Several industry groups asked federal regulators to extend the comment deadline for a new proposal that would implement Dodd-Frank’s credit risk retention provisions. The groups expressed concern about rule provisions related to the treatment of open market collateralized loan obligations (CLO), a form of securitization that promotes business lending.
The rulemaking comment period is scheduled to close on Oct. 30. The groups would like regulators to extend the deadline to Dec. 9.
The risk retention proposal initially released by six federal agencies in 2011 required CLO managers to satisfy the rule’s minimum risk retention requirement for each CLO securitization transaction they manage. CLO managers generally would have been required to satisfy the risk retention requirement by holding a sufficient amount of standard risk retention in horizontal, vertical or L-shaped form.
Some commenters asserted that most asset management firms currently serving as open market CLO managers do not have the balance sheet capacity to fund 5 percent horizontal or vertical slices of the CLO. Thus, they argued, imposing standard risk retention requirements on these managers could cause independent CLO managers to exit the market or be acquired by larger firms, thereby limiting the number of participants in the market and raising barriers to entry.