Regulation has constantly re-shaped the CLO market since the crash of 2008.
Some of the most important changes have been to the way banks are required to treat their CLO investments for regulatory capital purposes. Banks have always been important investors in CLOs and these rules therefore have a big effect on demand for different CLO tranches.
Regulators have also imposed regulations which direct affect the way that CLOs are structured and sold. A key example is risk retention, the requirement for the entity responsible for a securitisation to have its interests aligned with investors. The rules on risk retention differ significantly between the US and Europe.