Defaults Rose Modestly In 2022; Accelerated In Second Half Of The Year

Defaults in Europe increased in 2022 against the backdrop of high inflation, the Russia-Ukraine conflict, rising interest rates, and increasing recession risk. The Russia-Ukraine conflict challenged the region's energy markets because of dependence on Russian oil and gas. Russia limiting gas flows to the Nord Stream constrained energy supply and increased energy prices in the region (see "Europe Braces For A Bleak Winter", Aug. 29, 2022, and "Global Credit Conditions Q4 2022: Darkening Horizons", Sept. 29, 2022). Both the European Central Bank and the Bank of England hiked rates multiple times throughout the year, with each increase varying between 25 basis points to 75 basis points (bps). Tougher financing conditions and high inflation in the region weighed on household spending by eroding incomes.

Growth prospects in the European region continue to depend on the trajectory of energy markets, geopolitical events, and monetary policy decisions.

S&P Global Ratings' European corporate default tally (including financial and nonfinancial sectors) rose to 17 in 2022, from 14 in 2021(see chart 1). This resulted in an overall default rate of 1.0%, slightly higher than 0.8% in 2021.

Throughout the latter half of the year, defaults accelerated, as indicated by the 10 defaults between September and December. These figures suggest the number of defaults is likely to continue rising in the coming year. The first quarter of 2023 confirmed this increase with seven defaults, compared with none in the first quarter of 2022.

With rising rates and inflation still in the early stages in 2022, the overall increase in defaults from the prior year was modest. Defaults also came from fewer sectors than is typical in a more challenging year, such as 2020. The leisure time/media sector led with five defaults, followed by the energy and natural resources consumer/service with three defaults. Health care/chemicals and consumer/service sector had two defaults each and high tech/computers/office equipment, aerospace/automotive/capital goods/metal, transportation, financial institutions, and forest and building products/homebuilders sectors each had one default.

By country, defaults in 2022 were also sporadic. The U.K. led with six defaults, followed by Sweden, Switzerland, Luxembourg, and Germany with two each. The other three are from Spain, Ireland, and the Netherlands, having one default each.

The annual default rate rose to 1.0% in 2022, from 0.8% in 2021. For the 13th consecutive year, no corporate issuers that we rated investment grade ('BBB-' or higher) at the beginning of 2022 defaulted during the year. The speculative-grade ('BB+' or lower) default rate also rose, to 2.2% from 1.8% a year earlier (see table 1).

Table 1

European corporate default summary
Year	Total defaults*	Investment grade defaults	Speculative grade defaults	Default rate (%)	Investment grade default rate (%)	Speculative grade default rate (%)	Total debt outstanding (Bil. $)
1991	1	0	1	0.76	0.00	50.00
1992	0	0	0	0.00	0.00	0.00
1993	1	0	1	0.51	0.00	20.00
1994	0	0	0	0.00	0.00	0.00
1995	1	0	1	0.31	0.00	9.09
1996	0	0	0	0.00	0.00	0.00
1997	0	0	0	0.00	0.00	0.00
1998	0	0	0	0.00	0.00	0.00
1999	6	0	6	0.91	0.00	6.32	0.9
2000	4	1	3	0.54	0.16	2.56	0.6
2001	13	1	11	1.46	0.14	8.46	2.7
2002	23	1	18	2.07	0.13	12.59	16.2
2003	9	2	6	0.84	0.25	3.73	13.7
2004	3	0	3	0.30	0.00	1.61	1.3
2005	2	0	2	0.19	0.00	0.95	0.0
2006	4	0	4	0.37	0.00	1.80	0.0
2007	2	0	2	0.18	0.00	0.96	0.5
2008	9	1	5	0.54	0.11	2.50	80.1
2009	22	1	16	1.51	0.11	8.08	39.7
2010	4	0	2	0.18	0.00	1.02	9.3
2011	4	0	4	0.35	0.00	1.58	5.0
2012	9	0	7	0.59	0.00	2.23	19.7
2013	16	0	11	0.90	0.00	2.88	17.8
2014	6	0	5	0.37	0.00	0.97	1.7
2015	16	0	13	0.87	0.00	2.11	10.6
2016	15	0	12	0.80	0.00	1.95	22.0
2017	17	0	16	1.06	0.00	2.59	11.9
2018	13	0	12	0.79	0.00	1.95	22.3
2019	15	0	15	0.95	0.00	2.23	26.0
2020	42	0	38	2.32	0.00	5.35	110.3
2021	14	0	13	0.80	0.00	1.81	7.0
2022	17	0	17	1.00	0.00	2.17	17.6
Average	9	0	8	0.67	0.03	4.92	18.2
Median	6	0	5	0.57	0.00	2.14	11.2
Std. dev.	9	0	8	0.57	0.06	9.25	25.6
Min	0	0	0	0.00	0.00	0.00	0.0
Max	42	2	38	2.32	0.25	50.00	110.3
*This column includes companies that were no longer rated at the time of default. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

In aggregate, credit quality stabilized in 2022, with upgrades at 9.2% against a 6.0% downgrade rate. Nevertheless, the proportion of speculative-grade issuers rated 'B-' and lower remained high by year-end, at 30%.

Our credit ratings continue to serve as effective indicators of relative creditworthiness. The one-year Gini coefficient--a measure of the rank-ordering power of ratings--for European corporate issuers was 82.0% in 2022, down from 91.2% in 2021. The variation is due to two defaults from the 'BB' category in 2022, while the most highly rated defaults in 2021 emerged from the 'B+' category. From 1981 to 2022, the one-year weighted average Gini coefficient was 89.6%, the three-year average was 85.2%, and the five-year average was 82.4%.

We base this study on our public and confidential issuer credit ratings on both nonfinancial and financial companies, but we exclude credit estimates, which we typically base on private information we receive from investors. We include European industrials, utilities, financial institutions--including banks, brokerages, asset managers, and other financial entities--and insurance companies.

We base our calculations of default and transition rates on the number of issuer credit ratings rather than the affected debt volumes. Where we refer to the weighted average values of certain statistics across different periods, we weight the statistics for each period by the number of issuer credit ratings outstanding at the beginning of each period. Further details on our calculation approaches and the terminology we use in this study, including a list of the European countries that we included, are in Appendix I. Further details on the Gini coefficient methodology are in Appendix II.

2022 Observations

Below are other key observations from our review of European corporate defaults and rating transitions in 2022:

• The largest default by amount of debt in 2022 was Cinema operator Cineworld Group PLC, which filed for Chapter 11 protection to complete a restructuring process. It had $5.8 billion in outstanding debt at the time of its default on Sept. 9.
• We estimate the volume of outstanding debt associated with European corporate defaulters in 2022 was $17.6 billion, up considerably from $7.0 billion in 2021. Globally, there were 83 defaulters that accounted for about $107 billion in debt in 2022.
• Expressing defaults as a proportion of total ratings, the European speculative-grade corporate default rate rose to 2.2% in 2022 from 1.8% in 2021, roughly in line with the 1.7% in the U.S., 2.4% in emerging markets, and 1.5% globally (see chart 2).
• For the 17 European companies that defaulted in 2022, the average time to default from the initial rating was 3.9 years, down from 4.7 years in 2021 and the long-term average of 4.3 years.
• At year-end 2022, speculative-grade issuers accounted for 45.8% of all European corporate ratings, lower than 46.1% at the end of 2021 but up considerably from 17.9% at the end of 2009 (see chart 3).
• Of the 17 defaults in 2022, nine were distressed exchanges, and four each were the result of missed interest or principal payments, and Chapter 11.
• No European corporate entities that we rated higher than 'BB' at the beginning of 2022 defaulted during the year.
• Once again, defaults from the lowest ratings ('CCC'/'C') far exceeded those from any other rating (see table 3).

Table 2

2022 publicly rated European corporate defaults
Company name	Reason for default	Country	Industry	Debt amt. (Mil.$)	Default date	Rating 1 year prior to default	Rating 3 years prior to default	First rating	Date of first rating
Owl Finance Ltd. (Hibu Group Ltd.)	Distressed exchange	U.K.	Leisure time/media	293.8	4/7/2022	CCC	-	CCC+	12/20/2019
Promotora de Informaciones S.A.	Distressed exchange	Spain	Leisure time/media	0.0	4/11/2022	CCC+	-	CCC+	1/7/2021
Petropavlovsk PLC	Missed interest	U.K.	Energy and natural resources	500.0	4/12/2022	B-	B-	B-	10/24/2017
EuroChem Group AG	Missed interest	Switzerland	Health care/chemicals	0.0	4/14/2022	BB-	BB-	BB	12/3/2014
Safari Beteiligungs Gmbh (Dice Midco Sarl)	Distressed exchange	Germany	Leisure time/media	370.1	5/6/2022	CCC+	B	B	11/27/2017
SAS AB	Chapter 11	Sweden	Transportation	0.0	7/7/2022	CCC	-	B-	12/7/2020
Endo International PLC	Chapter 11	Ireland	Health care/chemicals	0.0	8/17/2022	B-	B	BB+	11/15/2010
Vue International Bidco plc (Vue Entertainment International Ltd)	Distressed exchange	U.K.	Leisure time/media	693.8	9/1/2022	CCC+	B-	B	7/8/2013
Bright Bidco B.V.	Chapter 11	Netherlands	Aerospace/automotive/capital goods/metal	1,783.1	9/1/2022	CCC	B	B+	7/28/2017
Cineworld Group PLC	Chapter 11	U.K.	Leisure time/media	5,803.2	9/9/2022	CCC	-	CCC	11/27/2020
Schur Flexibles GmbH	Distressed exchange	Germany	Forest and building products/homebuilders	485.3	9/30/2022	NR	B	B	2/4/2019
Transocean Ltd.	Distressed exchange	Switzerland	Energy and natural resources	4,909.0	10/3/2022	CCC	-	CCC-	11/25/2020
Metalcorp Group S.A.	Missed principal	Luxembourg	Energy and natural resources	254.7	10/6/2022	B	-	B	6/3/2021
Mitel Networks (International) Ltd	Distressed exchange	U.K.	High tech/computers/office equipment	1,470.0	10/31/2022	CCC+	B	B	6/25/2018
L1R HB Finance Ltd	Distressed exchange	U.K.	Consumer/service sector	0.0	11/16/2022	B-	B	B	9/26/2017
CORESTATE Capital Holding S.A.	Missed principal/interest	Luxembourg	Financial institutions	482.9	11/29/2022	BB-	BB+	BB+	11/6/2017
		Total		17,046
*Table does not include confidentially rated defaulters or their associated debt amounts. Initial ratings for these companies are those immediately following a prior distressed exchange. Health/chem = Healthcare/Chemicals, Aero/auto/CG/metal = Aerospace/automotive/capital goods/metal, High tech = High technology/computers/office equipment, Forest products = Forest and building products/homebuilders, Cons/service = Consumer/service sector E & NR = Energy and Natural Resources. Administration = Admin, Chapter 11 = Ch. 11, Chapter 15 = Ch. 15, Distressed Exchange = Dist. Ex., Foreign Bankruptcy = F. Bank, Missed Interest = Missed, Missed Principal = Missed, Missed Principal/Interest = Missed, Payment Suspension = Susp., Receivership = Rec., Regulatory Directive = Reg. Dir. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 3

