The FSA will allow brokers to carry goodwill as an asset on balance sheets until January 2008.
CP174 proposed that intangible assets, such as goodwill, must be excluded when brokers are calculating capital to determine their solvency requirements.
But sources said the moratorium, which will give brokers three years to write down the value of their goodwill, comes after responses to CP174 highlighted that by excluding goodwill, the FSA would discourage broker acquisitions.
"With the flood of brokers expected to sell up before regulation it's a sensible move," said one broker. Smart & Cook managing director Paul Meehan welcomed the temporary reprieve.
"It's better than taking it on the chin," he said.
Goodwill is the difference between the price paid for a business and the value of its fixed assets, such as buildings, vehicles and office equipment.
Under GISC regulation, goodwill can be carried on balance sheets and its value can be borrowed against.
Because brokers do not tend to have many fixed assets they are primarily valued by goodwill, which is calculated according to the size and quality of the business they write.
Tony Cornell of Cornell Consulting said that as a result, many acquisitive brokers are carrying a substantial amount of goodwill, and associated debt, on their balance sheets.
Before the moratorium, brokers with large amounts of goodwill were faced with either taking a one-off writedown on its value, which would have seen many plunge into the red this financial year, or incurring the cost and complexity of establishing holding companies to house their goodwill and associated debt.
An FSA spokeswoman said that because the near final rules from CP174 were not due out until September, the regulator could not comment.