The financial crisis of the late 1990s gave rise to a series of measures to strengthen the international financial system, one of the most notable of which was the World Bank-International Monetary Fund (Fund) initiative on standards and codes. The international financial community considered that the implementation of internationally recognized standards and codes would provide a framework to strengthen domestic institutions, identify potential vulnerabilities, and improve transparency. The Insolvency and Creditor/Debtor Rights (ICR) Reports on the Observance of Standards and Codes (ICR ROSCs) are assessments of countries conducted in accordance with a methodology based on the World Bank Principles for Effective Insolvency and Creditors Rights and the Recommendations of the UNCITRAL Legislative Guide on Insolvency. The process of participation, and the production of the report are intended to help spur reform and foster strengthened economic institutions in member countries.
The Purpose of an ICR ROSC
The main purpose of an ICR ROSC is to analyze and identify the areas for improvement in the country’s insolvency and credit systems. The ICR ROSC is designed to assess and compare a country’s institutional practices against the internationally recognized standard and, if needed, provide recommendations for improvement in a prioritized methodology. It is not a 'grading' or 'rating' exercise, but rather the ICR ROSC methodology is based on a pluralistic approach, to assess whether the goals of an efficient insolvency system are met and how these goals are achieved.
Areas Covered by an ICR ROSC
The ICR ROSC covers the following areas:
- Creditor rights and enforcement systems.
- Credit risk management, debt recovery and informal enterprise work out practices.
- Formal insolvency system (liquidation and reorganization proceedings).
- Effectiveness of the relevant institutional and regulatory frameworks in implementing laws in this area.
ICR ROSC Methodology
ICR ROSC assessments are conducted on the basis of the ROSC Assessment Methodology 2011 (ICR ROSC Methodology) developed by the Bank and experts in collaboration with the International Monetary Fund (Fund), as well as United Nations Commission on International Trade Law (UNCITRAL) experts. The ICR ROSC Methodology is based on the ICR Standard, in accordance with the objectives and within the parameters of the joint Bank/Fund initiative on standards and codes.
ICR ROSC Participants
As part of its process, an ICR ROSC requires the input of external legal consultants and internationally recognized experts in the area of insolvency and creditor/debtor rights. Stakeholders from the private and public sector also provide input as members of a steering committee, set up by the requesting government.