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TCH Submits Comments on FASB Proposals on Novations

The Clearing House Association, jointly with the ABA, submitted a comment letter to the FASB in response to a Proposed Accounting Standards Update issued on August 6 to clarify whether a novation requires de-designation and to simplify evaluating puts/calls. TCH is supportive of the proposal which clarifies that changes in the counterparty to a derivative that has been designated as a hedging instrument does not require designation of that hedge accounting relationship if all other hedge accounting criteria continue to be met. The letter supports allowing banks to choose whether to implement the guidance on a prospective or retrospective basis.