Volcker Rule CLO Relief, Madoff Workers Trial: Compliance

The Volcker Rule, which curbs risk-taking by banks by imposing restrictions on speculating with their own money, excludes collateralized loan obligations that don’t hold assets other than loans, according to the Loan Syndications & Trading Association.

The final rules released Dec. 10 by U.S. banking regulators don’t include ownership and transaction bans on CLOs, thus allowing warehousing and market-making in their assets and liabilities, Bram Smith, executive director of the New York-based trade association, said in an e-mailed statement. The restrictions don’t allow the funds to invest in bonds and other CLOs, and provide no provision to exempt existing CLOs, which means banks holding such obligations would have until July 2015 to divest them, Smith said.