This paper provides a comparative summary of secured transactions systems related to the use of movable property as collateral in the MENA region vis a vis international practices in countries with modern secured transactions systems. The paper sets out the importance of introducing reforms in the area of secured transactions with the objective of increasing access to credit for businesses, particularly SMEs. The MENA region clearly lags behind all other regions in the introduction of secured transactions reforms. The paper summarizes many of the weaknesses common across the region. The two main critical areas that need urgent reforms are the creation of modern secured transactions laws and electronic movable collateral registries, and the need to improve enforcement mechanisms for security interests in movable property.

The 2008 financial crisis was followed by a global economic downturn, credit crunch, and reduction in cross-border lending, trade finance, remittances, and foreign direct investment, which adversely affected businesses around the world. The consequent increase in the number of firm insolvencies in the financial and corporate sectors highlights the importance of efficient bankruptcy laws. This paper summarizes the theoretical and empirical literature on bankruptcy design, discusses the challenges of introducing and implementing bankruptcy reforms, and presents examples of how policymakers are trying to use the current economic downturn as an opportunity to engage in meaningful reform of the bankruptcy process.

The authors study the effect of reorganization costs on the efficiency of bankruptcy laws. They develop a simple model that predicts that in a regime with high costs, the law fails to achieve the efficient outcome of liquidating unviable businesses and reorganizing viable ones. The authors test the model using the Colombian bankruptcy reform of 1999. Using data from 1,924 firms filing for bankruptcy between 1996 and 2003, they find that the pre-reform reorganization proceeding was so inefficient that it failed to separate economically viable firms from inefficient ones. In contrast, by substantially lowering reorganization costs, the reform improved the selection of viable firms into reorganization. In this sense, the new law increased the efficiency of the bankruptcy system in Colombia.

The current financial crisis has pushed many firms to the brink of bankruptcy. A key policy question is thus whether bankruptcy laws are efficient, in the sense of allowing better firms to reorganize while liquidating unviable firms. The sixth in impact series presents lessons from a reform in Colombia that achieved this objective.

The 2008 financial crisis and consequent rise in corporate insolvencies highlight the clear need for efficient bankruptcy systems to liquidate unviable firms and reorganize viable ones and to do so in a way that maximizes the proceeds for creditors, shareholders, employees, and other stakeholders. This note summarizes the empirical literature on the effect of insolvency reforms on economic and financial activity. Overall, research suggests that effective reforms increase timely repayments, reduce the cost of credit, and lower the rate of liquidation among distressed firms.

The process of bank resolution, or the procedure for handling insolvency of banks using a range of tools, including alternatives to standard bankruptcy processes, has gained major traction since the experience of the 2008-09 financial crisis. In this context, this report reviews models for bank resolution that provide increased flexibility and describes several of the supervisory, legal and instrumental tools that can be used under modernized bank resolution procedures. As well, it looks at the recent European Commission proposals on this matter which take into account international best practices experiences. It also highlights areas of reform and areas where further regulatory considerations and priorities should be considered. The report reviews the bank resolution regimes of a group of European countries as well as those of two non-EU countries to highlight advantages as well as gaps in the legal and regulatory frameworks. This report surveys the banking and deposit insurance laws of six European countries : Poland...

The institutions of bankruptcy have been at the center of the great economic events of the last decade, ranging from the Asian economic crisis, to the transition from socialism to capitalism. Our understanding of the economic, and legal structure of these institutions, as well as of their impact on economic development, has advanced considerably during this period as well. This study provides valuable information on the advances for resolution of financial distress, through theoretical studies, historical data, and evidence from recent worldwide experiences. It illustrates the possibilities, and methods of beneficial legal reform of bankruptcy procedures, as well as the pitfalls of misguided political action. The study is a timely, and valuable resource for economists, lawyers, and all others interested in institutional reform in emerging financial markets.

The 2008 financial crisis was followed by a global economic downturn, a credit crunch, and a reduction in cross-border lending, trade finance, and foreign direct investment, which adversely affected businesses around the world. The consequent increase in the number of firm insolvencies in the corporate sector highlights the need for commercial bankruptcy laws to liquidate efficiently unviable firms and reorganize viable ones, so as to maximize the total value of proceeds received by creditors, shareholders, employees, and other stakeholders. The authors summarize the theoretical and empirical literature on bankruptcy design, discuss the challenges of introducing and implementing bankruptcy reforms, and present examples of how policymakers are trying to take advantage of the current economic downturn as an opportunity to engage in meaningful reform of the bankruptcy process. They also review the main principles of efficient insolvency laws and bankruptcy procedures.