Annual European corporate default rates by rating modifier (%)
	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-
1981	0.00	N/A	0.00	N/A	N/A	0.00	N/A	N/A	0.00	N/A	0.00	N/A	N/A	N/A	N/A	N/A
1982	0.00	N/A	0.00	N/A	0.00	0.00	N/A	N/A	0.00	N/A	0.00	N/A	N/A	N/A	N/A	N/A
1983	0.00	N/A	0.00	N/A	0.00	0.00	0.00	N/A	0.00	N/A	0.00	N/A	N/A	N/A	N/A	N/A
1984	0.00	0.00	0.00	N/A	0.00	0.00	0.00	N/A	0.00	N/A	N/A	0.00	0.00	N/A	N/A	N/A
1985	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	0.00	0.00	N/A	N/A	N/A
1986	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	0.00	0.00	N/A	N/A	N/A
1987	0.00	0.00	0.00	0.00	N/A	0.00	0.00	N/A	0.00	N/A	0.00	0.00	N/A	0.00	N/A	N/A
1988	0.00	0.00	0.00	0.00	N/A	0.00	0.00	N/A	0.00	N/A	0.00	0.00	N/A	0.00	N/A	N/A
1989	0.00	0.00	0.00	0.00	N/A	0.00	0.00	N/A	0.00	N/A	0.00	N/A	N/A	0.00	N/A	N/A
1990	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A
1991	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	0.00	N/A	N/A	N/A	N/A	100.00
1992	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	N/A	N/A	N/A	N/A	N/A
1993	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	0.00	50.00	N/A
1994	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	0.00	N/A
1995	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	33.33	0.00
1996	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1997	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1998	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1999	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.55	0.00	0.00	9.09	18.18
2000	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.45	0.00	0.00	0.00	0.00	0.00	10.53
2001	0.00	0.00	0.00	0.00	0.00	0.91	0.00	0.00	0.00	0.00	0.00	0.00	7.69	6.45	15.38	13.33
2002	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.93	0.00	0.00	0.00	3.03	6.90	11.76	9.09	44.44
2003	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.06	1.96	0.00	0.00	0.00	0.00	0.00	0.00
2004	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2005	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.08	0.00	0.00	0.00
2006	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.82	2.44	5.56
2007	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.55
2008	0.00	0.00	0.00	0.00	0.00	0.00	0.64	0.00	0.00	0.00	0.00	0.00	0.00	2.94	2.78	11.11
2009	0.00	0.00	0.00	0.00	0.00	0.58	0.00	0.00	0.00	0.00	0.00	0.00	2.94	0.00	19.23	11.76
2010	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2011	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.63	3.85
2012	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.08	0.00	0.00	3.70
2013	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.33	0.00	12.82
2014	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.32	4.08
2015	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.02	1.61
2016	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.48	5.26
2017	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.53	1.59
2018	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.58	2.82
2019	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.98	0.43	1.10
2020	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.70	2.02	2.01	6.48
2021	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.37	0.00	0.00
2022	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.61	1.25	0.00	0.78	1.41
Average	0.00	0.00	0.00	0.00	0.00	0.04	0.02	0.03	0.03	0.18	0.00	0.28	0.85	0.90	5.14	9.11
Median	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.66	3.70
Std. dev.	0.00	0.00	0.00	0.00	0.00	0.16	0.10	0.17	0.17	0.71	0.00	0.97	1.96	2.35	11.19	19.64
Min	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max	0.00	0.00	0.00	0.00	0.00	0.91	0.64	0.93	1.06	3.45	0.00	4.55	7.69	11.76	50.00	100.00
N/A--Not applicable. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Recent Defaults Remain Low Despite Growth In Speculative Grade

The count of active corporate ratings in Europe has increased noticeably since the financial crisis, largely because of the increase in new issuers (see table 4). New speculative-grade issuers have made up most of the annual totals since 2010. For the purposes of our default studies, we consider an issuer that has reemerged from a prior default as a new issuer once it receives a post-default rating. Many new issuers are the result of a completed distressed exchange, particularly at the 'CCC' level.

Table 4

Rating classification of new Europe corporate ratings*
	First rating
Year	AAA	AA	A	BBB	BB	B	CCC/C	Total	% IG	% SG
1981	2	0	0	0	0	0	0	2	100.00	0.00
1982	5	0	1	0	0	0	0	6	100.00	0.00
1983	6	2	1	0	1	0	0	10	90.00	10.00
1984	4	3	0	0	0	0	0	7	100.00	0.00
1985	1	2	2	0	0	0	0	5	100.00	0.00
1986	8	0	1	1	0	0	0	10	100.00	0.00
1987	4	7	2	0	0	0	0	13	100.00	0.00
1988	3	10	1	0	0	0	0	14	100.00	0.00
1989	3	15	4	0	0	1	0	23	95.65	4.35
1990	11	14	11	0	0	0	0	36	100.00	0.00
1991	5	13	9	2	1	0	0	30	96.67	3.33
1992	4	13	14	7	0	2	0	40	95.00	5.00
1993	7	17	22	9	0	1	0	56	98.21	1.79
1994	4	18	36	13	2	4	0	77	92.21	7.79
1995	1	8	19	12	5	2	0	47	85.11	14.89
1996	8	24	40	18	7	3	0	100	90.00	10.00
1997	4	22	33	30	14	12	0	115	77.39	22.61
1998	2	33	52	19	23	27	1	157	67.52	32.48
1999	4	26	44	35	24	22	0	155	70.32	29.68
2000	3	20	46	39	17	21	0	146	73.97	26.03
2001	3	26	51	51	27	7	0	165	79.39	20.61
2002	1	11	30	27	28	13	1	111	62.16	37.84
2003	0	4	23	36	17	22	0	102	61.76	38.24
2004	3	5	45	26	32	33	1	145	54.48	45.52
2005	1	16	29	28	15	39	2	130	56.92	43.08
2006	2	11	25	24	11	26	1	100	62.00	38.00
2007	3	19	38	19	24	19	1	123	64.23	35.77
2008	0	20	44	14	10	10	2	100	78.00	22.00
2009	0	6	28	18	8	13	14	87	59.77	40.23
2010	0	6	17	12	15	49	7	106	33.02	66.98
2011	1	3	15	19	24	62	6	130	29.23	70.77
2012	0	3	12	27	22	63	4	131	32.06	67.94
2013	0	4	29	26	30	127	13	229	25.76	74.24
2014	0	3	17	32	32	132	4	220	23.64	76.36
2015	0	2	14	28	28	78	5	155	28.39	71.61
2016	0	1	14	26	19	73	11	144	28.47	71.53
2017	0	1	11	38	30	102	7	189	26.46	73.54
2018	0	2	16	34	43	125	3	223	23.32	76.68
2019	0	3	16	20	25	109	9	182	21.43	78.57
2020	0	4	8	24	19	65	19	139	25.90	74.10
2021	0	0	6	28	32	113	14	193	17.62	82.38
2022	0	2	4	28	14	90	11	149	22.82	77.18
Total	103	399	830	770	599	1465	136	4302	48.86	51.14
*Includes issuers that are assigned a new rating after default as well as those companies that receive a rating for the first time. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Leisure/time media companies had the highest default rate in 2022, at 4.76%, much higher than any other sector but still below this sector's 2020 default rate of 5.77% (see table 5).

Table 5

Annual European corporate default rates by industry (%)
Year	Aerospace / automotive / capital goods / metal	Consumer / service sector	Energy and natural resources	Financial institutions	Forest and building products / homebuilders	Health care / chemicals	High technology / computers / office equipment	Insurance	Leisure time / media	Real estate	Telecommunications	Transportation	Utility
1991	0.00	0.00	0.00	0.00	N/A	0.00	33.33	0.00	0.00	N/A	0.00	0.00	0.00
1992	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00
1993	0.00	0.00	0.00	0.00	0.00	0.00	14.29	0.00	0.00	N/A	0.00	0.00	0.00
1994	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00
1995	0.00	0.00	0.00	0.69	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1996	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1997	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1998	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1999	2.44	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	17.24	0.00
2000	2.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.63	7.14	0.00
2001	4.55	1.54	0.00	0.00	0.00	2.50	0.00	1.03	5.71	0.00	6.67	3.33	0.00
2002	2.63	1.41	0.00	0.33	0.00	2.08	0.00	0.97	2.86	0.00	23.40	0.00	0.83
2003	0.00	1.30	3.57	0.00	0.00	0.00	0.00	0.93	0.00	0.00	8.33	2.70	0.81
2004	2.25	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.80
2005	0.00	1.25	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.38	0.00
2006	1.83	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.85	2.22	0.00
2007	1.01	1.54	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2008	0.00	4.55	0.00	0.28	0.00	1.85	0.00	0.00	0.00	0.00	0.00	2.08	0.00
2009	2.30	3.39	0.00	0.28	2.78	1.89	12.50	0.00	7.32	7.14	6.52	2.44	0.00
2010	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.35	0.00	0.00	0.00	0.00
2011	0.00	0.00	0.00	0.00	2.78	1.79	0.00	0.00	4.17	0.00	0.00	0.00	0.00
2012	0.96	0.00	2.38	0.00	0.00	0.00	0.00	0.00	3.85	0.00	1.72	3.92	0.00
2013	0.88	0.00	2.00	0.32	5.00	0.00	0.00	0.00	5.56	0.00	1.56	4.08	0.00
2014	0.00	2.50	3.57	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2015	0.70	0.00	7.69	1.22	1.92	0.00	0.00	0.00	0.99	0.00	0.00	1.56	0.00
2016	1.41	0.00	10.34	0.30	1.72	0.00	0.00	0.00	0.94	0.00	1.54	0.00	0.00
2017	0.77	3.92	5.45	0.30	1.59	1.79	2.04	0.00	0.00	0.00	1.67	0.00	0.00
2018	1.52	1.82	3.45	0.92	0.00	0.00	0.00	0.00	0.98	0.00	1.64	0.00	0.00
2019	2.84	2.63	3.17	0.00	0.00	2.22	0.00	0.00	0.93	0.00	0.00	0.00	0.00
2020	0.71	5.16	10.77	0.00	1.56	1.32	5.00	0.00	5.77	1.56	1.64	6.67	0.00
2021	0.68	1.86	1.64	0.29	0.00	0.00	0.00	0.00	2.94	0.00	0.00	4.41	0.00
2022	0.65	0.84	4.48	0.29	1.22	1.25	1.54	0.00	4.76	0.00	0.00	1.43	0.00
Average	1.08	1.57	2.99	0.18	0.86	0.70	1.15	0.07	2.10	0.30	2.13	2.11	0.09
Weighted Average	0.94	1.05	1.83	0.16	0.60	0.52	2.15	0.09	1.60	0.31	1.85	1.93	0.08
Median	0.69	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Std. dev.	1.14	1.50	3.03	0.29	1.19	0.87	6.61	0.29	2.29	1.37	4.48	3.45	0.24
Min	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max	4.55	5.16	10.77	1.22	5.00	2.50	33.33	1.03	7.32	7.14	23.40	17.24	0.83
N/A--Not applicable. Includes investment-grade and speculative-grade rated entities. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Due to the lingering impact from 2020 and geopolitical concerns, the aggregate 2022 default rates for nonfinancial companies still met or exceeded the long-term averages across their one-, three-, and 10-year averages. Similarly, defaults among financial services since 2015 have kept their one-year default and 10-year default rates ended 2022 above historical averages (see table 6).

