0001471055 ifrs-full:FuturesContractMember bsbr:PurchasedCommitmentMember bsbr:OthersMember 2019-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

(Mark One)

☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934

OR

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 20192021

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto.

OR

☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Date of event requiring this shell company report

 

Commission file number: 001-34476

 

BANCO SANTANDER (Brasil)(BRASIL) S.A.

(Exact name of Registrant as specified in its charter)

 

SANTANDER (BRAZIL) BANK, INC.

(Translation of Registrant’s name into English)

 

Federative Republic of Brazil

(Jurisdiction of incorporation)incorporation or organization)

 

Avenida Presidente Juscelino Kubitschek, 2,041 and 2,235 – Bloco2041, Suite 281, Block A

Condomínio WTORRE JK, Vila Olímpia
Nova Conceição
São Paulo, São Paulo SP 04543-011

Federative Republic of Brazil


(Address of principal executive offices)


Mercedes Pacheco, Managing Director – Senior Legal Counsel

Banco Santander, S.A.

New York Branch

45 E. 53rd Street

New York, New York New York 10022
(212)
(212) 350-3604

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading SymbolSymbols 

Name of each exchange on which registered 

Units, each composed of 1 common share, no par value, and 1 preferred share, no par value

SANB11

New York Stock Exchange*

Common Shares, no par valueSANB3New York Stock Exchange*
Preferred Shares, no par valueSANB4New York Stock Exchange*
American Depositary Shares, each representing one unit (or a right to receive one unit) which is composed of 1 common share, no par value, and 1 preferred share, no par value, of Banco Santander (Brasil) S.A.

BSBR


New York Stock Exchange

 

*Not for trading purposes, but only in connection with the listing of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Table of Contents

and Exchange Commission.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

None

(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

 

Title of each Class

7.375% Tier 1 Subordinated Perpetual Notes
6.000% Tier 2 Subordinated Notes due 2024

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 

Title of Class

Number of Shares Outstanding

Common shares3,818,695,0313,802,939,826
Preferred shares3,679,836,0203,664,080,815

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes☒No☐

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 

Yes☐No☒

 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes☒            No☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes☒             No☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”,filer,” “accelerated filer”,filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer☒          Accelerated Filer ☐         Non-accelerated Filer ☐          Emerging growth company ☐

 

Large Accelerated Filer☒Accelerated Filer☐Non-accelerated Filer☐Emerging growth company☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.☐

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

☐U.S. GAAP

☐ U.S. GAAP

 

☒International Financial Reporting Standards as issued by the International Accounting Standards Board

☒ International Financial Reporting Standards as issued by the International Accounting Standards Board

 

☐Other

☐ Other

 

Table of Contents

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

 

☐Item 17☐Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes☐            No☒

1325

 

Table of Contents

Table of Contents

 

table of contents

Page

PRESENTATION OF FINANCIAL AND OTHER INFORMATION7Page
FORWARD-LOOKING STATEMENTSPresentation of Financial and Other Informationiii
9Forward-Looking Statementsvii
PART I117
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS117
1A.Directors and Senior Management117
1B.Advisers118
1C.   Auditors118
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE118
2A.Offer Statistics118
2B.Method and Expected Timetable118
ITEM 3. KEY INFORMATION118
3A.Selected Financial Data118
3B.Capitalization and Indebtedness1917
3C.Reasons for the Offer and Use of Proceeds1917
3D.Risk Factors1917
ITEM 4. INFORMATION ON THE COMPANY5159
4A.History and Development of the Company5159
4B.Business Overview5571
4C.Organizational Structure121146
4D.Property, Plant and Equipment123148
ITEM 4A. UNRESOLVED STAFF COMMENTS124148
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS124148
5A.Operating Results124148
5B.Liquidity and Capital Resources148172
5C.Research and Development, Patents and Licenses, etc.152177
5D.Trend Information152177
5E.   Critical Accounting EstimatesOff-Balance Sheet Arrangements153
5F.Contractual Obligations153
5G.Safe Harbor154178
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES154178
6A6A.   Board of Directors and Board of Executive Officers154178
6B.Compensation167192
6C.Board Practices172196
6D.Employees179203
6E.Share Ownership180204
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS182205
7A.   Major Shareholders182205

Table of Contents

7B.Related Party Transactions183207
7C.Interests of Experts and Counsel184209
ITEM 8. FINANCIAL INFORMATION184209
8A.Consolidated Statements and Other Financial Information184209
8B.Significant Changes194218
ITEM 9. THE OFFER AND LISTING194218
9A.   Offering and Listing Details194218
9B.Plan of Distribution197222
9C.   Markets197222
9D.   Selling Shareholders200224
9E.   Dilution200225
9F.   Expenses of the Issue200225
ITEM 10. ADDITIONAL INFORMATION200225
10A.Share Capital201225
10B.By-Laws202225
10C.Material Contracts212234
10D.Exchange Controls212234
10E.   Taxation214236
10F.   Dividends and Paying Agents222243
10G.   Statement by Experts222243
10H.   Documents on Display223243
10I.   Subsidiary Information223243
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK223243
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES246265
12A.Debt Securities265
246Table of Contents
12B.Warrants and Rights246265
12C.Other Securities246265
12D.American Depositary Receipts246266
PART II248267
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES248267
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS248267
ITEM 15. CONTROLS AND PROCEDURES248267
15A.   Disclosure Controls and Procedures248267
15B.   Management’s Annual Report on Internal Control over Financial Reporting248267
15C.   AuditAttestation Report of the Registered Public Accounting Firm249268
15D.   Changes in Internal Control over Financial Reporting249268
ITEM 16. [RESERVED]249268
ITEM 16A.   AUDIT COMMITTEE FINANCIAL EXPERTAudit Committee Financial Expert249

Table of Contents

ITEM 16B. SANTANDER BRASIL’S CODE OF ETHICAL CONDUCT250268
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES16B.   Santander Brasil’s Code of Ethical Conduct250268
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES16C.   Principal Accountant Fees and Services251269
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS16D.   Exemptions from the Listing Standards for Audit Committees251269
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT16E.   Purchases of Equity Securities by the Issuer and Affiliated Purchasers252270
ITEM 16G. CORPORATE GOVERNANCE16F.   Change in Registrant’s Certifying Accountant252270
ITEM 16H. MINE SAFETY DISCLOSURE16G.   Corporate Governance270
25516H.   Mine Safety Disclosure273
16I.   Disclosure Regarding Foreign Jurisdictions that Prevent Inspections274
PART III256275
ITEM 17. FINANCIAL STATEMENTS256275
ITEM 18. FINANCIAL STATEMENTS256275
ITEM 19. EXHIBITS256275

 

Table of Contents

TablePresentation of Contents

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Financial and Other Information

General

In this annual report, the terms “Santander Brasil,” the “Bank,” “we,” “us,” “our,” “our company” and “our organization” meanrefer to Banco Santander (Brasil) S.A. and its consolidated subsidiaries, unless otherwise indicated. References to “Banco Real” mean Banco ABN AMRO Real S.A. and ABN AMRO Brasil Dois Participações S.A. and their respective consolidated subsidiaries, unless otherwise indicated. References to “Banespa” mean Banco do Estado de São Paulo S.A. – Banespa, one of our predecessor entities. The term “Santander Spain” means Banco Santander S.A. References to “Santander Group” mean the worldwide operations of the Santander Spain conglomerate, as indirectly controlled by Santander Spain and its consolidated subsidiaries, including Santander Brasil.

All references herein to the “real,” “reais” or “R$” are to the Brazilianreal, the official currency of Brazil. All references to “U.S. dollars,” “dollars” or “U.S.$” are to United States (or “U.S.”) dollars. All references to “euro,” “euros” or “€” are to the common legal currency of the member states participating in the European Economic and Monetary Union. References to “CI$” are to Cayman Islands dollars. References to “£” are to United Kingdom pounds sterling. See “Item 3. Key Information—A. Selected Financial Data—Exchange Rates” for information regarding exchange rates for the Brazilian currency.

Solely for the convenience of the reader, we have translated certain amounts included in “Item 3. Key Information—A. Selected Financial Data” and elsewhere in this annual report fromreais into U.S. dollars using the exchange rate as reported by the Brazilian Central Bank (Banco Central do Brasil), or the “Brazilian Central Bank,” as of December 31, 2019,2021, which was R$4.03075.5805 to U.S.$1.00, or on the indicated dates (subject, on any applicable date, to rounding adjustments). We make no representation that thereal or U.S. dollar amounts actually represent or could have been or could be converted into U.S. dollars at the rates indicated, at any particular exchange rate or at all.

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Consolidated Financial Statements

We maintain our books and records inreais, our functional currency and the presentation currency for our consolidated financial statements.

This annual report contains our consolidated financial statements as of December 31, 2019, 2018 and 2017, and for the years ended December 31, 2019, 20182021, 2020 and 2017.2019. Such consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or “IFRS”,IFRS, as issued by the International Accounting Standards Board, or “IASB”IASB and interpretations issued by the IFRS Interpretation Committee, or “IFRIC”.Committee. Our consolidated financial statements as of and for the years ended December 31, 2019, 20182021, 2020 and 20172019 have been audited by PricewaterhouseCoopers Auditores Independentes or “PwC.” PwC isLtda., an independent registered public accounting firm, whose report and unqualified opinion is included herein.

IFRS differs in certain significant aspects in comparison with the generally accepted accounting principles in the United States, or “U.S. GAAP”.U.S. GAAP. IFRS also differs in certain significant aspects in comparison with the Brazilian GAAP (as defined below).GAAP. Appendix I to our audited consolidated financial statements for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, included herein, contains information relating to certain differences between IFRS and Brazilian GAAP.

Under Brazilian law, we areAs required by the Brazilian Central Bank toand Brazilian law, we must prepare consolidated financial statements according toin accordance with IFRS. However, we will also continue to prepare statutory financial statements in accordance with accounting practicesthe Brazilian GAAP, as established by Law No. 6,404, dated December 15, 1976, as amended by Law 11,638, orby: (i) Brazilian Corporate Law; (ii) the “Brazilian Corporate Law” and standards established by the

7 

Table of Contents

National Monetary Council ((CMN - Conselho Monetário Nacional), or “CMN,”; (iii) the Brazilian Central Bank and document template providedincluding the regulatory reports set forth in the AccountingStandard Chart of Accounts for NationalBrazilian Financial System Institutions (Plano Contábil das Instituições do Sistema Financeiro Nacional), and(iv) the Brazilian Securities and Exchange Commission ((CVM - Comissão de Valores Mobiliários), or “CVM,” to the extent that such practices do not conflict with the rules of the Brazilian Central Bank,Bank; (v) the Accounting Pronouncements Committee (C(CPC - Comitê de Pronunciamentos Contábeis), to the extent that such practices are approved by the Brazilian Central Bank,Bank; (vi) the National Council of Private Insurance (Conselho Nacional de Seguros Privados),; and (vii) the Superintendence of Private Insurance ((SUSEP -Superintendência de Seguros Privados), or “SUSEP.” We refer to such Brazilian accounting practices as “Brazilian GAAP.”which is responsible for the supervision and control of the insurance, open private pension funds and capitalization markets in Brazil. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Auditing Requirements.”Requirements” for additional information.

iii 
Table of Contens

The Getnet Spin-Off

We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.

Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.

For additional information on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

Market Share and Other Information

We obtained the market and competitive position data, including market forecasts, used throughout this annual report from internal surveys, market research, publicly available information and industry publications. These data are updated to the latest available information as of the date of this annual report. We have made these statements on the basis of information from third-party sources that we believe are reliable, such as the Brazilian association of savings and mortgage financing entities (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança) or “ABECIP”; the Brazilian association of credit card companies (Associação Brasileira de Empresas de Cartões de Crédito e Serviços) or “ABECS”; the Brazilian association of leasing companies (Associação Brasileira de Empresas de Leasing); the national associationNational Association of financialFinancial and capital markets entitiesCapital Markets Entities (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais) or “ANBIMA”; the Brazilian Central Bank; the Brazilian social and economic development bankDevelopment Bank (Banco Nacional de Desenvolvimento Econômico e Social) or “BNDES”; the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística) or the “IBGE”; the Brazilian bank federationBank Federation (Federação Brasileira de Bancos), or “FEBRABAN”; the national federationNational Federation of private retirementPrivate Retirement and life insuranceLife Insurance (Federação Nacional de Previdência Privada e Vida); the Getúlio Vargas Foundation (Fundação Getúlio Vargas) or “FGV”; the Brazilian Central Bank systemInformation System (Sistema de Informações do Banco Central); the SUSEP; and the CVM, among others.

Certain Definitions

Unless otherwise indicated or the context otherwise requires, all references to:

“ADRs” mean American Depositary Receipts representing ADSs.

“ADSs” mean American Depositary Shares.

“ANBIMA” means the National Association of Financial and Capital Markets Entities (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais).

“B3” means the B3 S.A. – Brasil, Bolsa, Balcão, or the São Paulo Stock Exchange.

“BNDES” means the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social).

“Brazil” means the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil.

“Brazilian Capital Markets Law” means Brazilian Law No. 6,385/76, as amended.

“Brazilian Central Bank” means the Central Bank of Brazil (Banco Central do Brasil).

“Brazilian Corporate Law” means Brazilian Law No. 6,404/76, as amended.

“Brazilian GAAP” means the generally accepted accounting principles in Brazil.

iv 
Table of Contents

“CDI Rate” is the overnight interbank deposit rate (Certificado de Depósito Interbancário), which is the average daily interbank deposit rate in Brazil (at the end of each month and annually) for the given year.

“CMN” means the National Monetary Council (Conselho Monetário Nacional).

“COPOM” means the Brazilian Monetary Policy Committee (Cômite de Política Monetária).

“CPC” means the Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis).

“CVM” means the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários).

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“FEBRABAN” means the Brazilian Bank Federation (Federação Brasileira de Bancos).

“FGV” means the Getúlio Vargas Foundation (Fundação Getúlio Vargas).

“Getnet” means Getnet Adquirência e Serviços para Meios de Pagamento S.A. Getnet was one of our subsidiaries until the completion of the Spin-Off. For additional information on the Spin-Off of Getnet, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

 

“IASB” means the International Accounting Standards Board.

“IBGC” means the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança

Corporativa).

“IBGE” means the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística).

“IFRS” means International Financial Reporting Standards as issued by the IASB.

“IPCA” means the Brazilian consumer prices index (Índice de Preços ao Consumidor – Amplo), as calculated by FGV.

“IGP-M” means the Brazilian general index of market prices (Índice Geral de Preços – Mercado), as calculated by the IBGE.

“LGPD” means Law No. 13,709/2018, or the Brazilian General Data Protection Act (Lei Geral de Proteção de Dados).

“Nasdaq” means the Nasdaq Global Select Market.

“NYSE” means the New York Stock Exchange.

“Santander Spain” mean Banco Santander, S.A. and its consolidated subsidiaries.

“Santander Group” mean the worldwide operations of the Santander Spain conglomerate, as indirectly controlled by Santander Spain and its consolidated subsidiaries, including Getnet and Santander Brasil.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“SELIC” means the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.

“SMEs” means small and medium-sized enterprises.

“Spin-Off” means the distribution of all of the units, common shares and preferred shares of Getnet to holders of Santander Brasil units, common shares and preferred shares, including holders of Santander Brasil units represented by Santander Brasil ADSs, on a pro rata basis (excluding treasury shares), completed on October 26, 2021. For additional information on the Spin-Off of Getnet, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

8 

v 

Table of Contents

“SUSEP” means the Superintendence of ContentsPrivate Insurance (Superintendência de Seguros Privados).

“TJLP” means the Long-Term Interest Rate (Taxa de Juros de Longo Prazo), the interest rate applied by the BNDES for long-term financing (at the end of the period).

“U.S. GAAP” means the generally accepted accounting principles in the United States.

“United States” or “U.S.” means the United States of America.

vi 
Table of Contents

FORWARD-LOOKING STATEMENTS

Forward-Looking Statements

This annual report contains estimates and forward-looking statements subject to risks and uncertainties, principally in “Item 3. Key Information—D. Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and “Item 4. Information on the Company—B. Business Overview.Overview” and “Item 5. Operating and Financial Review and Prospects.” Some of the matters discussed concerning our business operations and financial performance include estimates and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

Our estimates and forward-looking statements are based mainly on our current expectations and estimates or projections of future events and trends, which affect or may affect our businesses and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to certain risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking statements may be influenced by the following factors, among others:

·●the 2019 coronavirus, or “COVID-19,” pandemic and other actual or potential epidemics, pandemics, outbreaks, or other public health crises, which could have an adverse impact on our business (see “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19”);
●the impact of the COVID-19 pandemic on general economic and business conditions in Brazil, Latin America and globally and any restrictive measures imposed by governmental authorities in response to the outbreak;
●our ability to implement, in a timely and efficient manner, any measure necessary to respond to, or reduce the impacts of the COVID-19 pandemic (including any variants of the virus) on our business, operations, cash flow, prospects, liquidity and financial condition; general economic, political, social and business conditions in Brazil, including the impact of the current international economic environment and the macroeconomic conditions in Brazil, and the policies of the Brazilian administration of Brazil whichthat took office on January 1, 2019;

·●exposure to various types of inflation and interest rate risks, and the Brazilian governmentgovernment’s efforts to control inflation and interest rates;

·●exposure to the sovereign debt of Brazil;

·●the effect of interest rate fluctuations on our obligations under employee pension funds;

·●exchange rate volatility;

·●infrastructure and labor force deficiencies in Brazil;

·●economic developments and perception of risk in other countries, including a global downturn;

·the future relationship of the United Kingdom with the European Union;

·●increasing competition and consolidation in the Brazilian financial services industry;

·●extensive regulation by the Brazilian government and the Brazilian Central Bank, among others;

·●changes in reserve requirements;

·●changes in taxes or other fiscal assessments;

·●potential losses associated with an increase in the level of nonperforming loans or non-performance by counterparties to other types of financial instruments;
vii 
Table of Contents

 

·●a decrease in the rate of growth of our loan portfolio;

·●potential prepayment of our loan and investment portfolio;

·●potential increase in our cost of funding, in particular with relation to short-term deposits;

·●a default on, or a ratings downgrade of, the sovereign debt of Brazil or of our controlling shareholder;

·●restrictions on the distributionsdistribution of dividends to holders of our shares and ADSs;ADRs representing ADS;

9 

Table of Contents

·●the effectiveness of our credit risk management policies;

·●our ability to adequately manage market and operational risks;

·●potential deterioration in the value of the collateral securing our loan portfolio;

·●failure to adequately protect ourselves against risks relating to cybersecurity;

·●our dependence on the proper functioning of information technology systems;

·●our ability to protect personal data;

·●our ability to protect ourselves against cybersecurity risks;

·●our ability to protect our reputation;

·●our ability to detect and prevent money laundering and other illegal activities;

·●our ability to manage the growth of our operations;

·●our ability to successfully and effectively integrate acquisitions or to evaluate risks arising from asset acquisitions; and

·●other risk factors as set forth under “Item 3. Key Information—D. Risk Factors” in this annual report.

The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast,” and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements are intended to be accurate only as of the date they were made, and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements. You should therefore not make any investment decision based on these estimates and forward-looking statements.

The forward-looking statements contained in this report speak only as of the date of this report. We do not undertake to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

 

10 

Table of Contents

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

1A. Directors and Senior Management

Not applicable.

1A.Directors and Senior Management 7
Table of Contens

1B. Advisers

Not applicable.

1B.Advisers

1C. Auditors

Not applicable.

1C.Auditors

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

2A.2A. Offer Statistics

Not applicable.

2B.2B. Method and Expected Timetable

Not applicable.

ITEM 3. KEY INFORMATION

3A.3A. Selected Financial Data

FinancialThe following tables set forth the selected financial information forof Santander Brasil as of and for the years ended December 31, 2019, 2018, 2017, 20162021, 2020 and 2015 has been2019 derived from our audited consolidated financial statements prepared in accordance with IFRS as issued by the IASB. See “Item 18. Financial Statements.” This financial information should be read in conjunction with our audited consolidated financial statements the related notes and “Item 5. Operating and Financial Review and Prospects”Prospects,” as well as our audited consolidated financial statements and the related notes thereto included within this annual report.

In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See and note 8 to our audited consolidated financial statements included elsewhere in this annual report.

 8
Table of Contents

Income Statement Data

  For the Year Ended December 31,
  2019 2019 2018 2017 2016 2015
  (in millions of U.S.$)(1) (in millions of R$)
Interest and similar income  18,072   72,841   70,478   71,418   77,146   69,870 
Interest expense and similar charges  (7,076)  (28,520)  (28,557)  (36,472)  (46,560)  (38,533)
Net interest income  10,996   44,321   41,921   34,946   30,586   31,337 
Income from equity instruments  5   19   33   83   259   143 
Income from companies accounted for by the equity method  37   149   66   72   48   116 
Fee and commission income  5,059   20,392   17,728   15,816   13,548   11,797 
Fee and commission expense  (1,161)  (4,679)  (3,596)  (3,094)  (2,571)  (2,314)
Gains (losses) on financial assets and liabilities (net)  611   2,463   (2,783)  969   3,016   (20,002)

11 

Table of Contents

 For the Year Ended December 31,
 2021 2021 2020 2019 2018 2017
 (in millions of U.S.$)(1) (in millions of R$)
Interest and similar income  13,975   77,987   62,775   72,841   70,478   71,418 
Interest expense and similar charges  (4,779)  (26,669)  (18,332)  (28,520)  (28,557)  (36,472)
Net interest income  9,196   51,318   44,443   44,321   41,921   34,946 
Income from equity instruments  16   90   34   19   33   83 
Income from companies accounted for by the equity method  26   144   112   149   66   72 
Fee and commission income  3,653   20,388   20,607   20,392   17,728   15,816 
Fee and commission expense  (917)  (5,115)  (4,378)  (4,679)  (3,596)  (3,094)
Gains (losses) on financial assets and liabilities (net)  40   222   12,998   2,463   (2,783)  969 
Exchange differences (net)  (692)  (2,789)  (2,806)  605   4,575   10,084   (359)  (2,002)  (24,701)  (2,789)  (2,806)  605 
Other operating income (expenses)  (275)  (1,108)  (1,056)  (672)  (625)  (347)  (201)  (1,119)  (873)  (1,108)  (1,056)  (672)
Total income  14,580   58,769   49,507   48,725   48,837   30,814   11,455   63,926   48,242   58,769   49,507   48,725 
Administrative expenses  (4,203)  (16,942)  (16,792)  (16,121)  (14,920)  (14,515)  (3,103)  (17,316)  (17,115)  (16,942)  (16,792)  (16,121)
Depreciation and amortization  (593)  (2,392)  (1,740)  (1,662)  (1,483)  (1,490)  (436)  (2,434)  (2,579)  (2,392)  (1,740)  (1,662)
Provisions (net)(2)  (913)  (3,682)  (2,000)  (3,309)  (2,725)  (4,001)  (391)  (2,179)  (1,657)  (3,682)  (2,000)  (3,309)
Impairment losses on financial assets (net)(3)  (3,317)  (13,370)  (12,713)  (12,338)  (13,301)  (13,634)  (3,067)  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)
Impairment losses on other assets (net)  (33)  (131)  (508)  (457)  (114)  (1,221)  (30)  (166)  (85)  (131)  (508)  (457)
Gains (losses) on disposal of assets not classified as non-current assets held for sale  3   11   (25)  (64)  4   781   (3)  (15)  231   11   (25)  (64)
Gains (losses) on non-current assets held for sale not classified as discontinued operations  2   10   182   (260)  87   50   9   48   77   10   182   (260)
Operating profit before tax  5,526   22,273   15,910   14,514   16,384   (3,216)
Operating income before tax  4,435   24,750   9,664   22,273   15,910   14,514 
Income taxes  (1,400)  (5,642)  (3,110)  (5,376)  (8,919)  13,050   (1,647)  (9,191)  3,787   (5,642)  (3,110)  (5,376)
Consolidated Profit for the Year  4,126   16,631   12,800   9,138   7,465   9,834 
Consolidated net income for the Year  2,788   15,559   13,451   16,631   12,800   9,138 
(1)Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, 2019,2021, forreais into U.S. dollars of R$4.03075.5805 to U.S.$1.00.

(2)Mainly provisions for tax risks and legal obligations, and judicial and administrative proceedings of labor and civil lawsuits. For further discussion, see notes 2221 and 2322 to our audited consolidated financial statements.statements included elsewhere in this annual report.

(3)Net provisions to the creditCredit loss allowance less recovery of loans previously written off.

 

 9
Table of Contents

Earnings and Dividend per Share Information

  For the Year Ended December 31,
  2019 2018 2017 2016 2015
Basic and Diluted Earnings per 1,000 shares          
From continuing and discontinued operations(1)        
Basic Earnings per shares (reais)          
Common Shares  2,094.83   1,604.34   1,133.43   929.93   1,236.96 
Preferred Shares  2,304.32   1,764.78   1,246.77   1,022.92   1,360.66 
Diluted Earnings per shares (reais)                    
Common Shares  2,094.83   1,604.34   1,132.44   929.03   1,235.79 
Preferred Shares  2,304.32   1,764.78   1,245.69   1,021.93   1,359.36 
Basic Earnings per shares (U.S. dollars) (2)                    
Common Shares  519.72   414.05   342.63   285.34   316.78 
Preferred Shares  571.69   455.45   376.90   313.87   348.46 
Diluted Earnings per shares (U.S. dollars) (2)                    
Common Shares  519.72   414.05   342.33   285.06   316.48 
Preferred Shares  571.69   455.45   376.57   313.57   348.13 
From continuing operations                    
Basic Earnings per shares (reais)                    
Common Shares  2,094.83   1,604.34   1,133.43   929.93   1,236.96 
Preferred Shares  2,304.32   1,764.78   1,246.77   1,022.92   1,360.66 
Diluted Earnings per shares (reais)                    
Common Shares  2,094.83   1,604.34   1,132.44   929.03   1,235.79 
Preferred Shares  2,304.32   1,764.78   1,245.69   1,021.93   1,359.36 
Basic Earnings per shares (U.S. dollars) (2)                    
Common Shares  519.72   414.05   342.63   285.34   316.78 
Preferred Shares  571.69   455.45   376.90   313.87   348.46 
Diluted Earnings per shares (U.S. dollars) (2)                    
Common Shares  519.72   414.05   342.33   285.06   316.48 
Preferred Shares  571.69   455.45   376.57   313.57   348.13 
                     
Dividends and interest on capital per 1,000 shares (undiluted)                    

  For the Year Ended December 31,
  2021 2020 2019 2018 2017
Basic and Diluted Earnings per 1,000 shares        
From continuing and discontinued operations(1)                    
Basic Earnings per shares (reais)                    
Common Shares  1,981.65   1,713.45   2,094.83   1,604.34   1,133.43 
Preferred Shares  2,179.82   1,884.80   2,304.32   1,764.78   1,246.77 
Diluted Earnings per shares (reais)                    
Common Shares  1,981.65   1,713.45   2,094.83   1,604.34   1,132.44 
Preferred Shares  2,179.82   1,884.80   2,304.32   1,764.78   1,245.69 
Basic Earnings per shares (U.S. dollars) (2)                    
Common Shares  355.10   329.72   519.72   414.05   342.63 
Preferred Shares  390.61   362.69   571.69   455.45   376.90 
Diluted Earnings per shares (U.S. dollars) (2)                    
Common Shares  355.10   329.72   519.72   414.05   342.33 
Preferred Shares  390.61   362.69   571.69   455.45   376.57 
From continuing operations                    
Basic Earnings per shares (reais)                    
Common Shares  1,981.65   1,713.45   2,094.83   1,604.34   1,133.43 
Preferred Shares  2,179.82   1,884.80   2,304.32   1,764.78   1,246.77 
Diluted Earnings per shares (reais)                    
Common Shares  1,981.65   1,713.45   2,094.83   1,604.34   1,132.44 
Preferred Shares  2,179.82   1,884.80   2,304.32   1,764.78   1,245.69 
Basic Earnings per shares (U.S. dollars) (2)                    
Common Shares  355.10   329.72   519.72   414.05   342.63 
Preferred Shares  390.61   362.69   571.69   455.45   376.90 
Diluted Earnings per shares (U.S. dollars) (2)                    
Common Shares  355.10   329.72   519.72   414.05   342.33 
Preferred Shares  390.61   362.69   571.69   455.45   376.57 
                     
Dividends and interest on capital per 1,000 shares (undiluted)                     
Common Shares (reais)   1,231.79   1,693.28   1,378.87   841.68   801.63 
Preferred Shares (reais)   1,354.97   1,631.71   1,516.76   925.85   881.80 
Common Shares (U.S. dollars)(2)  220.73   325.84   342.09   217.22   242.33 
Preferred Shares (U.S. dollars)(2)  242.80   313.99   376.30   238.94   266.57 
Weighted average share outstanding (in thousands) – basic                    
Common Shares  3,802,851   3,800,140   3,802,303   3,807,386   3,822,057 
Preferred Shares  3,664,423   3,664,666   3,663,444   3,668,527   3,683,145 
Weighted average shares outstanding (in thousands) – diluted(3)                    
Common Shares  3,802,851   3,800,140   3,802,303   3,807,386   3,825,313 
Preferred Shares  3,664,423   3,664,666   3,663,444   3,668,527   3,686,401 

12 

Table of Contents

Common Shares (reais)  1,378.87   841.68   801.63   666.21   784.90 
Preferred Shares (reais)  1,516.76   925.85   881.80   732.83   863.39 
Common Shares (U.S. dollars)(2)  342.09   217.22   242.33   204.42   201.01 
Preferred Shares (U.S. dollars)(2)  376.30   238.94   266.57   224.86   221.11 
Weighted average share outstanding (in thousands) – basic                    
Common Shares  3,802,303   3,807,386   3,822,057   3,828,555   3,839,159 
Preferred Shares  3,663,444   3,668,527   3,683,145   3,689,696   3,700,299 
Weighted average shares outstanding (in thousands) – diluted(3)                    
Common Shares  3,802,303   3,807,386   3,825,313   3,832,211   3,842,744 
Preferred Shares  3,663,444   3,668,527   3,686,401   3,693,352   3,703,884 
(1)Per share amounts reflect the effects of the bonus share issue and reverse share split for each period presented.

(2)Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, 2019,2021, forreais into U.S. dollars of R$4.03075.5805 to U.S.$1.00.

 

 10
(3)Average annual balance sheet data has been calculated based upon the averageTable of the monthly balances at 13 dates: as of December 31 of the prior year and each of the month-end balances of the 12 subsequent months.Contents

Balance Sheet Data

 

 As of December 31, As of December 31,
 2019 2019 2018 2017 2016 2015 2021 2021 2020 2019 2018 2017
 (in millions of U.S.$)(1) (in millions of R$) (in millions of U.S.$)(1) (in millions of R$)
Assets                        
Cash and balances with the Brazilian Central Bank(2)  4,993   20,127   19,464   20,642   26,285   89,143   2,985   16,657   20,149   20,127   19,464   20,642 
Financial assets held for trading(2)  -     -     -     86,271   131,245   50,537   -     -     -     -     -     86,271 
Financial Assets Measured At Fair Value Through Profit Or Loss  8,024   32,342   43,712   -     -     -     3,379   18,859   60,900   32,342   43,712   -   
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading  14,147   57,021   68,852   -     -     -     12,646   70,571   95,843   55,396   68,852   -   
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss  42   171   917   -     -     -     156   870   500   171   917   -   
Other financial assets at fair value through profit or loss  -     -     -     1,692   1,711   2,080   -     -     -     -     -     1,692 
Available-for-sale financial assets  -     -     -     85,823   57,815   68,265   -     -     -     -     -     85,823 
Financial Assets Measured At Fair Value Through Other Comprehensive Income  23,847   96,120   85,437   -     -     -     18,142   101,242   109,740   96,120   85,437   -   
Held to maturity investments  -     -     -     10,214   10,048   10,098   -     -     -     -     -     10,214 
Loans and receivables(2)  -     -     -     368,729   333,997   306,269   -     -     -     -     -     368,729 
Financial Assets Measured At Amortized Cost (2)  117,766   474,681   429,731   -     -     -     113,474   633,241   554,925   474,681   429,731   -   
Hedging derivatives  84   340   344   193   223   1,312   61   342   743   340   344   193 
Non-current assets held for sale  329   1,325   1,380   1,155   1,338   1,237   146   816   1,093   1,325   1,380   1,155 
Investments in associates and joint ventures  266   1,071   1,053   867   990   1,061   221   1,233   1,095   1,071   1,053   867 
Tax assets  8,336   33,599   31,566   28,826   28,753   34,770   7,483   41,757   41,064   33,599   31,566   28,826 
Other assets  1,256   5,061   4,800   4,578   5,104   3,802   1,084   6,049   7,222   5,061   4,800   4,578 
Tangible assets  2,427   9,782   6,589   6,510   6,646   7,006 
Property, plant and equipment  1,574   8,784   9,537   9,782   6,589   6,510 
Intangible assets  7,591   30,596   30,019   30,202   30,237   29,814   5,517   30,787   30,766   30,596   30,019   30,202 
Total assets  189,108   762,237   723,865   645,703   634,393   605,395   166,868   931,208   933,578   760,613   723,865   645,703 
Average total assets*  182,476   735,507   685,531   637,511   605,646   571,918   168,834   942,177   854,615   735,507   685,531   637,511 
Liabilities                                                
Financial liabilities held for trading(4)  -     -     -     49,323   51,620   42,388   6,622   36,953   75,020   -     -     49,323 
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading  11,428   46,065   50,939   -     -     -     -     -     -     44,440   50,939   -   
Financial Liabilities Measured At Fair Value Through Profit Or Loss  1,320   5,319   1,946   -     -     -     1,337   7,460   7,038   5,319   1,946   -   
Financial liabilities at amortized cost  142,712   575,230   547,295   478,881   471,579   457,282   134,413   750,094   707,289   575,230   547,295   478,881 
Deposits from the Brazilian Central Bank and deposits from credit institutions  21,684   121,006   131,657   99,271   99,023   79,375 
Customer deposits  84,036   468,961   445,814   336,515   304,198   276,042 
Marketable debt securities  14,163   79,037   56,876   73,702   74,626   70,247 
Subordinated debts  -     -     -     -     9,886   519 
Debt Instruments Eligible to Compose Capital  3,520   19,641   13,120   10,176   9,780   8,437 
Other financial liabilities  11,011   61,449   59,823   55,566   49,783   44,261 
Hedging derivatives  80   447   145   201   224   163 
Provisions(3)  2,079   11,604   13,815   16,332   14,696   13,987 
Tax liabilities  1,465   8,175   10,130   10,960   8,075   8,248 
Other liabilities  1,882   10,501   14,051   10,921   9,095   8,014 
Total liabilities  147,878   825,234   827,488   663,404   632,270   558,615 
Stockholders’ equity  19,541   109,047   106,205   96,736   91,882   87,425 
Other Comprehensive Income  (610)  (3,406)  (428)  (86)  (879)  (774)
Non-controlling interests  60   334   313   559   593   437 
Total Stockholders’ Equity  18,990   105,974   106,090   97,209   91,595   87,088 
Total liabilities and stockholders’ equity  166,868   931,208   933,578   760,613   723,865   645,703 
Average interest-bearing liabilities*  116,074   647,752   573,429   491,187   463,388   416,816 
Average total stockholders’ equity*  18,828   105,070   101,531   95,836   89,263   87,868 

 

*      The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13

Tabledates: as of ContentsDecember 31 of the prior year and for each of the month-end balances of the 12 subsequent months.

(1)   Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, 2021, for reais into U.S. dollars of R$5.5805 to U.S.$1.00.

(2)    In the fiscal year ended December 31, 2018, as a result of the implementation of IFRS 9, the balances related loans and receivables, assets held for trading, held to maturity, available for sale and compulsory deposits on time deposits were reclassified to new accounts prescribed by IFRS 9.

(3)   Mainly provisions for tax risks and legal obligations, and judicial and administrative proceedings of labor and civil lawsuits.

(4)   In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.

 

Deposits from the Brazilian Central Bank and deposits from credit institutions  24,629   99,271   99,023   79,375   78,634   69,451 
Customer deposits  83,488   336,515   304,198   276,042   247,445   243,043 
Marketable debt securities  18,285   73,702   74,626   70,247   99,843   94,658 
Subordinated debts  -     -     9,886   519   466   8,097 
Debt Instruments Eligible to Compose Capital  2,525   10,176   9,780   8,437   8,312   9,959 
Other financial liabilities  13,786   55,566   49,783   44,261   36,879   32,073 
Hedging derivatives  50   201   224   163   311   2,377 
Provisions(3)  4,052   16,332   14,696   13,987   11,776   11,410 
Tax liabilities  2,719   10,960   8,075   8,248   6,095   5,253 
Other liabilities  2,709   10,921   9,095   8,014   8,199   6,850 
Total liabilities  164,991   665,028   632,270   558,615   549,581   525,559 
Stockholders’ equity  23,994   96,711   91,882   87,425   85,435   83,532 
Other Comprehensive Income  (21)  (86)  (879)  (774)  (1,348)  (4,132)
Non-controlling interests  145   583   593   437   726   435 
Total Stockholders’ Equity  24,117   97,209   91,595   87,088   84,812   79,835 
Total liabilities and stockholders’ equity  189,108   762,237   723,865   645,703   634,393   605,395 
Average interest-bearing liabilities*  121,861   491,187   463,388   416,816   408,067   400,008 
Average total stockholders’ equity*  23,777   95,836   89,263   87,868   84,283   81,475 

 11
Table of Contents

Selected Consolidated Ratios (*)

  As of and for the Year Ended December 31,
  2021 2020 2019 2018 2017
   (%)  
Profitability and performance                    
Return on average total assets  1.7   1.6   2.3   1.9   1.4 
Asset quality                    
Impaired assets as a percentage of loans and advances to customers (gross)(1)  5.5   5.5   6.7   7.0   6.7 
Impaired assets as a percentage of total assets(1)  2.9   2.5   3.1   3.1   3.0 
Impairment losses to customers as a percentage of impaired assets(1) (4)  105.9   103.8   87.8   90.3   80.5 
Impairment losses to customers as a percentage of loans and advances to customers (gross) (5)  5.8   5.8   5.9   6.3   5.4 
Derecognized assets as a percentage of loans and advances to customers (gross)  3.0   3.7   4.3   3.5   4.7 
Impaired assets as a percentage of stockholders’ equity(1)  25.5   21.8   24.3   24.5   22.0 
Capital adequacy                    
Basel capital adequacy ratio(2)  14.9   15.3   15.0   15.1   15.8 
Efficiency                    
Efficiency ratio(3)  27.1   35.5   28.8   33.9   33.1 
*The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.

(1)Translated for convenience only using the selling rate as reported by the Brazilian Central Bank as of December 31, 2019, forreais into U.S. dollars of R$4.0307 to U.S.$1.00.

(2)In the fiscal year ended December 31, 2019, the balances related to compulsory deposits were reclassified from cash and reserves at the Brazilian Central Bank to the item Loans and other amounts with credit institutions for better presentation and, consequently, the respective comparative balances also have been reclassified.

(3)Mainly provisions for tax risks and legal obligations, and judicial and administrative proceedings of labor and civil lawsuits.

Selected Consolidated Ratios (*)

  As of and for the Year Ended December 31,
  2019 2018 2017 2016 2015
  (%)
Profitability and performance          
Return on average total assets  2.3   1.9   1.4   1.2   1.7 
Asset quality                    
Impaired assets as a percentage of loans and advances to customers (gross)(1)  6.7   7.0   6.7   7.0   7.0 
Impaired assets as a percentage of total assets(1)  3.1   3.1   3.0   3.0   3.1 
Impairment losses to customers as a percentage of impaired assets(1) (4)  87.8   90.3   80.5   87.0   81.9 
Impairment losses to customers as a percentage of loans and advances to customers (gross) (5)  5.9   6.3   5.4   6.1   5.7 
Derecognized assets as a percentage of loans and advances to customers (gross)  4.3   3.5   4.7   4.3   4.4 
Impaired assets as a percentage of stockholders’ equity(1)  24.3   24.5   22.0   22.3   23.3 
Capital adequacy                    
Basel capital adequacy ratio(2)  15.0   15.1   15.8   16.3   15.7 
Efficiency                    
Efficiency ratio(3)  28.8   33.9   33.1   30.6   47.1 

*The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.

(1)Impaired assets include all loans and advances past due by more than 90 days and other doubtful credits. For further information, refer tosee “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Short-Term Borrowings—Impaired Assets.”

(2)Basel capital adequacy ratio is measured pursuant to Brazilian Central Bank rules in effect as from December 31, 2014. This ratio is subject to a phased-in implementation schedule established by the Brazilian Central Bank, which is expected to be completed by 2019. The Basel III framework applies to all commercial banks operating in Brazil and covers, among other things, minimum capital requirements, capital buffers, risk-based capital measures, liquidity standards, net stable funding ratio, leverage ratio, exposures to central counterparties, as well as the definition of consolidated enterprise level (conglomerado prudencial). Since the enactment of the initial Basel III framework in 2013, the authorities have been implementing additional regulations and some important amendments to the existing framework. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation andrules.

14 

Table of Contents

Supervision—Capital Adequacy and Leverage – Basel.”

(3)Efficiency ratio is determined by takingdividing administrative expenses divided by total income.

(4)In 2019,2021, including the debt instruments accounted for in the loans and receivables,as financial assets measured at amortized cost, the ratio is 96.8%110.3%. For 20182020 the ratio was 78.1%110.6% and for 2019 the ratio was 96.8%. The debt instruments amount was not material in preceding years.

(5)In 2019,2021, including the debt instruments accounted for in the loans and receivablesas financial assets measured at amortized cost, the ratio is 5.8%6.0%. For 2018,2020 the ratio was 6.3%6.1% and for 2019 the ratio was 5.8%. The debt instruments amount was not material in preceding years.

 

See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Selected Credit Ratios.”

 12
Table of Contents

Selected Consolidated Ratios, Including Non-GAAP Ratios (*)

 As of and for the Year Ended December 31, As of and for the Year Ended December 31,
 2019 2018 2017 2016 2015 2021 2020 2019 2018 2017
 (%)(%)
Profitability and performance                              
Net yield(1)  6.8   6.9   6.4   6.2   6.6   5.9   6.0   6.8   6.9   6.4 
Return on average stockholders’ equity(2)  17.4   14.3   10.4   8.9   12.1   14.8   13.3   17.4   14.3   10.4 
Adjusted return on average stockholders’ equity(2)  24.7   21.0   15.4   13.3   18.5   20.2   18.4   24.7   21.0   15.4 
Average stockholders’ equity as a percentage of average total assets(2)(*)  13.0   13.0   13.8   13.9   14.2   11.2   11.9   13.0   13.0   13.8 
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(2)(*)  9.6   9.3   9.8   9.7   9.8   8.4   8.8   9.6   9.3   9.8 
Asset quality                                        
Impaired assets as a percentage of credit risk exposure (3)  6.0   6.2   5.8   6.3   6.0   4.9   5.0   6.0   6.2   5.8 
Impaired assets as a percentage of stockholders’ equity excluding goodwill(2)(3)  34.4   35.5   32.6   33.5   36.1   34.5   29.8   34.4   35.5   32.6 
Liquidity                                        
Loans and advances to customers, net as a percentage of total funding(4)  62.9   60.6   62.7   58.0   59.3   70.2   76.3   62.9   60.6   62.7 
Efficiency                                        
Adjusted efficiency ratio(5)  28.2   30.3   32.5   34.9   34.8   28.2   27.8   28.2   30.3   32.5 

 

(*) The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.

 

(1) “Net yield” is defined as net interest income (including dividends on equity securities) divided by average interest earning assets.

(2) “Adjusted return on average stockholders’ equity,” “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” and “Impaired assets as a percentage of stockholders’ equity excluding goodwill” are non-GAAP financial measures which adjust “Return on average stockholders’ equity,” “Average stockholders’ equity as a percentage of average total assets” and “Impaired assets as a percentage of stockholders’ equity,” to exclude the goodwill arising from the acquisition of Banco Real in 2008, Getnet Adquirência e Serviços para Meios de Pagamento S.A., or “GetNet” and Super Pagamentos e Administração de Meios Eletrônicos Ltda., or “Super”,“Super,” both in 2014, Banco Olé Bonsucesso Consignado S.A. (current name of(formerly known as Banco Bonsucesso Consignado S.A.) 60% in 2015 and the remaining 40% in 2020, and BW Guirapá I S.A. in 2016. Our calculation of these non-GAAP financial measures may differ from the calculation of similarly titled measures used by other companies. We believe that these non-GAAP financial measures supplement the GAAP information provided to investors regarding the substantial impact of the R$27 billion goodwill arising from the acquisition of Banco Real during the year ended December 31, 2008, the R$1.1 billion goodwill arising from the acquisition of GetNetGetnet and Super both during 2014, the acquisition of an interest in Banco Olé Bonsucesso Consignado S.A. in 2015.2015 (although Getnet and Super are no longer subsidiaries of Santander Brasil, the goodwill arising from their respective acquisitions continues to have an effect on our consolidated financial statements). Accordingly, we believe that the non-GAAP financial measures presented are useful to investors. The limitation associated with the exclusion of goodwill from stockholders’ equity is that it has the effect of excluding a portion of the total investment in our assets. We compensate for this limitation by also considering stockholders’ equity including goodwill.

(3) Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets), guarantees and documentary credits. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. The reconciliation of the measure to the most comparable IFRS measure is disclosed in the table of non-GAAP financial measures presented immediately after these notes.

(4) Total funding is the sum of financial liabilities at amortized cost, excluding other financial liabilities. For a breakdown of the components of total funding, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”

(5) Adjusted efficiency ratio excludes the effect of the hedge for investments held abroad. This exclusion affects the income tax, gains (losses) on financial assets and liabilities and exchange rate differences line items but does not affect the “Net profitincome from continuing operations” line item because the adjustment to gains (losses) on financial assets and liabilities and exchange rate difference is offset by the adjustment to income tax. Our management believes that the adjusted efficiency ratio provides a more consistent framework for evaluating and conducting business, as a result of excluding from our revenues the effect of the volatility caused by possible gains and losses on our hedging strategies for tax purposes. The adjusted efficiency ratio excluding the hedge of investments held abroad is a non-GAAP measure. For more details,further information, see the table below.below and “—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

 

 For the Year Ended December 31, For the Year Ended December 31,
 2019 2018 2017 2016 2015 2021 2020 2019 2018 2017
 (in millions of R$, except percentages) (in millions of R$, except percentages)
Effects of the hedge for investments held abroad  1,264   5,867   810  (6,140)  10,919   2,512   13,583   1,264   5,867   (810)
Efficiency ratio  28.8%  33.9%  33.1%  30.6%  47.1%  27.1%  35.5%  28.8%  33.9%  33.1%
Adjusted efficiency ratio  28.2%  30.3%  32.5%  34.9%  34.8%  28.2%  27.8%  28.2%  30.3%  32.5%

See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Selected Credit Ratios.”

 

15 

 13

Table of Contents

Table of Contents

Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures

Reconciliation of Non-GAAP Ratios to Their Most Directly Comparable IFRS Financial Measures

The information in the table below presents the calculation of specified non-GAAP financial measures to the most directly comparable IFRS financial measures. Our calculation of these non-GAAP financial measures may differ from the calculation of similarly titled measures used by other companies. We believe that these non-GAAP financial measures supplement the GAAP information provided to investors regarding the substantial impact of the R$1.1 billion goodwill arising from the acquisition of GetNetGetnet and Super both during 2014, the acquisition of Banco Olé Bonsucesso Consignado S.A. in 2015 and the significance of other factors affecting stockholders’ equity and the related ratios. See “Item 4. Information on the Company—A. History and Development of the Company—Important Events.” The limitation associated with the exclusion of goodwill from stockholders’ equity is that it has the effect of excluding a portion of the total investment in our assets. We compensate for this limitation by also considering stockholders’ equity including goodwill, as set forth in the above tables. Accordingly, while we believe that the non-GAAP financial measures presented are useful to investors and support their analysis, the non-GAAP financial measures have important limitations as analytical tools, and investors should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP measures including under IFRS.

