Lenders’ Roles and Responsibilities in Sovereign Debt Markets

50 Pages Posted: 25 Apr 2018 Last revised: 9 May 2018

See all articles by Susan Block-Lieb

Susan Block-Lieb

Fordham University School of Law

Mark C. Weidemaier

University of North Carolina School of Law

Date Written: April 5, 2018


Debates about sovereign debt markets presume these markets are unique, because sovereign governments are unique borrowers. To the extent observers look elsewhere for guidance, it is to corporate debt markets. We argue that this conventional view—though useful to a point—has substantially and unjustifiably limited the academic and policy agenda. Rather than dwell on the unique characteristics of sovereign borrowers, we examine the practices and incentives of lenders. We show that, when viewed through this lender-focused prism, sovereign debt has as much or more in common with consumer than with corporate debt. Using consumer debt as a metaphor, we reveal gaps in the debate over how to reform sovereign debt markets. First, assessments of the sustainability of sovereign debt presently—and unjustifiably—overlook the negative consequences of excessive debt for the borrower’s citizens. Second, reform initiatives designed to promote “responsible lending” lack clearly-articulated goals, an omission that will impair the development of a coherent reform agenda. While not a perfect metaphor, experience with consumer lending and financial regulation can help fill these gaps, producing a clearer vision of the roles and responsibilities of lenders in sovereign debt markets.

Keywords: sovereign debt, responsible lending, consumer debt

JEL Classification: H63

Suggested Citation

Block-Lieb, Susan and Weidemaier, Mark C., Lenders’ Roles and Responsibilities in Sovereign Debt Markets (April 5, 2018). University of Illinois Law Review, Forthcoming, UNC Legal Studies Research Paper, Fordham Law Legal Studies Research Paper, Available at SSRN: https://ssrn.com/abstract=3157211

Susan Block-Lieb

Fordham University School of Law ( email )

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Mark C. Weidemaier (Contact Author)

University of North Carolina School of Law ( email )

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CB #3380
Chapel Hill, NC 27599-3380
United States
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