Table 6

Cumulative European corporate default rates by sector (%)
	Financial institutions			Insurance			All financials			All nonfinancials
Year	One-year	Three-year	10-year	One-year	Three-year	10-year	One-year	Three-year	10-year	One-year	Three-year	10-year
1991	0.00	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A	1.96	N/A	N/A
1992	0.00	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A
1993	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	1.22	1.96	N/A
1994	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A
1995	0.69	0.00	N/A	0.00	0.00	N/A	0.52	0.00	N/A	0.00	1.22	N/A
1996	0.00	0.93	N/A	0.00	0.00	N/A	0.00	0.68	N/A	0.00	0.00	N/A
1997	0.00	0.69	N/A	0.00	0.00	N/A	0.00	0.52	N/A	0.00	0.00	N/A
1998	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A
1999	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	1.83	0.00	N/A
2000	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.04	1.63	1.96
2001	0.00	0.00	0.00	1.03	1.10	0.00	0.26	0.30	0.00	2.51	4.59	0.00
2002	0.33	0.00	0.00	0.97	2.04	0.00	0.49	0.57	0.00	3.31	6.48	1.22
2003	0.00	0.35	0.93	0.93	3.09	2.56	0.24	1.04	1.37	1.31	8.43	0.00
2004	0.00	0.33	0.69	0.00	1.94	2.08	0.00	0.74	1.04	0.54	5.07	0.79
2005	0.00	0.00	0.00	0.00	0.93	1.92	0.00	0.24	0.47	0.34	2.06	1.92
2006	0.00	0.00	0.00	0.00	0.00	2.82	0.00	0.00	0.78	0.65	1.27	3.52
2007	0.00	0.00	0.00	0.00	0.00	3.80	0.00	0.00	1.00	0.34	1.01	6.12
2008	0.28	0.00	0.00	0.00	0.00	3.30	0.19	0.00	0.90	0.87	1.47	8.26
2009	0.28	0.89	0.00	0.00	0.00	3.06	0.17	0.60	0.85	2.88	3.21	8.81
2010	0.00	0.56	0.35	0.00	0.00	3.09	0.00	0.37	1.04	0.37	3.64	9.79
2011	0.00	0.28	0.33	0.00	0.00	1.94	0.00	0.17	0.74	0.67	3.60	6.24
2012	0.00	0.00	0.32	0.00	0.00	0.93	0.00	0.00	0.48	1.07	2.04	3.55
2013	0.32	0.31	0.31	0.00	0.00	0.00	0.19	0.18	0.23	1.43	2.50	3.07
2014	0.00	0.31	0.30	0.00	0.00	0.00	0.00	0.19	0.21	0.61	2.91	3.54
2015	1.22	1.59	1.55	0.00	0.00	0.00	0.74	0.95	1.07	0.95	3.15	4.58
2016	0.30	1.21	2.07	0.00	0.00	0.00	0.19	0.74	1.39	1.14	2.18	5.58
2017	0.30	1.53	1.97	0.00	0.00	0.00	0.19	0.92	1.30	1.53	3.27	6.59
2018	0.92	0.61	1.69	0.00	0.00	0.00	0.59	0.37	1.05	0.90	3.20	6.29
2019	0.00	0.60	1.47	0.00	0.00	0.00	0.00	0.38	0.89	1.39	3.67	4.45
2020	0.00	0.92	1.53	0.00	0.00	0.00	0.00	0.59	0.91	3.36	4.89	6.17
2021	0.29	0.00	1.54	0.00	0.00	0.00	0.20	0.00	0.94	1.07	5.37	6.74
2022	0.29	0.30	1.59	0.00	0.00	0.00	0.20	0.20	0.95	1.34	5.40	6.73
Average	0.16	0.38	0.72	0.09	0.30	1.11	0.13	0.32	0.77	1.08	2.81	4.61
Median	0.00	0.29	0.33	0.00	0.00	0.00	0.00	0.22	0.90	0.99	2.70	4.58
Std. Dev.	0.29	0.48	0.76	0.29	0.76	1.40	0.20	0.33	0.43	0.93	2.09	2.78
Min	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max	1.22	1.59	2.07	1.03	3.09	3.80	0.74	1.04	1.39	3.36	8.43	9.79
Note: All Financials refers to financial institutions and insurance combined. N/A--Not applicable. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Cumulative Default Rates

Our default studies all show a consistent clear negative correspondence between ratings and defaults: The higher the issuer credit rating, the lower the observed default frequency, and vice versa (see chart 4 and tables 7-8). On average, from 1981 to 2022, European corporate issuers rated in the 'AA' category had a 0% default rate in the following year, a 0.02% default rate in the second year, and a 0.05% default rate in the third year. By comparison, issuers rated in the 'B' category recorded, on average, default rates of 1.85% in the first year, 4.89% in the second, and 7.76% in the third.

Europe has historically had fewer entities rated in the 'CCC'/'C' category than other regions, so the cumulative average default rate for this category might be less meaningful. The European region didn't have a significant proportion of speculative-grade ratings until 1996, so European cumulative average default rates are only now starting to fall more in line with the rates elsewhere.

Table 7

Comparison of corporate cumulative average default rates, 1981-2022 (%)
Europe	From/To	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
	AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
	AA	0.00	0.02	0.05	0.10	0.15	0.20	0.23	0.26	0.29	0.29
	A	0.03	0.06	0.09	0.14	0.21	0.27	0.34	0.37	0.38	0.40
	BBB	0.05	0.15	0.27	0.38	0.48	0.67	0.85	1.00	1.16	1.31
	BB	0.37	1.21	1.99	2.73	3.57	4.28	4.92	5.42	5.82	6.21
	B	1.85	4.89	7.76	10.17	12.17	13.57	14.60	15.29	16.01	16.60
	CCC/C	24.39	34.20	38.73	42.23	44.10	44.80	45.23	45.73	45.73	46.48
	Investment grade	0.03	0.08	0.14	0.20	0.27	0.37	0.46	0.52	0.58	0.63
	Speculative grade	2.71	5.26	7.36	9.11	10.60	11.65	12.47	13.06	13.58	14.06
	All rated	0.78	1.51	2.10	2.59	3.00	3.32	3.57	3.73	3.88	4.00
Global	From/To	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
	AAA	0.00	0.03	0.13	0.24	0.34	0.45	0.50	0.58	0.64	0.69
	AA	0.02	0.05	0.11	0.20	0.29	0.39	0.47	0.55	0.62	0.69
	A	0.05	0.12	0.20	0.31	0.42	0.55	0.71	0.84	0.97	1.11
	BBB	0.14	0.39	0.69	1.04	1.42	1.78	2.09	2.40	2.70	2.99
	BB	0.59	1.84	3.28	4.70	6.05	7.28	8.35	9.32	10.19	10.95
	B	3.07	7.17	10.84	13.79	16.11	17.98	19.45	20.63	21.71	22.71
	CCC/C	25.65	35.31	40.41	43.36	45.56	46.61	47.70	48.45	49.07	49.62
	Investment grade	0.08	0.22	0.38	0.59	0.80	1.02	1.22	1.40	1.59	1.76
	Speculative grade	3.52	6.79	9.61	11.91	13.80	15.34	16.62	17.68	18.63	19.50
	All rated	1.48	2.88	4.10	5.13	5.99	6.71	7.32	7.82	8.28	8.70
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 8

Europe corporate cumulative average default rates by rating modifier, 1981 to 2022 (%)
	Time horizon
Rating	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA	0.00	0.00	0.00	0.07	0.15	0.23	0.31	0.39	0.47	0.47
AA-	0.00	0.05	0.09	0.14	0.19	0.24	0.24	0.24	0.24	0.24
A+	0.00	0.00	0.04	0.04	0.04	0.04	0.04	0.04	0.04	0.04
A	0.05	0.11	0.14	0.17	0.20	0.31	0.41	0.45	0.45	0.45
A-	0.03	0.05	0.08	0.17	0.33	0.40	0.51	0.54	0.58	0.62
BBB+	0.03	0.14	0.28	0.40	0.44	0.57	0.81	1.06	1.33	1.56
BBB	0.04	0.07	0.15	0.20	0.29	0.54	0.65	0.70	0.77	0.91
BBB-	0.11	0.29	0.42	0.62	0.84	1.07	1.25	1.34	1.44	1.44
BB+	0.00	0.10	0.30	0.52	1.00	1.67	1.96	2.13	2.13	2.13
BB	0.26	0.80	1.18	1.69	2.35	2.47	2.74	3.02	3.50	3.87
BB-	0.85	2.66	4.40	5.87	7.21	8.56	9.90	10.96	11.66	12.44
B+	0.90	2.82	5.12	6.83	8.68	9.60	10.31	10.54	11.08	11.70
B	1.49	3.87	6.27	8.97	11.06	12.47	13.47	14.59	15.25	15.92
B-	4.03	10.34	15.49	18.58	20.72	23.17	25.05	25.87	27.19	27.58
CCC/C	24.39	34.20	38.73	42.23	44.10	44.80	45.23	45.73	45.73	46.48
Investment grade	0.03	0.08	0.14	0.20	0.27	0.37	0.46	0.52	0.58	0.63
Speculative grade	2.71	5.26	7.36	9.11	10.60	11.65	12.47	13.06	13.58	14.06
All rated	0.78	1.51	2.10	2.59	3.00	3.32	3.57	3.73	3.88	4.00
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Rating Actions And Transitions Were Consistent With Global Trends

In 2022, upgrades outnumbered downgrades, lowering the downgrade-to-upgrade ratio below 1 (0.65), from 0.72 in 2021, after reaching its fifth-highest reading in 2020 (7.5) (see table 9). Although the quality of ratings has improved for two consecutive years, these improvements do not fully offset the severity of the downgrades in 2020. At the end of 2022, the ratio of speculative-grade ratings at 'B-' and lower was 30%, up from year-end 2021 at 28%, but down only slightly from 2020's high of 33%.

Table 9

Summary of European corporate rating activity (%)*
Year	Issuers	Upgrades (%)	Downgrades** (%)	Defaults (%)	Withrawn ratings (%)	Changed ratings (%)	Unchanged ratings (%)	Downgrade/ upgrade ratio***
1981	11	0.00	9.09	0.00	0.00	9.09	90.91
1982	13	0.00	0.00	0.00	7.69	7.69	92.31
1983	18	0.00	11.11	0.00	0.00	11.11	88.89
1984	28	3.57	17.86	0.00	0.00	21.43	78.57	5.00
1985	35	2.86	2.86	0.00	0.00	5.71	94.29	1.00
1986	40	10.00	5.00	0.00	0.00	15.00	85.00	0.50
1987	50	2.00	2.00	0.00	4.00	8.00	92.00	1.00
1988	61	9.84	3.28	0.00	3.28	16.39	83.61	0.33
1989	73	8.22	1.37	0.00	1.37	10.96	89.04	0.17
1990	95	1.05	10.53	0.00	1.05	12.63	87.37	10.00
1991	131	2.29	18.32	0.76	0.00	21.37	78.63	8.00
1992	161	1.86	18.63	0.00	1.86	22.36	77.64	10.00
1993	198	1.52	12.63	0.51	2.53	17.17	82.83	8.33
1994	248	4.03	14.11	0.00	3.23	21.37	78.63	3.50
1995	319	6.27	15.05	0.31	0.31	21.94	78.06	2.40
1996	367	7.36	11.72	0.00	3.81	22.89	77.11	1.59
1997	455	6.81	8.79	0.00	5.49	21.10	78.90	1.29
1998	545	6.61	10.28	0.00	8.44	25.32	74.68	1.56
1999	659	6.22	13.20	0.91	11.23	31.56	68.44	2.12
2000	739	7.31	13.80	0.54	7.98	29.63	70.37	1.89
2001	824	6.07	16.26	1.46	7.28	31.07	68.93	2.68
2002	918	5.12	20.26	2.07	5.99	33.44	66.56	3.96
2003	956	5.13	16.84	0.84	6.28	29.08	70.92	3.29
2004	994	6.94	6.34	0.30	7.55	21.13	78.87	0.91
2005	1064	11.09	10.43	0.19	10.43	32.14	67.86	0.94
2006	1077	12.53	9.84	0.37	7.34	30.08	69.92	0.79
2007	1095	14.06	7.95	0.18	8.86	31.05	68.95	0.56
2008	1117	6.80	19.07	0.54	6.80	33.21	66.79	2.80
2009	1129	3.63	23.91	1.51	8.77	37.82	62.18	6.59
2010	1098	6.92	12.75	0.18	5.56	25.41	74.59	1.84
2011	1147	10.20	18.40	0.35	7.15	36.09	63.91	1.80
2012	1186	7.00	23.02	0.59	7.59	38.20	61.80	3.29
2013	1223	8.83	13.33	0.90	5.64	28.70	71.30	1.51
2014	1367	10.02	9.00	0.37	6.95	26.34	73.66	0.90
2015	1490	9.19	11.07	0.87	8.26	29.40	70.60	1.20
2016	1507	8.76	10.09	0.80	9.02	28.67	71.33	1.15
2017	1505	11.63	6.25	1.06	10.96	29.90	70.10	0.54
2018	1511	10.19	7.74	0.79	9.13	27.86	72.14	0.76
2019	1587	7.88	7.81	0.95	6.99	23.63	76.37	0.99
2020	1639	2.38	17.75	2.32	6.65	29.10	70.90	7.46
2021	1626	9.72	6.95	0.80	6.89	24.35	75.65	0.72
2022	1697	9.19	5.95	1.00	7.60	23.75	76.25	0.65
Weighted average		8.07	12.23	0.78	7.42	28.50	71.50	1.51
Average		6.45	11.44	0.51	5.48	23.88	76.12	1.77
Median		6.87	10.80	0.36	6.73	24.84	75.16	1.57
Std. dev.		3.64	5.87	0.58	3.41	8.50	8.50	1.61
Min		0.00	0.00	0.00	0.00	5.71	61.80	0.17
Max		14.06	23.91	2.32	11.23	38.20	94.29	1.70
*This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded.** Excludes downgrades to D, shown separately in the default column. ***Downgrades to 'D' excluded in this metric. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Typically, nonfinancial companies have higher credit deterioration than financial services companies in a given year, and this remained true in 2022 (see chart 5). It is largely because nonfinancial companies typically have more ratings at the lowest end of speculative grade, which are both more volatile by definition and in practice.

