Exclusive Study: Banks Don’t Need More Than 8 Percent Capital Leverage Ratios

Exclusive Study: Banks Don’t Need More Than 8 Percent Capital Leverage Ratios An Example of Why Data Matters In CECL

The vast majority of community banks would be severely damaged by a community bank leverage ratio requirement of 9 or 10 percent, an Invictus study has found. More than 82 percent of community banks have a strong case their requirement should be 8 percent or lower, while only 4.8 percent of banks require a ratio of more than 9 percent.

How the study was done: Invictus used BankGenome™, its powerful intelligence system, to calculate the optimal capital adequacy for all community banks. The system includes quarterly stress tests on every bank in the country driven by unique algorithms that leverage loan-level data as a proxy for regional lending trends. The BankGenome™ stress tests estimate optimal capital requirements for each bank based upon its unique mix of assets, business models, earnings strength, and asset quality profile.