Defaults Fall in 2003, But Questions Linger

The global default rate tumbled throughout 2003. It closed out the year at 4.57%, down from 9.37% at the beginning of the year. The lower default rate can be partly explained by typical economic behavior in every economic sector. Banks pulled back across the board after the stock market bubble. The companies that were able to secure financing at all were presumably the strong ones, which resulted in fewer bad loans. Another reason for fewer defaults has nothing to do with interest rates. New regulations - namely the Basell II accord - only apply to the biggest US banks, but are still bringing new quantitative tools to the forefront and putting them in the minds of bankers everywhere.