Brazil banks raise reserves against default

Brazilian banks increased reserves against potential default by 21 percent in 2011 to 115 billion reais ($67.3 billion) as Brazilian consumers struggled to manage record debt levels, the Correio Braziliense newspaper said on Sunday on its website. Banks' provisions against bad debt rose higher than in 2008 when the US banking crisis led to a world-wide credit crunch, Correio reported, citing figures from Brazil's central bank.
An increase in benchmark interest rates in the first eight months of 2011 increased pressure on borrowers, Correio said, citing Roberto Luis Troster, an economist with Delta Consultoria, a Sao Paulo economic consultancy.
After an expansion of credit in 2009 and 2010, Brazilian families are spending about half of their incomes to service debt, the paper reported.
The default rate on consumer credit in Brazil is 7.3 percent of loans with the highest default rates among so-called "Class A" consumers, higher-income individuals who are generally considered to have the lowest risk of default, Correio said.