The Federal Reserve has taken its easiest option in giving banks more time to divest holdings of collateralized loan obligations (CLOs) under the Volcker rule, industry officials said on Tuesday. The extension was seen as a way to avoid a massive “fire sale” of the investments, but it was far from satisfying. At a conference sponsored by the Loan Syndications and Trading Association (LSTA), industry officials criticized the The Fed’s announcement on Monday that will give banks two more years to divest CLOs that fall under the rule. The Fed said banks will now have until July 21, 2017 to shed CLOs that contain bonds as a portion of the overall investment, a structure that is considered a “covered fund” under the Volcker rule. “I think that (limiting a fire sale) is one of the objectives of extending the conformance period, but I think it was done because it was the easy solution,” said Meredith Coffey, head of research at the LSTA. Banks had hoped regulators would go even further
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