Japanese regulator allows CLO risk retention workaround

The Japanese Financial Services Agency (JFSA) published risk retention rules on Friday that allow Japanese investors to avoid capital charges even if they buy debt from non-risk retention compliant deals.

  • By Alexander Saeedy
  • 15 Mar 2019

While the full rule requires extra capital to be set aside for deals where issuers do not retain risk, investors can sidestep that burden by proving that the underlying assets were not “inadequately” formed, effectively allowing the market to self-regulate.

“The determination on whether the original assets may ...

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