House Passes CLO-Volcker Rule Bill
On Tuesday, the House of Representatives passed H.R. 4167, the Restoring Proven Financing for American Employers Act by voice vote. H.R. 4167 allows banks that hold collateralized loan obligations (CLOs) as assets a two-year extension, until July 21, 2017, to comply with the Volcker Rule, as long as the CLOs were issued prior to January 31, 2014. During the vote, Congressman Scott Garrett (R-NJ) endorsed the bill. “Today we have the opportunity to correct in a strong, bipartisan way an egregious example of regulatory overreach,” said Rep. Scott Garrett. “If the CLO provision goes forward as planned, there will be a heavy price to pay.” Congressman Patrick Murphy (D-FL) also praised the bill as a “narrow, common-sense fix to the Volcker Rule without undermining its core purpose.”

In April, the Federal Reserve Board (Fed) stated its intent to extend the conformance period for CLOs to the Volcker Rule by two years to July, 2017, and applies to CLOs in place as of December 31, 2013. It is SFIG’s understanding that the Fed’s extension was designed to provide banks additional time to restructure or re-finance non-conforming CLOs.

The bill sponsors brought H.R. 4167 to the House floor for a vote in order to maintain pressure on the regulators to find a complete solution to address legacy CLOs as they relate to the Volcker Rule. The bill will now be referred to the Senate, and likely to the Senate Committee on Banking, Housing, and Urban Affairs where it faces an uncertain future.
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