SAO PAULO - The total credit of the financial system grew by 32.4% in May, compared to the same month last year, reaching U.S. $ 1.04 million, representing 36.5% of GDP (Gross Domestic Product). This ratio is 4.6 percentage points higher than in May 2007, according to the Conjectural Information CNI (National Confederation of Industry), released on Wednesday (9).


 

The advance is based primarily credit with free resources, which increased by 36.1% in the period, while payroll loans in the form of transfer of BNDES (Banco Nacional de Desenvolvimento Econômico e Social), grew at a rate 27.3% in the same comparative basis.

Despite the growth, there is a slowdown in the pace of the credit for individuals. While earmarked credit firms kept a trend of acceleration in May, compared to the same month last year, reaching 39.8%, which aimed at individuals increased 32.1%, a percentage lower than that recorded in April (34%).

Leasing is more growth
The granting of leases, which increased by 89.9% for business and 128% for individuals in May against the same month in 2007, has been the source of further growth in total loans of the financial system. But this is thanks to the non-collection of IOF (Tax on Financial Operations).

Perspective
The upward trend in interest rates, according to CNI, should further reduce credit expansion in the second half of this year, with the higher cost of loading the loans. In addition, the tighter budget of families, because of food inflation, should undermine the payment of past debts. This may increase the default rates, which in May stood at 1.8% in the case of legal entity, and 7.3% in the case of an individual.

To avoid future problems with bad debt, banks are adopting more selective criteria for the granting of credit. According to Banco Cruzeiro do Sul, the reasons are not lacking. Follow the arguments of seats:

* The acceleration of inflation is making losses of income that may eventually affect the ability to pay of users of credit;

* The increase in interest rates (a procedure used by the Central Bank to fight inflation) directly affects the payment capacity of borrowers and indirectly through slowdown in economic activity;

* A new stage in international economic situation, with rising interest rates and slowing economies will eventually affect the growth of the Brazilian economy, with effects on income and employment;

* The latest data from the Brazilian industrial production, moreover, have indicated a new trend for the rate of expansion of economic activities;

* This kind of guidance from financial institutions, in addition to the adjustment in monetary policy course by the Central Bank, is a market solution much more interesting than the direct intervention of the monetary authority, such as imposing time limits for loans , setting limits to its expansion, or increase in reserve requirements (which already have an excessive percentage in Brazil).

Selectivity in lending and the bad American example
`For the financial institutions themselves, that kind of guidance is an appropriate way to preserve its rigidity. We have the advantage of knowing the organization, mainly by American banks were reckless in lending to real estate and have caused much turmoil since September of last year ', says the analysis of the financial institution.

The highest selectivity of banks in lending comes at a good time, given the slower growth of the Brazilian and world economies. 'If it is true that the stock market tends to anticipate trends, the recent behavior of stock exchanges around the world seems to confirm the accuracy of an environment of slower growth'.

Borrowed conscious
This way, banks are relearning how to work with the granting of credit and consumers to make use of it. According to the chief executive of Diamond, Hilgo Gonçalves, the current situation of inflation and a lot of competition in the credit market is forcing the Brazilian to take a loan more aware. He explained that competition in the credit market leads customers, especially those in classes C, D and E, to better analyze the various proposals.

According to Gill, to assist in this making conscious credit, financial decreased the level of income that can be committed to the provision of the loan, which was 35% last year and rose to 30% this year. `The objective was to strengthen the decision that each consumer to compromise - in making credit - only part of your income that can pay. We believe that 30% is a positive good 'level.

For the vice president of Acrefi (National Association of Credit Institutions, Finance and Investment), José Lemos Arthur Asuncion, the decreased level of commitment to decent income is a measure being taken by the market, amid a backdrop of inflation. `I dropped the commitment level of income, which was 25% or 30% at the beginning of the year, depending on the product and reached 20% or 23%`, he said.

Credit is the main means of increasing consumption
The NCC has, in his report, a rather pessimistic about the decline in the pace of lending. The organization emphasizes that the extension of credit is the main instrument of expansion of consumption goods increased aggregate volume, as is the case of durable goods - cars and furniture - and capital goods (construction, computers and trucks) .

The increase of interest in fact leads to a deterioration in the pace of credit expansion, as that adds to the cost of funding and requires greater selectivity in the granting of the loan. For NCC, there is an even worse consequence of cooling of economic activity, with negative impacts on employment, income and credit, which leads to deterioration of the consumer.

'This restriction will be greater the more intense the tightening [high interest rates to combat inflation]', concludes the entity.