In separate comment letters submitted this week to Federal bank regulatory agencies, the Equipment Leasing & Finance Association (ELFA) and the Secured Finance Network (SFNet) urged the authorities to incorporate additional recommendations into the proposed Basel III rulemaking. Their goal is to safeguard the essential role of asset‑based lending in financing businesses and sustaining U.S. economic activity.
The comments were addressed to the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC). They respond to the jointly proposed revision aimed at modernising regulatory capital requirements.
Representing a wide array of financial institutions—including banks, specialty financiers, and other commercial finance participants—ELFA and SFNet emphasize the importance of maintaining a safe and sound banking system. In their submissions, they commend the agencies for the revised proposal and the extended comment period, while advocating attention to three primary concerns that preserve asset‑based loans crucial for U.S. small and medium‑sized businesses:
- Adjustments to credit conversion factors for commitments
- The definition of a “commitment” in the new framework
- Recognition of the value of non‑financial collateral such as receivables, inventory, and marketable equipment in capital calculations
Asset‑based lending, equipment finance, factoring, and secured finance sectors are vital for providing capital to businesses of all sizes. Financing secured by assets—receivables, inventory, and equipment—offers a dependable source of working capital, especially during economic downturns when conventional credit may tighten.
ELFA and SFNet remain available to provide further insights, particularly if the agencies undertake additional data collection on non‑financial collateral and subsequently assess the true value and risks of the underlying credit exposures.