 

  As of and for the Year Ended December 31,
  2019 2018 2017 2016 2015
  (in millions of R$, except as otherwise indicated)
Return on average stockholders’ equity:          
Consolidated profit for the year  16,631   12,800   9,138   7,465   9,834 
Average stockholders’ equity (*)  95,836   89,263   87,868   84,283   81,475 
Return on average stockholders’ equity (*)  17.4%  14.3%  10.4%  8.9%  12.1%
Adjusted return on average stockholders’ equity(*):                    
Consolidated profit for the year  16,631   12,800   9,138   7,465   9,834 
Average stockholders’ equity(*)  95,836   89,263   87,868   84,283   81,475 
Average goodwill(*)  28,213   28,176   28,360   28,343   28,376 
Average stockholders’ equity excluding goodwill(*)  67,623   61,087   59,508   55,940   53,130 
Adjusted return on average stockholders’ equity(*)(3)  24.6%  21.0%  15.4%  13.3%  18.5%
Average stockholders’ equity as a percentage of average total assets(*):                    
Average stockholders’ equity(*)  95,836   89,263   87,868   84,283   81,475 
Average total assets(*)  735,507   685,531   637,511   605,646   571,918 
Average stockholders’ equity as a percentage of average total assets(*)  13.0%  13.0%  13.8%  13.9%  14.2%
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*):                    
Average stockholders’ equity(*)  95,836   89,263   87,868   84,283   81,475 
Average goodwill(*)  28,213   28,176   28,360   28,343   28,376 
Average stockholders’ equity excluding goodwill(*)  67,623   61,087   59,508   55,940   53,130 
Average total assets(*)  735,507   685,531   637,511   605,646   571,918 
Average goodwill(*)  28,213   28,176   28,360   28,343   28,376 
Average total assets excluding goodwill(*)  707,294   657,355   609,151   577,334   543,542 
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*)  9.6%  9.3%  9.8%  9.7%  9.8%
Impaired assets as a percentage of stockholders’ equity:                    
Impaired assets  23,426   22,426   19,145   18,887   18,599 
Stockholders’ equity  97,209   91,595   87,088   84,813   79,835 
Impaired assets as a percentage of stockholders’ equity  24.1%  24.5%  22.0%  22.3%  23.3%
 14
Table of Contents

 

16 

Table of Contents

  As of and for the Year Ended December 31,
  2021 2020 2019 2018 2017
  (in millions of R$, except as otherwise indicated)
Return on average stockholders’ equity:                    
Consolidated net income for the year  15,559   13,451   16,631   12,800   9,138 
Average stockholders’ equity (*)   105,070   101,531   95,836   89,263   87,868 
Return on average stockholders’ equity (*)   14.8%  13.2%  17.4%  14.3%  10.4%
Adjusted return on average stockholders’ equity(*):                    
Consolidated net income for the year  15,559   13,451   16,631   12,800   9,138 
Average stockholders’ equity(*)   105,070   101,531   95,836   89,263   87,868 
Average goodwill(*)   27,967   28,513   28,213   28,176   28,360 
Average stockholders’ equity excluding goodwill(*)   77,103   73,018   67,623   61,087   59,508 
Adjusted return on average stockholders’ equity(*)(3)  20.2%  18.4%  24.6%  21.0%  15.4%
Average stockholders’ equity as a percentage of average total assets(*):                    
Average stockholders’ equity(*)   105,070   101,531   95,836   89,263   87,868 
Average total assets(*)   942,177   854,615   735,507   685,531   637,511 
Average stockholders’ equity as a percentage of average total assets(*)   11.2%  11.9%  13.0%  13.0%  13.8%
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*):                    
Average stockholders’ equity(*)   105,070   101,531   95,836   89,263   87,868 
Average goodwill(*)   27,967   28,513   28,213   28,176   28,360 
Average stockholders’ equity excluding goodwill(*)   77,103   73,018   67,623   61,087   59,508 
Average total assets(*)   942,177   854,615   735,507   685,531   637,511 
Average goodwill(*)   27,967   28,513   28,213   28,176   28,360 
Average total assets excluding goodwill(*)   914,210   826,102   707,294   657,355   609,151 
Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill(*)   8.4%  8.8%  9.6%  9.3%  9.8%
Impaired assets as a percentage of stockholders’ equity:                    
Impaired assets  26,923   23,176   23,426   22,426   19,145 
Stockholders’ equity  105,974   106,090   97,209   91,595   87,088 
Impaired assets as a percentage of stockholders’ equity  25.4%  21.8%  24.1%  24.5%  22.0%
Impaired assets as a percentage of stockholders’ equity excluding goodwill:                    
                     
Impaired assets  26,923   23,176   23,426   22,426   19,145 
Stockholders’ equity  105,974   106,090   97,209   91,595   87,089 
Goodwill  27,915   28,360   28,375   28,378   28,364 
Stockholders’ equity excluding goodwill  78,059   77,730   68,834   63,217   58,724 
Impaired assets as a percentage of stockholders’ equity excluding goodwill  34.5%  29.8%  34.0%  35.5%  32.6%
Impaired assets as a percentage of loans and receivables:                    
Loans and advances to customers, gross  493,355   417,822   347,257   321,933   287,829 
Impaired assets  26,923   23,176   23,426   22,426   19,145 
Impaired assets as a percentage of loans and receivables  5.5%  5.5%  6.7%  7.0%  6.7%
Impaired assets as a percentage of credit risk exposure:                    
Loans and advances to customers, gross  493,355   417,822   347,257   321,933   287,829 
Guarantees  47,518   48,282   44,313   42,260   42,645 
Credit risk exposure  540,873   466,115   391,569   364,182   330,474 
Impaired assets  26,923   23,176   23,426   22,426   19,145 
Impaired assets as a percentage of credit risk exposure  5.0%  5.0%  6.0%  6.2%  5.8%
Loans and advances to customers, net as a percentage of total funding:                    
Loans and advances to customers, gross  493,355   417,822   347,257   321,933   287,829 
Impairment losses(1)  28,511   24,054   20,557   20,242   15,409 
Total Funding(2)  688,645   647,465   519,664   497,512   434,620 
Loans and advances to customers, net as a percentage of total funding(2)  75.8%  60.8%  62.9%  60.6%  62.7%

 

Impaired assets as a percentage of stockholders’ equity excluding goodwill:                    
Impaired assets  23,426   22,426   19,145   18,887   18,599 
Stockholders’ equity  97,209   91,595   87,088   84,813   79,835 
Goodwill  28,375   28,378   28,364   28,355   28,333 
Stockholders’ equity excluding goodwill  68,834   63,217   58,724   56,458   51,502 
Impaired assets as a percentage of stockholders’ equity excluding goodwill  34.0%  35.5%  32.6%  33.5%  36.1%
Impaired assets as a percentage of loans and receivables:                    
Loans and advances to customers, gross  347,257   321,933   287,829   268,438   267,266 
Impaired assets  23,426   22,426   19,145   18,887   18,599 
Impaired assets as a percentage of loans and receivables  6.7%  7.0%  6.7%  7.0%  7.0%
Impaired assets as a percentage of credit risk exposure:                    
Loans and advances to customers, gross  347,257   321,933   287,829   268,438   267,266 
Guarantees  44,313   42,260   42,645   33,265   43,611 
Credit risk exposure  391,569   364,182   330,474   301,703   310,887 
Impaired assets  23,426   22,426   19,145   18,887   18,599 
Impaired assets as a percentage of credit risk exposure  6.0%  6.2%  5.8%  6.3%  6.0%
Loans and advances to customers, net as a percentage of total funding:                    
Loans and advances to customers, gross  347,257   321,933   287,829   268,438   267,266 
Impairment losses(1)  20,557   20,242   15,409   16,435   15,233 
Total Funding(2)  519,664   497,513   434,620   434,502   425,209 
Loans and advances to customers, net as a percentage of total funding(2)  62.4%  60.6%  62.7%  58.0%  59.3%
(*)The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.

(1)Provision for impairment losses of loans and advances to customers.

(2)Total funding is the sum of financial liabilities at amortized cost, excluding the other financial liabilities.

The table below presents the reconciliation of our adjusted efficiency ratio to the most directly comparable IFRS financial measures for each of the periods presented.

 As of and for the Year Ended December 31, As of and for the Year Ended December 31,
 2019 2018 2017 2016 2015 2021 2020 2019 2018 2017
 (in millions of R$, except as otherwise indicated) (in millions of R$, except as otherwise indicated)
Efficiency ratio                              
Administrative expenses  16,942   16,792   16,121   14,920   14,515   17,316   17,115   16,942   16,792   16,121 
Total income  58,769   49,507   48,725   48,837   30,814   63,926   48,242   58,769   49,507   48,725 
of which:                                        
Gains (losses) on financial assets and liabilities (net) and exchange differences (net)  (326)  (5,589)  1,574   7,591   (9,918)  (1,781)  (11,703)  (326)  (5,589)  1,574 
Efficiency ratio  28.8%  33.9%  33.1%  30.6%  47.1%  27.1%  35.5%  28.8%  33.9%  33.1%
Total Income  58,769   49,507   48,725   48,837   30,814   63,926   48,242   58,769   49,507   48,725 
Effects of the hedge for investments held abroad  1,264   5,867   810  6,140   (10,919)  2,512   13,583   1,264   5,867   (810)
Total income excluding effects of the hedge for investments held abroad  57,505   43,640   47,915   42,697   41,733   66,438   61,825   60,033   55,374   47,915 
Administrative expenses  16,942   16,792   16,121   14,920   14,515   17,316   17,115   16,942   16,792   16,121 
Efficiency ratio adjusted for effects of the hedge for investments held abroad  29.5%  38.5%  33.6%  34.9%  34.8%  26.1%  27.7%  28.2%  30.3%  33.6%

 

 15
Table of Contents

Reconciliation of Non-GAAP Measures to Their Most Directly Comparable IFRS Financial Measures

The information in the table below presents the calculation of specified non-GAAP financial measures from each of their most directly comparable IFRS financial measures. Our calculation of these non-GAAP financial measures may differ from the calculation of similarly titled measures used by other companies. We believe that these non-GAAP financial measures supplement the GAAP information provided to investors regarding effects of the hedge for investments held abroad. The limitation associated with the exclusion of effects of the hedge for investments held abroad is that it has the effect

17 

Table of Contents

of excluding a portion of gains/losses on financial assets and liabilities (net) plus exchange differences (net) line item which is offset by excluding a portion in the Incomeincome tax line item. Accordingly, while we believe that the non-GAAP financial measures presented are useful to investors and support their analysis, the non-GAAP financial measures have important limitations as analytical tools, and investors should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP measures including under IFRS.


  As of and for the year ended December 31,
  2019 2018 2017 2016 2015
  (in millions of R$, except as otherwise indicated)
           
Gains/losses on financial assets and liabilities
(net) plus exchange differences (net)
  (326)  (5,589)  1,574   7,591   (9,918)
Effects on hedge for investment held abroad  1,264   5,867   810   (6,140)  10,919 

Adjusted Gains/losses on financial assets and

liabilities (net) plus exchange differences (net)

  (938)  (11,456)  764   1,451   1,001 
Total Income  58,769   49,507   48,725   48,837   30,814 
Effects on hedge for investment held abroad  1,264   5,867   810   6,140   (10,919)
Adjusted Total Income  57,505   43,640   47,915   42,697   41,733 
Operating profit before tax  22,273   15,910   14,514   16,384   (3,216)
Effects on hedge for investment held abroad  1,264   5,867   810   6,140   (10,919)
Adjusted Operating profit before tax  21,009   10,043   13,704   10,244   7,703 
Income Tax  (5,642)  (3,110)  (5,376)  (8,919)  13,050 
Effects on hedge for investment held abroad  (1,264)  (5,867)  (810)  6,140   (10,919)
Adjusted Income tax   (6,906)  (8,977)  (6,186)  (2,779)  2,130 
Operating profit before tax – Commercial Banking  18,375   12,397   11,220   12,652   (5,565)
Effects on hedge for investment held abroad  1,264   5,867   810   6,140   (10,919)
Adjusted Operating Profit before tax – Commercial Banking  17,111   6,530   10,411   6,512   5,354 

  As of and for the year ended December 31,
  2021 2020 2019 2018 2017
  (in millions of R$, except as otherwise indicated)
           
Gains/losses on financial assets and liabilities (net) plus exchange differences (net)  (1,781)  (11,703)  (326)  (5,589)  1,574 
Effects on hedge for investment held abroad  2,512   13,583   1,264   5,867   810 
Adjusted Gains/losses on financial assets and liabilities (net) plus exchange differences (net)  (4,293)  (25,286)  (1,590)  (11,456)  2,384 
Total Income  63,926   48,242   58,769   49,507   48,725 
Effects on hedge for investment held abroad  2,512   13,583   1,264   5,867   (810)
Adjusted Total Income  66,438   61,825   60,033   55,374   47,915 
Operating income before tax  24,750   9,664   22,273   15,910   14,514 
Effects on hedge for investment held abroad  2,512   13,583   1,264   5,867   (810)
Adjusted Operating income before tax  27,262   23,247   23,537   21,777   13,704 
Income Tax  (9,191)  3,787   (5,642)  (3,110)  (5,376)
Effects on hedge for investment held abroad  2,512   (13,583)  (1,264)  (5,867)  810 
Adjusted Income tax  (6,679)  (9,796)  (6,906)  (8,977)  (4,566)
Operating income before tax – Commercial
Banking		  19,491   4,666   18,375   12,397   11,220 
Effects on hedge for investment held abroad  2,512   13,583   1,264   5,867   810 
Adjusted Operating Income before tax –
Commercial Banking		  22,003   18,249   19,639   18,264   12,030 

 

Exchange Rates

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer ofreaisby any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

Since 1999, the Brazilian Central Bank has allowed thereal/U.S. dollar exchange rate to float freely, which resulted in increasing exchange rate volatility. In the past,However, the Brazilian Central Bank has intervened occasionally to control high volatility in the foreignmoderate exchange rates.rate volatility. We cannot predict whether the Brazilian Central Bank or the Brazilian government will continue to permit thereal to float freely or will intervene in the exchange rate market through the return of a currency band system or otherwise. In the future, thereal may fluctuate substantially against the U.S. dollar.

 16
Table of Contents

 

Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are compelling reasons to foresee a serious imbalance; temporary restrictions may be imposed on remittances of foreign capital abroad. Any such restrictions on remittances of foreign capital abroad may limit our ability to make distributions to holders of our American Depositary Receipts, or “ADRs”.“ADRs.” We cannot assure that such measures will not be taken by the Brazilian government in the future. Exchange rate fluctuations will affect the U.S. dollar equivalent of the price of our shares inreais on the São Paulo Stock Exchange, B3, S.A. – Brasil, Bolsa, Balcão, or “B3” as well as the U.S. dollar equivalent of any distributions we make with respect to our shares, which will be made exclusively inreais. Exchange rate fluctuations may also adversely affect our financial condition. For further information on these risks, see “—“Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic Conditions in Brazil and Globally—Exchange rate volatility may have a material adverse effect on the Brazilian economy and on us.”

18 

Table of Contents

The following tables set forth the selling rate, expressed inreais per U.S. dollar (R$/U.S.$), for the periods indicated:

  Period-endAverage(1)LowHigh
  (per U.S. dollar)
Year:     
2015 3.903.342.574.19
2016 3.263.483.124.16
2017 3.313.193.053.38
2018 3.873.683.144.19
2019 4.034.114.024.22
Month Ended:     
August 2019 4.154.033.844.17
September 2019 4.164.124.064.19
October 2019 4.024.093.994.18
November 2019 4.244.163.994.26
December 2019 4.034.114.024.22
January 2020 4.284.154.024.28
February 2020 4.504.344.244.50
March 2020 (through March 5, 2020) 4.624.534.494.62

  Period-end Average(1) Low High
  (per U.S. dollar)
Year:        
 2017   3.31   3.19   3.05   3.38 
 2018   3.87   3.68   3.14   4.19 
 2019   4.03   4.11   4.02   4.22 
 2020   5.20   5.16   4.02   5.94 
 2021   5.58   5.40   4.92   5.87 
 Month Ended:                 
 September 2021   5.44   5.28   5.16   5.44 
 October 2021   5.64   5.54   5.39   5.71 
 November 2021   5.62   5.56   5.41   5.67 
 December 2021   5.58   5.65   5.56   5.74 
 January 2022   5.36   5.53   5.36   5.70 
 February 2022 (through February 22, 2022)   5.06   5.22   5.06   5.33 

Source: Brazilian Central Bank.

(1)Represents the average of the exchange rates at the close of each business day during the period.

Our parent company, Santander Spain, reports its financial condition and operating results of operations in euros. As of December 31, 2019,2021, the exchange rate foreuro toreal was R$4.4097 6.3210 per €1.00.

3B.3B. Capitalization and Indebtedness

Not applicable.

3C.3C. Reasons for the Offer and Use of Proceeds

Not applicable.

3D. Risk Factors

This section is intended to be a summary of more detailed discussions contained elsewhere in this annual report. You should carefully read and consider the following risks, along with the other information included in this annual report on Form 20-F. The risks described below are not the only ones we face. Additional risks that we do not presently consider material, or of which we are not currently aware, may also affect us. Our business, results of operations or financial condition could be impacted if any of these risks materialize and, as a result, the market price of our Units and of our ADRs could be affected.

 17
Table of Contents

Summary of Risk Factors

Summary of Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally

3D.●Risk FactorsThe COVID-19 pandemic has had, and is expected to continue to have, a negative impact on global, regional and Brazilian economies, and we would be materially adversely affected by a protracted economic downturn.
●The Brazilian government has exercised significant influence over the Brazilian economy. The Brazilian government’s macroeconomic management strategies, as well as Brazilian political and economic conditions, could adversely affect us and the trading price of our securities.
●Inflation, government efforts to control inflation, and changes in interest rates may hinder the growth of the Brazilian economy and could have an adverse effect on us.
●Exposure to Brazilian federal government debt could have a material adverse effect on us.
●Fluctuations in interest rates and other factors may affect our obligations under legacy employee pension funds.
●Exchange rate volatility may have a material adverse effect on the Brazilian economy and on us.
●Infrastructure, labor force deficiency and other factors in Brazil may impact economic growth and have a material adverse effect on us.
●Disruption or volatility in global financial and credit markets could adversely affect the financial and economic environment in Brazil, which could have a material adverse effect on us.

The below risks could materiallySummary of Risks Relating to the Brazilian Financial Services Industry and adversely affectedOur Business

●The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.
●The strong competitive environment in the Brazilian financial services market may adversely affect us, including our business prospects.
●We may not be able to detect or prevent money laundering and other criminal activities fully or on a timely basis, which could expose us to additional liability and could have a material adverse effect on us.
●We are subject to increasing scrutiny and regulation from data protection laws. Failure to protect personal information could adversely affect us.
●We are exposed to risk of loss from legal and regulatory proceedings.
●Disclosure controls and procedures over financial reporting may not prevent or detect all errors or acts of fraud.
 18
Table of Contents
●Changes in taxes and other fiscal assessments may adversely affect us. Furthermore, we are subject to review by tax authorities, and an incorrect interpretation by us of tax laws and regulations may have a material adverse effect on us.
●Our loan and investment portfolios are subject to risk of prepayment, which could have a material adverse effect on us.
●The credit quality of our loan portfolio may deteriorate and our loan loss reserves could be insufficient to cover our loan losses, which could have a material adverse effect on us.
●Liquidity and funding risks are inherent in our business, and since our principal sources of funds are short-term deposits, a sudden shortage of funds could cause an increase in costs of funding and an adverse effect on our revenues and our liquidity levels.
●The value of the collateral securing our loans may not be sufficient, and we may be unable to realize the full value of the collateral securing our loan portfolio. We may face significant challenges in possessing and realizing value from collateral with respect to loans in default.
●We may not effectively manage risks associated with the replacement or reform of benchmark indices.
●Failure to successfully implement and continue to improve our risk management policies, procedures and methods, including our credit risk management system, could materially and adversely affect us, and we may be exposed to unidentified or unanticipated risks.
●Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.
●We are subject to counterparty risk in our business.
●Our financial results are constantly exposed to market risk. We are subject to fluctuations in interest rates and other market risks, which may materially and adversely affect us.
●We engage in transactions with related parties that others may not consider to be on an arm’s- length basis.
●Our business is highly dependent on the proper functioning of information technology systems.

Summary of Risks Relating to Our Controlling Shareholder, Our Units and operational state of our Company, and as result, could impact the investment of our shareholders.American Depositary Receipts (ADRs)

●Our ultimate controlling shareholder has a great deal of influence over our business and its interests could conflict with ours.
●Our status as a controlled company and a foreign private issuer exempts us from certain of the corporate governance standards of the NYSE, limiting the protections afforded to investors. Furthermore, our corporate disclosure may differ from disclosure regularly published by issuers of securities in other countries, including the U.S.
●The liquidity and market prices of the units and the ADRs may be adversely affected by the cancellation of units or substantial sale of units and shares in the market, or by the relative volatility and limited liquidity of the Brazilian securities markets.
●The relative volatility and limited liquidity of the Brazilian securities markets may negatively affect the liquidity and market prices of the units and the ADRs.
●Holders of our units and our ADRs may not receive any dividends or interest on stockholders’ equity, may be unable to exercise preemptive rights with respect to our units underlying the ADRs, and may find it difficult to exercise voting rights at our shareholders’ meetings.
●Investors may find it difficult to enforce civil liabilities against us, our directors or officers. In addition, judgments of Brazilian courts with respect to our units or ADRs will be payable only in reais.
 19
Table of Contents
●Holders of ADRs could be subject to Brazilian income tax on capital gains from sales of ADRs. Furthermore, if you exchange your ADRs for their underlying Units, you risk losing Brazilian tax advantages and the ability to remit foreign currency abroad.

Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally

The COVID-19 pandemic has had, and is expected to continue to have, a negative impact on global, regional and Brazilian economies, and we would be materially adversely affected by a protracted economic downturn.

The COVID-19 pandemic added a new source of uncertainty to global economic activity and it has had, and is expected to continue to have, a negative impact on global, regional and national economies and to disrupt supply chains and reduce international trade and business activity. New variants of the virus have emerged against which existing vaccines and acquired immunity may not be effective. Restrictions will likely remain in place, suppressing activity, if the contagion does not subside. The materialization of these risks has affected global growth and may decrease investors’ interest in assets from Brazil, which has adversely affected the market price of our securities, possibly making it more difficult for us to access capital markets and, as a result, to finance our operations in the future.

The current COVID-19 pandemic and its potential impact on the global economy may affect our ability to meet our financial targets. A continued downturn in local, regional or global economic conditions may adversely affect our business, results of operations and financial condition.

The Brazilian government has exercised significant influence over the Brazilian economy. The Brazilian government’s macroeconomic management strategies, as well as Brazilian political and economic conditions, could adversely affect us and the trading price of our securities.

The Brazilian government has frequently intervened in the Brazilian economy and has on occasion made significant changes in policy and regulations. In the past, the Brazilian government has adopted measures, including, among others, changes in regulations, price controls, capital controls, changes in the exchange rate regime, and limitations on imports, which have affected Brazilian asset prices. Recently, the Brazilian government has adopted measures, including changes in tax policies, and constraints that have affected Brazilian asset prices and the trading price of our securities.

We and the trading price of our securities may be adversely affected by changes in policy, laws or regulations at the federal, state and municipal levels involving or affecting factors such as:

·●interest rates;

·●currency volatility;

19 

Table of Contents

·●inflation;

·●reserve requirements;

·●capital requirements;

·●liquidity of capital and lending markets;

·●non-performing loans;

·●tax policies;

·●the regulatory framework governing our industry;

·●exchange rate controls and restrictions on remittances abroad; and

·●other political, social and economic developments in or affecting Brazil.

Uncertainty over whether the Brazilian government will implement changes in policy or regulation, createsas well as uncertainties related to the 2022 Brazilian presidential election, create instability in the Brazilian economy, increasing the volatility of the Brazilian securities markets, which may have an adverse effect on us and our securities. Recent economic and political instability has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian securities markets, which also may adversely affect us and our securities. The overall trend of the Brazilian political and economic arenas may also affect the business of the Brazilian financial industry.

 20
Table of Contents

We are not able to fully estimate the impact of global and Brazilian political and macroeconomic developments and economic regulatory policy changes on our business and lending activity, nor are we able to predict how current or future measures implemented by regulatory policy-makerspolicymakers may impact our business. In addition, due to the current political instability, there exists substantial uncertainty regarding future economic policies and we cannot predict what policies will be adopted by the Brazilian government and whether these policies will negatively affect the economy or our business or financial performance. Any changes in regulatory capital requirements for lending, reserve requirements, or product and service regulations, among others, or continued political uncertainty may materially adversely affect our business.

Political instability in Brazil may adversely affect Brazil’s economy and investment levels, and have a material adverse effect on us.

Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy by impacting the confidence of investors and the general public, which has historically resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies.

In recent years, there has been significant political turmoil in connection with the impeachment of the former president (who was removed from office in August 2016) and ongoing investigations of her successor (who left office in January 2019) as part of the ongoingLava Jato investigations.

There are uncertainties regarding the ability of the current government to implement policies and reforms, as well as external perception regarding the Brazilian economy and political environment, all of which could have a negative impact on our business and the price of our securities. In addition, a tax reform proposed in 2021 that has not been voted on, suggests the revocation of the income tax exemption on the payment of dividends, which, if enacted, would increase the tax expenses associated with any dividend or distribution by Brazilian companies, could impact our capacity to receive future cash dividends or distributions net of taxes from our subsidiaries. Any such new policies or changes to current policies may have a material adverse effect on us.

Furthermore, Brazil’s federal budget has been in deficit since 2014. Similarly, the governments of Brazil’s constituent states are also facing fiscal concerns due to their high debt burdens (particularly following the COVID-19 pandemic and the need for the Brazilian government to fund extensive economic relief programs), declining revenues and inflexible expenditures.

20 

Table of Contents

Uncertainty about the Brazilian government’s implementation of changes in policies or regulations that affect such implementation, as well as uncertainty arising from the 2022 Presidential election, may contribute to economic instability in Brazil and increase the volatility of securities issued abroad by Brazilian companies, including our securities.

Ongoing investigations relating to corruption and diversion of public funds that are being conducted by the Brazilian federal police as well as other Brazilian and non-Brazilian regulators and law enforcement officials may adversely affect the growth of the Brazilian economy and could have a material adverse effect on us.

Certain Brazilian companies active in the oil and gas, energy, construction, and infrastructure sectors are facinghave faced investigations by the CVM, the U.S. Securities and Exchange Commission, or the “SEC,” the U.S. Department of Justice, the Brazilian Federal Police and the Brazilian Federal Prosecutor’s Office, the Comptroller General of Brazil, and other relevant governmental authorities, in connection with corruption allegations (theLava Jato investigations). The Brazilian Federal Police insare also investigating allegations of improper payments made by Brazilian companies to officials of the Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais), or “CARF”,“CARF,” a tax appeals tribunal (the so-calledOperação Zelotes)Zelotes). It is alleged that the purpose of such improper payments was to induce those officials to reduce or waive certain tax-related penalties imposed by the Brazilian Federal Revenue Authority, which were under appeal in the CARF. Such investigations involve and/or involved several companies and individuals, including representatives of various companies, politicians and third parties. Certain of these individuals are being investigated by the Brazilian Federal Police and others were formally charged and are facing criminal proceedings and/or have already been convicted by the Brazilian Federal Courts.

Depending on the duration and outcome of such investigations, the companies involved may face a reduction in their revenues, downgrades from rating agencies or funding restrictions, among other negative effects. Given the significance of the companies cited in these investigations in the Brazilian economy, the investigations and their fallout have had an adverse effect on Brazil’s economic growth prospects in the near short to medium term.

 21
Table of Contents

Furthermore, the negative effects on such companies and others may also impact the level of investments in infrastructure in Brazil, which may lead to lower economic growth or contraction in the near to medium term (accordingterm. According to data from the IBGE, the Brazilian economy’s gross domestic product, or “GDP,” contracted by 3.3% in 2016, butthen increased by 1.3% in 2017, and1.8% in 2018 and 1.1%1.2% in 2019)2019. In 2020, Brazilian GDP contracted by 3.9% as a result of the adverse macroeconomic effects of COVID-19 pandemic. In 2021, Brazilian GDP is estimated to have increased by 4.6%. In addition, although we have reduced our exposure to companies involved in theLava Jato and other government investigations, we cannot assure that new investigations will not be launched or that additional persons will not become subject to investigation. To the extent that the repayment ability of these companies is hampered by any fines and/or other sanctions that may be imposed upon them or reputational or commercial damage as a result of the Lava Jato investigations, we may also be materially adversely affected.

As a result of the allegations under theLava Jato investigations and the economic downturn, Brazil was downgraded to non-investment grade status by SStandard & Poor's, or “S&P,” in September 2015, by Fitch Ratings, or “Fitch,” in December 2015, by Moody’s Investor Service, or “Moody’s,” in February 2016, and downgraded again by Fitch in May 2016. In addition, Brazil was further downgraded by S&P to BB- with a stable outlook in January 2018 as a result of the failure of the prior Brazilian government to approve certain reforms.reforms, Brazil’s sovereign rating is currently rated by the three major risk-ratingrisk- rating agencies as follows: BB- by S&P (stable outlook) and Fitch (negative outlook) and Ba2 by Moody’s.Moody’s (stable outlook). Further downgrading of Brazil’s credit rating could reduce the trading price of units and ADRs. Various major Brazilian companies were also downgraded. Such downgrades have further worsened the conditions of the Brazilian economy and the condition of Brazilian companies, especially those relying on foreign investments. In addition, theLava Jatoinvestigations have also reached members of the executive and legislative branches of the Brazilian government, which has caused considerable political instability, and, as a result, persistently poor economic conditions in Brazil could have a material adverse effect on us. It is difficult to predict the effects of such political instability, which may include further deteriorations in Brazil’s economic conditions.

Inflation, government efforts to control inflation, and changes in interest rates may hinder the growth of the Brazilian economy and could have an adverse effect on us.

The Brazilian government’s measures to fight inflation, principally through the Brazilian Central Bank, that have had significant effects on the Brazilian economy and our business, and can continue to do so. Tight monetary policies with high compulsory reserve requirements may restrict Brazil’s growth and the availability of credit, reduce our loan volumes, and increase our loan loss provisions. Conversely, less strict government and Brazilian Central Bank policies and interest rate decreases may trigger increases in inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect our spreads.

In DecemberThe SELIC rate had been on a downward trend since mid-2016. The SELIC rate reached a high as 14.25% as of October, 2016, before decreasing to 13.75% p.a. by the end of 2016. The SELIC rate fell further to 7.00% p.a. by the end of 2017, and to 6.50% p.a. in March 2018. The SELIC rate remained at this level until June 2019, when it resumed its downward trend, ending 2019 at 4.50% p.a. As a result of the negative economic impact of the COVID-19 pandemic, the SELIC rate (the basic interest ratecontinued to fall during 2020, and reached a historical low of 2.00% p.a. by the end of the year and remained at that level until mid-March 2021, when it reached 2.75%. As a result of inflationary pressures that have arisen in Brazil) was lowered to 13.75%,Brazil and globally in January 2017, the SELIC rate was further lowered to 13.0%,late 2021 and to 12.25% in February 2017. In May 2017, the Monetary Policy Committee (Comitê de Política Monetária) ofearly 2022, the Brazilian Central Bank or “COPOM”, decided to lowerstarted tightening monetary policy: the SELIC rate to 10.25%, then lowering it toreached 6.25% p.a. in late September 2021, 7.75% p.a. in late October 2021, 9.25% in July 2017, to 7.50% in October 2017 and to 7.0%p.a. in December 2017. In2021, and reached 10.75% p.a. in February 2018,2022. As of the COPOM lowereddate of this annual report, the SELIC rate to 6.75% and then to 6.50% in March 2018 and kept throughout the year 2018. In 2019, the

21 

Table of Contents

COPOM continued this trend for the first half of the year until August 2019, when the rate was lowered to 6.00%, and then successively lowered further to 5.50% in September 2019, 5.00% in October 2019 and 4.50% in December 2019. In February 2020, the COPOM cut the SELIC rate to 4.25%.

is 10.75% p.a..

The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2019,2021, a 1.0% increase or decrease in the basicbase interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$334553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.

Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, generallysuch as the consumer price index (Índice de Preços ao Consumidor – Amplo), or “IPCA,”IPCA, and the general index of market prices (Índice Geral de Preços-Mercado), or “IGPM.”IGP-M. For example, considering the amounts in 2019,2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$9390 million and R$7683 million, respectively.

 22
Table of Contents

Inflation, has increased duringas measured by the IPCA, reached 4.52% in 2020, compared to 4.31% in 2019, reaching 4.31% for the 12-month period ending December 31, 2019 (compared to 3.75% in 2018),mainly as a result of temporary supply shocks affecting the current market conditions.prices of foodstuff items. These inflationary pressures have persisted in 2021 and have also been compounded by additional ones, including climate events that hit electricity generation and led to an increase in energy prices, disruption in supply chains and the depreciation of the real, among others. As a result, inflation as measured by the IPCA reached 10.06% in 2021, significantly above the target of 3.75% set for the period.

Inflation, government measures to curb inflation, and speculation related to possible measures regarding inflation may significantly contribute to uncertainty regarding the Brazilian economy and weaken investors’ confidence in Brazil. Future Brazilian governmental actions, intervention in the foreign exchange market, and actions to adjust or fix the value of thereal,, may trigger increases in inflation and adversely affect the performance of the Brazilian economy as a whole. Any of these actions may adversely affect our asset quality. Furthermore, Brazil’s high rate of inflation, compounded by high and increasing interest rates, declining consumer spending and increasing unemployment, may have a material adverse impact on the Brazilian economy as a whole, as well as on us.

Exposure to Brazilian federal government debt could have a material adverse effect on us.

We invest in Brazilian federal government sovereign bonds. As of December 31, 2019,2021, approximately 17.8%18.4% of our total assets, and 78.4%76.1% of our securities portfolio, consisted of debt securities issued by the Brazilian federal government. Any failure by the Brazilian Government to make timely payments under the terms of these securities, or a significant decrease in their market value, will have a material adverse effect on us.

Fluctuations in interest rates and other factors may affect our obligations under legacy employee pension funds.

We sponsor defined benefit pension plans and a healthcare plan thatfor former and current employees, most of which were inherited from Banespa (though we discontinued the use of defined benefit pension plans for our employees in 2005).

In order to determine the funded status of each legacy defined benefit pension plan and, consequently, the carried reserves necessary to pay future beneficiaries, we use certain actuarial techniques and assumptions, which are inherently uncertain and involve the exercise of significant judgment, including with respect to interest rates, which are a key assumption in determining our current obligations under the legacy pension plans. For further information, refer tosee note 2221 to our audited consolidated financial statements.statements included elsewhere in this annual report.

 

22 

Table of Contents

Changes in the present value of our obligations under our legacy defined benefit pension plans could require us to increase contributions, which would divert resources from use in other areas of our business. Any such increase may be due to factors over which we have no or limited control. Increases in our pension liabilities and obligations could have a material adverse effect on our business, financial condition and results of operations.

DecreasesIncreases in interest rates can increasedecrease the present value of obligations under our legacy defined benefit pension plans and may materially and adversely affectlifetime medical assistance plan. Therefore, in 2021, there were two factors that contributed to the funded statusreduction of our legacy defined benefit plansprovisions when compared to 2020: first, increases in interest rates, and require ussecondly, the greater-than-average profitability of investments indexed to make additional contributions to these plans to meet our pension funding obligations.the IGP-M.

 

As of December 31, 2019, we had2021, our provisions for pensions and similar obligations totaled R$2.7 billion (out of total provisions for legal and administrative proceedings, commitments, pensions and other obligations in the amountmatters of R$16 million. See more11.6 billion). For additional information, insee note 2321 to our audited consolidated financial statements included in this annual report.

 

Exchange rate volatility may have a material adverse effect on the Brazilian economy and on us.

The Brazilian currency has experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. The Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system.

 23
Table of Contents

Although long-term depreciation of therealis generally linked to the rate of inflation in Brazil, depreciation of therealoccurring over shorter periods of time has resulted in significant variations in the exchange rate among thereal,, the U.S. dollar and other currencies. FromAs a result of fluctuations in commodity prices, international developments and periods of progress and setbacks on the domestic front—such as during the presidential impeachment process in 2016, or the approval of the national pension system reform in 2019—the real has weakened over the last few years. After having ended 2013 to 2014, thereal depreciated against the U.S. dollar due to a decrease in commodities prices, reachingwith an exchange rate of R$2.34 per U.S.$1.00, on December 31, 2013 andthe real/U.S. dollar exchange rate was R$2.65 per U.S.$1.00 on December 31, 2014. During 2015, due2014, depreciating further to the poor economic conditions in Brazil, including as a result of political instability, thereal devalued at a much higher rate than in previous years. On September 24, 2015, thereal depreciated to R$4.20 per U.S.$1.00. Overall, in 2015, thereal depreciated 47% against the U.S. dollar, reaching R$3.91 per U.S.$1.00 on December 31, 2015. In 2016,Despite the instability caused by a change in the country’s presidency, the real faced continuing fluctuations, primarily as a result of Brazil’s political instability, but had appreciated 17.0% year-over-year against the U.S. dollar as of December 31, 2016 to R$3.26 per U.S.$1.00. In 2017, therealremained relatively stable against the U.S. dollar, with an exchange rate of R$3.31 per U.S.$1.00 as of December 31, 2017. In 2018, thereal2017, but continued to depreciate againstin the U.S. dollar with the exchange ratefollowing years, reaching R$3.883.87 per U.S.$1.00 as of December 31, 2018. In 2019, thereal continued to depreciate against the U.S. dollar, with the exchange rate reaching2018, and R$4.03 per U.S.$1.00 as of December 31, 2019. On March 5,In 2020, in response to the turbulence and uncertainty caused by the COVID-19 pandemic, the real depreciated significantly against the U.S.$ dollar, but finished the year at R$5.20 per U.S.$1.00. In 2021, the fallout of the COVID-19 pandemic continued to weigh on the performance and prospects of the Brazilian economy. The adverse economic effects of the COVID-19 pandemic have led to pressure on the Brazilian government to increase its support for the economy, which has led it to increase its already high indebtedness. Along with an ongoing perception that the Brazilian government could continue such support and further increase its indebtedness, this has led to a depreciation of the real. As of December 31, 2021, the exchange rate was R$4.505.58 per U.S.$1.00. There can be no assurance that therealwill not substantially depreciate or appreciate further against the U.S. dollar.

In the year ended December 31, 2019,2021, a variation of 1.0% in the exchange rate ofreais to U.S. dollars would have resulted in a variation of income on our net foreign exchange position denominated in U.S. dollars of R$1,2641.17 million.

 

23 

TablePast episodes of Contents

Depreciationdepreciation of thereal relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets and prompted the adoption of recessionary policies by the Brazilian government. Depreciation of therealmay also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of therealcould make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of therealrelative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian balance of payments, as well as dampenhinder export-driven growth. Depending on the circumstances, either a depreciation or appreciation of therealcould materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.

Infrastructure, workforce deficiency and other factors in Brazil may impact economic growth and have a material adverse effect on us.

Our performance depends on the overall health and growth of the Brazilian economy. Brazilian gross domestic product, or “GDP”“GDP,” growth has fluctuated over the past few years, with a contraction of 3.5%3.3% in 2016 andfollowed by a three-year streak of growth of 1.0% and 1.1% in 2017 (1.3%), 2018 (1.8%) and 2018, respectively,2019 (1.2%). In 2020, the Brazilian GDP contracted by 3.9% as a result of the effects of the COVID-19 pandemic, and a growthdespite the significant economic support measures put in place by the Brazilian government (although it is believed that these measures averted an even stronger contraction).We estimate that Brazilian GDP increased by 4.6% in 2021 due to the extension of 1.0%income supports programs and the relaxation of certain mobility restrictions that allowed some businesses to resume their activities (e.g., after having contracted by 3.9% in 2019.2020, we estimate that the services sector increased by 4.8% in 2021). Growth ishas been limited by the lack of private and public investments, resulting in potential energy shortages and deficient transportation, declining logistics and telecommunication sectors, and a lack of a qualified labor force. In addition, the growth and performance of the Brazilian economy may be impacted by other factors such as nationwide strikes, natural disasters or other disruptive events. Additionally, travel restrictions or potential impacts on personnel due to the COVID-19 pandemic may disrupt our business and adversely affect the financial condition of our customers. Any of these factors could lead to labor market volatility and generally impact income, purchasing power and consumption levels, which could limit growth, increase delinquency rates and ultimately have a material adverse effect on us.

Developments and the perception of risk in other countries may adversely affect the Brazilian economy and market price of Brazilian issuers’ securities.

The market value of securities of Brazilian issuers is affected by economic and market conditions in other countries, including the United States, European countries (including Spain, where Santander Spain, our controlling shareholder, is based), and in other Latin American and emerging market countries. Although economic conditions in Europe and in the United States may differ significantly from economic conditions in Brazil, investors’ reactions to developments in these countries may have an adverse effect on the market value of securities of Brazilian issuers. In particular, investor perceptions of the risks associated with our securities may be affected by perception of risk conditions in Spain. Additionally, crises in other emerging market countries may diminish investor interest in securities of Brazilian issuers, including our securities. This could adversely affect the market price of our securities, restrict our access to capital markets and compromise our ability to finance our operations in the future on favorable terms, or at all.

 24
Table of Contents

In 2019, 20182021, 2020 and 2017,2019, there was an increase in volatility in all Brazilian markets due to, among other factors, uncertainties about how monetary policy adjustments in the United States would affect the international financial markets and the increasing risk aversion to emerging market countries. In 2021 and 2020, the fallout of the COVID-19 pandemic has also affected the performance of Brazilian markets. These uncertainties adversely affected us and the market value of our securities.

In addition, we continue to be exposed to disruptions and volatility in the global financial markets because of their effects on the financial and economic environment, particularly in Brazil, such as a slowdown in the economy, an increase in the unemployment rate, a decrease in the purchasing power of consumers and the lack of credit availability. We lend primarily to Brazilian borrowers, and these effects could materially and adversely affect our customers and increase our non-performing loans, resulting in increased risk associated with our lending activity and requiring us to make corresponding revisions to our risk management and loan loss reserve models.

24 

Table of Contents

A global economic downturn could have a material adverse effect on us.

The global macroeconomic environment is facing challenges, including the economic slowdown in China andsetbacks derived from the Eurozone, the end of funding by the U.S. Federal Reserve, the uncertain impact of Brexit and potential adoption of U.S. tariffs on steel imported from Brazil and Argentina.COVID-19 pandemic. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States.

Pandemics, epidemics or outbreaks of infectious diseases can have an adverse effect on the global market and economy, as well as on our operations. Historically, some epidemics and regional or global outbreaks, such as Zika virus, Ebola virus, H5N5 virus (popularly known as avian influenza), foot-and-mouth disease, H1N1 virus (influenza A, popularly known as swine flu), middle east respiratory syndrome (MERS) and severe acute respiratory syndrome (SARS) have affected certain sectors of the economy in the countries where these diseases have spread.

On March 11, 2020, World Health Organization, or “WHO,” declared that the COVID-19 epidemic rose to the level of a pandemic. This declaration triggered severe measures by government officials around the world with the aim of controlling the spread of COVID-19, including restrictions on the flow of people, with limitations on travel, use of public transport, quarantines and lockdowns, prolonged closure of commercial establishments, interruptions in the supply chain and reduction of consumption in general. These measures, combined with the uncertainties caused by the COVID-19 pandemic, had an adverse impact on the economy and the global capital market, including Brazil, including causing eight circuit breakers in B3 negotiations throughout March 2020. The price of most of the assets traded on B3 was adversely affected due to the COVID-19. Impacts similar to these may reoccur, causing the prices of securities traded on the B3 to fluctuate.

In addition, any material changes in the economy and the global capital market, including Brazil, may decrease the interest of investors in Brazilian assets, including our ADRs, which may adversely affect the market price of our securities, in addition to making it difficult for us to access the capital markets and finance our operations, including on acceptable terms.

There have also been concerns over conflicts, unrest and terrorist threats in the Middle East, Europe and Africa, which have resulted in volatility in oil and other markets. The United States and China have recently been involved in controversy over trade barriers in China that threatened a trade war between the countries and have implemented or proposed to implement tariffs on certain imported products. Sustained tension between the United States and China over trade policies could significantly undermine the stability of the global economy. In 2022, the military conflict between the Russian Federation and Ukraine is contributing to further increases in the prices of energy, oil and other commodities and to volatility in financial markets globally, as well as a new landscape in relation to international sanctions. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term.

In addition, on January 31, 2020, the UK ceased to be a member of the EU, on withdrawal terms that established a transition period until December 31, 2020. During the transition period, the UK continued to be treated as an EU member state and applicable EU legislation continued to be in force. A trade deal was agreed between the UK and the EU prior to the end of the transition period and the new regulations came into force on January 1, 2021. Uncertainty remains around the terms of the UK’s relationship with the European Union and the lack of a fully comprehensive trade agreement may negatively impact the economic growth of both regions. Similarly, an adverse effect on the UK and the European Union may have an adverse effect on the wider global economy or market conditions and investor confidence. This could, in turn, have a material adverse effect on our operations, financial condition and prospects and/or the market value of our securities.

 25
Table of Contents

Moreover, the risk of returning to a fragile and volatile environment and to heightened political tensions in Europe exists if, among others, the policies implemented to provide relief to the economies most affected by the COVID-19 pandemic do not succeed, the reforms aimed at improving productivity and competition fail, the banking union and other measures of European integration do not take hold or anti-European groups become more widespread. A deterioration of the economic and financial environment in Europe could have a material adverse impact on the global economy, affecting our operating results, financial position and prospects. In addition, growing protectionism and trade tensions, such as the tensions between the United States and China in recent years, could have a negative impact on the global economy, which would also impact our operating results, financial condition and prospects.

Any slowdown or instability in the global economy could impact income, purchasing power and consumption levels in Brazil, among other things, which could limit growth, increase delinquency rates and ultimately have a material adverse effect on us while also creating a more volatile economy, limiting potential access to capital and liquidity. In addition, any global economic slowdown or uncertainty may result in volatile conditions in the global financial markets, which could have a material adverse effect on us, including on our ability to access capital and liquidity on financial terms acceptable to us, if at all. Any such adverse effect on capital markets funding availability or costs or in deposit rates could have a material adverse effect on our interest margins and liquidity.

Disruption or volatility in global financial and credit markets could adversely affect the financial and economic environment in Brazil, which could have a material adverse effect on us.

Volatility and uncertainty in global financial and credit markets have generally led to a decrease in liquidity and an increase in the cost of funding for Brazilian and international issuers and borrowers. Such conditions may adversely affect our ability to access capital and liquidity on financial terms acceptable to us, if at all.

Part of our funding originates from repurchase agreements which are generally short-term and volatile in terms of volume, as they are directly impacted by market liquidity. As these transactions are typically guaranteed by Brazilian government securities, the value and/or perception of value of the securities may significantly impact the availability of funds, as the cost of funding will increase if the quality of the Brazilian government securities used as collateral is adversely affected as a result of conditions in financial and credit markets, making this source of funding inefficient for us.

If the size and/or liquidity of the Brazilian government bond and/or repurchase agreement markets decrease, or if there is increased collateral credit risk and we are unable to access capital and liquidity on financial terms acceptable to us or at all, our financial condition and the results of our operations may be adversely affected.

The exit of the United Kingdom (the “UK”) from the European Union (the “EU”) and the definition of its future relationship with the EU could adversely impact global economic or market conditions, as well as our operations, financial condition and prospects.

On 31 January 2020 the UK ceased to be a member of the EU on withdrawal terms which establish a transition period until 31 December 2020 during which the UK will be treated as if it were still a member of the European Union. Although the withdrawal agreement foresees the possibility to extend the transition period for one or two more years after the 31 January 2020, this is not automatic and the UK has enshrined the 31 December 2020 date in domestic legislation passing the withdrawal agreement as the end of the transition period, signaling a current desire not to extend it. Uncertainly remains around the terms of the UK's relationship with the EU at the end of the transition period. If the transition period were to end without a comprehensive trade agreement, the UK’s and Europe’s

25 

Table of Contents

economic growth may be negatively impacted. The uncertainty regarding and terms of the UK’s future relationship with the EU, as well as any adverse effect which it may have on the UK, the EU and the wider global economy could adversely affect global economic or market conditions and investor confidence. This could, in turn, have a material adverse effect on our operations, financial condition and prospects and/or the market value of our securities.

Our operations and results may be negatively impacted by the coronavirus outbreak.

Global or national health concerns, including the outbreak of pandemic or contagious disease, such as the recent coronavirus, may adversely affect us.

Since December 2019, a novel strain of coronavirus has spread in China and other countries. Such events could cause disruption of regional or global economic activity, which could affect our operations and financial results. The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

Risks Relating to the Brazilian Financial Services Industry and Our Business.Business

The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.

Climate change can create transition risks, physical risksHealth and safety restrictions adopted in 2020 and 2021 to contain the impact of the COVID-19 pandemic, including imposing mass quarantines, shelter-in-place orders, medical screenings, travel restrictions and limiting public gatherings, resulted and many continue to result in a severe decrease of global economic activity and decreases in production and demand, which led to sharp declines in the GDP of those countries that were most affected by the pandemic, including Brazil. Some of these measures remained in force as of the date of this annual report. Other consequences included increased unemployment levels, sharp decreases and high volatility in the stock markets, disruption of global supply chains, exchange rate volatility, steady customer draws on lines of credit, decline in real estate prices, and uncertainty in relation to the future impact in regional and global economies in the medium and long term. These measures have also negatively impacted, and could continue to negatively impact, businesses, market participants, our counterparties and customers, and the global economy for a prolonged period of time.

 26
Table of Contents

Many governments and regulatory authorities, including central banks, have acted, and may further act, to provide relief from the economic and market disruptions resulting from the COVID-19 pandemic, including providing fiscal and monetary stimuli to support the global economy, lowering federal funds rates and interest rates, and granting partial or total deferral (grace period) of principal and/or interest payments due on loans. Furthermore, it is unclear how the macroeconomic business environment or societal norms may be impacted after the pandemic. The post-COVID-19 environment may undergo unexpected developments or changes in the financial markets, fiscal, tax and regulatory environments as well as customer and corporate client behavior which could have an adverse impact on our business.

It is difficult to predict how effective these and other measures taken to mitigate the economic effects of the pandemic will be. For more information on the measures taken by the Brazilian Central Bank to combat the COVID-19 pandemic, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19.”

In 2021, high vaccination rates in many countries and a progressive relaxation of health and safety restrictions, together with the fiscal and monetary policy measures implemented, contributed to an increase in employment levels and recovery of the global economy generally, with some variations across sectors and geographies. However, the pandemic remains dynamic and the emergence of variants resistant to existing vaccines remains uncertain. In addition, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time, including labor shortages and disruptions of global supply chains, that are contributing to rising inflationary pressures.

If new COVID-19 waves or variants of the virus force countries to re-adopt measures that restrict economic activity, the macroeconomic environment could deteriorate and adversely impact our business and results of operations, which could include, but is not limited to (i) a continued decreased demand for our products and services; (ii) protracted periods of lower interest rates and resulting pressure on our margins; (iii) further material impairment of our loans and other assets including goodwill; (iv) decline in value of collateral; (v) constraints on our liquidity due to market conditions, exchange rates and customer withdrawal of deposits and continued draws on lines of credit; and (vi) downgrades to our credit ratings. See also “Our cost of funding is affected by our credit ratings, and any risks may have an adverse effect on both variables. Any downgrade in (i) the rating of Brazil’s, (ii) our controlling shareholders, or (iii) our credit rating would likely increase our cost of funding, requiring us to post additional collateral under some of our derivative and other contracts and adversely affect our interest margins and results of operations.”

Moreover, our operations could still be impacted by risks from remote working arrangements or bans on non-essential activities. For example, some of our branches in Brazil have been closed and others have been functioning with reduced hours for a significant period of time. During 2020, we had more than half of our total workforce working remotely, which has increased cybersecurity risks given greater use of computer networks outside the corporate environment.

During 2021, there was a progressive move to return to the office while still maintaining flexibility to work remotely, particularly during the peaks of the COVID-19 waves. If we become unable to successfully operate our business from remote locations including, for example, due to failures of our technology infrastructure, increased cybersecurity risks, or governmental restrictions that affect our operations, this could result in business disruptions that could have a material and adverse effect on our business.

