4Q
21
Threat and capital administration Pillar 3
Fourth quarter of 2021
Contents
Goal 1
Key indicators 1
Prudential Metrics and Threat Administration 2
KM1: Key metrics at consolidated stage 2
OVA: Financial institution danger administration strategy 3
Scope and major traits of danger administration 3
Threat and Capital Governance 4
Threat Urge for food 5
Threat Tradition 5
Stress Testing 6
Restoration Plan 7
Capital Adequacy Evaluation 8
Capital Adequacy 8
OV1: Overview of risk-weighted belongings (RWA)
Hyperlinks between monetary statements and regulatory exposures
LIA: Explanations of variations between accounting and regulatory publicity quantities
LI1: Variations between accounting and regulatory scopes of consolidation and mapping of economic assertion classes with regulatory danger classes
LI2: Principal sources of variations between regulatory publicity quantities and carrying values in monetary statements
9
10
10
11
12
PV1: Prudent valuation changes (PVA) 12
Establishments that comprise the Monetary Assertion of Itaú Unibanco Holding 13
Non Consolidated Establishments 17
Materials Entities 17
Composition of Capital 18
CCA: Principal options of regulatory capital instuments 18
CC1: Composition of regulatory capital 19
CC2: Reconciliation of regulatory capital to steadiness sheet 21
Macroprudential Indicators 22
CCyB1: Geographical distribution of credit score danger exposures thought of within the calculation of the 22
Countercyclical Capital Buffer
GSIB1: Disclosure of G-SIB indicators 22
Leverage Ratio 22
LR1: Abstract comparability of accounting belongings vs leverage ratio publicity measure (RA) 23
LR2: Leverage ratio widespread disclosure 23
Liquidity Ratios 24
LIQA: Liquidity Threat Administration Info 24
Framework and Therapy 24
LIQ1: Liquidity Protection Ratio (LCR) 25
LIQ2: Internet Steady Funding Ratio (NSFR) 26
Credit score Threat 27
CRA: Qualitative info on credit score danger administration 27
CR1: Credit score High quality of Belongings 28
CR2: Adjustments in Inventory of defaulted loans and money owed securities 29
CRB: Extra disclosure associated to the credit score high quality of belongings Credit score danger mitigation 29
Publicity by trade 30
Publicity by remaining maturity 30
Overdue exposures 31
Publicity by geographical space in Brazil and by nation 31
Largest debtors exposures 32
Restructured exposures 32
CRC: Qualitative disclosure associated to Credit score Threat Mitigation methods 32
CR3: Credit score Threat mitigation methods – overview 33
CR4: Standardized Strategy – Credit score Threat publicity and credit score danger mitigation results 34
CR5: Standardized Strategy – exposures by asset courses and danger weights 34
Counterparty Credit score Threat (CCR) 34
CCRA: Qualitative disclosure associated to CCR 34
CCR1: Evaluation of CCR exposures by strategy 35
CCR3: Standardized strategy – CCR exposures by regulatory portfolio and danger weights 35
CCR5: Composition of collateral for CCR exposures 36
CCR6: CCR related to credit score derivatives exposures 36
CCR8: CCR related to Exposures to central counterparties 37
Securitization Exposures 37
SECA: Qualitative disclosure necessities associated to securitisation exposures 37
SEC1: Securitisation exposures within the banking ebook 38
SEC2: Securitisation exposures within the buying and selling ebook 38
SEC3: Securitisation exposures within the banking ebook and related regulatory capital necessities – 38
financial institution appearing as originator or as sponsor
SEC4: Securitisation exposures within the banking ebook and related capital necessities – financial institution appearing 38
as investor
Market Threat 39
MRA: Qualitative disclosure necessities associated to market danger 39
MR1: Market danger underneath standardized strategy 41
MRB: Qualitative disclosures on market danger within the Inside Fashions Strategy (IMA) 41
MR2: RWA movement statements of market danger exposures underneath an IMA 44
Exposures topic to market danger 44
MR3: IMA values for buying and selling portfolios 44
MR4: Comparability of VaR estimates with beneficial properties/losses 45
Backtesting 45
Complete Publicity related to Derivatives 46
IRRBB 46
IRRBBA: IRRBB danger administration targets and insurance policies 46
Framework and Therapy 47
IRRBB1 – Quantitative info on IRRBB 49
Different Dangers 49
Insurance coverage merchandise, pension plans and premium bonds dangers 49
Social and Environmental Threat 50
Mannequin Threat 51
Regulatory or Compliance Threat 51
Reputational Threat 51
Nation Threat 53
Enterprise and Technique Threat 53
Contagion Threat 54
Operational Threat 54
Disaster Administration and Enterprise Continuity 55
Unbiased Validation of Threat Fashions 56
Glossary of Acronyms 57
Glossary of Rules 62
Threat and Capital Administration-Pillar 3
Goal
This doc presents Itaú Unibanco Holding S.A. (Itaú Unibanco) info required by the Central Financial institution of Brazil (BACEN) by Decision BCB nº 54 and subsequent amendments, which addresses the disclosure of knowledge on dangers and capital administration, the comparability between accounting and prudential info, the liquidity and market danger indicators, the calculation of risk-weighted belongings (RWA), the calculation of the Complete Capital (“Patrimônio de Referência”-PR), and the compensation of administration members. 1
The referred Decision introduced a number of amendments within the disclosure format of the Pillar 3 info, apart from modifications within the scope and frequency of the knowledge disclosed. All these amendments, carried out by the Central Financial institution, intention the convergence of the Brazilian monetary regulation to the suggestions of the Basel Committee, searching for to harmonize the knowledge disclosed by monetary establishments at a global stage, and bearing in mind the structural situations of the Brazilian financial system.
The disclosure coverage of the Threat and Capital Administration Report presents the rules and obligations of the areas concerned in its preparation, in addition to the outline of the knowledge that have to be disclosed and the integrity endorsement and approval governance, as established by the article 56 of the Decision nº. 4,557.
Key indicators
Itaú Unibanco’s danger and capital administration focuses on sustaining the ins titution according to the danger technique authorized by the Board of Administrators. The important thing indicators primarily based on the Prudential Consolidation, on December 31, 2021, are summarized beneath.
1 Compensation of administration members knowledge is reported yearly.
Itaú Unibanco
1
Threat and Capital Administration-Pillar 3
Prudential Metrics and Threat Administration
Itaú Unibanco invests in strong and firm -wide danger administration processes to function a foundation for its strategic choices supposed to make sure enterprise sustainability.
The important thing prudential metrics associated to regulatory capital and data on the financial institution’s built-in danger administration are introduced beneath.
KM1: Key metrics at consolidated stage
With a purpose to make sure the soundness of Itaú Unibanco and the provision of capital to assist enterprise development, Itaú Unibanco maintains capital ranges above the minimal necessities, as demonstrated by the Frequent Fairness Tier I, Extra Tier I Capital and Complete CapitaI ratios.
On December 31, 2021, the Complete Capital (PR) reached R$ 169,797 million, R$ 149,912 million of Tier I and R$ 19,885 million of Tier II.
Itaú Unibanco
Threat and Capital Administration-Pillar 3
The Basel Ratio reached 14.7% on December 31, 2021, remaining on the September 30, 2021 stage. On this interval, the rise in the results of the interval was offset by the expansion of the mortgage portfolio.
Moreover, Itaú Unibanco has a R$ 77,490 million capital extra in relation to its minimal required Complete Capital. It corresponds to six,7 pp above the minimal requirement (8%) and better than the Capital Buffer requirement of three.0% (R$ 34,615 million). Contemplating the Capital Buffers, the capital extra could be 3,7 pp.
The mounted belongings ratio exhibits the dedication share of adjusted Referential Fairness with the adjusted everlasting belongings. Itaú Unibanco falls throughout the most restrict of fifty% of adjusted PR, established by BACEN. At December 31, 2021, mounted belongings ratio reached 16.9%, exhibiting a surplus of R$ 56,280 million.
OVA – Financial institution danger administration strategy
Scope and major traits of danger administration
To undertake and handle dangers is likely one of the actions of Itaú Unibanco. Because of this, the establishment will need to have clearly established danger administration targets. On this context, the danger urge for food defines the character and the extent of dangers acceptable for the establishment, whereas the danger tradition guides the attitudes required to handle them. Itaú Unibanco invests in strong danger administration processes, which are the premise for its strategic choices to make sure enterprise sustainability and maximize shareholder worth creation.
These processes are according to the rules of the Board of Administrators and Executives who, by company our bodies, outline the establishment’s world targets, that are then translated into targets and thresholds for the enterprise items that handle dangers. Management and capital administration items, in flip, assist Itaú Unibanco’s administration by the processes of study and monitoring of capital and danger.
The ideas that present the danger administration and the danger urge for food foundations, in addition to tips concerning the actions taken by Itaú Unibanco’s staff of their each day routines are as follows:
• Sustainability and buyer satisfaction: the imaginative and prescient of Itaú Unibanco is to be a number one financial institution in sustainable
efficiency and buyer satisfaction. Because of this, the establishment is worried about creating shared values for workers, clients, shareholders and society to make sure the longevity of the enterprise. Itaú Unibanco is worried about doing enterprise that’s good for purchasers and for the establishment;
• Threat tradition: the establishment’s danger tradition goes past insurance policies, procedures and processes. It strengths the person and collective duty of all staff to handle and mitigate dangers consciously, respecting the ethic means of doing enterprise. The danger tradition is described within the merchandise “Threat Tradition”;
• Threat Pricing: Itaú Unibanco operates and assumes dangers in enterprise that it is aware of and understands, avoids those which are unknown or that don’t present aggressive benefits, and thoroughly assesses risk-return ratios;
• Diversification: the establishment has low urge for food for volatility in its outcomes. Accordingly, it operates with a diversified base of consumers, merchandise and enterprise, searching for danger diversification and giving precedence to low-risk transactions;
• Operational excellence: Itaú Unibanco intends to supply agility, in addition to a sturdy and steady inf rastructure, to be able to supply prime quality providers;
Itaú Unibanco
Threat and Capital Administration-Pillar 3
• Ethics and respect for rules: at Itaú Unibanco, ethics is non-negotiable. Because of this, the establishment promotes an institutional surroundings of integrity, educating its staff to domesticate moral relationships and companies, in addition to respecting the norms, and subsequently taking care of the establishment’s fame.
Since August, 2017, the Decision CMN 4,557 got here into pressure, which established the construction of danger and capital administration. The decision highlights are the implementation of a steady and built-in danger administration framework; the necessities for the definition of the Threat Urge for food Assertion (RAS) and the stress check program; the institution of a Threat Committee; the indication, earlier than BACEN, of the Chief Threat Officer (CRO); and the CRO’s roles, obligations and independence necessities.
Threat and Capital Governance
The Board of Administrators is the primary physique answerable for establishing the rules, insurance policies and authority ranges concerning danger and capital administration. In flip, the Threat and Capital Administration Committee (CGRC) offers assist to the Board of Administrators within the efficiency of their duties referring to danger and capital administration. On the govt stage, company our bodies headed by Itaú Unibanco’s Chief Government Officer (CEO) are established to handle dangers and capital. Their choices are overseen by the CGRC.
Moreover, the Itaú Unibanco Holding has company our bodies that carry out delegated duties within the danger and capital administration, underneath the duty of CRO (Chief Threat Officer).
To assist this construction, the Threat Space is structured with specialised departments. The target is to supply unbiased and centralized administration of the establishment’s dangers and capital, and to make sure the accordance with the established guidelines and procedures.
Itaú Unibanco’s danger administration organizational construction complies with Brazilian and worldwide rules in place and is aligned with the market’s greatest practices, together with governance for figuring out rising dangers, that are these with medium and long-term affect probably materials concerning the enterprise.
