Brazil's Central Bank Prepares New Measures to Combat Record Family Debt

The Central Bank of Brazil is developing a package of regulatory measures to mitigate financial risks and contain credit indebtedness after family income commitment reached a record high. According to the minutes of the 66th meeting of the Financial Stability Committee (Comef) released Wednesday, the bank aims to promote the timely recognition of risks by financial institutions, encourage the gradual accumulation of regulatory capital, and foster more sustainable credit offering conditions. Director of Supervision Ailton de Aquino indicated that credit cards and non payroll loans are likely targets for these measures, with a specific focus on transparency.

The committee noted that family indebtedness remains at historically high levels, driven largely by the significant share of expensive credit modalities in household debt. While growth in high risk bank credit for individuals has slowed, the Central Bank stated this deceleration was insufficient to reduce the burden on family income. Recent data shows that overdue loans in free credit, including credit cards and vehicle financing, reached 6.4 percent in July, the highest level since 2011. For individuals specifically, delinquency reached 7.8 percent in July.

Financial pressure extends to the corporate sector, where credit for micro, small, and medium enterprises has slowed. The Central Bank observed a decrease in the number of companies reporting increased net profit and an increase in those with higher net financial expenses. Additionally, the committee expressed concern regarding capital market structures involving multiple layers of investment funds that may hinder risk assessment. Director Aquino also identified betting platforms as a central element contributing to the compromise of family income. Despite these risks, the committee decided to maintain the Countercyclical Capital Buffer (ACCPBrasil) at 0 percent.