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IMF Survey Vol.31, No.18 October 2002
Article

Group of 10 communiqué: Industrial country officials weigh better crisis resolution tools

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2002
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The finance ministers and central bank governors of the countries of the Group of 10 met in Washington, D.C., on September 27, 2002. Didier Reynders, the Minister of Finance of Belgium and the current head of the Group of 10, chaired the meeting. Ministers and governors took note of reports from Henk Brouwer, Chair of the Deputies of the Group of 10; Mervyn King, Chairman of Working Party 3 of the Organization for Economic Cooperation and Development; and Andrew Crockett, General Manager of the Bank for International Settlements. Ministers and governors discussed procedures for the orderly and expeditious resolution of sovereign debt crises in a manner beneficial to both debtors and creditors. They stressed that crisis prevention and sound macroeconomic policies are the first line of defense. They welcomed the progress made on both the contractual and the statutory approach and agreed that contractual and statutory approaches are complementary and mutually reinforcing in developing effective crisis resolution procedures. They agreed that suitably crafted provisions in sovereign debt contracts would greatly enhance sovereign debt resolution and foster the orderly expansion of the market for emerging market debt.

Ministers and governors reviewed progress made in developing—with input from market participants—provisions that would facilitate the orderly restructuring of sovereign bonds governed by the laws of the major jurisdictions. They welcomed the work of the Group of 10 working group on contractual clauses. They concluded that the contractual provisions should aim at fostering early dialogue, coordination, and communication between creditors and sovereigns; helping to ensure effective means for creditors and debtors to agree to restructuring, when necessary, through collective action; and helping to ensure that disruptive legal action by individual creditors does not hamper sovereign debt workouts under way.

They welcomed the announcement of the European Union member states that they intend to include appropriate contractual provisions in the new government bonds that they issue under a foreign jurisdiction. Ministers and governors noted the importance of making rapid progress in incorporating suitable collective action provisions in the external bonds of sovereign emerging market issuers. In that context, they stressed the importance of close and collaborative work between the Group of 10, the private sector, and the emerging market economies. The objective of this collaboration is to make it common practice to include collective action clauses in sovereign bonds issued in foreign jurisdictions.

Ministers and governors reviewed the role that regulatory, tax, and disclosure policies play in shaping conditions in asset markets, alongside more conventional factors, such as macroeconomic policies and liquidity. They noted the value of considering the impact of regulatory, tax, and disclosure policy on asset price dynamics. In this context, they underscored the importance of robust financial systems and effective regulatory oversight for helping to ensure financial stability.

Ministers and governors reviewed the General Arrangements to Borrow (GAB) and endorsed the proposed renewal of the GAB without modifications for a further five-year period from December 26, 2003.

The Minister of Finance of Canada, John Manley, was elected Chair of the Group of 10 for the coming year.

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