We may also be adversely affected by measures taken by the Brazilian and other governments to mitigate the effects of the COVID-19 pandemic. For example, in 2020, a temporary suspension on dividends and other distributions was enacted in Brazil through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million in 2020 compared to R$10,800 million in 2019. This restriction was not applied in 2021, but we cannot assure you that the Brazilian Central Bank or other government agencies will not apply similar measures to us in the future, whether in an effort to mitigate the effects of the COVID-19 pandemic or otherwise.

The COVID-19 pandemic may persist for some time, which could affect the global economy and/or adversely affect us.our business, financial condition, liquidity or results of operations, and may also increase the likelihood and/or magnitude of other risks described in this “Item 3. Key Information—D. Risk Factors.” The extent to which the consequences of the COVID-19 pandemic affect our business, financial condition, liquidity and results of operations will depend on future developments that remain uncertain, including the rate of distribution and ad ministration of vaccines globally, the severity and duration of any resurgence of COVID-19 variants, future actions taken by governments, central banks and other third parties in response to the pandemic, and the effects on our customers, counterparties, employees and third-party service providers.

 27
Table of Contents

For more information about specific measures that we have adopted and the impact on our business operations, see “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”

Climate changeOur growth, asset quality and profitability, among others, may imply three primary drivers of financial risk that couldbe adversely affect us:affected by a slowdown in Brazil, as well as volatile macroeconomic and political conditions.

• Transition risks associated with the move to a low-carbon economy, both at idiosyncraticA slowdown or recession in Brazil and systemic levels,other major world economies, such as throughthe severe recession caused by COVID-19 that started in 2020, could lead major financial institutions, including some of the world’s largest global commercial banks, investment banks, mortgage lenders, mortgage guarantors and insurance companies to experience significant difficulties, including runs on deposits, the need for government aid or assistance or the need to reduce or cease providing funding to borrowers (including to other financial institutions). The year 2021 was marked by an accelerated recovery in the level of activity in the main global economies, as a result of the expansionary monetary and fiscal policy, regulatoryincluding reductions in interest rates. As a result, inflation rates have increased considerably in Brazil and technological changes.around, due to the strong increase in aggregate demand and bottlenecks in supply and production chains due to unavailability of inputs.

In Brazil, this process of generalized increase in prices was intensified by the depreciation of the Brazilian real against the U.S. dollar and other leading currencies, leading the Brazilian Central Bank to start raising interest rates. This increase in interest rates may have an adverse effect on economic growth in 2022 and 2023. It is also widely expected that Brazil will experience greater economic volatility in 2022 as a result of the Presidential elections which are scheduled to take place in the second half of the year.

• PhysicalVolatile conditions in financial markets could also have a material adverse effect on us, including on our ability to access capital and liquidity on financial terms acceptable to us, if at all. If capital markets financing ceases to become available, or becomes excessively expensive, we may be forced to raise the rates we pay on deposits to attract more customers and become unable to maintain certain liability maturities. Any such increase in capital markets funding availability or costs or in deposit rates could have a material adverse effect on our interest margins and liquidity.

In particular, we face, among others, the following risks related to extreme weather impactsthe economic downturn and longer-term trends, which could result in financial losses that could impair asset values and the creditworthiness of our customers.volatile conditions:

• Liability risks derived from parties who may suffer losses from the effects of climate change and may seek compensation from those they hold responsible such as state entities, regulators, investors and lenders.

These primary drivers could materialize, among others, in the following financial risks:

• Credit risks: Physical climate change could lead to increased credit exposure, and companies with business models not aligned with the transition to a low-carbon economy may face a higher risk of reduced corporate earnings and business disruption due to new regulations or market shifts.

• Market risks: Market changes in the most carbon-intensive sectors could affect energy and commodity prices, corporate bonds, equities and certain derivatives contracts. Increasing frequency of severe weather events could affect macroeconomic conditions, weakening fundamental factors such as economic growth, employment and inflation.

• Operational risks: Severe weather events could directly impact business continuity and operations both of customers and ours.

• Reputational risk could also arise from shifting sentiment among customers and increasing attention and scrutiny from other stakeholders (investors, regulators, etc.) on our response to climate change.

●reduced demand for our products and services;
●strong political polarization of the political scenario in Brazil, aggravated by the socioeconomic impacts of the pandemic;
●intensification of government action in banking regulation (BC#, CSLL, IOF and Tax Reform), technological disruptions (PIX and Open Finance) and the entry of new players including large technology companies, fintech and marketplaces) have made and may continue to make our industry more competitive and potentially less profitable;
●increased inflationary pressure, continued high unemployment and continued reductions in growth prospects could make the economic environment more unpredictable and adversely affect our results of operations;
●increased regulation of our industry and compliance with such regulation will continue to increase our costs and may affect the pricing for our products and services, increase our regulatory risks and limit our ability to pursue business opportunities; and
●inability of our borrowers to comply with their existing obligations on a timely basis, whether in part or at all. Continued macroeconomic uncertainty may adversely affect customers’ income across both our retail and corporate business, and may adversely affect the recoverability of our loans, resulting in increased loan losses.
 28
Table of Contents

Any of the conditions describeddevelopments mentioned above couldmay have a material adverse effect on our business, financial condition and results of operations, including without limitation as a result of a higher cost of capital and limitations on the availability of funding given the market’s requirement for a higher risk premium due to market conditions, expectations for the sector and availability of liquidity in the Brazilian and global economy.

Each of these factors could also affect the credit quality of our counterparties, due to the slowdown in the Brazilian economy as a whole, reduction in purchasing power and operating margins. The process we use to estimate losses inherent in our credit exposure requires complex judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans. The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the sufficiency of our loan loss allowances.

The value and liquidity of the portfolio of investment securities that we hold may be adversely affected.

The recoverability of our loan portfolios and our ability to increase the amount of loans outstanding and our results of operations and financial condition in general, are dependent to a significant extent on the level of economic activity in Brazil. See “—The credit quality of our loan portfolio may deteriorate and our loan loss reserves could be insufficient to cover our loan losses, which could have a material adverse effect on us.”

In addition, we are exposed to sovereign debt in Brazil. Our net exposure to Brazilian sovereign debt as of December 31, 2021 was R$171.4 billion (or 18.4% of our total assets as of that date) and consistent principally of National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C e NTN-F). Recessionary conditions in Brazil would likely have a significant adverse impact on our loan portfolio and sovereign debt holdings and, as a result, on our financial condition, cash flows and results of operations.

Our revenues are also subject to risk of deterioration from unfavorable political and diplomatic developments, social instability, international conflicts, and changes in governmental policies, including expropriation, nationalization, international ownership legislation, interest-rate caps, tax and monetary policies.

 

The economy of Brazil has experienced significant volatility in recent decades. This volatility resulted in fluctuations in the levels of deposits and in the relative economic strength of various segments of the Brazilian economy to which we lend. In addition, Brazil is affected by commodities price fluctuations, which in turn may affect financial market conditions through exchange rate fluctuations, interest rate volatility and deposits volatility. Furthermore, the Brazilian government has implemented fiscal and monetary policies and initiatives to mitigate the effects of the COVID-19 pandemic on the economy, individual businesses and households. These fiscal and monetary policy measures have accelerated the economic recovery in 2021 but have significantly increased public debt. Among the risks that could lead to an economic slowdown and financial markets falls are (i) the rise in energy prices that can cause inflation; (ii) the breakdown of global supply chains; (iii) excess liquidity and low interest rates, which has already led to an increase in inflation; and (iv) further tightening of monetary and public deficit policies. Negative and fluctuating economic conditions, such as slowing or negative growth and a changing interest rate environment, could impact our profitability by causing lending margins to decrease and credit quality to decline and leading to decreased demand for higher margin products and services.

26 

Table of Contents

The strong competitive environment in the Brazilian financial services market may adversely affect us, including our business prospects.

The Brazilian financial markets, including the banking, insurance and asset management sectors, are highly competitive, with this competition increasing in recent years. We face significant competition in all of our main areas of operation from other Brazilian and international banks, as well as state-owned institutions, including through portability of loans.

Non-traditional providers of banking services, such as Internet-basedinternet-based e-commerce providers, mobile telephone companies and Internetinternet search engines, as well as payment services for blockchainblock-chain technologies, may offer and/or increase their offerings of financial products and services directly to customers. These non-traditional providers of banking services currently have an advantage over traditional providers because they are not subject to banking regulation. Several of these competitors may have long operating histories, large customer bases, strong brand recognition and significant financial, marketing and other resources. They may adopt more aggressive pricingprices and rates and devote more resources to technology, infrastructure and marketing. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulation of New Financial Institutions That Operate in Online Lending.”Supervision”

 29
Table of Contents

New competitors have entered and may continue to enter the market or existing competitors may adjust their services with unique product or service offerings or approaches to providing banking services. If we are unable to successfully compete with current and new competitors, or if we are unable to anticipate and adapt our offerings to changing banking industry trends, including technological changes, our business may be adversely affected. In addition, our failure to effectively anticipate or adapt to emerging technologies or changes in customer behavior, including among younger customers, could delay or prevent our access to new digital-based markets, which would in turn have an adverse effect on our competitive position and business. Furthermore, the widespread adoption of new technologies, including distributed ledger, artificial intelligence and/or biometrics, to provide services such as cryptocurrencies and payment systems,payments, could require substantial expenditures to modify or adapt our existing products and services as we continue to grow our internet and mobile banking capabilities. Our customers may choose to conduct business or offer products in areas that may be considered speculative or risky. Such new technologies and mobile banking platforms could negatively impact the value of our investments in bank premises, equipment and personnel for our branch network. The persistence or acceleration of this shift in demand toward internet and mobile banking may necessitate changes to our retail distribution strategy. Our failure to swiftly and effectively implement changes to our distribution strategy swiftly and effectively could have an adverse effect on our competitive position.

In particular, we face the challenge to compete in an ecosystem where the relationship with the consumer is based on access to digital data and interactions. This access is increasingly dominated by digital platforms who are already eroding our results in very relevant markets such as payments. In addition, neobanks (i.e., banks that are fully digital) have begun operating in Brazil and have drawn significant numbers of customers. This privileged access to data can be used as a leverage to compete with us in other adjacent markets and may reduce our operations and margins in core businesses such as lending or wealth management. The alliances that our competitors are starting to build with major technology companies can make it more difficult for us to successfully compete with them and could adversely affect us.

Increasing competition could also require that we increase our rates offered on deposits or lower the rates we charge on loans, which could also have a material adverse effect on our profitability, as well as limit our ability to increase our customer base and expand our operations, andfurther increasing competition for investment opportunities.

In addition, if our customer service levels wereare perceived by the market to be materially below those of our competitor financial institutions, we could lose existing and potential business. If we are not successful in retaining and strengthening customer relationships, we may lose market share, incur losses on some or all of our activities, or fail to attract new deposits or retain existing deposits, which could have a material adverse effect on us.

Our ability to maintain our competitive position depends, in part, on the success of new products and services that we offer to our customers, as well as our ability to offer products and services that meet the customers’ needs throughout their entire life cycle, and we may not be able to manage emerging risks as we expand our range of products and services, which could have a material adverse effect on us.

The success of our operations and our profitability depends, in part, on the success of new products and services we offer our customers and our ability to offer products and services that meet the customers’ needs during their entire life cycle. However, our customers’ needs and/or desires may change over time, and such changes may render our products and services obsolete, outdated or unattractive and we may not be able to develop new products that meet our customers’ changing needs and/or desires. Our success is also dependent on our ability to anticipate and leverage new and existing technologies that may have an impact on products and services in the banking industry. Technological changes may further intensify and complicate the competitive landscape and influence client behavior. If we cannot respond in a timely fashion to the changing needs and/or desires of our customers, we may lose them, which could in turn materially and adversely affect us. In addition, the cost of developing products is likely to affect our results of operations.

As we expand the range of our products and services, some of which may be at an early stage of development, in certain regional markets where we operate, we will be exposed to new and potentially increasingly complex risks, such as conduct risk arising from relationships with customers, and development expenses. Our employees and risk management systems, as well as our experience and that of our partners may not be sufficient to enable us to properly manage such risks. Any or all of these factors, individually or collectively, could have a material adverse effect on us.

While we have successfully increased our customer service levels in recent years, should these levels ever be perceived by the market to be materially below those of our competitor financial institutions, we could lose existing and potential business. If we are not successful in retaining and strengthening customer relationships, we may lose market share, incur losses on some or all of our activities or fail to attract new deposits or retain existing deposits, which could have a material adverse effect on our operating results, financial condition and prospects.

 30
Table of Contents

We are subject to extensive regulation and regulatory and governmental oversight, which could adversely affect our business, operations and financial condition.

The Brazilian financial markets are subject to extensive and continuous regulatory control by the Brazilian government, principally by the Brazilian Central Bank, the CVM and the CMN, which, in each case, materially affects our business. We have no control over the issuance of new regulations that may affect our operations, including in respect of:

·●minimum capital requirements;

27 

Table of Contents

·●reserve and compulsory deposit requirements;

·●limits on investments in fixed assets;

·●lending limits and other credit restrictions, including compulsory allocations;

·●limits and other restrictions on interest rates and fees;

·●limits on the amount of interest banks can charge or the period for capitalizing interest; and

·●accounting and statistical requirements.

The regulationregulations governing Brazilian financial institutions isare continuously evolving, and the Brazilian Central Bank has reacted actively and extensively to developments in our industry.

Changes in regulations in Brazil and international markets may expose us to increased compliance costs and limit our ability to pursue certain business opportunities and provide certain products and services. Brazilian regulators are constantly updating prudential standards in accordance with the recommendations of the Basel Committee on Banking Supervision, in particular with respect to capital and liquidity, which could impose additional significant regulatory burdens on us. For example, future liquidity standards could require us to maintain a greater proportion of our assets in highly liquid but lower-yielding financial instruments, which would negatively affect our net interest margin. There can be no assurance that future changes in regulations or in their interpretation or application will not have a material adverse effect on us.

As some of the banking laws and regulations have been recently issued or become effective, the manner in which those laws and related regulations are applied to the operations of financial institutions is still evolving. Moreover, to the extent that these recently adopted regulations are implemented inconsistently in Brazil, we may face higher compliance costs. The measures of the Brazilian Central Bank and the amendment of existing laws and regulations, or the adoption of new laws or regulations, could adversely affect our ability to provide loans, make investments or render certain financial services. No assurance can be given generally that laws or regulations will be adopted, enforced or interpreted in a manner that will not have a material adverse effect on our business and results of operations. Furthermore, regulatory authorities have substantial discretion in how to regulate banks, and this discretion, and the regulatory mechanisms available to the regulators, have been increasing during recent years. RegulationRegulations may be imposed on an ad hoc basis by governments and regulators in response to a crisis, and these may especially affect financial institutions such as those whichthat may be deemed to be systemically important. In addition, the volume, granularity, frequency and scale of regulatory and other reporting requirements require a clear data strategy to enable consistent data aggregation, reporting and management. Inadequate management information systems or processes, including those relating to risk data aggregation and risk reporting, could lead to a failure to meet regulatory reporting requirements or other internal or external information demands, and we may face supervisory measures as a result.

We may also be subject to potential impacts relating to regulatory changes affecting our controlling shareholder, Santander Spain, due to continued significant financial regulatory reform in jurisdictions outside of Brazil that directly or indirectly affect Santander Spain’s businesses, including Spain, the European Union, the United States and other jurisdictions. In Spain and in other countries in which Santander Spain’s subsidiaries operate (including Brazil), there is continuing political, competitive and regulatory scrutiny of the banking industry. Political involvement in the regulatory process, in the behavior and governance of the banking sector and in the major financial institutions in which the local governments have a direct financial interest, and in their products and services and the prices and other terms they applyapplied to them, is likely to continue. Changes to current legislation and their implementation through regulation (including additional capital, leverage, funding, liquidity and tax requirements), policies (including fiscal and monetary policies established by central banks and financial regulators, and changes to global trade policies), and other legal and regulatory actions may impose additional

28 

Table of Contents

regulatory burdens on Santander Group, including Santander Brasil, in these jurisdictions. In the European Union, these reforms could include changes relating to capital requirements, liquidity and funding, or other measures, implemented as a result of the unification of the European banking system under a European Banking Union. In the United States, many changes have occurred as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and its implementing regulations, most of which are now in place. In May 2018, the United States Congress passed, and President Donald Trump signed into law,government enacted the Economic Growth, Regulatory Relief, and Consumer Protection Act, or “EGRRCPA,” the first major piece of legislation rebalancing the financial regulatory landscape since the passage of the Dodd-Frank Act. The U.S. financial regulatory agencies have begun to propose regulations implementing EGRRCPA, but the ultimate impact of these reforms on our operations is currently uncertain. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—U.S. Banking Regulation.” We cannot predict the outcome of any financial regulatory reforms in the European Banking Union, the United States or other jurisdictions, and we cannot yet determine their effects on Santander Spain and, consequently, their effects on us, but regulatory changes may result in additional costs for us.

 31
Table of Contents

 

We are subject to potential intervention by any of our regulators or supervisors.

Our business and operations are subject to increasingly significant rules and regulations set by the Brazilian Central Bank, the CVM and the CMN, thatwhich are required to conduct banking and financial services business. These apply to business operations, affect financial returns, and include reserve and reporting requirements and conduct-of-business regulations.

In their supervisory roles, the Brazilian Central Bank the CVM, and the CMN seek to maintain the safety and soundness of financial institutions with the aim of strengthening the protection of customers and the financial system. Their continuing supervision of financial institutions is conducted through a variety of regulatory tools, including the collection of information by way of prudential returns, reports obtained from skilled persons, visits to firms and regular meetings with management to discuss issues such as performance, risk management and strategy. As a result, we face increased supervisory scrutiny (resulting in increasing internal compliance costs and supervision fees), and in the event of a breach of our regulatory obligations we are likely to face more stringent regulatory fines.

We are subject to regulation on a consolidated basis and may be subject to liquidation or intervention on a consolidated basis.

We operate in a number of credit and financial services related sectors through entities under our control. For certain purposes related to regulation and supervision, the Brazilian Central Bank treats us and our subsidiaries and affiliates as a single financial institution. While our consolidated capital base provides financial strength and flexibility to our subsidiaries and affiliates, their individual activities could indirectly put our capital base at risk. Any investigation or intervention by the Brazilian Central Bank, particularly in the activities carried out by any of our subsidiaries and affiliates, could have a material adverse impact on our other subsidiaries and affiliates and, ultimately, on us. If we or any of our financial subsidiaries become insolvent, the Brazilian Central Bank may carry out an intervention or liquidation process on a consolidated basis rather than conduct such procedures for each individual entity. In the event of an intervention or a liquidation process on a consolidated basis, our creditors would have claims to our assets and the assets of our consolidated financial subsidiaries. In this case, claims of creditors of the same nature held against us and our consolidated financial subsidiaries would rank equally in respect of payment. If the Brazilian Central Bank carries out a liquidation or intervention process with respect to us or any of our financial subsidiaries on an individual basis, our creditors would not have a direct claim on the assets of such financial subsidiaries, and the creditors of such financial subsidiaries would have priority in relation to our creditors in connection with such financial subsidiaries’ assets. The Brazilian Central Bank also has the authority to carry out other corporate reorganizations or transfers of control under an intervention or liquidation process.

 32
Table of Contents

Increases in reserve, compulsory deposit and minimum capital requirements may have a material adverse effect on us.

The Brazilian Central Bank has periodically changed the level of reserves and compulsory deposits that financial institutions in Brazil are required to maintain, , as well as determined compulsory allocation requirements to finance government programs, with these changes continuing to be a potential area of risk as they may increase the reserve and compulsory deposit or allocation requirements in the future or impose new requirements, which as a result could reduce our liquidity to fund our loan portfolio and other investments and, as a result, may have a material adverse effect on us.

Compulsory deposits and allocations generally do not yield the same return as other investments and deposits because a portion of compulsory deposits and allocations:

·●do not bear interest; and

·must be held in Brazilian federal government securities; and

·●must be used to finance government programs, including a federal housing program and rural sector subsidies.

In recent years, the CMN and Brazilian Central Bank published several rules to implement Basel III in Brazil. This new set of regulations covers the revised definition of capital, capital requirements, capital buffers, credit valuation adjustments, exposures to central counterparties, leverage and liquidity coverage ratios, and treatment of systemically important financial institutions. No assurance can be

29 

Table of Contents

given that the Basel III rules will be adopted, enforced or interpreted in a manner that will not have an adverse effect on us. Furthermore, in January 2017, the CMN issued a new rule by means of which the Brazilian Central Bank established the terms for segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for proportional application of the prudential regulation, considering the size, international activity and risk profile of members of each segment. We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.

For more information on the rules implementing Basel III, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Capital Adequacy and Leverage—Basel”Leverage - Basel—Basel III” and “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding—Capital Management.”

We may not be able to detect or prevent money laundering and other criminal activities fully or on a timely basis, which could expose us to additional liability and could have a material adverse effect on us.

We are required to comply with applicable anti-money laundering, or “AML,” anti-terrorism, anti-bribery and corruption, sanctions and other laws and regulations applicable to us. These laws and regulations require us, among other things, to conduct full customer due diligence (including sanctions and politically exposed person screening) and keep our customer, account and transaction information up to date. We have implemented financial crime policies and procedures in place detailing what is required from those responsible. We are also required to conduct AML training for our employees and to report suspicious transactions and activity to appropriate law enforcement following full investigation by the Special Incidents area.

Financial crime has becomecontinues to be the subject of enhanced regulatory scrutiny and supervision by regulators globally. AML, anti-bribery, anti-corruption and sanctions laws and regulations are increasingly complex and detailed. The Basel Committee is now introducingKey standard-setting and regulatory bodies continue to provide guidelines to strengthen the interaction and cooperation between prudential and AML/Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT supervisors.supervisors). Compliance with these laws and regulations requires automated systems, sophisticated monitoring and skilled compliance personnel.

We maintain updated policies and procedures aimed at detecting and preventing the use of our banking network for money laundering and other financial crime related activities. However, emerging technologies, such as cryptocurrencies and blockchain,innovative payment methods, could limit our ability to track the movement of funds and therefore, present a risk to our Company. Our ability to comply with the legal requirements depends on our ability to improve detection and reporting capabilities and reduce variation in control processes and oversight accountability. These require implementation and embedding within our business effective controls and monitoring, which in turn requires ongoing changes to systems and operational activities. Financial crime is continually evolving and, as noted, is subject to increasingly stringent regulatory oversight and focus. This requires proactive and adaptable responses from us so that we are able to deter threats and criminality effectively. Even known threats can never be fully eliminated, and there will be instances where we may be used by other parties to engage in money laundering and other illegal or improper activities. In addition, we rely heavily on our employees to assist us by spotting such activities and reporting them, and our employees have varying degrees of experience in recognizing criminal tactics and understanding the level of sophistication of criminal organizations. Where we outsource any of our customer due diligence, customer screening or anti-financial crime operations, we remain responsible and accountable for full compliance and any breaches. If we are unable to apply the necessary scrutiny and oversight of third parties to whom we outsource certain tasks and processes, there remains a risk of regulatory breach.

 33
Table of Contents

Additionally, in 2015 and early 2016, pursuant to a new resolution issued by the United Nations Security Council, as well as a recently enacted lawlaws and regulations issued by the Brazilian Central Bank forrequiring the implementation of the aforementioned resolution in Brazil, additional compliance requirements were imposed on us and on other financial institutions operating in Brazil, which relate to the local

30 

Table of Contents

enforcement of sanctions imposed by the United Nations Security Council resulting from certain resolutions. We believe we already have the control and compliance procedures in place to satisfy such additional compliance requirements. However, we continue to evaluate their impact on our control and compliance procedures and whether adjustments will need to be made to our control and compliance procedures as a result.

If we are unable to comply fully comply with applicable laws, regulations and expectations, our regulators and relevant law enforcement agencies have the ability and authority to impose significant fines and other penalties on us, including requiring a complete review of our business systems, day-to-day supervision by external consultants and ultimately the revocation of licenses.

The reputational damage to our business and global brand would be severe if we were found to have breached AML, anti-bribery, anti-corruption or sanctions requirements. Our reputation could also suffer if we are unable to protect our customers’ data and bank products and services from being accessed or used for illegal or improper purposes.

TheFurthermore, the Brazilian Public Federal Public Prosecutor’s Office (Ministério Público Federal), or “MPF,” has charged one of our officers in connection with the alleged bribery of a Brazilian tax auditor to secure favorable decisions in tax cases, resulting in a claimed benefit of R$83 million (approximately U.S.$2515 million) benefit tofor us. On October 23, 2018, the officer was formally indicted and asked to present his defense. On November 5, 2018 the officer in question presented his defense. The proceedings isare currently in course.ongoing. We are not a party to these proceedings. We have voluntarily provided information to the Brazilian authorities and have relinquished the benefit of certain tax credits to which the allegations relate in order to show good faith.

In addition, we rely upon ourexpect relevant counterparties to a large degree to maintain and appropriately apply their own appropriate compliance measures, procedures and internal policies. Such measures may not be completely effective in preventing third parties from using our (and our relevant counterparties’) services as a conduit for illicit purposes (including illegal cash operations) without our (or our relevant counterparties’) knowledge. If we are associated with, or even accused of being associated with, breaches of AML, anti-terrorism, or sanctions requirements, our reputation could suffer and/or we could become subject to fines, sanctions and/or legal enforcement (including being added to “black“watch lists” that would prohibit certain parties from engaging in transactions with us), any one of which could have a material adverse effect on our operating results, financial condition and prospects.

We are subject to increasing scrutiny and regulation from data protection laws, including penalties in the event of noncompliance with the terms and conditions of certain new European and Brazilian regulations.

We receive, maintain, transmit, store and otherwise process proprietary, sensitive and confidential data, including public and non-public personal information of our customers, employees, counterparties and other third parties, including, but not limited to, personally identifiable information and personal financial information. The collection, sharing, use, retention, disclosure, protection, transfer and other processing of this information is governed by stringent federal, state, local and foreign laws, rules and regulations, and the regulatory framework for data privacy and cybersecurity is in considerable flux and evolving rapidly. As data privacy and cybersecurity risks for banking organizations and the broader financial system have significantly increased in recent years, data privacy and cybersecurity issues have become the subject of increasing legislative and regulatory focus.

On May 25, 2018, the Regulation (EU) 2016/279 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (the “General Data Protection Regulation” or “GDPR”) became directly applicable in all member states of the European Union.

In addition to the GDPR, we will soon face new regulations from Brazilian authorities. The Brazilian General Data Protection Act (Law no. 13,709/2018), or “LGPD,”LGPD was approved in the Federal Official Gazette on August 14, 2018 and, as amended by the Law no.No. 13,853/2019, will taketook effect in September 2020, with the exception of its Articles 52, 53 and 54, which address administrative penalties, which entered into force on August 2020.1, 2021. Law no.No. 13,853/2019 also set up the National Data Protection Authority for purposes of monitoring, implementing and supervising compliance with the LGPD in Brazil. The LGPD also brings about deep changes in the conditions for personal data processing, with a set of rules to be observed in activities such as collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons in Brazil.persons.

 34
Table of Contents

Although a number of basic existing principles have remained the same, the GDPRLGPD has introduced extensive new obligations on data controllers and rights for data subjects. The LGPD applies to

31 

Table of Contents

individuals, as well as private and public entities, regardless of the country where they are headquartered or where data is hosted, as long as (i) data processing takes place in Brazil; (ii) the data processing activity is intended to offer or supply goods or services or to process data of individuals located in Brazil; or (iii) the data subjects are located in Brazil at the time their personal data is collected. The application of the LGPD will apply irrespective of industry or business when dealing with personal data and is not restricted to data processing activities performed through digital media and/or on the Internet.

internet.

The GDPR has also introduced new fines and penalties for a breach of requirements, including fines for systematic breaches of up to the higher of 4% of annual worldwide turnover or €20 million, and fines of up to the higher of 2% of annual worldwide turnover or €10 million (whichever is highest) for other specific infringements. The LGPD similarly sets out several penalties, which include warnings, blocking and erasure of data, public disclosure of the offense, and fines of up to two percent (2%)2% of the economic group’s turnover in Brazil in the preceding year, capped at R$50 million per offense.

The implementation of the GDPR and of the LGPD has required substantial amendments to our procedures and policies. The changes have impacted, and could further adversely impact, our business by increasing our operational and compliance costs. Further, there is a risk that the measures may not be implemented correctly or that there may be partial non-compliancenoncompliance with the new procedures. If there are breaches of the GDPR and or the LGPD obligations, as the case may be, we could face significant administrative and monetary sanctions, as well as reputational damage, which could have a material adverse effect on our operations, financial condition and prospects. Furthermore, following any such breach, we may be ordered to change our business practices, policies or systems in a manner that adversely impacts our operating results.

For more information on the rules implementing LGPD, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Data Protection Requirements.”

We are exposed to risk of loss from legal and regulatory proceedings.

We face risk of loss from legal and regulatory proceedings, including tax proceedings that could subject us to monetary judgments, fines and penalties. The current regulatory and tax enforcement environment in Brazil reflects an increased supervisory focus on enforcement, combined with uncertainty about the evolution of the regulatory regime, and may lead to material operational and compliance costs.

We are from time to time subject to regulatory investigations and civil and tax claims and party to certain legal proceedings incidental to the normal course of our business, including in connection with conflicts of interest, lending activities, relationships with our employees, economic plans, and other commercial or tax matters. In view of the inherent difficulty of predicting the outcome of legal matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories, involve a large number of parties or are in the early stages of investigation or discovery, and we cannot state accuratelywith certainty what the eventual outcome of these pending matters will be. The amount of our reserves in respect to these matters, which is calculated based on the probability of loss of each claim, is substantially less than the total amount of the claims asserted against us, and, in light of the uncertainties involved in such claims and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves currently accrued by us. As a result, the outcome of a highly uncertain matter may become material to our operating results. As of December 31, 2019,2021, we had provisions for taxes, other legal contingencies and other provisions forof R$11,3668,876 million.

See more information in note 2322 to our audited consolidated financial statements included in this annual report.report and in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”

We may face operational difficulties under the Brazilian instant payment scheme.

On November 16, 2020, the Brazilian Central Bank instituted its instant payment scheme, or “PIX,” as well as the Instant Payment System (Sistema de Pagamentos Instantâneos), or “SPI,” which enables participants to settle electronic transfers of funds in real time and is available for 24 hours a day, seven days a week, and every day in the year.

 35
Table of Contents

As a direct participant of the PIX, we may face operational issues, as well as difficulties in adapting to the requirements established by the PIX payment scheme regulations and by the other applicable rules, mainly related to the minimum level of service to be provided on a recurring basis to customers, as well as recent new security and fraud prevention requirements set forth by the Brazilian Central Bank. The Brazilian Central Bank has also enacted a new rule to be implemented by July 2022 setting a limited amount of R$ 1,000.00 for PIX transactions carried out between 8 p.m. (or, at the user’s discretion, between 10 p.m.) and 6 a.m. As a result, we may be the target of administrative sanctions and/or judicial claims, either by the Brazilian Central Bank itself or as a result of complaints brought by our customers. Furthermore, as a consequence of potential administrative sanctions or judicial claims, we may face difficulties in retaining customers in relation to Santander SX, our solution for our customers to access PIX, which may have a material adverse effect on our financial results, as well as our reputation.

In addition, the Brazilian Central Bank may issue new and stricter rules applicable to PIX participants, including new operational capacity requirements. The imposition by the Brazilian Central Bank of new requirements may adversely affect our operations.

For more information related to the PIX and the SPI, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Brazilian Payment and Settlement System.”

Disclosure controls and procedures over financial reporting may not prevent or detect all errors or acts of fraud.

Disclosure controls and procedures, including internal controls over financial reporting, are designed to provide reasonable assurance that information required to be disclosed by the companyus in reports filed or submitted under the U.S. Securities Exchange Act of 1934, as amended, (theor the “Exchange Act”)Act,” is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and

32 

Table of Contents

forms.

These disclosure controls and procedures have inherent limitations, which include the possibility that judgments in decision-making can be faulty and result in errors or mistakes. Additionally, controls can be circumvented by any unauthorized override of the controls. Consequently, our business is exposed to risk from potential noncompliance with policies, employee misconduct, or negligence and fraud, which could result in regulatory sanctions, civil claims, and serious reputational or financial harm. In recent years, a number of multinational financial institutions have suffered material losses due to the actions of “rogue traders” or other employees. It is not always possible to deter employee misconduct, and the precautions we take to prevent and detect this activity may not always be effective. Accordingly, because of the inherent limitations in the control system, misstatements due to error or fraud may occur and not be detected.

We are subject to review by tax authorities, and an incorrect interpretation by us of tax laws and regulations may have a material adverse effect on us.

The preparation of our tax returns requires the use of estimates and interpretations of complex tax laws and regulations and is subject to review by taxingtax authorities. We are subject to the income tax laws of Brazil. These tax laws are complex and subject to different interpretations by the taxpayer and relevant governmental taxingtax authorities, leading to disputes, which are sometimes subject to prolonged evaluation periods until a final resolution is reached. In establishing a provision for income tax expense and filing returns, we must make judgments and interpretations about the application of these inherently complex tax laws. If the judgment, estimates and assumptions we use in preparing our tax returns are subsequently found to be incorrect, there could be a material adverse effect on us. The interpretations of Brazilian taxingtax authorities are unpredictable and frequently involve litigation, which introduces further uncertainty and risk as to tax expense.

Changes in taxes and other fiscal assessments may adversely affect us.

The Brazilian government regularly enacts reforms to the tax and other assessment regimes to which we and our customers are subject. Such reforms include changes in tax rates and, occasionally, enactment of temporary levies, the proceeds of which are earmarked for designated governmental purposes. The effects of these changes and any other changes that result from enactment of additional tax reforms cannot be quantified and there can be no assurance that any such reforms would not have an adverse effect upon our business. Furthermore, such changes may produce uncertainty in the financial system, increasing the cost of borrowing and contributing to the increase in our non-performing credit portfolio.

 36
Table of Contents

Changes in tax policy, including the creation of new taxes, may occur with relative frequency and such changes could have an adverse effect on our financial position or operating results. For example, in 2011, the Brazilian government established the Tax on Financial Transactions (the “IOF Tax”). It applied, which used to be charged at a rate of 1.0% per day onover the notional value of increased foreign exchange exposure, but has currently been reduced the rate to zero with respect to foreign exchange. The IOF Tax rates applicable to local loans toof individuals and legal entities have been frequently adjusted (both increases and decreases) in recent years. The currently applicable IOF Tax rates applicable to local loans are approximately 1.5% for legal entities and 3.0% for individuals, but could change in the future. We cannot estimate the impact that a change in tax laws or tax policy could have on our operations. For example, the IOF Tax is a tool used by the Brazilian government to regulate economic activity, which does not directly impact our results of operations, though changes in the IOF Tax can impact our business volumes generally.

Also, the Brazilian Congress may discuss broad tax reforms in Brazil to improve the efficiency of allocation of the economic resources, as proposed by the executive branch of the Brazilian federal government. Major tax reforms in Brazil have been discussed over the last few years. We cannot predict if tax reforms will be implemented in the future. The effects of these changes, if enacted, and any other changes that could result from the enactment of additional tax reforms, cannot be quantified.

33 

Table of Contents

Our loan and investment portfolios are subject to risk of prepayment, which could have a material adverse effect on us.

Our fixed-rate loan and investment portfolios are subject to prepayment risk, which results from the ability of a borrower or issuer to pay a debt obligation prior to maturity. Generally, in a low interest rate environment, prepayment activity increases, which reduces the weighted average terms of our earning assets and could have a material adverse effect on us. We would also be required to amortize net premiums or commissions into income over a shorter period of time, thereby reducing the corresponding asset yield and net interest income. Prepayment risk also has a significant adverse impact on credit card and collateralized mortgage loans, since prepayments could shorten the weighted average life of these assets, which may result in a mismatch in our funding obligations and reinvestment at lower yields. Prepayment risk is inherent to our commercial activity, and an increase in prepayments could have a material adverse effect on us.

The credit quality of our loan portfolio may deteriorate and our loan loss reserves could be insufficient to cover our loan losses, which could have a material adverse effect on us.

Risks arising from changes in credit quality and the recoverability of loans and amounts due from counterparties are inherent to a wide range of our businesses. Non-performing or low credit quality loans can negatively impactedimpact our results of operations as the amount of our reported non-performing loans may increase in the future as a result of growth in our total loan portfolio, including as a result of loan portfolios that we may acquire in the future (the credit quality of which may turn out to be worse than we had anticipated), or other factors, including factors beyond our control, such as adverse changes in the credit quality of our borrowers and counterparties or a general deterioration in economic conditions in Brazil and globally.globally, including as a result of the COVID-19 pandemic. In 2021, as a response to the macroeconomic shock of the COVID-19 pandemic, we used a part of the provision overlay on expected credit losses created in 2020. If we wereare unable to control the level of our non-performing or poor credit quality loans, this could have a material adverse effect on us.

Our provisions for impairment losses are based on our current assessment, as well as expectations, concerning various factors affecting the quality of our loan portfolio. These factors include, among other things, our borrowers’ financial condition, repayment abilities intentions, the realizable value of any collateral, the prospects for support from any guarantor, government macroeconomic policies, interest rates, and the legal and regulatory environment. As

Since, many of these factors are beyond our control and there is no infallible method for predicting loan and credit losses, we cannot assure you that our current or future provisions for impairment losses will be sufficient to cover actual losses. If our assessment of and expectations concerning the abovementioned factors differ from actual developments, if the quality of our total loan portfolio deteriorates, for any reason, or if the future actual losses exceed our estimates of expectedincurred losses, we may be required to increase our provisions for impairment losses, which may adversely affect us. If we were unable to control or reduce the level of our non-performing or poor credit quality loans, this could have a material adverse effect on us.

 37
Table of Contents

On December 31, 2021, our credit risk (which includes gross loans and advances to customers, guarantees and documentary credits) amounted to R$540,873 million (compared to R$466,104 million as of December 31, 2020).

Economic uncertainty may lead to a contraction in our loan portfolio.

The recent slow growth rate of the Brazilian economy in 2021, 2020, 2019 and 2018, and 2017 and recession in 2016,as well as a slowdown in the growth of customer demand, an increase in market competition, changes in governmental regulation, and a decreaserecent increase of the SELIC rate, since 2017as well as a recession in 2016 have adversely affected the rate of growth of our loan portfolio in recent years. Ongoing economic uncertainty could adversely affect the liquidity, businesses and financial condition of our customers, as well as lead to a general decline in consumer spending, a rise in unemployment and an increase in household indebtedness. All of thisthese factors could lead to a decrease in demand for borrowings in general, which could have a material adverse effect on our business.

Liquidity and funding risks are inherent in our business, and since our principal sources of funds are short-term deposits, a sudden shortage of funds could cause an increase in costs of funding and an adverse effect on our revenues and our liquidity levels.

Liquidity risk is the risk that we either do not have available sufficient financial resources available to meet our obligations as they fall due, or that we can only secure them onlysuch financial resources at excessive cost. This risk is inherent in any retail and commercialwholesale banking business and can be heightened by a number of enterprise-specific

34 

Table of Contents

factors, including over-relianceoverreliance on a particular source of funding, changes in credit ratings or market-wide phenomena such as market dislocation.dislocation, including as a result of the COVID-19 pandemic, Constraints in the supply of liquidity, including in interbank lending, can materially and adversely affect the cost of funding of our business, and extreme liquidity constraints may affect our current operations, our growth potential and our ability to fulfill regulatory liquidity requirements.

Our cost of obtaining funds is directly related to prevailing interest rates and to our credit spreads, withand increases in these factors increasingraise the cost of our funding. Credit spread variations are market-driven and may be influenced by market perceptions of our creditworthiness. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile.

Disruption and volatility in the global financial markets could have a material adverse effect on our ability to access capital and liquidity on financial terms acceptable to us. If wholesale markets financing ceases to become available, or becomes excessively expensive, we may be forced to raise the rates we pay on deposits, with a view to attracting more customers, and/or to sell assets, potentially at depressed prices. The persistence or worsening of these adverse market conditions or an increase in base interest rates could have a material adverse effect on our ability to access liquidity and cost of funding.

We rely primarily on retail deposits as our main source of funding. As of December 31, 2019, 80.6%2021, 87% of our customer deposits had remaining maturities of one year or less, or were payable on demand, while 31.6%55% of our assets havehad maturities of one year or more, resulting in a mismatch between the maturities of liabilities and the maturities of assets.assets, The ongoing availability of this type of funding is sensitive to a variety of factors beyond our control, including: general economic conditions, the confidence of retail depositors in the economy and in the financial services industry, the availability and extent of deposit guarantees, as well as competition for deposits between banks or with other products. Any of these factors could significantly increase the amount of retail deposit withdrawals in a short period of time, thereby reducing our ability to access retail deposit funding on economically appropriate and reasonable terms, or at all, in the future. If these circumstances were to arise, this could have a material adverse effect on our operating results, financial condition and prospects.

Central banks around the world have taken extraordinary measures to increase liquidity in the financial markets as a response to the financial crisis and the COVID-19 crisis. As a result of inflationary pressures in late 2021 and early 2022 central banks have begun to reduce or discontinue these measures. If current credit facilities wereare rapidly removed or significantly reduced, this could have a material adverse effect on our ability to access liquidity and on our funding costs.

Additionally, our activities could be adversely impacted by liquidity tensions arising from generalized drawdowns of committed credit lines to our customers.

Our ability to manage our funding base may also be affected by changes to the regulation on compulsory reserve requirements in Brazil. For more information on the rules on compulsory reserve requirements, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”

 38
Table of Contents

We cannot assure that in the event of a sudden or unexpected shortage of funds in the banking system, we will be able to maintain levels of funding without incurring high funding costs, a reduction in the term of funding instruments or the liquidation of certain assets. If this were to happen, we could be materially adversely affected. Finally, the implementation of internationally accepted liquidity ratios might require changes in business practices that affect our profitability. The liquidity coverage ratio, or “LCR,” is a liquidity standard that measures if banks have sufficient high-quality liquid assets to cover expected net cash outflows over a 30-day liquidity stress period. TheFor the observations in this disclosure (exercise(exercised with daily balances for October, November and December 2019) the institution2021), Santander Brasil had aan LCR of 126.7%148.5%, above the 100% minimum requirement. The Net Stable Funding Ratio, or “NSFR,” provides a sustainable maturity structure of assets and liabilities suchso that banks maintain a stable funding profile in relation to their activities. The NSFR, which must remain at a minimum of 100% beginning from October 1, 2018 according to CMN rules, stands at over 112.3%111.7% for us as of December 31, 2019.

2021.

Our cost of funding is affected by our credit ratings, and any risks may have an adverse effect on both variables. Any downgrade in (i) the rating of Brazil’s, (ii) our controlling shareholders, or (iii) our credit rating would likely increase our cost of funding, requiring us to post additional collateral under some of our derivative and other contracts and adversely affect our interest margins and operations results.

results of operations.

Credit ratings affect the cost and other terms upon which we are able to obtain funding. Rating agencies regularly evaluate us, and their ratings of our long-term debt are based on a number of factors, including our financial strength, conditions that affect the financial services industry and the economic environment in which we operate. In addition, due to the methodology of the main rating agencies, our credit rating is affected by the rating of Brazilian sovereign debt and the rating of our controlling shareholders. If Brazil’s sovereign debt or the debt of our controlling shareholder were downgraded, our credit rating would also likely be downgraded to a similar degree.

35 

Table of Contents

Any downgrade in Brazil’s sovereign credit ratings, those of our controlling shareholder, or in our ratings, would likely increase our borrowing costs. For example, a ratingsrating downgrade could adversely affect our ability to sell or markettrade some of our products, such as subordinated securities, engage in certain longer-term and derivatives transactions, and retain our customers, particularly customers who need a minimum rating threshold in order to invest. In addition, under the terms of certain derivative contracts and other financial commitments, we may be required to maintain a minimum credit rating or risk termination of such contracts or require the posting of collateral. Any of these results of a ratings downgrade could reduce our liquidity and have an adverse effect on us, including our operating results and financial condition.

While certain potential impacts of these downgrades are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain, as they depend upon numerous dynamic, complex and interrelated factors and assumptions, including market conditions at the time of any downgrade, whether the downgrade of our long-term credit rating indirectly downgrades our short-term credit rating, and assumptions about the potential behaviors of various customers, investors and counterparties. Actual outflows could be higher or lower than any hypothetical examples, depending upon certain factors, including: the credit rating agency issuing the downgrade, any management or restructuring actions that could be taken to reduce cash outflows, and the potential liquidity impact from loss of unsecured funding (such as from money market funds) or loss of secured funding capacity. Although unsecured and secured funding stresses are included in our stress-testing scenarios and a portion of our total liquid assets is held against these risks, a credit rating downgrade could still have a material adverse effect on us.

Santander Spain’s long-term debt is currently rated investment grade by the major rating agencies: A2 stable outlook by Moody’s, A with a stablenegative outlook by Standard & Poor’s Ratings Services, or “S&P,” and A- with a stablenegative outlook by Fitch Ratings Ltd., or “Fitch”.“Fitch.” In February 2017, S&P revised the outlook from stable to positive, reflecting the revised funding plans announced by Santander Spain, which give S&P comfort that Santander Spain will build a substantial additional loss-absorbing capacity buffer over the next two years. In June 2017, S&P revised the outlook from positive to stable as a result of the risks associated with the acquisition of Banco Popular Español, S.A. by Santander Spain. FollowingApril 2018, following the upgrade of the Spanish sovereign debt rating, in April 2018 S&P and Moody’s upgraded their ratings of Santander Spain from A- to A and from A3 to A2, respectively, and in July 2018, Fitch confirmed its rating and outlook. In 2019, the agencies maintained their 2018 analysis, considering, in some cases, a positive rating depending Santander Spain’s performance in 2019. However, due to the crisis caused by the COVID-19 pandemic and the macroeconomic deterioration in 2020, S&P and Fitch revised the outlook to negative, while Moody’s maintained its rating and outlook. In 2021, Fitch revised the outlook to stable and S&P revised its outlook to negative, considering the strength of Santander Spain’s geographic diversification and the fact that it has the potential to withstand an additional deterioration of its assets’ quality in some geographies and business segments. Santander Spain’s long-term debt in foreign currency is currently rated A+ with a negative outlook by S&P, and A2 with a stable outlook by Moody’s.

Santander Brasil’sOur long-term debt in foreign currency is currently rated BB- with a stable outlook by S&P and Ba3Ba1 with a stable outlook by Moody’s.

 39
Table of Contents

S&P lowered Brazil’s credit rating in September 2015 from BBB- to BB+ (a non-investment-grade rating), and then again in mid-February 2016 from BB+ to BB with a negative outlook, mainly due to the continuing weak economic conditions of Brazil, political instability, the ongoingLava Jato investigations, and uncertainty as to whether the Brazilian government will enact reforms in the 2016 federal budget to improve the country’sBrazil’s fiscal accounts and economic situation. In January 2018, Brazil was further downgraded by S&P to BB- with a stable outlook as a result of the failure of the prior Brazilian government to approve certain reforms. Fitch also lowered Brazil’s credit rating in December 2015 from BBB to BB+ (a non-investment grade rating), and then again in May 2016 from BB+ to BB, citing Brazil’s worsening economic outlook and growing political crisis as reasons for downgrading the country.Brazil. In February 2018, Fitch further downgraded Brazil to BB-. Moody’s lowered Brazil’s credit rating from Baa2 to Baa3 (the lowest investment grade rating) in August 2015, and then to Ba2 (a non-investment-grade rating). Brazil’s sovereign rating is currently rated by the three major risk rating agencies as follows: BB- (stable) by S&P and Fitch, and Ba2 (stable) by Moody’s. Any further downgrade in Brazil’s sovereign rating would likely increase our funding costs and adversely affect us, including our asset quality.

As a result of the lowering of Brazil’s sovereign credit rating, our long-term foreign currency credit rating was lowered during the course of 2015 and in early 2016. On August 12, 2015, Moody’s lowered our credit rating from Baa2 to Baa3, lowering it again on February 25, 2016 to Ba3, and in March and

36 

Table of Contents

May 2017, it affirmed the rating at Ba3.of Ba1. On September 10, 2015, S&P lowered our credit rating from BBB- to BB+ (a non-investment-grade rating), lowering it again on February 17, 2016 to BB and maintaining the rating at BB in August 2017 while changing the outlook to negative. In January 2018, Santander Brasil waswe were downgraded by S&P to BB- with a stable outlook from BB with a negative outlook. In February 2019, Santander Brasil was upgraded by S&P to BB- with a stable outlook from BB- with a negative outlook. We are currently rated as follows: Ba1BB- by S&P and Ba3Ba1 by Moody’s, both with a stable outlook. Any further downgrade in our long-term debt in foreign currency would likely increase our funding costs and adversely affect our interest margins and results of operations.

We cannot assure that the rating agencies will maintain their current ratings or outlooks, or with regard to those rating agencies that have a negative outlook with respect to us or our controlling shareholder, there can be no assurances that such agencies will revise such outlooks upward. In general, the future evolution of our ratings will be linked, to a large extent, to the macroeconomic outlook and to the impact of the COVID-19 pandemic (including, for example, additional waves, new lockdowns, etc.) on our asset quality, profitability and capital, as well as on the rating of Santander Spain. Our failure to maintain favorable ratings and outlooks would likely increase our cost of funding and adversely affect our interest margins and results of operations.

The effectiveness of our credit risk management is affected by the quality and scope of information available in Brazil.

In assessing customers’ creditworthiness, we rely largely on the credit information available from our own internal databases, certain publicly available customer credit information, information relating to credit contracted, which is provided by the Brazilian Central Bank and other sources. Due to limitations in the availability of information and the developing information infrastructure in Brazil, our assessment of credit risk associated with a particular customer may not be based on complete, accurate or reliable information. In addition, we cannot assure that our credit scoring systems collect complete or accurate information reflecting the actual behavior of customers or that their credit risk can be assessed correctly. Without complete, accurate and reliable information, we have to rely on other publicly available resources and our internal resources, which may not be effective. As a result, our ability to effectively manage our credit risk and subsequently our allowances for impairment losses may be materially adversely affected.