Obligations for danger administration at Itaú Unibanco are structured in keeping with the idea of three strains of protection, specifically:
• within the first line of protection, the enterprise and company assist areas handle dangers they offer rise to, by figuring out, assessing, controlling and reporting such dangers;
• within the second line of protection, an unbiased unit offers central management, in order to make sure that Itaú Unibanco’s
danger is managed in keeping with the danger urge for food and established insurance policies and procedures. This centralized management offers the Board and executives with a worldwide overview of Itaú Unibanco’s publicity, to make sure right and well timed company choices;
• within the third line of protection, inner audit offers an unbiased evaluation of the establishment’s actions, in order that senior administration can see that controls are satisfactory, danger administration is efficient and institutional requirements and regulatory necessities are being complied with.
Itaú Unibanco makes use of strong automated techniques for full compliance with capital rules, in addition to for measuring dangers in accordance with the regulatory determinations and fashions in place. It additionally displays adherence to the qualitative and quantitative regulators’ minimal capital and danger administration necessities.
Itaú Unibanco
Threat and Capital Administration-Pillar 3
Threat Urge for food
Itaú Unibanco has a danger urge for food coverage, which was established and authorized by the Board of Administrators and guides the establishment’s enterprise technique. The financial institution’s danger urge for food is grounded on the next declaration of the Board of
Administrators:
“We’re a common financial institution, working predominantly in Latin America. Supported by our danger tradition, we function primarily based on rigorous moral and regulatory compliance requirements, searching for excessive and rising outcomes, with low volatility, by the use of the long-lasting relationship with shoppers, appropriately pricing dangers, well-distributed fund-raising and correct use of capital.”
Based mostly on this declaration, the financial institution established 5 dimensions, every of which comprising a set of metrics related to the important thing dangers concerned, combining complementary measurements and searching for a complete view of its publicity:
• Capitalization: establishes that Itaú Unibanco ought to have ample capital to guard itself in opposition to a severe recession or stress occasions with out the necessity to modify its capital construction und er adversarial circumstances. It’s monitored by following up the financial institution’s capital ratios, in traditional or stress conditions, and the establishment’s debt concern scores.
• Liquidity: establishes that the establishment’s liquidity ought to have the ability to assist lengthy stress intervals. It’s monitored by following up on liquidity ratios.
• Composition of outcomes: establishes that enterprise will primarily give attention to Latin America, the place Itaú Unibanco could have a diversified vary of consumers and merchandise, with low urge for food for outcomes volatility and excessive danger. This dimension contains enterprise and profitability, in addition to market and credit score dangers facets. The metrics monitored by the financial institution search to make sure, by the use of publicity focus limits equivalent to, for instance, trade sectors, high quality of counterparties, international locations and geographic areas and danger elements, an acceptable composition of the financial institution’s portfolios, aiming at low volatility
of outcomes and enterprise sustainability.
• Operational danger: focuses on controlling operational danger occasions that will adversely affect the financial institution’s enterprise technique and operations. This management is carried out by monitoring key operational danger occasions and incurred losses.
• Status: offers with dangers that will affect model worth and the establishment’s fame earlier than its clients, staff, regulators, buyers and most of the people. On this dimension, dangers are monitored by following up on clients’ satisfaction or dissatisfaction, media publicity and commentary of the establishment’s conduct.
The Board of Administrators is answerable for approving danger urge for food tips and limits, performing its actions with the assist of the Threat and Capital Administration Committee (CGRC) and the Chief Threat Officer (CRO).
Metrics are usually monitored and should adjust to the boundaries outlined. The monitoring is reported to the danger commissions and to the Board of Administrators, guiding using preventive measures to make sure that exposures are throughout the limits offered and according to the financial institution’s technique.
Threat Tradition
Aiming at strengthening its values and aligning the habits of its staff with danger administration tips, the establishment adopts a number of initiatives to disseminate and strengthen its Threat Tradition, which is predicated on 4 ideas: aware danger taking, discussions and actions on the establishment’s dangers, and every and everybody’s duty for danger administration.
Itaú Unibanco
Threat and Capital Administration-Pillar 3
Chart 1-Threat Tradition
Moreover the danger administration insurance policies, procedures and processes, the establishment promotes its Threat Tradition by emphasizing a habits that helps folks of all firm ranges to undertake and handle dangers in a aware means. By disseminating these ideas, the establishment fosters the understanding and the open dialogue about dangers, in order that they’re stored throughout the danger urge for food ranges established and every worker individually, no matter their place, space or duties, may additionally assume duty for managing the dangers of the enterprise.
Itaú Unibanco additionally makes some channels out there for communication of working failures, inner or exterior fraud, conflicts on the office, or circumstances that will lead to inconveniences and/or losses for the establishment or its clients. All staff or third events are answerable for informing any issues instantly, as quickly as they turn into conscious of the scenario.
Stress Testing
The stress check is a strategy of simulating excessive financial and market situations on Itaú Unibanco’s outcomes, liquidity and capital. The establishment has been finishing up this check to be able to assess its solvency in believable eventualities of disaster, in addition to to determine areas which are extra vulnerable to the affect of stress that could be the topic of danger mitigation.
For the needs of the check, the financial analysis space estimates macroeconomic variables for every stress state of affairs. The elaboration of stress eventualities considers the qualitative evaluation of the Brazilian and the worldwide conjuncture, historic and hypothetical parts, brief and long run dangers, amongst different facets, as outlined in CMN Decision 4,557.
On this course of, the primary potential dangers to the financial system are assessed primarily based on the judgment of the financial institution’s workforce of economists, endorsed by the Chief Economist of Itaú Unibanco and authorized by the Board of Administrators. Projections for the macroeconomic variables (equivalent to GDP, the fundamental rate of interest and inflation) and for variables within the credit score market (equivalent to raisings, lending, charges of default, margins and prices) used are primarily based on exogenous shocks or by use of fashions validated by an unbiased space.
Then, the stress eventualities adopted are used to affect the budgeted consequence and steadiness sheet. Along with the state of affairs evaluation methodology, sensitivity evaluation and the Reverse Stress Check are additionally used.
Itaú Unibanco
Threat and Capital Administration-Pillar 3
Itaú Unibanco makes use of the simulations to handle its portfolio dangers, contemplating Brazil (segregated into wholesale and retail) and Exterior Items, from which the risk-weighted belongings and the capital and liquidity ratios are derived.
The stress check can also be an integral a part of the ICAAP (Inside Capital Adequacy Course of), the primary objective of which is to evaluate whether or not, even in severely adversarial conditions, the establishment would have satisfactory ranges of capital and liquidity, with none affect on the event of its actions.
This info allows potential offenders to the enterprise to be recognized and offers assist for the strategic choices of the Board of Administrators, the budgeting and danger administration course of, in addition to serving as an enter for the establishment’s danger urge for food metrics.
Restoration Plan
In response to the most recent worldwide crises, the Central Financial institution issued the Decision No. 4,502, which requires the event of a Restoration Plan for the monetary establishments which are categorized within the Phase 1, with a complete publicity of greater than 10% of Gross Home Product (GDP). This plan goals to reestablish satisfactory ranges of capital and liquidity, above the regulatory necessities, by applicable methods within the occasion of extreme stress shocks of a systemic or idiosyncratic nature. Accordingly, every establishment would have the ability to protect its monetary feasibility and, on the identical time, mitigate the affect on the Nationwide Monetary System.
Itaú Unibanco has a Restoration Plan that contemplates your complete Conglomerate, together with international subsidiaries, and accommodates the outline of the next objects:
I. Important features rendered by Itaú Unibanco to the market, actions that, if abruptly interrupted, may affect the Nationwide Monetary System (SFN) and the functioning of the true financial system;
II. Establishment’s important providers: actions, operations or providers which discontinuity may compromise the financial institution’s viability;
III. Month-to-month monitoring program, establishing important ranges for a set of indicators, with a view to danger monitoring and eventual set off for the execution of the Restoration Plan;
IV. Stress eventualities, considering occasions that will threaten the busines s continuity and the viability of the establishment, together with reverse exams, which search to determine distant danger eventualities, contributing to a rise of the administration sensitivity;
V. Restoration methods in response to completely different stress eventualities, together with the primary dangers and obstacles, in addition to the mitigators of the latter and the procedures for the operationalization of every technique;
VI. Communication plan with stakeholders, searching for its well timed execution with the market, regulators and ot her
stakeholders;
VII. Governance mechanisms mandatory for the coordination and execution of the Restoration Plan, such because the
definition of the director answerable for the train at Itaú Unibanco.
This plan is reviewed yearly and is subjected to the approval of the Board of Administrators.
With this follow, Itaú Unibanco has been capable of repeatedly exhibit, that even in extreme eventualities, with distant chance of prevalence, it has methods able to producing ample sources to make sure the sustainable upkeep of important actions and important providers, with out losses to clients, to the monetary system and to different members within the markets by which it operates.
Itaú Unibanco
Threat and Capital Administration-Pillar 3
Itaú Unibanco ensures the train upkeep to ensure that methods stay up-to-date and viable within the face of organizational, aggressive or systemic modifications.
Capital Adequacy Evaluation
For its capital adequacy evaluation course of, the annual Itaú Unibanco’s process is as follows:
Identification of fabric dangers and evaluation of the necessity for added capital;
Preparation of the capital plan, each in normality and stress conditions;
Inside evaluation of capital adequacy;
Structuring of capital contingency and restoration plans;
Preparation of administration and regulatory studies.
By adopting a potential stance concerning capital administration, Itaú Unibanco carried out its capital administration construction and its ICAAP to be able to adjust to Nationwide Financial Council (CMN) Decision 4,557, BACEN Round 3,846 and BACEN Round Letter 3,907.
The results of the final ICAAP, which incorporates stress exams – dated as of December 2020 – confirmed that, along with having sufficient capital to face all materials dangers, Itaú Unibanco has a major buffer, thus guaranteeing the soundness of its fairness place.
Capital Adequacy
Itaú Unibanco, by the ICAAP course of, assesses the adequacy of its capital to face the incurred dangers, composed by regulatory capital for credit score, market and operational dangers and by the mandatory capital to face different dangers. With a purpose to make sure the soundness and the provision of Itaú Unibanco’s capital to assist enterprise development, the Complete Capital ranges have been maintained above the minimal necessities.
Itaú Unibanco
8
Threat and Capital Administration-Pillar 3
OV1 – Overview of risk-weighted belongings (RWA)
In response to CMN Decision 4,193 and subsequent amendments, for assessing the minimal capital necessities, the RWA have to be calculated by including the next danger exposures:
RWA = RWACPAD + RWAMINT + RWAOPAD
• RWACPAD = portion associated to exposures to credit score danger, calculated utilizing standardized strategy;
• RWAMINT = portion associated to the market danger capital requirement, made up of the utmost between the inner mannequin and 80% of the standardized mannequin, and controlled by BACEN Circulars 3,646 and three,674;
• RWAOPAD = portion associated to the operational danger capital requirement, calculated utilizing standardized strategy.
The upper quantity of credit score risk-weighted belongings (RWACPAD) was primarily because of the enhance in mortgage portfolio within the interval.
Itaú Unibanco
9
Threat and Capital Administration-Pillar 3
Hyperlinks between monetary statements and regulatory exposures
LIA: Explanations of variations between accounting and regulatory publicity quantities
The principle distinction between the accounting carrying worth and the quantities thought of for regulatory functions is the non-consolidation of non-financial corporations (particularly Insurance coverage, Pension Plan and Capitalization corporations) within the regulatory consolidated, a distinction that additionally impacts the elimination of associated events transactions.
Inside the regulatory scope, the procedures for assessing the necessity for prudent valuation changes (PVAs) arising from the pricing of economic devices, in addition to the outline of the techniques and controls used to make sure its reliability are described beneath.
The pricing methodology for the monetary devices topic to Decision No. 4,277, of October thirty first, 2013, performed by an unbiased space from the enterprise areas, considers, along with benchmarks, the dangers listed within the closeout uncertainty, market focus, early termination, mannequin danger, investing and funding prices, unearned credit score unfold and others.
