Brazil’s central bank chief Gabriel Galípolo said on Monday it is natural for household debt to rise as credit expands, but warned that the growth of more expensive, unsecured funding lines raises concerns over responsible borrowing.
Speaking at the Febraban Tech event in São Paulo, Galípolo noted that Brazil’s financial inclusion drive over recent years has broadened access to credit but stressed the need for disciplined use of financial services. He added that while the household debt indicator excluding mortgage financing has grown significantly, the expansion has been driven primarily by private payroll-deductible loans, which have higher default rates and rising interest costs.
The central bank governor highlighted that indebtedness has continued to climb even amid high employment and income levels, attributing the trend to pressure from unsecured credit, credit cards, and delays in vehicle financing and private payroll loan repayments. Last year, the central bank liquidated Banco Master, a lender that had expanded rapidly through high-yield debt securities backed by Credit Guarantee Fund (FGC) guarantees before balance sheet inconsistencies emerged and triggered a police investigation.
Galípolo emphasized that banks must maintain adequate provisions for the risks associated with the products they offer, adding that the central bank is focused on prudential measures and reviewing international experiences. He cautioned against institutions growing rapidly on the assumption that potential losses will not appear on their balance sheets, stating that responsible financial expansion remains a priority.
The central bank has already implemented measures related to security, fraud prevention, and the FGC, though Galípolo noted that the process has no predetermined endpoint, signaling ongoing regulatory vigilance in Brazil’s credit market.
