Bangkok--4 Mar--Standard & Poor's, Among corporates, the total number of defaults (22) in 2007 was the lowest recorded since 1996, with all defaulters originally rated speculative grade ('BB+') or lower. According to an article published today by Standard & Poor's titled "2008 Basel II Update Of Global Ratings," given the low incidence of corporate defaults in 2007, there were no breaches at any threshold across any of the rating categories in the most recent three-year time period (ending in 2007). The same applies for sovereigns or structured finance deals rated by Standard & Poor's Ratings Services. The Basel II international accord, developed by the Basel Committee on Banking Supervision (BCBS), provides guidelines and a conceptual framework necessary for financial institutions to determine their minimum regulatory capital on an ongoing basis. This framework seeks to strengthen risk-management practices by better aligning regulatory capital requirements with the actual underlying risks faced by banks. As per the guidelines in this agreement, credit ratings may be used to assign risk weights under the so-called standardized approach, with higher ratings corresponding to lower risk weights, and vice versa. "The data presented in the article offer market participants--bankers, investors, risk managers, and regulators--a way to benchmark their portfolios under the guidelines stipulated by the standardized approach as articulated in Pillar 1 of the accord," explained Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. The default rates reported in this study are calculated for the Standard & Poor's rated universe on an issuer-weighted basis using the average-of-transitions method and do not take into account the volume of debt affected. Data for corporates, sovereigns, and structured finance transactions are all generated using a cohort-based approach instead of the vintage-based measure often favored for structured finance. The key objectives of this report are to: -- Update empirical findings on the two main parameters of interest in the standardized approach, which are the most recent three-year cumulative default rate (CDR) and the 10-year average of the most recent three-year CDRs. -- Identify historical breaches in these two key parameters--referred to as the monitoring level and the trigger level--by rating and region. -- Compare default experience across financial and nonfinancial companies. -- Examine whether CDRs remain within the guidelines laid out by the BCBS across various asset classes (i.e., corporates, structured finance, and sovereigns). In line with our previous report, the empirical evidence, based on data from 1981-2007, suggests that by and large, contraventions of these key risk-monitoring parameters are rare occurrences, regardless of whether the data are broken out by region or broad sector. Exceptions were driven by the telecommunications collapse and the financial crisis in Argentina in 2000-2002. However, in general, breaches subside to below these key parameters after one or two periods. As our default studies show, ratings clearly and consistently demonstrate a monotonic pattern: The higher the rating, the lower the probability of default, and vice versa. Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research, and data. With approximately 8,500 employees, including wholly owned affiliates, located in 23 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.