The Federal Reserve granted a fresh concession to banks that are subject to the Volcker rule on Monday, giving them two more years to offload their holdings in collateralized loan obligations to comply with the measure.
The Volcker rule, aimed at banning proprietary trading, would have forced banks to divest their CLO investments, resulting in billions of dollars in losses.
Some industry groups wanted regulators to go further by providing a broad exemption for ownership interests in CLOs.
“We are disappointed that the agencies involved did not use their rule-making authority to provide broad relief from the Volcker rule to legacy CLOs,” said Kenneth Bentsen, president of the Securities Industry and Financial Markets Association, or Sifma. “Sifma strongly believes that regulators should have addressed the problem in a comprehensive, co-ordinated, and conclusive manner yet the statement released today seems to suggest the agencies have taken a different approach.”
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