Generally, European investment-grade companies have greater credit stability (as measured by the frequency of rating transitions) than their speculative-grade counterparts. About 94.8% of European corporate entities rated in 'AA' at the beginning of 2022 were still rated in that category at the end of the year, whereas the comparable measure for companies rated in the 'B' category was 77.6% (see table 10).

Table 10

2022 Corporate transition rates: Europe versus global
Europe	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	100.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
	AA	0.00	94.81	1.30	0.00	0.00	0.00	0.00	0.00	3.90
	A	0.00	0.75	94.97	1.01	0.00	0.00	0.00	0.00	3.27
	BBB	0.00	0.00	1.14	94.28	0.92	0.00	0.00	0.00	3.66
	BB	0.00	0.00	0.00	4.55	80.91	2.73	0.00	0.91	10.91
	B	0.00	0.00	0.00	0.21	3.73	77.64	4.35	0.83	13.25
	CCC/C	0.00	0.00	0.00	0.00	0.00	21.25	53.75	13.75	11.25
Global	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	87.50	12.50	0.00	0.00	0.00	0.00	0.00	0.00	0.00
	AA	0.00	95.62	1.09	0.00	0.00	0.00	0.00	0.00	3.28
	A	0.00	0.86	94.88	1.73	0.00	0.00	0.00	0.00	2.52
	BBB	0.00	0.05	1.64	91.64	1.11	0.05	0.00	0.00	5.50
	BB	0.00	0.00	0.00	3.54	82.30	2.83	0.24	0.31	10.78
	B	0.00	0.00	0.00	0.09	3.70	76.29	5.03	1.09	13.80
	CCC/C	0.00	0.00	0.00	0.00	0.00	17.55	57.05	13.79	11.60
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

The 2022 pattern correlates with the long-term ratings behavior trend among all global rated issuers. This study--in line with our previous default studies--confirms that higher ratings are generally more stable than lower ratings. On average, of all the European corporate issuers that we rated in the 'A' category, 88.3% retained ratings in the same category after one year, whereas only 73.9% of those rated in the 'B' category remained in the same rating category a year later (see table 11). Lower ratings also tend to exhibit less stability than higher ratings over multiple years (see table 12).

Table 11

Average one-year transition rates, 1981 to 2022 (%)
Europe	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	87.16	9.09	0.45	0.11	0.00	0.00	0.11	0.00	3.07
		(8.72)	(7.73)	(1.36)	(0.90)	(0.00)	(0.00)	(0.75)	(0.00)	(4.45)
	AA	0.26	86.34	9.42	0.52	0.00	0.00	0.00	0.00	3.46
		(0.65)	(6.97)	(6.33)	(1.14)	(0.00)	(0.00)	(0.00)	(0.00)	(2.37)
	A	0.01	1.70	88.34	5.05	0.14	0.03	0.00	0.03	4.70
		(0.04)	(1.73)	(4.88)	(3.35)	(0.32)	(0.39)	(0.00)	(0.08)	(1.92)
	BBB	0.00	0.07	3.77	86.21	3.20	0.25	0.08	0.05	6.37
		(0.00)	(1.17)	(1.99)	(4.92)	(2.56)	(0.48)	(0.25)	(0.19)	(2.92)
	BB	0.00	0.00	0.09	5.02	75.32	6.60	0.35	0.37	12.25
		(0.00)	(0.00)	(0.56)	(2.45)	(6.52)	(3.38)	(0.92)	(0.78)	(4.23)
	B	0.00	0.00	0.02	0.20	4.69	73.92	4.97	1.85	14.35
		(0.00)	(0.00)	(0.18)	(0.45)	(3.16)	(6.24)	(3.13)	(2.93)	(4.81)
	CCC/C	0.00	0.00	0.00	0.18	0.00	13.68	45.44	24.39	16.32
		(0.00)	(0.00)	(0.00)	(0.58)	(0.00)	(9.44)	(15.87)	(15.41)	(8.55)
Global	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	87.07	9.05	0.52	0.05	0.10	0.03	0.05	0.00	3.12
		(7.19)	(7.21)	(0.82)	(0.24)	(0.27)	(0.17)	(0.34)	(0.00)	(2.45)
	AA	0.47	87.42	7.66	0.46	0.05	0.06	0.02	0.02	3.86
		(0.53)	(5.16)	(4.15)	(0.67)	(0.19)	(0.20)	(0.06)	(0.07)	(1.76)
	A	0.02	1.54	88.95	4.85	0.25	0.10	0.01	0.05	4.22
		(0.08)	(1.05)	(3.86)	(2.16)	(0.37)	(0.23)	(0.06)	(0.10)	(1.67)
	BBB	0.00	0.08	3.13	86.95	3.38	0.40	0.09	0.14	5.83
		(0.03)	(0.14)	(1.60)	(3.99)	(1.62)	(0.63)	(0.20)	(0.24)	(1.49)
	BB	0.01	0.02	0.10	4.50	78.28	6.50	0.53	0.59	9.47
		(0.05)	(0.08)	(0.23)	(1.96)	(4.51)	(3.13)	(0.68)	(0.79)	(2.12)
	B	0.00	0.02	0.06	0.15	4.49	74.83	4.81	3.07	12.58
		(0.00)	(0.07)	(0.18)	(0.20)	(2.08)	(3.80)	(2.67)	(2.97)	(2.22)
	CCC/C	0.00	0.00	0.08	0.15	0.46	13.73	44.79	25.65	15.13
		(0.00)	(0.00)	(0.37)	(0.57)	(0.83)	(7.46)	(8.74)	(11.96)	(4.66)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 12

Average three-year transition rates, 1981-2022 (%)
Europe	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	65.07	23.29	2.40	0.11	0.23	0.00	0.11	0.00	8.79
		(15.34)	(12.84)	(3.38)	(0.76)	(1.21)	(0.00)	(0.82)	(0.00)	(8.93)
	AA	0.69	64.60	21.83	2.30	0.32	0.00	0.02	0.05	10.19
		(1.39)	(11.69)	(9.65)	(2.39)	(0.54)	(0.00)	(0.12)	(0.16)	(4.29)
	A	0.02	3.88	69.68	11.67	0.81	0.16	0.09	0.10	13.61
		(0.10)	(3.12)	(8.51)	(4.29)	(1.41)	(0.55)	(0.31)	(0.19)	(3.82)
	BBB	0.00	0.19	9.26	65.17	6.32	0.95	0.25	0.28	17.58
		(0.00)	(2.15)	(2.84)	(8.41)	(3.07)	(1.00)	(0.52)	(0.71)	(5.62)
	BB	0.00	0.00	0.43	11.26	44.37	10.76	0.69	1.97	30.52
		(0.00)	(0.00)	(0.85)	(3.70)	(8.53)	(3.58)	(1.06)	(2.48)	(6.98)
	B	0.00	0.00	0.00	0.59	7.99	39.20	6.07	8.26	37.89
		(0.00)	(0.00)	(0.00)	(1.09)	(4.59)	(8.08)	(2.72)	(5.91)	(8.74)
	CCC/C	0.00	0.00	0.00	0.25	0.75	13.43	9.20	42.79	33.58
		(0.00)	(0.00)	(0.00)	(0.91)	(2.12)	(11.00)	(8.45)	(16.26)	(14.31)
Global	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	65.53	22.12	2.32	0.32	0.26	0.08	0.11	0.13	9.14
		(11.64)	(12.28)	(1.73)	(0.76)	(0.53)	(0.29)	(0.41)	(0.37)	(5.29)
	AA	1.09	67.38	18.05	1.89	0.32	0.20	0.02	0.11	10.94
		(0.86)	(9.45)	(6.08)	(1.42)	(0.49)	(0.43)	(0.07)	(0.18)	(3.89)
	A	0.05	3.59	71.17	11.04	1.06	0.37	0.08	0.21	12.45
		(0.09)	(2.19)	(7.42)	(2.91)	(1.01)	(0.56)	(0.13)	(0.27)	(3.48)
	BBB	0.01	0.23	7.70	67.34	6.64	1.37	0.24	0.71	15.76
		(0.06)	(0.37)	(2.98)	(7.72)	(1.96)	(1.25)	(0.34)	(0.89)	(3.25)
	BB	0.01	0.04	0.41	10.10	49.56	11.20	1.13	3.34	24.22
		(0.05)	(0.12)	(0.64)	(3.60)	(7.72)	(2.55)	(0.84)	(3.27)	(3.48)
	B	0.00	0.02	0.15	0.60	8.79	42.61	5.41	11.24	31.17
		(0.04)	(0.10)	(0.38)	(0.72)	(3.61)	(5.04)	(2.08)	(6.66)	(4.55)
	CCC/C	0.00	0.00	0.10	0.47	1.42	16.13	9.78	43.06	29.04
		(0.00)	(0.00)	(0.45)	(1.08)	(1.52)	(6.96)	(5.42)	(11.76)	(7.66)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

The transitions at the rating modifier level (that is, including the "plus" or "minus" identifiers) also generally have the same relationship, although differences in sample sizes occasionally create slight variations between adjacent rating levels (see table 13).

