“WASHINGTON—U.S. regulators are again weighing whether to ease the impact of the “Volcker rule,” this time on a $300 billion market for loans to U.S. companies.

Federal Reserve governor Daniel Tarullo told lawmakers Wednesday that regulators are considering whether to loosen provisions that could affect collateralized loan obligations, or CLOs, which are securities backed by bundles of loans made to companies with low credit ratings. CLOs typically offer higher returns than corporate bonds and other loans.

“This issue is already at the top of the list” for an interagency group of regulators to consider, Mr. Tarullo said in testimony before the House Financial Services Committee. Both Democrats and Republicans on the panel pressed Mr. Tarullo and other regulators on the interagency group responsible for coordinating the implementation and enforcement of the Volcker rule to ease its impact on CLOs.

As a result of the Volcker rule’s ban on certain types of trading, many banks that own CLOs may have to divest them, according to industry officials. Industry representatives have urged U.S. agencies to exempt CLOs by clarifying that they are debt investments and aren’t equivalent to the equity investments prohibited under the Volcker rule, which five U.S. financial overseers completed in December.“

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