When large corporations, those that turn over more than $50 million, default on their debts their banks usually end up with either all or nothing. And to be more precise, the most common outcome is that the bank can recover its full outstanding amount.
Three quarters come back home
It is Richard Crecel, executive director of Global Credit Data, who sums up data in a recent report from his company, in an article on the web site of The Global Treasurer.
Banks recover on average 76 percent of debts owed by large corporations after default, according to the report.
Clearly above what Basel requires
“These are, therefore, reassuring results (though the global outlook for corporate debt remains worrying), indicating that banks are well positioned to absorb corporate defaults without incurring damaging losses. For comparison, the Basel Committee on Banking Supervision (BCBS) requires a recovery rate of just 55 percent under the Foundation IRB approach,” writes Richard Crecel.