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Risk

Probability of Default (PD)

The estimated likelihood that a borrower will fail to meet its obligations over a given period, usually one year.

Probability of Default puts a number on how likely a borrower is to default. It is one of the three core credit risk parameters, alongside loss given default and exposure at default.

PD feeds both regulatory capital and accounting provisions, and it is estimated from a borrower's characteristics, credit history and the wider economic outlook.

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