Brazil's Central Bank Considers Measures to Reduce Growing Household Debt

Brazil's Central Bank is studying macroprudential measures and the experience of other countries in response to rising household debt, announced Gabriel Galípolo, the head of the central bank.

Galípolo made this statement at an event organized by Febraban, a banking lobby organization. According to him, the central bank is working on a slow and gradual transformation to solve the problem, so that rising household debt does not become a persistent issue.

According to the central bank head, the growth in debt is to some extent a natural result when credit resources become more accessible to the population. However, he noted that increased financial inclusion should also be accompanied by responsible use of financial services.

In Brazil, excluding mortgage loans, household debt represented 31.1% of their income in May. This indicator reflects the ratio of existing obligations to income accumulated over the past 12 months.

The central bank is particularly concerned about the rapid growth of non-mortgage debt. This is especially noteworthy given that incomes in the country are growing and unemployment is at historically low levels, yet loan default rates are still increasing.

According to Galípolo, the central bank is considering measures that would help improve discipline in the credit market. It is also important that borrowers better understand the true cost of various credit products, while banks and other creditors create adequate reserves for the risks they assume.