After coming to a near-halt after the final version of the Volcker Rule was released in mid-December, the primary CLO market has shifted cautiously into low gear, despite the fact that the rules of the road remain unclear.

The collateralized loan obligation market had hoped to escape unscathed, but the rules under Volker prohibit U.S. banks from having an ownership interest in a securitization backed by bonds or other securities. Three potential outcomes exist to the problem of U.S. banks holding the senior tranches of CLOs that hold bonds, one of which would address the matter for all CLOs, present and future.

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