A banking entity would not have to include ownership interests in CLOs to determine its investment limits under the final rule, and a banking entity would not be required to deduct CLO investments from tier 1 capital under the final rule until the end of the relevant conformance period.
ABA President and CEO Frank Keating said he was “puzzled” that CLOs remain covered by the Volcker Rule. “The extension doesn’t address the underlying problem,” he said. “These instruments and others like them were created and exist to meet customer needs, not for proprietary trading purposes nor are they investments in hedge funds.”
ABA has been aggressively advocating for a solution to the Volcker CLO issue. In a bipartisan March vote, the House Financial Services Committee passed H.R. 4167, which would largely protect preexisting bank investments in CLOs from Volcker Rule restrictions. Sen. Mark Kirk (R-Ill.) in January introduced a similar bill.
Read the Fed's statement.