Our hedging strategy may not be able to prevent losses.

We use a range of strategies and instruments, including entering into derivative and other transactions, to hedge our exposure to market, credit and operational risks. Nevertheless, we may not be able to hedge all risks to which we are exposed, whether partially or in full. Furthermore, the hedging strategies and instruments on which we rely may not achieve their intended purpose. Any failure in our hedging strategy or in the hedging instruments on which we rely could result in losses to us and have a material adverse effect on our business, financial condition and results of operations.

Inadequate pricing methodologies for insurance, pension plan and premium bond products may adversely affect us.

We establish prices and make calculations in relation to our insurance and pension products based on actuarial or statistical estimates. The pricing of our insurance and pension plan products is based on models that include a number of assumptions and projections that may prove to be incorrect, since these assumptions and projections involve the exercise of judgment with respect to the levels and timing of receipt or payment of premiums, contributions, provisions, benefits, claims, expenses, interest, investment results, retirement, mortality, morbidity, and persistence. We could suffer losses due to events that are contrary to our expectations as a result of, among others, incorrect biometric and economic assumptions or the use of incorrect actuarial bases in the calculation of contributions and provisions.

 40
Table of Contents

Although the pricing of our insurance and pension plan products and the adequacy of the associated reserves are reassessed on a yearly basis, we cannot accurately determine whether our assets supporting our policy liabilities, together with future premiums and contributions, will be sufficient for the payment of benefits, claims and expenses. Accordingly, the occurrence of significant deviations from our pricing assumptions could have an adverse effect on the profitability of our insurance and pension products. In

37 

Table of Contents

addition, if we conclude that our reserves and future premiums are insufficient to cover future policy benefits and claims, we will be required to increase our reserves and record these effects in our financial statements, which may have a material adverse effect on us.

Social and environmental risks may have a material adverse effect on us.

As part of the risk analysis we undertake with respect to our customers, we take into account environmental factors (such as soil and water contamination, vegetation suppression, or lack of environmental authorizations) as well as social factors (such as the existence of working conditions akin to slavery). We are also exposed to the risk that our assessment that a product or service we provide is socially or environmentally responsible will be challenged by customers, regulators or third parties. Any failure by us to identify and accurately assess these factors and the potential risks to us before entering into proposed transactions with our customers may result in damage to our image and reputation, as well as have a material adverse effect on our business, results of operations and financial condition.

 

Furthermore, the Brazilian Central Bank has recently issued new regulations and standards applicable to us relating to the management and governance of social, environmental and climate risks by financial institutions. These rules relate both to risks resulting from our products, services and activities, and to risks arising out of the activities of our counterparties, controlled entities, suppliers and outsourced service providers. The majority of these regulations will enter into effect in July 2022. Any failure by us to adequately identify and assess these risks may subject us to future sanctions by the Brazilian Central Bank, as well as have a material adverse impact on our business and financial condition. For more information on the new regulatory requirements issued by the Brazilian Central Bank relating to environmental, social and governance requirements applicable to Brazilian financial institutions, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Environmental, Social and Governance (ESG) requirements applicable to financial institutions.”

The value of the collateral securing our loans may not be sufficient, and we may be unable to realize the full value of the collateral securing our loan portfolio.

The value of the collateral securing our loan portfolio may fluctuate or decline due to factors beyond our control, including among others,as a result of a prolonged COVID-19 pandemic or a weaker than expected economic recovery after the COVID-19 pandemic and macroeconomic factors globally and in Brazil, as well asforce majeure events. events, such as natural disasters (including as a result of climate change). We may also not have sufficiently recent information on the value of collateral, which may result in an inaccurate assessment for impairment losses of our loans secured by such collateral. If any of the above were to occur, we may need to make additional provisions to cover actual impairment losses of our loans, which may materially and adversely affect our results of operations and financial condition.

We may face significant challenges in possessing and realizing value from collateral with respect to loans in default.

If all resources appliedwe are unable to recover ofsums owed to us under secured loans in default through extrajudicial measures are not sufficient,such as restructurings, our last recourse with respect to such loans may be to enforce the collateral secured in our favor by the applicable borrower. Depending on the type of collateral granted, we mayeither have to enforce thesuch collateral through the courts or through extrajudicial measures. However, we may face delays oneven where the enforcement mechanism is duly established by the law, Brazilian law allows borrowers to challenge the enforcement in the courts, even if such challenge is unfounded, which can delay the realization of value from the collateral due to juridical measures foreseen bycollateral. In addition, our secured claims under Brazilian law will in certain cases rank below those of preferred creditors such as challenge in the courts, ranking of preferred creditors.employees and tax authorities. As a result, we may not be able to realize value from the collateral, or may only be able to do so to a limited extent or after a significant amount of time, thereby potentially adversely affecting our financial condition and results may be potentially affect by the inability to realize the value of the collateral, in full or at all or, by delay in realizing such collateraloperations.

 41
Table of Contents

We are subject to market, operational and other related risks associated with our derivative transactions and our investment positions that could have a material adverse effect on us.

We enter into derivative transactions for trading purposes, as well as for hedging purposes. We are subject to market, credit and operational risks associated with these transactions, including basis risk (the risk of loss associated with variations in the spread between the asset yield and the funding and/or hedge cost) and credit or default risk (the risk of insolvency or other inability of the counterparty to a particular transaction to perform its obligations thereunder, including providing sufficient collateral). We also hold securities in our own portfolio as part of our investment and hedging strategies.

Financial instruments, including derivative instruments and securities represented 86.7%88.6% of our total assets as of December 31, 2019. 2021. As of December 31, 2021, the notional value of derivatives in our books amounted to R$2,427,444 million (with a market value of R$21,125 million of debit balance and R$24,619 million of credit balance).

Any realized or unrealized future gains or losses from these investments or hedging strategies could have a significant impact on our income. These gains and losses, which we account for when we sell or mark to market investments in financial instruments, can vary considerably from one period to another. If, for example, we enter into derivatives transactions to protect ourselves against decreases in the value of thereal or in interest rates and thereal instead increases in value or interest rates increase, we may incur financial losses. We cannot forecast the amount of gains or losses in any future period, and the variations experienced from one period to another do not necessarily provide a meaningful forward-looking reference point. Gains or losses in our investment portfolio may create volatility in net revenue levels, and we may not earn a return on our consolidated investment portfolio, or on a part of the portfolio in the future. Any losses on our securities and derivative financial instruments could materially and adversely affect our operating income and

38 

Table of Contents

financial condition. In addition, any decrease in the value of these securities and derivatives portfolios may result in a decrease in our capital ratios, which could impair our ability to engage in lending activity at the levels we currently anticipate.

The execution and performance of these transactions depend on our ability to maintain adequate control and administration systems. Our ability to adequately monitor, analyze and report derivative transactions continues to depend, largely, on our information technology systems. These factors further increase the risks associated with these transactions and could have a material adverse effect on us.

We may not effectively manage risks associated with the replacement or reform of benchmark indices.

Interest rate, equity, foreign exchange rate and other types of indices, which are deemed to be “benchmarks” are“benchmarks,” including those in widespread and long-standing use, have been the subject of ongoing international, national and other regulatory scrutiny and initiatives and proposals for reform. Some of these reforms are already effective while others are still to be implemented or are under consideration. These reforms have caused and may in the future cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences, which cannot be fully anticipated.

Any of the benchmark reforms which have been proposed or implemented, or the general increased regulatory scrutiny. For example, regardingscrutiny of benchmarks, could also increase the costs and risks of administering or otherwise participating in the setting of benchmarks and complying with regulations or requirements relating to benchmarks. Such factors may have the effect of discouraging market participants from continuing to administer or contribute to certain benchmarks, trigger changes in the rules or methodologies used in certain benchmarks or lead to the disappearance of certain benchmarks.

Any of these developments, and any future initiatives to regulate, reform or change the administration of benchmarks, could result in adverse consequences to the return on, value of and market for loans, mortgages, securities, derivatives and other financial instruments whose returns are linked to any such benchmark, including those issued, funded or held by us.

Various regulators, industry bodies and other market participants in the U.S. and other countries have worked to develop, introduce and encourage the use of alternative rates to replace certain benchmarks. A transition away from the widespread use of interest rate benchmarks to alternative rates has begun and will continue over the course of the next few years. While central bank-sponsored committees in 2017,various jurisdictions have recommended alternative rates for various important interest rate benchmarks, if a particular benchmark were to be discontinued and an alternative rate had not been successfully introduced to replace that benchmark, this could result in widespread dislocation in the UK’sfinancial markets, engender volatility in the pricing of securities, derivatives and other instruments, and suppress capital markets activities, all of which could have adverse effects on our results of operations. In addition, the transition of a particular benchmark to a replacement rate could affect hedge accounting relationships between financial instruments linked to that benchmark and any related derivatives, which could adversely affect our results.

 42
Table of Contents

On 5 March 2021, the U.K. Financial Conduct Authority, or the “FCA,” announced that it will no longer persuade or compel banks to submit rates for the calculation ofwhich regulates the London interbank offered rate or “LIBOR,” benchmark(LIBOR), published an announcement to confirm the dates immediately after 2021. This announcement indicates that the continuation ofwhich all LIBOR on the current basis cannot andsettings will not be guaranteed after 2021. Therefore, after 2021 LIBOR mayeither cease to be produced. The Bankprovided by any administrator or no longer be representative: December 31, 2021 for all EUR, GBP, JPY and CHF LIBOR tenors and 1-week and 2-month USD LIBOR tenors, and June 30, 2023 for the remaining USD LIBOR tenors (overnight, 1-, 3-, 6- and 12-month). Therefore, since January 1, 2022, most LIBOR settings have ceased to be available. While publication of Englandthe 1-, 3- and 6-month GBP and JPY tenors will continue at least until the end of 2022 on the basis of a “synthetic” methodology, these rates are solely available for use in legacy transactions. In addition, while certain USD LIBOR tenors are expected to continue to be published until June 30, 2023, U.S. regulators and the FCA have published guidance instructing banks to cease entering into new contracts referencing USD LIBOR no later than December 31, 2021, with limited exceptions.

In October 2020, the International Swaps and Derivatives Association, or “ISDA,” launched the 2020 IBOR Fallbacks Protocol, which amends the ISDA’s interest rate definitions used among protocol adherents, to incorporate new fallbacks for legacy non-cleared derivatives linked to LIBOR and certain other interest rate benchmarks. The protocol became effective as of January 25, 2021. We have adhered to this new protocol. Similarly, ISDA’s IBOR Fallbacks Supplement also amended ISDA’s standard definitions to incorporate these new fallbacks in new derivatives entered into on or after that same effective date. Following December 31, 2021, derivatives referencing non-USD LIBOR that were amended through adherence to the 2020 IBOR Fallbacks Protocol or that incorporate the IBOR Fallbacks Supplement are working with market participants to catalyze a transition toor will be valued using Sonia. In addition, the European Money Market Institute (“EMMI”) announced the discontinuationadjusted version of the Euro OverNight Index Average, or “EONIA,” after January 3, 2022 and that from October 2, 2019 until its total discontinuation it will be replacedapplicable risk-free reference rate selected as an alternative to the applicable IBOR by the euro short-term rate,appropriate national committee.

With respect to USD LIBOR-linked contracts that are governed by New York law, New York State has enacted legislation that will replace references to LIBOR in certain contracts with a benchmark based on the Secured Overnight Financing Rate (SOFR), including any spread adjustment, recommended by the Federal Reserve Board, the Federal Reserve Bank of New York or “€STR,”) plusthe Alternative Reference Rates Committee (the ARRC) convened by the Federal Reserve Board and the Federal Reserve Bank of New York. The Federal Reserve Bank of New York currently publishes the SOFR based on overnight U.S. Treasury repurchase agreement transactions, which has been recommended as the alternative to USD LIBOR by the ARRC.

Our exposure to LIBOR-linked contracts as of December 31, 2021 was limited and related only to USD LIBOR. In 2021, we adopted the SOFR (Secured Overnight Finance Rate) as a spread of 8.5 basis points. replacement for USD LIBOR for new agreements and since January 1, 2022 we are no longer entering into new USD LIBOR transactions. We are communicating with our customers to amend existing agreements to include appropriate fallback clauses for when USD LIBOR ceases to be published.

These and other reforms have caused and may in the future cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences, which cannot be fully anticipated, which introducesintroduce a number of risks for us. These risks include (i) legal risks arising from potential changes required to documentation for new and existing transactions; (ii) risk management, financial and accounting risks arising from market risk models and from valuation, hedging, discontinuation and recognition of financial instruments linked to benchmark rates; (iii) business risk that theof a decrease in revenues of products linked to LIBOR (in particular those indices that will be replaced) decrease;replaced; (iv) pricing risks arising from how changes to benchmark indices could impact pricing mechanisms on some instruments; (v) operational risks arising from the potential requirement to adapt IT systems, trade reporting infrastructure and operational processes; and (vi) conduct risks arising from the potential impact of communication with customers and engagement during the transition period.period and inquiries, reviews or other actions from regulators regarding our preparation, readiness and transition plans and (vii) litigation risks and risks relating to other disputes and actions with clients, counterparties, investors and other parties regarding our existing products and services, which could adversely impact our profitability. The replacement benchmarks and their transition path have been defined, but, with respect to some benchmarks, the mechanisms for implementation are under development. Accordingly, it is not currently possible to determine whether, or to what extent, any such changes would affect us. However, the implementation of alternative benchmark rates may have a material adverse effect on our business, results of operations, financial condition and prospects. We may also be adversely affected if the change restricts our ability to provide products and services or if it necessitates the development of additional information technology systems.

 43
Table of Contents

Failure to successfully implement and continue to improve our risk management policies, procedures and methods, including our credit risk management system,systems, could materially and adversely affect us, and we may be exposed to unidentified or unanticipated risks.

TheRisk management of risk is an integral part of our activities. We seek to monitor and manage our risk exposure through a variety of separate but complementary financial, credit, market, operational, compliance and legal reporting systems, among others. We employ a broad and diversified set of risk monitoring and risk mitigation techniques, which may not be fully effective in mitigating our risk exposure in all economic market environments or against all types of risk, including risks that we may fail to identify or anticipate.

We use certain qualitative tools and metrics for managing market risk, including our use of value at risk, or “VaR,” and statistical modeling tools, which are based upon our use of observed historical market behavior. We apply statistical and other tools to these observations to arrive at quantifications of our risk exposures. These qualitative tools and metrics may fail to predict future risk exposures. These risk exposures could, for example, arise from factors we did not anticipate or correctly evaluate in our statistical models. This would limit our ability to manage our risks. OurThus, our losses thus could be significantly greaterhigher than the historical measures indicate. In addition, our quantified modeling doesstatistical models may not

39 

Table of Contents

take all risks into account. Our more qualitative approach to managing those risks could prove insufficient, exposing us to material unanticipated losses. We could face adverse consequences as a result of decisions, which may lead management to, based on models that are poorly developed, implemented or used, or as a result of the modeled outcome, misunderstand or misuse such information for purposes for which it was not designed. In addition, if existing or potential customers or counterparties believe our risk management is inadequate, they could take their business elsewhere or seek to limit their transactions with us. Any of these factors could have a material adverse effect on our reputation, as well as our revenues and profits. We also face risks from operational losses that may occur due to inadequate processes, people and systems failures or even from external events like natural disasters, terrorism, robbery and vandalism. Despite the operational risk management process supported by the Board and the internal audit tests, the internal controls and procedures effectiveness may not be fully adequate or sufficient to avoid all the known and unknown operational risks. We have suffered losses from operational risk in the past, including losses related to the migration of customer accounts in connection with acquisitions, phishing scams perpetuated by third parties, and information system platform upgrades. There can be no assurance that we will not suffer material losses from operational risk in the future, including losses related to security breaches.

As a retail bank, one of the main types of risks inherent in our business is credit risk. For example, an important feature of our credit risk management system is to employ an internal credit rating system to assess the particular risk profile of a customer.individual customers and SMEs. As this process involves detailed analyses of the customer, taking into account both quantitative and qualitative factors, it is subject to human or IT systems errors. In exercising their judgment on current or future credit risk behavior of our customers, our employees may not always be able to assign an accurate credit rating, which may result in oura higher exposure to higher credit risks than indicated by our risk rating system.

Some of the models and other analytical and judgment-based estimations we use in managing risks are subject to review by, and require the approval of, our regulators. If models do not comply with all their expectations, our regulators may require us to make changes to such models, may approve them with additional capital requirements, or we may be precluded from using them. Any of these potential situations could limit our ability to expand our businesses or have a material impact on our financial results.

Failure to effectively implement, consistently monitor or continuously refine our credit risk management system may result in an increase in the level of non-performing loans and a higher risk exposure for us, which could have a material adverse effect on us.

Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.

We face various cybersecurity risks, including but not limited to: penetration of our information technology systems and platforms by ill-intentioned third parties, infiltration of malware (such as computer viruses) into our systems, contamination (whether intentional or accidental) of our networks and systems by third parties with whom we exchange data, unauthorized access to confidential customer and/or proprietary data by persons inside or outside our organization, ransomware affecting our services and cyber-attacksend-user technology, social engineering and phishing attacks, and cyberattacks causing systems degradation or service unavailability that may result in business losses.

 44
Table of Contents

We may not be able to successfully protect our information technology systems and platforms against such threats. We have seen in recent years computer systems of companies and organizations being increasingly targeted, and the techniques used to obtain unauthorized, improper or illegal access to information technology systems have become increasingly complex and sophisticated. Furthermore, such techniques change frequently and are often not recognized or detected until after they have been launched and can originate from a wide variety of sources, including not only by cyber criminals, but also by activists and rogue states. We have been and continue to be subject to a range of cyber-attacks,cyberattacks, such as denial of service, malware and phishing. Cyber-attacksCyberattacks could give rise to the loss of significant amounts of customer data and other sensitive information, as well as significant levels of liquid assets (including cash). In addition, cyber-attackscyberattacks could give rise to the disablement ofdisrupt our information technologyelectronic systems used to service our customers.

If we fall victim to successful cyber-attackscyberattacks or experience cybersecurity, operational or security incidents in the future, we

40 

Table of Contents

may incur substantial costs and suffer other negative consequences, such as remediation costs (liabilities for stolen assets or information, or repairs of system damage, among others), increased cybersecurity protection costs, lost revenues arising from the unauthorized use of proprietary information or the failure to retain or attract customers following an attack, as already mentioned, litigation and legal risks, increased insurance premiums, reputational damage affecting our customers’ and investors’ confidence, as well as damages to our competitiveness, stock price and long-term shareholder value.

We are also subject to increasing scrutiny and regulation governing cybersecurity risks. Such regulation is fragmented and constantly evolving.evolving, and includes CMN Resolution No. 4,893/2021. See “Item 4B—4. Information on the Company��B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulations on Cybersecurity”.Cybersecurity.” We could be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that we are required to alter our systems or require changes to our business practices or policies. A failure to implement all or some of these new global and local regulations, that in some cases have severe sanctions regimes, could also have a material adverse effect on us. If we fail to effectively manage our cybersecurity risk, for example, by failing to update our systems and processes in response to new threats, this could harm our reputation and adversely affect our operating results, financial condition and prospects through the payment of customer compensation or other damages, litigation expenses, regulatory penalties and fines and/or through the loss of assets. Furthermore, upon a failure to comply with applicable law and regulation, we may be ordered to change our business practices, policies or systems in a manner that adversely impacts our operating results.

In addition, we may also be subject to cyber-attackscyberattacks against critical infrastructures of Brazil. Our information technology systems are dependent on such critical infrastructure, and any cyber-attackcyberattack against such critical infrastructure could negatively affect our ability to service our customers. As we do not operate such critical infrastructure, we have limited ability to protect our information technology systems from the adverse effects of such a cyber-attack.cyberattack. See “Item 4. Information on the Company—B. Business Overview.”

It is important to highlight that even when a failure of or interruption in our systems or facilities is resolved in a timely manner or an attempted cyber incident or other security breach is successfully avoided or thwarted, normally substantial resources are expended in doing so, and we may be required to take actions that could adversely affect customer satisfaction or behavior, as well as represent a threat to our reputation.

For additional information, see also “—We are subject to increasing scrutiny and regulation from data protection laws, including penalties in the event of noncompliance with the terms and conditions of certain new European and Brazilian regulations” and “—Failure to protect personal information could adversely affect us.”

We are subject to counterparty risk in our business.

We are exposed to counterparty risk in addition to credit risks associated with lending activities. Counterparty risk may arise from, for example, investing in securities of third parties, entering into derivative contracts under which counterparties have obligations to make payments to us, or executing securities, futures, currency or commodity trades from proprietary trading activities that fail to settle at the required time due to non-delivery by the counterparty or systems failure by clearing agents, clearing houses or other financial intermediaries.

We routinely transact with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual funds, hedge funds and other institutional customers. Defaults by, and even rumors or questions about the solvency of, certain financial institutions and the financial services industry generally have led to market-wide liquidity problems and could lead to losses or defaults by other institutions. Many of the routine transactions we enter into expose us to significant credit risk in the event of default by one of our significant counterparties.

 45
Table of Contents

If these risks give rise to losses, this could materially and adversely affect us. We have a diversified loan portfolio, with no specific concentration exceeding 10% of total loans. Furthermore, currently, 0.9%1.2% of our loan portfolio is allocated to our largest debtor and 6.9%7.4% to our next 10 largest debtors.

41 

Table of Contents

However, we cannot assure this will continue to be the case. If counterparty risks give rise to losses, this could materially and adversely affect our results of operations and financial condition.

Our financial results are constantly exposed to market risk. We are subject to fluctuations in interest rates and other market risks, which may materially and adversely affect us and our profitability.

The COVID-19 pandemic has caused and may continue to cause significant market volatility which may materially and adversely affect us and our trading and banking book.

Market risk refers to the probability of variations in our interest income/(charges) or in the market value of our assets and liabilities due to volatility of interest rate, inflation, exchange rate, commodity price or equity price. Changes in interest rates affect the following areas, among others, of our business:

●interest income / (charges);
●the volume of loans originated;
●credit spreads;
●the market value of our securities holdings;
●the value of our loans and deposits; and
●the value of our derivatives transactions.

Interest rates are sensitive to many factors beyond our control, including increased regulation of the financial sector, monetary policies and domestic and international economic and political conditions. Variations in interest rates could affect the interest earned on our assets and the interest paid on our borrowings, thereby affecting our interest income/(charges), which comprises the majority of our revenue, reducing our growth rate and potentially resulting in losses. In addition, costs we incur as we implement strategies to reduce interest rate exposure could increase in the future (which, in turn, will impact our results).

Due to the historically low interest rate environment in Brazil in recent years, the rates on many of our interest-bearing deposit products have been priced at or near zero or negative, limiting our ability to further reduce rates and thus negatively impacting our margins.

Interest rates have been increasing in Brazil since March 2021. Increases in interest rates may reduce the volume of loans we originate. We have generally observed an inversely proportional relationship between interest rates and credit demand. We believe this is due to the fact that higher interest rates increase transaction costs and therefore discourage consumption. However, the demand for certain products and services, such as overdrafts and revolving checks, is not significantly affected by increases in interest rates. As a result of these factors, we estimate that the recent increases in interest rates could result both in decreased demand for credit products but also in changes to the overall composition of our portfolio.

Sustained high interest rates may dampen economic growth. Higher interest rates have historically discouraged customers from borrowing and have resulted in increased delinquencies in outstanding loans and deterioration in the quality of assets.

Increases in interest rates may reduce the value of our financial assets and may reduce gains or require us to record losses on sales of our loans or securities. In particular, certain assets are constantly marked-to-market and are therefore affected by changes in prevailing interest rates. This process may result in significant reductions in book values and to impairment losses.

 46
Table of Contents

We are also exposed to foreign exchange rate risk as a result of mismatches between assets and liabilities denominated in different currencies. Fluctuations in the exchange rate between currencies may negatively affect our earnings and value of our assets and securities.

We are also exposed to equity price risk in our investments in equity securities in the banking book and in the trading portfolio. The performance of financial markets may cause changes in the value of our investment and trading portfolios. The volatility of world equity markets due to the continued economic uncertainty and sovereign debt crisis has had a particularly strong impact on the financial sector. Continued volatility may affect the value of our investments in equity securities and, depending on their fair value and future recovery expectations, could become a permanent impairment which would be subject to write-offs against our results.

Market conditions have resulted and could result in material changes to the estimated fair values of our financial assets. Negative fair value adjustments could have a material adverse effect on our operating results, financial condition and prospects.

In the past, financial markets have been subject to significant stress resulting in steep falls in perceived or actual financial asset values, particularly due to volatility in global financial markets and the resulting widening of credit spreads, including as a result of the COVID-19 pandemic. We have material exposures to securities, loans and other investments that are recorded at fair value and are therefore exposed to potential negative fair value adjustments. Asset valuations in future periods, reflecting then-prevailing market conditions, may result in negative changes in the fair values of our financial assets and these may also translate into increased impairments. In addition, the value ultimately realized by us on disposal may be lower than the current fair value. Any of these factors could require us to record negative fair value adjustments, which may have a material adverse effect on our operating results, financial condition or prospects.

In addition, to the extent that fair values are determined using financial valuation models, such values may be inaccurate or subject to change, as the data used by such models may not be available or may become unavailable due to changes in market conditions, particularly for illiquid assets, and particularly in times of economic instability. In such circumstances, our valuation methodologies require us to make assumptions, judgements and estimates in order to establish fair value, and reliable assumptions are difficult to make and are inherently uncertain and valuation models are complex, making them inherently imperfect predictors of actual results. Any consequential impairments or write-downs could have a material adverse effect on our operating results, financial condition and prospects.

We face risks related to market concentration.

Concentration risk is an essential factorthe risk associated with potential high financial losses triggered by significant exposure to particular component of risk, whether it be related to a particular counterparty, industry or geographic concentration. Examples of such risks include significant exposure to a single counterparty, to counterparties operating in the managementsame economic sector or geographical region, or to financial instruments that depend on the same index or currency.

We believe that an excessive concentration with respect to a particular risk factor could generate a relevant financial loss for us, especially if the risk is one described in this annual report. We recognize the importance of creditthis risk and is therefore monitored continuously. Aspects such as the economic sector, concentrationpotential impacts that may affect our portfolio and results of risk in certain groups of customers and products, are assessed monthly as part of the Risk Appetite exercise. This risk arises from the imperfect diversification of credit portfolios, which may derive from “name concentration” (incomplete diversification of the borrower's idiosyncratic risk) and “concentration sector ”(existence of multiple systematic risk factors, generally related to sectors of the economy, but also has other sources as origin, such as geographic location or factors macroeconomic conditions).

We acknowledge that any excessive concentration of risk could have a material adverse effect on us if the relevant risk materializes and generates a substantial financial loss.

operations.

The financial problems faced by our customers could adversely affect us.

MarketPotential market turmoil and economic recession could materially and adversely affect the liquidity, credit ratings, businesses and/or financial conditions of our borrowers, which could in turn increase our non-performingnonperforming loan ratios, impair our loan and other financial assets, and result in decreased demand for borrowings in general. We have credit exposure to borrowers whichthat have entered or may shortly enter into bankruptcy or similar proceedings. We may experience material losses from this exposure.

In addition, our customers may further significantly decrease their risk tolerance to non-deposit investments such as stocks, bonds and mutual funds, which would adversely affect our fee and commission income. Any of the conditions described above could have a material adverse effect on us.

We engage in transactions with related parties that others may not consider to be on an arm’s- lengtharm’s-length basis.

We and our affiliates have entered into a number of services agreements pursuant to which we render and/or receive services, such as administrative, accounting, finance, treasury, legal services and others from (or provide such services to) related parties. We are likely to continue to engage in transactions with such related parties (including our controlling shareholder) that others may not consider to be on an arm’s-length basis. Future conflicts of interests may arise between us and any of our affiliates, or among our affiliates, which may not be resolved in our favor. See “Item 7. Major Shareholders and Related Party Transactions.”

 47
Table of Contents

Changes in accounting standards could impact reported earnings.

The accounting standard setters and other regulatory bodies periodically change the financial accounting and reporting standards that govern the preparation of our consolidated financial statements. These changes can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements.

For further information about developments in financial accounting and reporting standards see note 1 to our audited consolidated financial statements included elsewhere in this annual report.

Our financial statements are based in part on assumptions and estimates which, if inaccurate, could cause material misstatement ofthat impact the results of our operations and financial position.

operations.

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts whichthat differ from those estimates. Estimates, judgments and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates

42 

Table of Contents

are recognized in the period in which the estimate is revised and in any future periods affected. The accounting policies deemed critical to our results and financial position, based upon materiality and significant judgments and estimates, include impairment of loans and advances,financial assets measured at amortized cost, goodwill impairment, valuation of financial instruments, impairment of available-for-sale financial assets measured at fair value through other comprehensive income, deferred tax assets provision, and pension obligation for liabilities.

If the judgment, estimates and assumptions we use in preparing our consolidated financial statements are subsequently found to be incorrect, there could be a material effect on our results of operations and a corresponding effect on our funding requirements and capital ratios.

Our business is highly dependent on the proper functioning of our information technology systems.

Our business is highly dependent on the ability of our information technology systems to accurately process a large number of transactions across numerous and diverse markets and products in a timely manner, and on our ability to rely on our digital technologies, computer and email services, software, and networks, as well as on the secure processing, storage and transmission of confidential data and other information in our computer systems and networks. The proper functioning of our financial control, risk management, accounting, customer service and other data processing systems is critical to our business and our ability to compete effectively.

We do not operate all of our redundant systems on a real-time basis and cannot assure that our business activities would not be materially disrupted if there were a partial or complete failure of any of these primary information technology systems or communication networks. Such failures could be caused by, among other things, major natural catastrophes, software bugs, computer virus attacks, conversion errors due to system upgrading, security breaches caused by unauthorized access to information or systems, or intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment. Any such failures could disrupt our business and impair our ability to provide our services and products effectively to our customers, which could adversely affect our reputation as well as our business, results of operations and financial condition.

Our ability to remain competitive and achieve further growth will depend in part on our ability to upgrade our information technology systems and increase our capacity on a timely and cost-effective basis. We must continually make significant investments and improvements in our information technology infrastructure in order to remain competitive. We cannot assure that in the future we will be able to maintain the level of capital expenditures necessary to support the improvement or upgrading of our information technology infrastructure. Any substantial failure to improve or upgrade our information technology infrastructure and management systems effectivelyin an effective, timely and cost-effective manner, including in response to new or onmodified cybersecurity and data privacy laws, rules and regulations could have a timely basis could materially and adversely affectmaterial adverse effect on us.

 

 48
Table of Contents

Failure to protect personal information could adversely affect us.

We receive, maintain and store confidential personal information of our customers and counterparties, including, but not limited to, personally identifiable information and personal financial information in the ordinary course of our banking operations. The sharing, use, disclosure and protection of this information are governed by various Brazilian and foreign laws.

Although we have procedures and controls in place to safeguard personal and other confidential or sensitive information in our possession, unauthorized disclosuresaccess or security breachesdisclosures could subject us to legal actions and administrative sanctions, as well as damages and reputational harm that could materially and adversely affect our operating results, financial condition and prospects. Further,Furthermore, our business is exposed to risk from employees’ potential non-compliance with policies, employee misconduct, or negligence andor fraud, which could result in regulatory sanctions and serious reputational orand financial harm. It is not always possible to deter or prevent employee misconduct, and the precautions we take to detect and prevent this activity may not always be effective. We also face the risk that the design of our controls and procedures prove to be inadequate or are circumvented such that the data we hold is incomplete, not recoverable or not securely stored. In addition, we may be required to report events related to information security issues, (including any cyber security issues), events where customer information may be compromised, unauthorized access to our systems and other security

43 

Table of Contents

breaches, to the relevant regulatory authorities. Any material disruption or slowdown of our systems could cause information, including data related to customer requests, to be lost or delivered to our customers with delays or errors, which could reduce demand for our services and products and could materially and adversely affect us. In addition, ifIf we cannot maintain an effective and secure electronic data and information, management systemand processing systems or if we fail to maintain complete physical and electronic records, this could result in disruptions to our operations, claims from customers, regulators, employees and other parties, violations of applicable privacy and other laws, regulatory sanctions and serious reputational and financial harm to us. Moreover, as a result of the COVID-19 pandemic, we have increased the number of employees working remotely, which may increase the vulnerability of our systems and impact our ability to conduct business.

Furthermore, data breaches and other security incidents with respect to our or our third-party vendors’ systems could adversely affect our business or reputation, and create significant legal, regulatory or financial exposure. Although we work with our clients, vendors, service providers, counterparties and other third parties to develop secure data and information processing, collection, authentication, management, usage, storage and transmission capabilities and to ensure the eventual destruction of sensitive and confidential information, including personal information, to prevent against information security risk, we routinely manage personal, confidential and proprietary information by electronic means, and we, our third-party vendors or other third parties with which we do business may be the target of attempted cyberattacks or subject to other information security incidents or breaches. This is especially applicable in the current environment, which is still being affected by the COVID-19 pandemic, and the shift to work-from-home policies for a significant portion of our workforce, as they access our secure networks remotely (see “—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations”). If we cannot maintain effective and secure electronic data and information (including personal information), management and processing systems or if we fail to maintain complete physical and electronic records, this could result in disruptions to our operations, litigation or claims from customers, regulators, employees and other third parties, violations of applicable privacy and other laws, rules or regulations, regulatory sanctions and serious reputational and financial harm to us.

For additional information, see also “—We are subject to increasing scrutiny and regulation from data protection laws, including penalties in the event of noncompliance with the terms and conditions of certain new European and Brazilian regulations” and “—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”

Damage to our reputation could cause harm to us.

Maintaining a positive reputation is critical to protect our brand, attract and retain customers, investors and employees and conduct business transactions with counterparties. Damage to our reputation cancould therefore cause significant harm to our business and prospects. Harm to our reputation cancould arise from numerous sources, including, among others, employee misconduct, including the possibility of fraud perpetrated by our employees, litigation or regulatory enforcement, failure to deliver minimum standards of service and quality, dealings with sectors that are not well perceived by the public, ratings downgrades, significant fluctuations in our share price, dealing with customers in sanctions lists, rating downgrades, significant variations in the price of our ADRs throughout the year, compliance failures, unethical behavior, and the activities of customers, service providers and other counterparties, including activities that negatively affect the environment. Further, negative publicity regarding us may result in harm to our prospects.

 49
Table of Contents

Actions by the financial services industry generally or by certain members of, or individuals in, the industry can also affect our reputation. For example, the role played by financial services firms in the financial crisis and the seeming shift toward increasing regulatory supervision and enforcement has caused public perception of us and others in the financial services industry to decline.

We could suffer significant reputational harm if we fail to identify and manage potential conflicts of interest properly. The failure, or perceived failure, to adequately address conflicts of interest could affect the willingness of clientscustomers to deal with us or give rise to litigation or enforcement actions against us. Therefore, there can be no assurance that conflicts of interest will not arise in the future that could cause material harm to us.

We may be the subject of misinformation and misrepresentations deliberately propagated to harm our reputation or for other deceitful purposes, or by profiteering short sellers seeking to gain an illegal market advantage by spreading false information about us. There can be no assurance that we will effectively neutralize and contain false information that may be propagated regarding us, which could have an adverse effect on our operating results, financial condition and prospects.

We plan to continue to expand our operations and we may not be able to manage such growth effectively, which could have an adverse impact on us, including our profitability.

We may also not be successful in any reorganizations, dispositions or spin-offs we undertake.

We allocate management and planning resources to develop strategic plans for organic growth and to identify possible acquisitions and disposals and areas for restructuring our businesses. From time to time, we evaluate acquisition and partnership opportunities that can offer additional value to our shareholders and are consistent with our business strategy. However, we may not be able to identify suitable acquisition or partnership candidates, and our ability to benefit from any such acquisitions and partnerships will depend in part on our successful integration of those businesses. Any such integration entails significant risks such as unforeseen difficulties in integrating operations and systems and unexpected liabilities or contingencies relating to the acquired businesses, including legal claims. We cannot provide assurance that we will, in all cases, be able to manage our growth effectively or deliver our strategic growth objectives. Challenges that may result from our strategic growth decisions include our ability to:

44 

Table of Contents

·●manage efficiently the operations and employees of expanding businesses;

·●maintain or grow our existing customer base;

·●assess the value, strengths and weaknesses of investment or acquisition candidates, including local regulation that can reduce or eliminate expected synergies;

·●finance and integrate strategic investments or acquisitions;

·●align our current information technology systems adequately with those of an enlarged group;

·●apply our risk management policy effectively to an enlarged group; and

·●manage a growing number of entities without over-committingovercommitting management or losing key personnel.

Any failure to manage growth effectively could have a material adverse effect on our operating results, financial condition and prospects.

In addition, any acquisition or venture could result in the loss of key employees and inconsistencies in standards, controls, procedures and policies.

Moreover, the success of the acquisition or venture will at least in part be subject to a number of political, economic and other factors that are beyond our control. Any of these factors, individually or collectively, could have a material adverse effect on us.

Similarly, we cannot ensure that we will be able to successfully divest or spin off businesses or other assets that we have identified for this purpose, or that any completed divestment or spin-off will achieve the expected strategic benefits, operational efficiencies or opportunities, or that the divestment or spin-off will ultimately maximize shareholder value.

 50
Table of Contents

We may not realize the anticipated benefits from the Spin-Off, and the Spin-Off could harm our business.

We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, in October 2021. We cannot assure you that the Spin-Off will achieve the expected strategic benefits, operational efficiencies or opportunities we envisaged, or that it will ultimately maximize shareholder value.

Furthermore, on April 15, 2021, we entered into the Getnet Partnership Agreement with Getnet, which provides a framework for our relationship with Getnet following the Spin-Off. Pursuant to the Partnership Agreement, both parties have the right to terminate the Partnership Agreement at will, upon one-year prior written notice to the other party. In case of fault by the other party, as described by the Partnership Agreement, such as due to insolvency, bankruptcy, loss of material license, among others, the non-defaulting party is free to terminate the Partnership Agreement by means of a simple notification sent to the other party. We may suffer a material adverse effect if the Getnet Partnership Agreement is terminated or not renewed, or if we are unable to enter into a favorable agreement with a new partner in the event of termination of the Getnet Partnership Agreement.

Goodwill impairments may be required in relation to acquired businesses.

We have made business acquisitions in the past and may make further acquisitions in the future. It is possible that the goodwill which has been attributed, or may be attributed, to these businesses may have to be written down if our valuation assumptions are required to be reassessed as a result of any deterioration in their underlying profitability, asset quality and other relevant matters. Impairment testing in respect of goodwill is performed annually, or more frequently if there are impairment indicators present, and comprises a comparison of the carrying amount of the cash-generating unit with its recoverable amount. Goodwill impairment does not, however, affect our regulatory capital. There can be no assurances that we will not have to write down the value attributed to goodwill in the future, which would adversely affect our results and net assets.

We rely on recruiting, retaining and developing appropriate senior management and skilled personnel.

Our continued success depends in part on the continued service of key members of our senior executive team and other key employees. The ability to continue to attract, train, motivate and retain highly qualified and talented professionals is a key element of our strategy. The successful implementation of our strategy and culture depends on the availability of skilled and appropriate management, both at our head office and in each of our business units. If we or one of our business units or other functions fails to staff its operations appropriately, or loses one or more of its key senior executives or other key employees and fails to replace them in a satisfactory and timely manner, our business, financial condition and results of operations, including control and operational risks, may be adversely affected.

Our ability to attract and retain qualified employees is affected by perceptions of our culture and management, our profile in the markets in which we operate and the professional opportunities we offer.

In addition, the financial industry has experienced and may continue to experience more stringent regulation of employee compensation, which could have an adverse effect on our ability to hire or retain the most qualified employees. If we fail or are unable to attract and appropriately train, motivate and retain qualified professionals, our business may also be adversely affected.

45 

Table of Contents

We rely on third parties and affiliates for important products and services.

Third-party vendors and certain affiliated companies provide key components of our business infrastructure such as loan and deposit servicing systems, back office and business process support, information technology production and support, internet connections, and network access.access (including cloud-based services). Relying on these third parties and affiliated companies can be a source of operational and regulatory risk to us, including with respect to security breaches affecting such parties. We are also subject to risk with respect to security breaches affecting the vendors and other parties that interact with these service providers. As our interconnectivity with these third parties and affiliated companies increases, we face the risk of operational failure with respect to their systems. We may be required to take steps to protect the integrity of our operational systems, thereby increasing our operational costs. In addition, certain problems caused by these third parties or affiliated companies could affect our ability to deliver products and services to customers. ReplacingWhile we have diversified providers for the main services and keep strict and close monitoring on them, in some instances, replacing these third-party vendors could also entail delays and expense. Further, the operational and regulatory risk we face as a result of these arrangementsarrange ments may be increased to the extent that we restructure such arrangements. Restructurings could involve significant expense to us and entail significant delivery and execution risk, which could have a material adverse effect on our business, operations and financial condition.

 51
Table of Contents

Past performance of our loan portfolio may not be indicative of future performance; changes in the profile of our business may adversely affect our loan portfolio. In addition, the value of any collateral securing our loans may not be sufficient, and we may be unable to realize the full value of the collateral securing our loan portfolio.

Our historical loan loss experience may not be indicative of our future loan losses. While the quality of our loan portfolio is associated with the default risk in the sectors in which we operate, changes in our business profile may occur due, among other factors, to our organic growth, merger and acquisition activity, changes in local economic and political conditions, a slowdown in customer demand, an increase in market competition, changes in regulation and in the tax regimes applicable to the sectors in which we operate and, to a lesser extent, other related changes in countries in which we operate and in the international economic environment. In addition, the market value of any collateral related to our loan portfolio may fluctuate, from the time we evaluate it at the beginning of the trade to the time such collateral can be executed upon, due to the factors related to changes in economic, political or sectorial factors beyond our control, and we may be unable to realize the full value of the collateral securing our loan portfolio.

We rely on models for many of our decisions. Their inaccurate or incorrect use could have a material adverse effect on us.

We use models for approval (scoring/rating), capital calculation, behavior, provisions, market risk, operational risk, compliance and liquidity. A model is a system, approach or quantitative method that applies statistical, economic, financial or mathematical theories, techniques or hypotheses to transform input data into quantitative estimates. It involves simplified representations of real world relationships between characteristics, values and observed assumptions that allows us to focus on specific aspects.

Model risk is the negative consequence of decisions based on inaccurate, improper or incorrect use of models. Sources of model risk include (i) incorrect or incomplete data in the model itself or the modelling method used in systems; and (ii) incorrect use or implementation of the model.

Model risk can cause financial loss, erroneous commercial and strategic decision-making or damage to our transactions any of which could have a material adverse effect on our operating results, financial condition and prospects. In addition, our models and the underlying methodologies are subject to scrutiny from our supervisors, who could identify potential weaknesses or deficiencies that may result in enforcement actions, including sanctions, fines and/or the imposition of stricter capital requirements, as well as mandates and recommendations with respect to the methodologies underlying our models, which could also lead us to more onerous or inefficient capital consumptions.

Unprecedented movement in economic and market drivers related to the COVID-19 pandemic required monitoring and adjustment of financial models (including credit loss models, capital models, traded risk models and models used in the asset/liability management process) to comply with the guidance and recommendations of standard setters, regulators and supervisors, particularly for credit loss models. It also resulted in the use of mitigants for model limitations, such as adjustments to model outputs to reflect consideration of management judgment. The performance and usage of models was and may continue to be impacted by the consequences of the COVID-19 pandemic. In addition, data obtained during the COVID-19 pandemic may not be representative and may distort the calibration of the models in the future, which could have a material adverse effect on us.

In addition, the fair value of our financial assets, determined using financial valuation models, may be inaccurate or subject to change and, as a consequence, we may have to register impairments or write-downs that could have a material adverse effect on our operating results, financial condition and prospects. See “—Market conditions have resulted and could result in material changes to the estimated fair values of our financial assets. Negative fair value adjustments could have a material adverse effect on our operating results, financial condition and prospects.

Climate change can create transition risks, physical risks and other risks that could adversely affect us.

There is an increasing concern over the risks of climate change and related environmental sustainability matters. Climate change may imply three primary drivers of financial risk that could adversely affect us:

 52
Table of Contents
●Transition risks associated with the move to a low-carbon economy, both at idiosyncratic and systemic levels, such as through policy, regulatory and technological changes, which could increase our expenses and impact our strategies.
●Physical risks related to discrete events, such as flooding and wildfires, and extreme weather impacts and longer term shifts in climate patters, such as extreme heat, sea level rise and more frequent and prolonged drought, which could result in financial losses that could impair asset values and the creditworthiness of our customers. Such events could disrupt our operations or those of our customers or third parties on which we rely and do business with, including through direct damage to assets and indirect impacts from supply chain disruption and market volatility.
●Liability risks derived from parties who may suffer losses from the effects of climate change and may seek compensation from state entities, regulators, investors and lenders, among others.

These primary drivers could materialize, among others, in the following financial risks:

●Credit risks: Physical climate change could lead to increased credit exposure and companies with business models not aligned with the transition to a low-carbon economy may face a higher risk of reduced corporate earnings and business disruption due to new regulations or market shifts.
●Market risks: Market changes in the most carbon-intensive sectors could affect energy and commodity prices, corporate bonds, equities and certain derivatives contracts. Increasing frequency of severe weather events could affect macroeconomic conditions, weakening fundamental factors such as economic growth, employment and inflation.
●Operational risks: Severe weather events could directly impact business continuity and operations both of customers and ours.
●Reputational risk: our reputation and client relationships may be damaged as a result of our practices and decisions related to climate change, social and environmental matters, or to the practices or involvement of our clients, in certain industries or projects associated with causing or exacerbating climate change.

As a financial institution, we are already subject to certain regulatory environmental, social and governance, or “ESG,” requirements as detailed under “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Environmental, Social and Governance (ESG) requirements applicable to financial institutions.” These requirements may increase going forward as a result of the increasing importance of ESG matters. This and other changes in regulations in Brazil and international markets may expose us to increased compliance costs, limit our ability to pursue certain business opportunities and provide certain products and services, each of which could adversely affect our business, financial condition and results of operations.

As climate risk is interconnected with all key risk types, we have developed and continue to enhance processes to embed climate risk considerations into our risk management strategies established for risks; however, because the timing and severity of climate change may not be predictable, our risk management strategies may not be effective in mitigating climate risk exposure.

Any of the conditions described above could have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Our Controlling Shareholder, Our Units and American Depositary Receipts (ADRs)

Our ultimate controlling shareholder has a great deal of influence over our business, and its interests could conflict with ours.

Santander Spain, our ultimate controlling shareholder, currently owns, directly and indirectly, approximately 89.5%89.53 % of our total capital (not including the shares held by Banco Madesant – Sociedade Unipessoal).capital. Due to its share ownership, our controlling shareholder has the power to control us and our subsidiaries, including the power to:

·●elect a majority of our directors that appoint our executive officers, set our management policies and exercise overall control over our companyCompany and subsidiaries;

 53
Table of Contents
·●influence the appointment of our principal officers;

·●declare the payment of any dividends;

·●agree to sell or otherwise transfer its controlling stake in our company;Company; and

·●determine the outcome of substantially all actions requiring shareholder approval, including amendments of our bylaws, transactions with related parties, corporate reorganizations, acquisitions and dispositions of assets, and dividends.

In December 2012, primarily in response to the requirements of the European Banking Authority, Santander Spain adopted a corporate governance framework (Marco de Gobierno Interno del Grupo Santander) to organize and standardize the corporate governance practices of certain companies of the Santander Group (including us). We adopted this corporate governance framework in May 2013, subject to the precedence of applicable Brazilian laws, regulations and limitations. Our corporate governance model was further amended in 2015 to reflect certain new requirements imposed on our parent company, Santander Spain, by the European Central Bank, the Bank of Spain and regulators in different jurisdictions. See “Item 16G. Corporate Governance.”

We operate as a stand-alone subsidiary within the Santander Group. Our controlling shareholder has no liability for our banking operations, except for the amount of its holdings of our capital stock and for other specific limited circumstances under Brazilian law. The interests of Santander Spain may differ from the interests of our other shareholders, and the concentration of control in Santander Spain

46 

Table of Contents

will limit other stockholders’ ability to influence corporate matters. As a result, we may take actions that our other shareholders do not view as beneficial.

Our status as a controlled company and a foreign private issuer exempts us from certain of the corporate governance standards of the New York Stock Exchange, or “NYSE”,“NYSE,” limiting the protections afforded to investors.

We are a “controlled company” and a “foreign private issuer” within the meaning of the NYSE corporate governance standards. Under the NYSE rules, a controlled company is exempt from certain NYSE corporate governance requirements. In addition, a foreign private issuer may elect to comply with the practice of its home country and not to comply with certain NYSE corporate governance requirements, including the requirements that (i) a majority of the board of directors consists of independent directors, (ii) a nominating and corporate governance committee be established that is composed entirely of independent directors and has a written charter addressing the committee’s purpose and responsibilities, (iii) a compensation committee be established that is composed entirely of independent directors and has a written charter addressing the committee’s purpose and responsibilities, and (iv) an annual performance evaluation of the nominating and corporate governance and compensation committees be undertaken. Although we have similar practices, they do not entirely conform to the NYSE requirements; therefore, we currently use these exemptions and intend to continue using them. Accordingly, you will not have the same protections provided to shareholders of companies that are subject to all NYSE corporate governance requirements.

The liquidity and market prices of the units and the ADRs may be adversely affected by the cancellation of units or substantial sale of units and shares in the market.

market, or by the relative volatility and limited liquidity of the Brazilian securities markets.

Holders of units may present these units or some of these units for cancellation in Brazil in exchange for the common shares and preferred shares underlying these units. If unit holders present a significant number of units for cancellation in exchange for the underlying common shares and preferred shares, the liquidity and price of the units and ADRs may be materially and adversely affected.

Also, sales of a substantial number of our units, common shares or preferred shares in the future, or the anticipation of such sales, could negatively affect the market prices of our units and ADRs. If, in the future, substantial sales of units, common shares or preferred shares are made by existing or future holders, the market prices of the ADRs may decrease significantly. As a result, holders of ADRs may not be able to sell their ADRs at or above the price they paid for them.

The relative volatility and limited liquidity of the Brazilian securities markets may negatively affect the liquidity and market prices of the units and the ADRs.