Table 13

One-year weighted-average transition rates for European corporates by rating modifier, 1981-2022 (%)
	Rating
From/To	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC	D	NR
AAA	87.16	6.82	1.59	0.68	0.11	0.34	0.00	0.00	0.11	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.11	0.00	3.07
	(8.72)	(6.74)	(2.56)	(1.60)	(0.53)	(1.03)	(0.00)	(0.00)	(0.90)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.75)	(0.00)	(4.45)
AA+	1.14	78.01	13.84	2.93	0.49	0.49	0.33	0.16	0.00	0.16	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.44
	(3.12)	(13.60)	(11.38)	(4.60)	(1.33)	(1.44)	(1.11)	(0.77)	(0.00)	(0.75)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(3.26)
AA	0.14	1.48	79.52	9.82	3.53	1.13	0.42	0.28	0.07	0.07	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.53
	(0.68)	(2.56)	(13.41)	(9.29)	(5.51)	(1.82)	(0.79)	(0.83)	(0.49)	(0.29)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(3.71)
AA-	0.09	0.05	3.48	77.61	11.29	2.30	0.86	0.23	0.32	0.09	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.70
	(0.38)	(0.24)	(3.78)	(8.86)	(7.04)	(3.20)	(1.52)	(0.52)	(1.17)	(0.44)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(3.22)
A+	0.00	0.04	0.25	4.88	76.72	10.02	1.89	0.43	0.25	0.11	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.42
	(0.00)	(0.17)	(0.68)	(5.31)	(9.84)	(6.55)	(1.72)	(0.81)	(0.81)	(0.31)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(2.91)
A	0.00	0.11	0.08	0.38	5.86	77.17	8.57	1.97	0.63	0.19	0.03	0.03	0.00	0.05	0.00	0.00	0.00	0.05	4.87
	(0.00)	(0.48)	(0.29)	(1.21)	(4.51)	(8.55)	(6.06)	(2.15)	(1.09)	(0.48)	(0.16)	(0.16)	(0.00)	(0.85)	(0.00)	(0.00)	(0.00)	(0.20)	(2.98)
A-	0.03	0.00	0.08	0.11	0.51	6.87	77.56	8.03	1.77	0.67	0.19	0.08	0.05	0.03	0.00	0.00	0.00	0.03	4.00
	(0.12)	(0.00)	(0.24)	(0.32)	(2.29)	(4.46)	(7.50)	(3.89)	(3.32)	(0.90)	(0.52)	(0.27)	(0.21)	(0.74)	(0.00)	(0.00)	(0.00)	(0.13)	(2.39)
BBB+	0.00	0.00	0.00	0.07	0.20	0.56	7.36	75.74	8.43	1.37	0.46	0.42	0.13	0.10	0.03	0.00	0.07	0.03	5.03
	(0.00)	(0.00)	(0.00)	(0.32)	(0.45)	(1.50)	(4.10)	(8.14)	(4.93)	(1.64)	(0.72)	(0.81)	(0.30)	(0.38)	(0.18)	(0.00)	(0.24)	(0.17)	(2.85)
BBB	0.00	0.04	0.04	0.00	0.07	0.25	0.88	7.85	74.61	7.04	1.49	0.64	0.18	0.07	0.18	0.07	0.04	0.04	6.54
	(0.00)	(1.91)	(0.26)	(0.00)	(0.29)	(0.63)	(1.02)	(4.97)	(7.87)	(4.06)	(2.15)	(1.03)	(0.35)	(0.27)	(0.49)	(0.29)	(0.26)	(0.19)	(4.40)
BBB-	0.00	0.00	0.06	0.00	0.11	0.17	0.17	0.89	11.67	69.61	6.00	1.78	0.56	0.11	0.22	0.00	0.17	0.11	8.39
	(0.00)	(0.00)	(0.30)	(0.00)	(0.54)	(0.55)	(0.67)	(1.00)	(6.11)	(8.06)	(4.87)	(2.84)	(1.12)	(0.43)	(0.76)	(0.00)	(0.71)	(0.55)	(4.21)
BB+	0.00	0.00	0.00	0.00	0.09	0.00	0.09	0.45	0.63	12.03	62.75	8.98	2.60	0.99	0.45	0.09	0.18	0.00	10.68
	(0.00)	(0.00)	(0.00)	(0.00)	(0.34)	(0.00)	(1.51)	(1.14)	(1.40)	(5.72)	(11.35)	(6.06)	(3.99)	(1.55)	(1.06)	(0.38)	(0.86)	(0.00)	(5.80)
BB	0.00	0.00	0.00	0.00	0.00	0.00	0.09	0.26	0.09	1.37	12.29	60.84	7.51	2.39	0.60	0.09	0.60	0.26	13.65
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.51)	(0.94)	(1.71)	(2.37)	(6.31)	(9.31)	(4.68)	(2.63)	(1.23)	(0.50)	(1.67)	(0.86)	(7.56)
BB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.34	0.34	1.10	10.82	59.09	11.33	3.04	0.51	0.25	0.85	12.34
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.98)	(0.89)	(3.25)	(5.27)	(10.36)	(5.37)	(2.46)	(1.13)	(0.79)	(1.74)	(5.46)
B+	0.00	0.00	0.00	0.00	0.00	0.06	0.00	0.13	0.06	0.13	0.65	2.13	10.06	56.45	12.06	2.32	1.55	0.90	13.48
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.48)	(0.00)	(0.54)	(0.22)	(0.47)	(0.80)	(4.81)	(5.25)	(8.48)	(6.02)	(2.87)	(3.01)	(2.04)	(6.41)
B	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.04	0.04	0.08	0.08	0.13	1.06	5.91	62.64	10.24	3.14	1.49	15.13
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.12)	(0.27)	(0.42)	(0.44)	(0.92)	(1.49)	(4.23)	(9.41)	(5.77)	(2.89)	(3.10)	(5.44)
B-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.09	0.00	0.00	0.00	0.38	1.03	9.94	56.66	13.98	4.03	13.88
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.89)	(0.00)	(0.00)	(0.00)	(0.93)	(1.44)	(4.50)	(10.68)	(7.75)	(6.22)	(7.18)
CCC/C	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.18	0.00	0.00	0.00	0.00	0.18	1.75	11.75	45.44	24.39	16.32
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.58)	(0.00)	(0.00)	(0.00)	(0.00)	(0.96)	(2.34)	(7.99)	(15.87)	(15.41)	(8.55)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Time To Default Shows Strong, Positive Relationship With Rating Quality

Higher-rated corporate entities generally have a longer time to default than their lower-rated counterparts when using the original ratings as the reference points (see table 14). European corporate entities that we initially rated in the 'B' category, but later defaulted, took an average of 4.0 years to default--less than the average of 7.5 years for defaulting entities we originally rated in the 'A' category. For the corporate entities that defaulted in 2022, an average of four years elapsed between the initial rating date and the default date, slightly less than the long-term average of 4.7 years.

Table 14

Time to default from original rating for European corporate defaulters
Original rating	Defaults	Average years from original rating*	Median years from original rating	St. dev. of years from original rating
AAA	0	N/A	N/A	N/A
AA	1	8.42	8.42	N/A
A	11	7.54	6.25	4.28
BBB	18	8.45	7.33	5.42
BB	53	5.78	4.77	4.19
B	156	3.99	3.58	2.50
CCC/C	49	1.5	1.1	1.8
Total	288	4.33	3.32	3.58
*Or Dec. 31, 1980, whichever is greater. N/A—Not available. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

For the entire history of European corporate defaults (288 for 1981-2022), the average time to default across all rating categories was 4.3 years, compared with 5.9 years globally (see chart 6). The relationship between the initial rating and the time to default is less clear in Europe, partly because of smaller sample sizes. In the 42 years ended in 2022, 1,808 companies with initial ratings in the 'B' category defaulted globally, and only 156 were from Europe.

In 2022, more than half of the defaulters in Europe were initially rated in the 'B' category.

As expected, the average time to default for post-original ratings (in other words, excluding initial ratings) also shows that higher-rated corporate issuers generally take longer to default. However, the time to default is somewhat shorter than from initial ratings (see chart 7).

Gini Coefficients And Lorenz Curves

A quantitative analysis of ratings performance shows that our European corporate ratings continue to correlate with the level of default risk across different time horizons.

To measure ratings performance, we plot the cumulative share of defaulters against the cumulative share of issuers by rating in a Lorenz curve, which visually represents the ratings' rank-ordering power and is summarized quantitatively by the Gini coefficient (see definitions and methodology in Appendix II).

Over the long term, the European corporate weighted average one-year Gini coefficient was 89.6%, the three-year average was 85.2%, and the five-year average was 82.4% (see table 15 and charts 8-10).

Table 15

Corporate gini coefficients by region (%)
		Time horizon
Region		One-year	Three-year	Five-year	Seven-year
Global			75.38	71.61	69.13
			78.68	74.50	71.38
			(5.08)	(5.29)	(5.19)
U.S.			72.79	68.94	66.41
			76.59	72.12	68.85
			(6.50)	(6.49)	(6.06)
Europe			85.16	82.37	79.56
			87.20	82.41	76.99
			(5.31)	(6.10)	(10.40)
**Note: Numbers in parentheses are standard deviations. Average and Standarad deviations for Europe are from 1996-2022. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

The Gini coefficients decline as the time horizon lengthens because longer times allow for more opportunities for credit degradation among higher-rated entities. In the one-year Lorenz curve for European corporate issuers, for example, 97.2% of defaults were in speculative-grade rating categories, while the speculative-grade segment accounted for only 28.1% of all European corporate issuers (see chart 8).

The five-year Lorenz curve shows speculative-grade issuers accounted for 91.9% of defaulters and only 24.1% of the entire sample (see chart 10). If the rank ordering of ratings had little predictive value, the cumulative share of defaulting entities and the cumulative share of all entities would be nearly the same, producing a Gini coefficient close to zero.

Appendix I: Calculation Approach And Definitions

This long-term corporate default and rating transition study uses S&P Global Market Intelligence's CreditPro® database of long-term local currency issuer credit ratings. The analysis excludes public information (pi) ratings and ratings based on the guarantee of another company or government entity. We also do not include short-term issuer credit ratings. We do not require all issuers with debt that we rate to have an issuer credit rating. Therefore, if an issuer has rated debt but not an issuer credit rating, we assign a proxy rating so the CreditPro® corporate dataset accurately represents the complete universe of ratings. The local currency senior unsecured rating is the preferred debt rating used for the proxy because this rating is usually consistent with the issuer credit rating. In a small number of cases, we use the subordinated debt rating or the senior secured rating as the proxy.

An issuer credit rating is a forward-looking opinion about an obligor's overall creditworthiness. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation because it does not take into account the nature and provisions of any single obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. Issuer credit ratings can be either long-term or short-term.

Our ongoing enhancement of the database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. However, each annual default and transition study reports statistics back to Dec. 31, 1980 and is therefore self-contained and effectively supersedes all previous editions.

Issuers included in this study

This study analyzes the rating histories of 4,313 European companies that we rated as of Dec. 31, 1980, or that we first rated between that date and Dec. 31, 2022. These include industrials, utilities, financial institutions, and insurance companies in the region with long-term local currency ratings. Structured finance vehicles, public-sector issuers, and sovereign issuers are the subjects of separate default and transition studies, and we exclude them from this study.

For the purposes of this study, Europe consists of Austria, Belgium, the British Virgin Islands, Bulgaria, the Channel Islands, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Ireland, the Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, Montenegro, the Netherlands, Norway, Poland, Portugal, Republic of Moldova, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the U.K.

To avoid overcounting, we exclude subsidiaries with debt that is fully guaranteed by a parent or with default risk that we consider identical to that of a parent. The latter case arises for companies with obligations that are not legally guaranteed by a parent but that have operating or financing activities that are so entwined with those of the parent that a default of one and not the other would be highly unlikely, in our view. At times, however, a parent's guarantee might not have yet covered some of these subsidiaries, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. We include such subsidiaries in the dataset for the period during which they had distinct and separate risk of default.

Issuers with withdrawn ratings

We withdraw ratings when an entity's entire debt is paid off or when the program or programs that we rate are terminated and the relevant debt extinguished. We may also withdraw ratings at the issuer's request, as a result of a merger or acquisition, or when a company no longer provides all of the information we require to continue surveillance on the ratings.

Definition of default

For the purposes of this study, we deem 'D' (default), 'SD' (selective default), and 'R' (regulatory intervention) issuer credit ratings to be defaults. We assume the default takes place on the earliest of the date we revised the rating(s) to 'D', 'SD', or 'R'; the date the issuer missed a debt payment; the date a distressed exchange offer was announced; or the date the debtor filed for bankruptcy.

An obligor rated 'SD' or 'D' is in default on one or more of its financial obligations, including rated and unrated financial obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. We consider an obligor to be in default unless we believe that such payments will be made within five business days of the due date in the absence of a stated grace period, or within the earlier of the stated grace period or 30 calendar days.

