LSTA requests that Volcker Rule not be applied to syndicated loans

By Sara Rosenberg

New York, Nov. 8 - The Loan Syndications and Trading Association sent a letter to the Financial Stability Oversight Council on Friday asking that the provisions of the "Volcker Rule" not be extended to syndicated loans, according to a news release.

The Volcker Rule prohibits banks from engaging in certain forms of proprietary trading under the Dodd-Frank Act.

The letter also said that if the rule is applied to syndicated loans, it should be done cautiously.

"If the FSOC does decide to recommend extending the Volcker Rule to cover syndicated loans, we strongly urge the council to carefully craft its recommendation to avoid creating regulations that may destabilize or trigger significant adverse effects on secondary loan trading, syndicated lending and, ultimately, the flow of credit to the U.S. economy," Bram Smith, executive director of the LSTA, said in the release.

"Commercial credit is essential to maintaining and expanding payrolls, replenishing inventories, expanding plants and operations and maintaining and purchasing equipment. Accordingly, actions that could inadvertently disrupt or destabilize lending activities should be carefully considered and avoided," Smith added.

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