CRAB RATINGS’ Default Study on Corporate Rating-2025

 Calculation of Marginal Default Rate (MDR)CRAB RATINGS’ DEFAULT STUDY
Rating CategoryMDR for Year 1MDR for Year 2MDR for Year 31-Year Default Rate3-Year CDR
AAA0.00%0.0%0.00%0.00%0.00%
AA0.00%0.0%1.25%0.00%1.25%
A0.00%0.0%0.00%0.00%0.00%
BBB0.00%0.0%0.00%0.00%0.00%
BB0.00%0.0%0.00%0.00%0.00%
B0.00%0.0%0.00%0.00%0.00%
CCC0.00%0.0%0.00%0.00%0.00%

CRAB RATINGS’ Default Study on SME Rating-2025

 Calculation of Marginal Default Rate (MDR)CRAB RATINGS’ DEFAULT STUDY
Rating CategoryMDR for Year 1MDR for Year 2MDR for Year 31-Year Default Rate3-Year CDR
CRAB-ME 10.0%0.00%0.0%0.0%0.00%
CRAB-ME 20.0%0.00%0.0%0.0%0.00%
CRAB-ME 30.1%0.87%2.1%0.1%3.09%
CRAB-ME 411.6%4.35%9.1%11.6%23.15%
CRAB-ME 50.0%0.0%0.0%0.0%0.0%
CRAB-ME 60.0%0.0%0.0%0.0%0.0%

CRAB calculates default rate based on the default performance of Issue/Instrument/Entity/Bank Loan. A missed or deferred payment on the Issue/ Instrument is treated as a default. In case of Issue/Instrument rating, Default is recognized at the first instance of delay in servicing of interest or principal on the rated debt instrument. In case of Bank loan rating, CRAB defines default as a missed or a delayed payment for long time by an entity in breach of the agreed terms of the loan facility which defined as default in the Bangladesh Bank Company Act 1991. Default rate is the percentage of default to total rated entities in a particular time period in a specific scale. It is calculated for each rating scale for a multiple time periods.

Upon a default, CRAB downgrades the rating for the rated Issue/ Instrument to ‘D’, regardless of the magnitude or duration of the default. However, if strong reasons exist for differentiating among the rating of the Issue/ Instrument / bank loan that is in default and that of the other Instruments/ bank loan that aren’t, the reasons and protective factors for such Issue/Instruments/ bank loan (that are not in default), as assessed by CRAB, would have a critical bearing on the rating of the other Issue/ Instrument. In such cases, the rating of the other Issue/ Instruments of the same Issuer may not be revised to ‘D’, but suitably reviewed.

Marginal Default Rate (MDR) is defined as the number of entities defaulting in a particular year in a specific rating category as a proportion of the number of entities in that rating category in the cohort at the beginning of the year under study, adjusted for non-cooperative client. In case of Corporate Default Study the cohort includes all category of rating (Instrument, entity, bank loan) except SME rating. Cumulative Default Rate (CDR) captures the default rate over one or more-than one-year horizon. In calculating the CDR, the weighted average marginal default rates (MDRs) of the various cohorts are used, the weights being the number of issuers in the cohorts.