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.