The honest worth measurement at Itaú Unibanco follows the ideas enclosed in the primary regulatory our bodies, equivalent to CVM and BACEN. The establishment follows one of the best practices by way of pricing insurance policies, procedures and methodologies and is dedicated to safe the pricing of economic devices in its steadiness sheet with costs quoted and disclosed by the market, and within the impossibility of doing so, expends its greatest efforts to estimate which might be the honest worth at which monetary belongings could be successfully traded, maximizing using related observable knowledge and, underneath particular situations, these devices will be valued on a mannequin foundation. In all of those conditions, the group has management over its pricing strategies and mannequin danger administration.
The method of unbiased worth verification (IPV) follows the rules included in Decision No. 4,277, with each day verification of costs and market inputs, which is carried out by a workforce unbiased from the pricing workforce. This course of can also be topic to an unbiased analysis by the inner management, inner audit and exterior audit groups.
The establishment has a hybrid mannequin for assessing the necessity for prudent valuation changes with two parts. The primary element is a well timed evaluation mannequin that assesses new merchandise, operations and danger elements traded and verifies the compliance and legal responsibility with any parts of the present prudent valuation changes. The second is a periodic evaluation that goals to investigate the present prudent valuation changes in relation to satisfactory pricing. The method and methodology are evaluated periodically and independently by inner controls and inner audit.
Within the line Different Variations of the desk LI2, are reported the transactions topic to credit score danger and counterparty credit score danger, which aren’t accounted for within the steadiness sheet or within the off-balance sheet quantities.
Itaú Unibanco
10
Threat and Capital Administration-Pillar 3
LI1: Variations between accounting and regulatory scopes of consolidation and mapping of economic assertion classes with regulatory danger classes
Itaú Unibanco
11
R$ million, on the finish of the eeriod 1213112021
Carrying values of things:
Carrying values
Carrying values Not topic to
as reported in
underneath scope of Topic to
Subjectto
Topic to the Topic to the
capital
revealed
regulatory credit score danger
counterparty
securitisation market danger
necessities or
monetary consolidation credit score danger subjectto statements frameworX framework framework framework deduction from
capital
Belongings
Present belongings and Lengthy-term receivables 2,136,498 1,907,804 1,545,801 321,856 10,265 215,267 27,428
Money 44,512 44 ,373 44,373 9,310
Interbank investments 243,916 241,601 75,460 166,141 15,635
Securities and by-product monetary devices 706,306 485,672 403,084 68,708 10,265 30,984 1,161
Interbank accounts 160,354 160,354 149,064 11,290
lnterbranch accounts 369 369 369
Mortgage, lease and different credit score operations 774,927 775,796 768,312 62,487 7,484
Different receivables 202,661 196,373 102,242 87,007 96,851 7,124
Deferred tax belongings 56,065 49,019 7,046
Sundry 140,308 53,223 87,007 96,851 78
Different belongings 3,453 3,266 3,266
Everlasting belongings 29,521 46,744 28,711 18,033
Investments 6,676 25,018 22,681 2,337
Actual property 6,417 5,937 5,937
Goodwill and Intangible belongings 16,428 15,789 93 15,696
Goodwill 2,608 2,808
Intangible belongings 13,088 13,088
Different 93 93
Complete belongings 2,166,019 1,954,548 1,574,512 321 ,856 10,265 21 5,267 45,461
Liabilities
Present and Lengthy-term Liabilities 2,007,337 1,795,858 297,785 227,484 1,498,073
Deposits 850,372 860,024 55,494 860,024
Deposits acquired underneath securities repurc hase 271 ,051 271,104 255,922 14 15,182
agreements
Funds from acceptances and issuance of securities 143,138 143,138 16,931 143,138
Interbank accounts 64,307 64 ,307 64,307
lnterbranch accounts 8,992 8,995 144 8,995
Borrowings and onlending 97,005 97,005 10,495 97,005
By-product monetary devices 63,969 63,974 41 ,883 774 22,111
Technical provision for insurance coverage, pension plan and 217,558
capitalization
Provisions 16,240 15,869 15,869
Allowance for monetary ensures offered and mortgage
4,784 4 ,784 4,784
commitments
Different l iabilities 269,921 266,658 143,632 266,658
Deferred tax liabilities 2,511 2,511
Sundry 264,147 143,632 264,147
Deferred earnings 3,106 3,178 3,178
Complete liabilities 2,010,443 1,799,036 297,785 227,484 1,501 ,251
Threat and Capital Administration-Pillar 3
LI2: Principal sources of variations between regulatory publicity quantities and carrying values in monetary statements
PV1: Prudent valuation changes (PVA)
Itaú Unibanco
12
Threat and Capital Administration-Pillar 3
Establishments that comprise the Monetary Statements of Itaú Unibanco Holding
The lists beneath present the establishments that comprise the monetary statements and the Prudential Consolidation of Itaú Unibanco Holding S.A..
Itaú Unibanco
13
Threat and Capital Administration-Pillar 3
Itaú Unibanco
14
Threat and Capital Administration-Pillar 3
Establishments that comprise the Monetary Statements of Itaú Unibanco Holding
Itaú Unibanco
15
Threat and Capital Administration-Pillar 3
Itaú Unibanco
16
Threat and Capital Administration-Pillar 3
The establishments introduced within the tables above signify the full scope of corporations of Itaú Unibanco Holding.
Non Consolidated Establishments
Materials entities
Complete belongings, stockholders’ fairness, nation and the actions of the fabric entities, together with these topic to the danger weight for the aim of capital necessities are as follows:
Itaú Unibanco
17
Threat and Capital Administration-Pillar 3
Composition of Capital
CCA: Principal options of regulatory capital devices
The licensed regulatory capital devices could also be extinguished in keeping with the standards established in Decision nº 4,192 in articles 17, merchandise XV, or 20, merchandise X, equivalent to non-compliance with the minimal regulatory ratios, decree of momentary particular administration regime or intervention, utility of public sources or upon the Central Financial institution of Brazil willpower. Ought to any standards for the extinction of subordinated devices be triggered, the realm answerable for Itaú Unibanco’s Capital administration will activate the areas concerned to execute the next motion plan:
• The treasury, by the cost agent of the subordinated devices or straight by the central
depository, will notify its holders and take actions to make sure that Itaú Unibanco’s buying and selling desks stop to commerce such devices;
• The operational and accounting areas will perform the mandatory procedures for the right therapy of the extinction; and
• The Investor Relations space will talk the market of the extinction of the subordinated devices.
The desk CCA-Principal options of regulatory capital devices, is on the market at www.itau.com.br/investor-relations, part “Outcomes and Studies”, “Regulatory Studies”, “Pillar 3”.
Itaú Unibanco
18
Threat and Capital Administration-Pillar 3
CC1-Composition of regulatory capital
Itaú Unibanco
19
Threat and Capital Administration-Pillar 3
Itaú Unibanco
20
Threat and Capital Administration-Pillar 3
CC2: Reconciliation of regulatory capital to steadiness sheet
Itaú Unibanco
21
Threat and Capital Administration-Pillar 3
Macroprudential Indicators
CCyB1: Geographical distribution of credit score danger exposures thought of within the calculation of the Countercyclical Capital Buffer
The next desk particulars the geographic distribution of credit score danger exposures thought of within the calculation of the Countercyclical Capital Buffer, in keeping with Round 3,769 of 29 October 2015:
GSIB1: Disclosure of G-SIB indicators
The GSIB1 desk, disclosure of worldwide systemically essential financial institution (G-SIB) indicators, will likely be out there on the web site www.itau.com.br/investor-relations, part “Studies”, “Pillar 3 and World Systemically Vital Banks”, throughout the interval stipulated by BCB Decision 54/20.
Leverage Ratio
The Leverage Ratio is outlined because the ratio between Tier I Capital and Complete Publicity, calculated in keeping with BACEN Round 3,748. The ratio is meant to be a easy measure of non-risk-sensitive leverage, and so it doesn’t take into consideration danger weights or danger mitigation.
As required by BACEN Round Letter 3,706, Itaú Unibanco month-to-month studies to BACEN the Leverage Ratio, which minimal requirement is of three%.
The next info is predicated on the methodology and normal format launched by BACEN Round 3,748.
Itaú Unibanco
22
Threat and Capital Administration-Pillar 3
LR1: Abstract comparability of accounting belongings vs leverage ratio publicity measure (RA)
LR2: Leverage ratio widespread disclosure
Itaú Unibanco
23
Threat and Capital Administration-Pillar 3
Liquidity Ratios
LIQA: Liquidity Threat Administration Info
Framework and Therapy
Liquidity danger is outlined because the chance of the establishment not with the ability to successfully honor its anticipated and sudden obligations, present and future, together with these from ensures dedication, with out affecting its each day operations or incurring in important losses.
According to the fundraising technique, Itaú Unibanco has diversified and steady sources of funding out there, monitored by focus and maturity indicators, to be able to mitigate liquidity dangers, in accordance with the establishment’s danger urge for food.
The governance of the liquidity danger administration is predicated on advisory boards, subordinated to the Board of Administrators or the chief construction of Itaú Unibanco. Such boards set up the establishment’s danger appetites, outline the boundaries associated to the liquidity management and monitor the liquidity indicators.
The management of the liquidity danger is carried out by an space that’s unbiased of the enterprise areas, answerable for defining the composition of the reserve, estimating the money movement and the publicity to liquidity danger in numerous time horizons and monitoring brief and long run liquidity indicators (LCR and NSFR respectively). As well as, it proposes minimal limits to soak up losses in stress eventualities for every nation the place Itaú Unibanco operates and studies any non-compliance to the competent authorities. All actions are topic to verification by the unbiased validation, inner controls and audit departments.
Moreover, and pursuant to the necessities of Decision 4,557, BACEN Round 3,749 and Round 3,869, the Liquidity Threat Assertion (DRL-LCR) and the Lengthy Time period Liquidity Assertion (DLP-NSFR) are month-to-month despatched to BACEN. Lastly, the next objects are periodically ready and submitted to senior administration for monitoring and determination assist:
• Stress of liquidity indicators primarily based on macroeconomic eventualities, simulation of reverse stress primarily based on danger urge for food, and projection of the primary liquidity indicators to assist choices;
• Contingency and restoration plans for disaster conditions, with actions that present for a gradation in keeping with the extent of criticality decided by the easiness of implementation, bearing in mind the traits of the native market by which it operates, searching for a speedy restoration of liquidity indicators;
• Studies and graphs that describe danger positions;
• Focus indicators of funding suppliers and time.
The doc that particulars the liquidity danger management institutional coverage is on the Investor Relations web site https://www.itau.com.br/investor-relations,section “Itaú Unibanco”, underneath “Company Governance”, “Guidelines and Insurance policies, Studies”.
Itaú Unibanco
24
Threat and Capital Administration-Pillar 3
LIQ1: Liquidity Protection Ratio (LCR)
Itaú Unibanco has Excessive High quality Liquidity Belongings (HQLA) that amounted to R$ 307.3 billion on common for the quarter, primarily composed of Sovereign Securities, Central Financial institution Reserves and Money. Internet Money Outflows amounted to R$ 193.1 billion on common for the quarter, that are largely comprised of Retail Funding, Wholesale, Extra Necessities, Contractual and Contingent Obligations, offset by Money inflows from loans and different Money inflows.
The desk exhibits that the typical LCR within the quarter is 159.1%, above the restrict of 100% and subsequently the establishment has prime quality liquidity sources comfortably out there to assist the losses within the standardized stress state of affairs for the LCR.
Itaú Unibanco
25
Threat and Capital Administration-Pillar 3
LIQ2: Internet Steady Funding Ratio (NSFR)
Itaú Unibanco has an Accessible Steady Funding (ASF) amounted to R$ 1,017.0 billion within the 4 quarter, primarily composed of Capital, Retail Funding and Wholesale. As well as, the Required Steady Funding (RSF) amounted to R$ 839.8 billion
Itaú Unibanco
26
Threat and Capital Administration-Pillar 3
within the 4 quarter, which is usually composed of loans and financing granted to wholesale, retail, central economies and central financial institution operations.
