K&L Gates: New Japanese Securitization Risk Retention Rule and Its Impact on CLO Investors in Japan

In December 2018, the Financial Services Agency of Japan (the “JFSA”) proposed amendments to its regulations[1] under the Banking Act of Japan to introduce a new risk retention rule applicable to collateralized loan obligations (“CLOs”), along with other amendments that relate to bank capital related rules, and sought public comments. On March 15, 2019, after considering public comments submitted in response to the December proposal, the JFSA adopted the final rule (the “Rule”). As usual, the JFSA also published its views and guidance on certain issues raised in the public comments and updated Q&As regarding bank capital requirements, including guidance on an exception to the Rule. The Rule became effective March 31, 2019, for securitization exposures acquired after that date. The Rule applies to all securitizations, but it predominantly affects the CLO market because of the importance of Japanese banks as investors in US and European CLOs. This note focuses on the application of the Rule to investments in CLOs.

The full article is available at https://www.jdsupra.com/legalnews/new-japanese-securitization-risk-28997/

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