WASHINGTON — Federal banking regulators on Wednesday were unable to say when they might finalize rules under the international Basel III accord that would require banks to increase the capital backing their assets and change the way they determine the riskiness of their investments and loans.

The Securities Industry and Financial Markets Association and other market participants have sent some 1,500 letters to the regulators warning that rules they proposed in June, which were to take effect on Jan. 1, would hurt the municipal and other financial markets as well as banks.

Banks are the fastest growing holders of munis, according to Municipal Market Advisors. They increased their holdings of munis by 22% between the second quarters of 2011 and 2012, MMA said in its weekly outlook.

The new rules are designed to shore up banks so that they can absorb losses after periods of severe stress, such as the recent financial crisis and recession.

The banking regulators announced last Friday that they would revise and replace the current proposed rules as well as postpone their effective date because of a wide range of concerns about them.

At a hearing on Wednesday, Senate Banking Committee Chairman Sen. Tim Johnson, D-S.D. and Sen. Patrick Toomey, R-Pa., pressed officials from the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. about how long it would take to rework the rules.

“It will take time,” said John Lyons, the OCC’s senior deputy comptroller bank supervision policy and chief national bank examiner. “I hesitate to give you an exact date but we are working diligently” to come up with rules as soon as possible, he said.

The banking regulators said they planned to review each of the 1,500 comments they received.

Johnson urged the regulators “to take the appropriate amount of time needed to get these rules right.”

Sen. Richard Shelby from Alabama, the top Republican on the committee, demanded the regulators “demonstrate to this committee and the public that their proposed rules are supported by proper data and rigorous economic analysis.”

Shelby said he sent letters to the banking agencies weeks ago, asking them to detail how the new capital levels would change for U.S. banks and how those levels would leave the U.S. banking system well-capitalized, as well as the compliance costs.

He complained the agencies did not respond to him until the day before the hearing and said their responses show they relied heavily on studies by the Basel Committee, which uses data only from the very largest banks.

“It is time that our banking regulators stop outsourcing their economic analysis to the Basel Committee and start doing their own work,” Shelby said. “They need to determine how Basel III will impact our diverse and unique banking system and the overall U.S. economy. They also need to end their cloistered approach to rulemaking.”

During the hearing, the regulators said that their toughest proposed capital requirements were aimed at the big, international banks and that they took pains to go easier on community banks.

But Toomey complained about “financial repression in the U.S.” and said that the rules would likely have very significant compliance costs for banks that pose no systemic risk to the banking system.

In its letters to the banking regulators, SIFMA had complained that the rules would require banks to assign risk weights of 20% to general obligation bonds and 50% to revenue bonds. SIFMA argued the rules should view munis differently and should assign risk weights of 20% to investment grade bonds and 50% to lower rated or nonrated bonds.

The group also urged regulators to exclude munis from requirements that banks change their capital requirements based on changes in the market value of their assets. SIFMA also said proposed capital requirements should not apply to muni-related derivatives contracts with state and local governments.

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