The desk exhibits that the NSFR on the finish of the quarter is 121.1%, above the restrict of 100%, and subsequently the establishment has Accessible Steady Funding to assist the Required Steady Funding comfortably within the lengthy -term, in keeping with the metric.
Credit score Threat
CRA: Qualitative info on credit score danger administration
Itaú Unibanco defines credit score danger as the danger of loss related to: failure by a borrower, issuer or counterparty to satisfy their respective monetary obligations as outlined within the contracts; worth lack of credit score agreements ensuing from deterioration of the borrower’s, issuer’s or counterparty’s credit standing; discount of income or earnings; advantages granted upon subsequent renegotiations; or debt restoration prices.
The administration of credit score danger is meant to protect the standard of the mortgage portfolio at ranges appropriate with the establishment’s danger urge for food for every market phase by which Itaú Unibanco operates. The governance of credit score danger is managed by company our bodies, which report back to the Board of Administrators or to the Itaú Unibanco govt construction. Such company our bodies act primarily by assessing the aggressive market situations, setting the credit score limits for the establishment, reviewing management practices and insurance policies, and approving these actions on the respective authority ranges. The danger communication and reporting course of, together with disclosure of institutional and supplementary insurance policies on credit score danger administration, are additionally operate of this construction. Itaú Unibanco manages the credit score danger to which it’s uncovered throughout your complete credit score cycle, from earlier than approval, throughout the monitoring course of and as much as the gathering or restoration section, with the periodic monitoring of troubled belongings, that are outlined as:
• Overdue Transactions for greater than 90 days;
• Restructured Operations for Troubled Belongings;
• Counterparties that current lack of ability to pay, whether or not by authorized measures, chapter, loss, amongst others;
• Vital deterioration in credit score high quality, which will be recognized by deterioration in inner score metrics, ensures honored, overdue publicity, amongst others.
Moreover, whether it is recognized {that a} CNPJ could contaminate the counterparties, they could be marked as Troubled Belongings.
The monitoring accommodates info on important exposures, together with restoration historical past and prospects, in addition to restructuring info. These analyzes are generated month-to-month for executives and quarterly for the Board of Administrators by the Threat and Capital Administration Committee (CGRC).
There’s a credit score danger administration and management construction, centralized and unbiased of the enterprise items which defines operational limits, danger mitigation mechanisms and processes, and devices to measure, monitor and management the credit score danger inherent to all merchandise, portfolio concentrations and impacts to potential modifications within the financial surroundings. Such construction is subjected to inner and exterior auditing processes. The credit score’s portfolio, insurance policies and techniques are repeatedly monitored in order to make sure compliance with the principles and legal guidelines in impact in every nation. The important thing assignments of the enterprise items are (i) monitoring of the portfolios underneath their duty, (ii) granting of credit score, bearing in mind present approval ranges, market situations, the macroeconomic prospects and modifications in markets and merchandise, and (iii) credit score danger administration aimed toward making the enterprise sustainable.
Itaú Unibanco
27
Threat and Capital Administration-Pillar 3
Itaú Unibanco’s credit score coverage is predicated on inner elements, equivalent to: consumer score standards, efficiency and evolution of the portfolio, default ranges, return charges and allotted financial capital, amongst others; and likewise take into consideration exterior elements equivalent to: rates of interest, market default indicators, inflation and modifications in consumption, amongst others.
With respect to people, small and medium corporations, retail public, the credit score scores are assigned primarily based on statistical utility (within the early levels of relationship with a buyer) and habits rating (used for purchasers with whom Itaú Unibanco already has a relationship) fashions.
For wholesale public, the classification is predicated on info such because the counterparty’s financial and monetary scenario, its cash-generating capability, and the enterprise group to which it belongs, the present and potential scenario of the financial sector by which it operates. Credit score proposals are analyzed on a case-by-case foundation by the approval governance. The concentrations are monitored repeatedly for financial sectors and largest debtors, permitting preventive measures to be taken to keep away from the violation of the established limits.
Itaú Unibanco additionally strictly controls credit score publicity to shoppers and counterparties, appearing to reverse occasional restrict breaches. On this sense, contractual covenants could also be used, equivalent to the suitable to demand early cost or require extra collateral.
To measure credit score danger, Itaú Unibanco takes into consideration the chance of default by the borrower, issuer or counterparty, the estimated quantity of publicity within the occasion of default, previous losses from default and focus of debtors. Quantifying these danger parts is a part of the lending course of, portfolio administration and definition of limits.
The fashions utilized by Itaú Unibanco are independently validated, to make sure that the databases utilized in setting up the fashions are full and correct, and that the tactic of estimating parameters is satisfactory.
Itaú Unibanco additionally has a particular construction and processes aimed toward guaranteeing that different facets of credit score danger, equivalent to nation danger, are managed and managed, described within the merchandise “Different Dangers”.
In compliance with CMN Decision 4,557, the doc “Public Entry Report-Credit score Threat,” which describes the rules established within the institutional ruling on credit score danger management, will be seen on the web site www.itau.com.br/investor-relations, part “Itaú Unibanco”, underneath “Company Governance”, “Guidelines and Insurance policies”, “Studies”.
CR1: Credit score High quality of Asset
Itaú Unibanco
28
Threat and Capital Administration-Pillar 3
CR2: Adjustments in Inventory of defaulted loans and money owed securities
CRB: Extra disclosure associated to the credit score high quality of belongings
The tables beneath comprise extra disclosure associated to the credit score high quality exposures reported within the desk CR1. The place is knowledgeable breakdown of exposures by geographical space, trade and defaulted exposures. As well as, the full exposures by residual maturity by delay vary, the full of restructured exposures and the share of the ten and 100 largest exposures are reported.
Itaú Unibanco
29
Threat and Capital Administration-Pillar 3
Publicity by trade
Publicity by remaining maturity
Itaú Unibanco
30
Threat and Capital Administration-Pillar 3
Overdue exposures
Publicity by geographical space in Brazil and by nation
Itaú Unibanco
31
Threat and Capital Administration-Pillar 3
Largest debtors exposures
Restructured exposures
CRC: Qualitative disclosure associated to Credit score Threat Mitigation methods
Itaú Unibanco makes use of ensures to extend its restoration capability in operations topic to credit score danger. The ensures used will be monetary, credit score derivatives, fiduciary, actual, authorized buildings with mitigation energy and offsetting agreements. For these ensures to be thought of as credit score danger mitigating devices, it’s mandatory that they adjust to the necessities and determinations of the that regulate them, whether or not inner or exterior, and that they’re legally enforceable (efficient), enforceable and usually evaluated.
The knowledge concerning the doable focus related to the mitigation of credit score danger considers these completely different mitigating devices, segregating by sort and by supplier. For causes of confidentiality, the establishment determines the non-disclosure of knowledge past the classification of the kind of guarantor, however guaranteeing adherence to the final necessities.
• Monetary Ensures: the borrower or third get together highlights a monetary asset (deposits, bonds, shares, shares of low-risk fairness, amongst others), in such a means as to ensure the creditor’s reimbursement in case of default.
• Fiduciary Ensures and credit score derivatives: a 3rd get together assumes the duty for fulfilling the duty contracted by the debtor, which falls on the final fairness of that third get together. Avals, sureties and CDS are examples of those ensures.
Fiduciary ensures are segregated into the next suppliers: Authorized Entities; Multilateral Improvement Entities (EMD); Monetary Establishments, Sovereigns, Nationwide Treasury or Central Financial institution.
Itaú Unibanco additionally makes use of credit score derivatives to mitigate the credit score danger of its securities portfolios. These devices are priced primarily based on fashions that use the honest worth of market variables, equivalent to credit score spreads, restoration charges, correlations and rates of interest. They’re additionally segregated into: Authorized Entities; Multilateral Improvement Entities (EMD); Monetary Establishments and Sovereigns.
Itaú Unibanco
32
Threat and Capital Administration-Pillar 3
• Actual Ensures: the borrower himself or a 3rd get together highlights an asset or a set of belongings, movable or immovable, in such a means as to ensure the reimbursement of the creditor in case of default. Examples of devices and belongings: mortgages on actual property, pledge of products, fiduciary sale of actual property, autos, equipment and gear. These ensures are segregated by sort: monetary collateral, bilateral contracts and belongings.
• Clearing and Settlement of Obligations Settlement and authorized buildings with mitigating energy : the clearing settlement goals to cut back the danger of credit score publicity of 1 get together to the opposite, ensuing from transactions entered into between them, in order that, in case of maturity, after offsetting, the online quantity owed by the debtor to the creditor is recognized. It’s generally utilized in by-product transactions, however it could possibly additionally cowl different forms of monetary transactions.
In authorized buildings with mitigation energy and compensation agreements, mitigation is predicated on methodologies established and authorized by the enterprise items answerable for credit score danger administration and by the centralized credit score danger management space.
Such methodologies think about elements associated to the authorized enforceability of the ensures, the prices mandatory for such and the anticipated worth within the execution, bearing in mind the volatility and liquidity of the market.
To regulate the mitigating devices, there’s periodic monitoring that displays the extent of compliance with using every instrument when in comparison with inner measurement insurance policies, even together with corrective motion plans when there’s noncompliance, analyzing focus, sorts, suppliers, formalization. The parameters used are: HE (Haircut of execution) which evaluates the chance of success in executing the assure, HV (Volatility Haircut) represents the liquidity of the collateral being supplied, and LMM (Most Mitigation Restrict) which is the mitigation ceiling for actual ensures.
CR3: Credit score Threat mitigation techniques-overview(1)
Improve in credit score concession primarily noticed within the strains of corporations and in retail, in bank card. In debt securities the primary variation comes from the discount in exposures to central governments partially offset by the expansion in non-public securities.
Itaú Unibanco
33
Threat and Capital Administration-Pillar 3
CR4: Standardized Strategy – Credit score Threat publicity and credit score danger mitigation results
CR5: Standardized Strategy – exposures by asset courses and danger weights
The rise within the complete publicity in tables CR4 and CR5 occurred primarily within the within the corporates and retail exposures and was partially offset by the discount in exposures linked to governments and central banks.
Counterparty Credit score Threat (CCR)
CCRA: Qualitative disclosure associated to CCR
Counterparty credit score danger is the opportunity of noncompliance with obligations associated to the settlement of transactions that contain the buying and selling of economic belongings with a bilateral danger. It encompasses by-product monetary devices, settlement pending transactions, securities lending and repurchase transactions.
Itaú Unibanco has well-defined guidelines for calculating its managerial and regulatory publicity to this danger, and the fashions developed are used each for the governance of consumption of limits and administration of counterparties sub-limits, in addition to for the allocation of capital, respectively.
Itaú Unibanco
34
Threat and Capital Administration-Pillar 3
The managerial volatility of the potential credit score danger (PCR) of derivatives (interpreted as the quantity of potential monetary publicity that an operation can attain till its maturity) and the volatility of repurchase agreements and international alternate transactions are monitored periodically to take care of the publicity at ranges thought of acceptable by the establishment’s administration.
The danger could also be mitigated by means of margin name, preliminary margin or different mitigating instrument.
At present, Itaú Unibanco doesn’t have affect within the quantity of collateral that the financial institution could be required to supply given a credit standing downgrade. The regulatory exposures of counterparty credit score danger are introduced as follows.
CCR1: Evaluation of CCR exposures by strategy
CCR3: Standardised strategy – CCR exposures by regulatory portfolio and danger weights
Within the tables CCR1 and CCR3 there was a lower within the publicity of repo operations primarily in central governments and central banks and in monetary establishments and others licensed by the Central Financial institution of Brazil.
Itaú Unibanco
35
Threat and Capital Administration-Pillar 3
CCR5: Composition of collateral for CCR exposures
CCR6: CCR related to credit score derivatives exposures
Itaú Unibanco
36
Threat and Capital Administration-Pillar 3
CCR8: CCR related to Exposures to central counterparties
Lower in non-segregated preliminary margin.
Securitisation Exposures
SECA: Qualitative disclosure necessities associated to securitisation exposures
At present, Itaú Unibanco coordinates and distributes problems with securitized securities within the capital market with or with no agency placement assure. In case of exercising the agency assure, the financial institution will assume the danger as an investor within the operation.
