Relevant EU directives would also need to be taken into account. All this strengthens my view that although synergies should be realised through consistency in the approaches to corporate and financial sector workouts, we need to recognise that banks (and insurance companies) are different. I have noted that, in corporate insolvencies, countries may differ in the extent to which their legal and statutory arrangements favour the debtor or the creditor. But they will also differ in the extent to which their insolvency laws embody a universal or territorial approach to cross-border insolvencies. Exactly the same distinction is relevant in an international financial insolvency. In the ”single-entity” approach, a bank with branches in several jurisdictions will be wound up according to universal principles, so that creditors and depositors worldwide are entitled to an equal claim on the bank’s worldwide assets. By contrast, a ”separate-entity” (or ”ring-fencing”) approach to liquidating an LCFI proceeds according to territorial principles, so that creditors and depositors of an individual bank branch in a particular jurisdiction take precedence in the distribution of all the LCFI’s assets within that jurisdiction, before the local liquidator is authorised to turn over any excess assets to the home country liquidator. This implies that, in both corporate sector and financial sector insolvencies, banking supervisors and insolvency practitioners will be subject to varying legal responsibilities that may make the co-ordination problem more difficult. I would argue that initiatives such as those of the ILG and UNCITRAL are more consistent with the spirit of a universal approach.

In fact, I would go further and suggest that the application of these initiatives to international financial restructurings and insolvencies is only possible, in all respects, if a country adopts a single entity approach to the liquidation of international banks. Continued adherence to separate entity approaches could therefore make it more difficult to achieve greater consensus on the principles governing cross-border corporate workouts and international financial insolvencies. Sovereign debt workouts I would now like to stray into even more uncharted territory and turn to my third area, sovereign debt workouts. I hope I have already said enough to clarify that the establishment of an effective framework governing the relationships between non-sovereign debtors and their creditors provides a means of involving the private sector in the resolution of financial crises. But how does this relate to the current very live debate about private sector involvement (PSI) in sovereign debt workouts? The potential linkages between the three strands of financial restructurings are amply illustrated by the Asian crisis of 1997-98, which involved widespread defaults by the corporate sector on both its domestic liabilities and its obligations to foreign creditors. This impacted not only on the banking sector’s balance sheets and capital positions, with further feedback effects on the corporate sector, but also on the sovereign sector, through its need to involve itself in bank recapitalisation and corporate sector restructuring.