CLO retention rules could have biggest impact in Europe, says Wells Fargo

Wells Fargo’s latest CLO Market Update report notes that Europe’s proposed “skin-in-the-game” rules are even tougher than those recently passed into US law. The Committee of European Banking Supervision is consulting on proposed new bank capital rules that would force securitisation “sponsors” to retain a 5% interest in the assets.

The new rules would take effect from the beginning of next year. This short time frame means the regulation would most likely dampen demand for new CLOs in Europe, writes analyst Dave Preston.