Collateralised loan obligation (CLO) investors need clarity on the level of involvement of the retention holder before the market can recover, according to those close to the Loan Market Association (LMA).
A LMA working group consisting of collateral managers and arranging banks have approached the European Banking Authority (EBA) for clarification on Article 122a of the Capital Requirements Directive (CRD) the skin-in-the-game risk retention requirements for originators and sponsors and the accompanying guidelines.
David Quirolo of Ashurst, who represented the working group, said the biggest ambiguity is what ongoing role, if any, the equity investor whos holding the risk retention needs to have.
Do they need an ongoing role, which can create regulatory and tax issues, or can they just be involved in the selection of the initial portfolio of assets and the initial structuring of the deal? said Quirolo.
Clarifying that would be...