FIL) applies to all FDIC-supervised institutions that are eligible to elect CBLR.


  • Effective March 31, 2020, qualifying community banking organizations that elect the CBLR framework are not required to report tier 2 capital, which historically has been a part of the denominator used in calculating credit concentration ratios for supervisory processes.
  • In response to this regulatory change, for supervisory purposes, the agencies are adjusting their calculation for credit concentration ratios. As of March 31, 2020, the agencies' examiners will calculate ratios that measure credit concentrations using:
    • Tier 1 capital plus the entire allowance for loan and lease losses as the denominator or
    • Tier 1 capital plus the portion of the allowance for credit losses attributable to loans and leases as the denominator for banking organizations that have adopted the Financial Accounting Standards Board's Accounting Standards Codification Topic 326, Financial Instruments—Credit Losses that implements the current expected credit losses (CECL) methodology.
  • These approaches are expected to:
    • Provide a consistent methodology for calculating these ratios at all insured depository institutions and
    • Approximate the agencies' historical methodology for calculating credit concentration ratios.

Suggested Distribution:

FDIC-Supervised Banks

Suggested Routing:

Chief Executive Officer
Chief Credit Officer
Chief Risk Officer

Related Topics:

Division of Risk Management Supervision Manual of Examination Policies


Paper copies of FDIC FILs may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).