Featured Product

    FSB Seeks Views on Debt Overhang Issues of Non-Financial Corporates

    February 22, 2022

    The Financial Stability Board (FSB) published a discussion paper on approaches to the debt overhang issues of non-financial corporates in the context of the COVID-19 pandemic. The discussion paper aims to gather views, from public, on the practical extent of debt overhang issues in a post COVID-19 environment. It also aims to facilitate a dialog between financial authorities and external stakeholders, including financial institutions, restructuring experts and borrowers, on emerging policy approaches and market practices that could prove effective to support a smooth transition out of debt overhang issues. FSB is requesting feedback on the discussion paper by April 08, 2022.

    The discussion paper looks at debt overhang issues from three angles: assessing companies’ viability in the context of COVID-19, facilitating and incentivizing timely restructuring and refinancing of the debt of viable companies and ways to facilitate exit of unviable companies, and dealing with a large number of companies with debt restructuring needs, with focus on small and medium-size enterprises (SMEs) and micro companies. The discussion paper refers to several examples of policy approaches in place in FSB member jurisdictions to date and emerging industry practices. These include the systematic classification of distressed companies and standardized restructuring solutions, mobilization of private-sector resources by building private-public co-funds or by supporting banking sector code of conducts, and speeding up restructuring procedures that involve SMEs. FSB welcomes comments on the discussion paper and the questions set out below:

    • How do creditors or investors assess the viability of a company in the current environment, given the possible transformation of business environment and consumption patterns following the COVID-19 crisis and considering a need to swiftly process a high number of (re-) assessments as government support measures phase out?
    • What type of market-led mechanisms can help determine corporate viability? How could such market-led mechanisms for conducting due diligence be incentivized or supported?
    • How can governments and financial authorities create favorable conditions to provide incentives for lenders and debtors to engage in corporate debt restructurings and to allow market exit of non-viable companies in a timely fashion?
    • Is there likely to be a need to swiftly process a high number of restructurings as government support measures phase out?
    • How can favorable conditions be created to incentivize investors to provide new financing to distressed but viable companies—for example through equity capital and particularly for SMEs? What other (new) forms of market-based financing may be used to address debt overhang issues—and how?
    • How can public policy support private-sector financing for a smooth transition out of the debt distress post COVID? Which forms of public-private partnerships can be considered effective and under what conditions?

     

    Related Links

     

    Keywords: International, Banking, COVID-19, Credit Risk, SMEs, Resolution Plan, Debt Restructuring, Debt Overhang, Lending, Financial Stability, Basel, FSB

    Featured Experts
    Related Articles
    News

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News
    News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News
    News

    EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance

    The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks

    May 20, 2022 WebPage Regulatory News
    News

    NGFS Report Explores Quantification of Climate Risk Differentials

    The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations

    May 19, 2022 WebPage Regulatory News
    News

    EC Publishes Results on Review of Web Accessibility Directive

    The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.

    May 19, 2022 WebPage Regulatory News
    News

    MAS Consults on Adjustment Spreads for Conversion of SOR Contracts

    The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.

    May 18, 2022 WebPage Regulatory News
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8206