Brazil’s Financial-Stability Committee Warns of Rising Household Debt and Calls for Greater Credit Caution

Overview

• The Comef minutes published June 3 say household indebtedness is near record highs, with debt at about 49.8% of annual income and monthly income committed to debt around 29.3%, figures the committee says continued to rise.
• The Central Bank urged financial institutions to adopt extra diligence in credit underwriting because the shift toward more onerous loan types raises default probability for households under a contractionary policy-rate environment.
• Bank lending has decelerated since March, with higher-risk household credit slowing but still growing faster than lower-risk loans, credit to micro and small firms cooling while large-company borrowing reaccelerated.
• Corporate funding is shifting into capital markets, which the BC called 'heated' in Q1 as debentures and commercial paper drove a faster expansion of market-based financing than bank credit.
• The BC said the system broadly remains resilient with capital and liquidity above prudential floors and stress tests passing, but it flagged some banks with provisions below the regulator’s estimates and warned that advances in AI could amplify cyber risks, prompting calls to strengthen cyber-resilience.