At its meeting in Prague in September 2000, the International Monetary and Financial Committee of the International Monetary Fund (IMF) decided that, in the event of a sovereign default, private creditors should henceforth also share the burden. There is to be no more preferential treatment of creditor groups. – The purpose of the regulation is to prevent private lenders from lending to a country that is already facing sovereign default (e.g. Argentina in 2000, Brazil in 2002) in the expectation that the bad debts will be satisfied by others (practically the IMF). – See London procedure, moral hazard, risk enhancement, subjective, debt repayment mechanism, independent, sovereign debt, denied, debt rescheduling clauses, asset levy.
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