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Wall Street group to challenge Dodd-Frank risk retention rules 

November 25, 2014
Sarah N. Lynch, Reuters

A Wall Street trade group said on Monday it has filed a lawsuit to strike down a new rule that requires banks to retain some risk on their books when they securitize loans, saying the rule could stifle crucial financing to certain companies.

The Loan Syndications and Trading Association (LSTA) said it was concerned about how the "risk retention" rule, which requires banks to retain at least five percent of the loans they originate on their books, is not workable for the market for collateralized loan obligations (CLOs), or bundles of business loans packaged as securities.

In the final rule, regulators required the independent managers of CLOs, rather than the originating banks, to retain the risk.

The regulation "disproportionately punishes an industry that was not involved in the financial crisis," the group said in a statement on Monday.

Read more: Reuters

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