Public Information Notice: IMF Board Discusses Collective Action Clauses in Sovereign Bond Contracts
July 26, 2002

The Design and Effectiveness of Collective Action Clauses
June 6, 2002




Collective Action Clauses in Sovereign Bond Contracts—Encouraging Greater Use

Prepared by the Policy Development and Review, International Capital Markets and Legal Departments (In Consultation with other Departments)


June 6, 2002

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Contents


I. Introduction
II. Current Market Practice
A. The Outstanding Stock and Issuance since 1995
B. Reasons for Resistance to Change
    Short run costs and inertia
    Permanent costs
    Institutional Structure of the State
III. Considerations in Promoting the Broader Use of Clauses
IV. The Scope for the Fund to Promote the Use of Clauses
A. Fund Surveillance
B. Financial Incentives: Conditions for Access to Fund Financing
    Conditions for access to Fund facilities
    Changes of the financial terms of Fund facilities
C. Obligations of Membership
V. The Scope Outside the Fund to Promote the Use of Clauses
A. Persuasion
B. Regulatory Requirements
VI. Conclusion
VII. Issues for Discussion