The B3 is significantly less liquid than the NYSE or other major exchanges in the world. As of December 31, 2019,2021, the aggregate market capitalization of the B3 was equivalent to approximately R$ 4.84.5 trillion (U.S.$1.2 trillion)0.8 billion), and the top ten stocks in terms of trading volume accounted for approximately 36%43% of all shares traded on B3 in the year ended December 31, 2019.2021. In contrast, as of December 31, 2019,2021, the aggregate market capitalization of the NYSE was approximately U.S. 24.1$27.7 trillion. Although any of the outstanding shares of a listed company may trade on the B3, in most cases fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, government entities or a principal shareholder.

 54
Table of Contents

The uncertainties caused by the outbreak of COVID-19 had an adverse impact on the global economy and global capital markets, including in Brazil, during the course of 2020 and, to a lesser extent, 2021 and early 2022. As a result of this volatility, the B3’s circuit breaker mechanism was triggered eight times during March 2020. The prices of most of the securities traded on the NYSE and the B3, including the price of our securities, was adversely affected by the COVID-19 pandemic. Impacts similar to those described above may reoccur, which may result in volatility in the prices of our securities traded on the NYSE and on the B3. We cannot assure you that the price of our securities will not fall below the lowest levels at which our securities traded during the ongoing pandemic.

The relative volatility and limited liquidity of the Brazilian securities markets may substantially limit your ability to sell the units or ADRs at the time and price you desire and, as a result, could negatively impact the market price of these securities.

If securities analysts do not publish research or reports about our business or if they downgrade our ADRs or securities issued by other companies in our sector, the price and trading volume of our ADRs and/or our shares could decline.

The trading market for our ADRs and our shares has been affected in part by the research and reports that industry and financial analysts publish about us or our business. We do not control these

47 

Table of Contents

analysts. Furthermore, if one or more of the analysts downgrade our ADRs, our shares or our industry, change their views regarding the shares of any of our competitors, or other companies in our sector, or publish inaccurate or unfavorable research about our business, the market price of our ADRs and/or shares could decline. If one or more of these analysts stops providing reports or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our ADR and/or share price or trading volume to decline.

The economic value of your investment may be diluted.

We may, from time to time, need additional funds, and we may issue additional units or shares. Any additional funds obtained by such a capital increase may dilute your interest in our company.

Company or decrease the market price of our shares, units or ADRs.

Discontinuation of the current corporate governance practices may negatively affect the price of our ADRs and units.

After completion of the voluntary exchange offers by Santander Spain in Brazil and in the United States (respectively, the “Brazilian Exchange Offer” and the “U.S. Exchange Offer”) for the acquisition of up to all of our shares that were not held by the Santander Group at that time, we are no longer subject to the obligations of the special listing segment of B3 known as Corporate Governance Level 2 (the “Level 2 Segment”). Currently, we voluntarily comply with certain of the corporate governance requirements for companies listed on the Level 2 Segment.

Discontinuation, in whole or in part, of our existing corporate governance practices or minimum protections may adversely affect your rights as a security holder and may result in a decrease of the price of our shares, units and ADRs.

Holders of our units and our ADRs may not receive any dividends or interest on stockholders’ equity.

According to our By-Laws, we must generally pay our shareholders at least 25.0% of our annual net income as dividends or interest on stockholders’ equity, as calculated and adjusted under Brazilian Corporate Law, or “adjusted net income,” which may differ significantly from our net income as determined under IFRS. This adjusted net income may be used to increase capital or to absorb losses, or otherwise retained as allowed under Brazilian Corporate Law, and may not be available to be paid as dividends or interest on stockholders’ equity. Additionally, Brazilian Corporate Law allows a publicly traded company, like ours, to suspend the mandatory distribution of dividends and interest on stockholders’ equity in any particular year if our board of directors informs our shareholders that such distributions would be inadvisable in view of our financial condition or cash

 55
Table of Contents

availability. We paid R$10.810.9 billion, R$6.63.8 billion and R$6.310.8 billion (R$2.90,2.94, R$1.771.03 and R$1.682.90 per unit, respectively) as dividends and interest on stockholders’ equity (considering gross value) in 2019, 20182021, 2020 and 2017,2019, respectively, in accordance with our dividend policy, but there can be no assurance that dividends and interest on stockholders’ equity will be paid in the future. We are also subject to Brazilian banking regulations that may limit the payment of dividends or interest on stockholders’ equity. SeeThese regulations have recently included a temporary restriction on dividend distributions and other payments as a result of measures taken by the Brazilian Central Bank to combat the COVID-19 pandemic’s effect on the Brazilian financial sector (see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19—Temporary Suspension of Dividend Distributions and Other Payments” and “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—History of Payment of Dividends and Interest Attributable to Stockholders’Shareholders’ Equity.”

Although this restriction has not been reinstated in 2021, we cannot assure you that it will not be reinstated in the future.

Holders of ADRs may find it difficult to exercise voting rights at our stockholders’shareholders’ meetings.

Holders of ADRs will not be our direct shareholders and will be unable to enforce directly the rights of shareholders under our By-Laws and Brazilian Corporate Law. Holders of ADRs may exercise voting rights with respect to the units represented by ADRs only in accordance with the deposit agreement governing the ADRs. Holders of ADRs will face practical limitations in exercising their voting rights because of the additional steps involved in our communications with ADR holders. For example, we are required to publish a notice of our stockholders’ meetings in specified newspapers in Brazil. Holders of our units will be able to exercise their voting rights by attending a stockholders’ meeting in person or voting by proxy. By contrast, holders of ADRs will receive notice of a stockholders’ meeting by mail from the ADRs depositary following our notice to the depositary requesting the depositary to do so. To

48 

Table of Contents

exercise their voting rights, holders of ADRs must instruct the ADR depositary on a timely basis on how they wish to vote. This voting process necessarily will take longer for holders of ADRs than for holders of our units or shares. If the ADR depositary fails to receive timely voting instructions for all or part of the ADRs, the depositary will assume that the holders of those ADRs are instructing it to give a discretionary proxy to a person designated by us to vote their ADRs, except in limited circumstances.

Holders of ADRs also may not receive the voting materials in time to instruct the depositary to vote the units underlying their ADRs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of ADRs or for the manner of carrying out those voting instructions. Accordingly, holders of ADRs may not be able to exercise voting rights, and they will have little, if any, recourse if the units underlying their ADRs are not voted as requested.

Holders of ADRs could be subject to Brazilian income tax on capital gains from sales of ADRs.

Law No. 10,833 of December 29, 2003 provides that the disposal of assets located in Brazil by a nonresident to either a Brazilian resident or a nonresident is subject to taxation in Brazil, regardless of whether the disposal occurs outside or within Brazil. This provision results in the imposition of income tax on the gains arising from a disposal of our units by a nonresident of Brazil to another nonresident of Brazil. It is unclear whether ADRs representing our units, which are issued by the ADR depositary outside Brazil, will be deemed to be “property located in Brazil” for purposes of this law. We believe ADRs do not qualify as property located in Brazil and, thus, should not be subject to Brazilian income tax. Nevertheless, there is no judicial guidance as to the application of Law no. 10,833 of December 29, 2003 and, accordingly, we are unable to predict whether Brazilian courts may decide that it applies to dispositions of our ADRs between non-residentsnonresidents of Brazil. However, in the event that the disposition of assets is interpreted to include a disposition of our ADRs, this tax law would accordingly impose withholding taxes on the disposition of our ADRs by a nonresident of Brazil to another nonresident of Brazil. See “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations.”

Any gain or loss recognized by a U.S. taxpayer will generally be treated as U.S. source gain or loss. A U.S. taxpayer would not be able to credit any Brazilian tax imposed on the disposition of our units or ADRs against such person’s U.S. federal income tax liability, unless such credit can be applied (subject to applicable limitations) against tax due on other income of such person from foreign sources. See “Item 10. Additional Information—E. Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders.”

Our corporate disclosure may differ from disclosure regularly published by issuers of securities in other countries, including the United States.

Issuers of securities in Brazil are required to make public disclosures that are different from, and that may be reported under presentations that are not consistent with, disclosures required in other countries, including the United States. In particular, for regulatory purposes, we currently prepare and will continue to prepare and make available to our shareholders statutory financial statements in accordance with IFRS as issued by the IASB and Brazilian GAAP, both of which differ from U.S. GAAP in a number of respects. In addition, as a foreign private issuer, we are not subject to the same disclosure requirements in the United States as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short-swing profit rules under Section 16 of the Exchange Act. Accordingly, the information about us available to you will not be the same as the information available to shareholders of a U.S. company and may be reported in a manner with which you are not familiar.

 56
Table of Contents

Investors may find it difficult to enforce civil liabilities against us or our directors and officers.

The majority of our directors and officers reside outside of the United States. In addition, all or a substantial portion of our assets and the assets of our directors and officers are located outside of the United States. Although we have appointed an agent for service of process in any action against us in the United States with respect to our ADRs, none of our directors or officers has consented to service

49 

Table of Contents

of process in the United States or to the jurisdiction of any U.S. court. As a result, it may not be difficultpossible for investorsholders of our shares, units and/or ADRs to effect service of process against these other persons within the United States or other jurisdictions outside Brazil or to enforce against these other persons judgments obtained in the United States or other jurisdictions outside Brazil. Holders of our ADRs may face greater difficulties in protecting their interests due to actions by us or our directors or executive officers than would shareholders of a U.S. corporation, because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if the judgment meets the following conditions: (i) it must comply with the formalities necessary for enforcement under the laws of the jurisdiction in which it was rendered; (ii) it must have been issued by a competent jurisdiction/court after proper service of process on the parties, which service must comply with Brazilian law if made in Brazil, or after sufficient evidence of the parties’ absence (revelia) has been given, as required by applicable law; (iii) it must be final, binding and therefore not subject to appeal (res judicata) in the jurisdiction in which it was issued; (iv) it must be apostilled by a competent authority of the country from which the document emanates according to the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalization for Foreign Public Documents or, if such persons.

country is not signatory of the Hague Convention, it must be duly authenticated by a competent Brazilian consulate in the country where the foreign judgment is issued; (v) it must be accompanied by a translation thereof into Portuguese made by a certified translator in Brazil, unless an exemption is provided by an international treaty to which Brazil is a signatory; (vi) it must not be contrary to Brazilian national sovereignty, good morals or public policy or violate the dignity of the human person (as set forth in Brazilian law); (vii) it must not relate to a matter which is also subject to a similar proceeding in Brazil involving the same parties, based on the same grounds and with the same object, which has already been judged by a Brazilian court (res judicata); and (viii) it must not violate the exclusive jurisdiction of Brazilian courts pursuant to the provision of Article 23 of the Brazilian Code of Civil procedure (Law No. 13,105/2015). Judgments which meet these criteria are not subject to an analysis of the merits or a retrial by Brazilian courts.

Judgments of Brazilian courts with respect to our units or ADRs will be payable only in reais.

Our By-Laws provide that we, our shareholders, our directors and officers and the members of our fiscal council shall submit to arbitration any and all disputes or controversies that may arise amongstamong ourselves relating to, or originating from, the application, validity, effectiveness, interpretation, violations and effects of violations of the provisions of Brazilian Corporate Law, our By-Laws, the rules and regulations of the CMN, the Brazilian Central Bank and the CVM, as well as other rules and regulations applicable to the Brazilian capital markets and the rules and regulations of the Arbitration Regulation of the Market Arbitration Chamber. However, in specific situations, including whenever precautionary motions are needed for protection of rights, the dispute or controversy may have to be brought to a Brazilian court. If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the units or ADRs, we will not be required to discharge our obligations in a currency other thanreais. Under Brazilian exchange control limitations and according to Brazilian laws, an obligation in Brazil to pay amounts denominated in a currency other thanreais may be satisfied in Brazilian currency only at the exchange rate, as determined by the Brazilian Central Bank or competent court, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then-prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the units or ADRs.

 57
Table of Contents

Holders of ADRs may be unable to exercise preemptive rights with respect to our units underlying the ADRs.

Holders of ADRs will be unable to exercise the preemptive rights relating to our units underlying ADRs unless a registration statement under the Securities Act is effective with respect to the shares for which those rights are exercisable or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares relating to these preemptive rights or to take any other action to make preemptive rights available to holders of units or ADRs. We may decide, at our discretion, not to file any such registration statement. If we do not file a registration statement or if we and the ADR depositary decide not to make preemptive rights available to holders of units or ADRs, those holders may receive only the net proceeds from the sale of their preemptive rights by the depositary, or if they are not sold, their preemptive rights will be allowed to lapse.

As a holder of ADRs, you will have different shareholders’ rights than do shareholders of companies incorporated in the United States and certain other jurisdictions.

Our corporate affairs are governed by our By-Laws and by Brazilian Corporate Law, which may differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States or in certain other jurisdictions outside Brazil.

Under Brazilian Corporate Law, holders of the ADRs are not our direct shareholders and will have to exercise their voting rights through the depositary. Therefore, holders of ADRs may have fewer and less well-defined rights to protect their interests relative to actions taken by our board of directors or the holders of our common shares under Brazilian law than under the laws of other jurisdictions outside Brazil.

Although Brazilian Corporate Law imposes restrictions on insider trading and price manipulation, the form of these regulations and the manner of their enforcement may differ from that in the U.S. securities markets or markets in certain other jurisdictions. In addition, in Brazil, self-dealing and the preservation of shareholder interests may be regulated differently, which could potentially disadvantage you as a holder of the preferred shares underlying ADRs.

If you exchange your ADRs for their underlying Units, you risk losing Brazilian tax advantages and the ability to remit foreign currency abroad.

Brazilian law requires that parties obtain registration with the Brazilian Central Bank in order to remit foreign currencies, including U.S. dollars, abroad. The Brazilian custodian for the Units must obtain the necessary registration with the Brazilian Central Bank for payment of dividends or other cash distributions relating to the Units or after disposal of the Units. If you exchange your ADRs for the underlying Units, however, you may only rely on the custodian’s certificate for five business days from the date of exchange. Thereafter, you must obtain your own registration in accordance with the rules of the Brazilian Central Bank and the CVM, in order to obtain and remit U.S. dollars abroad after the disposal of the Units or the receipt of distributions relating to the Units. If you do not obtain a certificate of registration, you may not be able to remit U.S. dollars or other currencies abroad and may be subject to less favorable tax treatment on gains with respect to the Units. For more information, see “Item 10. Additional Information—D. Exchange Controls.”

If you attempt to obtain your own registration, you may incur expenses or suffer delays in the application process, which could delay your receipt of dividends or distributions relating to the Units or the return of your capital in a timely manner. The custodian’s registration and any certificate of foreign capital registration you may obtain may be affected by future legislative changes. Additional restrictions applicable to you, to the disposal of the underlying Units or to the repatriation of the proceeds from disposal may be imposed in the future.

Holders of the ADRs may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could be less favorable or less desirable to the plaintiff(s) in any such action.

The deposit agreement provides that, to the extent permitted by law, holders of the ADRs waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADRs or the deposit agreement. The deposit agreement, including the waiver of the right to jury trial, governs the rights of the initial holders of the ADRs as well as the rights of subsequent holders that acquire holders of the ADRs in the secondary market.

If you or any other holders or beneficial owners of the holders of the ADRs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADRs, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. Any plaintiff(s) in such an action may believe that a non-jury trial would be less favorable to the plaintiff(s) or otherwise less desirable.

50 

 58

Table of Contents

Table of Contents

ITEM 4. INFORMATION ON THE COMPANY

4A.4A. History and Development of the Company

General

We are a publicly held corporation (sociedade(sociedade anônima)nima) of indefinite term, incorporated under Brazilian law on August 9, 1985. Documentation of our incorporation is duly registered with the Commercial Registry of the State of São Paulo (Junta(Junta Comercial do Estado de São Paulo or “JUCESP”), under NIRE (Registry Number) 35300332067. Our corporate name is Banco Santander (Brasil) S.A. and our commercial name is Banco Santander. Our headquarters are located in Brazil, in the city of São Paulo, state of São Paulo, at Avenida Presidente Juscelino Kubitschek, 2,041 and 2,235, Bloco2041, Suite 281, Block A, Condomínio WTORRE JK - Vila Olímpia, 04543-011.Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil. Our telephone number is 55-11-3553-3300+55-11-3553-3300 and theour website is https://www.santander.com.br/ri. In addition, the SEC maintains a website at www.sec.gov that contains information filed by us electronically. The information contained on our website, any website mentioned in this annual report or any website directly or indirectly linked to these websites, is not part of, and is not incorporated by reference in, this annual report and you should not rely on such information.

Our agent for service is Mercedes Pacheco, Managing Director – Senior Legal Counsel, Banco Santander, S.A., New York Branch, 45 E. 53rd Street New York, New York 10022.

History

We are currently the third-largest privately ownedthird largest privately-owned bank in Brazil, and the only international bank with scale in the country. With high value added offers, wethat operates countrywide. We operate in both the retail and wholesale segments with high-added value offers, which allows us to meet the needs ofprovide our products and services to individuals, small and medium enterprises, and large corporate customers.

We are part of the Santander Group, a Spanish bankfinancial institution founded in Spain in 1857, and that has expanded globally through numerous acquisitions. We believe that this give us an advantage over our competitors. Although, underUnder the Santander Group’s business model each major unit is autonomous and required to be self-sufficient in terms of capital and liquidity,liquidity. However, our relationship with the Santander Group allows us to:

·●access the Santander Group’s global operations, providingoperation network, using the operational synergies with the Santander Group and enhancingto enhance our ability to provide global products and services to our customers, while reducing technology development costs;

·●provide our customers with the benefits of a strong presence in certain international markets, predominantly in Latin America and Western Europe;

·●take advantage ofassimilate best practices with regardsrespect to products, services, internal controls and risk management, alreadythat were implemented in other countries;by the Santander Group internationally; and

·develop our employees’ skills throughby means of local and international training and development as well as by allow them to gaininitiatives, including international experience in other offices ofexperiences at the Santander Group.Group’s offices worldwide.

Our history in the Brazilian banking industry goes back to the 1970’s1970s and is as summarized in the following figure:

51 

 59

Table of Contents

Table of Contents

 

  

Santander Brasil Timeline

In 1957, the Santander Group entered the Brazilian market for the first time through an operating agreement with Banco Intercontinental do Brasil S.A. In 1970, the Santander Group opened a representative office in Brazil, followed by its first branch in 1982. The foundation of Santander Brasil was in 1985 through an acquisition of a local bank.

InSince the 1990s, the Santander Group has sought to establishestablished its presence in Latin America, particularly in Brazil, by capitalizing on organic growth as well asand pursuing an acquisition strategy, including the following most notable acquisitions:

·●In November 2000, the Santander Group acquired Banespa, a bank owned by the State of São Paulo which becamethat resulted in the Santander Group becoming one of Brazil’s largest financial groups.

·●On July 24, 2008, Santander Spain took an indirect share control of Banco Real, which itwas then absorbed into the Santander Group in order to further consolidate its investments in Brazil. On August 29, 2008, theSantander Brasil’s acquisition of Banco Real’s share capital by Santander Brasil was approved through a share exchange transaction andon August 29, 2008, which resulted in Banco Real becamebecoming a wholly-owned subsidiary of Santander Brasil. Subsequently, it was merged into Santander Brasil on April 30, 2009.

Since October 7, 2009, our units, and common and preferred shares have been listed and traded on B3 under the tickers “SANB11”,symbols: “SANB11,” “SANB3” and “SANB4”, respectively, while our“SANB4,” respectively. Our ADRs representing American Depositary Shares (or “ADSs”) have been registered with the SEC under the Securities Act and are listed and traded on the NYSE under the ticker “BSBR”.symbol “BSBR.” For further information, see “Item 9. The Offer and Listing—A. Offering and Listing Details.”

Important Events

We have set forth below important recent events in the development of our business. For further information, please refersee to Notenote 3 Basis of consolidation of IFRS Financial Statements to our audited consolidated financial statements included elsewhere in “Item 18. Financial Statements” of this annual report.

 

Plans to Optimize Our Capital Structure

On September 26, 2013, we announced that, in order to optimize our capital structure, our board of directors submitted a proposal to optimize the composition of our regulatory capital to our shareholders for their approval (“PR Optimization Plan”). The aim was to establish a more efficient capital structure, consistent with recent capital rules and aligned with our business strategy and asset growth plan. The PR Optimization Plan was composed of the following items: (i) an equity distribution to the shareholders of Santander Brasil in the total amount of R$6 billion, with no reduction in the number of shares; (ii) the issuance abroad of capital instruments to compose Tier I and Tier II of our regulatory capital; and (iii) a bonus share program and an adjustment in the composition of the Units, followed by a reverse share split, with the purpose of eliminating trading in cents of reais.

 60
Table of Contents

On November 5, 2018, our board of directors approved the issuance, through our Cayman Islands branch, of debt instruments to form part of our Tier 1 and Tier 2 regulatory capital in the aggregate amount of U.S.$2.5 billion, pursuant to an offering made to non-U.S. Persons under Regulation S of the U.S. Securities Act of 1993, as amended, or the “Notes Offering.” In addition, our board of directors also approved the redemption of debt instruments issued to form part of our Tier 1 and Tier 2 regulatory capital, as set out in the board’s resolution of January 14, 2014. The proceeds from the Notes Offering were used to fund this redemption. On December 18, 2018, the Brazilian Central Bank authorized the transactions contemplated in the Notes Offering and the redemption, which were completed on January 29, 2019.

Sale of equity stake in Super PagamentosSantander Securities Services Brasil Distribuidora de Títulos e Administração de Meios EletrônicosValores Mobiliários S.A.

, or “SSS DTVM.”

On February 28, 2020,June 19, 2014, we soldexecuted preliminary documents containing the main terms and conditions of the sale of our qualified custody business and the sale of our subsidiary SSS DTVM, which renders third-party fund administration services, to Superdigital Holding Company, S.L., a holding company indirectly controlledowned by Santander Spain and a group of private equity funds managed by Warburg Pincus. Following the sale, we will continue to act as the administrator of the funds, as per CVM Instruction No. 306, dated as of May 5, 1999, as amended.

The closing of the transaction occurred on August 31, 2015, when all of our entire equity interestshares in Super Pagamentos e Administração de Meios Eletrônicos S.A. (“Superdigital”).SSS DTVM were formally transferred to Santander Securities Brasil and SSS DTVM acquired our qualified custody business. We received consideration of R$270859 million for our interest in Superdigital. As a result, we are no longer a shareholder of Superdigital.

Put optionat the closing of the remaining equity interest in Banco Olé Consignado S.A. against Aymoré Crédito, Financiamento e Investimento S.A.

On March 14, 2019, the minority shareholdertransaction which generated gains of Banco Olé formalized its interest in exercising the put option right providedR$751 million before taxes recorded in the Investment Agreement executed with Aymoré CFI, on July 30, 2014, to sell its 40% equity interest in Banco Olé to Aymoré CFI, a controlled entity of Santander Brasil.

52 

Table of Contents

On January31, 2020, Santander Brasil and the shareholders of Bosan Participações S.A. (holding company whose single asset are the shares representing 40% of the corporate capital of Banco Olé) have entered into the definitive agreements and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon transferring Bosan’s shares to Santander Brasil and the payment to the sellers of the total price of R$1,608,772,783,47. As a result, Santander Brasil became, directly and indirectly, the holder of all shares issued by Banco Olé.

“Other non-financial gains/losses” line.

Establishment of the Credit Intelligence Bureau

On January 20, 2016, we entered into a non-binding memorandum of understanding with Banco Bradesco S.A., Banco do Brasil S.A., Caixa Econômica Federal and Itaú Unibanco S.A., for the creation of a credit intelligence bureau, GestoraCredit Intelligence Bureau (Gestora de Inteligência de Crédito S.A., or “CIB”). The CIB was structured as a corporation and each of Santander Brasil, Banco Bradesco S.A., Banco do Brasil S.A., Caixa Econômica Federal and Itaú Unibanco S.A. havehas a 20% ownership stakeequity interest in the corporation.

The purpose of the CIB is to develop a database that, in conformitycompliance with the applicable laws,law, will collect, reconcile and handleprocess the credit information of registered individuals and legal entities who expressly authorize the inclusion of their credit information on such database. We believe this initiative will lead to an increased degree of efficiency and improvements in our credit management activities, and will also facilitate the disbursement of long and medium-term lines of credit to participants in the Brazilian Financial System and to other corporate entities. At the extraordinary shareholders’ meeting held on October 5, 2017, a capital increase in an amount of R$285,205 thousand was approved as a result of which CIB’s database.capital stock increased from R$65,823 thousand to R$351,028 thousand. On April 14, 2017, the definitive documents were signedexecuted by theCIB’s shareholders. The necessary regulatory authorizations, including those issued by the Brazilian Central Bank and theby CADE, have already been granted. The CIB became fully operational in 2019.

Joint Venture withFormation of Banco Hyundai Capital Services, Inc.

Brasil S.A.

On April 28, 2016, our wholly-owned subsidiary Aymoré Crédito, Financiamento e Investimento S.A., or “Aymoré CFI,” entered into a joint venture with Hyundai Capital Services, Inc., or “Hyundai Capital”,Capital,” for the purposes of incorporating (i) Banco Hyundai Capital Brasil S.A. and (ii) an insurance brokerage company. These entities were incorporated to provide, respectively, auto financefinancing and insurance brokerage services and products to consumers through the Hyundai dealerships in Brazil.

Aymoré CFI holdsowns a 50% equity stakeinterest in Banco Hyundai Capital Brasil S.A., whileand Hyundai Capital holdsowns the remaining 50% equity interest.

On February 21, 2019, the Brazilian Central Bank granted Banco Hyundai Capital Brasil S.A. the authorization to operate as a banking entity. Banco Hyundai Capital Brasil S.A. began operating in the first half of 2019.

On April 30, 2019, the Brazilian Central Bank authorized the formation of the insurance brokerage company. The insurance brokerage company was incorporated on July 2, 2019 and began operating in November 2019.

 61
Table of Contents

Accession to Certain Tax Payment Plans

AcquisitionIn August 2017, we joined the PERT. The program allows for certain tax debts to be repaid in installments. In connection with our participation in this program, we are repaying in installments certain amounts due as a result of equity stakelawsuits and administrative proceedings relating to corporate income tax and social security contributions for the periods from 1999 to 2005 in Ipanema Empreendimentos e Participações S.A., currently named Return Capital Serviços de Recuperação de Créditos S.A. (“Return Credit Management”),a total amount of R$492 million in January 2018 (taking into account the reduction arising from our participation in the program). A payment of R$191.9 million was due in August 2017 and Gestora de Investimentos Ipanema S.A., currently named Return Gestão de Recursos S.A. (“Return Asset” and, together with Return Credit Management,a further payment of R$299.7 million was due by January 2018, both of which we have made within the “Return Entities”)

On October 16, 2019, Atual Companhia Securitizadora de Créditos Financeiros, or “Atual,” informed the remaining shareholders of the Return Entities´ of its decision to exercise its call option for shares representing the remaining 30% of the Return Entities’ total voting capital owned for a value of approximately R$17 million. The transaction was completed on November 1, 2019.prescribed time limits. As a result of this transaction, Atual currently owns 100%our participation, we recorded expenses in an amount of R$364 million (after tax) in the third quarter of 2017.

In October 2017, we joined the Incentive Payment Programs and Installments (Programas de Parcelamento Incentivado) created by the cities Rio de Janeiro and São Paulo. The program allows for certain tax debts to be repaid in installments. In connection with our participation in these programs, we are repaying in installments certain amounts due as a result of lawsuits and administrative proceedings relating to ISS for the periods from 2005 to 2016 in a total amount of R$293 million as of December 31, 2017. As we had made provisions for these losses, we registered income of R$435 million as a result of the Return Entities’ issued and outstanding share capital. The Return Entities are activereversal of certain provisions, net of tax effects, in the credit recovery intelligence sector, providing services such as credit portfolio evaluation and pricing, collection, management and recoveryan amount of non-performing loans.

R$96 million.

Joint Venture with HDI Seguros

On December 20, 2017, we entered into binding agreements with HDI Seguros for the formation

53 

Table of Contents

of a partnership throughinvolving the creation of a new insurance company called Santander Auto S.A., or “Santander Auto”.Auto.” Sancap Investimentos e Participações S.A., a company controlled by Santander Brasil, will hold 50% of the issued share capital of Santander Auto with the remaining 50% being held by HDI Seguros.Seguros, Santander Auto will focus on offering motor insurance policies through a fully digital platform. The transaction closed on October 9, 2018 when the documentation to form Santander Auto S.A. was executed.executed and we and HDI Seguros undertook a joint capital contribution of R$15 million into Santander Auto. On January 11, 2019, Santander Auto was granted regulatory authorization to begin operations by SUSEP.SUSEP and effectively started its operations in the second half of 2019.

Sale of equity interest in BW Guirapá I S.A.

On December 22, 2017, Santander Investimentos, Corretora de Seguros, Cia. de Ferro Ligas da Bahia – Ferbasa S.A. and Brazil Wind S.A. entered into an agreement for the sale of 100% of the shares issued by BW Guirapá I S.A. held by Santander Corretora de Seguros and Brazil Wind to Cia. de Ferro Ligas da Bahia – Ferbasa S.A. The transaction also encompassed the seven wind farms organized as special purpose companies held by BW I. The base consideration paid was R$450 million, and an additional amount of up to R$35 million may still be paid if certain contractual targets are met. The transaction closed on April 2, 2018.

Acquisition of Isban Brasil S.A. and Produban Serviços de Informática S.A. Companies

On February 19 and 28, 2018, respectively, we purchased all shares issued by Isban Brasil from Ingenería de Software Bancário, S.L., and all shares issued by Produban Serviços de Informática S.A. from Produban Servicios Informáticos Generales, S.L., for R$61,078 thousand and R$42,731 thousand, respectively. While all parties to these transactions are ultimately controlled by Santander Spain, the transactions were conducted on an arm’s length basis. On February 28, 2018, Isban Brasil was merged into Produban Serviços de Informática S.A. and on the same date, Produban Serviços de Informática S.A. changed its corporate name to Santander Brasil Tecnologia S.A.

Creation of PI Distribuidora de Títulos e Valores Mobiliários S.A.

On May 3, 2018, our indirectly controlled subsidiary Santander Finance Arrendamento Mercantil S.A. was converted into a securities brokerage company and had its corporate name changed to SI Distribuidora de Títulos e Valores Mobiliários S.A. The conversion was approved by the Brazilian Central Bank on November 21, 2018.

On December 17, 2018, SI Distribuidora de Títulos e Valores Mobiliários S.A. changed its name to PI Distribuidora de Títulos e Valores Mobiliários S.A., or “PI DTVM.” The corporate name change was approved by the Brazilian Central Bank on January 22, 2019.

PI DTVM began its operations in March 2019. PI DTVM is a securities brokerage company, with an open digital platform, which willwhose focus is to broaden the portfolio of financial products we are able to offer to our clients.customers.

 62
Table of Contents

Formation of BEN Beneficios

On June 11, 2018, we incorporated BEN Beneficios, Benefícios e Serviços S.A., or “Ben,” an entity fully held by Santander Brasil, whose purpose is to create, supply and administer various types of vouchers and tickets used to provide employee benefits (such as for meals, transportation and cultural events) in the form of printed electronic and magnetic cards.cards, BEN Beneficios began operating in the second quarter of 2019.

Formation of Esfera Fidelidade S.A.

Esfera Fidelidade was incorporated on August 14, 2018 as our wholly-owned subsidiary. Esfera Fidelidade was formed to develop and manage customer loyalty programs. The company started its operations in November 2018.

Investment in Loop Gestão de Pátios S.A.

In 2018, Webmotors, a company in which we own an indirect 70% equity interest, entered into an agreement with Allpark Empreendimentos, Participações e Serviços S.A. and Celta L.A. Participações S.A. to acquire a 51% stake in Loop through a capital increase and issuance of new shares by Loop which were fully subscribed and paid-in by Webmotors. Loop conducts physical and virtual car auctions. This acquisition has enabled Webmotors to expand its service portfolio and strengthen its competitive position. The transaction was completed on September 25, 2018 for the amount of R$23.9 million.

Acquisition of residual equity stake in Getnet

On December 19, 2018, the minority shareholders of Getnet exercised their right to sell all of their shares to Santander Brasil, or the “Put Option”,Option,” pursuant to the Shares’Share Purchase and Sale Agreement and Other Covenants executed between the parties on April 4, 2014, or “SPA”.“SPA.” On the exercise date of the Put Option, we entered into a binding amendment to the SPA, to acquire all of the Getnet shares owned by minority shareholders, corresponding to 11.5% of the entity’s equity interest, in the amount of R$1.4311.4 billion. The acquisition transaction was approved by the Brazilian Central Bank on February 18, 2019 and the transaction closed on February 25, 2019. We subsequently spun-off Getnet to our shareholders as a result of which Getnet is no longer a subsidiary of Santander Brasil, see “—A. History and Development of the Company—The Getnet Spin-Off.”

Put option of the remaining equity interest in Banco Olé Consignado S.A. against Aymoré Crédito, Financiamento e Investimento S.A.

On March 14, 2019, the minority shareholder of Banco Olé Consignado S.A., or “Banco Olé” formalized its interest in exercising the put option right provided in the Investment Agreement executed with Aymoré CFI on July 30, 2014, to sell its 40% equity interest in Banco Olé to Aymoré CFI, a controlled entity of Santander Brasil. On January 31, 2020, Santander Brasil and the shareholders of Bosan Participações S.A. (a holding company whose single asset is the shares representing 40% of the corporate capital of Banco Olé) entered into the definitive agreements and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon the transfer of Bosan’s shares to Santander Brasil and payment of the total price of R$1,608.8 million to the sellers. As a result, Santander Brasil currently ownsbecame, both directly and indirectly, the holder of all shares issued by Banco Olé.

Acquisition of Summer Empreendimentos Ltda.

On May 14, 2019, we and our wholly-owned subsidiary Santander Holding Imobiliária S.A., or “SHI,” entered into a binding document with the shareholders of Summer Empreendimentos Ltda., or “Summer,” for the acquisition of Summer’s issued share capital. The acquisition was approved by the Brazilian Central Bank on September 16, 2019 and concluded on September 20, 2019. We now hold, directly and indirectly through SHI, 100% of Getnet’s issuedSummer’s share capital. Initially, Summer was not consolidated in our financial statements because it was treated as a temporary investment (non-current assets for sale). However, the investment is no longer considered temporary, and outstanding share capital.

therefore Summer is included in our consolidated financial statements.

Sale of equity stake in CIBRASEC – Companhia Brasileira de Securitização

On July 24, 2019, we completed the sale to ISEC Securitizadora S.A. (“ISEC”) of our entire equity interest in CIBRASEC – Companhia Brasileira de Securitização, (“Cibrasec”)or “Cibrasec,” to ISEC Securitizadora S.A., correspondingor “ISEC.” Our interest amounted to 4,000 common shares and 50 Class A preferred shares, representing, in the aggregate, approximately 9.72% of Cibrasec’s total capital stock. The transaction was effected pursuant to the Shares Purchase and Other Covenants Agreement executed on the same date byamong Santander Brasil, the other shareholders of Cibrasec, ISEC and Cibrasec, who acted as an intervening party. We received consideration of R$9.8 million for our interest in Cibrasec. As a result, we are no longer a shareholder of Cibrasec.

 63
Table of Contents

Projections Disclosure

Acquisition of equity stake in Ipanema Empreendimentos e Participações S.A., currently named Return Capital Serviços de Recuperação de Créditos S.A. (“Return Credit Management”), and Gestora de Investimentos Ipanema S.A., currently named Return Gestão de Recursos S.A. (“Return Asset” and, together with Return Credit Management, the “Return Entities”)

On October 8,16, 2017, Santander Brasil, through its wholly-owned subsidiary Atual Companhia Securitizadora de Créditos Financeiros, or “Atual,” acquired a direct equity interest in Return Credit Management, and an indirect equity interest in Return Asset corresponding to 70% of Return Entities’ share capital.

On October 16, 2019, Atual informed the remaining shareholders of the Return Entities of its decision to exercise its call option for shares representing the remaining 30% of the Return Entities’ total voting capital owned for a value of approximately R$17 million. The transaction was completed on November 1, 2019. As a result of this transaction, Atual currently owns 100% of the Return Entities’ issued and outstanding share capital. The Return Entities are active in the credit recovery intelligence sector, providing services such as credit portfolio evaluation and pricing, collection, management and recovery of non-performing loans.

Incorporation of the spun-off portion of Integry Tecnologia e Serviços A.H.U Ltda.

On October 31, 2019, we approved a spin-off of Integry Tecnologia e Serviços AHU Ltda, or “Integry,” a then wholly-owned subsidiary of Getnet (which was itself a subsidiary of Santander Brasil until the completion of the Getnet Spin-Off). Subsequently on December 20, 2019, Getnet and Santander Merchant Platform Solutions, S.L., or “SMPS Global,” a company based in Spain and controlled by Santander Spain, entered into a share purchase agreement as a result of which SMPS Global now holds 100% of Integry’s share capital. On December 23, 2019, Integry changed its name to Santander Merchant Platform Solutions Brasil Ltda.

Sale of equity stake in Super Pagamentos e Administração de Meios Eletrônicos S.A.

On February 28, 2020, we sold our entire equity interest in Super Pagamentos e Administração de Meios Eletrônicos S.A., or “Superdigital,” to Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain, for the amount of R$270 million as consideration. As a result of such transaction, we are no longer a shareholder of Superdigital.

Disclosure of Projections

On July 29, 2020, we informed the market that we have decidedwill no longer disclose guidance, as previously announced in the material fact dated October 8, 2019. This decision comes in response to disclose projections (guidance)the ongoing uncertainty with respect to the impact of the COVID-19 pandemic on our business, financial condition, assets, liquidity, cash flows and results of operations, as well as on the macroeconomic environment in Brazil and globally.

Acquisition of direct equity interest in Toque Fale Serviços de Telemarketing LTDA

On March 24, 2020, we acquired all of the outstanding share of Toque Fale Serviços de Telemarketing Ltda., or “Toque Fale,” held by our then subsidiaries Getnet and Auttar HUT Processamento de Dados LTDA for an amount of R$1.1 million, corresponding to the equity value of the quotas on February 29, 2020. As a result, we became the direct holders of 100% of Toque Fale’s share capital.

Purchase of Equity Interest in Gira – Gestão Integrada de Recebíveis do Agronegócio S.A.

On August 11, 2020, Santander Brasil executed a share purchase and sale agreement and other covenants with the shareholders of Gestão Integrada de Agronegócio S.A., or “Gira” to acquire 80% of Gira’s share capital. Gira is a technology company that operates in the management of agribusiness receivables and whose platform has the potential to make agricultural credit transactions more secure. This increased layer of security is achieved through the use of applications, such as geolocation of productive areas, capture and analysis of agronomic data and permanent monitoring of production performance for sites involved in credit transactions. Gira’s solutions also include the review and digital registration of collateral provided under commercial contracts and continuous observation of crop development as a way of monitoring risks. The applicable regulatory approvals were received on December 18, 2020 and the closing of the transaction took place on January 8, 2021. As a result, Santander Brasil now holds an 80% equity interest in Gira.

 64
Table of Contents

Merger of Banco Olé Consignado S.A. into Banco Santander (Brasil) S.A.

Following the acquisition of the remaining equity interest over Banco Olé Consignado S.A., through the holding company Bosan Participações S.A., together referred to as “Olé Companies,” the shareholders of Santander Brasil and the Olé Companies approved the merger of Olé Companies into Santander Brasil, as provided by the general meetings held on August 31, 2020. As a result, the Olé Companies ceased to exist and were succeeded by Santander Brasil. The incorporation of the Olé Companies has been approved by the Brazilian Central Bank and is in the process of being registered with the applicable commercial registries (juntas comerciais).

Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.

On September 29, 2020, Santander Brasil’s subsidiary, PI DTVM, entered into an investment and other covenant agreement with the shareholders of Toro Controle e Participações S.A., or “Toro Controle,” to invest in Toro Controle. Toro Controle is the holding company of Toro Corretora de Títulos e Valores Mobiliários Ltda, or “Toro Corretora,” and Toro Investimentos S.A., or “Toro Investimentos,” which jointly run an investment platform focused on the retail market, founded in Belo Horizonte in 2010. We refer to Toro Controle, Toro Corretora and Toro Investimentos as “Toro.” As a result of the transaction, and the subsequent merger of Toro Controle into Toro Corretora, PI DTVM holds 60% of Toro Corretora’s share capital.

In addition, PI DTVM and Toro Corretora combined their market experiences to develop a complete platform of fixed and variable income products. This platform is based on shared expertise, technology and operate in the growing Brazilian investment market. The completion of the transaction occurred in April, 2021, following the execution of certain customary agreements between the parties, the fulfillment of customary conditions precedent and the receipt of certain regulatory approvals, including the approval of the Brazilian Central Bank.

Capital reduction of Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A.

On October 8, 2020, the shareholders of Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A., which we refer to jointly as the “Norchem Companies,” approved a capital reduction in the two Norchem Companies, in the amounts of R$14.7 million and R$19.9 million, respectively. As a result, we ceased to be shareholders of the Norchem Companies.

Dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A.

On November 12, 2020, we approved the dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A., a Spanish entity wholly-owned by us, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our indicatorscustomers for working capital and trade-related financings. The capital invested abroad was repatriated to Brazil in November 2020. The deed of dissolution and liquidation of the entity was registered with the Mercantile Registry of Madrid and effective on December 15, 2020. These activities are now carried out by our Luxembourg branch.

Acquisition of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém EIRELI

On December 8, 2020, we entered into a quota purchase agreement with the owners of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém Eireli (jointly “Paytec”) for the yearacquisition of 2022. While we believe that the projections,entirety of Paytec’s issued share capital. Paytec is a logistics operator with Brazil-wide coverage which we intend to disclose, are basedfocuses on reasonable assumptions made by our management, such projections are nevertheless subject to significant uncertainties and matters outside of our control, including: the future average growth of our loan portfolio, returnpayments market. The transaction closed on equity (ROE), cost

54 

Table of Contents

to income (end of term), the future average growth in the number of our active customers and ourProspera (microcredit) customers.

March 12, 2021.

Buyback Program

On November 1, 2019,February 2, 2021, our board of directors approved, in continuation ofcontinuity with the buyback program set to expirethat expired on November 5, 2019,4, 2020, a new buyback program of our units and ADRs. Our units and ADRs issued by us,will be acquired either directly or through our branch in the Cayman Islands, to be held in treasury or subsequently sold. The buyback program will covercovers the acquisition of up to 37,256,07236,956,402 units or ADRs, representing a combination of 37,256,07236,956,402 common and 37,256,07236,956,402 preferred shares, corresponding to approximately 1% of our share capital. The term of the buyback program is up to 1218 months beginning November 5, 2019,on February 3, 2021 and expiring on NovemberAugust 2, 2022.

 65
Table of Contents

Corporate reorganization Santander Leasing S.A. Arrendamento Mercantil and Banco Bandepe S.A.

On May 11, 2021, Santander Brasil and Banco Bandepe SA, or “Bandepe,” entered into an Agreement for the Purchase and Sale of Shares through which Santander Brasil acquired the entire equity interest held by Bandepe in Santander Leasing S.A. Arrendamento Mercantil, or “Santander Leasing,” which amounted to 21.42% of Santander Leasing’s share capital. As a result, Santander Brasil became the sole shareholder of Santander Leasing. On May 27, 2021, an incorporation of all the shares of Bandepe by Santander Leasing was approved, in order to convert Bandepe into a wholly-owned subsidiary of Santander Leasing. As a result, the capital stock of Santander Leasing increased by approximately R$5.4 billion.

Acquisition of Equity Interest in Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.

On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos SA, or “Toro Investimentos” entered into an investment agreement and other covenants with the partners of Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda., or, collectively, “Monetus,” by means of which Toro Investimentos will hold, upon the closing of the transaction, 100% of the capital stock of Monetus. Monetus, originally from Belo Horizonte in the state of Minas Gerais, carries out its activities through an automated investment application. Taking into account a customer’s needs and risk profile, this application automatically creates, executes and tracks a diversified and personalized investment strategy to provide optimal service to customers. The transaction is subject to the execution of the definitive agreements and the occurrence of certain conditions usual to this type of transaction, including the applicable regulatory approvals.

Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.

On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos S.A. executed an investment agreement and other covenants with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda (jointly “Mobills”), by which, once the transaction is concluded, Toro Investimentos will hold 100% of the capital stock of Mobills. Domiciled in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning. After the conditions precedent established in the investment agreement were fulfilled, the transaction closed on January 4, 2020.2022.

Acquisition of Equity Interest in Solutions 4 Fleet Consultoria Empresarial Ltda.

On July 13, 2021, Aymoré Crédito, Financiamento e Investimento S.A., or “Aymoré,” and the partners of Solution 4 Fleet Consultoria Empresarial Ltda., or “Solution4Fleet,” executed a certain Investment Agreement and Share Purchase and Sale Agreement, by means of which Aymoré will hold, upon the closing of the transaction, 80% of the capital stock of Solution4Fleet, or “Solution4Fleet Transaction.” Solution4Fleet specializes in structuring vehicle rental and subscription businesses – long-term rental for individuals. The transaction closed on October 8, 2021 after the applicable conditions precedent were fulfilled.

Acquisition of equity interest in Car10 Tecnologia e Informação S.A. and Pag10 Fomento Mercantil Eireli.

On July 13, 2021, Webmotors S.A., or “Webmotors,” the shareholders of Car10 Tecnologia e Informação S.A., or “Car10 Tecnologia,” and Pag10 Fomento Mercantil Eireli, or “Pag10,” and, together with Car10 Tecnologia, “Car10,” entered into certain agreements for the acquisition by Webmotors of 66.7% of the capital stock of Car10 Tecnologia, which is the sole holder of Pag10. Car10 acts as a marketplace that brings together more than 7,000 service providers such as workshops and autocenters, auto body and paint, and cleaning and sanitizing, as well as emergency assistance and towing. The transaction closed on September 20, 2021.

Acquisition of equity interest in Liderança Serviços Especializados em Cobranças Ltda. and Fozcobra Agência de Cobranças Ltda.

On August 4, 2021, Atual Serviços de Avaliação de Créditos e Meios Digitais S.A., or “Atual,” a wholly-owned subsidiary of Santander Brasil and the shareholders of Liderança Serviços Especializados em Cobranças Ltda., or “Liderança,” entered into a certain Agreement for the Assignment of Quotas and Other Covenants, for the acquisition by Atual of 100% of the capital stock of Liderança. Liderança operates in the industry of overdue credit recovery, providing extrajudicial collection services to financial institutions and other industries, and has a subsidiary: Fozcobra Agência de Cobranças Ltda. The transaction closed on October 1, 2021. Subsequently, Fozcobra Agência de Cobranças Ltda. was merged into Liderança on October 4, 2021.

 66
Table of Contents

Acquisition of Equity Interest in Apê11 Tecnologia e Negócios Imobiliários Ltda.

On September 2, 2021, Santander Holding Imobiliária S.A., or “SHI,” a wholly-owned subsidiary of Santander Brasil, entered into a Share Purchase and Sale Agreement and Investment Agreement with the shareholders of Apê11 Tecnologia e Negócios Imobiliários Ltda., or “Apê11,” for the acquisition of 90% of the capital stock of Apê11. Apê11 acts as a collaborative marketplace, pioneering the digitization of the purchase journey of houses and apartments. After the conditions precedent established in the agreement were fulfilled, the closing of the transaction occurred on December 16, 2021.

Issuance of Notes

OnIn November 5, 2018,and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our board of directors approved the issuance, through our Cayman Islands branch, of debt instruments to form part of our Tier 1 and Tier 2 regulatory capital, in the aggregatetotal amount of U.S.$2.5 billion, pursuant to an offering made to non-U.S. Persons under Regulation SR$5.5 billion. The Financial Bills have a term of the U.S. Securities Act of 1993, as amended, or the “Notes Offer”.

Our board of directors also approved theten years, and redemption of instruments issued to form part of our Tier 1 and Tier 2 regulatory capital,repurchase options in accordance with the board resolutionapplicable regulations. The Financial Bills had an estimated impact of January 14, 2014. The redemption were carried out with funds raised through the Notes Offer.92 basis points on our Tier 2 regulatory capital.

Acquisition of Equity Interest in CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A.

On December 18, 2018,January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A., or “Santander Corretora,” together with other investors (including Banco BTG Pactual S.A. and CBOE III, LLC) entered into an investment agreement with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A., or “CSD BR,” and its shareholders for the acquisition of a minority equity interest in CSD BR. CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Brazilian Central Bank, authorized the transactions contemplated in the Notes OfferCVM and the redemption,SUSEP. Subject to closing, Santander Corretora’s interest in CSD BR will be 20%. The closing of the transaction is subject to the conclusion of definitive agreements and the implementation of certain customary conditions precedent, including the receipt of applicable regulatory approvals.

The Getnet Spin-Off

On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which werewas undertaken by our then-subsidiary Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. As a result of the Spin-Off, each holder of our common shares, preferred shares and Santander Brasil units, including the custodian for the Santander Brasil ADS facility, received Getnet common shares, preferred shares and Getnet units, at the rate of 0.25 common share, preferred share or Getnet Unit, as the case may be, for each one common share, preferred share or Santander Brasil Unit issued by us held at close of trading on the B3 on the relevant record date. Additionally, each holder of Santander Brasil ADSs representing Santander Brasil units received Getnet ADSs, each representing two Getnet units, at a rate of 0.125 Getnet ADS for each Santander Brasil ADS held at the close of trading on the NYSE on the relevant ADS record date. The Getnet common shares, preferred shares and Getnet units are traded on B3, and Getnet ADSs are traded on Nasdaq under the symbol “GET.” The Spin-Off was completed on January 29, 2019.October 26, 2021.

As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. On April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “ Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.”

