Delinquency and Default
What happens when obligations fail.
When an agent fails to satisfy the requirements of a credit position, the position can enter a delinquent or default state according to protocol-defined conditions.
- The event becomes part of the agent's permanent financial history.
- Available supporting capital can be utilized according to the applicable risk rules.
- Where eligible, protocol reserves can absorb additional losses.
- Any remaining uncovered exposure is accounted for at the protocol level.
- Default activity can also affect the agent's future access to credit.
This creates an economic relationship between financial behavior and future financial capacity.