In a letter to SEC Chair Mary Jo White and Fed Chair Janet Yellen, Senator Donnelly acknowledged that in their August 2013 re-proposal the regulators sought improvements over the original April 2011 proposal to avoid significant disruption to the CLO market. The re-proposed regulations acknowledge that the agencies' goal in proposing this alternative risk retention option is to avoid having the general risk retention requirements create unnecessary barriers to potential open-market CLO managers sponsoring CLO securitizations. However, despite this language, the Senator said that the regulations will still unnecessarily restrict the market and result in fewer CLO issuances and less competition. When issuing the final risk retention regulations, he asked the SEC and bank regulators to carefully consider these concerns.
He added that he supports efforts on risk retention to ensure that complex financial products do not pose grave risks to the greater economy. But in the process of minimizing broader risk, he noted, regulators must strike a balance and do so in a way that does not threaten CLOs, which he views as a vital source of financing. He urged the regulators to ensure that the final regulations do not risk harming the CLO market's ability to fund the business lending that is important to the nation.