We assign a 'D' rating when we believe that the default will be a general default and that the obligor will fail to pay all or almost all of its obligations as they come due. We assign an 'SD' rating when we believe the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. We also lower our rating on an obligor to 'D' or 'SD' if it is conducting a distressed exchange offer, whereby one or more financial obligations are either repurchased for an amount of cash or replaced by other instruments with a total value that is less than par.

An obligor rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.

When an issuer defaults, we commonly subsequently withdraw the 'D' or 'SD' rating. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. If any defaulting entity reemerges from bankruptcy--or otherwise restructures its defaulted debt instruments, thereby reestablishing regular, timely payment on all its debts--we reenter this issuer into the database as a new entity. Its rating history after the default event is included in all calculations as entirely separate from its rating history prior to the earlier default.

Many practitioners use statistics from this default study to estimate "probability of default" and "probability of rating transition," based on observed historical default and transition frequencies. It is important to note that we do not ascribe a specific default probability to each rating category.

Calculations

Static pool methodology.   S&P Global Ratings Credit Research & Insights conducts its default studies on the basis of groups of ratings called static pools. For the purposes of this study, we form static pools by grouping issuers by rating category at the beginning of each year, quarter, or month that the database covers. Each static pool is followed from that point forward. We assign all companies included in the study to one or more static pools. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged.

We use the static pool methodology to avoid certain pitfalls in estimating default rates, like by ensuring that default rates account for rating migration and can be calculated across multiperiod time horizons. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. Other methods may calculate default rates using only the most recent year's default and rating data, which may yield comparatively low default rates during periods of high rating activity because they ignore prior years' default activity.

The pools are static in the sense that their membership remains constant over time. Each static pool can be viewed as a buy-and-hold portfolio. Because errors, if any, are corrected in each update and because the criteria for inclusion or exclusion of companies in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. Therefore, every update revises results to the same starting date of Dec. 31, 1980, to avoid continuity problems.

Entities with ratings we have withdrawn or discontinued--that is, revised to not rated (NR)--are surveilled with the aim of capturing a potential default. Because static pools only include entities with active ratings as of the beginning date of a given pool, we exclude companies with withdrawn ratings, as well as those that have defaulted, from subsequent static pools. If the rating on an entity is withdrawn after the start date of a particular static pool and the entity subsequently defaults, we will include it in that static pool as a default and categorize it in the rating category of which it was a member at that time.

For instance, the 2001 static pool consists of all companies rated as of 12:01 a.m. on Jan. 1, 2001. Adding those companies first rated in 2001 to the surviving members of the 2001 static pool forms the 2002 static pool. All rating changes that took place are reflected in the newly formed 2002 static pool through the ratings on these entities as of 12:01 a.m. on Jan. 1, 2002.

Consider the following example: An issuer is originally rated 'BB' in mid-2000, and we downgrade the company to 'B' in 2002. This is followed by a rating withdrawal in 2003 and a default in 2004. We would include this hypothetical company in the 2001 and 2002 static pools with the 'BB' rating, which it held at the beginning of those years. Likewise, we would include it in the 2003 static pool with the 'B' rating. It would not be part of the 2004 static pool because it was not rated as of the first day of that year, and we would not include it in any pool after the last day of 2004 because we had withdrawn our rating on the company by then. Yet each of the three static pools in which we include this company (2001-2003) would record its 2004 default at the appropriate time horizon.

Default rate calculation.   We calculate annual default rates for each static pool, first in units and later as percentages of the issuers in each rating category. We combined these percentages to obtain cumulative default rates for the 42 years the study covers.

Issuer-weighted default rates.   We base all default rates that appear in this study on the number of issuers rather than the currency amounts affected by defaults or rating changes. Although currency amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings.

Average cumulative default rate calculation.   In this study, we also calculate and present average cumulative default rates for different time horizons. For example, table 7 shows that the one-year average cumulative default rate for 'A' rated European corporate issuers is 0.03% and the three-year average is 0.09%.

We first consider the static pool of ratings at the beginning of each calendar year. For each static pool, we calculate the marginal default rates for each calendar year after the static pool's formation. These one-year marginal default rates are "conditional on survival." For example, the marginal default rate for the third year is equal to the number of defaults during the third year divided by the number of ratings from the static pool that had "survived" (in other words, not moved to 'D') by the beginning of the third year. 

We then average the marginal default rates for each time horizon across static pools, weighting by the number of surviving ratings at the beginning of each time horizon, to give an average marginal default rate per time horizon, as well as average marginal survival rates (equal to one minus the average marginal default rate). Finally, the average cumulative default rate for each time horizon is calculated as one minus the product of marginal survival rates up to that time horizon.

Transition analysis

Transition rates compare the issuer credit ratings at the beginning of a period with the ratings at the end of the period. To compute one-year rating transition rates by rating category, we compare the rating on each entity at the end of a particular year with the rating at the beginning of the same year. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. For instance, an issuer rated from the middle of 1984 to the middle of 1991 would appear in the seven consecutive one-year transition matrices from 1985 to 1991. If the rating on the issuer was withdrawn in the middle of 1991, it would be included in the column representing transitions to NR in the 1991 transition matrix. Similarly, if it defaulted in the middle of 1991, it would be included in the column representing transitions to 'D' in the 1991 one-year transition matrix.

All 1981 static pool members still rated on Jan. 1, 2022, had 42 one-year transitions, while companies first rated on Jan. 1, 2022, had only one. Each one-year transition matrix displays all rating movements between rating categories from the beginning of the year through year-end. For each rating listed in the matrix's leftmost column, there are nine ratios listed in the rows, corresponding to the rating categories from 'AAA' to 'D', plus NR.

The only ratings considered in these calculations are those on entities at the beginning of each static pool and those at the end. All rating changes that occur in between are ignored. For example, if an entity was rated 'A' on Jan. 1, 2014, downgraded to 'BBB' in the middle of the year, and then upgraded to 'A' later in the year (with no other subsequent rating changes), this entity would be included only in the percentage of issuers that began the year as 'A' and ended the year as 'A'. This approach also applies to transition matrices that span longer time horizons. If an issuer defaults or the rating is withdrawn in the middle of the year, then we would consider it either rated 'D' or not rated as of Dec. 31 of that particular year.

Multiyear transitions

We also calculate multiyear transitions for periods of two to 10 years. In this case, we compare the rating at the beginning of the multiyear period with the rating at the end. For example, three-year transition matrices are the result of comparing ratings at the beginning of the years 1981-2020 with the ratings at the end of the years 1983-2022. Otherwise, the methodology is identical to the one we use for single-year transitions.

We calculate average transition matrices on the basis of the multiyear matrices just described. These average matrices are a true summary, the ratios of which represent the historical incidence of the ratings listed in the first column changing to the ones listed in the top row over the course of the multiyear period. Transition matrices that present averages over multiple time horizons are also calculated as issuer-weighted averages.

Rating modifiers

We use rating modifiers (plus and minus signs) to calculate the upgrade and downgrade rates, as well as the magnitude of rating changes, throughout this study. However, some transition tables may show only full rating categories for practical reasons. In other words, the use of a rating category suggests that transitions to, for example, 'AA-' from 'AA' or to 'BBB-' from 'BBB+' are not considered rating transitions because the rating remained within the rating category.

Standard deviations

Many of the tables and charts in this study display averages of default rates, transition rates, and Gini coefficients. Often these are issuer-weighted averages. Default and transition rates can fluctuate depending on many circumstances specific to particular time frames, industries, and geographic regions. As a supplement to many of the averages and time series we present in this study, we also show standard deviations to provide a gauge of the dispersion of data behind the averages.

For the transition matrices, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying static pool years that contribute to the averages, weighted by that static pool year's issuer base for each rating level. For example, in the average one-year transition matrix, each cell's weighted standard deviation is calculated from the series of that particular cell in each of the 42 static pools beginning with the 1981 static pool and ending with the 2022 static pool. The squared difference between each static pool's transition rate and the weighted average--which is the data point in each cell--is multiplied by each static pool's weight. These weights are based on each static pool rating level's contribution to the 42-year total issuer base for each rating level. We then divide this by the ratio of the total number of nonzero weights minus one and the total number of nonzero weights.

We derive Gini coefficients' standard deviations from the time series for all of their constituent annual static pools. As an example, we calculate the standard deviation for the seven-year weighted average global Gini coefficient from the time series of all available seven-year Gini coefficients by static pool. In this case, these are the seven-year Gini coefficients beginning with the 1981 static pool through the 2016 static pool. We calculated standard deviations for Gini coefficients in this study as the standard deviations of a sample, rather than as the standard deviations of a population.

Appendix II: Gini Coefficient Methodology

We calculate Gini coefficients as one way to quantify our ratings' rank-ordering power of creditworthiness, based on observed default rates.

To measure relative ratings performance, we use the Lorenz curve as a graphical representation of the proportionality of a distribution, and we summarize this via the Gini coefficient. For this study, the Lorenz curve is plotted with the x-axis showing the cumulative share of issuers, arranged by rating level, while the y-axis represents the cumulative share of defaulters, also arranged by rating level. For both axes of the Lorenz curve, the observations are ordered from the low end of the ratings scale ('CCC'/'C') to the high end ('AAA'). As an example, if 'CCC'/'C' rated entities made up 10% of the total population of issuers at the start of the time frame examined (x-axis) and 50% of the defaulters (y-axis), then the coordinate (10, 50) would be the first point on the curve.

We illustrate the procedure for calculating the Gini coefficient in chart 11. Area B is bounded by the random curve and the Lorenz curve, while area A is bounded by the Lorenz curve and the ideal curve. The Gini coefficient is defined as area B divided by the sum of area A and area B. The Gini coefficient can therefore range from 0% (if the Lorenz curve follows the random curve) to 100% (if the Lorenz curve follows the ideal curve). In general, therefore, the higher the Gini coefficient, the greater the link between our ratings and observed default propensity.

If our ratings only randomly approximated default propensity, the Lorenz curve would fall along the diagonal shown as the random curve in chart 11, and the Gini coefficient would be 0%. On the other hand, if all defaults occurred only among the lowest-rated issuers, with no defaults among the higher-rated issuers, the Lorenz curve would lie along the line shown as the ideal curve in chart 11, and the Gini coefficient would be 100%. Typically, the observed Lorenz curve falls between the ideal and random curves, and we use the Gini coefficient as a summary statistic to quantify its proximity to the ideal curve.

