Lawmakers Propose CLO Risk Retention Carve-out Again

Bipartisan legislation, sponsored by Rep. Andy Barr (R- KY) and Rep. David Scott (D-GA) that would exempt certain CLOs from risk retention requirements, has been reintroduced in the House of Representatives, following last year's stalled attempt, the Asset Securitization Report reports.

Reps. Barr and Scott introduced a similar bill, H.R. 3772, in December 2015, but the bill never advanced to the floor for a vote.

The new bill was introduced on September 14, 2017 and largely tracks measures proposed in H.R. 3772. Under a "qualified" CLO framework, managers which meet certain requirements would only have to retain 5 percent of the equity rather than 5 percent of the value of the notes.

Rep. Andy Barr said in a statement that while "the CLO market is currently doing well, I am concerned that in the event of another economic crisis, due to certain misaligned regulation on CLOs, the valuable and safe form of funding will dry up at the worst time."

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