Brazilian banks increase reserves fearing a consumers’ credit bubble

Tuesday, February 21st 2012 - 06:38 UTC

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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 Read full article

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Forgetit87
Hm

“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/
Feb 21st, 2012 - 09:15 am - Link - Report abuse 0
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GeoffWard2
”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”

This 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.
Feb 21st, 2012 - 10:29 am - Link - Report abuse 0
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GreekYoghurt
@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.

Seems the same story here.
Feb 21st, 2012 - 10:45 am - Link - Report abuse 0
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Forgetit87
@Geoff

I'd have to read the article Mercopress mentions in order to know whether translation was accurate. Supposing it was, I'd guess that bad loans increased among sectors related to upper- or middle-class consumption, such as the car market. Perhaps those sectors are more volatile and vulnerable to the CB's monetary policy? But I think you're correct; it wasn't much long ago when people were complaining about default rates among the lower-class: traditionally, it's the poor who make the riskiest borrowers.

@GY

Credit card market has been in Brazil since... IDK, since before I was born. And it's main clientele is the A-class consumers Mercopress mentions - a groups that is not unaccostumed to credit cards and knows full well how it works.
Feb 21st, 2012 - 02:53 pm - Link - Report abuse 0
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