Appendix III: Detailed Cumulative Default And Transition Data

Table 16

Static pool cumulative corporate default rates among all European ratings, 1981 to 2022 (%)
Rating: All rated		Time horizon
Year	Issuers	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
1981	11	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1982	13	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1983	18	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1984	28	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1985	35	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1986	40	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1987	50	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1988	61	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1989	73	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1990	95	0.00	1.05	1.05	1.05	1.05	1.05	1.05	1.05	1.05	1.05	1.05	1.05	1.05	1.05	1.05
1991	131	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76	0.76
1992	161	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1993	198	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51	0.51
1994	248	0.00	0.40	0.40	0.40	0.40	0.40	0.40	0.40	0.81	0.81	0.81	0.81	0.81	0.81	0.81
1995	319	0.31	0.31	0.31	0.31	0.31	0.31	0.31	0.94	0.94	0.94	0.94	0.94	0.94	0.94	0.94
1996	367	0.00	0.00	0.00	0.00	0.00	0.00	0.82	0.82	1.09	1.09	1.09	1.09	1.09	1.09	1.09
1997	455	0.00	0.00	0.00	0.00	0.00	0.88	1.76	1.98	1.98	1.98	1.98	1.98	1.98	1.98	1.98
1998	545	0.00	0.73	0.73	1.28	2.20	2.94	3.30	3.30	3.30	3.30	3.30	3.30	3.30	3.30	3.30
1999	659	0.91	1.37	2.43	3.34	4.10	4.40	4.40	4.55	4.55	4.55	4.55	4.55	4.55	4.55	4.55
2000	739	0.54	1.76	3.65	4.33	4.60	4.60	4.74	4.87	4.87	5.01	5.01	5.01	5.01	5.01	5.14
2001	824	1.46	3.88	4.98	5.22	5.34	5.46	5.58	5.58	5.70	5.70	5.70	5.70	5.70	5.83	6.31
2002	918	2.07	2.94	3.16	3.27	3.49	3.59	3.70	3.81	3.81	3.81	3.92	4.03	4.14	4.58	4.68
2003	956	0.84	1.05	1.26	1.46	1.57	1.67	1.99	1.99	1.99	2.20	2.30	2.41	2.82	2.93	3.24
2004	994	0.30	0.50	0.70	0.80	1.11	1.51	1.51	1.51	1.71	1.81	1.81	2.21	2.31	2.62	2.62
2005	1064	0.19	0.47	0.56	0.85	1.32	1.50	1.69	1.88	2.07	2.07	2.54	2.63	2.82	2.82	2.91
2006	1077	0.37	0.56	0.84	1.58	1.76	2.04	2.32	2.60	2.60	3.06	3.25	3.44	3.44	3.44	3.44
2007	1095	0.18	0.82	2.01	2.10	2.37	2.74	3.01	3.01	3.47	3.65	3.84	3.84	3.84	3.93	3.93
2008	1117	0.54	1.97	2.06	2.33	2.78	3.13	3.22	3.67	3.85	4.03	4.03	4.03	4.30	4.30	4.30
2009	1129	1.51	1.59	1.86	2.30	2.66	2.75	3.19	3.45	3.63	3.63	3.63	3.90	3.90	3.90
2010	1098	0.18	0.55	1.00	1.46	1.55	2.09	2.46	2.64	2.64	2.64	2.91	2.91	2.91
2011	1147	0.35	0.78	1.39	1.66	2.53	2.88	3.05	3.05	3.05	3.66	3.66	3.75
2012	1186	0.59	1.35	1.69	2.61	3.04	3.29	3.37	3.46	4.05	4.13	4.22
2013	1223	0.90	1.31	2.21	2.62	3.11	3.27	3.43	4.01	4.17	4.25
2014	1367	0.37	1.24	1.61	2.27	2.56	2.93	3.80	3.95	4.17
2015	1490	0.87	1.61	2.42	2.89	3.56	4.70	4.83	5.10
2016	1507	0.80	1.73	2.19	3.05	4.25	4.51	4.78
2017	1505	1.06	1.66	2.52	4.05	4.32	4.58
2018	1511	0.79	1.79	3.44	3.84	4.43
2019	1587	0.95	2.96	3.65	4.28
2020	1639	2.32	3.05	3.78
2021	1626	0.80	1.66
2022	1697	1.00
Summary statistics		Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
Marginal average		0.78	0.73	0.60	0.50	0.42	0.33	0.26	0.17	0.15	0.13	0.09	0.09	0.08	0.08	0.08
Cumulative average		0.78	1.51	2.10	2.59	3.00	3.32	3.57	3.73	3.88	4.00	4.08	4.17	4.24	4.32	4.40
Standard deviation		0.58	0.99	1.35	1.53	1.68	1.75	1.78	1.80	1.79	1.82	1.82	1.83	1.85	1.91	1.97
Median		0.36	0.76	0.92	1.28	1.43	1.51	1.72	1.88	1.84	1.81	1.45	1.09	1.07	1.05	1.00
Min		0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max		2.32	3.88	4.98	5.22	5.34	5.46	5.58	5.58	5.70	5.70	5.70	5.70	5.70	5.83	6.31

Table 17

Static pool cumulative corporate default rates among investment-grade European ratings, 1981 to 2022 (%)
Rating: Investment-grade		Time horizon
Year	Issuers	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
1981	10	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1982	12	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1983	17	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1984	26	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1985	33	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1986	38	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1987	47	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1988	58	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1989	71	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1990	92	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1991	129	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1992	159	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1993	193	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1994	244	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.41	0.41	0.41	0.41	0.41	0.41	0.41
1995	308	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.32	0.32	0.32	0.32	0.32	0.32	0.32	0.32
1996	350	0.00	0.00	0.00	0.00	0.00	0.00	0.29	0.29	0.57	0.57	0.57	0.57	0.57	0.57	0.57
1997	432	0.00	0.00	0.00	0.00	0.00	0.23	0.93	1.16	1.16	1.16	1.16	1.16	1.16	1.16	1.16
1998	502	0.00	0.00	0.00	0.20	0.60	1.20	1.59	1.59	1.59	1.59	1.59	1.59	1.59	1.59	1.59
1999	564	0.00	0.00	0.18	0.53	1.06	1.42	1.42	1.60	1.60	1.60	1.60	1.60	1.60	1.60	1.60
2000	622	0.16	0.32	0.64	1.13	1.45	1.45	1.61	1.61	1.61	1.61	1.61	1.61	1.61	1.61	1.77
2001	694	0.14	0.43	1.15	1.44	1.44	1.59	1.59	1.59	1.59	1.59	1.59	1.59	1.59	1.73	2.31
2002	775	0.13	0.65	0.77	0.77	0.90	0.90	1.03	1.03	1.03	1.03	1.03	1.16	1.29	1.81	1.94
2003	795	0.25	0.25	0.25	0.25	0.25	0.38	0.63	0.63	0.63	0.63	0.75	0.88	1.38	1.51	1.51
2004	808	0.00	0.00	0.00	0.00	0.12	0.37	0.37	0.37	0.37	0.50	0.50	0.99	1.11	1.11	1.11
2005	853	0.00	0.00	0.00	0.12	0.35	0.35	0.35	0.35	0.47	0.47	0.94	1.06	1.06	1.06	1.06
2006	855	0.00	0.00	0.00	0.23	0.23	0.23	0.23	0.35	0.35	0.82	0.82	0.82	0.82	0.82	0.82
2007	886	0.00	0.23	0.45	0.45	0.45	0.45	0.45	0.45	0.90	0.90	0.90	0.90	0.90	0.90	0.90
2008	917	0.11	0.33	0.33	0.33	0.33	0.44	0.44	0.87	0.87	0.87	0.87	0.87	0.87	0.87	0.87
2009	931	0.11	0.11	0.11	0.11	0.21	0.21	0.64	0.64	0.64	0.64	0.64	0.64	0.64	0.64
2010	901	0.00	0.00	0.00	0.11	0.11	0.55	0.55	0.55	0.55	0.55	0.55	0.55	0.55
2011	894	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.11	0.11	0.11
2012	872	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.11	0.23	0.23
2013	841	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.12	0.24	0.24
2014	854	0.00	0.00	0.00	0.00	0.00	0.12	0.23	0.35	0.35
2015	875	0.00	0.00	0.00	0.00	0.00	0.23	0.34	0.34
2016	891	0.00	0.00	0.00	0.00	0.22	0.22	0.22
2017	887	0.00	0.00	0.00	0.11	0.11	0.11
2018	895	0.00	0.00	0.11	0.11	0.11
2019	915	0.00	0.00	0.00	0.00
2020	929	0.00	0.00	0.00
2021	906	0.00	0.00
2022	914	0.00
Summary statistics	N/A	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
Marginal average		0.03	0.05	0.06	0.06	0.07	0.10	0.09	0.06	0.06	0.05	0.04	0.05	0.05	0.05	0.06
Cumulative average		0.03	0.08	0.14	0.20	0.27	0.37	0.46	0.52	0.58	0.63	0.66	0.72	0.76	0.82	0.87
Standard deviation		0.06	0.14	0.25	0.32	0.39	0.45	0.51	0.53	0.54	0.55	0.56	0.58	0.61	0.66	0.74
Median		0.00	0.00	0.00	0.00	0.00	0.00	0.11	0.29	0.34	0.32	0.37	0.41	0.48	0.41	0.37
Min		0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max		0.25	0.65	1.15	1.44	1.45	1.59	1.61	1.61	1.61	1.61	1.61	1.61	1.61	1.81	2.31
N/A--Not applicable.

Table 18

Static pool cumulative corporate default rates among speculative-grade European ratings, 1981 to 2022 (%)
		Rating: Speculative-grade
Rating: Speculative-grade		Time horizon
Year	Issuers	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
1981	1	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1982	1	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1983	1	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1984	2	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1985	2	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1986	2	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1987	3	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1988	3	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1989	2	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1990	3	0.00	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33
1991	2	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00
1992	2	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1993	5	20.00	20.00	20.00	20.00	20.00	20.00	20.00	20.00	20.00	20.00	20.00	20.00	20.00	20.00	20.00
1994	4	0.00	25.00	25.00	25.00	25.00	25.00	25.00	25.00	25.00	25.00	25.00	25.00	25.00	25.00	25.00
1995	11	9.09	9.09	9.09	9.09	9.09	9.09	9.09	18.18	18.18	18.18	18.18	18.18	18.18	18.18	18.18
1996	17	0.00	0.00	0.00	0.00	0.00	0.00	11.76	11.76	11.76	11.76	11.76	11.76	11.76	11.76	11.76
1997	23	0.00	0.00	0.00	0.00	0.00	13.04	17.39	17.39	17.39	17.39	17.39	17.39	17.39	17.39	17.39
1998	43	0.00	9.30	9.30	13.95	20.93	23.26	23.26	23.26	23.26	23.26	23.26	23.26	23.26	23.26	23.26
1999	95	6.32	9.47	15.79	20.00	22.11	22.11	22.11	22.11	22.11	22.11	22.11	22.11	22.11	22.11	22.11
2000	117	2.56	9.40	19.66	21.37	21.37	21.37	21.37	22.22	22.22	23.08	23.08	23.08	23.08	23.08	23.08
2001	130	8.46	22.31	25.38	25.38	26.15	26.15	26.92	26.92	27.69	27.69	27.69	27.69	27.69	27.69	27.69
2002	143	12.59	15.38	16.08	16.78	17.48	18.18	18.18	18.88	18.88	18.88	19.58	19.58	19.58	19.58	19.58
2003	161	3.73	4.97	6.21	7.45	8.07	8.07	8.70	8.70	8.70	9.94	9.94	9.94	9.94	9.94	11.80
2004	186	1.61	2.69	3.76	4.30	5.38	6.45	6.45	6.45	7.53	7.53	7.53	7.53	7.53	9.14	9.14
2005	211	0.95	2.37	2.84	3.79	5.21	6.16	7.11	8.06	8.53	8.53	9.00	9.00	9.95	9.95	10.43
2006	222	1.80	2.70	4.05	6.76	7.66	9.01	10.36	11.26	11.26	11.71	12.61	13.51	13.51	13.51	13.51
2007	209	0.96	3.35	8.61	9.09	10.53	12.44	13.88	13.88	14.35	15.31	16.27	16.27	16.27	16.75	16.75
2008	200	2.50	9.50	10.00	11.50	14.00	15.50	16.00	16.50	17.50	18.50	18.50	18.50	20.00	20.00	20.00
2009	198	8.08	8.59	10.10	12.63	14.14	14.65	15.15	16.67	17.68	17.68	17.68	19.19	19.19	19.19
2010	197	1.02	3.05	5.58	7.61	8.12	9.14	11.17	12.18	12.18	12.18	13.71	13.71	13.71
2011	253	1.58	3.56	6.32	7.51	11.46	13.04	13.83	13.83	13.83	16.21	16.21	16.60
2012	314	2.23	5.10	6.37	9.87	11.46	12.42	12.74	13.06	14.97	14.97	15.29
2013	382	2.88	4.19	7.07	8.38	9.95	10.47	10.99	12.57	12.83	13.09
2014	513	0.97	3.31	4.29	6.04	6.82	7.60	9.75	9.94	10.53
2015	615	2.11	3.90	5.85	6.99	8.62	11.06	11.22	11.87
2016	616	1.95	4.22	5.36	7.47	10.06	10.71	11.36
2017	618	2.59	4.05	6.15	9.71	10.36	11.00
2018	616	1.95	4.38	8.28	9.25	10.71
2019	672	2.23	6.99	8.63	10.12
2020	710	5.35	7.04	8.73
2021	720	1.81	3.75
2022	783	2.17
Summary statistics		Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
Marginal average		2.71	2.63	2.21	1.89	1.63	1.18	0.93	0.67	0.60	0.56	0.43	0.29	0.27	0.24	0.27
Cumulative average		2.71	5.26	7.36	9.11	10.60	11.65	12.47	13.06	13.58	14.06	14.43	14.68	14.91	15.11	15.34
Standard deviation		8.32	10.16	10.47	10.68	11.01	11.06	11.08	11.30	11.50	11.71	11.90	12.12	12.32	12.52	12.69
Median		1.71	3.90	6.18	7.51	8.85	10.47	11.19	12.18	12.50	13.09	14.50	13.71	13.61	13.51	12.66
Min		0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max		50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00	50.00

