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According to information from Moody's, global banks will be protected against the high rate of default that could occur next year. See below. 

Protecting global banks in the rise of default cases 

Moody's recently said that banks will be safe from rising defaults next year. The main reason for this is the increase in interest rates that will take place in 2023, as well as the strengthening of reserves. 

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According to the agency, the outlook for the segment is stable and banks will report large profits. In Latin America, however, with interest rates expected to continue to rise, this could damage investor confidence. 

Due to the rise in interest rates, capital generation, which is already strong, will continue to increase. On the other hand, liquidity and financing will remain robust, even in the midst of adverse situations around the world. 

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According to the risk agency, demand for credit could weaken next year. In addition, combined with the interest rate, the bank's profit margins will consequently decrease. South American countries, such as Brazil, could cut interest rates in the first half of 2023. 

Due to the governmental changes that will take place in some countries around the world, such as Brazil, there will be uncertainty next year. But the risk agency believes that the new government will put pressure on the fundamentals to improve these conditions in the medium term. On the other hand, in countries like Uruguay and Peru, there are additional risks due to the rise in the US dollar. 

Inflation

One of the main reasons for the strain on household finances this year will be inflation. This is one of the biggest reasons for defaults. To soften the impact this can have on the market, certain standards have been adopted in the case of loans. 

Although Argentina and Paraguay lend money to agribusiness, their loan portfolios are diversified and mitigate climate risks. As for foreign trade, the low dependence on international markets will not cause major impacts due to volatility. 

What is Default 

Default is one of the biggest problems in any consumer's financial life. If you don't have financial planning in place, you're bound to face it. It usually happens when money gets tight, reducing consumers' ability to pay their bills. 

Consumers need to avoid default at all costs. However, if it does appear in your life, don't despair. There are ways to deal with this problem and regain control of your finances. 

In short, default is the failure to pay debts or any financial obligations. When a consumer fails to pay their credit card bill, for example, they are in default with the companies that offer these services. 

There are various factors that can lead consumers into default, such as unemployment, debts exceeding their income or unexpected expenses. It's important to remember that default is different from indebtedness. 

After all, even if consumers have a lot of debt, they can organize themselves financially to pay it off and avoid default. In other words, when a consumer makes purchases in installments with a credit card, they have incurred a debt, but it doesn't mean they are in default. 

As long as the debt is paid on time, consumers run no risk of default. However, if the opposite happens, the financial institution will contact the consumer to warn them of risks, such as having their name registered with protection agencies in the event of non-payment. 

In this sense, to check whether or not your name is "dirty", all you have to do is access credit protection services such as Serasa. These platforms are responsible for recording people's payments, as well as having a list of dividends available for consultation by various companies. 

What is inflation? 

Inflation is one of the most well-known economic concepts among Brazilians. However, despite its popularity, many people have no idea what the term means and why it has such an impact on the economy. 

In short, inflation is the term used to refer to the generalized increase in services and consumer goods, in other words, it represents an increase in the cost of living. And, linked to this, there is a reduction in the purchasing power of the currency. 

A great way to see how inflation works is to go to a supermarket. The price today is not the same as it was 10, 15 or 20 years ago, because prices are higher. But inflation has an impact on other items, such as cars or university tuition fees. 

Price rises are not necessarily bad for consumers, especially when they are controlled. In other words, when it follows minimum wage increases and is spaced out from time to time. 

One of the main causes of inflation is increased demand. In other words, when there is a shortage of a certain product or service that many people want to consume, the price of the product tends to balance out the supply. 

Another possibility is an increase in production costs. This is known as cost inflation. It can happen, for example, when the price of electricity rises. After all, every industry needs energy to produce, but will have to pay more to access the service. 

And eventually, this price will be passed on to the consumer. The same can happen when the price of raw materials rises. And, as in the previous case, the price is passed on to the end customers. 

Cost inflation can cause a crisis in demand. This is because, when a producer sees that the costs of making products are high, he can produce in smaller quantities. Consequently, they won't be able to meet consumer demand. 

Last but not least, the main consequence of inflation is the loss of consumers' purchasing power. This is because, as the price of products and services rises, the currency begins to devalue. 

Another consequence is related to the return on real investments. In other words, the real profitability achieved through an investment. 

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