Where are the citizens, the taxpayers, in all the discussions about sovereign debt restructuring?

Sir, I refer to Robin Wigglesworth’s and Elaine Moore’s interesting discussion about sovereign debt restructuring. "FT Big Read. Sovereign Debt." May 9.

In it they state: “The International Monetary Fund and finance industry bodies have spent the past few years overhauling aspects of the sovereign bankruptcy architecture….

In April 2013, the US Treasury orchestrated an informal group of creditors, bankers, lawyers and governments to find a solution to the problem. Over the course of a year the ‘Sovereign Debt Roundtable’ meetings were attended by representatives from multilateral institutions, major governments and the London-based International Capital Markets Association.”

And I have to ask: Should not citizens be present there in order to make sure they are not forced to pay what could be considered odious borrowings by the governments or odious credits given by the lenders.

I know that all the costs or additional risks for creditors that could result from any Sovereign Debt Restructuring Mechanism will be reflected, one way or another, sooner or later, in the interest rates of the loans. Even so I am all for a SDRM as it represents a golden opportunity to reduce the risks that we citizens, we taxpayers, are taken to the cleaners, by any arrangements between governments and their bankers.

For instance, it would be great if governments, who cannot earn the right to be trusted by the markets sufficiently, and therefore had to accept risk premiums over x%, had no access to markets, otherwise being willing to accept, on us citizens’ behalf, interest rates in line with payday loans.

And what if the feeling you have is that those collecting payday high interests are some creditors who are "very" close to the government?

Equally a creditor that knowingly lends to a government that is not functioning, as it should, that is for instance violating human rights, should not see his debt classified for repayment in the same conditions than more bona fide lender.

Sir, let me give an example from Venezuela. Would you like your children have to repay a foreign debt contracted, at high interest rates, only because a government, even though there is lack of food and medicines, sells petrol at less than 2 US$ cents per liter?

Whenever we sit down to work out unsustainable debt… I would like that debt qualified.

PS. And there’s more and more and more on this issue.

@PerKurowski ©

FCA, if there are “high interest rules” should there not be “low interest rate rules” too?

Sir, I refer to your “High interest rules”, October 4.

When reading about the laudable efforts of Financial Conduct Authority (FCA) of trying to reign in the excesses of payday lenders, one can also wonder about when the FCA would tackle the other side of the coin; namely the absurd low interest government pays on its debt and which might even be the reason for why many savers might end up having to reach out for moneylenders.

Let us not ignore that besides awful money lenders who could break your kneecaps, there are also awful money borrowers too, even though these use more subtle methods. Like for instance the borrowing public sector, who have the regulators allowing the banks to lend to it holding no capital, while simultaneously requiring the banks to hold about 8 percent in capital when lending to any ordinary citizen.

The best help Britain’s Financial Conduct Authority can give on payday lending is to diminish the need for payday borrowings.

Sir, in “Payday lending”, December 7, you refer to Britain’s new Financial Conduct Authority to be given powers to cap the cost and duration of loans that target the low-paid and vulnerable. 

But the truth is that in terms of the accumulated amounts of excessive interest all vulnerable have to pay, nothing beats what the normal bank borrowers perceived as “The Risky” need to pay in extra interests to the banks, just in order to make up for the fact that bank regulators, for no particular good reason at all, allow banks to hold less capital when lending to “The Infallible”. 

If these regulatory discrimination which make access to bank credit so much scarcer and onerous that they would ordinary be for ‘The Risky”, those which includes small businesses and entrepreneurs, is eliminated, then they would perhaps not be so much need for payday loans. 

In July 2012 I registered a complaint on this with the Financial Ombudsman Service in UK, so I guess I might need to re-register it with the Financial Conduct Authority.