Brazil's central bank flags fiscal deficits and record defaults as top bank concerns

Brazil's central bank reported that financial institutions' main concerns are fiscal risk from repeated public deficits and record-high default rates amid elevated interest rates, according to its first-half Financial Stability Report. The report identifies risks pointing to expected economic slowdown, reflecting uncertainty over public debt sustainability and high household and corporate indebtedness. A central bank survey found "default," "interest rates," and "inflation" among the most cited risk terms. The report followed Sunday's presidential election win by Luiz Inácio Lula da Silva, which triggered market turbulence including an Ibovespa drop over 10% and dollar surge to R$5.40. Despite challenges, the central bank sees no relevant risk to financial stability.