MercoPress. South Atlantic News Agency
Brazilian banks increase reserves fearing a consumers’ credit bubble
Consumers rushing to buy at Sao Paulo shopping malls Brazilian banks have increased their reserves by 21% to the equivalent of 67.3 billion dollars fearing a possible moratorium while consumers are facing growing problems to address payments, according to the Sunday edition of Correio Braziliense
Bank reserves against possible bad debts have increased to a higher level than back in 2008 when the housing crisis in the US caused a world shortage of credit, said the Brasilia based newspaper quoting Central bank figures.
An increase in the reference interest rates during the first eight months of 2011 put pressure on credit users, said Correio quoting economist Roberto Luis Troster from Sao Paulo Delta Consultants.
Following a strong expansion of credit in 2009 and 2010, Brazilian families are spending almost half their income to pay debts, said Correio Braziliense.
The delinquency rate of consumer credit in Brazil is above 7.3% of loans with the highest interest rates among the so called ‘A class’ consumers which are considered of lesser risk, according to the newspaper. In the private sector Brazilian owned banks increased reserves by 25% and foreign banks by 28%
Non government banks have increased their bad debts reserves to 26% in 2011, while government managed banks have done something similar but to 14%.
The Brazilian government is putting pressure on the Bank of Brazil, managed by the government and the Caixa Economica Federal to cut their credit interest rates, a measure which pretends to help expand credit and encourage private banks to follow.
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Feb 21st, 2012 - 09:15 am 0“Bad loans rates reaches lowest level in São Paulo since 2004, says Fecomercio.” http://colunistas.ig.com.br/guilhermebarros/2011/11/27/inadimplencia-em-sao-paulo-atinge-menor-nivel-desde-2004-diz-fecomercio/
“In January bad consumer loans drops 0.4%” http://colunistas.ig.com.br/guilhermebarros/2011/11/27/inadimplencia-em-sao-paulo-atinge-menor-nivel-desde-2004-diz-fecomercio/
”Household debt levels drops in January, says CNC (...) The percentage of households with account in arrears or without the means to service debts dropped 1.3% in January, reaching 19.9% against 21.2% in the previous month.”
http://colunistas.ig.com.br/guilhermebarros/2011/11/27/inadimplencia-em-sao-paulo-atinge-menor-nivel-desde-2004-diz-fecomercio/
”The delinquency (sic) rate of consumer credit in Brazil is above 7.3% of loans with the highest interest rates among the so called ‘A class’ consumers which are considered of lesser risk”
Feb 21st, 2012 - 10:29 am 0This is counter-intuitive, and does not match the interest rates charged across the 'risk-classes' in the developed world, where higher rates are charged to the most risky prospects.
I think we need interpretative help from Forgetit.
@2 The same thing happened in China if I recall. When people were issued with credit cards people just saw it as free money and spent it without considering the debt level or having any personal reprocussions through credit rating agencies not existing. Delinquency was at about 60% and Mastercard and Visa basically retreated never to return. Now Chinese people have unionpay which is a little better, and understands chinese economic sentiment.
Feb 21st, 2012 - 10:45 am 0Seems the same story here.
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