Report of the G-10 Working Group on Contractual Clauses

September 2002

Introduction

It is widely recognised that an important factor complicating the rapid and orderly resolution of sovereign debt crises is the collective action problem, whereby the incentives for individual creditors diverge from those of creditors as a whole. This problem has become more acute as bond finance has accounted for an increasing share of sovereign borrowing, leading to growing interest in mechanisms to facilitate faster and more orderly debt restructuring. In that context, the G10 Ministers and Governors have approved the public release of a report prepared by a working group operating under their auspices. The report sets out the key features of collective action clauses for sovereign bonds that the G10 Ministers and Governors believe would, if widely adopted, make the resolution of debt crises more orderly. It also contains an annex with examples of clauses that conform to the key features identified by the Working Group.