Thematic Peer Review on Corporate Debt Workouts: Summary Terms of Reference
Effective corporate restructuring and insolvency frameworks are necessary to help minimise risks to financial stability that could be caused by widespread defaults.
The Financial Stability Board (FSB) is seeking feedback from stakeholders as part of its thematic peer review on corporate debt workouts. The objective of the review is to support COVID-19 response efforts by examining FSB member jurisdictions’ practices, experiences and lessons from out of court debt workouts (OCWs), and the implications for financial stability.
The peer review will take stock of existing and planned OCW frameworks in FSB jurisdictions. It will examine the experience of particular mechanisms that have been, or are being used, to address corporate stress, including the role of financial sector authorities. The review will also seek to identify good practices and lessons on how well OCW frameworks have worked in terms of preserving value for viable companies and how useful their debt restructurings are for resolving non-performing loans and dealing with a large number of distressed corporates.
The Summary Terms of Reference provide more details on the objectives, scope and process for this review. The FSB has distributed a questionnaire to member jurisdictions to collect information in this area. In addition, as part of this peer review, the FSB invites feedback from financial institutions, corporates, insolvency practitioners and other stakeholders on out of court corporate debt workouts. This could include comments on:
the types of OCW frameworks (e.g. informal workouts, enhanced workouts and hybrid workouts) most often used in your jurisdiction and why;
features of OCW frameworks that may be particularly helpful to minimise the economic and financial system damage caused by corporate defaults due to COVID-19;
the appropriate role of financial sector authorities in facilitating debt restructuring, including to incentivise the participation of various stakeholders in an OCW; and
experiences and challenges in the use of OCWs, including to manage the volume of non-performing loans in the financial system.
Feedback should be submitted by 9 August 2021 to [email protected] under the subject heading “FSB Thematic Peer Review on Corporate Debt Workouts”. Individual submissions will not be made public.
The peer review report is expected to be published in early 2022.