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TCH Responds to BCBS ECL Proposal

The Clearing House (TCH) submitted a comment letter to the Basel Committee in response to its proposal on the policy considerations related to the regulatory treatment of accounting provisions under the Basel III capital framework. In the letter, TCH expressed support for the BCBS decision to conduct a QIS and transitional arrangements to mitigate the potential "cliff effects" and "capital shock" resulting from the adjustment to retained earnings and CET1 upon implementation of the new accounting standards. TCH emphasized that a proper calibration between accounting and regulatory capital frameworks is necessary to ensure that excessive or duplicative capital requirements for credit risk do not result from the implementation of the new accounting standards.