(Bloomberg) -- New York state lawmakers are moving to change a decades-old law that sets a 9% interest rate on defaulted sovereign emerging-market bonds.

State Senator Liz Krueger and Assemblymember Jessica Gonzalez-Rojas introduced measures on Monday that would change the mandatory rate. Under current law, sovereign nations that issue debt in New York are slapped with a 9% rate on their past-due-coupons after they default. 

That can add millions to what a country owes as part of its restructuring. The proposal would match the rate to the going yield on one-year Treasury bills, currently 5.1%. A copy of the proposed legislation was posted to Krueger’s website on Monday. 

Groups that advocate for debt relief have long pushed to cut the so-called statutory rate, which they say penalizes countries while they’re in economic crises. Former Governor Andrew Cuomo called for the change as part of his proposed 2021 budget, but the measure failed in the legislature. 

It’s part of a broader effort by New York lawmakers to overhaul the protracted process of revamping defaulted government debt. At stake is roughly half of all hard currency, emerging-market sovereign bonds — an amount that currently stands at around $800 billion. 

Another amendment introduced Monday would differentiate conventional creditors from “vulture funds” in emerging-market restructurings. 

The so-called champerty doctrine is intended to make “clear that it is unlawful for a minority of bad faith creditors to use New York law to sue and profiteer from the distressed debt of struggling countries,” groups backing the bill said Monday in a statement. 

The amendment specifically targets funds that buy sovereign debt for cheap with the intent of pursuing litigation, according to New York Communities for Change, one of the nonprofits backing the bill.

Read more: New York Bills Spur Sri Lanka Creditors to Mull Bond Changes

Separately, Albany is pushing a bill known as the Sovereign Debt Stability Act, which, among other things, would cap the amount private creditors could recoup during a restructuring. The proposal, which stalled last year, has been criticized by trade associations representing institutional investors, who say it would result in higher upfront borrowing costs. 

Adjusting the interest rate, however, is likely to prove less contentious with Wall Street. Lawmakers passed a similar measure for consumer debt in 2021, but left the rate for sovereign bonds unchanged. 

Jay Shambaugh, US Treasury undersecretary for international affairs, in April backed the idea of using the market to set the rate, rather than a fixed figure.

The rate was originally fixed at 9% in 1981 when former Federal Reserve Chairman Paul Volcker raised borrowing costs to stamp out inflation. 

The change would apply to all claims after May 15. The bills, Senate No. 5623 and its companion Assembly No. 5290, have yet to pass committee in either chamber.

(Updates with details from legislation starting in second paragraph.)

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