Itaú Unibanco doesn’t act as a sponsoring counterpart of any particular objective firm with the target of working within the securitisation market, nor does it handle entities that purchase securities issued or originated by their very own.
In relation to accounting, it ought to be famous that (i) belongings representing third-party securitisations are accounted for in addition to different belongings owned by the Financial institution, in keeping with the brazilian accounting requirements; and (ii) securitisation credit originating from Itaú Unibanco’s personal portfolio stay accounted for in circumstances of credit score task with co-obligation.
In 2021, Itaú Unibanco didn’t perform the sale of credit score belongings with out substantial danger retention and didn’t assign exposures with substantial danger retention, which have been honored, repurchased or written off as loss.
Itaú Unibanco
37
Threat and Capital Administration-Pillar 3
SEC1: Securitisation exposures within the banking ebook
SEC2: Securitisation exposures within the buying and selling ebook
In Itaú Unibanco’s present securitization portfolio, there are not any exposures to be reported in desk SEC2.
SEC3: Securitisation exposures within the banking ebook and related regulatory capital necessities – financial institution appearing as originator or as sponsor
In Itaú Unibanco’s present securitization portfolio, there are not any exposures to be reported in desk SEC3.
SEC4: Securitisation exposures within the banking ebook and related capital requirements-bank appearing as investor
Itaú Unibanco
38
Threat and Capital Administration-Pillar 3
Market Threat
MRA: Qualitative disclosure necessities associated to market danger
Market danger is the opportunity of losses ensuing from fluctuations out there values of positions held by a monetary establishment, together with the danger of operations topic to variations in international alternate charges, rates of interest, fairness and commodity costs, as set forth by CMN. Value Indexes are additionally handled as a danger issue group.
The institutional coverage for market danger is in compliance with Decision 4,557 and establishes the administration construction and market danger management, which has the operate of:
• Present visibility and luxury for all senior administration ranges that market dangers assumed have to be according to Itaú Unibanco risk-return targets;
• Present a disciplined and nicely knowledgeable dialogue on the general market danger profile and its evolution over time;
• Improve transparency as to how the enterprise works to optimize outcomes;
• Present early warning mechanisms to facilitate efficient danger administration, with out obstructing the enterprise targets; and
• Monitoring and avoiding the focus of dangers.
Market danger is managed by an space unbiased of the enterprise items, which is answerable for the each day actions: (i) measuring and assessing danger, (ii) monitoring stress eventualities, limits and alerts, (iii) making use of, analyzing and stress testing eventualities, (iv) reporting danger to the people accountable within the enterprise items, in compliance with Itaú Unibanco´s governance, (v) monitoring the measures wanted to regulate positions and/or danger ranges to make them viable, and (vi) supporting the safe launch of latest monetary merchandise.
The market danger administration framework categorizes transactions as a part of both the Buying and selling Ebook or the Baking Ebook, in accordance with common standards established by CMN Decision 4,557 and BACEN Round 3,354. Buying and selling Ebook consists of all trades with monetary and commodity devices (together with derivatives) undertaken with the intention of buying and selling. Banking Ebook is predominantly characterised by portfolios originated from the banking enterprise and operations associated to steadiness sheet administration, are supposed to be both held to maturity, or bought within the medium and in the long run.
The market danger administration is predicated on the next key metrics:
• Worth at Threat (VaR): a statistical metric that quantifies the utmost potential financial loss anticipated in regular market situations, contemplating an outlined holding interval and confidence interval;
• Losses in Stress Situations (Stress Testing): a simulation approach to guage the affect, within the belongings, liabilities and derivatives of the portfolio, of varied danger elements in excessive market conditions (primarily based on potential and historic eventualities);
• Cease Loss: metrics that set off a administration evaluate of positions, if the collected losses in a given interval attain specified ranges;
• Focus: cumulative publicity of sure monetary instrument or danger issue calculated at market worth (“MtM-Mark to Market”); and
Itaú Unibanco
39
Threat and Capital Administration-Pillar 3
• Harassed VaR: statistical metric derived from VaR calculation, aimed toward capturing the largest danger in simulations of the present buying and selling portfolio, taking into account the observable returns in historic eventualities of maximum volatility.
Along with the danger metrics described above, sensitivity and loss management measures are additionally analyzed. They embody:
• Hole Evaluation: collected publicity of the money flows by danger issue, that are marked -to-market and positioned by settlement dates;
• Sensitivity (DV01 – Delta Variation Threat): affect in the marketplace worth of money flows when a 1 foundation level change is utilized to present rates of interest or on the index charges; and
• Sensitivities to Varied Threat Components (Greeks): partial derivatives of a portfolio of choices on the costs of the underlying belongings, implied volatilities, rates of interest and time.
In an try to suit the transactions into the outlined limits, Itaú Unibanco hedges its consumer transactions and proprietary positions, together with investments abroad. Derivatives are probably the most generally used devices for finishing up these hedging actions, and will be characterised as both accounting or financial hedge, each of that are ruled by institutional rules at Itaú Unibanco.
The construction of limits and alerts is in alignment with the board of administrators’ tips, being reviewed and authorized on an annual foundation. This construction extends to particular limits and is aimed toward bettering the method of danger monitoring and understanding in addition to stopping danger focus. Limits and alerts are calibrat ed primarily based on projections of future steadiness sheets, stockholders’ fairness, liquidity, complexity and market volatility, in addition to the Itaú Unibanco’s danger urge for food.
The consumption of market danger limits is monitored and disclosed each day by publicity and sensitivity maps. The market danger space analyzes and controls the adherence of those exposures to limits and alerts and studies them well timed to the Treasury desks and different buildings foreseen within the governance.
Itaú Unibanco makes use of proprietary techniques to measure the consolidated market danger. The processing of those techniques takes place in an access-controlled surroundings, being extremely out there, which has knowledge safekeeping and restoration processes, and counts on an infrastructure to make sure the continuity of enterprise in contingency (catastrophe restoration) conditions.
Itaú Unibanco
40
Threat and Capital Administration-Pillar 3
MR1: Market danger underneath standardized strategy
The variations noticed within the Market Threat-Weighted Belongings weren’t important.
MRB: Qualitative disclosures on market danger within the Inside Fashions Strategy (IMA)
Within the inner fashions strategy, the harassed VaR and VaR fashions are used. These fashions are utilized to operations within the Buying and selling Ebook and Banking Ebook. For the Buying and selling Ebook, the danger elements thought of are: rates of interest, inflation charges, alternate charges, shares and commodities. For the Banking Ebook, alternate charges and commodities are thought of. The VaR and harassed VaR fashions are used within the corporations of the Prudential Conglomerate which are introduced within the following desk:
Itaú Unibanco
41
Threat and Capital Administration-Pillar 3
Itaú Unibanco
42
Threat and Capital Administration-Pillar 3
Itaú Unibanco, for regulatory functions, makes use of the historic simulation methodology to calculate the VaR and Harassed VaR. This system makes use of the returns noticed prior to now to calculate the beneficial properties and losses of a portfolio over time, with a 99% confidence interval and a holding interval of no less than 10 days. On December 31, 2021, VaR represented 56% of the capital requirement, whereas the harassed VaR represented 44%. The identical methodology is used for administration functions, that’s, there are not any variations between the managerial and regulatory fashions.
In relation to the VaR mannequin, the historic returns are each day up to date. Itaú Unibanco makes use of in its VaR mannequin each the unweighted strategy, by which historic knowledge have the identical weight, and the weighted by the volatility of returns. For the calculation of volatilities, the Exponentially Weighted Transferring Common technique is used. The Historic VaR methodology with 10-day upkeep intervals assumes that the anticipated distribution for doable losses and beneficial properties for the portfolio will be estimated from the historic habits of the returns of the market danger elements to which this portfolio is uncovered. The returns noticed prior to now are utilized to present operations, producing a distribution of chance of losses and simulated beneficial properties which are used to estimate the Historic VaR, in keeping with the 99% confidence stage and utilizing a historic interval of 1,000 days. Losses and beneficial properties from linear operations are calculated by multiplying mark-to-market by returns, whereas non-linear operations are recalculated utilizing historic returns. The returns utilized in simulating the actions of danger elements are relative.
Concerning the Harassed VaR mannequin, the calculation is carried out for a time horizon of 10 working days, contemplating the 99% confidence stage and easy returns within the historic interval of 1 yr. The historic stress interval is periodically calculated for the interval since 2004 and will be revised at any time when deemed mandatory. This may happen when the composition of Itaú Unibanco’s portfolios modifications considerably, when modifications are noticed within the outcomes of the simulation of historic returns or when a brand new market disaster happens. Losses and beneficial properties from linear operations are calculated by multiplying mark to market by returns, whereas non-linear operations are recalculated utilizing historic returns.
Along with using VaR, Itaú Unibanco carries out each day danger evaluation in excessive eventualities by a diversified framework of stress exams, to be able to seize potential important losses in excessive market conditions. The eventualities are primarily based on historic, potential crises and predetermined shocks in danger elements. One issue that has a terrific affect on the outcomes of the exams, for instance, is the correlation between the belongings and the respective danger elements, and this impact is simulated in a number of methods within the numerous eventualities examined.
With a purpose to determine its best dangers and help within the decision-making of treasury and senior administration, the outcomes of stress exams are assessed by danger elements, in addition to on a consolidated foundation.
The effectiveness of the VaR mannequin is confirmed by backtesting methods, by evaluating hypothetical and precise each day losses and beneficial properties, with the estimated each day VaR, in keeping with BACEN Round 3,646. The variety of exceptions to the established VaR limits have to be appropriate, inside a suitable statistical margin, with three completely different confidence intervals (99%, 97.5% and 95%), in three completely different historic home windows (250, 500 and 750 working days). This contains 9 completely different samples, subsequently guaranteeing the statistical high quality of the historic VaR speculation.
Itaú Unibanco has a set of processes, that are periodically executed by the inner management groups, whose goal is to independently replicate the metrics that affect market danger capital by inner fashions. Along with the outcomes of the periodic processes, Itaú Unibanco assesses the method of measuring time horizons by danger elements and the estimate of the stress interval for calculating the harassed VaR. The validation of the inner mannequin contains a number of matters thought of important for the important evaluation of the mannequin, equivalent to, the analysis of the mannequin’s limitations, the adequacy of the parameters used within the volatility estimate and the comprehensiveness and reliability of the enter knowledge.
Itaú Unibanco
43
Threat and Capital Administration-Pillar 3
MR2: RWA movement statements of market danger exposures underneath an IMA
Exposures topic to market danger
The next desk presents the exposures topic to market danger within the inner fashions strategy, for calculating the capital requirement.
The lower in RWAMINT in comparison with the earlier quarter was primarily because of the discount within the danger ranges of the positions held by Itaú Unibanco.
MR3: IMA values for buying and selling portfolios
The next desk presents the VaR and harassed VaR values decided by the inner market danger fashions.
VaR elevated in relation to the earlier quarter attributable to elevated volatility in rates of interest. Harassed VaR decreased in comparison with the previus quarter duo to the decrease stage of danger in equities.
Itaú Unibanco
44
Threat and Capital Administration-Pillar 3
MR4: Comparability of VaR estimates with beneficial properties/losses
Backtesting
The effectiveness of the VaR mannequin is validated by backtesting methods, evaluating each day hypothetical and precise outcomes with the estimated each day VaR. The each day VaR is calculated over a one-day upkeep horizon, in keeping with the 99% confidence stage and utilizing a historic interval of 1,000 days. The proportion of capital requirement related to this mannequin is 100%.
The backtesting evaluation introduced beneath considers the ranges instructed by the Basel Committee on Banking Supervision (BCBS). The ranges are divided into:
• Inexperienced (0 to 4 exceptions): backtesting outcomes that don’t recommend any downside with the standard or accuracy of the adopted fashions;
• Yellow (5 to 9 exceptions): intermediate vary group, which signifies an early warning monitoring and should point out the necessity to evaluate the mannequin; and
• Pink (10 or extra exceptions): want for enchancment actions.
