alt Hacker News> maybe the stress test was measuring something different?
The Fed is measuring the loss on bank loans to the private-credit lenders. A 10% portfolio loss shouldn't result in those lenders defaulting to their banks.
By my rough estimate, one can halve the portfolio loss rate to get the NBFI-to-bank loss rate. So a 10% portfolio loss means we're around a 5% expected long-run loss to the banks. Which is still weirdly high, so I feel like I must be missing something...
The 9% of borrowers defaulting stat cited in the title is not the same as 9% of the loanbook defaulting.
As stated in the article, 9% is the number of borrowers that defaulted, which was concentrated in smaller borrowers (thus smaller loans).
And then, again, you can say probably half of the dollar amount of those defaults are recoverable.
Bond defaults spiked to around 6% in aggregate in 2008, to use a worst case example.