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Preferred and Non-Preferred Creditors / Tito Cordella.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Cordella, Tito.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Capital Markets and Capital Flows.
- Debt Markets.
- Debt Restructuring.
- Defaults.
- Emergency Financing.
- External Debt.
- Finance and Financial Sector Development.
- Financial Markets.
- Governance.
- International Economics and Trade.
- International Financial Institutions.
- International Financial Markets.
- International Governmental Organizations.
- Preferred Creditor Status.
- Preferred Creditor Treatment.
- Sovereign Debt.
- Local Subjects:
- Capital Markets and Capital Flows.
- Debt Markets.
- Debt Restructuring.
- Defaults.
- Emergency Financing.
- External Debt.
- Finance and Financial Sector Development.
- Financial Markets.
- Governance.
- International Economics and Trade.
- International Financial Institutions.
- International Financial Markets.
- International Governmental Organizations.
- Preferred Creditor Status.
- Preferred Creditor Treatment.
- Sovereign Debt.
- Physical Description:
- 1 online resource (28 pages)
- Place of Publication:
- Washington, D.C. : The World Bank, 2019.
- System Details:
- data file
- Summary:
- International financial institutions (IFIs) generally enjoy preferred creditors treatment (PCT). Although PCT rarely appears in legal contracts, when sovereigns restructure bilateral or commercial debts they normally pay IFIs in full. This paper presents a model where a creditor, such as an IFI, that can commit to lend limited amounts at the risk-free rate and can refrain from lending into arrears is always repaid and adds value. The analysis suggests that IFIs should not mimic commercial lenders, but exploit their complementarity, even if banning commercial borrowing can sometimes be optimal. IFIs should also focus on countries with limited market access and should not be forced into debt restructurings.
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