Definition of default

Roles that need it

• Credit Risk Analyst
• Credit Risk Model Developer
• Collections & Recoveries Specialist
• Regulatory Reporting Analyst
• Model Validation Analyst

Skills it belongs to

• Credit analysis and creditworthiness
• Credit risk models (IFRS 9, IRB)
• Prudential and regulatory reporting (COREP, FINREP, US call reports)

Related concepts

• Probability of default (PD)Probability of default is the likelihood that a borrower defaults over a given horizon, usually one year. Capital models use a long-run average (through-the-cycle) PD per rating grade, while IFRS 9 uses point-in-time 12-month and lifetime PDs that react to the economic outlook.
• IFRS 9 stagingIFRS 9 staging sorts financial assets into three buckets by credit quality since initial recognition. Stage 1 carries a 12-month expected credit loss, Stage 2 (significant increase in credit risk) and Stage 3 (credit-impaired) carry a lifetime expected credit loss.
• Non-performing exposure (NPE)A non-performing exposure is a loan or other exposure that is more than 90 days past due or unlikely to be paid in full without collateral being realised. The EU prudential backstop requires minimum loss coverage that rises with the time an exposure has been non-performing.
• ForbearanceForbearance is a concession, such as a payment holiday, longer maturity or lower rate, granted to a borrower facing or about to face financial difficulty. The CRR defines forborne exposures, which carry probation periods before the flag can be removed.

Sources

• Regulation (EU) No 575/2013 (Capital Requirements Regulation), EUR-Lex (external site) accessed 31 Oct 2026
• Guidelines on PD estimation, LGD estimation and treatment of defaulted assets, EBA (external site) accessed 31 Oct 2026

Updated 31 Oct 2026.