Fact Sheet on the Explaination of the Qualified CLO
The LSTA submitted a comment letter to the EBA arguing that CLOs performed well in the crisis, that they have none of the characteristics identified as likely to create difficulties during periods of turmoil, and explaining that Qualified CLOs align with the principles of simple, standard and transparent securitizations.
In response to questions from the agencies, the LSTA submitted a comment letter that answered questions on whether companies issuing institutional loans are audited by PCAOB-registered accountants, whether all investors in CLOs are QIBs, and whether the SEC has access to CLO trustee reports.
LSTA submitted a letter to the U.S. Risk Retention regulators highlighting the similarity in the principles of the U.S. industry’s “Qualified CLO” proposal and the Bank of England and European Central Bank’s “Qualifying Securitisation” proposal.
The LSTA, SIFMA and SFIG proposes the “Qualified CLO”, whereby a CLO that meets six strict criteria can meet the risk retention requirement by retaining 5% of equity, not 5% of the notional amount of a new CLO.
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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.