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Finance & Banking vocabulary · Risk Management

Default

Meaning in finance & banking, with examples

/dɪˈfɔːlt/nounCore term

In finance & banking, default means: Failure to make loan or bond payments as agreed. A borrower is usually treated as in default after missing payments for a set period, often 90 days.

In Turkish: temerrüt, ödeme yapmama, borcunu ödeyememe

How it is used

Used as a noun and a verb: a borrower defaults on a loan. Risk teams estimate the probability of default (PD) and loss given default (LGD). Countries and companies can also default on their bonds.

Example sentences

  1. The company defaulted on its bank loans after losing its biggest customer.

  2. Our model estimates the probability of default for every corporate client.

Common collocations

  • default on a loan
  • probability of default
  • in default
  • default rate
  • risk of default
  • credit riskThe risk that a borrower or another party will not pay back money it owes on time or in full, causing a loss for the lender.
  • non-performing loanA loan on which the borrower has stopped making payments, usually for 90 days or more, or which is unlikely to be repaid in full.
  • borrowerA person or organisation that receives money from a lender and agrees to pay it back, usually with interest.
  • write offTo remove a debt or asset from the accounts because it has no value or will not be recovered, and record the amount as a loss.
  • provisionAn amount a bank sets aside from its profit to cover expected losses on loans that may not be repaid.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Risk Management

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This page explains English vocabulary for learners. It is not financial advice.