Despite considerable pressure from Capitol Hill, it does not appear that regulators charged with implementing the Volcker Rule plan to make it easy for new collateralized loan obligations (CLOs) to hold bonds.

The Volcker Rule rule prohibits U.S. banks, which are important buyers of CLOs, from having an ownership interest in a securitization backed by anything other than loans. CLOs have typically allocated a small portion of their assets to bonds, in part to help juice up returns. And because of the way that “ownership interest” is defined in the rule, banks are unable to hold the senior tranches of debt issued by CLOs, which give holders the  right to fire manager for cause. 

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