The main objective of this toolkit is to provide technical advice and guidance to World Bank Group staff, donor institutions, government officials and other practitioners on the implementation of secured transactions law and institutional reforms in emerging market countries. However, the Toolkit has not been designed to eliminate the need for in-person expert advice for governments that undertake to introduce a secured transactions system. It is necessary to take into account the factors that are unique to each jurisdiction. The content of the Toolkit will guide the reader through the various stages of the project cycle (identification, diagnostic, solution design, implementation, and monitoring and evaluation) involved in the introduction of secured transactions reforms. The recommendations presented in the Toolkit are based on IFC s experience in the secured transactions area, the contributions of a number of experts in this field, existing literature, and reform experience in a number of emerging market countries and the existing best practices in jurisdictions with advanced secured transactions systems. While the Toolkit does not cover all aspects of secured transactions reform...

“Unfortunately, Stern v. Marshall has become the mantra of every litigant who, for strategic or tactical reasons, would rather litigate somewhere other than the bankruptcy court.” I. INTRODUCTION Quite aptly, the United States Supreme Court borrowed the words of Charles Dickens to describe the life of the case that ultimately resulted in Stern v. Marshall : “This suit has, in the curse of time, become so complicated, that . . . no two . . . lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises.’” Ironically, even after the Court’s decision, the “curse” has continued and many, especially those of the bankruptcy bar, are in disagreement as to the ultimate outcome and unforeseen consequences of Stern. The “big fuss” arose out of the Court’s holding that bankruptcy courts do not have constitutional authority to enter final judgment on a state law counterclaim “that is not resolved in the process of ruling on a creditor’s proof of claim.” The Court stated that common law claims, as well as suits in equity and admiralty, fall within the province of Article III courts, and Congress cannot “chip away at the authority of the judicial branch” by enacting statutes delegating such power to non-Article III judges. The Constitution grants judicial power to courts whose judges enjoy tenure during good behavior and salary protections. Article III provisions are safeguards against intrusion by other branches of government and they ensure that judicial decisions are being made with “[c]lear heads . . . and honest hearts.” A different outcome would have been likely if the case involved a ‘public right’ because the Court has recognized that Congress has the authority to adjudicate in suits involving that exception. The public rights exception applies in cases where a “right is integrally related to particular federal government action.” Other than the obvious limiting effect that Stern will have on bankruptcy courts with regards to adjudicating common law claims...

RESUMEN. La valoración que el mercado realiza de los problemas de insolvencia empresarial se ve condicionada por las características de la legislación concursal, siendo tradicional la distinción entre normativas orientadas a la protección del deudor o de los acreedores. Sin embargo, resulta necesario atender también al propósito perseguido con cada medida concreta establecida en la legislación para tratar de solucionar las difi cultades fi nancieras. En el presente trabajo se realiza una aproximación considerando los diferentes tipos de efi ciencia de la normativa concursal, el carácter antagónico que, en ocasiones, tienen entre sí, y la valoración que el mercado realiza de cada uno de ellos a través de un análisis internacional en los principales países de la Unión Europea.; ABSTRACT. The market valuation of corporate insolvency problems is conditioned by the attributes of bankruptcy laws, with different codes traditionally being oriented toward protecting the debtor or the creditor. Nevertheless, it is also necessary to address the objective of each concrete measure established in the legislation to try to resolve fi nancial distress. This study carries out an approximation, taking into account the different types of effi ciency in bankruptcy regulations...

The Australian corporate insolvency and personal bankruptcy regimes are separate. In recent ears, it has been suggested the two procedures should be merged. Those favouring merger believe it would increase efficiencies, reduce existing overlap and lessen costs. The benefits of a single insolvency regulator are noted as one particular benefit of merged insolvency legislation. Such arguments in support of merger underestimate the difficulties associated with unification given the tradition of separate insolvency laws within Australia and the terms of the Constitution. Significant costs would be associated with merging insolvency and bankruptcy legislation and the reduction of two governmental insolvency regulators to one. The Commonwealth may be unable o enact merged insolvency legislation that included all existing insolvency provisions given limitations within the Constitution. These limitations do not appear to have been addressed by those arguing in favour of merged insolvency procedures. The corporate insolvency and personal bankruptcy procedures have similar objectives and procedures. Both provide for the appointment of an independent entity to ascertain the debtor's abilities, realise their assets and distribute the proceeds among creditors. Further...

The note shares conflicting interests hampering insolvency systems reform in Latin America, and aims at assessing legal weaknesses, to propose some common solutions. Most insolvency systems share two prime objectives: allocating risk among participants in the economy, in a predictable, equitable and transparent way, and, maximizing the value of the insolvent firm for the benefit of all interested parties, and the broader economy. However, current regional problems reflect too rigid and formal insolvency laws; very high degrees of judicial discretion, increasing uncertainty, and financial risks; rampant corruption; absence of enforcement mechanisms to protect creditor interests; and, a powerful, explicit bias in favor of labor claimants, who are highly protected under preferential treatment. The note proposes a common set of essential reforms, to be prioritized according to each county's circumstances. First, disclosure of behind-the-scene dealings should be required, incentives created to combat corruption...

