On Tuesday, the European Banking Authority (EBA) published a consultation paper that would seem to threaten the recent revival of the European CLO market.  

The paper seeks to clarify the requirements that either the sponsor or originator of securitization retain a portion of the risks in these deals. Article 122a of the Capital Requirements Directive, which was released by the Committee of European Banking Supervisors in December 2010, has a kind of get-around: it allows the deal’s sponsor to outsource this risk-retention to a third-party.

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