Legal Implementation and Management of Infrastructure Financing Models: Trade-Offs between Risk and Maturity
Bank for International Settlements Working Paper No. __ (2015), Forthcoming
Posted: 5 Aug 2015 Last revised: 19 Aug 2015
Date Written: August 4, 2015
Many economies have difficulty financing infrastructure development: Bank loans of the long tenure necessary pose currency and maturity risks, and stable capital markets require robust legal foundations. Shortfalls in infrastructure financing, however, reduce the quality of life for citizens and inhibit the productive capacity of economies. Intermediate financing models therefore must sustain private financing in infrastructure projects in economies in which legal reforms remain ongoing. Previous studies have explored possible structures for these models. The studies, however, have not considered the legal infrastructure necessary to implement and support these financing techniques. This paper analyzes the tradeoffs that intermediate models for financing infrastructure present, in terms of augmenting the availability of long-term capital versus managing its risks. The paper explores potential fault lines in each model, and the necessary role for law in each. The Bank for International Settlements provided grant funding to support the research underlying this paper, and the Bank will use the research to inform its work related to infrastructure finance and advice to central banks.
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