Managing Subnational Credit and Default Risks

As a result of worldwide decentralization, subnational debt is rising. Subnational debt crises in major developing countries in the 1990s have led to strengthened regulatory frameworks for subnational borrowing and insolvency. With the fragility of...

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Bibliographic Details
Main Authors:	Waibel, Michael, Liu, Lili
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ADJUSTMENT OF DEBT ADMINISTRATIVE PROCEDURES ARREARS ASSET ASSETS ASSETS FOR DISTRIBUTION ASSETS IN BANKRUPTCY BAILOUT BAILOUTS BALANCE SHEETS BANK LOANS BANKRUPT BANKRUPTCY BANKRUPTCY CODE BANKRUPTCY COURT BANKRUPTCY FILINGS BANKRUPTCY FRAMEWORK BANKRUPTCY MECHANISMS BANKRUPTCY PROCEDURES BANKRUPTCY PROCEEDING BARGAINING POWER BENEFICIARIES BEST INTERESTS OF CREDITORS BOND MARKETS BONDHOLDERS BORROWER BORROWERS BORROWING CAPACITY BUDGET BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET DEFICIT BUDGET DEFICITS CAPITAL INVESTMENT CAPITAL INVESTMENTS CAPITAL MARKET CAPITAL MARKETS CAUSE OF INSOLVENCY CHAPTER 13 CLAIMS CLASS OF CLAIMS CONTINGENT LIABILITIES CONTINGENT LIABILITY CONTRACT LAWS CONTRACTUAL RIGHTS CORPORATE BANKRUPTCY CORRECTIVE ACTIONS CORRUPTION CREDIT CREDIT CONTRACT CREDIT MARKET CREDIT RATING CREDIT RATINGS CREDITOR CREDITOR CLAIMS CREDITOR RIGHTS CREDITOR RIGHTS SYSTEMS CREDITS CREDITWORTHINESS DEBT DEBT ADJUSTMENT PLAN DEBT CRISES DEBT CRISIS DEBT FINANCE DEBT FINANCING DEBT INSTRUMENT DEBT INSTRUMENTS DEBT MANAGEMENT DEBT MARKET DEBT OBLIGATIONS DEBT PAYMENTS DEBT PROBLEM DEBT RELIEF DEBT RESTRUCTURING DEBT RESTRUCTURING MECHANISM DEBT SERVICE DEBTOR DEBTORS DEBTS DECENTRALIZATION DEFAULT DEFAULT RISK DEFAULT RISKS DEFAULTS DEVELOPING COUNTRIES DISCHARGE OF DEBT EFFECTIVE INSOLVENCY EFFECTIVE INSOLVENCY SYSTEM ENFORCEMENT EXCHANGE RATES EXISTING DEBT FINANCIAL ACCOUNTS FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INDICATORS FINANCIAL INSTITUTIONS FINANCIAL MANAGEMENT FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL PROBLEMS FINANCIAL RESOURCES FINANCIAL RISKS FINANCIAL STABILITY FINANCIAL SYSTEM FISCAL DEFICIT FISCAL DEFICITS FISCAL DISTRESS FISCAL POLICIES FISCAL POLICY FISCAL REFORMS FOREIGN EXCHANGE FOREIGN EXCHANGE RISKS FRAMEWORK FOR INSOLVENCY GENERAL DEBT GOOD FAITH GOVERNMENT DEFICIT GOVERNMENT INSOLVENCY GUARANTEES HARD BUDGET HIGH DEBT IMPLICIT GUARANTEES INDEPENDENT COURTS INDIVIDUAL CREDITORS INFRASTRUCTURE INVESTMENTS INSOLVENCY INSOLVENCY FRAMEWORK INSOLVENCY LAW INSOLVENCY MECHANISM INSOLVENCY MECHANISMS INSOLVENCY PROCEDURE INSOLVENCY PROCEDURES INSOLVENCY PROCEEDING INSOLVENCY PROCEEDINGS INSOLVENCY SYSTEM INSOLVENCY TRIGGER INSOLVENT INSTITUTIONAL PRINCIPLES INSTITUTIONAL REFORMS INSURANCE INTEREST RATES INTERNATIONAL BANK INVESTMENT INVESTMENTS JUDGMENT JUDICIAL MECHANISM JUDICIAL PROCEDURES JURISDICTION LEGAL FRAMEWORK LEGAL FRAMEWORKS LENDER LENDERS LENDING LIQUIDATION LIQUIDATION OF ASSETS LIQUIDITY LOCAL GOVERNMENT LOCAL GOVERNMENT DEBT LONG-TERM BORROWING LOSS-MAKING MAJORITY OF CREDITORS MANDATES MARKET FINANCING MARKET PARTICIPANTS MISMANAGEMENT MODEL LAW MUNICIPAL BANKRUPTCY MUNICIPAL BANKRUPTCY FRAMEWORK MUNICIPAL CREDIT MUNICIPAL CREDIT MARKET MUNICIPAL DEBT MUNICIPAL DEBT ADJUSTMENT MUNICIPAL DEBTORS MUNICIPAL DEFAULTS MUNICIPAL INSOLVENCIES MUNICIPAL INSOLVENCY NEGOTIATIONS NEGOTIATIONS BETWEEN DEBTOR NET DEBT OUTSIDE BANKRUPTCY POVERTY POWER OF CREDITORS PRIVATE CREDITORS PRIVATE INVESTORS PRIVATE LAW PUBLIC ACCOUNTANT PUBLIC ACCOUNTANTS PUBLIC DEBT PUBLIC DISCLOSURES PUBLIC INVESTMENT REGULATORY FRAMEWORK REGULATORY FRAMEWORKS REGULATORY REFORMS REGULATORY SYSTEMS REMEDIES REORGANIZATION REORGANIZATION PLAN REPAYMENT REPAYMENT OF CREDITORS RESTRUCTURING PLAN RESTRUCTURING PROCESS RISK OF INSOLVENCY RISKY DEBT ROLE OF COURTS SATISFACTION OF CREDITORS SETTLEMENT SETTLEMENT OF CLAIMS SHARE SHORT-TERM BORROWING SOFT BUDGET CONSTRAINTS SOVEREIGN DEBT STATE DEBTS TRANSITION ECONOMIES TRANSPARENCY LAW TRUSTEE UNSECURED CREDITORS WAGES WORKOUTS
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100719154958 http://hdl.handle.net/10986/3847

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Summary:	As a result of worldwide decentralization, subnational debt is rising. Subnational debt crises in major developing countries in the 1990s have led to strengthened regulatory frameworks for subnational borrowing and insolvency. With the fragility of the global recovery and increasing public debt, and the structural trends of decentralization and urbanization, it becomes more important to prudently manage subnational default risks. Although the regulatory frameworks share central features, the historical context and entry points for reform drive variations across countries. Addressing soft budget constraints is integral to the regulatory framework. Ex ante fiscal rules for subnational governments attempt to limit default risks; ex post regulation predictably allocates default risk, while providing breathing space for orderly debt restructuring and fiscal adjustment, as well as the continued delivery of essential public services. The regulatory reforms are inseparable from the reform of broader intergovernmental fiscal systems and financial markets.

Managing Subnational Credit and Default Risks

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