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TCH Comments on Basel Committee’s Revisions to the Standardized Approach to Credit Risk

The Clearing House (TCH), SIFMA and FSR commented on the Basel Committee's second consultative document to revise the standardized approach to credit risk. Among other things, the letter: (i) raises concerns about disparate treatment between calibrations for risk weighting under the external credit rating, and non-credit rating approaches; (ii) suggests aligning the determination of “investment grade” with the process set forth by the U.S. Agencies; (iii) suggests that credit conversion factors (CCFs) for retail and wholesale commitments are too conservative and are not supported by historical experiences; (iv) recommends that the final rule differentiate applicable CCFs by product to increase risk sensitivity; and (v) identifies the credit risk mitigation framework’s haircuts for equity and corporate debt securities as too high. TCH previously submitted a comment letter in response to the initial consultation on March 26, 2015.