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Regulation: From Rearguard to Vanguard?

June 29, 2017 - After years of regulatory barrage – which often inadvertently hit the leveraged loan market – the situation may have stabilized. In fact, we may even be heading to the point where reasonable FinReg fixes could be in the offing.  And, perhaps surprisingly, regulatory refinements may be most likely to come from the regulators themselves. In January, President Trump signed an executive order (“EO”) laying out his core regulatory principles and requiring the Treasury to prepare reports identifying regulations that did not correspond to the core principles (and that were ripe for fixes). Earlier this month, the Treasury department released its first report on banks and credit unions. In that report, Treasury recommended fixes to the Leveraged Lending Guidance and Volcker’s covered fund definition (which effectively prohibits CLOs from owning bonds). Upcoming reports will cover capital markets (which may include risk retention), asset management and non-bank financial institutions. With President Trump in position to appoint new regulatory heads at key agencies by early 2018, there is a chance that these fixes may come to pass.  Of course, the LSTA is engaged on these issues both in Washington and with our membership. To wit, last Friday the LSTA hosted a 30-minute webcast on what the June 12th Treasury report might do, on Tuesday LSTA General Counsel Elliot Ganz moderated a regulatory roundtable at Euromoney’s Institutional and Alternative Lending Conference, and on Wednesday LSTA EVP-Research Meredith Coffey presented on Regulatory Refinements at the GFMI Annual Leveraged Lending Conference.  If you missed these, the webcast replay and slides are available here and the GFMI slides are available here. Please feel free to reach out to [javascript protected email address]g or [javascript protected email address] if you have any questions.

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