Regulators are in dialogue with the
US’s loan trading trade body on the potential
exemption of open market collateralised loan obligations (CLOs)
from risk retention rules.
If these talks result in a carve-out, attorneys say
it would be a significant win for the CLO industry, which is
possibly the hardest hit by the controversial risk retention
It’s thought this carve-out could help
prevent the US market sliding into a situation
like that being experienced in Europe under CRD 4.
Syndication and Trading Association’s (LSTA)
meetings with the regulators have culminated, to date, in its
letter filed last month which sets out the
LSTA’s proposal to ringfence open market, or
arbitrage, CLOs from risk retention requirements.
The LSTA has argued, and CLO attorneys agree, that
fundamental differences between open market CLOs and other
forms of securitisation make it crucial to exempt these