IOSCO publishes Final Report on Leveraged Loans and CLOs Good Practices for Consideration

03 June 2024

In its analysis IOSCO has focussed on examining the impact of fewer and looser covenants on investor protections, whether there is adequate transparency in these markets and the scope for potential conduct-related issues to arise.

IOSCO has been following the evolution of the Leveraged Loans and CLO markets, including significant shifts in market practices that emerged during the ‘low-for-long’ interest rate environment. 

The Final Report describes in detail 12 Good Practices which are designed to support market participants in their decision-making when operating in these markets, and which are grouped into five themes:

1. Origination and refinancing based on a sound business premise;
2. EBITDA and loan documentation transparency;
3. Strengthening alignment of interest from loan origination to end investors;
4. Addressing interests of different market participants throughout the intermediation chain; and
5. Disclosure of information on an ongoing basis.

The Final Report reflects the results of the public consultation launched on 14 September 2023 which received valuable feedback from stakeholders.

James Andronis, Chair of the IOSCO Committee on Regulation of Market Intermediaries (Committee 3), said: “While these measures will provide further support on the usage of existing industry best practices guides, they will also be of great help to jurisdictions that may be looking to develop or expand into these markets”.

 

IOSCO

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