Fed Chair Yellen Responds to Question on SFIG-Supported Bipartisan QCLO Risk Retention Bill

On January 28th, Federal Reserve Board Chair Janet Yellen responded for the record to a question she was asked about H.R. 4166, the Expanding Proven Financing for American Employers Act (“Act”) at a November 4, 2015 hearing before the House Financial Services Committee. H.R. 4166, co-sponsored by Representatives Andy Barr (R-KY) and David Scott (D-GA), creates an SFIG-supported workable risk retention regime for collateralized loan obligations (“CLOs”).

Specifically, the Act creates a risk retention obligation that applies to “qualified” CLOs that meet criteria across six categories that are designed to enhance the alignment of interest between CLO managers and investors.

Specifically, Chair Yellen was asked whether she “would consider such a [QCLO] concept as you examine liquidity in the market, and is the Federal Reserve planning to promulgate any rules or regulations that would include the Qualified CLO concept?”

In her response, Chair Yellen stated that while the Board will not promulgate rules on the QCLO concept, “The [Federal Reserve] Board recognizes that certain structural features of Qualified CLOs may contribute in some degree to aligning the interests of CLO managers with investors with respect to the quality of securitized loans.”

SFIG will continue to work with policymakers to create a workable risk retention regime for CLOs.

To view SFIG’s support letter for H.R. 4166, please click here

To learn more about SFIG’s advocacy efforts on H.R. 4166, please contact Michael.Flood@sfindustry.org

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