Campos Neto says look at people’s purchasing capacity – 12/04/2023 – Market

The president of the Central Bank, Roberto Campos Neto, stated this Monday (4) that the monetary authority does not intend to make changes that affect the purchasing capacity of the Brazilian population.

The statement was given amid discussion about interest on revolving credit cards and a possible redesign of interest-free installments for purchases.

“At no point does the BC want or will make any type of change that would influence people’s ability to buy. But it is important for us to look at the long term. Our fear is that we are doing something that in the short term seems better, but will inhibit sustainable credit growth in the long term”, said Campos Neto on the BC’s weekly live.

The head of the institution stated that it is easier to understand the facts than to find a solution to the problem. He said that there are distortions that need to be resolved and defended a broad conversation with all participants in this segment.

“The interest-free installments had a very large volume, [o mercado de] cards had a high default rate. It ended up having very high interest rates on the revolving loan,” she said.

“In a cash flow discount industry, where the store owner ends up accepting a large discount to anticipate that flow because he agreed to make the large installments, but he needs the money to have cash flow. So, he accepts a discount The discount is made at a rate higher than the issuer’s risk rate,” he continued.

In the live broadcast, which was mediated by director Mauricio Moura (Relationship, Citizenship and Conduct Supervision), the BC president once again highlighted the expansion of interest-free installments, which, according to him, currently corresponds to around 15% of credit in Brazil, and the low growth of CDC (direct credit to consumers).

In turn, Abranet (Brazilian Internet Association, which represents part of the machine companies) states in a letter sent to the Central Bank, based on data from the monetary authority, that the percentage is lower and is around 5%.

The association also criticizes the hypothesis raised by the BC that interest-free installments could be inhibiting consumer credit (CDC). According to Abranet, also based on BC data, when evaluating the share of the two modalities in the credit portfolio made up of credit cards and CDC since 2001, both are slightly falling (by 1%). Interest-free installments, on the other hand, grew 3% in this period.

On the 22nd, at an event by the Parliamentary Front for the Free Market, Campos Neto commented that he saw the possibility that interest-free installment payments on purchases were inhibiting the growth of the CDC with lower interest rates.

Limiting interest-free installment payments on purchases has been debated within the sector’s negotiations to reduce the high rates charged on credit card revolving credit cards. However, there is an impasse in negotiations.

On the one hand, the banks want to limit the number of interest-free installments — they defend an escalation until reaching three installments. On the other hand, independent machine companies refute the need to change the modality, claiming that installment payments are not the cause of high interest rates.

Since October, the BC has been coordinating meetings with representatives of banks, acquirers, cards and retailers to reach a solution through self-regulation in relation to revolving interest, as provided for in the Desenrola law.

The last meeting took place on November 7th. Since then, the BC has analyzed the proposals presented by participants and prepared its own study on the topic.

If the entities do not reach an agreement with the approval of the CMN (National Monetary Council) by the end of the year, the ceiling limiting the debt to double the original amount will apply. The law makes no mention of interest-free installment purchases.

The initiative that passed through Congress and was sanctioned by the Executive sought to respond to the escalation of the interest rate charged on the revolving bill, activated automatically when the customer fails to pay the full invoice within the due date.

In September, according to the latest data released by the BC, the average interest rate charged by banks for individuals on the revolving basis was 441.1% per year, the most expensive line of credit on the market. Default in this modality was 49.2%.