‘BC is just a referee in the rotating discussion’, says director – 11/09/2023 – Market

The Director of Supervision at the Central Bank, Ailton de Aquino Santos, stated this Thursday (9) that the municipality only plays an arbitrator role in discussions between banks and machine companies about limiting interest on revolving credit cards. According to him, the monetary authority should not interfere in the debate.

BC members have participated in meetings with representatives of the financial sector to discuss lower rates for revolving cards, the most expensive type of credit in the country. Since the sanction of the Desenrola Brasil law was published, which provides for changes to the rules for this modality, the 90-day period began for companies to present a proposal for the topic — if there is no consensus, the debt will be limited to the double the original amount.

“The BC, from this perspective, is just an arbiter, it should not influence or have an opinion on what should be built. Because the construction must be carried out by the market”, said Aquino during an interview about the financial stability report.

“We have many proposals [feitas pelos diferentes envolvidos] on the table. The role of the BC is to evaluate the proposals and submit, if it is a consensus proposal – as the normative text says –, to the CMN [Conselho Monetário Nacional]. Our role is that of regulator, supervisor and monitoring”, he stated.

The law sanctioned on October 3 determines that issuers of credit cards and other payment instruments must, as a self-regulatory measure, submit for approval to the CMN, through the BC, limits on interest rates and financial charges charged on the revolving credit and installments of outstanding balances on card invoices and other payment instruments.

If the limits presented are not approved within a maximum period of 90 days, counting from the date of publication of the law, the total charged in each case as interest and financial charges cannot exceed the original value of the debt.

At the last meeting on the subject, on Tuesday (7), the president of the BC, Roberto Campos Neto, opened the discussion by saying that participants could present their positions and proposals on the subject and that the monetary authority would like to understand the position of each side and clarify doubts about the data presented.

According to one of the participants, the majority of those present were resistant to any pricing or limitation on interest-free installment payments in this discussion.

Another member heard by Sheet He described the meeting as fluid and highlighted the collaborative environment in the negotiations, saying he was optimistic after this new meeting.

According to Aquino, the BC does not have conclusive studies on what impact the changes could have on the results of financial institutions. Even so, the director states that the measures should affect the numbers of companies in the sector.

“The credit card line is very important for financial institutions. Any change, any change, obviously, by nature, will impact the result. I don’t know what this impact will be, but, obviously, we are working and simulating and doing exercises together with the market”, he said.

For him, there will be a consensual solution within the period stipulated by law. “I’m very optimistic. The deadline is running out, we have 32 days [passados] after the enactment of the law. There is little time left before the 90 days, but I believe that the market, intelligently, will find a balance point”, he stated.

The statements were made during a presentation on the financial stability report. In the document, the BC assessed that there are no relevant risks, in a scenario of capitalization, liquidity and adequate provisions — but highlighted the effects of high interest rates on credit, as well as a “high degree of uncertainty” in the international environment.

The BC said it considers that capital and liquidity stress tests demonstrate the “robustness” of the banking system.

“Expectations are positive for the coming quarters due to the quality of new concessions, the reduction in estimates of credit losses and the gradual monetary easing”, assessed the authority in the document, emphasizing that the banking system remains with comfortable liquidity, while the capital base remains solid and the capital structure is more homogeneous among creditor segments.

According to the BC, the financial market also perceives a resilient financial system, as “financial market agents have reduced their risk perceptions, mainly in relation to fiscal risks and the international scenario”.

However, there remains a “high degree of uncertainty about the growth prospects of the global economy”, warned the monetary authority, also drawing attention to the risk that the central banks of the main economies will raise interest rates even further or keep their rates at higher levels for longer.

Furthermore, in the domestic scenario, “financing to the real economy continued to slow down, in line with the monetary policy cycle and the perception of credit risk”, said the BC.

“The context of high indebtedness continues to manifest itself in the materialization of credit risk. Default and the portfolio considered higher risk continue to increase in credit for micro and small companies, and, to a lesser extent, in credit to families”, added the authority in the document.

In this scenario, financial institutions reduced their appetite for risk, assessed the BC, highlighting that the criteria for granting credit to families have become more restrictive due to recent losses.

On the other hand, provisions increased and remain above expected losses, which, according to the BC, “maintained a comfortable level of provisioning to support expected credit losses.”

With Reuters