Lesevorschlag: Sovereign default and state-contingent debt

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Financial Stability Paper No. 27 – November 2013
Sovereign default and
state-contingent debt
Martin Brooke, Rhys Mendes, Alex Pienkowski and Eric Santor

The Latin American debt crises in the 1980s and the Asian crisis in the late 1990s both provided
impetus for reforming the framework for restructuring sovereign debt. In the late 1980s, the
Brady plan established the importance of substantive debt relief in addressing some crises.
A decade later, as the Asian crisis faded, the G10 and major emerging market economies worked
together to increase the flexibility of IMF lending and promoted the wider use of collective
action clauses in foreign law bonds.
More recently, the banking crisis of 2008–09 has led to the implementation of an ambitious
financial sector reform agenda to reduce the risk of such a crisis occurring again. But reforms to
reduce the incidence and cost of sovereign debt crises, such as those experienced in the
euro area, have proceeded more slowly.
The international community has a role to play in addressing this gap. In that regard, this paper
is intended to stimulate debate on the problems in the current practices for sovereign debt
restructuring and puts forward some proposals to improve the functioning of sovereign debt
markets.
The Bank of Canada and the Bank of England have collaborated on these issues in the past.
For example, in 2001, Andy Haldane and Mark Kruger authored a joint paper on how to resolve
sovereign debt crises in a more orderly and transparent manner. This current work builds on
those ideas by exploring how state-contingent debt could further improve the system.
Charlie Bean John Murray
London Ottawa
November 2013

http://www.bankofengland.co.uk/research/Documents/fspapers/fs_paper27.pdf