IMF proposes insolvency body for bankrupt countries
The International Monetary Fund has proposed the creation of a single independent insolvency body to oversee bankruptcy procedures of insolvent countries.
At the G7 summit on Saturday, the IMF suggested the creation of an insolvency body to supervise formal international bankruptcy procedures for countries suffering debt crises, such as Argentina.
The body would ‘oversee the process of verifying claims and resolve disputes’ in the proposed sovereign debt restructuring mechanism, proposed by the IMF’s first deputy managing director Anne Krueger.
The SDRM would provide a formal international legal framework to put countries with very high debts into bankruptcy. The approach would be based on existing corporate insolvency procedures similar to America’s Chapter 11 and Chapter 9 designed for municipalities.
A judicial panel would appoint an administrator and give the sovereignty bankruptcy protection from creditors. The panel would be based on the World Bank or the International Court of Justice.
Although the IMF would provide the panel, it would allow creditors to approve the restructuring agreement and make a majority decision, and the country’s sovereignty would be safeguarded as it would only go into the process at its own request.
A spokeswoman from the IMF told Accountancy Age she could not speculate on the composition of the insolvency panel as the proposals were at an early stage and were in the process of being formalised.