Brazil’s central bank is evaluating steps to contain household indebtedness, including potential caps on credit card and unsecured lending, before considering a broader debt-to-income threshold. The move follows a record 26.6% share of household income committed to debt service in June, excluding housing finance, up from 25.7% at the end of last year.
The Financial Stability Committee met this week to discuss measures aimed at mitigating risks from high-cost credit products, which analysts cite as a growing concern. Among the options under review are higher capital requirements, adjustments to reserve ratios, and modifications to the Financial Operations Tax, according to BTG Pactual. The central bank has also not ruled out activating the Countercyclical Capital Buffer, currently set at zero, a tool designed to require banks to build capital during expansions and release it during stress.
The International Monetary Fund recommended in July 2026 that Brazil impose a limit on debt-service-to-income ratios, a suggestion that aligns with the central bank’s current focus. An IMF counterfactual analysis estimated that capping new loans at 40% in 2025 would have reduced the average debt-service ratio by about five percentage points and trimmed household credit stock by roughly 5.6%, excluding housing loans and most credit card operations.
Credit card debt remains a particular focus, with 52.8 million Brazilians carrying revolving or interest-bearing balances. Revolving credit interest rates can reach 15.1% per month, underscoring the strain on household finances. The central bank has highlighted concerns over weak transparency in lending practices and low financial literacy as contributing factors to rising indebtedness.
Analysts at Citi noted the shift in the central bank’s approach, moving from monitoring credit growth speed to scrutinizing underwriting standards and the quality of deteriorating credit portfolios. The measures under consideration aim to strengthen the sustainability of credit growth and bolster the resilience of the financial system amid persistent debt pressures.
