MFA Submits Comments on the Application of Risk Retention Proposal

The Managed Funds Association ("MFA") submitted comments to the Office of the Comptroller of the Currency ("OCC"), the SEC, the Board of Governors of the Federal Reserve System ("FRB"), the Federal Deposit Insurance Corporation ("FDIC"), the Federal Housing Finance Agency ("FHFA"), and the U.S. Department of Housing and Urban Development ("HUD") on the proposal on credit risk retention, focusing specifically on its application to collateralized loan obligation ("CLO") managers.

In the letter, the MFA urged the agencies to reconsider its analysis of the applicability of Dodd-Frank Section 941 ("Regulation of credit risk retention") to open market CLO managers, since such managers are not by definition "securitizers," nor do they act in such capacity. Should the agencies decide that open market CLO managers do fall within the scope of Section 941, the MFA continued, it urged the adoption of the proposed regulatory framework set forth in the Loan Syndacations and Trading Association's Letter. This framework deals with the quantum of risk that the open market CLO manager or coordinating party must retain, as well as circumstances in which the credit risk may be retained by a person other than the CLO manager. According to the LSTA letter, the proposed framework would impose far fewer costs and allow relatively more CLOs to support important loan markets, resulting in the preservation of liquidity for syndicated loans, an increase in competition in the provision of credit, lower borrower costs, and an increase in the availability of credit.

See: MFA Comment Letter; MFA Press Release. Related news: Agencies Propose Rule Change Regarding Credit Risk Retention of Securitized Assets (Fed. Reg.) (October 18, 2013).