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.
This week we cover Equity, HY Volatility vs. Loan Stability; Volcker Returns; LIBOR I (Fed Speaks) & II (LSTA Explains)
In May, the federal bank regulatory agencies and the SEC approved a sweeping 373 page proposal to revise the 2013 Volcker Rule and the proposal was formally published in the Federal Register in July kicking off a 90 day comment period. This week, the LSTA submitted its comment letter, with one full day to spare! Importantly for the loan and CLO markets, the proposal puts into play the issue of whether banks can own the debt securities of CLOs that hold bonds. While not taking a position on this issue, the agencies requested comments on a number of questions, such as the definitions of “covered fund”, “ownership interest” and “loan securitization”, changes to any of which could result in the end of the current prohibition.
The LSTA submitted a comment letter on proposed changes to the Volcker Rule. Importantly for the loan and CLO markets, the proposal puts into play the issue of whether banks can own the debt securities of CLOs that hold bonds. The LSTA’s comment letter focuses on two points. First, it suggests that the final rule’s “loan securitization” […]
More than seven years after the passage of the Dodd-Frank Act, some of the resulting regulations imposed on CLOs are still being hotly contested. Indeed, just this week the LSTA learned the identities of the three judges from the D.C. Circuit Court of Appeals that will constitute the panel presiding over the three-year old lawsuit against the SEC and Federal Reserve Board on the issue of risk retention. Also this week, in response to the OCC’s request for comment on revising the Volcker Rule, the LSTA filed a comment letter addressing the prohibition on banks owning debt securities of CLOs that hold any amount of bonds.
The LSTA submitted a comment letter to Treasury Secretary Mnuchin on the issue of ownership interests on May 26, 2017
Collateralized Loan Obligation (Fact Sheet on CLOs and the Volcker Rule
Banks are working with the trade associations to develop a draft template to facilitate amendments to remove bond baskets from legacy CLOs, thus “Volckerizing” them.
Testimony of LSTA EVP Meredith Coffey on the Volcker Rule and Risk Retention before the House Financial Services Subcommittee on Capital Markets.
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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.