New credit card rules could affect up to 5% of banks' revenues, says Barclays

Wednesday, May 25, 2011

New rules for credit cards in Brazil, announced Tuesday (May 24) by central bank BCB, could impact banks' total revenues in the range of 2-5%, Barclays Capital said in a research note.

"We estimate only some 2-5% of banks' total revenues would potentially be at risk if we were to assume very conservatively all card fees from clients currently charged by banks were indeed the scope of the measures," analysts Roberto Attuch and Fabio Zagatti wrote.

Starting June 1, the number of credit card fees that can be charged will be reduced to five, from the current 80. The new rules also force credit card holders to pay at least 15% of their bill as of next month, a percentage that will increase to 20% in December this year.

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BCB governor Alexandre Tombini said Tuesday (May 24) that the new rules will help to avoid excessive consumer indebtedness and also promote transparency and sustainable growth in the sector over the long term.

Local financial daily Valor Econômico, quoting undisclosed sources, suggested the negative impact could be as much as 10% of banks' revenues. For Barclays, "this figure is extremely bearish, and hard to argue if based on reasonable assumptions."

Attuch and Zagatti noted that total card fees represent 10-20% of banks' fee income, excluding merchant discount rates (MDRs). In turn, fees represent around 20-25% of banks' total revenues.