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Insolvency Frameworks for Sub-national Governments

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  • Katharina Herold

Abstract

Sub-national insolvency frameworks stipulate rules and procedures to resolve sub-national debt in a prompt and orderly way. As such they may serve to facilitate debt restructuring and the fiscal recovery of sub-national entities. They may even prevent sub-national governments from sliding into insolvency. This paper identifies the benefits of setting up an insolvency framework for sub-national governments complementing existing budget rules and procedures. It analyses different design options of sub-national insolvency frameworks by drawing on existing regimes for municipalities in Colombia, Hungary, South Africa, Switzerland and the United States as well as proposals for sovereign bankruptcy procedures in the literature. The paper also explores the main challenges for implementing sub-national insolvency regimes and presents possible solutions.

Suggested Citation

  • Katharina Herold, 2018. "Insolvency Frameworks for Sub-national Governments," OECD Working Papers on Fiscal Federalism 23, OECD Publishing.
    • Handle: RePEc:oec:ctpaab:23-en
    DOI: 10.1787/f9874122-en
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    Cited by:

    1. Chirinko, Robert, 2023. "What went wrong? The Puerto Rican debt crisis, the “Treasury Put,” and the failure of market discipline," Journal of Corporate Finance, Elsevier, vol. 80(C).
    2. Mikel Erkoreka, 2021. "The fiscal and budgetary impact of COVID-19 pandemic on the public finances of the Basque Country: the Basque system of fiscal federalism put to the test," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 100(02), pages 120-149.

    More about this item

    Keywords

    debt resolution frameworks; municipal bankruptcy; sub-national insolvency;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • K3 - Law and Economics - - Other Substantive Areas of Law

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