The next chart exhibits the comparability between VaR and precise and hypothetical outcomes:
The exceptions in relation to the hypothetical outcomes occurred on 10/19/2021 and 10/21/2021, within the amo unts of R$ 37,7 and R$ 7,9 million, respectively. These excesses have been brought on by the elevated stage of native curiosity market volatility.
In relation to the precise outcomes, the exceptions additionally ocurred on 10/19/2021 and 10/21/2021, within the quantities of R$ 23,2 and R$ 3,5 million, respectively. These excesses have been brought on by the elevated stage of native curiosity market volatility.
The precise outcomes don’t embody charges, brokerage charges and commissions. There are not any revenue reserves.
Itaú Unibanco
45
Threat and Capital Administration-Pillar 3
Complete Publicity related to Derivatives
The principle objective of the by-product positions is to handle dangers within the Buying and selling Ebook and within the Banking Ebook within the corresponding danger elements.
Derivatives: Buying and selling and Banking
IRRBBA: IRRBB danger administration targets and insurance policies
BACEN’s (Central Financial institution of Brazil) Round 3,876, revealed in January 2018, states on methodologies and procedures for analysis of the capital adequacy, held to cowl rates of interest danger from devices held within the banking ebook.
For the needs of this Round, are outlined:
• â^†EVE (Delta Financial Worth of Fairness) is outlined because the distinction between the current worth of the sum of
repricing flows of devices topic to IRRBB in a base state of affairs, and the current worth of the sum of repricing flows of the identical devices in an interest-rate shocked state of affairs;
• â^†NII (Delta Internet Curiosity Revenue) is outlined because the distinction between the results of monetary intermediation of devices topic to IRRBB in a base state of affairs, and the results of monetary intermediation of the identical devices in an interest-rate shocked state of affairs.
The sensibility evaluation launched listed here are only a static analysis of the portfolio rate of interest publicity, and, subsequently, don´t think about the dynamic administration of the treasury desk and danger management areas, which maintain the duty for measures to mitigate danger underneath an adversarial scenario, minimizing important losses. Furthermore, it’s highlighted, although, the outcomes introduced don’t translate into accountable or financial outcomes for sure, as a result of this evaluation has, solely, an rate of interest danger disclosure objective and to exhibit the precept safety actions, contemplating the devices honest worth, other than any accounting practices adopted by Itaú Unibanco.
The establishment makes use of an inner mannequin to measure â^†EVE and â^†NII. â^†EVE outcomes don’t signify instant affect within the stockholders’ fairness. In the meantime, â^†NII outcomes point out potential volatility within the projected rates of interest outcomes.
In compliance with the round 3,876, the next demonstrates qualitative and quantitative particulars of danger administration for IRRBB in Itaú Unibanco.
Framework and Therapy
Rate of interest danger within the banking ebook refers back to the potential danger of affect on capital sufficiency and/or on the outcomes of economic intermediation attributable to adversarial actions in rates of interest, bearing in mind the principal flows of devices held within the banking ebook.
Itaú Unibanco
46
Threat and Capital Administration-Pillar 3
The principle level of belongings and liabilities administration is to maximise the risk-return ratio of positions held within the banking ebook, bearing in mind the financial worth of those belongings/liabilities and the affect on precise and future financial institution’s outcomes.
The rate of interest danger managing on transactions held within the banking ebook happens throughout the governance and hierarchy of decision-making our bodies and underneath a limits construction and alerts authorized particularly for these objective, which is delicate attributable to completely different ranges and courses of market danger.
The administration construction of IRRBB has it owns danger insurance policies and controls supposed to make sure adherence to the financial institution’s danger urge for food. The IRRBB framework has granular administration limits for a number of different danger metrics and consolidated limits for â^†EVE and â^†NII outcomes, apart from the boundaries related to stress exams.
The asset and legal responsibility administration unit is answerable for managing timing mismatches between asset and legal responsibility flows, and minimizes rate of interest danger by by methods as financial hedge and accounting hedge.
All of the fashions related to IRRBB have a sturdy unbiased validation course of and are authorized by a CTAM (Technical Mannequin Evaluation Fee). As well as, all of the fashions and processes are assessed by inner audit.
The rate of interest danger framework within the banking ebook makes use of administration measurements which are calculated each day for restrict management. The â^†EVE and â^†NII metrics are calculated in keeping with the danger urge for food limits and the opposite danger metrics by way of administration danger limits.
Within the strategy of managing rate of interest danger of the banking ebook, transactions topic to computerized choices are calculated in keeping with inner market fashions which break up the merchandise, so far as doable, into linear and non -linear payoffs. The linear payoffs are handled equally to another devices with out choices, and for non-linear payoffs an extra worth is computed and added on the â^†EVE and â^†NII metrics.
On the whole phrases, transactions topic to behavioral choices are categorized as deposits with no contractual maturity date outlined or merchandise topic to early reimbursement. Non-maturity deposits are categorized in keeping with their nature and stability to ensure compliance with regulatory limits. A survival evaluation mannequin treats the merchandise topic to pre-payment, utilizing the historic dataset to calibrate its parameters. The devices flows with homogeneous traits are adjusted by particular fashions to replicate, in probably the most applicable means, the repricing flows of the devices.
The banking ebook consists of asset and legal responsibility transactions originating in numerous industrial channels (retail and wholesale) of Itaú Unibanco. The market danger exposures inherent within the banking ebook consists of varied danger elements, that are major parts of the market in worth formation.
IRRBB additionally contains hedging transactions supposed to reduce dangers deriving from robust fluctuations of market danger elements and their accounting asymmetries.
Market danger generated from structural mismatches is managed by quite a lot of monetary devices, equivalent to exchange-traded and over-the-counter derivatives. In some circumstances, operations utilizing by-product monetary devices will be categorized as accounting hedges, relying on their danger and money movement traits. In these circumstances, the supporting documentation is analyzed to allow the effectiveness of the hedge and different modifications within the accounting course of to be repeatedly monitored. The accounting and administrative procedures for hedging are outlined in BACEN Round 3,082.
The IRRBB mannequin features a sequence of premises:
• â^†EVE and â^†NII are measured on the premise of the money flows of the banking ebook devices, damaged down into their danger elements to isolate the impact of the rate of interest and the unfold parts;
Itaú Unibanco
47
Threat and Capital Administration-Pillar 3
• For non-maturity deposits, the fashions are categorized in keeping with their nature and stability and distributed over time contemplating the regulatory limits;
• The establishment makes use of survival evaluation fashions to deal with credit score transactions topic to prepayment, and empirical fashions for transactions topic to early redemption;
• The medium-term repricing attributed to non-maturity deposits is outlined as 1.71 years;
• The utmost-term repricing attributed to non-maturity deposits is outlined as 30.00 years.
The article 16 of the BCB Decision 54 defines the necessity to publish â^†EVE and â^†NII, utilizing the usual shock eventualities described in article 11 of the BACEN Round 3,876.
The desk beneath are introduced the primary outcomes due the change within the rates of interest over the banking ebook within the standardized eventualities. It is very important observe that, following the normative guidelines, the potential losses are represented by constructive values and potential beneficial properties by damaging values (between parentheses).
• Parallel Up: growing within the short-term and within the long-term rates of interest;
• Parallel Down: reducing within the short-term and within the long-term rates of interest;
• Brief-term enhance: growing within the short-term rates of interest;
• Brief-term discount: reducing within the short-term rates of interest;
• Steepener: reducing within the short-term rates of interest and growing the within the long-term rates of interest;
• Flattener: growing within the short-term rates of interest and reducing the within the long-term rates of interest.
Itaú Unibanco
48
Threat and Capital Administration-Pillar 3
IRRBB1 – Quantitative info on IRRBB
Potential Lack of Devices Categorized within the Banking Ebook arising from Curiosity Fee Variation Situations (1)
(Losses are represented by constructive values, whereas beneficial properties are represented by damaging values between parentheses)
For the outlier check, the utmost variation of the â^†EVE, with standardized shocks was R$ 10,406 million as of December
31, 2021, similar to a possible lack of 6.94% of Tier I, which is lower than 15%-percentage that defines the establishment as outlier (in keeping with Artwork. 44 of Round 3,876).
The â^†NII, with inner shocks, for a horizon of a yr, has most lack of R$ 1,724 million within the Parallel Excessive
State of affairs.
Different Dangers
Insurance coverage merchandise, pension plans and premium bonds dangers
Merchandise that compose portfolios of insurance coverage corporations of Itaú Unibanco are associated to life and elementary insurance coverage, in addition to pension plans and premium bonds. The principle dangers inherent in these merchandise are described beneath and their definitions are given of their respective chapters.
• Underwriting Threat: risk of losses arising from insurance coverage merchandise, pension plans and premium bonds that go in opposition to establishment’s expectations, immediately or not directly related to technical and act uarial bases used for calculating premiums, contributions and technical provisions;
• Market Threat;
• Credit score Threat;
• Operational danger;
Itaú Unibanco
49
Threat and Capital Administration-Pillar 3
• Liquidity danger.
According to home and worldwide greatest practices, Itaú Unibanco has a danger administration construction which ensures that dangers ensuing from insurance coverage, pension and particular financial savings merchandise are correctly assessed and reported to the related boards.
The method of danger administration for insurance coverage, pensions and premium bond plans is unbiased and give attention to the particular nature of every danger.
The intention of Itaú Unibanco is to make sure that belongings serving as collateral for long-term merchandise, with assured minimal returns, are managed in keeping with the traits of the liabilities, in order that they’re actuarially balanced and solvent over the long run.
Social and Environmental Threat
Itaú Unibanco understands social and environmental danger as the danger of potential losses attributable to publicity to social and environmental occasions arising from the efficiency of its actions, in keeping with CMN Decision 4,327/14.
The Social and Environmental Accountability and Sustainability Coverage (PRSA) establishes the rules, methods and major ideas for social and environmental administration, ranging from institutional points, and addressing, by particular procedures, probably the most related dangers to the establishment’s operation.
Mitigation actions on social and environmental danger are carried out by the mapping of processes, dangers and controls, the monitoring of latest rules on the topic, and the itemizing of occurrences in inner databases. Along with identification, the levels of prioritization, danger response, monitoring and reporting of the assessed dangers complement the administration of this danger at Itaú Unibanco.
The administration of this danger is carried out by the primary line of protection, enterprise areas that handle it of their each day actions, following the PRSA tips, manuals and particular procedures supplemented by the specialised evaluation of the devoted groups of Company Compliance, Modeling and Credit score Threat and Authorized and Institutional division, which work built-in within the administration of all the scale of Social and Environmental Threat linked to the Conglomerate actions. Enterprise items even have the governance for the approval of latest services and products, which incorporates the social and environmental danger evaluation, that ensures the compliance within the new merchandise and processes employed by the establishment, in addition to with particular social and environmental processes relevant to the establishment’s personal operation (fairness, department infrastructure and expertise), suppliers, credit score, investments and key subsidiaries. The second line of protection, in flip, is represented by Modeling and Credit score Threat, Int ernal Controls, in addition to Compliance, by the Social and Environmental Threat Administration, which helps and ensures the governance of the actions of the primary line. The third line of protection, composed of Inside Audit, acts independently, finishing up the mapping and evaluation of the danger’s administration, controls and governance.
The Social and Environmental Threat Governance additionally contains the Social and Environmental Threat Committee, which is primarily answerable for debating and deciding on institutional and strategic points, in addition to deciding on merchandise, operations, providers, amongst others, that contain Social and Environmental Threat, together with Local weather Threat.