The charts below set forth a summary of our simplified corporate structure before and after the Spin-Off and after the reorganization of the PagoNxt group, of which Getnet forms part:

 67
Table of Contents

Corporate Structure Prior to the Spin-Off

 

Corporate Structure After the Spin-Off

 68
Table of Contents

Corporate Structure After the Reorganization of the PagoNxt Group

Impact of COVID-19

We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. Based on the information available as of the date of this annual report, we present below a summary of the main effects of the COVID-19 pandemic on our business and results of operations:

●As the COVID-19 pandemic escalated in Brazil starting March 2020, we adjusted our operations to be able to continue providing our products and services to our customers while ensuring the health and safety of our employees. We have prioritized the safety and health of our employees and customers by adhering to prevention and care measures recommended by the Brazilian health and labor ministries, while striving to minimize the impact on our business. From the beginning, we implemented remote working arrangements to safeguard employees most at risk from COVID-19. We have also provided telemedicine services in addition to standard medical support to support the care of our employees and their families. Furthermore, we have instituted a protocol for mapping, protecting, and monitoring all contaminated individuals and those in contact with them, as well as a remote working strategy that evolved in lockstep with the pandemic. We supported our employees throughout the COVID-19 pandemic by offering them and their dependent remote medical care through an agreement with a leading Brazilian hospital. We also provided advance payment of thirteenth salary installments in April 2020 (these are normally paid in April and November of each year).
●From March 2020 to October 2021, our branches operated with reduced service hours; from 9:00 a.m. to 2:00 p.m. from March 2020 to July 2020 and then from 9:00 a.m. to 3:00 p.m. until October 2021. From November 2021 through to the date of this annual report, we have been expanding our service hours in our branches from 9:00 a.m. to 4:00 p.m. We adopted a staggered entry system in branches with heavy customer traffic in order to reduce the total number of customers in the branch at any given time. We also reserved the period from 9:00 a.m. to 10:00 a.m. for customers who would are more vulnerable to COVID-19. To provide continuous service and meet the increased demand of our call centers, we temporarily relocated retail employees to our call centers to help deal with the increased demand for remote banking services. In line with our commitment to clear customer communication, we launched the “Overcome Together” and “Santander Supports You” websites, which gathered resources and initiatives related to our business.
 69
Table of Contents
●We have offered individual, microentrepreneur and SME customers the possibility of deferring their loan payments for up to 60 days. In May 2020, we allowed an extension for an additional 30 days, as a result of which our deferred loan portfolio reached a total of R$49.8 billion as of June 30, 2020, R$40.6 million as of December 31, 2020 and R$25.9 million as of December 31, 2021. At the same time, we continuously monitored our loan quality indicators, which remained at acceptable levels throughout the COVID-19 pandemic and through the date of this annual report. We also participated in government programs created in 2020 that granted special credit lines for businesses, particularly in retail, to minimize the negative effects of the pandemic including CMN Resolution No. 4,846, which was published on August 24, 2020 and regulated lending under the Emergency Employment Support Program, initially established by Provisional Measure No. 944/2020. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” As a result, our total portfolio balance of government-sponsored loans reached R$10.3 billion as of December 31, 2021.
●The onset of COVID-19 had a negative impact on our net fee and commission income, especially in the first half of 2020, due to a lower volume of customer transactions, which adversely affected the total amounts we were able to charge in credit and debit card fees. As a result, we experienced reductions in the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2019 to the six months ended June 30, 2020, as compared to the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2018 to the six months ended June 30, 2019. These reductions were due to the abovementioned lower transaction volumes, a higher share of global wholesale banking in the loan portfolio, alongside a shift in the product mix, with a decreased share of higher risk products, such as credit cards and overdrafts. In 2021, in particular in the second half of the year, there was a recovery in economic activity. As a result, in the year ended December 31, 2021, our net interest income increased by 15.5% compared to the year ended December 31, 2020 (although our net fee and commission income decreased by 5.9% in the same period), our sales through physical distribution channels increased (by 46% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and so did our sales through digital channels (which increased by 45% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and we added 784,000 new customers in December 2021 (which is 78% more than in December 2020). For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Interest Income” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Fee and Commission Income.”
●In 2020, we constituted an additional provision in the amount of R$3,200 million. This provision was calculated based on the analysis of the potential macroeconomic effects and took into account not only quantitative and qualitative indicators, but also the adequate and accurate identification of risks and a collective assessment of exposures. In 2021 as a response to the macroeconomic shock of the COVID-19 pandemic, we used a part of the provision overlay on expected credit losses created in 2020, as further explained under “Item 5. Operating and Financial Review and Prospects—A. Operating Results— Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).” However, we also experienced an improvement in our loan portfolio, in particular with respect to individuals as loans to individuals increased by 17% in the year ended December 31, 2021 compared to the year ended December 31, 2020. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019— Results of Operations—Impairment Losses on Financial Assets (Net).”
●In 2020, the National Monetary Council, or “CMN,” and the Brazilian Central Bank introduced measures to minimize the impact of COVID-19 on the financial system. With respect to liquidity, these changes included: (i) a reduction in the time deposit reserve requirement from 31% to 17%; and (ii) an increase in the additional limit on the reserve requirement treated as High Quality Liquidity Assets from 15% to 30%, ensuring greater liquidity in a stress scenario. In addition, a temporary suspension on dividends and other distributions was enacted through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This suspension on the payment of dividends was not renewed in 2021. The CMN also published Resolution No. 4,783, which temporarily reduced the capital conservation buffer (where all rates relate
 70
Table of Contents

to the total amount of risk-weighted assets) required from financial institutions from 2.5% to 1.25% as of the second quarter of 2020, leading our Basel ratio to reach 15.3% as of December 31, 2020. In 2021, the time deposit reserve requirement increased from 17% to 20% as of November 2021, and the capital conservation buffer required from financial institutions rose from 1.25% to 1.625% as of April, 2021, with this percentage increasing gradually until April 2022, when it will reach 2.5%. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” and “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”

●We experienced an increase in digital business. Specifically, we recorded an increase of 45% in the number of new contracts originated through digital channels in the year ended December 31, 2021 compared to the year ended December 31, 2020.

See also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”

Capital Expenditures and Divestitures

Our main capital expenditures include investments in our Information Technology (“IT”)information technology platform. Our ITinformation technology platform focuses on our customers and supports our business model. In 2019, 20182021, 2020 and 2017,2019, total investments in ITinformation technology were R$1,8581,905 million, R$1,2761,432 million, and R$1,1321,858 million, respectively.

 

In 2021, 2020 and 2019, we realized meaningful transformationscontinually improved in our operations and technologic infrastructure,technology platforms by means of investment in our digital applications, especially through the implementation of various and modernnew solutions in the areas of Artificial Intelligence (Machine Learning,artificial intelligence (machine learning, AIOPs), Micro Services, BPM, Block Chain, Cybernetic Insurance, Facial Recognition, MultiCloud,micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. The application of these new technologies allowed the renovation ofimproved our digital channels for continually improve the experience of interaction between clients and the bank, searching for offer services more and more practical and intuitive, besides makes possible the launch of products all digital and innovativewith our customers enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness, investments to better address client needs. We also continued to invest in the areas of Credit, Consortium, Payments, Agribusiness, Investments, in a way to serve the demands and expectations of the modern client.

In theour physical service’s scope (Branch,distribution network (branches, PABs and PAEs), applying new functionalities, including: biometrybiometric identification for clients PJ in transactions with card,corporate customers, digital purchase and payment of exchange, by digital treasure, administration of single line for a more efficient organization of the service and recognition of preferential clients in the totem of branches, searching for more security, agility and service’s personalization.among other initiatives. For more details about our technology and infrastructure, of Technology, consultsee the item “ “—B. Business Overview - Overview—Technology and Infrastructure”.Infrastructure.”

Our ongoing capital expenditures consist primarily of investments in information technology. We expect to fund our ongoing capital expenditures principally from our cash flow from operations.

 

Our major divestituredivestitures in the past three fiscal years and until the date of this annual report waswere the Spin-Off of Getnet and the sale of BW I in 2017.Super Pagamentos.

 

For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting the Comparability of Our Financial Condition and Results of Operations and “—Important Events—Sale of BW Guirapá I S.A.Operations.”).

55 

Table of Contents

4B.4B. Business Overview

Our Strategy

Our strategy is centered on endeavoring to endeavor to grow in agenerate profitable, recurring, and sustainable manner by providing services with excellence and consistently strive to enhance customer satisfaction levels, expandgrowth. We believe the expansion of our customer base over the years is due to our ability to capture new customers and increase their loyalty. We have achieved this by offering a comprehensive portfolio of products and services, with a particular emphasis on quality and a constant drive to improve customer satisfaction. We serve our customers through multi-channel solutions which we believe enable us to provide a tailored and human service which is responsive to the loyaltyneeds of our customers. We rely on our four integrated service channels to do offer our services to our customers: digital, remote, physical and external channels.

To accomplish this goal,We recorded net income of R$15,559 million, R$13,451 millionand R$16,631 million in the years ended December 31, 2021, 2020 and 2019, an increase of 15.7% in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the years ended December 31, 2021, 2020 and 2019 we achieved capital adequacy ratios of 14.9%, 15.3% and 15.0% respectively. In the years ended December 31, 2021, 2020 and 2019, we have been deeply focusedachieved efficiency ratios of 27.1%, 35.5% and 28.8%, and adjusted efficiency ratios of 28.2%, 27.7% and 28.2%, respectively. In addition, we achieved an adjusted return on understanding howaverage stockholders’ equity of 20.2%, 18.4% and 24.6% in 2021, 2020 and 2019, respectively. Adjusted return on average stockholders’ equity is a non-GAAP financial measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” We believe these metrics demonstrate our track record of consistent performance and the Brazilian market works to address its demands effectively. As a consequenceresults of our initiatives, Santander Brasil has made substantial progress in all key business areas, highlighted by a remarkable ROE evolution in the last five years. We believeconstant efforts to improve our productivity.

 71
Table of Contents

In recent years, we have been ableundergone significant transformations, thereby enabling us to redirectidentify and capitalize on business opportunities. We have expanded our efforts toward a customer-centric business model with efficiencyplatform to diversify our offering of products and risk model accuracy.services:

●In 2016, we initiated our commercial transformation by implementing new work models, streamlining processes and digitalizing our operations. We have sought to introduce a culture of innovation, while remaining cognizant of our surroundings and customer demands. This led us to expand our vehicle financing offering at a time when the market was moving in the opposite direction.
●In 2017, we took steps to improve service quality and we placed customer satisfaction to the core of our strategy. We believe we were industry pioneers in implementing and publicly disclosing our net promoter score, or NPS, as a measure of customer satisfaction.
●In 2018, alongside our culture of service, we advanced our pursuit of efficiency by bringing an industrial cost approach into our banking business, covering three critical fronts: organization, technology, and culture. We believe this strategy has already yielded positive results and that it will enable us to further optimize our productivity while also improving customer experience on our platforms.
●In 2019, we expanded our ecosystem by introducing new, innovative products into the market. We launched Sim, emDia, Santander Auto, Auto Compara and Ben Visa Vale while repositioning ourselves in the card market, as well as refocusing our efforts on customer and account holder loyalty.
●In 2020, we focused our efforts on assisting customers in facing the challenges posed by the COVID-19 pandemic by providing products and services adapted to the new reality brought in by the pandemic. We did so by improving and expanding our digital channels in order to deliver to our customers robust self-service banking at a time when in-person service delivery was not possible. We also reaffirmed our commitment to efficiency and rapid response to emerging market trends by launching SX Santander to offer customers exclusive benefits, differentiating ourselves from the Brazilian Central Bank’s PIX instant payment solution.
●Finally, in 2021 we redoubled our efforts to improve customer experience and satisfaction across all channels. Our strategy is to convert new customers into loyal customers (we define loyal customers as those who purchase six or more products), thus, generating profitability for the bank and satisfaction in using the bank for our customers. We seized on the opportunities we saw in the market and managed to reach 53.4 million customers as of December 31, 2021, including adding more than 784,000 new customers in December 2021. We achieved this while also maintaining high levels of customer loyalty, reaching eight million loyal customers as of December 31, 2021 (an increase of 32% compared to December 31, 2020). The combined effect of the growth in our customer base and our levels of customer loyalty enabled us to increase our customer base by 11% as of December 31, 2021 compared to December 31, 2020. We also further improved our digital operations by expanding our offerings through this channel, which has grown significantly, as evidenced by an increase of 45% in financial products and services purchased through this channel in the year ended December 31, 2021 compared to the year ended December 31, 2020. In addition, we continued to focus on streamlining processes, digitalizing our operations, and reducing paper consumption to enable us to operate faster and more efficiently. As a result, we have achieved: (i) faster service, as the lead time to open a business current account decreased by 78% in the year ended December 31, 2021 compared to the year ended December 31, 2020 and (ii) improved efficiency, with 87.0% of credit card bills issued in digital or email format in the year ended December 31, 2021, an increase of 13 p.p. compared to the year ended December 31, 2020.
●We strive to continuously improve our customer experience through the addition of new services, the expansion of our offering, and the enhancement and deeper integration of our channels.

We have sought to identifyconsolidated and improved our different typesfour service channels through which customers can select the product or solution that best meets their needs. Our digital channel averaged 442 million total visits per month in 2021, adding 554,000 new accounts in December 2021. Similarly, the physical channel, which consists of our branch network that is expanding into Brazil’s rural areas, recorded a monthly average of more than 15 million visits by customers and their specific consumption needs. Based on that, we have adoptedpotential customers, serving as a strategy which relies on serving our customers wherever and whenever they want, through multi-channel (digital and/or physical) solutions that deliver a customized and innovative portfoliocrucial pillar for business origination. In the remote channel, with the implementation of services and products.

We endeavor to seize all the opportunities presented to us by our ecosystem in order to cross-sell and upsell our products and services. For example, our automotive-related ecosystem consisting of Santander Financiamentos, Webmotors and Olé Consignado, has been instrumental in attracting new customers to Santander Brasil. Moreover, we have invested in initiatives that we believe have growth potential, such BEN, Sim, emDia, Santander Auto and PI. We believe that continuing to cross-sell and upsell across our business and investing in initiatives, which we believe to be promising, are key pillars for us to attract new customers and retain existing ones.

Further evidence that we are on the right track is the fact that in 2019 we were recognized by Euromoney Awards for Excellence as the Best Bank in Brazil and the Best Bank in Latin America.

Below we outline the main initiatives we have taken during these last years:

•       Net promoter score or NPS. We introduced the NPS as our main customer satisfaction metric in 2017 and in 2018, we were pioneers in disclosing this index to the market. After each interaction with Santander Brasil, our customers are asked randomly to rate their experience following the NPS methodology. Nowadays, we take into account our NPS with respect to our compensation (profit sharing) metrics, affecting virtually every department and position level at the organization, including the administrative and commercial departments. Additionally, and reinforcing our commitment to service excellence, we invited our senior management to become personally involved in enhancing customer satisfaction, by getting in touch with at least three detractors (unsatisfied customers) in order to understand and solve their problems and turn them into promoters (satisfied customers). We ended 2019 with an NPS of 56 points and we believe that this high level in satisfaction translates into an expansion of our loyal customer base.

•       Operational excellence.With the goal of fine-tuning the customer journey and boosting efficiency, we have transformed several aspects of our operational model. First, we switched to an industrial approach, which means that we now have an end-to-end view of the customer experience, reducing manual activities and dispersion, as well as enhancing cost transparency. Additionally, this year we launchedSX Negócios, a new service model, we have redefined our model to move away from a call center and toward a business channel. We have built a platform to capture new business, processing over 25 million support requests per month in large partthe year ended December 31, 2021, 4.6 million of which are handled by humans. The external channel is comprised of bank correspondents, which are entities allowed to provide specific services to customers, including customer services, on behalf of another financial institutions, and our business verticals, such as payroll-deductible loans, Prospera and Olé Consignado.

 72
Table of Contents

We believe that our digital platform enables us not only to offer our customers a comprehensive set of services but also to benefit from the business generation potential which arises from the ease with which customers are able to purchase our products and services through our digital sales channels. Sales of our low-income portfolio, where we have transformed five types of careers into a single businessproducts and service manager career, further optimizingservices through our customer service at our branches, generating more business and delivering greater efficiency. With these changes, we have already obtained notable results, such as a decreasedigital channels increased by 45% in the time needed for customersyear ended December 31, 2021, compared to finalize the purchase of certain products andyear ended December 31, 2020, including an increase in the number of agreements issued.premium bonds (capitalização) contracts of 360% and 23% in premiums written in open insurance contracts (considering life insurance, personal accident insurance, home insurance, and other types of insurance) in each case in the year ended December 31, 2021 compared to the year ended December 31, 2020. GENT&, our artificial intelligence channel, recorded over 18.5 million interactions in December 2021 and is currently capable of answering more than 26,000 questions.

•       Digital strategy.We are in constant digital transformationbelieve that our business has the potential to better serve our customers. We have implemented a collaborative work system in our organization based on the “Agile” methodology, commonly used in IT. This new approach consistsgrow by means of multidisciplinary teams, with employees from

56 

Table of Contents

businessinnovation and technology, areas, who are given autonomy to make decisions rapidly. Thanks to that, we have been able to offerin conjunction with user experience enhancements and steady evolution in the quality of our services. Our products, services, and services, as well as add system updates throughbusinesses form part of the daily lives of all our available channels quickly. These tools include: (i) providing a wide range ofcustomers, whether businesses or individuals, and include, among others, payment solutions (i.e., payment platforms), investment and advisory services, across all channels according to customers' choices and/or needs; (ii) giving customers the ability to meet all their needs through digital channels;vehicle and (iii) integrating all service channels to ensure that customers have a homogeneous experience, regardless of the channel chosen.

•       Optimization of commercial tools.We have simplified day-to-day operations of branch staff, so that they can spend more time meeting customer needs. As part of this initiative, we provided our employees with new features in our customer relationship tool (CRM) that centralizes all the information they need for their daily commercialconsumer goods financing, mortgage loans, payroll-deductible and financial activities. We have also implemented time-saving tools, which reduce the amount of information and steps required to perform operational tasks.

•       Greater empowerment and incentives for branch staff.We have sought to decentralize the management of branch resources. Branch managers are now responsible for managing the expenses of their branches, and each branch has its own results report. This gives branch employees and managers a higher sense of autonomy and responsibility,agribusiness loans, as well as the feelingproducts and services offered through our wholesale unit. We also endeavor to maintain sound risk management, which entails continuously improving our credit granting models to maintain our credit risk indicators at acceptable levels.

In order to strengthen our platform, we have launched new businesses that continue to evolve and support our customer loyalty strategy, such as (i) Ben, which grew its customer base to 565,000 cards as of December 31, 2021 along with 2,675 human resources customers and 365,432 partner establishments as of the same date; (ii) Sim, which surpassed the five million customer mark and reached a loan portfolio of R$1.6 billion as of December 31, 2021; (iii) emDia, which increased recovered credit volume by 12% in the year ended December 31, 2021 compared to the year ended December 31, 2020, and (iv) Santander Auto, where the percentage of new consumer finance contract purchasers who also acquired insurance reached 20% in 2021, resulting in over R$210 million in written premiums in 2021. In 2020, we also announced the acquisition of securities brokerage firm Toro Corretora to complement our investment platform and broaden our product offering. Finally, in 2021, we launched Auto Compara, a fully online auto insurance comparison and offering platform that is now also available to non-customers. Auto Compara had an average of 350,000 website visits in the year ended December 31, 2021 and we increased by 26% in premiums written during the year. Additionally, we reinforced our position in the automotive and real estate industries by completing acquisitions of businesses and solutions to expand our business and build a more comprehensive platform.

As a result of our efforts to constantly improve our business, we were recognized the Best Bank in Brazil in 2021 by The Banker Magazine.

Our People

Our people are a key pillar of our strategy, supported by a culture that values employees, promotes diversity, encourages efficiency, and fosters innovation, while also preparing us for a new cycle and enabling us to continue anticipating market trends. Our performance is the embodiment of our culture, with our people serving as the catalyst for the transformation. Thus, we have built a diverse and engaged team. We value meritocracy, diversity, and inclusion, as evidenced by the fact that, as of December 31, 2021, 31% of our leadership positions were held by women, 27% of our employees were black employees, and 5% were held by people with disabilities. We also place a premium on proactive knowledge acquisition: in 2021, over 3,200 courses were held on the Santander Academy platform, with 78% of them being taught by employees. Close leadership and open communication are ingrained in our DNA. Our actions are backed by a culture that is increasingly centered on our people – 94% of whom are proud to work for Santander, according to the Great Place to Work, or “GPTW,” survey from 2021. As a result of our efforts, we have been named one of the top 10 best companies to work for in Brazil by GPTW 2021, appearing in the following categories: Ethnic-Racial, Women, LGBTQI+, Early Childhood, 50+, and Healthy Management. Additionally, we were honored with the following awards: (i) Ethnic-Racial by Exame magazine’s Diversity Guide, (ii) Diversity and Inclusion by Euromoney’s Awards for Excellence, and (iii) Bloomberg’s Gender Equality Index. Finally, we were also included on the GPTW B3 index.

 73
Table of Contents

Social and Environmental Initiatives

Similarly, and consistent with our strategy of responsible growth, we recognize our role as a financial institution in Brazil’s development. Hence, for twenty years, we have sought to foster sustainable businesses. We highlight our Amigo de Valor program, one of the main social programs in Brazil today, started in 2002. In 2021, we continued to advance initiatives that reflect how sustainability and social issues are embedded in every layer of our organization:

●In the social realm, we lead initiatives that have impacted more than one million people over the last three years. For the past 19 years, we have worked to protect, promote, and defend the rights of children and adolescents in vulnerable situations through the Amigo de Valor program, benefiting thousands of people and raising R$20 million in 2021 through employee and customer contributions. Since 2002, we have been promoting financial inclusion by means of Prospera Santander Microfinance (Prospera Santander Microfinanças), which had 708,000 active customers and a R$1.9 billion portfolio as of December 31, 2021, with the goal of helping microentrepreneurs thrive and thereby develop the communities in which they operate, while also providing business management guidance. Likewise, for more than two decades, we have consistently invested in education, as we believe that it is the foundation for societal transformation. Finally, we have awarded higher education scholarships since 2005, including 33,000 scholarships in 2021 alone.
●With respect to our environmental initiatives, we offer a comprehensive suite of financing solutions for the development of sustainable businesses, both for individuals and businesses, which we accelerated in 2021, generating R$ 51.6 billion in sustainable businesses in the year ended December 31, 2021. We pioneered green financing, with over R$ 1.3 billion loans linked to environmental, social and governance, or “ESG,” goals and green loans in our portfolio as of December 31,2021, in addition to being among the leaders in CBIOs (decarbonization credit). We are also active solar energy loans, financing photovoltaic panels for individuals, companies, and agribusinesses, disbursing R$ 2.3 billion in the year ended December 31, 2021. In 2021, we also launched a financing facility exclusively for bicycles.

We implement routine socioenvironmental risk assessment, for which we rely on a Socioenvironmental Questionnaire, or “QSA,” by means of which we collect information on customers that have environmental practices, including data on carbon emissions, management of offsets and extreme weather events. The QSA is applied to the Wholesale and Business 3 segments, as well as to Retail customers. This analysis is part of their own branch's success. Additionally,the annual credit review for 14 sectors in which we operate, all of which are potentially affected by climate change according to the Task Force on Climate-related Financial Disclosures, or “TCFD.”

Since 2016, we have taken climate change issues into consideration in the credit rating of Wholesale customers, and, since 2020, we have used a water stress calculator in our socioenvironmental assessments. This tool considers our customers’ economic activity, watershed location and measures taken to save water. It has been developed considering customer vulnerability to climate change in general, even as a result of changes in legislation or consumer preferences.

Regarding decarbonization targets, in 2021 we announced our intention to achieve net zero carbon emissions by 2050 to support the goals of the Paris Agreement on climate change using 100% renewable energy sources by 2025 and eradicating single-use plastic from all our operations. We have been carbon neutral since 2010, fully offsetting our emission sources.

In July 2021, we established a forum with the goal of preventing greenwashing by seeking to ensure that operations which we describe as green, social, or sustainable comply with Santander Group’s taxonomy and market standards. The forum, which is composed of senior executives from the Sustainability, Risk, Social and Environmental Risk, Business, Compliance, and Legal departments, also assesses reputational risks associated with our operations. Out of a total of 40 proposals to label a particular service of product as being “green” which were reviewed by the forum in 2021, 31 have been approved.

In addition, we have developed products that contribute to lowering the impact on climate change, such as:

 74
Table of Contents
●Low Carbon CDB, we launched the Low Carbon CDB, a sustainable, low risk investment aimed at companies that want to have more sustainable investments in their portfolio capable of reducing their greenhouse gas emissions. The resources of the investments in CDB will be used to finance sustainable projects of companies that promote actions to reduce greenhouse gas emissions.
●Carbonômetro (Carbon meter), a tool that calculates the daily greenhouse gas emissions of our operations.
●Carbon Calculator, which encourages employees of Santander Brasil and affiliates to calculate their carbon footprint.
●"The Future of the Carbon Market in Brazil” live video. We produced a live video to discuss the future of the carbon market in Brazil and the challenges and opportunities for the business sector.

In July 2020, we announced a plan to promote sustainable development in the Amazon, in collaboration with two other largest private-sector banks in Brazil. Part of this plan, named “Plano Amazônia,” aims to eliminate deforestation in the supply chain for cattle farms for beef processors in the Amazon, aiming to finance the cultivation of local crops, such as açaí, Brazilian nuts and cocoa, and to identify opportunities for the development of bioeconomy chains. In 2021, we also launched the new commercial network Rede Norte Amazônica, in order to expand our operations in the region, and we have established the North Amazon Network, a business unit comprised of four Brazilian states (Amazonas, Acre, Rondônia, and Roraima), with the objective of fostering business in the region and a particular focus on sustainability. Since its creation, we have made some adjustmentsover R$ 270 million in credit lines available to cooperatives and agribusinesses, as well as to producers of Amazonian products who adopt sustainable practices.

In 2021, we inaugurated Brazil’s first sustainable train station in partnership with the compensation structureState Government of branch employeesSão Paulo, maximizing on-site natural resource efficiency by means of solar energy panels and managers to ensure thata water reuse system. Furthermore, in collaboration with the variable componentsInternational Finance Corporation, a World Bank Group institution, and the State Government of their compensation depend onSão Paulo, we supported the performance of the branch where they work.Pinheiros River clean-up program.

•       Culture strengthening. We believe that committed employees make the business sustainable. With that in mind, we have established clear and horizontal communication of senior management with employees, promoting meritocracy and diversity. In line with this practice, Santander Academy encourages our staff to assume a proactive role in their technical training and has been attended by 75% of total employees, who act as internal multipliers. As a result, in 2019, we were recognized for the fourth consecutive yearalso use ESG as one of the Best Companies to Workcriteria for evaluating our executives, evidencing how deeply embedded the subject is in Brazil, according to the GPTW (Great Place to Work) survey.our culture.

Finally, aligned with the Santander Group’s responsible growth strategy, Santander Brasil has made several public commitments to society, including: (i) having 30%In recognition of our leadership positions held by women by 2024 (today women account for 26% of leading roles at Santander Brasil); (ii) having 100% of our operations powered by renewable energy by 2025; and (iii) eradicating single-use plastic consumption at our facilities by 2020. Another equally important componentefforts, we have received several ESG accolades in fulfilling our responsibilities to society is2021, including Exame magazine’s Best ESG Bank, the “Prospera” microcredit program, through which we help Brazilians in low-income communities to prosper by giving them access to credit and financial products, and which contributed to placing us in the top spot among banks on Fortune magazine’s 2019 “Change the World” list. Finally, we were namedEco Brazil Award, Época Negócios 360°’s Most Sustainable Company, of the Year on Exame Magazine’s diversity ranking, in addition to being recognized asnamed to Fortune magazine’s Change the financial institution with the best inclusion and diversity practices in the country.World list.

Our Business

We provide our 26.3complete portfolio of products and services to our 30 million active customers as of December 31, 2019 with our complete portfolio of products and services2021 through the following business divisions:segments:

•       Commercial Banking:This includes individuals and companies (except for global corporate customers, managed by our Global Wholesale Banking). Revenue from this segment is rendering of banking and financial products and services to our account holder and non-account holder customers.

•       Global Wholesale Banking:We offer a wide range of national and international tailored financial services and structured solutions for our global corporate customers, principally local and multinational corporations, and it also carries out proprietary trading activities.

57 

Table of Contents

●Commercial Banking: provides services and products to individuals and companies (except for global corporate customers who are managed by our Global Wholesale Banking). The revenue from this segment is derived from the banking and financial products and services available to our account and non-account holders.
●Global Wholesale Banking: offers a wide range of national and international tailored financial services and structured solutions for our global corporate customers, comprised mostly of local and multinational corporations.

We outline below the operatingbusiness divisions underfor each of our operating segments, as well as the breakdown of our net interest income and profitoperating income before tax by segment:

Commercial Banking

Global Wholesale Banking

1.     ●Retail Banking1.         ●Santander Corporate & Investment Banking (“SCIB”)
●Individuals2.         Proprietary Trading
●SMEs 
2.     ●Consumer Finance 
3.     ●Corporate 

  For the Year Ended December 31,
  2019 2018 2017 2019 2018 2017
  Net interest income Operating profit before tax
  (R$ millions)
Commercial Banking (1)  42,044   39,391   32,392   18,657   12,397   11,220 
Global Wholesale Banking  2,277   2,531   2,554   3,616   3,512   3,293 
Total  44,321   41,922   34,946   22,273   15,909   14,513 

 75
Table of Contents
  For the Year Ended December 31,
  Net interest income Operating income before tax
  2021 2020 2019 2021 2020 2019
  (R$ millions)
Commercial Banking(1)   46,236   41,457   42,044   19,491   4,666   18,375 
Global Wholesale Banking   5,082   2,985   2,277   5,260   4,998   3,898 
Total   51,318   44,443   44,321   24,750   9,664   22,273 
(1)ProfitOperating income before tax reported under commercial banking includes the effects of the hedge for investments held abroad (offset in the same amount in the “Income Tax” line). The effect of the hedge for investments held abroad in 2019, 20182021, 2020 and 20172019 amounted to gainsloss of R$2,512 million, R$13,583 million and loss of R$1,264 million, gains of R$5,867 million and expenses of R$810 million, respectively.

 

The following table shows a managerial breakdown of our loans and advances by customer type at the dates indicated:

  As of December 31, Change between 2018 Change between 2017
  2019 2018 2017 and 2019 and 2018
  (R$ millions)
Individuals  156,177   133,603   107,610   16.9%  24.2%
Consumer Finance  48,421   40,964   33,170   18.2%  23.5%
SMEs  53,119   49,624   46,879   7.0%  5.9%
Corporate(1)  89,539   97,742   100,171   -8.4%  -2.4%
Total Credit Portfolio  347,257   321,933   287,829   7.9%  11.8%

  As of December 31, 

Change between

2020 and 2021

 

Change between

2019 and 2020

  2021 2020 2019    
    (R$ millions)      
Individuals   203,678   174,042   156,177   17.0%  11.4%
Consumer Finance   55,441   51,637   48,421   7.4%  6.6%
SMEs   59,602   54,525   53,119   9.3%  2.6%
Corporate(1)   174,634   137,618   89,539   26.9%  53.7%
Total Credit Portfolio   493,355   417,822   347,257   18.1%  20.3%
(1)For purposes of loan portfolio presentation, “corporate” includes companies with annual gross revenues exceeding R$200 million, including our Global Corporate Banking customers.

  

Commercial Banking

Retail

1.        Retail

Individuals

 

We have structured thisthe individual customer service segment as follows:

 

Private Banking– is responsible for select group of customers with at least R$5.0 million in assets available for investment. In this segment, we offer a complete and tailored portfolio of onshore and offshore financial products and services, investment advice, loans and asset management through a dedicated manager for investments and banking services.

●Private Banking – is responsible for customers with at least R$5.0 million in assets available for investment. In this segment, we offer a complete and tailored portfolio of financial products and services, investment advice, loans and asset management through a dedicated manager for investments and banking services.

 

●Santander Select – is responsible for customers with a monthly income above R$10,000, and R$30,000 in investments, or more than R$100,000 in investments. The offer here consists of a value proposition with differentiated products and services, exclusive service spaces, relationship managers who serve a small number of customers and provide asset management advisory services,

•    Santander Select– is responsible for customers with a monthly income above R$20,000, or a monthly income above R$10,000 and R$30,000 in investments, or more than R$ 300,000 in

58 

Table of Contents

investments. The offer here consists of a value proposition with differentiated products and services, exclusive service spaces, relationship managers who serve a small number of customers and provide asset management advisory services.

•    Santander Van Gogh– is responsible for customers with a monthly income from R$4,000 to R$10,000, or with investments above R$40,000. Our goal is to understand the needs of our customers at each stage of their life
●Santander Van Gogh – is responsible for customers with a monthly income ranging from R$4,000 to R$10,000, or with investments above R$40,000. Our goal is to understand the needs of our customers at each stage of their lives and provide them with financial advice through a multi-channel solution, including financial products and services, as well as financial advice,

●Santander Especial – is responsible for customers who earn up to R$4,000 per month. Our business model offers simple and efficient solutions with an attractive cost benefit to the customer, primarily through electronic channels.

Furthermore, we also support our Select and Van Gogh customers through our Santander Direct channel, Santander Direct is suited to customers who want more flexible service hours, from 8:00 a.m., to 10:00 p.m. and who prefer using a remote method, such as telephone, e-mail or chat, as well as financial advice.access to digital channels. This service complements our offering and broadens our capillarity by catering to regions where we do not have a physical presence.

 76
Table of Contents

 

•    We launched the following products or functionalities for retail customers in 2021:

●Santander Especial – New customers who opened their accounts on our digital channels have access to Santander Direct.

●New account digital process - isWe endeavor to simplify the account opening process using internal and external information and making the experience quick and simple for new customers.

Small and Medium Enterprises (SMEs)

We serve SMEs under the “Santander Negócios e Empresas” brand, with the following customer service segmentation model:

●Empresas 3 Núcleos (Core Companies) – responsible for companies with annual revenues between R$30 million and R$200 million. Our service model is based on dedicated relationship managers, a team of experts for more complex demands and loan managers specializing in risk management. We also provide specialized services to multinational, technology companies and other major corporations in order to meet their specific needs.
●Empresas 2 Polo (Hub Companies) – responsible for companies with annual revenues between R$3 million and R$30 million. We offer these customers who earn up to R$4,000 per month. Our business model offers simplea comprehensive range of products and efficient solutions with an attractive cost benefit to the customer, primarilyservices through electronic channels.

It is worth noting that we also support our Select and Van Gogh customers through our Santander Direct channel. Santander Direct is suited to customers who want more flexible service hours, from 8:00 a.m. to 10:00 p.m., and who prefer using a remote method, such as telephone, e-mail or chat,user-friendly interface, as well as access to digital channels. This service complements our offering and broadens our capillarity by also catering to regions where we do not have a physical presence.

Small and Medium Enterprises (SMEs)

We serve SMEs under the Santander Negócios e Empresas brand, under the following segmentation:

•Empresas Núcleos (Core Companies)– is responsible for companies with annual revenues between R$30 million and R$200 million. Our service model is based on dedicated relationship managers, a team of experts for more complex demands and loan managers specializing in risk management. We also provide specialized services to multinational companies and other major corporations in order to meet their specific needs.dedicated relationship managers that work in specialized hubs.

•Empresas Polo (Hub Companies)- is responsible for companies with annual revenues of between R$3 million and R$30 million. We offer these customers a comprehensive range of products and services in a user-friendly interface.

•Negócios Agência (Branches Business)- is responsible for companies with annual sales of up to R$3 million. We offer these customers a simple banking solution through an integrated account that combines a corporate account with a point of sale (POS) terminal. This arrangement provides our customers with benefits while they use the Getnet terminal in their credit card sales and receipts in a Santander Brasil current account.

•Empresas MEI (Individual Microentrepreneur)- is responsible for companies with annual revenues up to R$81,000. We offer these customers a simplified and cost-effective option (Santander Conta MEI).

It is worth noting that we also offer an attendance channel, the Negócios Direct (Direct Business), which is
●Empresas 1 Agência (Branch Businesses) – responsible for companies with annual revenues of up to R$13 million. We supportoffer these clientscustomers a simple banking solution through an integrated account that combines a corporate account with a point of sale, or “POS,” terminal hosted by our former subsidiary Getnet. Through this arrangement, our customers receive benefits for using the Getnet solution to process their credit card sales, with receipts being posted to a Santander Brasil checking account.
●Negócios Direct - for companies with annual revenues of up to R$300 thousand. We offer these customers direct access to a relationship manager who is available during extended service hours and via remote channels, such as telephone, e-mail or chat, as well as access to digital channels that facilitate the client’s day to day needs.
●Empresas MEI (Individual Microentrepreneur) – responsible for companies with annual revenues of up to R$81 thousand. We offer these customers a customer’s daily life.

2. Consumer Finance

We provide consumer credit to finance motor vehicles, goodssimplified and services directly orcost-effective option through intermediate agencies.our Santander Financiamentos is our mainConta MEI, a remote service, channel but we also operate under multiple brands.

The following table sets forth certain key financial and operating data regarding our credit financedigital solutions such as Gent& Santander – the artificial intelligence solution for motor vehicles to individuals for the periods indicated:

59 service and sales.

Consumer Finance

We provide consumer credit to finance motor vehicles, goods and services directly or through intermediate agencies, Santander Financiamentos is our main service channel, but we also operate under multiple brands.

The following table sets forth certain key financial and operating data regarding our consumer finance business for the periods indicated:

 

As of December 31,

Change between 2020 and 2021

Change between 2019 and 2020

 

2021

2020

2019

Individual consumer finance loan portfolio market share (1) (%) 24.4%25.1%25.0%(1.1) p.p.0.1 p.p.

Table of Contents

  As of December 31, Change between 2018 and Change between 2017 and
  2019 2018 2017 2019 2018
Consumer finance loan portfolio market share (1) (%)  25.0%  25.4%  24.0%  (0.4) p.p   1.4 p.p 

(1)Source: Brazilian Central Bank.

 

1.Corporate

Our corporate customer segment caters

Corporate

Our corporate banking segment aims to be the main distribution channel of the Santander Group to Brazilian and foreign and/or multinational corporate clients. The product offering ranges from simple cash accounts to large companies that have annual gross revenues greater than R$200 million (except for our Santander Corporate & Investment Banking customers). We focus on fostering a close relationship with our corporate customers through managers and specialists geographically distributed across Brazil, providing customer-tailored services with a complete portfolio of local and global products (including products from Commercial Banking and SCIB as defined below).

Global Wholesale Banking

1.Santander Corporate & Investment Banking (SCIB)

SCIB is the global business unit that covers those customers, which, due to their size and complexity, require tailored services or high-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customer portfolio consists of a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.

Our customers in the SCIB segment benefit from the global structure of services provided by the Santander Group with its worldwide-integrated wholesale banking network and global services solutions, combined with its local market expertise and provision of integrated services.

2.Proprietary Trading

Our proprietary trading division is responsible for managing our proprietary books and liquidity positions.

Our Portfolio of Products and Services

Payments

1.Credit and Debit Cards

We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards compatible with the income level and lifestyle of each of our customers.

We are the exclusive distributors of the AAdvantage® card in Brazil, which is linked to the American Airlines loyalty program, one of the most recognized programs in the market.

We highlight the Crediário, launched in March 2019, which allows our customers to simulate and pay for their purchases in installments directly on a POS device. Merchants receive payments two days after they are effective.

The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.

60 

 77

Table of Contents

  As of and For the Year Ended December 31, Change between 2018 and Change between 2017 and
  2019 2018 2017 2019 2018
Credit card portfolio market share(1)  12.9%  13.3%  12.8%  (0.37) p.p   1.2 p.p 
Credit card portfolio (R$ billion) (2)  36.1   30.9   25.1   16.8%  23.1%
Total card turnover (R$ billion)  (2)  236.4   201.6   168.3   17.3%  19.8%
Credit card turnover (R$ billion) (2)  161.0   137.1   111.9   17.4%  22.5%
Total card transactions (in millions) (2)  2,725.4   2,338.2   1,987.6   16.6%  17.6%
Credit card transactions (in millions) (2)  1,450.9   1,206.1   992.9   20.3%  21.5%
Participation of credit card in the household consumption – Market overview (2) (%)  24.5%  23.1%  21.6%  2.94 p.p   1.4 p.p 

mergers and acquisitions advisory services. We leverage our strength in consumer finance, asset and wealth management, payments and markets to serve our clients and their shareholders, employees, clients and suppliers. We serve companies with annual gross revenues in excess of than R$200 million located across Brazil by physical and digital channels. Our corporate banking segment has been constantly evolving as a segment relying on a disciplined analytical toolkit, consistent communication and workforce upskilling.

Global Wholesale Banking

Santander Corporate & Investment Banking (SCIB)

SCIB is the global business unit that serves customers, who, due to their size and complexity, require tailored services or high-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customer portfolio comprises a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.

Our customers in the SCIB segment benefit from Santander Group’s global structure of services, which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and provision of integrated services.

Our Portfolio of Products and Services

Payments

Credit and Debit Cards

We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.

In order to reach a greater number of customers and remain competitive, we launched the SX card in November 2020, as part of the SX strategy detailed below. This product benefits highly engaged and transactional customers, facilitating the exemption from annual card fees. In addition, we also took the opportunity with the SX card to launch a more modern and ambitious card design for our customers.

To improve customer experience for the high-income segment, where we are aiming to increase market share and brand awareness, we launched the Gold, Platinum and Centurion products with American Express which include NFC technology, the accumulation of Esfera points that do not expire and still allow access to Membership Rewards, an exclusive American Express program.

In line with Santander Brasil’s global purpose of becoming NetZero by 2050, we launched cards made from recycled material in July 2021. The new cards made of recycled material were issued to customers who already had an SX or Elite card, close to expiry. We expect to make the official launch for the first quarter of 2022, with the issuance of 100% of SX and Elite cards with recycled material. Currently, we are the only bank in Brazil that issues cards made from recycled material.

In the SMEs segment, believing in the great potential of microentrepreneurs, or “MEI,” who represent more than half of the companies in Brazil, we developed an exclusive card for this segment. The MEI card grants customers discounts on purchases made with partners, chosen according to the microentrepreneurs field of activity, as a result of which cardholders have access to exclusive offers for the purchase of input for their companies. In addition, there is the possibility of an annual fee waiver by binding the card by using the card on a monthly basis or by registering with the PIX system.

In line with the objective of becoming an open financial services platform, in November 2021 we launched a partnership with Samsung, a solution that offers digital account opening, card sales and SIM loans on the first screen of Samsung pay. The objective is to provide a simple and fluid journey within the app that is already used on a daily basis to pay for on-the-go purchases.

We also improved our digital journey to provide better customer self-service, which we believe is a key component for higher customer engagement. A recent novelty is “Clique e Retire,” a new physical card delivery system that provides a quick, autonomous solution for customers by allowing them to opt to collect their cards from self-service machines.

 78
Table of Contents

The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.

  As of and For the Year Ended
December 31,		 Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
Credit card portfolio market share (1)   12.4%  13.4%  12.9%  (1.0 p.p.)   0.5 p.p. 
Credit card portfolio (R$ billion) (2)    48   37.8   36.1   27.0   (100.0%)
Total card turnover (R$ billion) (2)    306.0   242.0   236.4   26.4   2.4%
Credit card turnover (R$ billion) (2)    203   158.7   161.0   27.9   (1.4%)
Total card transactions (in millions) (2)    3,555.3   2,570.8   2,725.4   38.3   (5.7%)
Credit card transactions (in millions) (2)    1,859.1   1,300.0   1,450.9   43.0   (10.4%)
Participation of credit card in the household consumption (only debit)– Market overview (2)(%)   24.1%  17.4%  13.8%  6.7 p.p.   3.6 p.p. 
Participation of credit card in the household consumption (only credit) – Market overview (2)(%)   42.1%  25.2%  24.0%  16.9 p.p.   1.2 p.p. 
Participation of credit card in the household consumption (total, debit and credit) – Market overview (2)(%)   69.3%  43.5%  38.2%  25.8 p.p.   5.3 p.p. 
 

(1)Source: Brazilian Central Bank, as of December, 2018.
(1)Source: Brazilian Central Bank, as of September 31, 2021. Data for the year ended December 31, 2021 was not available as of the date of this annual report.
(2)Source ABECS – “Monitor bandeiras,” The data relating to the year ended December 31, 2017 has been revised as a consequence of the restatement of the way to measure the market share data relating for the year ended December 2021 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS.

 

(2)Source ABECS – “Monitor bandeiras”. In 2018 the methodology began to include all acquirings

Santander Way

Santander Way is an app available to our cardholders that allows them to manage their Santander Brasil cards at any time and place. This complete payment platform also works as a digital wallet, enabling customers to conduct instant contactless payments. The app is frequently updated with new features. Some of the most notable features launched in 2021 included: (i) extra loan and installment offers, (ii) virtual cards that allow purchases before the physical card arrives, (iii) functions for safer online purchases without a physical card, (iv) possibility for the customer to update his or her income to obtain a higher credit limit, and (v) chargeback from unrecognized purchases. In 2021, we have nine million active customers using Santander Way.

Merchant Acquiring Market | Getnet

Getnet is a technology company that offers payment solutions to a range of merchants, from large businesses to the small entrepreneurs, both physically and digitally. Getnet was our subsidiary until the completion of the Spin-Off on October 26, 2021. For more information on the Spin-Off of Getnet, see “—A. History and Development of the Company—The Getnet Spin-Off.”

The following table sets forth certain historical key financial and operating data regarding Getnet’s business for the periods indicated. 

  As of and For the Year Ended December 31, Change between 2020 and 2021 Change between 2019 and 2020
   2021 (1)  2020   2019         
   (R$ millions, except as otherwise indicated)
Market share of total turnover (2)  15.3%  14.9%  11.3%  0.4 p.p.   3.6 p.p. 
Debit turnover (3)  105.8   105.8   80.9   0%  30.8%
Credit turnover (3)  182.7   167.9   126.6   8.8%  32.6%
                     
(1)We completed the Spin-Off of Getnet on October 26, 2021 and, for better comparison the 2017 and 2016 values were restated. The data relating to the years ended December 31, 2018 and 2017 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS.

2.Santander Way

SantanderWay an app that allows customers to manage all their Santander Brasil cards through a digital channel and has also become a payment platform, with new features that allow instant transfers peer-to-peer through contact list or QR Code, account sharing between users and payments via QR Code in POS Getnet.

3.Merchant Acquiring Market | Getnet

result, Getnet is no longer a technology company that offers physical and digital solutions, to people and businesses. The acquisitionsubsidiary of Getnet, which was completed in 2019, gave us more flexibility, and enabled us to create more complete and tailored solutions for our customers, integrating its services with Santander Brasil.

Through We stopped consolidating Getnet we are ablewithin our results of operations on March 31, 2021. For additional information on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to offer a wide array of payment solutions to individuals and companies, including: (i) mobile and Wi-Fi point of sale or POS devices; (ii) SuperGet, a mobile POS device that self-employed professionals and small companies can buy or rent from us; (iii) TEF, a solution for establishments with a significant number of transactions, operatingour audited consolidated financial statements included elsewhere in synergy with the establishment’s systems and which offers sales reconciliation through our bank-integrated customer benefits; (iv) Getnet App, which allows its users to track sales details in real time, and anticipate amounts, while also providing business analytics information, such as the best time to make a sale, thus helping business owners better manage their activities based on a richer set of data; (v) Digital POS, a complete solution that can be customized and, when connected to the internet, allows app downloads and the use of integrated management functions; and (vi) Getnet Digital Platform, a tool for all e-commerce environments, with integrated services such as safe boxes, recurrence and anti-fraud systems, which is modeled after the “one-stop shop” concept and provides financial intermediation between a marketplace and its storeowners, as well as several other financial services, such bill generation, and sales conciliation; (vii) Getnet Digital, which is geared towards Small and Medium-sized Enterprises (SME) and allows its users to set up their stores online, in addition to offering a number of services, such as payment platform, alongside visual and fully integrated management.

Getnet also enables us to provide SME customers with a fully integrated offer, including card payment solutions. One of them is “Conta Integrada,” a bundle that combines a current account with an integrated card payment solution, which rewards customers who concentrate their sales on POS devices.

The following table sets forth certain key financial and operating data regarding our merchant acquiring business for the periods indicated.

this annual report.

61 

 79

Table of Contents

  As of and For the Year Ended December 31, Change between 2018 and Change between 2017 and
  2019 2018 2017 2019 2018
  (R$ millions, except as otherwise indicated)
Market share of total turnover(1)  11.3%  12.3%  11.0%  (1.0) p.p.   1.3 p.p. 
Debit turnover  80.9   73.4   51.2   10.2%  43.4%
Credit turnover  126.6   114.1   90.9   11.0%  25.5%
Number of debit transactions (thousand)  1,415,089   1,245,269   840,171   13.6%  48.2%
Number of credit transactions (thousand)  1,070,717   893,519   743,263   19.8%  20.2%

(1)Source: Data for 2019 is based on ABECS Monitor Bandeiras - Acquirers data for the nine-month period ended September 30, 2019. Data for the year ended December 31, 2019 was not available as of the date of this annual report. For comparison purposes, the difference between September 30, 2019 and September 30, 2018 would be: (0.9) p.p
(2)  Source: Data for 2021 relates to the nine-month period ended September 30, 2021 and is based on ABECS Monitor Bandeiras - Acquirers. Data for the year ended December 31, 2021 was not available as of the date of this annual report. For comparison purposes, the difference between September 30, 2021 and September 30, 2020 would be an increase of 1.7 percentage points.
(3) Considers data until September, 2021.

 

4.Superdigital

Superdigital is a digital pre-paid solution that allows customers to manage their daily financial activities entirely online through a pre-paid account with a user-friendly interface. As mentioned above, on February 28, 2020, we sold to Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain, our entire equity interest in Superdigital.

We completed the Spin-Off of Getnet in October 2021, and Getnet is no longer our subsidiary. However, on April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.

 

5.Esfera

Esfera is our loyalty program, which can be accessed through a dedicated website and mobile app. Our loyalty program enables holders of credit cards issued by Santander Brasil to exchange their reward points for many products, services and travel benefits, with exclusive deals and discounts with partners such as Cinépolis, FastShop and Casas Bahia, among others.

Following the Spin-Off, Getnet is operating as the Brazilian leg and regional acquirer of the Santander Group’s PagoNxt merchant solutions. PagoNxt is a strategic initiative that seeks to promote sustainable and profitable growth by integrating various payment solutions for businesses and consumers using the latest technology. PagoNxt is an autonomous company within the Santander Group. Through its three lines of business, namely merchant solutions for businesses, trade solutions for international trade and consumer solutions for consumers, it provides solutions not only to banking clients of the Santander Group but also to third-party customers, financial institutions and fintechs.

