* Minister says banks overestimate default risk
* Annual credit rates range from 8.99 percent to 603 percent
* Government to keep pushing banks to cut rates -Mantega
RIO DE JANEIRO, Oct 6 Brazilian banks have room
to cut consumer lending rates in half, Brazil's Finance Minister
Guido Mantega said in remarks published on Saturday in the O
Banks are overestimating default risk and the government
intends to keep up pressure on banks to lower rates, the paper
quoted Mantega as saying.
Average rates of 40 percent to 50 percent a year make no
sense in an economy in which inflation is 4.5 percent to 5
percent a year, the minister told Globo.
"Workers are in more formal working environments and can
prove their earning capacity, homes are becoming more stable and
risk in the Brazilian economy is lower than in many advanced
economies," Mantega told the newspaper. "It doesn't make any
sense to charge excessively high interest rates."
Brazil's central bank cut the country's benchmark interest
rate, long one of the world's highest, to 7.5
percent in September from 12.5 percent in July 2011. In the past
11 years, Brazil's average interest rate has been 14.72 percent.
The government has also been pushing banks to cut rates by
forcing state-controlled Banco do Brasil SA and Caixa
Economica Federal to cut their finance charges and banking fees.
Non-state banks such as Banco Bradesco SA, Itau
Unibanco Holding SA and foreign banks such as
Citigroup Inc. and Banco Santander SA have been
quietly resisting the pressure.
Banks have argued that the government requirement that they
make large compulsory deposits with the central bank in an
effort to help control inflation reduces cash available for
consumer credit and lower rates.
Financial institutions also blame high consumer default
rates, a lack of credit databases and the government's large
borrowing needs as factors that squeeze credit for consumers and
keep rates high.
Mantega told Globo he is not convinced by the banks'
"The financial sector at times accuses us over the
compulsory deposits, but if you look what weighs heavily, it's
the projection they have for bad debt," Mantega told Globo.
"They tend to overestimate bad debt. It's necessary to update
these calculations for today, for a country that is more solid
and credit that is more secure."
As part of efforts to push rates lower, the government is
working to increase consumer knowledge of finance costs and
charges and is requiring merchants and bankers to make their
rates and charges clearer, the paper said, citing Mantega.
Annual consumer finance charges range from 8.99 percent a
year to 603 percent a year, Mantega said.