FSB Launches Review of Corporate Debt Workouts

Feedback is invited from financial institutions, corporates, insolvency practitioners and other stakeholders in relation to out of court debt workouts.

The FSB (Financial Stability Board) is seeking feedback from stakeholders as part of its thematic peer review on corporate debt workouts.

The objective of the review is to support Covid-19 response efforts by examining FSB member jurisdictions’ practices, experiences and lessons from out of court debt workouts (OCWs), and the implications for financial stability.

The peer review will take stock of existing and planned OCW frameworks in FSB jurisdictions, examining the experience of particular mechanisms that have been or are being used to address corporate stress, including the role of financial sector authorities.

The review will also seek to identify good practices and examples of how well OCW frameworks have worked in terms of preserving value for viable companies and how useful their debt restructurings are for resolving NPLs and dealing with a large number of distressed corporates.

The summary terms of reference, available here, provide more details on the objectives, scope and process for the review. The FSB has circulated a questionnaire to its member jurisdictions to collect information in this area.

As part of the peer review, the FSB also invites feedback from financial institutions, corporates, insolvency practitioners and other stakeholders on OCWs, including comments on:

  • the types of OCW frameworks (e.g. informal workouts, enhanced workouts and hybrid workouts) most often used in your jurisdiction and why
  • features of OCW frameworks that may be particularly helpful to minimise the economic and financial system damage caused by corporate defaults due to Covid-19
  • the appropriate role of financial sector authorities in facilitating debt restructuring, including to incentivise the participation of various stakeholders in an OCW
  • experiences and challenges in the use of OCWs, including to manage the volume of NPLs in the financial system

Feedback should be sent to [email protected] by 9 August 2021.

The peer review report will be published in early 2022.

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