September 27, 2019 / 4:53 PM / 22 days ago

Brazil needs to do more to reduce cost of credit, central bank chief says

BRASILIA, Sept 27 (Reuters) - Brazil has made progress in reducing the cost of credit to consumers and businesses, central bank President Roberto Campos Neto said on Friday, but much more needs to be done, as well as to make credit markets more efficient.

Although the central bank’s benchmark Selic interest rate has been reduced to a record low 5.50% and market-based rates are historically low, the cost of credit for consumers and companies in Brazil remains high.

Speaking at an event in Sao Paulo, Campos Neto said the battle to reduce banks’ lending spreads is a “tough” one that will only be won by increasing competition and innovation in the sector, as well as reducing default rates.

Central bank data this week showed that the one measure of the difference between what banks pay to raise and lend funds, the so-called “banking spread,” was 31.6 percentage points in August.

The last time it was higher than that was April last year, effectively reflecting no improvement since then.

Other measures paint a similar picture. The central bank’s cost of credit index for companies has inched down to 14.3%, its lowest in years. But it remains stuck at 21.3% for consumers.

Campos Neto also outlined some of the central bank’s other longer-term goals, including making the currency fully convertible and reducing the amount of physical cash in circulation.

$1 = 4.16 reais Reporting by Jamie McGeever and Stefani Inouye in Sao Paulo Editing by

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