Table 19

One-year weighted average European corporate transition matrix, 1981 to 2022 (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	87.16	9.09	0.45	0.11	0.00	0.00	0.11	0.00	3.07
	(8.72)	(7.73)	(1.36)	(0.90)	(0.00)	(0.00)	(0.75)	(0.00)	(4.45)
AA	0.26	86.34	9.42	0.52	0.00	0.00	0.00	0.00	3.46
	(0.65)	(6.97)	(6.33)	(1.14)	(0.00)	(0.00)	(0.00)	(0.00)	(2.37)
A	0.01	1.70	88.34	5.05	0.14	0.03	0.00	0.03	4.70
	(0.04)	(1.73)	(4.88)	(3.35)	(0.32)	(0.39)	(0.00)	(0.08)	(1.92)
BBB	0.00	0.07	3.77	86.21	3.20	0.25	0.08	0.05	6.37
	(0.00)	(1.17)	(1.99)	(4.92)	(2.56)	(0.48)	(0.25)	(0.19)	(2.92)
BB	0.00	0.00	0.09	5.02	75.32	6.60	0.35	0.37	12.25
	(0.00)	(0.00)	(0.56)	(2.45)	(6.52)	(3.38)	(0.92)	(0.78)	(4.23)
B	0.00	0.00	0.02	0.20	4.69	73.92	4.97	1.85	14.35
	(0.00)	(0.00)	(0.18)	(0.45)	(3.16)	(6.24)	(3.13)	(2.93)	(4.81)
CCC/C	0.00	0.00	0.00	0.18	0.00	13.68	45.44	24.39	16.32
	(0.00)	(0.00)	(0.00)	(0.58)	(0.00)	(9.44)	(15.87)	(15.41)	(8.55)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 20

Two-year weighted average European corporate transition matrix, 1981-2022, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	75.63	16.74	1.25	0.11	0.11	0.00	0.11	0.00	6.04
	(12.87)	(11.11)	(2.44)	(0.82)	(0.91)	(0.00)	(0.80)	(0.00)	(7.52)
AA	0.50	74.40	16.72	1.37	0.14	0.00	0.00	0.02	6.84
	(1.09)	(10.23)	(8.78)	(1.85)	(0.36)	(0.00)	(0.00)	(0.11)	(3.30)
A	0.01	3.00	78.16	8.90	0.43	0.09	0.03	0.06	9.31
	(0.05)	(2.51)	(7.44)	(4.25)	(0.90)	(0.44)	(0.19)	(0.14)	(2.97)
BBB	0.00	0.12	6.95	74.63	5.14	0.59	0.19	0.15	12.21
	(0.00)	(1.70)	(2.81)	(7.08)	(3.23)	(0.90)	(0.56)	(0.39)	(4.35)
BB	0.00	0.00	0.28	8.71	57.40	9.73	0.55	1.17	22.16
	(0.00)	(0.00)	(0.74)	(2.90)	(8.03)	(3.99)	(1.06)	(1.83)	(5.46)
B	0.00	0.00	0.02	0.40	7.22	53.90	6.38	4.99	27.08
	(0.00)	(0.00)	(0.19)	(0.79)	(4.37)	(8.17)	(3.16)	(5.09)	(7.36)
CCC/C	0.00	0.00	0.00	0.20	0.61	15.71	21.22	35.71	26.53
	(0.00)	(0.00)	(0.00)	(0.83)	(1.94)	(11.67)	(12.82)	(14.97)	(11.58)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 21

Three-year weighted average European corporate transition matrix, 1981-2022, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	65.07	23.29	2.40	0.11	0.23	0.00	0.11	0.00	8.79
	(15.34)	(12.84)	(3.38)	(0.76)	(1.21)	(0.00)	(0.82)	(0.00)	(8.93)
AA	0.69	64.60	21.83	2.30	0.32	0.00	0.02	0.05	10.19
	(1.39)	(11.69)	(9.65)	(2.39)	(0.54)	(0.00)	(0.12)	(0.16)	(4.29)
A	0.02	3.88	69.68	11.67	0.81	0.16	0.09	0.10	13.61
	(0.10)	(3.12)	(8.51)	(4.29)	(1.41)	(0.55)	(0.31)	(0.19)	(3.82)
BBB	0.00	0.19	9.26	65.17	6.32	0.95	0.25	0.28	17.58
	(0.00)	(2.15)	(2.84)	(8.41)	(3.07)	(1.00)	(0.52)	(0.71)	(5.62)
BB	0.00	0.00	0.43	11.26	44.37	10.76	0.69	1.97	30.52
	(0.00)	(0.00)	(0.85)	(3.70)	(8.53)	(3.58)	(1.06)	(2.48)	(6.98)
B	0.00	0.00	0.00	0.59	7.99	39.20	6.07	8.26	37.89
	(0.00)	(0.00)	(0.00)	(1.09)	(4.59)	(8.08)	(2.72)	(5.91)	(8.74)
CCC/C	0.00	0.00	0.00	0.25	0.75	13.43	9.20	42.79	33.58
	(0.00)	(0.00)	(0.00)	(0.91)	(2.12)	(11.00)	(8.45)	(16.26)	(14.31)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 22

Five-year weighted average European corporate transition matrix, 1981-2022, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	48.51	30.85	4.70	0.57	0.46	0.00	0.00	0.00	14.91
	(16.87)	(11.86)	(4.73)	(1.17)	(1.60)	(0.00)	(0.00)	(0.00)	(10.96)
AA	0.64	49.32	29.06	3.65	0.56	0.08	0.03	0.15	16.51
	(1.12)	(12.95)	(9.89)	(2.53)	(0.85)	(0.20)	(0.15)	(0.32)	(5.13)
A	0.03	4.92	56.24	14.98	1.58	0.26	0.12	0.22	21.65
	(0.14)	(3.52)	(9.22)	(4.68)	(1.65)	(0.37)	(0.44)	(0.34)	(4.80)
BBB	0.00	0.37	11.56	51.11	6.64	1.41	0.40	0.54	27.98
	(0.00)	(2.68)	(2.19)	(9.46)	(3.12)	(1.12)	(0.69)	(0.89)	(7.60)
BB	0.00	0.04	0.80	13.88	29.10	9.31	0.84	3.47	42.56
	(0.00)	(0.60)	(1.21)	(4.22)	(7.62)	(2.55)	(0.94)	(3.31)	(7.73)
B	0.00	0.00	0.00	1.51	7.65	21.24	3.05	13.00	53.56
	(0.00)	(0.00)	(0.00)	(1.47)	(3.95)	(4.43)	(1.92)	(6.20)	(7.41)
CCC/C	0.00	0.00	0.00	0.62	1.86	8.98	1.86	44.27	42.41
	(0.00)	(0.00)	(0.00)	(1.71)	(3.80)	(6.42)	(2.68)	(15.63)	(13.63)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 23

Seven-year weighted average European corporate transition matrix, 1981-2022, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	36.75	34.45	6.91	1.50	0.46	0.00	0.00	0.00	19.93
	(16.99)	(11.93)	(4.30)	(2.11)	(1.60)	(0.00)	(0.00)	(0.00)	(11.31)
AA	0.54	38.70	32.81	4.57	0.68	0.16	0.03	0.24	22.27
	(0.63)	(11.24)	(8.90)	(2.38)	(0.80)	(0.37)	(0.16)	(0.42)	(5.86)
A	0.03	5.35	45.96	17.16	2.15	0.27	0.05	0.38	28.65
	(0.12)	(3.34)	(8.98)	(4.46)	(1.67)	(0.37)	(0.11)	(0.51)	(5.38)
BBB	0.00	0.54	12.37	41.78	5.86	1.46	0.52	0.97	36.50
	(0.00)	(2.96)	(2.09)	(8.67)	(2.39)	(0.93)	(0.73)	(1.02)	(7.87)
BB	0.00	0.05	1.55	13.49	20.51	7.84	0.68	5.10	50.77
	(0.00)	(0.65)	(3.01)	(5.34)	(6.46)	(2.05)	(0.69)	(3.71)	(8.10)
B	0.00	0.00	0.00	2.28	6.63	13.22	1.34	15.90	60.63
	(0.00)	(0.00)	(0.00)	(1.88)	(3.34)	(3.06)	(1.06)	(6.35)	(7.25)
CCC/C	0.00	0.00	0.00	0.42	2.54	4.66	1.27	45.76	45.34
	(0.00)	(0.00)	(0.00)	(1.47)	(3.69)	(4.89)	(2.55)	(18.44)	(16.88)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 24

Ten-year weighted average European corporate transition matrix, 1981-2022, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	23.08	35.55	11.31	2.91	0.12	0.00	0.00	0.00	27.04
	(13.48)	(8.86)	(4.94)	(2.21)	(0.81)	(0.00)	(0.00)	(0.00)	(10.97)
AA	0.29	27.48	34.27	6.88	0.74	0.18	0.00	0.32	29.83
	(0.52)	(8.10)	(6.88)	(3.10)	(0.81)	(0.32)	(0.00)	(0.46)	(5.74)
A	0.00	5.31	34.05	19.12	2.62	0.41	0.00	0.51	37.98
	(0.00)	(3.18)	(7.59)	(4.39)	(1.78)	(0.54)	(0.00)	(0.56)	(6.29)
BBB	0.00	0.72	12.23	32.05	5.50	1.26	0.67	1.53	46.04
	(0.00)	(3.45)	(2.34)	(7.49)	(2.55)	(0.87)	(0.80)	(0.95)	(6.40)
BB	0.00	0.06	2.47	10.63	13.47	6.51	0.44	7.34	59.08
	(0.00)	(0.77)	(5.25)	(5.47)	(5.37)	(1.99)	(0.67)	(3.96)	(7.93)
B	0.00	0.00	0.00	1.98	6.51	6.93	0.64	19.73	64.21
	(0.00)	(0.00)	(0.00)	(1.41)	(3.12)	(2.58)	(0.62)	(7.87)	(7.44)
CCC/C	0.00	0.00	0.00	1.33	2.67	2.67	0.00	52.00	41.33
	(0.00)	(0.00)	(0.00)	(3.45)	(4.63)	(4.87)	(0.00)	(21.13)	(20.55)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

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Ratings Performance Analytics:	Gregoire Rycx, Paris +33 1 4075 2573; gregoire.rycx@spglobal.com
	Nick W Kraemer, FRM, New York + 1 (212) 438 1698; nick.kraemer@spglobal.com
Research Contributors:	Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai
	Nivedita Daiya, CRISIL Global Analytical Center, an S&P affiliate, Mumbai