Although bank regulators in concert with the SEC and CFTC pledged to Congress that they will reconsider treatment of collateralized loan obligations (CLOs) under the Volcker Rule legislation has been introduced in the House to rewrite the law. CLOs issued up to 2014 would be fully grandfathered, reducing spread disparities in the market due to concerns about Volcker compliance, and most new issues would also be permissible bank investments. Absent changes along these lines, banks now holding problematic CLOs could take significant losses despite the fact that no change in credit risk occurred.
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