Esfera

Esfera is our loyalty program, which can be accessed through its own website and mobile app. Our loyalty platforms enable our credit card holders to exchange their reward points for many products, services and travel benefits, including exclusive deals and discounts with a broader selection of partners such as some of Brazil’s largest retailers and a cinema chain, among others. Esfera also operates a marketplace offering cashback to is clients on purchases of products that aggregate more than sixty partners as of the date of this annual report.

Ben

Ben is an employee benefits company that provides greater flexibility, purchasing power and quality of life to its users by creating, supplying and managing types of employee benefit vouchers (e.g. meals, such as Vale Alimentação and Vale Refeição, as well as transportation) in the form of magnetic cards. These benefits are offered through an integrated digital platform.

Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.

Ben is currently working on development of new products, such as fuel cards and other benefit options to expand its portfolio.

Ben added Ben Único to its portfolio. This product allows customers to have two kinds of benefits in a single card, reducing the cost with card emission and logistics, contributing with ESG metrics,

According with new products developing planning, Ben submitted a request to the Brazilian Central Bank to issue a license to operate as a payment institution (instituição de pagamento) and it was granted in December 2021.

The following table sets forth certain key financial and operating data regarding Ben´s business for the periods indicated.

  As of and For the Year Ended December 31,
  2021 2020 2019
  (in R$ millions, except as otherwise indicated)
Card Purchases   1,484   946   560 
Number of Cards (in thousands)   565   217   98 
Number of Transactions (in thousands)   20,477   12,192   9,534 
Merchant accredited (in thousands)   365   338   253 

 

6.BEN Benefícios

BEN is a benefits company that brings greater freedom, purchasing power and quality of life to the people who use them, in addition to delivering an integrated digital experience, as mentioned above in the “Item 4.A—History and development

For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”

Payroll Loans

Payroll loans support account holders and non-account holders in the execution of projects and financial organization. Monthly installments are deducted directly from borrowers’ paychecks by their own employers, and are then credited to Santander Brasil, significantly reducing our credit risk. As a result, payroll loan rates are lower than other credit options. We make payroll loans available to our account holders, as well as to non-account holders through Olé Consignado.

Payroll loans are offered through our mobile banking platform and through our branches. Our customers have the possibility of refinancing their payroll loans, as well as choosing from other options to help them manage their debts.

The following table sets forth certain key financial and operating data regarding our payroll loans business as of the dates indicated.

62 

 80

Table of Contents

  As of December 31, Change between 2018 and Change between 2017 and
  2019 2018 2017 2019 2018
Market share in origination (1)  13.2%  12.2%  12.1%  1.01 p.p   0.1 p.p 

Payroll loan portfolio (R$ billion)43.0 33.825.527.1%32.5%

Payroll Loans

(1)Source: Brazilian Central Bank, as of December 31, 2019, December 31, 2018 and December 31, 2017, as applicable.

Mortgages

We offer long-term financing to our customers for the purchase of real estate, secured by deeds of trust, or for customers who wish to obtain a loan using real estate as collateral. We consider mortgages to be a strategic product due to their lower risk (since the acquired property serves as collateral) and ability to increase customer loyalty with the Bank (especially given that we offer customers more attractive rates if they choose to bank with us). In this market, our customers and those of our competitors are primarily individuals.

We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not make any financing for more than 90% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment or other types of revenue, which allows us to evaluate their credit risk profile and (iii) other indebtedness added to the financing cannot exceed 35% of borrowers’ monthly gross income.

To improve practicality for our customers, we have launched our real estate portal, a digital channel that enable customers to obtain mortgages in a 100% digital fashion. We believe we are first bank in Brazil to offer customers the opportunity to obtain a mortgage while only need to be physically present to sign the contract and then return it duly registered. We have established a partnership with the largest real estate portal in Brazil in order to improve our sales network and strengthen our digital presence. In addition, we launched a high-impact marketing campaign, in conjunction with a major retailer in which we offered customers market-leading terms to obtain mortgage financing or transfer their existing mortgage financing to us, while also giving customers the chance to win a refrigerator.

The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated.

  As of December 31, Change between Change between
  2019 2018 2017 2018 and 2019 2017 and 2018
  (in R$ billions, except percentages)
Mortgage loan portfolio  39.3   36.3   34.8   8.3%  4.3%
Individual sector mortgage loans  37.2   31.4   28.2   18.4%  11.3%
Loan to value(1) – Production (% quarterly average)  62.9%  60.6%  58.6%  2.31 p.p   2 p.p 
Loan to value(2) – Portfolio (%)  49.4%  48.7%  46.4%  0.73 p.p   2.3 p.p 

Payroll loans support both account and non-account holders in the execution of projects and financial organization. Under these loans, monthly installments are deducted directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, significantly reducing our credit risk. We offer these payroll loans to our customers through our mobile banking platform and our branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts. Furthermore, these loans are also offered to non-account holders through Olé Consignado. For further information on relevant events, relating to Olé Consignado’s corporate events, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”

The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.

  As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
Market share in origination (1)   16.96%  18.90%  13.2%  (1.94)p.p  9.09 p.p 
Payroll loan portfolio (R$ billion)   53.3   48.1   43.0   10.85%  11.9%
 

(1)Source: Brazilian Central Bank, as of December 31, 2021, 2020 and 2019, as applicable

 

SIM

SIM is a digital lending platform for individuals through which customers can apply, and be approved, for a loan completely online. After two years of operation, SIM has already achieved a positive net profit, a loan portfolio of R$1.6 billion as of December 31, 2021 and a market share of 0.7%, in the year ended December 31, 2021, as well as a total of 6.5 million registered users as of December 31, 2021. SIM also has a high level of customer satisfaction, with an NPS of 80 points in the year ended December 31, 2021.

emDia

emDia is an online debt renegotiation platform. It provides customers with a simple platform to access debt renegotiation services on a 24/7 basis, As of December 31, 2021, emDia had 6.5 million customers and had contributed to the recovery of R$78 million in credit volume in 2021.

Mortgages

We offer long-term financing to our customers for real estate purchases, secured by deeds of trust. We consider mortgages to be a strategic product due to their lower risk (since the acquired property serves as collateral) and their ability to increase our customer loyalty (especially since we offer customers more attractive rates if they choose to bank with us). In this market, our customers, and those of our competitors, are primarily individuals.

We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 90% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of the borrower’s monthly gross income,

To facilitate the process for our customers, we provide a real estate digital platform where customers can obtain mortgages completely online. We were the first bank in Brazil to offer customers the opportunity to secure a mortgage without being physically present, except for the signing of the agreement and returning it duly registered. We have a partnership with the largest real estate platform in Brazil in order to improve our sales network and strengthen our digital presence.

The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated:

 81
Table of Contents

  As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
   (in R$ billions, except percentages)
Mortgage loan portfolio   54.8   45.8   39.7   19.7%  15.4%
Individual sector mortgage loans   53.0   44.0   37.2   20.5%  18.3%
Loan to value(1) – Production (% quarterly average)   65.5%  64.9%  62.9%  0.06 p.p.   2.0 p.p. 
Loan to value – Portfolio (%)   52.5%  52.2%  49.4%  0.30 p.p.   2.75 p.p. 
(1)Ratio between loans and the value of the collateral, excluding home equity.

 

(2)As of 2017, the LTV guarantee is calculated at market value. In the previous years it was calculated based on the value of the collateral registered in the contract. For better comparison, the 2017 value was restated.

Tailored Products and Services

We have a complete offering

Home Equity

In our portfolio of loan products, we also offer a “home equity” financing product called “UseCasa” in which clients can receive a loan if they provide real estate as collateral. This product enables clients to access financing to pursue their personal objectives. “UseCasa” has increased its market share to 23.5% in 2021, maintaining our position as the leading private sector bank for these types of loans in Brazil. Our portfolio was R$3.2 billion in 2021, an increase of 27% in the year ended December 31, 2021 compared to the year ended December 31, 2020. Efficiency has also improved as approximately 50% of loans are now approved in less than 10 days. We do not offer home equity loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 60% of the value of the property, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of borrowers’ monthly gross income.

To facilitate the process, customers can obtain home equity loans completely online through our real estate digital platform. When using this option, customers only need to be physically present when signing the contract and when returning it once it is duly registered.

Tailored Products and Services

As mentioned above, we offer a complete set of services and products worldwide. In this way, we have a portfolio that ranges from basic to tailor-made and highly complex solutions in the following areas:

·
●Global Transaction Banking -which includes – Responsible for the sale and management of local and global transactional banking products, which includesinclude local loans, commercial finance (confirming), transfersfinancing such as on-lending of BNDES onlending, trade finance, guarantees, structuredfunds from development banks, structuring of local loans and cash management solutions and funding from international banks.

63 

Table of Contents

·solutions).

●Global Transactional Services - which is responsible– Responsible for sales and managementthe sale of global transactional banking, trade finance,products, financing for export and import, guarantees, structured loans, and fundingstructuring of assets in foreign currency, in addition to raising funds from international banks;

·banks.

●Global Debt Financing - which includes funding– Responsible for the provision of financing and financial advisory services related toadvice on infrastructure projects, origination, and distribution of fixed-income securitiesfixed income instruments in the debt capital markets both locally and internationally, financing offor acquisitions and syndicated loans other structured financing arrangements, subordinated debtin local and energy efficiency transactions.

·foreign currency.

●Investment Banking - which includes advisory services in– Advice on mergers and acquisitions and equity transactions in the capital markets transactions, including initial public offering and follow-on offerings.

·markets.

●Equities - which includes stock– It operates brokerage and advisory services, equity services for individuals,individual, corporate and financial institutional investors in stocks, listed derivatives as well as equityand research.

·

●Treasury Customers – - which is responsibleResponsible for structuring and offering foreign exchange derivativeproducts, derivatives and investment products for customers from severalinvestments to clients in our various segments, of Santander Brasil, including institutional investors, corporate clients and retail customers.

·individuals.

●Market Making – - which is responsibleResponsible for the pricing of customer deals originated byoperations (foreign exchange and derivatives) for customers originating from the sales efforts of our sales force from corporate, institutional, corporate, private banking and retail segments.

We are oneretail. This area is also responsible for managing our proprietary books.

 82
Table of the leading banks in capital marketsContents
●Energy Trader – Performs transaction with qualified customers and financial advisory servicesend consumers, and also acts as a hedge and market making provider in the Brazilian and international markets as evidenced by the awards we have received, the principal amongenergy markets.

We are one of the leading banks in capital markets and financial advisory services in the Brazilian and international markets as evidenced by the awards we have received, of which the most significant are listed in the table below.

 

Company

Acknowledgments

AreaAcknowledgments

Global

Transaction

Banking

1st place in BNDES Disbursements to Large Companies and 4th place in BNDES Disbursements to Small and Medium Enterprises in the first half of 2017, according to the BNDES
Best Trade Bank in Latin America and Deal of the Year Latin America: Seaborn Networks by Global Trade Review in 2016 and 2017
1stplace in Trade Finance Bank, according to Febraban
Dealogic

Full Year 2021

#8 Latin America & Caribbean ECM Revenue

#9 Latin America ECM Volume by Bookrunner

#10 Brazil M&A Revenue by Advisor

#6 Brazil M&A Volume by Advisor

#4 Latin America & Caribbean DCM Volume by Bookrunner

#8 Latin America and Caribbean Loans Volume by Bookrunner

#8 Latin America and Caribbean IB Revenue by Bookrunner

#5 Brazil Investment Banking by Bank¹

#1 Latin American & Caribbean Project Finance Loans Volume by MLA²

#1 Americas Project Finance Volume by Finance Adviser to Consortium²

#1 Americas Project Finance Volume by Finance Adviser²

#4 Americas Renewable Energy Project Finance Volume by MLA²

 

¹ For the third quarter of 2021

² For the first half of 2021

Global FinanceBest New Measures to Support Trade Finance Customers during Pandemic 2021

Best Supply Chain Finance Bank Global 2021

Best Post-Shipment Financing Solution 2021

Best Provider of Short-Term Investments Money 2021

Market Funds in Latin America 2020

Best Trade Finance Bank in LatAm 2020

World’s Best Payment Hub Solution 2020

Best Trade Finance Provider for LatAm 2020

Institutional Investors

#1 The Latin America Strategy Team 

#4 The Latin America Sales Team

# Sales Trading Institutional Team

#5 Research Team

First Quarter of 2020
TMI AwardsBest Trade & Supply Chain Finance Bank in South America 2020
Euromoney

The Best Bank for SMEs Award in LatAm.

October 2020
FX Markets

Best Bank for emerging LatAm currencies 2020

Best Bank for LatAm 2020

Best Bank for USD/BRL 2020

Global Trade Review

Best Trade Finance Bank in LatAm 2020

Best Deal Award Route 2020

Best Supply Chain Bank 2020

First Quarter of 2020
Bond Radar

#1 DCM Distributed in the International Market 

Brasil Bonds & Corporate Bonds

Full Year 2020

Trade Finance an IJ Global

Best Supply Chain Finance Bank 2020

Best Receivables Financier 2020

PFI Awards

Global Adviser of the year

First Quarter of 2020

Anbima

#2 DCM Distributed in the Local Markets 

#4 DCM Originated in Local Markets– Fixed Income Consolidation

Project Finance 

Financing advisory #1 Announced value

First Quarter of 2021

Full Year 2020

Risk Net

Risk Solutions House of the Year 2020

Deals: Cosan (EDQ) / Syngenta (Special Sits)

64 

 83

Table of Contents

EquitiesRanked as 4th place among Brazilian banks and 6th place among banks in Latin America. Ranked as 1st place in the Energy & Sanitation and Transportation (Latin America), Education (Brazil) and Strategy (Brazil and Latin America) sectors, and several leading positions in Brazil’s Research rankings by U.S. magazine Institutional Investor in 2017

Santander Corretora was authorized to use B3’s Agro Broker certificates. It now has all B3 qualification certificates

Santander Corretora has ranked 1st place in stock picking since 2012, according to Valor Econômico

Clients Treasury1stplace in the Foreign Exchange Rankings by the Brazilian Central Bank since 2014
Best Treasury in Brazil in 2017, according to Euromoney
Global Debt Financing (GDF)

Financial advisory: 1st place in Latam and Brazil ranking in 3Q19 by Dealogic

LatinFinance 2017 Awards

Best Infrastructure Financing: Brazil

Ventos do Araripe III

2nd place in DCM International – Brazilian Bonds by BondRadar

ü1st place as Financial Advisor and Structurer (number of projects)

ü1st place as Financial Advisor for Auctions

(financial volume)

2018:

ü1st place - Financial Advisor by Volume

ü1st place - Auction Financial Advisor by Volume

ü1st place - Arranger by Volume

 

Customer SolutionsLatin Finance

 

AgribusinessCorporate High-Grade Bond of the Year: Suzano FY2020

Equity Follow-On of The Year: Via Varejo

Infrastructure Bank of the Year – Brazil

Syndicated Loan of the Year: LD Celulose

Domestic M&A Deal of the Year: Grupo Notre Dame Intermédica purchases Clinipam

Corporate High-Yield Bond of the Year: Braskem

Bank of the Year: Southern Cone

 

Agribusiness remains one of our key areas of expansion, and we believe that expanding our agribusiness network further also helps broadening our reach within the Brazilian countryside to areas in which are not present yet. We provide a full range of products and services focused on the agribusiness sector. Our approach to rural producers differs from the approach we take with our other customers as we offer rural producers a specialized relationship, which we believe to be more agile and efficient through a network of physical stores and digital solutions.Bacen

 

The following table sets forth certain key financial and operating data regarding our agribusiness for the periods indicated.#1 Total FX 

 

  As of and For the Year Ended December 31, Change between Change between
  2019 2018 2017 2018 and 2019 2017 and 2018
           
Number of agribusiness-focused stores  34   21   14   13   7 
Agribusiness loan portfolio (R$ billion)  10.9   11.8   11.5   -7.9%  2.6%

Microfinance

Prospera Santander Microfinance is the largest productive and microcredit-oriented operation among privately owned banks in Brazil, based on market share and portfolio value. It is geared toward supporting formal and informal microentrepreneurs in society with the purpose of generating work and income. With a 100% digitalized service process, in addition to products intended to improve business management skills, we have clients who hire us

September 2021
The BankerBest Transaction Bank for Latam 2021

Customer Solutions

Agribusiness

Agribusiness remains one of our key areas of expansion, and we believe that expanding our agribusiness network will help broaden our reach into the Brazilian countryside to strategic areas in which we are not yet present. We provide a full range of products and services focused on the agribusiness sector. Our approach towards rural producers differs from the one taken with our other customers in that we offer a specialized relationship to our rural producers. We believe that a network of physical stores and digital solutions will result in a more agile and efficient communication with these customers.

The following table sets forth certain key financial and operating data regarding our agribusiness for the periods indicated.

  As of and For the Year Ended December 31, 

Change between

2020 and 2021

 Change between 2019 and 2020
  2021 2020 2019    
Number of agribusiness-focused stores   42   40   34   5%  6%
Agribusiness loan portfolio (R$ billion)   13.9   13.7   10.9   1.5%  26.2%

Microfinance

We believe that Prospera Santander Microfinance is a leading microcredit-oriented operation among privately owned banks in Brazil, based on market share and portfolio value. This product aims to support formal and informal microentrepreneurs by generating business and income with a 100% digitalized service process, in addition to products intended to improve business management skills, we have customers who hire us for services previously not available to them, because they do otherwise have access to financial services, such as property finance, consortium and investment services.

  As of and For the Year Ended December 31, Change between 2020 and 2021 

Change between

2019 and 2020

  2021 2020 2019    
Number of Prospera stores   119   99   100   20.02   (1.0%)
Microfinance loan portfolio (R$ billion)   1.9   1.3   1.2   49.2%  8.3%

Webmotors

Webmotors is the first and largest Brazilian technology company focused on providing automotive purchase and sale solutions for dealers, original equipment manufacturers and private sellers, holding the largest online automotive listing in Brazil.

Webmotors received an average of more than 30 million visits per month in 2021. Through Cockpit, a pioneering and disruptive platform for utilities, which brings together solutions for the entire network described above, we offer the following solutions: business management/ performance, buyer profile (CRM), data intelligence, predictive pricing models and market data (AutoGuru).

Webmotors endeavors to be a platform that accompanies private and corporate users throughout the life of their vehicle, from purchase, to use and sale. In order to do so, Webmotors reformulated the business of its subsidiary Loop, which was a traditional auctioning business, into an omnichannel dealer which is able to increase the sale value of demobilized fleets in its digital and physical stores. Webmotors also launched “Agenda Fácil,” a product focused on scheduling services through WhatsApp.

65 

 84

Table of Contents

Webmotors

Webmotors is the first and biggest Brazilian technology company focused on automotive purchase and sale solutions for dealers, original equipment manufacturers and private sellers, holding the biggest online automotive classified in Brazil.

Webmotors received over 30 million visits each month and had an average over 450,000 cars listed. Through the Cockpit, a pioneering and disruptive platform for car dealers, which combines solutions for the entire chain described above, we offer the following solutions: business management/performance, buyer profile (CRM), data intelligence, predictive pricing models and market data (AutoGuru). This hub generated positive results, such as a 25% increase in the volume

Santander Auto

In 2019, we launched Santander Auto, a fully digital car insurance solution which relies on the use of big data analytics for pricing.

The Brazilian insurance market is characterized by: (i) low insurance penetration in proportion to its GDP; (ii) low technological evolution, dominated by companies with low innovation rates, still focused on financial results (due to a history of high interest rates); and (iii) retail brokers as the main distribution channel. As a result, the subscription process still requires that the customer complete a question form (approximately 40 questions). As a result, only approximately 20% of Brazilian vehicles are insured.

Actuarial techniques and behavioral models enable Santander Auto to make an insurance proposal, without making additional information requests from the customer, based on information already available to us.

During 2019, its first year of operation, almost 110 thousand policies were sold, which represents a penetration rate of 16% (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos). These results are based on a pricing system based on information bureaus which provides have a more accurate price, which makes it possible to make an offer at the time the vehicle is purchased, and which enables customers to include insurance in their purchase with a single click.

During 2020, we focused on consolidating our insurance offer, by ensuring that all customers have at least one insurance offer, while also covering the most diverse types of risk. We intend to expand the business through the optimization of our ecosystem and penetration in our customer base.

In 2021, Santander Auto expanded its product offering to cover 95% of all vehicles financed by Santander Financiamentos, reaching a penetration rate of 20% in the year ended December 31, 2021 (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos), and registering an increase of 80% in the number of policies sold in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the fourth quarter of 2021, Santander Auto started to offer car insurance to customers who are not financing their vehicle with Santander Financiamentos in order to expand its distribution channel further.

Solution4fleet and Car10

In 2021, we acquired Solution4fleet, a company specialized in leasing vehicles to third parties. Solution4fleet offers services such as assistance, fleet management, inspection, vehicle maintenance and fine management. It is the only company in the Brazilian market that has a complete ecosystem for fleet management and leasing operations.

We also acquired Car10, a company which provides a marketplace to simplify auto repair shops and services with over 7,000 registered garages across Brazil.

+ Negócios and +Vezes | Santander Financiamentos

In 2017, we launched “+Negócios,” which we believe to be an innovative digital trading platform. This simple and intuitive platform enables faster execution of loan simulations, receipt of credit approval and proposal formalization for vehicles, in addition to providing portfolio management reports. In the same year, we also introduced “+Vezes,” a digital trading platform allowing retailers to offer installment payment options for the sale of goods and services.

In 2021, approximately 15 million separate Brazilian individual taxpayer identification numbers were used to simulate vehicle leasing through the “+Negocios” platform, which makes it one of the most widely used platform in Brazil’s vehicle leasing market.

+Vezes has a strong focus on digital channels. With the use of +Vezes website, two editions of “Decora +” and “Energia +” have been launched, both focused on the development of digital showcases to bring main resellers closer to the end customers, mostly on the furniture and photovoltaic segments. Additionally, Crédito Pessoal +Vezes has also been launched, which is a complementary offer of credit for end customers in their checking account, without a specifically required purpose. We have also advanced multiplying +Vezes presence and service throughout the national territory for the implementation of the CONSULTANT + Model, strengthening the relationship with intermediary customers.

 85
Table of contracts by sellers and a 15% decrease in the time of these contracts with end-customers. With that, we experienced a 30% growth in the number of dealerships with a high level of engagement with us.

We have also launched “+Fidelidade,” a loyalty program aimed at providing our intermediate customers with a full value offer through a model of incentives to store owners based on their loyalty and relationship level with Grupo Santander Brasil and Webmotors. We have sought to improve customers’ after-sales experience through several functionalities made available on anContents

Moreover, “+Fidelidade” is a loyalty program with the objective of offering incentives to agents based on their relationship with Santander Brasil and Webmotors. Accordingly, we have sought to improve the customer’s post-sales experience by implementing several features on +Fidelidade’s online portal.

+ Negócios and + Vezes

In 2017 we launched + Negócios, an innovative digital trading platform designed to be simple and intuitive, which enables faster execution of loan simulations, receipt of credit approval and proposal formalization for vehicle, in addition to providing portfolio management reports. In the same year we introduced “+Vezes”, a digital trading platform which allows retailers to offer installment payment options when they sell goods and services.

Cash Management

We offer cash management solutions to corporate customers and SMEs online through our Internet banking and mobile banking services.

Our revenues from cash management include fees fromcharged for offering the following products which we offer:products: (i) collections, in which we assist customers in carrying out commercial transactions using printed or online payment slips; (ii) payments, consisting of simple and automatic management of our customers’ accounts payable activities through individual transactions or via electronic file transfer; (iii) instant Payments, in which our customer pays and receives funds online with an immediate credit or debit to the account (this can be added to our collection, payments or acquiring products); (iv) payroll, which is intended to facilitate the management of salary and benefits payments to our customers’ employees via an online tool; (iv)(v) collection of values, which consists of the payment of cash values and checks at the customer’s points of sale; and (v)(vi) custody, by which we perform the custody, control and deposit of predated checks up to the date of clearing.

In addition, we also provide other revenue-generating products generate revenue andwhich are structured and tailored to the customer’s operation.

Customer Funding

Our main sources of liquidity are customer funding through deposits and other bank funding instruments. These deposits, combined with equity and other instruments, enable us to meet most of our liquidity and legal reserve requirements.

For further information, see “Item 5. Review and Operating and Financial Outlook—Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”

Investments

Our investment process for retail customers seeks to provide qualified guidance and help them to achieve their financial objectives based on fourfive major pillars:

·●Client investment profile -– We appraise theassess our customer’s situation of our costumer to understand their level of financial knowledge, investment horizons, liquidity needs and the levels of risk they are willing to assume, among other factors. This analysis is reviewed periodically, according to the customer’s needs and local regulations;

66 

Table of Contents

of financial culture, investment horizons, liquidity needs and the levels of risk they are willing to assume, among other factors. This analysis is reviewed periodically, according to customer’s needs and local regulations.

·●Investment strategy -– Our investment philosophy aims to provide long-term returns through a structured asset allocation process and mitigate market risks from diversificationby diversifying among different asset classes.classes;

·●Model Portfolio – We define strategic portfolios for each customer profile and build our “Model Portfolio” on a monthly basis according to market conditions and trends. This tactical view arises from the Asset Allocation Committee, which consists of our advisory team and economists from oursour economics department, our Santander Asset Management division, our Private Banking unit and our brokerage house (Santander Corretora).;

·●Execution and implementation -– To assure a successful execution of investment strategy, we provide a complete array of financial products, ranging from banking instruments, bonds, stocks, structured notes, investment funds with an open architecture withand selected investment providers, real Estateestate funds and exchange traded funds, among other capital markets instruments. Our partnership with Zurich Santander completes this offering with a wide range of private pension plans. Furthermore, our recent acquisition of Toro Corretora has further enhanced our PI DTVM investment platform by expanding our product offering. For more information regarding this acquisition, see “—A. History and Development of the Company—Important Events—Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.;” and

 86
Table of Contents
·●Follow-up- – Our advisory team performs along with the client, a thorough and frequent revisionreview of theirour clients’ profile, objectives and results seekingalongside each client in order to keepmaintain the investmentsclient’s investment within the parameters established parameters and Model Portfolio’s guidance.the guidance provided by the model portfolio.

In order to identify possible deviations in the positions from the investment profile,profile’s recommended positions, we also rely on automated monitoring systems. These controls warns the costumersalert customers of any operationstransactions that compromise the suitability of their portfolio and are in line towith our commitment to protect our costumer’scustomers’ interests.

Furthermore, each customer has direct access to itstheir positions through a private access site on the Internetinternet and Mobile App, enabling them tomobile app, where they can view the evolution of their investment strategies.

Programa Avançar

We also have a non-financial solution, known as “Programa Avançar,” which is aimed at entrepreneurial customers, which we make available a web platform through whichcustomers. By means of this solution, SMEs can access content and solutions related to management and innovation, internationalization, team building, and other topics that we believe are relevant to businesses.businesses via a web platform. We see this program as a key component of our offering to Brazilian entrepreneurs.

In addition, we offer a digital account solution where individual entrepreneurs can purchase banking products and services in a 100% digital experience.

Similarly, we offer “Santander Copiloto,” an enterprise resource planning tool designed for our SME customers. This tool is integrated with the Santander Digital channels, and provides solutions such as e-commerce, sales point software and tax compliance.

Service Channels

We offer our financial services and products to our customers through our multichannel distribution network composed of: (i) physical channels, such as branches, mini-branches and ATMs; (ii) call centers; and (iii) digital channels, such as Internet banking and mobile banking.

Physical Distribution Network

Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network as of the dates indicated.

  As of December 31,
  2021 2020 2019
Branches   1,987   2,153   2,328 
Mini-branches   1,384   1,411   1,512 
Own ATMs   12,561   12,949   13,296 
Shared ATMs   24,255   23,798   23,780 

 

  As of December 31,
  2019 2018 2017
Branches  2,328   2,283   2,255 
Mini-branches  1,512   1,267   1,211 
Own ATMs  13,296   13,641   13,522 
Shared ATMs  23,780   23,049   21,195 

67 

Table of Contents

Branch Network

Our branch network offers our customers our entire portfolio of products and services withto our customers through a personal and customized customer service.approach. The table below shows the geographic distribution of our branch network as of the dates indicated.

 As of December 31, As of December 31,
 2019 2018 2017 2021 2020 2019
Northeast  9%  8%  8%  9.74%  9%  9%
North and Midwest  7%  7%  6%  8.42%  7%  7%
Southeast  70%  71%  72%  67.31%  70%  70%
South  13%  13%  13%  14.53%  14%  14%

 

PABs (Mini-branches)

We offer daily banking services to our SME andSMEs, as well as corporate customers and their employees through our PABs (the acronym stands for (“Postos de Atendimento Bancário in Portuguese)rio”), which are exclusive sales points located on their sites,at our customers’ buildings, as well as in hospitals and universities. Our PABs are generally exclusive sale points at customers’ sites. The presence of PABs in our customers’ offices strengthens our relationship and builds loyalty with those customers, who benefit from the convenience of conducting their banking transactions at their workplace.

 87
Table of Contents

ATMs

We operate an extensive network of 13,29612,561 ATMs, including those located in our branches and Mini-branches.mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 23,78024,255 ATM units. Through this network, our customers are able tocan access their accounts and conduct banking transactions, as well as purchase most of the products and services available in our portfolio.

Call Centers

Remote Channel

Our remote channel consists of call centers, provide active Santander Brasilonline messaging services and contact emails available to all our customers. These allow customers (accountto solve issues, engage new products and single product holders)services and generally interact with consultation, financial transactions and product hiring services. This important distribution channel has a variety of customer self-service facilities. Our call centersus to fulfil their banking requirements. We received over 15025 million contacts per month through our remote channel in 2019.the year ended December 31, 2021.

In, we began a process to reshape the way in which we interact with customers through our remote channel. In 2021, this transformation allowed us to achieve more than 740,000 sales in December 31, 2021.

Digital Channels

Our digital channels include Internet banking, mobile banking and other digital solutions intendedaimed at facilitating our customers’ access to provide our customers a convenient manner in which to access the products and services that we offer.

The last few years have been marked by a significant digital transformation for us. We believe that in 2021 we have strengthened our focus on customers with a digital mindset while also leveraging digital tools to enhance our efficiency and scalability. In this context, we highlight the following key features:

following:

·●OnePay – This service is available throughWe have created an online store to receive and serve our customers on an ongoing basis. In the Santander Appyear ended December 31, 2021 we recorded an average of approximately 442 million total visits per month and enables customers to transfer funds to foreign countrieswe increased the number of digital buyers in various currencies.comparison with the year ended December 31, 2020.

• Santander On “Financial control” – This service is also available through Santander App and enables our customers view all of their commitments to us, as well as pending issues with the Brazilian tax authorities (Receita Federal do Brasil), Serasa (a Brazilian credit bureau) and the Brazilian Central Bank and transparency in the credit relationship with Santander Brasil. Its service shows, with easy interface and simple language, credit quality and the use of debt with Santander, allowing income to be updated without the necessity of showing any voucher, as well as relocation of available limits.

●We added 557,000 new accounts in December 2021, an increase of 190% when compared to December 2020. We believe this growth is due to our streamlined account opening process, which improved our customers’ experience, and to an increase in our approval rates as a result of improvements in our fraud detection and offline processes.
●We have performed an average of approximately 3.2 million sales per month in the year ended December 31, 2021, an increase of 45% when compared to the year ended December 31, 2020. This increase has been primarily driven by an increase in credit cards sales, representing an average of 297,000 sales per month in the year ended December 31, 2021, an increase of 99% when compared to the year ended December 31, 2020. We have consolidated our position as a leading credit and digital recovery platform in Brazil, with more than 2.4 million contracts per quarter in the year ended December 31, 2021 (considering only individuals) an increase of 69% when compared to the year ended December 31, 2020, and with a share of sales amounting to 64% in loans in the year ended December 31, 2021.
●We have also taken steps to improve our digital customer service, in the form of Gent&, our virtual assistant. Gent& is an artificial intelligence launched in 2020. This solution offers a more personalized digital service that provides greater autonomy for our customers.

The following table provides certain key operating information with regards to our digital channels as of the dates indicated.

  For the Year Ended December 31,
  2021 2020 2019
  (in millions)
Number of digital customers (1)   18.8   15.6   13.4 
Number of digital channel transactions (2)   7,482   5,262   4,311 

 

68 

Table of Contents

  For the Year Ended
  December 31,
  2019 2018 2017
  (in millions)
             

Number of digital customers(1)  13.4   11.4   8.6 
Number of digital channel transactions(2)  4,311   4,073   3,699 

(1)We define digital customers as customersthose who have used at least one of theSantander Brasil’s digital channels made available by Santander Brasil (i.e.(e.g., mobile banking and internet banking) in the preceding 30 days preceding the end of year end.the applicable year.

(2)Refers to transactions carried out through internet banking, mobile banking and other digital platforms. The data relatingrefers to the year ended December 31, 2018 has been revised as a consequence31.

 88
Table of a change in the criteria applicable to digital transactions accounting.

Contents

 

The following table provides an overview of the weight of each key non-physical distribution channel in our overall distribution system.

  

For the Year Ended

December 31,

  2021 2020 2019
   (%)
Internet banking  27.7   37.8   39.7 
ATMs  3.6   5.9   8.9 
Mobile (1)  62.3   46.9   39.0 
Branch  1.1   2.2   4.1 
IVR (2)  4.6   6.4   7.4 
Call Center  0.7   0.9   0.9 

 

  For the Year Ended
  December 31,
  2019 2018 2017
  (%)
Internet banking  39.7   46.1   54.0 
ATMs  8.9   10.4   14.4 
Mobile(1)  39.0   34.5   19.9 
Branch  4.1   5.2   5.4 
Interactive Voice Response (IVR) (2)  7.4   2.3   2.7 
Call Center  0.9   1.4   3.5 

(1)Includes tablet transactions. Data refersRefers to total transactions (account holder and unique product-holder).

(2)Interactive voice response is an automated telephonytelephone system in which a computer interacts with callers (who can use their voice and tones input via aor the telephone keypad to communicate with the computer), gathers information and routes callstransfers caller to the appropriate recipient.representative.

 

Technology and Infrastructure

In addition to Internet banking and mobile banking,2021, we have digital solutions that play an important role in providing a better digital experience for our customers and potential customers, including:

·Digital account opening - We have made it possible to open an account with Santander Brasil entirely online.

·Santander Corretora App - We provide a digital trading platform for our brokerage customers.

·Autocompara- It allows customers to obtain insurance quotes from six different insurance companies and purchase the best offer through Autocompara’s website.

·Pi– This is a solution that acts as a digital broker, empowering clients to invest through a simple and intuitive digital platform. It also provides market information and financial education tools. Pi was launched in 2019.

·Sim– This is a digital credit solution for non-account holders, with competitive conditions and a better experience and usability. It is a complete credit marketplace, which we believe to be transparent and through which we offer financial guidance. Sim was launched in 2019.

·emDia – This debt renegotiation solution is an evolution of the traditional collection model. It provides a self-service debt management portal to indebted customers and was launched in 2019.

Technology and Infrastructure

Throughout 2019, we accelerated ourperformed significant investments in technology. Our goal was to deliverour technology systems. We put customers at the center of our strategy. We are continuously seeking improvements in customer experience and satisfaction by launching new services, as well as combining self-service features with human and personalized services and channels.

Therefore, we have strengthened our technological culture and our business systems capacity, which supports an innovativeintense flow of more than 53 million customers as of December 31, 2021 and agile bank, being able to face pertinent challengesan average of 442 million total visits per month to our digital transformationchannels in the year ended December 31, 2021, along with competitivenessan efficient and service quality. Through technology, we aimedsecure processing of an average of more than 367 million transactions per day in the year ended December 31, 2021. We believe that this continuous improvement of our customer services, combined with the offer of new solutions and the expansion of the range of our channels contributed to boostthe growth of our efficiencycustomer base by 11% in the year ended December 31, 2021 compared to grow faster.the year ended December 31, 2020.

In 2019, we launched a program to simplify and digitize our sales network and customer support

69 

Table of Contents

processes by 2022. We have also improvedincreased our developmentoperational efficiency and system implementation chainscalability, expanding the use of computing to over 75% of operations, and improving the time-to-market of products and services, by adoptingusing Agile and DevOps methodologies in the execution of 85% of our projects. Furthermore, we have reduced the number of relevant incidents (which we define as high priority incidents, i.e., those that could result in the unavailability of a wide range of critical services) in the last three years by more automated, robustthan 90% on average, ensuring greater availability of our products and scalable architecture based on micro services and cloud computing as well as by refiningto our DevSecTestOps practices for application development and infrastructure operations.customers. We have listed below a fewother initiatives we have delivered this year:

• Corporate Platform:We have redesigned our mobile channel, in order to deliver a simple and safer navigation. We have deployed the QR Code authenticationcarried on ATMs, a new chat services platform, registration of favorite contacts for future transactions and digital access to Getnet sales receipt, online access to consolidated receipts within Corporate Internet Banking and payment of municipal, state and federal taxes through bar code, ensuring a more transparent and digital experience to our corporate customers.

throughout 2021:

•●Santander Way Transformation:Investments:We improvedhave launched the Algo+ service (stands for “algorithm”), which simplifies the investment process to our payment platformcustomers, allowing them to invest in stocks from the bank’s recommended portfolios without having to sign-in to the home broker. This initiative ensures diversification and time saving in investments, also protecting investors from cognitive biases and human failures.
●Open Banking: We have started to provide the “Open Finance” service to our customers, which allows them to authorize the sharing of their financial data to other financial institutions. This enables us to understand customers’ profiles better, so we can offer personalized products, services, and other benefits, such as increases in credit card limits and competitive banking fees. Customers can also concentrate the management of their finances in a single place, and they will soon be able to manage all their accounts from other banking institutions (e.g., balance and statement checking, making payments and investments) by launching version 2.0means of our digital channels. We have also implemented resources and mechanisms to ensure data privacy and security to conform to government regulations.
 89
Table of Contents
●Security: Aiming to provide our customers with a streamlined digital experience, we have offered authentication via facial recognition, eliminating the need to authorize mobile devices at an ATM in order to use all the features of our digital channels. The new security system recognizes the customer with the use of artificial intelligence, including legitimacy checks through advanced Machine and Deep Learning models developed internally, ensuring proof of life and facial verification. Customers only need to register face biometrics when opening an account and afterwards in their mobile application, which grants our customers with a more digital and secure experience.
●Individual Bank Account (Mobile): We have added new resources and features in order to provide a better experience for our customers. Regarding customer service, we provide the DialMyApp service. When the customers access our call center, they are guided to online services (App, Website and Virtual Assistant) through a graphic menu displayed on his cell phone concurrently with the phone call they have placed, which improves engagement and reduces customer service costs. With respect to foreign exchange, we have included a new feature for uploading documents through the OnePay service, optimizing the time of carrying out exchange transactions, in addition to improvements in exchange rates checking for the main currencies. With respect to investments, we have offered our customers a new feature to monitor and analyze the evolution of their investment portfolio for a given period of time by means of the Santander Way App. We believe that the improved layout emphasizes important functionalities,Investment Profitability Chart (GRENT).
●Corporate Bank Account (Mobile): In order to ensure greater support to our corporate customers, we offer new assistance service channels, such as ID Santander, NFC (Near Field Communication)our AI virtual assistant, as well as direct contact with one of our managers in our corporate mobile App. This service also includes a feature that enables our customers to contract our business management system (Santander CoPilot), by means of which they can control their business sales and OPC (“Online Purchase Card”), besides many upgradesinventory. Moreover, the Open Banking feature gives customers an opportunity to ensure an evenshare their company data, which ensures a better customer experience. Additionally, new features were incorporatedunderstanding of their business profiles.
●Credit Cards: In the context of the COVID-19 pandemic, we have expanded the digitalization of our card transactional services, enabling customers to self-serve through digital channels for acquisition and post-sales purposes, such as invoice checking via WhatsApp. Another disruptive initiative is the application,generation of the online card before the physical card, allowing customers to make their purchases in e-commerce and also by cell phone approximation before they receive send and charge cash: P2P transfers through contact list or QR Code, purchase split with contacts within mobile’s contact list and payments through QR Code scanning on Getnet POS.their physical card by mail.

•●Investments Platform Evolution –Customer Service: Combining entrepreneurship, technology and focus on customer experience, we developed a Voice Analytics solution to scale our capabilities of listening to our customers by means of the use of machine learning, Graphics Processing Units (GPU) and cloud computing, which accelerates our deliveries and adds value to our shareholders. Currently, we have already studied and addressed the needs of our customers going through credit recovery processes and with reduced investments.
●Software Development Agility:We simplifiedhave transformed our software deployment process through the customer registration experienceadoption of a new solution focused on the brokerage platformintegration of software development lifecycle tools, providing greater autonomy to the development teams, in addition to ensuring production environment stability through automatic deploy and rollback processes without manual interventions (Zero Touch). As a result, our development teams are able to better meet customer needs, delivering new features with more assertiveness, speed and quality. In just nine months after the process was implemented, twice as many software deploys were made compared to the entire year of 2020.
●Cloud: In order to make it fasterimprove the availability and intuitive. Weresilience of our main applications, we expanded the use of our computing capacity with two public cloud services providers, extended our on-premises datacenter network using these cloud providers, and created a full mesh connectivity model. Using this model, we have also increasedupdated software applications to use cloud capabilities adopting an abstraction strategy for the numberproviders’ Cloud products (for example: accessing products through open and common protocols), ensuring code standardization and reduction of investment products offeredlock-in (dependency on a single cloud provider technology implementation), in our investment platform.addition to the implementation of normal/peak/special day auto-scaling strategies and the creation of automated capacity to balance applications in multi-cloud service.

• Multicloud:We have executed our Cloud First global strategy, which focuses on providing an Infrastructure as a Service (IaaS and PaaS), supported by a secure integration architecture between Santander’s Datacenter in Brazil and various local public cloud service providers. This infrastructure allows applications to be balanced between internal environment and the public cloud, ensuring greater flexibility and agility for an accelerated implementation of new business structures with the development of modern, digital and continually monitored applications. This transformation adds more robustness and scalability to our technology solutions, increasing the offer and availability of services provided to our customers and then leveraging the growth of our business while keeping high quality and performance standards.

• Business Process Digitization:In order to improve efficiency and productivity, we digitized over seventeen major processes from our asset, transactional services, manufacture and treasury/cards departments, by developing new business rules in our business process management tool. This reduced the total analysis time for each process, paper printing and increased our overall control over the processes.

• Payroll loans:we have made improvements to the product’s digital journeys, in order to make the customer’s interaction more intuitive and decrease the amount of complaints reported to local regulatory agencies. We have launched new preventive credit products in order to support our customer’s doubts clarification and increase the institution’s capital allocation efficiency. Furthermore, we have improved the point of sales designation, making the post sales experience more transparent to our customers and increasing the accuracy of the point of sales goals control.

• Interactive Voice Response (IVR) Transformation:we have deployed a newly humanized interactive voice response, or IVR for contact center and corporate customers support, with conversation mechanisms and a language closer to human language. The IVR can also predict customer’s actions, enabling a better self-service experience and minimizing the need for intervention from human assistants. Additionally, new features were incorporated into the IVR for individual customers, such as identification of defaulting customers and call transfer to the debt collection department so that customers can renegotiate credit products debts.

• Chatbots:we have implemented a modern chatbot platform to develop and evolve new communication solutions with our customers. These solutions take advantage of artificial intelligence and Natural Language Processing (NLU), to allow our customers to solve their needs with the support of chats and virtual assistants, in a practical and digital way.

70 

Table of Contents

•Brazilian General Data Protection Act (Law no. 13,709/2018), or “LGPD”):We have begun taking steps to make our systems comply with the LGPD’s requirements through technical alignment with digital and human channels responsible for meeting holder’s rights, carrying out an assessment to identify the systems that store and use personal identifiable information, adaptation of technical and structural components processes, policies and procedures review.

• Technology lifecycle management and applications portfolio optimization:In 2019, we updated and renewed over nearly 18% of our software applications, avoiding risks of upcoming obsolescence events, which could lead to high unavailability incidents, security, and data breaches as well as long time to recover on service outages. Additionally, we have strongly optimized our software applications portfolio: almost 8% of our software applications were decommissioned in the means of functional consolidation toward fewer software components holding same business products and services.

Secure Bank (Cyber Security and Antifraud)

•Cyber Security:In order to protect our business and our customers against potential sensitive data leaks or confidential data, we have strengthened our infrastructure and capabilities to detect and prevent cyber attacks in 2019. We integrated our cyber security systems and processes at a global level, expanded the use of artificial intelligence to proactively identify behaviors of potential threats, evolved our security operational centers (SOCs) and expanded our data protection and access control levels.

•Antifraud:On the field of fraud prevention, we have enhanced our biometric platform through the deployment of facial recognition solutions to authenticate online inquiries and payments on checking account or Santander Way applications. On the corporate platform, we have developed a new module to monitor malwares installed in computers that access our Internet Banking, preventing our customers to be redirected to fake websites.

Communications and Marketing

We operate under multiple brands. A key aspect of our brand positioning strategy is to endeavor to fulfill our role as a responsible bank, i.e. one that does not just offer products and services, but also encourages its customers to use these responsibly by offering financial education and by seeking to be transparent in all of our actions.

We use and monitor several communication tools in order to achievecommunicate effectively with our multiple customer portfolio with a unique approach and visual identity. Thiscustomers. These include not only the traditional media, such as television and printed media, but also the internet, mobile advertising and mobile advertising.social networks.

 90
Table of Contents

We had over 7.8 million users connectedregularly provided information through all available media, seeking to us acrossmake a real and positive difference in the lives of our clients. Such information includes guidance on what open finance is, i.e., an ecosystem that allows financial institution customers to share their information to other banks which enables banks to develop more tailored products. We publicized updated solutions, like Gent& and Algo+, an algorithm that helps investors to follow our monthly portfolio recommendations. Internally, we released more than 200 videos aimed at instructing our teams on how to best-serve our customers, and guidelines to prevent COVID-19 in the workplace. Externally, we ran 297 video advertisements on TV and social networks. Our communications campaign generated significant feedback, with 100,000 articles published in newspapers and magazines, and 120 stories featured in Brazilian national media outlets as well. On social media, (Facebook, Instagram, Twitter, LinkedInwe averaged 10 posts per day, with 2.6 million impressions. We have also joined new media formats on networks such as Telegram, WhatsApp and Youtube)games. Additionally, we conducted more than 120 live broadcasts and events where our senior management, as well as experts and government officials were invited to address several topics, including the current economic scenario, social investment, sustainability, diversity, women’s leadership, entrepreneurship, and culture and entertainment, The Fourth Edition of December 31, 2019, which enables us to reach significant audiences. We also carried out important television campaigns, which we believe demonstrated our constant search for democratizationGlobal Citizen, organized in access to informationcollaboration with newspaper Valor Econômico and financial services, in addition to maintaining transparency about all of our actions.

Sustainability

Basedfeaturing Al Gore, the 2007 Nobel Peace Prize winner, received more than 935,338 views. Also, the 22nd Annual Santander Conference showed discussions on a responsible internal management, a consistent risk culture, ethical values as a basispolitics, sustainable businesses, health and technology, atwith the serviceparticipation of peoplemajor chief executive officers, public authorities and business we seek to support the Brazilian society in its transformation into the Brazilour leadership. The conference was broadcasted on YouTube, garnering a total of the 21st century by fostering the economic growth in a resilient and inclusive manner, stimulating the development of human potential and promoting an efficient and strategic use of natural resources.7.1 million views.

Sustainability

In Brazil, sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through the Board of Directors, the Executive Committee and the Sustainability Executive Superintendents. The Sustainability Committee (responsibleis responsible for clarificationsproviding clarification and recommendations to the Board of Directors regarding the development of guidelines relatedsustainability-related guidelines.

Our sustainability strategy is based on three pillars: (i) strategic and efficient use of environmental resources, (ii) developing potential and (iii) resilient and inclusive economy. Our vision, based on these three pillars, is to sustainability),contribute to a better society, while maintaining management excellence and responsibility, in accordance with our executive committeeethical values and the Sustainability Executive Superintendenceusing our technology to serve people and businesses.

71 

Table of Contents

Resilient and Inclusive Economy

Our broad commercial activity allows us to advise and support both from large clientsof our customers and projectsprojects. We believe we can play a role as well as informal entrepreneurs. Thus, our role is to be a facilitator and contribute to the generation of jobs and income, and the improvement of logistics and infrastructure in order to contribute to the development of Brazil.

for Brazil’s development.

Through this pillar, for example, we seek to financially empower people who are unbanked, underbanked or who may be financially vulnerable by offeringoffer access to banking services, products and non-financial initiatives. RegardingWe have specific products to support microentrepreneurs and SMEs, such as the “Prospera Santander Microfinanças,” “Programa Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include the topic of financial management in the client's relationship with the Bank, using tools such as Santander On.

In 2021, we helped 341,000 people through financial inclusion products and financial education in 2019, we trained approximately 28,000 people. This also included providing in-person training at our branches over the weekend, where volunteers taught over 1,961 people.

In addition, we have specific offers supporting microentrepreneurs and small and medium enterprises such as above mentioned Santander ON and Prospera SantanderMicrofinanças.

guidance.

Development of Potentials

Our commitment to the development of potential begins with our employees. We have been ranked as one of the best companies to work for in the Great Place to WorkGPTW survey since 2016.2016, ranking top ten in 2021. Guided by our corporate culture and internal policies, we offer opportunities supporting thethat promote development and professional growth, in order to build a culture of delivering results, respect, innovation, inclusion and diversity.

We also contributework to the promotioncreate a culture of respect, inclusion and equity, where everyone can develop their talents with their unique attributes. Diversity is one of the rightsfive principles of childrenour Code of Ethical Conduct. Our priorities are gender and adolescents. Through Amigo de Valor Program, Santander Brasil,racial equity, inclusion of LGBTI+ and people with disabilities, as well as diversity of experience and generational diversity. Since 2018, we have set inclusion targets for black employees in the bank and clients directly donate a partfemale employees in leadership, which in 2021, were 27.3% and 31.4%, respectively. Additionally, in 2021, we received two diversity awards from GPTW: one for our ethnic-racial practices and another, for the fourth time, as one of the due income taxbest companies for women to the Funds for the Rights of Children and Adolescents (Fundo dos Direitos da Criança e do Adolescente). In 2019, this program raised funds R$19 million.

work.

