Brazil's Central Bank released its Financial Stability Report for the first half of 2026 on Tuesday (Oct. 27). The report concludes that the financial system remains resilient and that the central bank sees no relevant risk to the country's financial stability, but it points to a deterioration in credit: the share of household income committed to debt payments reached its highest level in 21 years, the probability of default among micro, small and midsize enterprises remains high, and banks are signaling even tighter credit for both companies and households in the second half.
The report is published twice a year and assesses the ability of banks and other institutions to absorb losses. This edition came out the day after a sharp market sell-off following Brazil's presidential runoff, with the benchmark Selic rate at 13.75% a year. According to the report, problem assets in household credit, which include long-overdue and restructured loans, reached their highest level since 2012 in most loan types, driven mainly by delinquency. The central bank says the indicator would have risen even without the accounting changes to write-off rules adopted in 2025. According to data cited by InfoMoney, the problem share of the household loan book was 9.2% in June.
What changes for businesses
For companies, the picture is mixed. The central bank says most firms show no significant deterioration, but more companies reported lower net profit and higher net financial expenses, leaving less room to service debt. The probability of default, known as PD, remained high, especially among small and midsize firms, and bank lending to that group slowed. In practice, smaller businesses may face higher collateral requirements, shorter terms or higher rates when seeking working capital and financing. According to the central bank, the credit slowdown reflects high interest rates and more moderate economic activity, and lenders have become more cautious.
Based on its quarterly survey of credit conditions with banks, the report also indicates that lending will become more restrictive for both individuals and businesses in the second half of 2026. For companies that sell on installment or depend on credit-financed consumption, such as retail and services, that could mean customers with less access to credit. The central bank also said it is studying macroprudential measures, meaning rules to reduce risk across the system as a whole, aimed at higher-risk credit segments to curb over-indebtedness. No timeline has been set.
“Risk materialization has increased and should remain under pressure in the short term.”
— Financial Stability Report, Brazil's Central Bank (translated from Portuguese)
On the system's soundness, the central bank says capital and liquidity stress tests confirm banks' robustness, that provisions remain in line with expected losses and that 73% of institutions surveyed say they are very or fully confident in the system's resilience. Risks cited include fiscal risk, delinquency tied to high interest rates for a prolonged period, the conflict in the Middle East, named as the main source of global risk, and cyber incidents, with 99 recorded through September. The report also notes that the digitalization of financial services has significantly increased lower-income consumers' exposure to credit offers.
What to watch next
- The Copom decision on Nov. 4, which sets the baseline cost of credit.
- The announcement of the macroprudential measures under study and which credit lines they will cover.
- The central bank's next data on delinquency and new lending, especially for small and midsize firms.
- The next Financial Stability Report, due in the first half of 2027.
