Brazil's central bank is actively studying macroprudential tools and international experience to confront a growing level of household indebtedness, central bank chief Gabriel Galipolo said on Monday.
Speaking at an event organized by the banking lobby Febraban, Galipolo described the institution's approach as cautious and incremental. The central bank is pursuing a "slow and gradual transition process so that we do not allow this growing problem to perpetuate itself," he said.
Galipolo acknowledged that higher household debt can be an expected consequence of policies aimed at broadening access to credit, but he stressed that expanding financial inclusion must go hand in hand with responsible consumer use of financial services.
The central bank provided a snapshot of household leverage that underscores the recent trend: total household debt excluding mortgage loans reached 31.1% in May, measured as outstanding liabilities relative to income accumulated over the previous 12 months.
Officials singled out the strong expansion in non-mortgage debt as a notable concern. Galipolo pointed to this area of credit and to the fact that delinquency rates have been rising even as incomes have improved and unemployment remains historically low.
To address these dynamics, the central bank is considering a range of measures, Galipolo said. The proposals under review include steps to strengthen discipline in lending markets, initiatives to make sure borrowers have clearer information on the cost of different credit products, and requirements for lenders to provision appropriately for the risks they assume.
Galipolo linked these policy evaluations to the broader goal of balancing credit expansion with financial stability. He framed the central bank's work as focused on preventing the buildup of persistent debt problems while preserving the benefits of wider credit access.
Summary
The central bank is examining macroprudential options and international examples to respond to rising household indebtedness, emphasizing a gradual transition, responsible use of credit, borrower education on costs, and stronger lender provisioning. Total household debt excluding mortgages was 31.1% in May. Non-mortgage debt growth and rising delinquencies despite stronger incomes and low unemployment are key concerns.