Itaú Unibanco continuously seeks to evolve within the administration of social and environmental danger, all the time attentive to the challenges calls for of society. Due to this fact, amongst different actions, Itaú Unibanco has assumed and integrated into Itaú
Unibanco’s inner processes a lot of nationwide and worldwide voluntary commitments and pacts aimed toward integrating social, environmental and governance facets into Itaú Unibanco enterprise. The principle ones are the Ideas for Accountable Funding (PRI), the Constitution for Human Rights – Ethos, the Equator Ideas (EP), the World Pact, the Carbon Disclosure Venture (CDP), the Brazilian GHG Protocol Program, the Pacto Nacional para Erradicação do Trabalho Escravo (Nationwide Pact for Eradicating Slave Labor), the Process Drive on Local weather-Associated
Itaú Unibanco
50
Threat and Capital Administration-Pillar 3
Monetary Disclosures (TCFD), amongst others. Itaú Unibanco efforts to extend the data of the evaluation of the social and environmental standards have been acknowledged as fashions in Brazil and overseas, as proven by the recurring presence of the establishment within the main sustainability indexes overseas, such because the Dow Jones Sustainability Index, and lately, in Sustainability Index Euronext Vigeo – Rising 70, and in Brazil, for instance within the Company Sustainability Index, in addition to the quite a few prizes which Itaú Unibanco has been awarded.
Mannequin Threat
The mannequin danger arises from the wrong growth or upkeep of fashions, equivalent to mistaken assumptions, and inappropriate use or utility of the mannequin.
The usage of fashions can result in choices which are extra correct and subsequently it’s a main follow within the establishment. The fashions have supported strategic choices in a number of contexts, equivalent to credit score approval, pricing, volatility curve estimation, calculation of capital, amongst others.
As a result of growing use of fashions, pushed by the applying of latest applied sciences and the growth of information use, Itaú Unibanco has improved its governance in relation to its growth, implantation, use and monitoring, by the definition of tips, insurance policies and procedures aimed toward assuring the standard and mitigation of the related dangers.
The efficiency of the areas answerable for fashions is evaluated by the Operational Threat and Inside Audit groups to make sure adherence to such insurance policies. The alternatives for enchancment discovered throughout these assessments are duly addressed with motion plans, that are adopted up by the three strains of protection and by senior administration till their conclusion.
Regulatory or Compliance Threat
Regulatory or Compliance danger is the danger related to any nature, monetary losses or harm to fame, arising from non-compliance with exterior or inner requirements, commitments to regulators, or different commitments undertaken voluntarily by adhering codes of self -regulation, strategies or codes of conduct associated to the actions of the Conglomerate.
This danger is managed by a structured course of aimed toward figuring out modifications within the regulatory surroundings, analyzing their impacts on the departments of the establishment and monitoring the actions directed at adherence to the regulatory necessities and different commitments talked about above.
This structured course of contains the next actions: (i) to know the modifications within the regulatory surroundings; (ii) to observe regulatory developments; (iii) to take care of the connection between the establishment and the regulator, self-regulatory our bodies and the illustration entity; (iv) to observe motion plans on regulatory or self -regulatory compliance; (v) to coordinate a program to adjust to important norms, equivalent to Integrity and Ethics; and (vi) to report regulatory points in Operational and Compliance Threat boards, in keeping with the construction of committees established in inner insurance policies.
Reputational Threat
Itaú Unibanco understands reputational danger as the danger arising from inner practices and/or exterior elements that will generate a damaging notion of Itaú Unibanco by clients, staff, shareholders, buyers, regulatory our bodies, authorities, suppliers, the press and the society typically. It may well affect the financial institution’s fame, the worth of its model and/or lead to monetary losses. Moreover, this will have an effect on the upkeep of present enterprise relationships, entry to
Itaú Unibanco
51
Threat and Capital Administration-Pillar 3
sources of fundraising, the attraction of latest enterprise and expertise to compose the corporate’s workers and even the license to function.
The establishment believes that its fame is extraordinarily essential for reaching its long-term objectives, which is why it seeks the alignment of the speech, the motion and the moral and clear follow, important to boost the boldness of
Itaú Unibanco’s stakeholders. Itaú Unibanco’s fame is dependent upon its technique (imaginative and prescient, tradition and abilities) and derives from direct or oblique expertise of the connection between Itaú Unibanco and its stakeholders.
Because the reputational danger immediately or not directly permeates all operations and processes of the establishment, Itaú Unibanco’s governance is structured in a means to make sure that potential dangers are recognized, analyzed and managed nonetheless within the preliminary phases of its operations and evaluation of latest merchandise, together with using new applied sciences.
The therapy given to reputational danger is structured by the use of many processes and inner initiatives, which, in flip, are supported by inner insurance policies, and their major objective is to supply mechanisms for the moni toring, administration, management and mitigation of the primary reputational dangers. Amongst them are (i) danger urge for food assertion; (ii) course of for the prevention and battle in opposition to illegal acts; (iii) disaster administration course of and enterprise continuity; (iv) processes and tips of the governmental and institutional relations; (v) company communication course of; (vi) model administration course of; (vii) ombudsman workplaces initiatives and dedication to buyer satisfaction; and (vii) ethics tips and prevention of corruption.
Monetary establishments play a key position in stopping and preventing unlawful acts, particularly cash laundering, terrorist financing and fraud, by which the problem is to determine and suppress more and more subtle operations that search to hide the origin, location, disposition, possession and motion of products and cash derived, immediately or not directly, from unlawful actions. Itaú Unibanco has launched a company coverage to be able to forestall its involvement in unlawful acts and to guard its fame and picture in the direction of staff, shoppers, strategic companions, suppliers, service suppliers, regulators and society, by a governance construction primarily based on transparency, strict compliance with guidelines and rules, together with BACEN Round 3,978/20 amongst others, and cooperation with police and judicial authorities. It additionally seeks a repeatedly alignment with native and worldwide greatest practices for stopping and preventing in opposition to unlawful acts, by investing and coaching eligible staff.
In compliance with the rules of this company coverage, Itaú Unibanco established a program to forestall and battle in opposition to unlawful acts primarily based on the next pillars:
• Insurance policies and Procedures;
• Shopper Identification Course of;
• Know Your Buyer (KYC) Course of;
• Know Your Associate (KYP) Course of;
• Know Your Provider (KYS) Course of;
• Know Your Worker (KYE) Course of;
• Evaluation of New Merchandise and Providers;
• Compliance with Sanctions;
• Monitoring, Choice and Evaluation of Suspicious Operations or Conditions;
Itaú Unibanco
52
Threat and Capital Administration-Pillar 3
•
•
Reporting Suspicious Transactions to the Regulatory Our bodies; and
Coaching.
This program applies to your complete establishment, together with subsidiaries and associates in Brazil and overseas. The stopping and combating illegal acts governance is carried out by the Board of Administrators, Audit Committee, Operational Threat Committee, Threat and Capital Administration Commitee and Anti-Cash Laundering Committees. The doc that presents the rules established within the company program to forestall and fight illegal acts could also be seen on the www.itau.com.br/investor-relations, part Itaú Unibanco, underneath Company Governance, Guidelines and Insurance policies, Insurance policies, Company Coverage for Prevention and Battle Towards Unlawful Acts.
As well as, Itaú Unibanco has been growing numerous knowledge evaluation fashions to enhance buyer danger classification, transaction monitoring and KYC methodology to supply higher accuracy in its evaluation and to lower false-positives. Itaú Unibanco has additionally been innovating its modeling options utilizing new strategies primarily based on machine studying methods to determine probably suspicious actions.
Furthermore, Itaú Unibanco is dedicated to defending company info and guaranteeing consumer and common public privateness in any transactions. To this finish, it has a Company Info Safety Coverage and Cyber Secutity and has a monitoring course of and a management construction that covers expertise, enterprise areas and worldwide items, advert hering to principal regulatory our bodies and exterior audits, and greatest market practices and certifications. Moreover, a Safety Operation
Heart (SOC) that works 24/7 contributes to the cyber safety of Itaú Unibanco’s digital channels and IT infrastructure, to the monitoring of operations and thus the minimization of the danger of a safety incident.
The Company Info Safety and Cyber Safety Coverage will be seen on the web site www.itau.com.br/investor-relations, part Itaú Unibanco, underneath Company Governance, Guidelines and Insurance policies, Insurance policies, Company Coverage on Info Safety and Cyber Safety.
Nation Threat
The nation danger is the danger of losses associated to non-compliance with obligations in reference to debtors, issuers, counterparties or guarantors, because of political-economic and social occasions or actions taken by the federal government of the nation.
Itaú Unibanco has a particular construction for the administration and management of nation danger, consisting of company our bodies and devoted groups, with obligations outlined in insurance policies. The establishment has a structured and constant process, together with: (i) institution of nation scores; (ii) willpower of limits for international locations; (iii) monitoring using restrict s.
Enterprise and Technique Threat
Enterprise and technique danger is the danger of a damaging affect on the outcomes or capital as a consequence of a defective strategic planning, the making of adversarial strategic choices, the lack of Itaú Unibanco to implement the right strategic plans and/or modifications in its enterprise surroundings.
Itaú Unibanco has carried out many mechanisms that be sure that each the enterprise and the strategic determination -making processes comply with correct governance requirements, have the energetic participation of executives and the Board of Administrators, are primarily based on market, macroeconomic and danger info and are aimed toward optimizing the danger -return ratio. Determination-making and the definition of enterprise and technique tips, rely on the total engagement of t he Board of Administrators, primarily by the Technique Committee, and of the executives, by the Government Committee. With a purpose to deal with danger adequately, Itaú Unibanco has governance and processes to contain the Threat Space in enterprise and technique
Itaú Unibanco
53
Threat and Capital Administration-Pillar 3
choices, in order to make sure that danger is managed and choices are sustainable in the long run. They’re: (i) {qualifications} and incentives of board members and executives; (ii) price range course of; (iii) product evaluation; (iv) analysis and prospecting of proprietary mergers and acquisitions; and (v) a danger urge for food framework which, for instance, restricts the focus of credit score and publicity to particular and materials dangers.
Contagion Threat
Contagion Threat is the opportunity of losses occurring for entities which are a part of the Prudential Conglomerate because of monetary assist to unconsolidated entities, in a anxious scenario, within the absence or along with the obligations offered for within the contract.
Itaú Unibanco has a construction for danger administration and management, a devoted workforce and a coverage that defines roles and obligations. This construction covers (i) the identification of entities in relation to the potential era of contagion danger, (ii) the evaluation of dangers in relationships, (iii) the monitoring, management and mitigation of contagion danger, (iv) the evaluation of affect on capital and liquidity and (v) studies.
It’s a part of the scope of contagion danger governance: Associated Social gathering audiences, primarily composed of controllers, managed and associated entities (as outlined in Res. 4,693 / 18), foundations, investments in non-consolidated entities, suppliers of important services and products, assigness, patrons and sellers of related belongings, third events with merchandise distributed by Itaú Unibanco and third events to whom Itaú Unibanco distributes merchandise, apart from all of the evaluation of the worldwide Items.
Operational Threat
Operational danger is outlined as the opportunity of losses arising from failure, deficiency or inadequacy of inner course of, folks or techniques or from exterior occasions that have an effect on the achievement of strategic, tactical or operational targets. It contains authorized danger related to inadequacy or deficiency in contracts signed by the establishment, in addition to penalties attributable to noncompliance with legal guidelines and punitive damages to 3rd events arising from the actions undertaken by the establishment.
Itaú Unibanco internally classifies its danger occasions in:
• Inside fraud;
• Exterior fraud;
• Labor claims and poor safety within the office;
• Insufficient practices associated to shoppers, services and products;
• Damages to personal bodily belongings or belongings in use by Itaú Unibanco;
• Interruption of Itaú Unibanco’s actions;
• Failures in info expertise (IT) techniques, processes or infrastructure;
• Failures within the efficiency, compliance with deadlines and administration of actions at Itaú Unibanco.
Itaú Unibanco
54
Threat and Capital Administration-Pillar 3
Operational danger administration contains conduct danger, which is topic to mitigating procedures to evaluate product design and incentive fashions. The inspection space is answerable for fraud prevention. No matter their origin, particular circumstances could also be dealt with by danger committees and integrity and ethics committees. Itaú Unibanco has a governance course of that’s structured by boards and company our bodies composed of senior administration, which report back to the Board of Administrators, with well-defined roles and obligations to be able to segregate the enterprise and administration and management actions, guaranteeing independence between the areas and, consequently, well-balanced choices with respect to dangers. That is mirrored within the danger administration course of carried out on a decentralized foundation underneath the duty of the enterprise areas and by a centralized management carried out by the inner management, compliance and operational danger division, by the use of methodologies, coaching programs, certification and monitoring of the management surroundings in an unbiased means.
