U.S. regulators are again weighing whether to ease the impact of the "Volcker rule," this time on a $300 billion market for loans to U.S. companies, the Wall Street Journal reported today. Federal Reserve governor Daniel Tarullo told lawmakers yesterday that regulators are considering whether to loosen provisions that could affect collateralized loan obligations (CLOs), which are securities backed by bundles of loans made to companies with low credit ratings. Both Democrats and Republicans on the House Financial Services Committee yesterday pressed Tarullo and other regulators on the interagency group responsible for coordinating the implementation and enforcement of the Volcker rule to ease its impact on CLOs. As a result of the Volcker rule's ban on certain types of trading, many banks that own CLOs may have to divest them, according to industry officials. Industry representatives have urged U.S. agencies to exempt CLOs by clarifying that they are debt investments and aren't equivalent to the equity investments prohibited under the Volcker rule, which five U.S. financial overseers completed in December.
