Reacting to a regulatory change, more than 90% of banks in a survey told the Federal Reserve they had reclassified some securities as available-for-sale during the last six weeks of 1995.

The move makes securities portfolios more liquid, allowing banks to change investment strategies quickly.

The Fed learned from the senior loan officers it contacted that 77.8% of banks in the survey had increased securities in the for-sale account by more than 20%. Another 15.5% boosted these accounts by smaller ratios.

The Fed also found that one-quarter of the 59 domestic and 23 foreign banks contacted had tightened standards for credit card applicants and one- sixth had tightened standards on car loans. The bankers said demand had slightly decreased for both types of credit.

About 20% of banks tightened standards for construction and nonresidential loans, the biggest increase in four years.

Regarding the shift of securities, bankers said they took advantage of a window opened by the Financial Accounting Standards Board - from Nov. 15 to Dec. 31 - when securities could freely be moved into available-for-sale accounts.

Securities classified as held to maturity do not have to be marked to market; however, they cannot be sold. Securities available for sale must be marked to market, but banks are free to sell these assets.

Bankers told the Fed they don't plan to sell all the securities moved into available-for-sale accounts. Rather, they said, they made the shifts to take advantage of regulatory policy.

In November 1994, the agencies said banks could calculate capital reserves on the basis of the original purchase prices of securities available for sale or held to maturity.

That was a policy reversal. Earlier that year and in 1993, regulators had said banks would be required to value for-sale securities at market prices. Bankers, realizing that this policy would make it nearly impossible to use these securities in capital calculations, moved them into held-to- maturity accounts.

The late-'94 reversal let banks keep securities in their for-sale accounts and still use them to meet capital standards. Bankers prefer holding securities in for-sale accounts because they can be quickly liquidated if needed.

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