My speech this morning, therefore, provides an opportunity to signal the Bank’s support for INSOL’s mission to take a leadership role in international insolvency and credit issues and to bring about greater international co-operation among the main players. The growing interest by a number of international organisations in the design of orderly and effective corporate insolvency regimes, and in the encouragement of greater co-operation in cross-border corporate insolvencies, suggests you have been successful in that objective. I think this has been greatly assisted by the important work which the INSOL Lenders Group has been co-ordinating in developing a set of principles governing corporate workouts at the pre-insolvency stage. But corporate workouts represent just one strand in financial restructurings more generally. There are two others I want to cover; and these are, first, restructurings of financial institutions, including banks, and, second, sovereign debt workouts. Indeed, in many instances, restructurings in the corporate sector will need to proceed in tandem with those in the financial and sovereign sectors. I would argue that, in all three cases, a collective approach by the different participants in the private and public sectors, and effective co-ordination among creditors and debtors, should help to preserve value. So I would like to consider today the extent to which these differing approaches raise common themes, and also whether there are distinguishing features which could affect the interactions between the three strands.

Such factors might be compounded by other differences between the corporate and sovereign frameworks, including the lack of collateral (or the means to acquire it) underlying sovereign debt, and the greater uncertainties in the sovereign case on issues such as creditor seniority, assessing ongoing debt sustainability and burden sharing. This latter point also raises the thorny issue of Paris Club comparability, which could be regarded as imposing a form of involuntary PSI on the private creditors. The sovereign case will also generally be subject to political factors that are simply not present in the corporate case. The uncertainties surrounding these questions explain why progress has been slow in devising a framework governing sovereign workouts that is capable of commanding widespread support. I believe there is great scope in developing such a framework to draw heavily on the principles governing corporate and financial sector restructurings, where they are relevant, without compromising the distinct features of sovereign workouts. I am pleased to see that this seems to be the approach being taken by the various private sector groups, and I wish them well in their efforts. Conclusion Let me try to bring my remarks to some conclusion. In a financial system that has become ever more global and inter-connected, central banking increasingly involves spotting linkages between developments in different countries, sectors or markets. Usually this is a matter of identifying and dealing with threats before they emerge. But there is also an opportunity to take ideas developed to address one set of problems and apply them elsewhere.