The American Securitization Forum has submitted a letter to federal banking regulators requesting the near-term announcement of a six-month moratorium on any regulatory capital rule changes related to the implementation of accounting standards FAS 166 and 167 and the proposed elimination of the option for ABCP conduit sponsors to disregard consolidation of conduits for risk-based capital purposes, as proposed in regulators' 15 September Notice of Proposed Rulemaking (NPR). The letter represents an initial response to the NPR; the ASF says it is developing an additional, comprehensive reply that will be submitted before the 15 October comment deadline.

The rationale behind the moratorium is that by the time final rules are promulgated (i.e. sometime after 15 October), banks will likely have no choice but to begin the process of capital raising and reallocation of resources based on assumptions developed from the conservative approach that the proposed rules take, regardless of any changes that might be included in the final rules. This may have significant, negative and possibly unnecessary consequences on both the banking system and credit availability more generally, the ASF notes. If regulators are unwilling to grant the moratorium, the Association asks them to at least immediately announce a phase-in period of at least four quarters for any rule changes.

The agencies' final decisions on the issues addressed in the NPR will have substantial implications for bank capital and possibly credit availability. Even with only a one-month comment period, it is hard to see how those final decisions will be reached before late November, leaving banks just over a month to react before the accounting changes take effect. The ASF warns that this would leave banks with little choice but to plan, and perhaps begin to act, based on the conservative assumption that the NPR represents the agencies' final position on these issues.

According to the ASF, it is also important to note that the economic risks to banks will not change when the accounting changes take effect. While the agencies are likely to conclude that at least some additional capital is required, the cost of a six-month delay in implementation would not be high.