The note highlights the importance of sound intergovernmental fiscal relations, and proper regulation for successful sub-national borrowing, and illustrates the potential macroeconomic hazards of decentralizing borrowing powers, arguing that the impact of a possible moral hazard problem, namely, the access to financial markets by sub-national governments, may generate unplanned liabilities for central governments. Yet academia, and country experiences do not suggest adverse links between decentralized borrowing powers, and the central government's ability to maintain fiscal discipline, and macroeconomic stability. Rather the key seems to lie in the design of fiscal decentralization, particularly the regulatory framework under which borrowing powers are decentralized. The note outlines the reasons why sub-national governments require access to financial markets: to finance capital spending, and foster political accountability, which can be achieved through direct borrowing by central government, through a public financial intermediary...

The recent literature on law and finance has drawn attention to the importance of creditor rights in influencing the development of financial systems and in affecting firm corporate governance and financing patterns. Recent financial crises have also highlighted the importance of insolvency systems to resolve corporate sector financial distress. The literature and crises have emphasized the complex role of creditor rights, affecting not only the efficiency of ex-post resolution of distressed corporations, but also influencing ex-ante risk-taking incentives and an economy's degree of entrepreneurship more generally. The authors document how often bankruptcy is actually being used for a panel of 35 countries. Next they investigate the effects of specific design features of insolvency regimes in relation to the quality of the countries' overall judicial systems on the use of bankruptcy. The authors find, correcting for overall financial development and macroeconomic shocks, that bankruptcies are higher in Anglo-Saxon countries and in market-oriented financial systems characterized by weaker and multiple banking relationships. They also find that greater judicial efficiency is associated with more use of bankruptcy...

Reforming bankruptcy laws is difficult for many reasons. First of all, attitudes in Italy toward bankruptcy make it a difficult subject to generate support for. Secondly, bankruptcy reforms are complex and lengthy. They require changes not only to the bankruptcy law but also to other important parts of the legal framework, such as the codes of civil procedures and, in the case of Italy, the penal code. Finally, they require support from those that must implement them. This paper outlines the author experience in leading the commission for the reform of the bankruptcy law and the lessons learned from it.

Did the U.S. government's intervention in the Chrysler reorganization overturn bankruptcy law? Critics argue that the government-sponsored reorganization impermissibly elevated claims of the auto union over those of Chrysler's other creditors. If the critics are correct, businesses might suffer an increase in their cost of debt because creditors will perceive a new risk, that organized labor might leap-frog them in bankruptcy. This paper examines the financial market where this effect would be most detectible, the market for bonds of highly unionized companies. The authors find no evidence of a negative reaction to the Chrysler bailout by bondholders of unionized firms. They thus reject the notion that investors perceived a distortion of bankruptcy priorities. To the contrary, bondholders of unionized firms reacted positively to the Chrysler bailout. This evidence suggests that bondholders interpreted the Chrysler bailout as a signal that the government will stand behind unionized firms. The results are consistent with the notion that too-big-to-fail government policies generate moral hazard in the credit markets.

This paper examines the relationship between corporate governance level and the bankruptcy law for such debt variables as firms' cost of debt and amount (and variation) of debt. Our empirical results are consistent with the model's prediction. First, we find that the better the corporate governance, the lower the cost of debt. Second, we find that better corporate governance arrangements relate to firms with higher amounts of debt. Finally we find that better governance and harsher bankruptcy laws have a positive effect on debt. Moreover, this effect is stronger for firms with worse corporate governance, which indicates that the law works as a substitute for governance practices to protect creditors' interests.

Esta tese é composta por três ensaios sobre o mercado de crédito e as instituições que regem bancarrota corporativa. No capítulo um, trazemos evidências que questionam a ideia de que maiores níveis de proteção ao credor sempre promovem desenvolvimento do mercado de crédito. Desde a publicação dos artigos seminais de La Porta et al (1997,1998), a métrica de proteção ao credor que os autores propuseram -- o índice de proteção ao credor -- tem sido amplamente utilizada na literatura de Law and Finance como variável explicativa em modelos de regressão linear em forma reduzida para determinar a correlação entre proteção ao credor e desenvolvimento do mercado de crédito. Neste artigo, exploramos alguns problemas com essa abordagem. Do ponto de vista teórico, essa abordagem geralmente supõe uma relação monotônica entre proteção ao credor e expansão do crédito. Nós apresentamos um modelo teórico para um mercado de crédito com seleção adversa em que um nível intermediário de proteção ao credor é capaz de implementar equilíbrios first best. Este resultado está de acordo com diversos outros artigos teóricos, tanto em equilíbrio geral quanto em equilíbrio parcial. Do ponto de vista empírico...

This paper examines the relationship between corporate governance level and the bankruptcy law for such debt variables as firms' cost of debt and amount (and variation) of debt. Our empirical results are consistent with the model's prediction. First, we find that the better the corporate governance, the lower the cost of debt. Second, we find that better corporate governance arrangements relate to firms with higher amounts of debt. Finally we find that better governance and harsher bankruptcy laws have a positive effect on debt. Moreover, this effect is stronger for firms with worse corporate governance, which indicates that the law works as a substitute for governance practices to protect creditors' interests.