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February 26, 2014

How Dodd-Frank Might Kill the CLO Market

“Regulators are facing mounting pressure from lawmakers and the financial industry to address ongoing concerns about the treatment of collateralized loan obligations under the Dodd-Frank Act, which critics warn could effectively destroy the market.”

“The most public fight has centered on such assets’ inclusion under the Volcker Rule, which could force banks to sell off billions of dollars worth of CLOs before the rule goes into effect in July 2015. But a separate battle is also brewing over the impact of banking agencies’ pending risk retention rule.”

“The fight has already won the attention of Congress, which industry supporters say is a sign that the tide may be turning in the public debate over securitization.”

“‘Securitization got a pretty bad name during the crisis and was pretty consistently demonized for a long time,’ said Chris Killian, a managing director and head of securitization at the Securities Industry and Financial Markets Association. ‘But I think people are realizing it’s a valuable way to fund credit.’”

 

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Read full American banker article here.

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