Collective Action Clauses in Sovereign Bond Contracts--Encouraging Greater Use

Collective Action Clauses in Sovereign Bond Contracts—Encouraging Greater Use

Prepared by the Policy Development and Review, International Capital Markets and Legal Departments (In Consultation with other Departments)

June 6, 2002

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Contents

I. Introduction

II. Current Market Practice
A.	The Outstanding Stock and Issuance since 1995
B.	Reasons for Resistance to Change
		Short run costs and inertia
		Permanent costs
		Institutional Structure of the State

III. Considerations in Promoting the Broader Use of Clauses

IV. The Scope for the Fund to Promote the Use of Clauses
A.	Fund Surveillance
B.	Financial Incentives: Conditions for Access to Fund Financing
		Conditions for access to Fund facilities
		Changes of the financial terms of Fund facilities
C.	Obligations of Membership

V. The Scope Outside the Fund to Promote the Use of Clauses
A.	Persuasion
B.	Regulatory Requirements

VI. Conclusion

VII. Issues for Discussion