Over the past two weeks the LSTA has continued its political advocacy with legislators and regulators on issues of importance to the loan market. Last week, Meredith Coffey and Elliot Ganz, Co-heads of the LSTA’s Public Policy Group, had the opportunity to join Congressman Greg Meeks (D. NY) for a free-ranging discussion over breakfast.
As we noted recently, because of recent litigation over whether term loan Bs should be considered securities, the implications for CLOs of the current interpretation of the Volcker Rule have suddenly become a critical issue. Fortunately, the SEC and a number of banking agencies are currently deliberating over potential amendments to the Volcker Rule providing an opening to address this potential issue.
Earlier today the Federal Deposit Insurance Company (FDIC) and the Office of the Comptroller of the Currency (OCC) separately approved final rules amending rules originally published in November 2013 that implemented the Volcker Rule. Importantly, today’s amendments do not affect loans and CLOs. The FDIC signaled that amendments to the part of the Volcker Rule pertaining to CLOs would be forthcoming sometime in the future. Today’s amended rules are available here.
A number of global regulators have been warning institutions that i) LIBOR is ceasing, ii) transition plans are critical and iii) it’s (past) time to move on to a new rate. Last Friday the SEC added its voice in a joint eight-page Staff Statement on LIBOR Transition. This is not simply theoretical.
This is a presentation that Elliot Ganz, our General Counsel and Chief of Staff, along with Michael Nechamkin of Otocagon, Jeff Bakalar of Voya and Howard Tiffen of First Trust did at the DC Finance Conference in Tel Aviv in mid June 2019
This week, The LSTA returned to Tel Aviv to participate in the 11th Annual Tandem Capital Global Investors Conference. Why Tel Aviv? In fact, Israeli investors are intrigued by U.S. leveraged loans for a number of reasons. First, the Israeli economy has been very robust for a number of years with high tech, health care and tourism leading the way.
Many market participants have been closely following the LSTA’s risk retention lawsuit against the SEC and the Fed and many rumors have come to our attention concerning the status of the case. Specifically, we have been hearing that the decision would come out this week (it did not) and that we will prevail (we may or we may not). The following brief summary is meant to describe where we are now and explain what is actually likely to happen in the coming days or weeks.
On Friday, May 26, 2017, LSTA EVP Meredith Coffey and general counsel Elliot Ganz met with Craig Phillips, Counselor to Secretary of the Treasury Steven Mnuchin to discuss a number of regulatory issues impacting the loan market. The meeting was connected to an Executive Order on Core Principles for Regulating the United States Financial System (the “EO”) issued by president Trump early in February that enumerates “core principles” by which the administration will be guided in regulating the U.S. financial system. Most relevant to the loan market is a provision to “make regulation efficient, effective, and appropriately tailored.”
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Membership in the LSTA offers numerous benefits and opportunities. Chief among them is the opportunity to participate in the decision making process that ultimately establishes loan market standards, develops market practices, and influences the market’s direction.