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What is the default rate?
The default rate is the percentage of loans that have entered a state of default at least once during the monitored period.
When is a loan considered to be in default?
According to European legislation, a loan is considered to be in default if at least one of the following situations occurs:
1. Probability of non-repayment
If there is any reason to believe that the client will not repay the loan in full or will fail to meet their financial obligations without the need for extraordinary measures – such as enforcing collateral.
2. Long-term default
The project owner is more than 90 days past due with a significant portion of the loan.
What the contract allows
If the contract states that the client (or project owner) may defer or modify repayments (e.g. in the case of a repayment deferral), this is not considered a default. In such a case, the new repayment schedule is followed.
Other situations in which a loan may be classified as in default
In addition to the above, the following scenarios are also taken into account:
- Debt restructuring – for example, a significant reduction in the amount owed or a deferral of repayments.
- Insolvency or bankruptcy – the project owner has filed for insolvency or has been granted it by a court.
These cases are also reflected in the calculation of the so-called default rate.
How is the default rate calculated?
The default rate is determined using the following formula:
Default rate (%) = (number of loans that defaulted at least once during the year / number of active loans at the beginning of the year) × 100
- Twelve-month periods are monitored.
- Each loan is calculated individually based on the specific project.
- The loan amount has no effect – each loan carries the same weight.
- Short-term loans do not distort the calculation.
What is the expected default rate?
The expected default rate is an estimate based on historical data and trends. It is not an exact forecast, but a calculation based on the average default rate over the past 36 months, or a shorter period if applicable.
Transparency and risk categorisation
Each loan is assigned to a specific risk category. The default rate is then calculated separately for each of these categories and published in accordance with Article 20 of Regulation (EU) 2020/1503 of the European Parliament and of the Council.
What information we publish
Each year, we publish the default rate of projects listed on the platform for at least the past 36 months.
By the end of April following the close of each financial year, we publish:
- The expected and actual default rate of all loans offered on the platform, broken down by risk category for the past period,
- A summary of the assumptions used to determine the expected default rate.
According to legislation:
🔗 Regulation (EU) 2020/1503 of the European Parliament and of the Council, Article 20/1)
🔗 Commission Delegated Regulation (EU) 2022/2115 of 13 July 2022, Article 1