The managers of the chief areas use company strategies constructed and made out there by the Operational Threat and Company Compliance and Cash Laundering Prevention Areas. Among the many methodologies and instruments used are the self -evaluation and the map of the establishment’s prioritized dangers, the approval of processes, merchandise, the monitoring of key danger indicators and the database of operational losses, guaranteeing a single conceptual foundation for managing processes, dangers, initiatives and new services and products.
Inside the governance of the danger administration course of, usually, the consolidated studies on danger monitoring, controls, motion plans and operational losses are introduced to the enterprise space executives.
According to CMN Decision 4,557, the doc “Public Report – Built-in Administration of Operational Threat /Inside Controls/Compliance”, summarized model of the institutional operational danger administration coverage will be discovered on the web site www.itau.com.br/investor-relations, part Itaú Unibanco, underneath Company Governance, Guidelines and Insurance policies, Studies.
Disaster Administration and Enterprise Continuity
Itaú Unibanco’s Enterprise Continuity Program’s objective is to guard its staff, make sure the continuity of the important features of its enterprise strains and maintain each the steadiness of the markets by which it operates and the boldness of its clients and strategic companions in its provision of providers and merchandise.
It establishes the Enterprise Continuity Plan (BCP), which consists of modular procedures which are out there to be used within the occasion of incidents. The descriptions/traits of the present plans are:
• Catastrophe Restoration: it goals to make sure the provision and integrity of Info Expertise sources and communication within the occasion of a failure within the major Information Heart to take care of the processing of important techniques;
• Office Contingency: different amenities to carry out the actions within the occasion the executive buildings turn into unavailable;
• Operational Contingency: options to hold out important processes whether or not they’re systemic, procedural or emergency responses.
With a purpose to maintain the continuity options aligned with the enterprise necessities (processes, minimal sources, authorized necessities, and so forth) the Program applies the next instruments to evaluate the establishment:
• Enterprise Influence Evaluation (BIA): evaluates the criticality and resumption requirement of the processes that assist the supply of services and products.
Itaú Unibanco
55
Threat and Capital Administration-Pillar 3
• Threats and Vulnerabilities Evaluation (AVA): identification of threats close to to Itaú Unibanco’s buildings.
Contemplating the dependence that some processes have on third -party providers, the Enterprise Continuity Program conducts an evaluation of the danger of unavailability of providers supplied with a view to resilience to threats of interruption.
The establishment has a Disaster Administration Program, which is aimed toward managing enterprise interruption occasions, pure disasters, impacts of an environmental, social, and infrastructure/operational (together with info expertise) or of another nature that jeopardize the picture and fame and/or viability of Itaú Unibanco’s processes with its staff, shoppers, strategic companions and regulators, with well timed and built-in responses.
The Program establishes a frequent movement of acculturation with the corporate’s senior administration, in addition to a continuing evaluation of high-impact eventualities and occasions to determine response plans according to present threats. To evaluate effectivity and determine factors for enchancment in disaster response plans, exams are carried out no less than yearly.
Unbiased Validation of Threat Fashions
Itaú Unibanco validates the processes and danger fashions independently. That is achieved by a division which is separate from the enterprise and danger management areas, to make sure that its assessments are unbiased.
The validation technique, outlined in an inner coverage, meets regulatory necessities equivalent to these of BACEN Circulars 3,646 and three,674 and Resolutions 2,682 and 4,557. The validation levels embody:
• Verification of mathematical and theoretical growth of the fashions;
• Qualitative and quantitative evaluation of the fashions, together with the variables, building of an unbiased calculator and using applicable technical;
• When relevant, comparability with different fashions and worldwide benchmarks;
• Historic Backtesting of the mannequin;
• The proper implementation of the fashions within the techniques used.
Moreover, the validation space assesses the stress testing program.
The efficiency of the unbiased validation space and the validation of the processes and fashions are assessed by Inside Audit and reported to the precise senior administration committees. Motion plans are ready to deal with alternatives recognized throughout the unbiased validation course of, and are monitored by the three strains of protection and by senior administration till the conclusion.
Itaú Unibanco
56
Threat and Capital Administration-Pillar 3
Glossary of Acronyms
A
• ASF – Accessible Steady Funding
• AT1 – Extra Tier 1 Capital
• AVA – Avaliação de Vulnerabilidade e Ameaças(Threats and Vulnerabilities Evaluation)
B
• BACEN-Banco Central do Brasil (Central Financial institution of Brazil)
• BCB-Banco Central do Brasil (Central Financial institution of Brazil)
• BCP – Enterprise Continuity Plan
• BCBS-Basel Committee on Banking Supervision
• BIA – Enterprise Influence Evaluation
• BIS – Financial institution for Worldwide Settlements
C
• CCF – Credit score Conversion Issue
• CCP – Non-Certified Central Counterparty
• CCR – Counterparty Credit score Threat
• CDP – Carbon Disclosure Venture
• CEM-Present Publicity Technique
• CEO-Chief Government Officer
• CET 1-Frequent Fairness Tier I
• CGRC-Comitê de Gestão de Risco e Capital (Threat and Capital Administration Committee)
• CMN-Conselho Monetário Nacional (Nationwide Financial Council)
• Comef-Comitê de Estabilidade Financeira (Monetary Stability Committee)
• CRI – Actual State Receivables Certificates
Itaú Unibanco
57
Threat and Capital Administration-Pillar 3
• CRM – Credit score Threat Mitigation
• CRO-Chief Threat Officer
• CTAM – Comissão Técnica de Avaliação de Modelos (Technical Mannequin Evaluation Fee)
• CVA-Credit score Valuation Adjustment
• CVM-Comissão de Valores Mobiliários (Brazilian Securities and Change Fee)
D
• DLP-Lengthy- Time period Liquidity Assertion
• DRL-Liquidity Threat Assertion
• D-SIB-Home Systemically Vital Banks
• DV-Delta Variation
E
• EAD – Publicity at Default
• ECL – Anticipated Credit score Losses
• EMD – Entidades Multilaterais de Desenvolvimento (Multilateral Improvement Entities)
• EP – Equator Ideas
• EVE – Financial Worth of Fairness
F
• FIDC – Credit score Rights Funding Funds
• FCC-Credit score Conversion Credit score
• FPR-Fator de Ponderação de Risco(Weighting Issue)
G
• GAP-Hole Evaluation
• GDP-Gross Home Product
• GHG – Greenhouse Gasoline Protocol
Itaú Unibanco
58
Threat and Capital Administration-Pillar 3
• Greeks – Sensitivities to Varied Threat Components
• G-SIB – World Systemically Vital Banks
H
• HE – Haircut of Execution
• HQLA – Excessive High quality Liquid Belongings
• HV – Volatility Haircut
I
• ICAAP – Inside Capital Adequacy Evaluation Course of
• IMA – Inside Fashions Strategy
• IPV – Unbiased Value Verification
• IRRBB – Curiosity Fee Threat within the Banking Ebook
• IT – Info Expertise
Okay
• KYC – Know your Buyer
• KYP – Know your Associate
• KYS – Know your Provider
• KYE – Know your Worker
L
• LCR – Liquidity Protection Ratio
• LMM-Limite de Mitigação Máxima (Most Mitigation Restrict)
M
•
N
•
MtM-Mark to Market
NII – Internet Curiosity Revenue
Itaú Unibanco
59
Threat and Capital Administration-Pillar 3
• NSFR – Internet Steady Funding Ratio
O
• OTC – Over-the-Counter
P
• PR – Patrimônio de Referência (Complete Capital)
• PRI – Ideas for Accountable Investments
• PRSA – Política de Sustentabilidade e Responsabilidade Socioambiental (The Social and Environmental Responsability and Sustainability Coverage)
• PCR – Potential Credit score Threat
• PVA – Prudent Valuation Changes
Q
• QCCP – Certified Central Counterparties
R
• RA – Leverage Ratio
• RAS-Threat Urge for food Assertion
• RSF – Required Steady Funding
• RWA- Threat Weighted Belongings
• RWACPAD-Portion referring to exposures to credit score danger
• RWACPrNB-amount of risk-weighted belongings similar to credit score danger exposures to the non-banking non-public sector, calculated for jurisdictions whose ACCPi is completely different from zero
• RWAMINT-Portion referring to exposures to market danger, utilizing inner appro ach
• RWAMPAD-Portion referring to exposures to market danger, calculated utilizing normal strategy
• RWAOPAD-Portion referring to the calculation of operational danger capital necessities
S
• SA – Joint-Inventory Firm
Itaú Unibanco
60
Threat and Capital Administration-Pillar 3
• SA-CCR – Standardised Strategy to Counterparty Credit score Threat
• SFN – Sistema Financeiro Nacional(Nationwide Monetary System)
• SFT – Securities Financing Transactions
• SOC – Safety Operation Heart
T
• TCFD – Process Drive on Local weather-Associated Monetary Disclosures
• TLAC – Complete Loss-Absorbing Capability
• TVM-Títulos de valores mobiliários(Securities)
V
• VaR-Worth at Threat
Itaú Unibanco
61
Threat and Capital Administration-Pillar 3
Glossary of Rules
BACEN Round No. 3,354, of June twenty seventh, 2007
BACEN Round No. 3,644, of March 4th, 2013
BACEN Round No. 3,646, of March 04th, 2013
BACEN Round No. 3,674, of October thirty first, 2013
BACEN Round No. 3,748, of February twenty sixth, 2015
BACEN Round No. 3,749, of March 05th, 2015
BACEN Round No. 3,751 of March nineteenth, 2015
BACEN Round No. 3,769, of October twenty ninth, 2015
BACEN Round No. 3,809, of August twenty fifth, 2016
BACEN Round No. 3,846, of September 13rd, 2017
BACEN Round No. 3,869, of December nineteenth, 2017
BACEN Round Letter No. 3,706 of Might 05th, 2015
BACEN Round Letter No. 3,907 of September tenth, 2018
BACEN Round Letter No. 4,068 of July seventh, 2020
BACEN Round Letter No. 3,876 of January thirty first, 2018
BACEN Round Letter No. 3,082 of January thirtieth, 2012
BACEN Round Letter No. 3,978 of January twenty third, 2020
BACEN Communication No. 37.942, of November 18th, 2021
BCB Decision No. 54, of December sixteenth, 2020
CMN Decision No. 2,682, of December twenty second, 1999
CMN Decision No. 4,192, of March 1st, 2013
CMN Decision No. 4,193, of March 1st, 2013
Itaú Unibanco
62
Threat and Capital Administration-Pillar 3
CMN Decision No. 4,327, of April twenty fifth, 2014
CMN Decision No. 4,502, of June thirtieth, 2016
CMN Decision No. 4,557, of February twenty third, 2017
CMN Decision No. 4,589, of June twenty ninth, 2017
CMN Decision No. 4,693, of October twenty ninth, 2018
CMN Decision No. 4,783, of March sixth, 2020
Itaú Unibanco
63
Disclaimer
Itaú Unibanco Holding SA revealed this content material on 11 February 2022 and is solely answerable for the knowledge contained therein. Distributed by Public, unedited and unaltered, on 11 February 2022 16:07:35 UTC.
© Publicnow 2022
|
|
|
|
|
|
|
||||
|
||||
Technical evaluation developments ITAÚ UNIBANCO HOLDING S.A.
Brief Time period | Mid-Time period | Lengthy Time period | |
Developments | Bullish | Bearish | Bearish |
Revenue Assertion Evolution
Promote Purchase |
|
Imply consensus | BUY |
Variety of Analysts | 16 |
Final Shut Value | 26,52 BRL |
Common goal worth | 30,82 BRL |
Unfold / Common Goal | 16,2% |