US Markets

Brazil bank default ratio should not exceed 4%, central bank says

Credit: REUTERS/Adriano Machado

Brazil's 90-day loan delinquency ratio is likely to reach 4% at most next year amid the economic crisis stemming from the coronavirus pandemic, the country's central bank supervision director Paulo Souza said on Thursday.

By Marcela Ayres

BRASILIA, Oct 15 (Reuters) - Brazil's 90-day loan delinquency ratio is likely to reach 4% at most next year amid the economic crisis stemming from the coronavirus pandemic, the country's central bank supervision director Paulo Souza said on Thursday.

Currently, the central bank sees banks' default ratio peaking at between 3% and 4%, Souza told reporters in a report on financial stability.

If this scenario materializes, the crisis would be less severe for Brazilian banks than the period between 2015 and 2016, when the country was hit by a deep recession.

The central bank also said in the report it sees 90-day delinquency ratios going up by year-end and the beginning of 2021, as grace periods extended by banks to consumers and companies come to an end, and more companies should file for bankruptcy protection.

Still, Souza said the central bank is unsure if a cap on dividend payouts for banks would be necessary next year, as economic activity is picking up. In May, central bank restricted banks dividends through December.

"It will depend on how risks stemming from the pandemic will materialize. I am sure lots of things will happen by year-end," he said, adding the regulators will reassesses banks' capital ratio before making any decision.

(Reporting by Marcela Ayres, writing by Carolina Mandl Editing by Chizu Nomiyama and David Gregorio)

((carolina.mandl@thomsonreuters.com; +55 11 5644 7703; +55 11 97116-3806;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

    Reuters

    Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

    Learn More