December 08, 2016
David Quirolo discusses how the proposed changes to EU regulations may effect Europe’s CLO market with Bloomberg:
The proposed 5 percent and 10 percent retention levels should only be seen as a floor, as they may rise, according to David Quirolo, a partner at Cadwalader Wickersham & Taft. There is a provision for the relevant authorities to lift retention rates up to 20 percent in light of market circumstances, Quirolo said in a Dec. 8 memo to clients seen by Bloomberg.
“The idea of having a series of different risk retention levels, which could be subject to further change every two years, not only risks causing distortions to the European securitization market, but could, in combination with ECON’s other proposed amendments, hamper the market,” said Cadwalader’s Quirolo.
“It is possible that some of the more controversial new proposals from the Parliament could be changed during this process,” he said. However, given the differences between the members of the trilogue over aspects of the regulation, including risk retention, it may take time for the three parties to reach a compromise, and the negotiations could drag on through most of 2017, Quirolo said.