Brazil’s central bank is examining measures to curb rising household debt levels after the ratio of debt service to income reached a record 26.6% in June, up from 25.7% at the end of 2025. The data, released Friday, underscores growing concerns over consumer credit stress despite rising incomes and historically low unemployment.
Policymakers are focusing on lender-side restrictions rather than direct caps on household borrowing. The Financial Stability Committee is evaluating stricter requirements for lenders, including higher capital and reserve buffers, elevated risk weights for riskier loans, and adjustments to the IOF financial transactions tax. These steps aim to reduce the availability of costly credit products and improve transparency in lending practices.
The central bank kept its countercyclical capital buffer at 0% this week but has signaled it may raise it to a positive-neutral level to help banks build capital cushions and restrain credit growth by increasing funding costs. Revolving credit-card balances and unsecured personal loans remain key areas of concern, with over 52.8 million Brazilians—more than half of credit card users—carrying revolving balances.
The International Monetary Fund, in a July statement, recommended imposing a maximum debt service-to-income ratio cap to limit loan eligibility and strengthen consumer protections against predatory lending. However, Brazilian authorities have not indicated that a direct borrowing cap is their preferred initial approach.
Analysts at BTG Pactual have suggested the central bank could introduce a positive-neutral countercyclical capital buffer to temper credit expansion. The measures under consideration reflect broader efforts to address vulnerabilities in consumer credit markets amid sustained debt accumulation.
