In the wake of the financial crises of the late 1990s, the inextricable link between corporate and bank restructuring is widely recognized. One sector’s debt is the other’s asset. The portfolio of the banking sector is the mirror image of the condition of the corporate sector, and successful bank restructuring is contingent on ensuring a robust corporate sector. In order to contain the fiscal cost of financial crises, policymakers need to implement programs that recognize this linkage. For example, in Malaysia, where restructuring of the corporate and banking sector were decisive , the fiscal cost of crisis was 5 percent of GDP, while in Indonesia the slow progress has been an important factor behind the larger fiscal costs there—as high as 60 percent of GDP, according to some estimates.

Countries are recognizing the need for a strategy to avoid and mitigate the severity of crises in the corporate sector. However, there is no magic bullet for corporate restructuring. Policymakers and restructuring agencies face a host of challenges different from those facing the banking sector. There are far more corporations than banks, and policymakers are less knowledgeable about the corporate sector, and no central supervisory agency exists, so countries are less equipped institutionally to deal with fragile corporations.

Corporate restructuring requires a complementary set of government measures and private sector initiatives. Experience has shown that the most effective measures include an effective bankruptcy code, a manageable out-of-court workout, and financial restructuring techniques, including debt -for-equity and asset swaps, as well as operational restructuring, Because cooperation among banks, firms, and government institutions is essential, the government should play a leading role in establishing the policy framework, while corporates and banks should negotiate and finalize the workouts.

Learning to deal with this complex challenge is critical for policymakers, regulators, lawyers, corporate restructuring specialists, and bankers. In this context, the World Bank is organizing a global seminar on Corporate Restructuring: International Best Practices. The seminar will bring together all the parties involved in corporate restructuring to share their insights about what works best, and how to coordinate their efforts better. The seminar will address the following issues:

• Assessing corporate financial vulnerabilities;
  
• Strengthening preventive measures, such as early warning systems;
  
• Applying the right policies after a crisis;
  
• Implementing a workable bankruptcy code;
  
• Applying a feasible, country-specific out-of-court workout approach; and
  
• Using financial engineering techniques.
  

The conference will convene senior policymakers from ministries of finance and central banks, restructuring experts, lawyers, investment bankers, and multilateral specialists in corporate restructuring.

We hope that you will join us in this initiative!