Through the Santander Universities Program, we offer initiatives focused on granting national and international scholarships, programs for theentrepreneurial development, of entrepreneurs andas well as internship and employment programs. On

 91
Table of Contents

As of December 31, 2019,2021, about 6,00033,000 scholarships and entrepreneurships were granted with a total investment of aboutapproximately R$2733 million.

We maintained our actions to support society and continued with our private social investment strategy with our programs to support children, teenagers, the elderly and entrepreneurs.

●In the 19th edition of the Amigo de Valor Program, we raised R$19.8 million to support 100 initiatives throughout Brazil, benefiting over 12,400 people.
●Campanha Brasil sem Fome: we are responsible for the donation of 200,351 baskets of staple food.

Our initiatives, including Amigo de Valor, Parceiro do Idoso, Blood Donation Campaign and Volunteer Program, had an impact on 542,545 people in 2021.

Efficient and strategicStrategic Use of Natural Resources

We are implementing changes to our business that contribute to a responsible and more efficient use of our national environmental resources, including with respect to a reduction in carbon emissions. In this sense, in addition to the Natural Resource

responsible environmental management of our operations, we finance and advise companies in the fields of infrastructure and renewable energy, while also providing support for sustainable agribusiness.

In 2019, the total amountyear ended December 31, 2021, we have destined R$ 51.6 billion to foster sustainable businesses, 96% more than in the year ended December 31, 2020. We believe these operations are in line with market benchmarks and include the issuance of environmentalgreen bonds, advisory services to sanitation businesses and financing withfor renewable energy (such as CDC Solar). For instance, we have transformed the Vila Olímpia station, at the city ​​of São Paulo, into the first sustainable station in Brazil, increasing its efficiency in the use of natural resources on site. As a consequence of our investments, 70% of the energy now used by the station derives from solar panels and it has implemented a system to recycle its water usage.

One year after the launch of Plano Amazônia, a commitment signed by Santander Brasil, facilitated acrossBradesco and Itaú in connection with measures to enhance and scale up solutions that promote the sustainable regional development, we highlight the following initiatives from Santander Financiamentos, Responsible Agribusiness, Corporate, Retail (IndividualBrasil:

●We made available over R$ 270 million in credit lines directed to cooperatives and agribusinesses in the Amazon region.
●We held the Bioeconomy in the Spotlight conference that has promoted a debate related to bioeconomy, preservation and sustainable development of the Amazon region, with market specialists and the CEOs of Santander, Bradesco and Itaú.
●We have been in contact with regional meatpacking companies to inform them about credit restrictions starting in 2025.
●In early 2021, we have announced our commitment to achieve zero net carbon emissions by 2050. The commitment applies to the Santander Group’s and also to Santander Brasil’s activities, as well as to all emissions from customers from any financial, advisory or investment service the bank offers.

Since 2002, we have adopted social and Corporate clients), Project Financeenvironmental parameters in the credit risk analysis for projects and Santander Corporatecompanies. Our analyses seek to identify issues such as contaminated land, deforestation, labor practices in conditions analogous to slavery and Investment Banking, including Green Bonds, totaled approximately R$13 billion.child labor, among other matters that would prevent us from doing business with such projects and companies.

We have been carbon neutral since 2010, by completely offsetting our Scope 1 and 2 emissions. Since 2013, we follow a methodology for selecting projects from which to purchase Verified Emission Reductions, or “VERs,” in order to ensure the social and environmental benefits for the Amazon region. In recent years, we bought VERs from reforestation and renewable energy ventures.

In relationaddition, we have made a commitment to internal environmental management, in 2019, we announced our decision to eliminate the single-use plastic consumption at Santander Brasil, by launching the #Desplastifique program. The implementation plan started with the administrative buildings, in 2019, and will be present in all branches by the end of 2020.

We also intend to havesupply 100% of our operations powered by renewalwith renewable energy by 2025.2025, establishing specific metrics for electricity, water, paper and internal renewable energy consumption. In the year ended December 2019, approximately 24%31, 2021, 53% of the electricity we consumed was derivedour energy consumption came from renewable sources.

 92
Table of Contents

In 2021, we will renew our ISO 14,001 certification in our administrative buildings, including our headquarters, Campinas radar and data center, and we will also implement the Zero Landfill Program, with the objective of giving a more sustainable destination for our waste.

Socio-Environmental Responsibility Policy

Our Socio-Environmental Responsibility Policy, or PRSA“PRSA,” meets the requirements of CMN Resolution n° 4.327/No. 4,327/14 and SARB Regulation 14 of FEBRABAN. It definesThese regulations define guidelines and consolidatesconsolidate specific policies for socio-environmental practices in business and relationships with certain parties. These practices include socio-environmental opportunities and impacts, and risk management related to subjects,

72 

Table of Contents

such as suitability in granting and using credits, management of suppliers and socio-environmental risk analysis. There isWe also have a PRSA Senior Group, of our PRSA, which consists of our vice-presidents of Risks, Legal Issues, Corporate, Human Resources, Finance and Communication, Marketing, Institutional Relationships and Sustainability, as well as theand officers of Agribusiness and the Compliance Officers.Compliance. This Senior Group is involved in the decision-making related to the PRSA and operates as ain connection with our Executive Committee.

On September 2021, the Brazilian Central Bank published the new CMN Resolution No. 4.945, which provides for the Social, Environmental and Climate Responsibility Policy (PRSAC) and the actions aimed at its effectiveness. As of July 1, 2022, the PRSA will be revoked and the PRSAC will come into effect.

Competition and Industry Transformation

Currently, there are five commercial financial institutions at the forefront of the Brazilian financial industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal.Federal, Together, these financial institutions accounted for 73.3%71.7% of the credit and 68.8%73.9% of the deposits available in the country inBrazil as of September 2019,30, 2021, according to the Brazilian Central Bank and the financial statements of the aforementioned banks.

banks,

The following table shows the total loans and deposits of the five leading financial institutions in Brazil at the dates indicated:

  Santander Brasil Bradesco Itaú Unibanco Banco do Brasil Caixa Economica Federal Financial System
  December 2019 (R$ billions)
Total loans(1)  352.0   454.0   429.4   621.3   693.7   3,478.5 
Total deposits(1)  268.5   367.8   402.1   330.7   433.6   2,621.8 

(1)       According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (December 2019).

  Santander Brasil Bradesco Itaú
Unibanco		 Banco
do Brasil		 Caixa Econômica Federal Financial System
  September 2021 (R$ billion)
Total loans (1)  450.3   581.3   567.4   745.3   842.0   4,442.0 
Total deposits (1)  389.8   559.8   792.6   475.2   472.5   3,641.7 
                         
(1)According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 2021).

Insurance Coverage

We maintain insurance policies that we reneware renewed annually in order to protect our assets. All of our branches, affiliates and administrative buildings are insured against losslosses caused by fire, lightning, explosions and other risks. Such coverage establishes reimbursement for the asset replacement value.

In addition, we also maintain the following insurance policies:

·●In addition, we also maintain the following insurance policies:
●policies against material and/or bodily damage caused to third parties for which we are held responsible;

·●policies against financial losses due to fraud or employee misconduct, among others;

·●directors’ and officers’ insurance policy for our management against third-party complaints regarding management acts. There are insurance policies against crimes, employee dishonesty and damages arising out of public offerings; and

·●policies against hacker attacks and cyber-crimes.

 93
Table of Contents

Dependence on Patents, Licenses, Contracts and Processes

The major trademarks we use, including, among others, the “Santander” brand,trademark, are owned by Santander Investment Bank. Santander Brasil has a license to use this brand.trademark. All trademarks of our business are registered withor applied through the National Institute of Intellectual Property (InstitutoBrazilian Patent and Trademark Office (Instituto Nacional de Propriedade Industrial, or “INPI”), the agency responsible for registering trademarks, patents and designs in Brazil, or have been submitted to INPI by us or by the Santander Group.Brazil. After registration,

73 

Table of Contents

the owner has exclusive rights ofto use of the trademark throughoutin Brazil for a ten-year10-year period that can be successively renewed for equal periods.

As of the date of this annual report, we own 567a total of 568 trademarks in Brazil, among them,with Santander Brasil ownsowning over 100 trademark registrations in Brazil with117 of these trademarks, while the remaining are owned by other companies of the Santander Group.

REGULATION AND SUPERVISION

The basic institutional framework of the Brazilian financial system was established by Law 4,595, of December 31, 1964,4,595/64, as amended from time to time, or the “Banking Reform Law”.Law.” The Banking Reform Law created the CMN, responsible for establishing the general guidelines of the monetary, foreign currency and credit policies, as well as regulating the institutions of the financial system.

Principal Regulatory Agencies

CMN

The CMN oversees the Brazilian monetary, credit, budgetary, fiscal and public debt policies. The board of the CMN is composed of the president of the Brazilian Central Bank, the Minister of Planning and the Minister of Finance, who also chairs the Board.Board, Pursuant to the Banking Reform Law, the CMN is the highest regulatory entity within the Brazilian financial system, and is authorized to regulate the credit operations of Brazilian financial institutions, to regulate the Brazilian currency, to supervise Brazil’s gold reserves of gold and foreign exchange, to determine Brazilian savings and investment policies and to regulate the Brazilian capital markets with the purpose of promoting the economic and social development of Brazil. In this regard, the CMN also oversees the activities of the Brazilian Central Bank and the CVM.

Brazilian Central Bank

The Brazilian Central Bank is an autonomous authority responsible for the implementation of the CMN policies related to foreign currency and credit, the regulation of Brazilian financial institutions, including asparticularly in regards to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out by financial institutions as well asand their financial information. The Brazilian Central Bank has committees to addressaddresses specific issues. COPOM, one of these, hasissues through the purpose ofMonetary Policy Committee (COPOM), a committee responsible for adopting measures to fulfill themeet inflation targets defined by the CMN and establishing monetary policy guidelines. The activity ofIn order to meet inflation targets, the COPOM in the control of inflation targets includes the definition ofmust set the target for the SELIC Raterate (the average rate for daily financing, backed by federal instruments, as assessed under the Special SettlementSELIC) and Custody System) and publication ofpublish reports on the Brazilian economic and financial environment and projections for the inflation rate.

CVM

The CVM is responsible for the implementation of theCMN policies established by the CMN related to securities, with the purpose of regulating, developing, controlling and inspecting the securities market and its participants (companies with securities traded in the market, investment funds, investors, financial agents, such as custodians of instruments and securities, asset managers, independent auditors, consultants, andas well as instruments and securities analysts).

Self-Regulating Entities

The Brazilian financial and capital markets are also subject to the regulation of self-regulating entities that are divided by field of activity. TheThese self-regulating entities include, among others, the National Association of Investment Banks – ANBIMA, the Brazilian Association of Credit Card and Services Companies – ABECS, the Brazilian Banks Federation – FEBRABAN, the Brazilian Association of Publicly-Held Companies – ABRASCA and the B3.

74 

Table of Contents

Principal Limitations and Obligations of Financial Institutions

In line with leading international standards of regulation, Brazilian financial institutions are subject to a series of limitations and obligations. In general, such limitations and obligations concern the offering of credit, the concentration of risk, investments, operating procedures, loans and other transactions in foreign currency, and the

 94
Table of Contents

administration of third-party funds and micro-credit.microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:

·●No financial institution may operate in Brazil without the prior approval of the Brazilian Central Bank.Bank, In December 2017, the CMN enacted a new rule establishing that all such requests submitted to the Brazilian Central Bank must be approved within 12 months (subject to suspension of the term in some instances);

·●A Brazilian financial institution may not hold direct or indirect equity interests in any company located in Brazil or abroad registered as permanent assets without prior approval of the Brazilian Central Bank. The corporate purpose of such company shall be complementary or subsidiary to the activities carried out by the financial institution;

·●Brazilian financial institutions must submit for prior approval by the Brazilian Central Bank the corporate documents that govern their organization and operation, such as capital increases, transfer of headquarters, opening, transfer or closing of branches (whether in Brazil or abroad), election of the members of the statutory bodies and any corporate restructuring or alteration in the composition of their equity control. The requests for change ofchanges in control submitted to the Brazilian Central Bank must be approved within 12 months and requests for changes to organizational documents must be approved within three months (in both cases subject to suspension of the term in some instances);

·●Brazilian financial institutions must fulfill minimum capital and compulsory deposit requirements and must comply with certain operational limits;

·●A Brazilian financial institution may not own real estate, except for properties it occupies and subject to certain limitations imposed by the CMN. If a financial institution receives real estate, for example, in satisfaction of a debt, such property must be sold within one year, unless otherwise authorized by the Brazilian Central Bank;

·●Brazilian financial institutions must comply with the principles of selectivity, guarantee, liquidity and risk diversification;

·●A Brazilian financial institution belonging to the S1 segment, as is the case of Santander Brasil, cannot lend more than 25% of its Tier 1 Regulatory Capital (patrimônio de referência) to a single person or a group and the maximum exposure to concentrated individual clientscustomers or group of connected clientscustomers of such Segment 1 financial institution is 600% of its Tier 1 Regulatory Capital (a concentrated individual client would mean, for the purpose of the proposed rule, as any one client to which exposure is equal to or higher than 10% of its Tier 1 Regulatory Capital);

·●According to the Banking Reform Law, a Brazilian financial institution cannot carry out credit transactions with (i) its controlling shareholders, directors and members of other statutory bodies (fiscal, advisory and other) and their respective spouses and relatives up to second degree, (ii) with the individuals or legal entities that hold a qualified interest (15% of the capital stock) in their capital, (iii) with the legal entities in which they have qualified interest (direct or indirect), (iv) with the legal entities in which they have effective operational control or preponderance in the deliberations, regardless of the equity interest, and (v) with the legal entities with common directors or members of the board of directors. Such prohibition does not apply, subject to limits and conditions established by the CMN through the enactment ofResolution No. 4,693 in October 2018,, to: (i) transactions with a counterparty that has an officer or director in common with the financial institution providing credit, provided that the officer or director is considered an independent member in both entities; (ii) transactions carried out under market-compatible conditions, without additional benefits or different benefits when compared to the operations deferred to the institution to other customers with the same profile, (iii) credit operations that have as counterparty a financial institution that is part of the institution prudential conglomerate, provided that they contain contractual clauses of subordination, except in the case of overnight and loan transactions with other financial institutions specified by the law, (iv) the interbank deposits, according to the law, (v) the obligations assumed by related parties under the compensation and settlement services authorized by the Brazilian Central Bank or by the CVM and their respective counterparties, and (vi) other cases authorized by the CMN; the management of third-party assets must be segregated from other activities and must follow the regulations issued by the CVM;

75 

 95

Table of Contents

Table of Contents

or director in common with the financial institution providing credit, provided that the officer or director is considered an independent member in both entities; (ii) transactions carried out under market-compatible conditions, without additional benefits or different benefits when compared to the operations deferred to the institution to other customers with the same profile, (iii) credit operations that have as counterparty a financial institution that is part of the institution prudential conglomerate, provided that they contain contractual clauses of subordination, except in the case of overnight and loan transactions with other financial institutions specified by the law, (iv) the interbank deposits, according to the law, (v) the obligations assumed by related parties under the compensation and settlement services authorized by the Brazilian Central Bank or by the CVM and their respective counterparties, and (vi) other cases authorized by the CMN; the management of third-party assets must be segregated from other activities and must follow the regulations issued by the CVM.

·●The total amount of the funds applied in permanent assets of the financial institutions cannot exceed 50% of their adjusted stockholders’ equity;

·●Brazilian financial institutions must comply with anti-money laundering, combating the financing of terrorism and anti-corruption regulations;

·●Brazilian financial institutions must implement policies and internal procedures to control their systems of financial, operating and management of information, as well as their conformity to all applicable regulations;

·●Brazilian financial institutions must implement a policy for remuneration of board members and executive officers that is compatible with their risk management policies; and

·●The Banking Reform Law and specific regulations enacted by the CMN provide for the imposition ofimpose penalties on financial institutions in certain situations where applicable requirements, controls and requisites have not been observed. In addition, the Brazilian Central Bank may cancel the financial institution’s authorization to operate in certain situations. The cancellation of an authorization for operation of a financial institution may only occur upon the establishment and processing of the appropriate administrative proceeding by the Brazilian Central Bank.

Additionally, as part of the Santander Group and due to the global nature of our organization we are subject to related international rules.

Capital Adequacy and Leverage – Basel

Current Requirements

The Brazilian Central Bank supervises the Brazilian banking system in accordance with the Basel Committee on Banking Supervision, or “Basel Committee”Committee,” guidelines and other applicable regulations, including the Basel II Accord, or “Basel II”, which was recently implemented in Brazil, and the Basel III Accord, or “Basel III”, which supplements and amends Basel II and is in the process of being implemented.regulations. For this purpose, banks provide the Brazilian Central Bank with theany information necessary forwhich it to performdeems useful in performing its supervisory functions, which includeincludes supervising the changes in the solvency and the capital adequacy of banks.

The main principle that guides the directives set forth in the Basel II and Basel IIICommittee is that a bank’s own resources must cover its principal risks, including credit risk, market risk and operational risk.

Brazilian financial institutions are subject to capital measurement and standards based on a risk weighted asset ratio. The parameters of this methodology resemble the international framework for minimum capital measurements adopted by Basel II, except for certain differences (for instance, Basel II requires banks to have a capital to risk weighted assets ratio of at least 8.0%, while current Brazilian rules require minimum capital of 11.0% of risk weighted assets). Brazilian financial institutions’

76 

Table of Contents

Regulatory Capital is composed of two tiers. Tier I capital is represented by stockholders’ equity plus certain reserves, earned income and hybrid debt and capital instruments authorized by the Brazilian Central Bank. Tier II capital is represented by revaluation reserves, contingency reserves, special profit reserves related to mandatory dividends not yet distributed, preferred cumulative stock, certain subordinated debt and hybrid instruments and non-realized earnings related to available-for-sale securities market value adjustments.

III.

Basel III

On December 16, 2010, the Basel Committee issued theits Basel III framework, which supplementswas revised and amends Basel II.republished on June 1, 2011. The Basel III includes higherframework increases minimum capital requirements, andcreates new conservation and countercyclical buffer capital requirements, revisedbuffers, changes risk-based capital measures, and the introduction ofintroduces a new leverage ratiolimit and new liquidity standards in comparison to the former framework. The rules were phased in gradually and were fully implemented by January 1, 2019. Regulatory Capital is composed by Core Capital and two liquidity standards. As with other Basel directives, the Basel III framework will not be self-effectuating and will be implemented gradually by each country through legislation or regulation to be imposed upon that country’s home banks. Basel III is currently being implemented in Brazil and its implementation is expected to conclude on January 1, 2022, according to the agreed international time frame.

Regulatory Capital will continue to be composed of two tiers.

additional tiers:

Tier I capital will have to reach a minimum indexratio of 6.0% (according to the schedule established by the Brazilian Central Bank), divided into two portions: (i) PrincipalCore Capital consisting mainly of corporate capital and profit reserves (shares, units of ownership, reserves and earned income) of at least 4.5%, and (ii) Supplementary CapitalAdditional Tier I consisting mainly of perpetual hybrid securities and capital instruments authorized by the Brazilian Central Bank (but excluding amounts relating to funding instruments issued by other local or foreign financial institutions) and any of our own shares purchased by us and the integration of which into the SupplementaryAdditional Tier I Capital is permitted. To improve the quality of the capital of financial institutions, Basel III restricts the acceptance of financial instruments that fail to demonstrate effective capability of absorbing losses and requires the reduction of assets that in certain situations could jeopardize the financial institution’s capital value due to the instruments’ low liquidity, dependence on future profits for realization or difficulty of value measurement.

There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid instruments and subordinated debt approved by the Brazilian Central Bank as additional capital requirements, or Tier II, are expected to be maintained if they also comply with requirements introduced by Basel III, including the mandatory conversion clauses into equity or write-off upon the occurrence of triggering events provided for in the regulations. The instruments that do not comply with Basel III rules have been gradually reduced since January 1, 2013 and shall continue to be so reduced until they do not consist of any portion of our Regulatory Capital as from January 1, 2022.

 96
Table of Contents

In accordance with the Basel III standards, the Brazilian Central Bank created the Premium PrincipalAdditional Core Capital buffer (Adicional de Capital Principal), which correspondsis composed by the sum of three buffers:

●Core Capital Conservation buffer (Adicional de Capital Principal de Conservação), which was introduced to ensure that banks have an additional layer of usable capital that can be drawn down when losses are incurred. Whenever the buffer falls below 2.5%, automatic constraints on capital distribution (for example, dividends, share buybacks and discretionary bonus payments) will be imposed so that the buffer can be replenished. Countercyclical capital buffer (Adicional Contracíclico de Capital Principal), which aims to protect the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risks. The countercyclical capital buffer is fixed by the Financial Stability Committee (Comitê de Estabilidade Financeira) based on discussions about the pace of credit expansion, and currently is set zero (Brazilian Central Bank Communication No. 36,830/21). Should the requirement increase, the new percentage takes effect twelve months after the announcement,
●Core Capital Systemic buffer (Adicional de Importância Sistêmica de Capital Principal), which is applicable to the S1 bank segment (banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity).

On March 16, 2020, due to additional capitals (buffers) that create additional capital reserves to be used in periods of stress. In accordance with CMN regulation,the challenging macroeconomic environment resulting from the COVID-19 pandemic, the Brazilian Central Bank is entitled to establishissued Resolution No. 4,783 which establishes the percentage to be applied to the risk-weighted assets value for the purpose of calculating the Premium Principalcapital conservation buffer. This percentage increases gradually until April 2022, when it reaches 2.5%.

This level will phase-in towards the 2019 level by 2022, as shown in the image below. This buffer change decreased the minimum Core Capital within certain minimum and maximum limits previously set forth by the CMN, the final minimum and maximum limits being 2.5% and 5%, respectively, of the risk weighted asset ratio.

On December 29, 2014, the Brazilian Central Bank established that the amount of the Premium Principal Capital wasrequirements, reaching 6.75% to start at 0.625% of the risk weighted asset ratio10.5%, as of January 1, 2016, increasing to 1.25% on January 1, 2017, 1.875% on January 1, 2018 and 2.5% on January 1, 2019.December 31, 2021.

In 2015, the CMN and the Brazilian Central Bank enacted a set of rules which determined that the Premium Principal Capital will be equivalent to the sum of the Capital Conservation Buffer (Adicional de Conservação de Capital Principal), the Countercyclical Buffer (Adicional Contracíclico de Capital Principal), and the Systemic Relevance Premium Principal Capital (Adicional de Importância Sistêmica de Capital Principal). The regulation establishes the minimum requirements and methods to calculate each of them separately. The Conservation Buffer and the Countercyclical Buffer will compose the Premium Principal Capital of all financial institutions and institutions authorized to operate by the

77 

Table of Contents

Brazilian Central Bank (except for those expressly waived from complying with Regulatory Capital requirements). The Systemic Relevance Premium Principal Capital will only apply to multiple banks, commercial banks, investment banks and saving banks (caixas econômicas).

The Basel III minimum capital index increased from the former 11% to a maximum of 13% as from 2019. The total index will be calculated as the sum of two parts: the Regulatory Capital and the Premium Principal Capital.

The Basel III rules also provide for the implementation of a leverage ratio calculated by the division ofdividing the Tier I capital by athe bank’s total exposure. In early 2015, the Brazilian Central Bank issued a new regulation governing the calculation and reporting of the leverage ratio of Brazilian financial institutions in line with the Basel III rules, which became effective in October 2015. Financial institutions classified as segment 1 (S1), as is the case for Santander Brasil, or segment 2 (S2), for purposes of the application of prudential rules, are required to maintain a minimum RA of 3% as from January 1, 2018.

Additionally, in order to enable the implementation of the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No. 12,838, enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.

 97
Table of Contents

In 2015, the CMN and the Brazilian Central Bank also issued a set of rules for the implementation in Brazil of the liquidity coverage ratio or “LCR,” a short-term liquidity index. The purpose of the LCR is to demonstrate that financial institutions have sufficient liquid assets to make it through a stress scenario lasting one month. According to the recently enactedthese rules, the largest Brazilian banks have beenwere required to maintain an LCR of at least 60% since October 2015. This ratio will increaseincreased 10% annually until it reachesreached 100% in 2019. The Brazilian Central Bank also released, in 2015, the local methodology for calculating the LCR so as to align the existing rules with the guidelines of the document “Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools” issued by the Bank for International Settlements in January 2013. In January 2017, the Brazilian Central Bank enacted a new rule amending the calculation method and procedures for disclosure of LCR information. The new regulation establishes a new possible stress scenario and, for purposes of LCR retail, includes spot and forward deposits.

As mentioned above, the LCR is a short-term liquidity ratio for a 30-day stress scenario. It represents the resultratio of the division of the high qualityhigh-quality liquidity assets byto net outflows. High Quality Liquidity Assets are composed mainly byof Brazilian federal government bonds and reserve requirementsrequirement returns. Net Outflows are mainly composed byof losses ofon deposits, offset in part by Inflows, which are mainly credits. In the months ending on October 31, November 30 and December 31, 2017, Santander Brasil had a surplus (difference between net assets and net cash outflows) of R$14.6 billion, which resulted in an LCR of 123%, above the regulatory requirement of 80%.

In November 2017, the CMN established a minimum limit for the Net Stable Funding Ratio (Índice de Liquidez de Longo Prazo, or “NSFR”) and the Leverage Ratio (Razão de Alavancagem, or “RA”) with which Brazilian financial institutions are required to comply. The NSFR corresponds to the ratio between the Available Stable Funds (Recursos Estáveis Disponíveis, or “ASF”) and the Required Stable Funds (Recursos Estáveis Requeridos, or “RSF”) of the financial institution. The financial institutions classified as “segment 1” for purposes of the application of prudential rules, as we are, and must maintain, as from October 1, 2018, a minimum NSFR of 1.00. The RA consists ofRegarding the leverage ratio, between the sum of the principal capital and the supplementary capital divided by the total liabilities of the financial institution as determined pursuant to applicable regulation. The financial institutions classified as “segment 1,” as we are, or “segment 2” for purposes of the application of prudential rules are required to maintain a minimum RA of 3% as from January 1, 2018.

The following table presents an estimate of the implementation schedule of the main changes related to capital adequacy and leverage expected as a result of Basel III, as established by the Brazilian Central Bank:

Parameters 2014 2015 2016 2017 2018 2019 As from 2020
Common equity  4.5%  4.5%  4.5%  4.5%  4.5%  4.5%  4.5%
Tier I  5.5%  6.0%  6.0%  6.0%  6.0%  6.0%  6.0%
Regulatory Capital  11.0%  11.0%  9.9%  9.3%  8.6%  8.0%  8.0%
Capital conservation buffer  0.0%  0.0%  0.6%  1.3%  1.9%  2.5%  2.5%
Countercyclical bufferup to 0.6%up to 1.3%up to 1.9%up to 2.5%up to 2.5%up to 2.5%up to 2.5%

78 

Table of Contents

In addition, in order to enable the implementation of the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No 12,838 enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.

Systemically Important Financial Institutions

The assessment of the global systemic importance of financial institutions, or “IAISG” comprises the index of systemic importance, or “ISG” and the aggregate of ancillary indexes established by regulations issued by the Brazilian Central Bank, which take into account, among other things, amounts relating to certain current and long-term liabilities, deposits, financial transactions and revenues. The Brazilian Central Bank adopted the same components set out by the Basel Committee to calculate the ISG, including (i) size; (ii) interconnectedness; (iii) lack of readily available substitute or financial institution infrastructure for the services provided; (iv) global or cross-jurisdictional activity; and (v) complexity, with each of these components receiving an equal weight in the assessment.

This assessment should be carried out by banks with total exposure in excess of R$500 billion, individually or at the consolidated enterprise level (conglomerado prudencial), as the case may be. Our controlling shareholder Santander Spain is considered a global systemically important financial institution in accordance with the Basel Committee rules. In Brazil, we are considered a systemically important financial institution pursuant to regulations issued by the Brazilian Central Bank.

Other Applicable Laws and Regulations

Consolidated Enterprise Level (conglomerado prudencial)

Financial institutions must submit to the Brazilian Central Bank, monthly and semiannually, consolidated financial statements based on the “consolidated enterprise level” (conglomerado prudencial)(conglomerado prudencial) of which the financial institution is a member, which servemember. Such information serves as the basis for calculation of the required Regulatory Capital of the Brazilian institutions. The “consolidated enterprise level” includes data relative to the financial institutions and other institutions authorized to operate by the Brazilian Central Bank, consortium administrators, of consortia, payment institutions and credit factoring companies, including real estate credit, or of credit rights, such as mercantile foment companies, securitization companies and specific purpose companies, located in Brazil or abroad, as well as other legal entities headquartered in Brazil that have equity participation in the mentioned entities as their exclusive business purpose.

On January 29, 2020, the CMN published Resolution No. 4,776,4,818, which requires financial institutions categorized as S1, S2 and S3 to publish IFRS financial statements. The requirement is already in force for publicly held financial institutions and financial institutions which are leaders of a prudential conglomerate and will comecame into effect for all remaining financial institutions on January 1, 2022.

New accounting criteria applicable to financial instruments, hedging and leasing agreements

On November 25, 2021 and December 16, 2021, the CMN issued Resolution No. 4,966/2021 and Resolution No. 4,975/2021. These rules establish, respectively, new accounting principles and criteria applicable to financial instruments, as well as to hedging and financial leasing transactions contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank.

The rules intend to align the accounting criteria applicable to financial instruments and leasing agreements contracted by financial institutions and other entities supervised by the Brazilian Central Bank with best international practices, including the “IFRS 9 – Financial Instruments” and “IFRS 16 – Leases” standards issued by the IASB.

 98
Table of Contents

CMN Resolution No. 4,966/2021 and Resolution No. 4,975/2021 will enter into effect on January 1, 2025, ensuring a transition period for the institutions subject to the changes.

 

Segmentation for the Proportional Application of Prudential Regulation

In January 2017, the CMN enacted a resolution establishing segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for the purposes of proportional application of the prudential regulation. The segmentation is based on the size, international activity and risk profile of members of each segment. Pursuant to the resolution, the segments are as follows:

(i)       Segment 1 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base equivalent or superior to 10% of Brazil’s GDP;

79 

Table of Contents

or (b) which perform relevant international activities, irrespective of the size of the institution;

(ii)       Segment 2 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base lower than 10% of Brazil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brazil’s GDP;

(iii)       Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brazil’s GDP;

(iv)       Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and

(v)        Segment 5 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP that applies a simplified optional method for the verification of reference equity’s minimum requirements, except for multiservice banks, commercial banks, investment banks, foreign exchange banks and savings bank.

●Segment 1 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base equivalent or superior to 10% of Brazil’s GDP; or (b) which perform relevant international activities, irrespective of the size of the institution;
●Segment 2 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base lower than 10% of Brazil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brazil’s GDP;
●Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brazil’s GDP;
●Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and
●Segment 5 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP, that apply a simplified optional method for verifying the regulatory capital’s minimum requirements, except for multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks.

We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.

Regulation of Risk and Capital Management Structure

The rules enacted by the CMN and the Brazilian Central Bank provide that risk management must be conducted through an integrated effort by the relevant entity (i.e., not only must risks be analyzed on an individual basis, but must also control and mitigate the adverse effects caused by the interaction between different risks). The rules set out different structures for risk and capital management, which are applicable for different risk profiles. This means that a financial institution of limited systemic importance can have a simplified structure of management, while institutions of larger complexity have to follow stricter protocols.

Compulsory Reserve Requirements

Currently, the Brazilian Central Bank imposes a series of compulsory reserves requirements. Financial institutions must deposit these reserves with the Brazilian Central Bank. The Brazilian Central Bank uses these reserve requirements as a mechanism to control the liquidity of the Brazilian financial system for both monetary policy and risk mitigation purposes. Reserves imposed on time deposits, demand deposits and saving accounts represent almost the entirety of the amount that must be deposited at the Brazilian Central Bank.

●Time Deposits (CDBs), The Brazilian Central Bank imposes a reserve requirement of 20% in relation to time deposits. Financial institutions must deposit an amount equivalent to the surplus of (i) R$3.6 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2.4 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1.2 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with a Regulatory Capital greater than R$15 billion.

·Time Deposits (CDBs). TheAdditionally, as from the issuing of Brazilian Central Bank imposes a reserve requirement of 31% in relation to time deposits. Financial institutions mustResolution No. 145 on September 24, 2021, collateral deposit an amount equivalent tofor the surplus of (i) R$3.6 billionnew funding mechanism for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2.4 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1.2 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with a Regulatory Capital greater than R$15 billion.

Additionally, since Brazilian Central Bank Circular No. 3,943(called Linhas Financeiras de Liquidez) can be used to deduct up to three percentage points of May 23, 2019 was enacted, interbank deposits made by leasing companies are excluded from the assessment basethis type of the compulsory reserve requirement for time deposits of financial institutions of the same conglomerate.requirements.

·Demand Deposits. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits.

·Savings Deposits. The Brazilian Central Bank imposes a reserve requirement of 20% in relation to general savings deposits and to rural savings deposits.

●Demand Deposits. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits.
 99
Table of Contents
●Savings Deposits. The Brazilian Central Bank imposes a reserve requirement of 20% in relation to general savings deposits and to rural savings deposits.

Asset Composition Requirements

Permanent assets (defined as property and equipment other than commercial leasing operations,

80 

Table of Contents

unconsolidated investments and deferred charges) of Brazilian financial institutions may not exceed 50% of their adjusted net equity, calculated in accordance with the criteria established by the Brazilian Central Bank.

Brazilian financial institutions, as a general rule, may not have more than 25% of their Tier 1 Regulatory Capital allocated to credit and leasing transactions and guarantees extended to the same customer or group of customers acting jointly or representing the same economic interest. In addition, Brazilian financial institutions must comply with an exposure limit of 25% of their Regulatory Capital in connection with underwriting for or investments in securities of the same entity, its affiliates, or controlled or controlling companies. Repurchase transactions executed in Brazil are subject to operational capital limits based on the financial institution’s Regulatory Capital, as adjusted in accordance with Brazilian Central Bank regulations. A financial institution may carry out repurchase transactions in an amount of up to 30 times its Regulatory Capital. Within that limit, repurchase transactions involving private securities may not exceed five times the Regulatory Capital. Limits on repurchase transactions involving securities backed by Brazilian governmental authorities vary in accordance with the type of security involved in the transaction and the perceived risk of the issuer as determined by the Brazilian Central Bank.

The regulation issued by the Brazilian Central Bank with respect to the classification and valuation of securities and derivative financial instruments —- including government securities —- owned by financial institutions, based on the investment strategy of the financial institution, determined that securities and derivatives are to be classified into three categories: (i) trading; (ii) available for sale; and (iii) held to maturity.

“Trading” and “available for sale” securities are to be marked-to-market with effects in income and stockholders’ equity, respectively. Securities classified as “held to maturity” are recorded at amortized cost.cost, Derivatives are marked-to-market and recorded as assets and liabilities in the balance sheet. Changes in the market value of derivatives are generally recognized in income with certain modifications, if these are designated as hedges and qualify for hedge accounting under the regulations issued by the Brazilian Central Bank. Securities and derivatives in the “held to maturity” portfolio may be hedged for accounting purposes but their increase or decrease in value as derived from the marked-to-market accounting method should not be taken into account.

On June 31, 2018, the CMN enacted a rule providing that financial institutions categorized as “Segment 1” as per the Brazilian Central Bank’s classification system established in 2017 (which is our case) (1) may not have more than 25.0% of their Regulatory Capital allocated to a single legal or natural person, and (2) that the total exposure of such financial institutions to one individual customer may not exceed 600% of their Regulatory Capital allocated to focused exposure, that is 10% of their Regulatory Capital – Tier 1. The rule also subjects financial institutions categorized as segment 2, segment 3 or segment 4 to less restrictive rules.

Centralized Registration and Deposit of Financial Assets and Securities

Law No. 13,476/17 consolidates the provisions on creation of liens over financial assets and securities.securities, CMN RuleResolution No. 4,593/2017, as amended, regulates the registration and deposit of financial instruments and securities by financial institutions as well as the provision of custody services by such institutions.

Resolution 4,734/19 sets out the guidelines applicable to the establishment of liens and encumbrances on credit and debit payment instruments due to credit operations with financial institutions andregulatescredit operations guaranteed by receivables from payment arrangements. The amount of receivables perfected into guarantees for a certain credit transaction will be reduced, whenever applicable, so that they are limited to the outstanding balance of the transaction or to the maximum limit extended, in the case of an extension of a non-dischargeable credit facility by a financial institution on an absolute and unilateral basis.

Circular 3,952/19, deals in particular with the procedures for the registration of receivables, and

81 

Table of Contents

requires a convention between market infrastructures to guarantee the uniqueness of the receivables as financial assets that can be registered, interoperability, exchange of information between registration systems and participants in the structure. Circular 3,952/19 came into effect on June 7, 2021.

 100
Table of Contents

Brazilian Payment and Settlement System

The rules for the settlement of payments in Brazil are based on the guidelines adopted by the Bank of International Settlements, or “BIS,” and the current Brazilian Payment and Settlement System (Sistema(Sistema de Pagamentos Brasileiroor the “SPB”). The Brazilian Central Bank and CVM (in relation to transactions with securities) have the power to regulate and supervise this system.system, SPB is composed of systems for the clearing of checks, clearing and settlement of debit and credit electronic orders, transfer of funds and other financial assets, clearing and settlement of transactions involving securities, clearing and settlement of transactions carried out in commodities and futures, and others, collectively designated as Financial Market Infrastructures, as well as the payment arrangements and payment institutions.

Within the scope of SPB, the Brazilian Central Bank operates the Reserves Transfer System, or “STR”“STR,” and the SELIC. STR is a system of transfer of funds with real-time gross settlement, which means that transfers are made at the processing time, one by one, and are subject to the existence of outstanding balance in the account. STR is composed of financial institutions, clearing and settlement houses and the National Treasury Office. SELIC is the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.

Instant Payment System

The Brazilian Central Bank also plans to implementimplemented an instant payment ecosystem byin November 2020, and is taking steps to launch the ecosystem before the scheduled implementation date, such as studying and testing available technologies, establishing parameters and participants of the system.2020. The settlement of the system will beis centralized at the Brazilian Central Bank. In addition to increasing the speed at which payments or transfers are made and received, available 24 hours a day, seven days a week in all days of the year, the ecosystem has the potential to increase market competitiveness and efficiency; lower costs; and enhance customer experience.

On February 18,June 12, 2020, the Brazilian Central Bank publishedissued Circular No. 3,985,4,027/20, which sets out implementation procedures and participation criteria forestablished the Brazilian Instant PaymentsPayment System (Sistema de Pagamentos Instantâneos, or “SPI”). Circular 4,027/20 also approved the regulation with which the direct and indirect participants in the SPI must comply, and provided that the SPI started operating on November 3, 2020 with certain features and becoming available gradually until it was fully operational on November 16, 2020. Brazilian Central Bank Normative Ruling No. 47/20 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 129/21, in turn, establishes the procedures for the adherence to the instant payment arrangement (PIX).

According to the by-laws of the SPI, the participation in the SPI is mandatory for the participants of the PIX arrangement, and optional for (i) the clearing houses and other providers of clearing services, and (ii) the National Treasury Department.

There are two types of participation in the SPI: (i) direct, in which the participant holds an instant payment account and is directly connected to the SPI; and (ii) indirect, in which the participant institution does not hold an instant payment account and its participation occurs via a direct participant to the SPI, responsible for registering the indirect participant in the SPI and to act as its clearing agent in the SPI for instant payments, Circular 4,027/20 came into effect on July 1, 2020.

On August 12, 2020, the Brazilian Central Bank’s instant payments arrangement. The rule determines that allBank issued Central Bank Resolution No. 1, or “Central Bank Resolution 1/2020,” establishing the PIX System payment arrangement and approving the regulation governing it, or (the “PIX Regulation”).

Pursuant to Central Bank Resolution 1/2020, participation in the PIX System is mandatory for financial institutions and payment institutions with a licenseauthorized to operate granted by the Brazilian Central Bank and whichthat have more than 500,000 active clientcustomer accounts, (including checking,considering cash deposit accounts, savings deposit accounts and prepaid payment accounts. Participation in the PIX System is optional for financial institutions and payment accounts) will mandatorilyinstitutions that do not meet this threshold, as well as for the National Treasury Secretariat.

The PIX Regulation applies to all PIX System participants. According to the PIX Regulation, there are three types of participation: (i) transactional account provider, which is a financial institution or a payment institution that offers deposit accounts or payment accounts to end users; (ii) government entity, which is the National Treasury Secretariat, with the exclusive purpose of making collections and payments related to its activities; and (iii) special clearing houses, that are the financial institutions and payment institutions that (a) within the scope of the PIX System, have the exclusive purpose of providing settlement services to other participants, (b) meet the requirements to act as settlement participant in the Brazilian Central Bank’s SPI, and (c) do not meet the criteria of mandatory participation in the PIX System.

 101
Table of Contents

Brazilian Central Bank Resolution 1/2020 came into effect on September 1, 2020. PIX System transactions started operating on a restricted basis through to November 3, 2020 and was fully as of November 16, 2020.

Furthermore, on September 2, 2021, the Brazilian Central Bank issued Resolutions No. 135 and 136, which regulate the offering of the PIX Withdrawal and PIX Change services by regulated institutions that participate in the SPI and in the Central Banks instant payments arrangement. Circular No. 3,985 will enterBrazilian Instant Payments System. Both rules came into effect on March 2, 2020.November 1, 2021. The new services were established by the Brazilian Central Bank on August 24, 2021, in a meeting of its Collegiate Board, which approved changes to the PIX Regulations.

PIX Withdrawal will allow all the clients of any participating institution to make a withdrawal in kind at one of the points that offer the service. Merchants, shared ATM networks and PIX participants, through their own ATMs, may offer the service. In order to withdraw funds in kind through PIX, the client simply executes a PIX transaction to the withdrawal agent, in a similar dynamic to a normal PIX transaction, by reading a QR Code or through the service provider's API.

With the PIX Change, the dynamic is almost identical. The difference is that the withdrawal of cash can be carried out during a purchase transaction with a merchant that offers PIX as a mean of payment. In this case, the PIX transaction is executed for the total amount (purchase + cash withdrawal). The customer's invoice will show the amount corresponding to the cash withdrawal and the purchase amount.

The offer of the two new products on PIX’s evolving agenda to users is optional, and the final decision to implement PIX Withdrawal and PIX Change is up to the merchants that accept PIX, the companies that own ATM networks, and the financial institutions that have their own ATMs.

Further, on September 23, 2021, the Brazilian Central Bank issued Resolution No. 142, introducing security measures to be adopted by institutions under its regulation and supervision to prevent frauds in the provision of payment services.

Resolution No. 142 establishes that financial and payment institutions must limit the provision of payment services for the period from 8 p.m. to 6 a.m. to a maximum of R$1,000 per deposit or prepaid payment account, as applicable. This limit may be increased at the client's request, which must be submitted formally through the relevant electronic service channels, but the institution must establish a minimum period of 24 hours for the change to take effect. Resolution No. 142 required payment service providers to implement the new transaction limit by October 4, 2021.

Pursuant to Resolution No. 142, financial and payment institutions must also implement, by November 16, 2021: (i) procedures aimed at evaluating the customer prior to offering the anticipation of the settlement of payment receivables on the same date of the execution of a payment transaction within the scope of payment schemes in which the institutions participate; and (ii) daily registration of the occurrence of fraud or attempted fraud in the rendering of payment services, including the corrective measures adopted by the institution. Based on these records, the institutions must prepare a monthly report consolidating the occurrences and the preventive and corrective measures adopted. This report must be forwarded to the institution audit and risk committees (if instituted), internal audit unit, Executive Board and Board of Directors (if instituted).

Furthermore, on September 28, 2021, the Brazilian Central Bank issued Resolution No. 147, which established security mechanisms specific to PIX transactions. The rule also details, within the scope of PIX, the measures established by Resolution No. 142, which applies to all electronic payment methods (including other types of electronic transfers available in Brazil, such as Transferência Eletrônica Disponível – TED or Documento de Ordem de Crédito – DOC). The security measures came into effect on November 16, 2021, with the exception of the new transaction limits, which came into effect on October 4, 2021.

Open Banking Regulation in Brazil

On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open banking. Open banking consists of the sharing of data and payment initiation services and forwarding credit transaction proposals, by financial institutions and other authorized entities (with customers permission) and the integration of information systems.

 102
Table of Contents

Among other topics, the resolution sets forth the mandatory and voluntary participating institutions, the data and services covered, the requirements for sharing, the responsibilities for sharing, the implementation schedule and the form of agreement to be entered into by the participating institutions.

According to the resolution, financial institutions and prudential conglomerates belonging to the S1 and S2 segments, as is our case, are required to participate in open banking.

Open banking has a four-stage implementation plan, as follows:

●Stage 1 (completed on February 1, 2021): public access to participating institutions’ data on their access channels and product/service channels related to checking, savings, prepaid payment accounts and to lending transactions.
●Stage 2 (completed on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
●Stage 3 (completed October 29, 2021): start of PIX transactions by payment transaction initiators, as well as the gradual entry of other payment arrangements.
●Stage 4 (starting on December 15, 2021): sharing of customer transactional data related to additional products, pursuant to the following deadlines: (i) insurance, open-end private pension and capitalization products: until March 4, 2022; (ii) merchant acquiring services: until March 11, 2022; (iii) foreign exchange transactions: until March 18, 2022; and (iv) time deposit accounts and other investment products: until March 25, 2022.

On October 29, 2020, the Brazilian Central Bank issued Central Bank Resolution 32/2020, which sets forth the technical and operational requirements to be observed by institutions which participate in the Brazilian Open Banking System.

The new rule lays out, among others, rules relating to (i) the scope of the data and services to be shared by participating institutions within Open Banking, detailed in a specific manual; (ii) the standards for the development of application programming interfaces (APIs) by participating institutions, detailed in a specific manual, which deals with their design, data transmission protocols, data exchange formats, control accesses, version control systems and specification parameters; among other things; (iii) criteria for registration and cancellation of registration in Open Banking; (iv) services to be rendered by the Open Banking Governance Structure, which also is detailed in a specific manual, including the maintenance of a repository of participating institutions and a website containing updated information about Open Banking and its implementation; and (v) minimal security standards and certifications.

Additionally, on September 9, 2021, the Brazilian Central Bank published Resolution No. 138, which disclosed the minimum scope of data to be available for sharing on Stage 4 of Open Banking, to be further detailed by the Open Banking Governance Body. The fourth stage of the ecosystem, which covers data on foreign exchange, investment, insurance, and open-end private pension transactions, as well as merchant acquiring services, began on December 15, 2021, when the participating institutions must make the information about the mentioned products and services available to other financial institutions.

Regarding investment transactions, the main financial and capital market products offered in Brazil were included in the scope of Stage 4, such as: (i) Banking Time Deposit Certificates (Certificados de Depósito Bancário or CDBs); (ii) Banking Time Deposit Receipts (Recibos de Depósito Bancário or RDBs); (iii) Real Estate Credit Bills (Letras de Crédito Imobiliário or LCIs); (iv) Agribusiness Credit Bills (Letras de Crédito do Agronegócio or LCAs); (v) investment fund quotas; (vi) direct treasury government bonds (títulos do tesouro direto); (vii) stock; (viii) quotas of exchange-traded investment funds (ETFs); (ix) debentures; (x) Certificates of Real Estate Receivables (Certificados de Recebíveis Imobiliários or CRIs); and (xi) Certificates of Agribusiness Receivables (Certificados de Recebíveis do Agronegócio or CRAs).

With regard to foreign exchange transactions, effective total value of transactions (VET) and commercial exchange rates will need to be made available. The data referring to merchant acquiring services will cover applied service fees and rates.

 103
Table of Contents

Finally, the data referring to insurance products and pension plans will follow the scope defined by the CNSP and the SUSEP in CNSP Resolution No. 415/2021 and SUSEP Circular No. 635/2021, respectively, which establish a specific timeline for the implementation of Open Insurance, an exclusive governance body responsible for Open Insurance, as well as specific implementation manuals.

Stage 4 of Open Banking introduced information sharing beyond traditional banking products and services, marking the beginning of the migration from Open Banking to Open Finance in Brazil.

Regulatory Sandbox

On November 28, 2019, the Brazilian Central Bank published Public Consultation No. 72/2019, which ended on January 31, 2020, regarding the Controlled Testing Environment for Financial Innovations or “Sandbox” which is intended to enable institutions test innovative financial and payment projects for a specified period.

After receiving comments on such Public Consultation, the CMN and the Brazilian Central Bank issued, on November 26, 2020, CMN Resolution 4,865/20 and BCB Resolution 29/20, to regulate the Sandbox. These rules set forth the applicable conditions for the implementation of the Sandbox, among which are the specific rules for the first cycle of tests, such as duration and number of participants, required documentation, criteria for the classification of institutions and the schedule for registration, selection and authorization processes of such entities. In November 2021, the Brazilian Central Bank selected developers’ projects for the first cycle, which will last for one year and may be extended for another year.

Treatment of Overdue Debts

The Brazilian Central Bank requires financial institutions to classify credit transactions in accordance with their level of credit risk and to make provisions according to the level attributed to each transaction. Such credit classifications shall be determined in accordance with criteria set forth from time to time by the Brazilian Central Bank, relating to the conditions of the debtor and the guarantor and the transaction terms. Where there are several credit transactions involving the same customer, economic group or group of companies, the credit risk must be determined by analyzing the particular credit transaction of such customer or group that represents the greatest credit risk to the financial institution.

Credit transactions of up to R$50,000 may be classified either by the financial institution’s own evaluation method or according to the number of days such transaction is past due, whichever is the more stringent. Credit classifications are required to be reviewed (i) monthly, in the event of a delay in the payment of any installment of principal or interest, in accordance with the maximum risk classifications; (ii) every six months, in the case of transactions involving the same customer, economic group or group of companies, the amount of which exceeds 5% of the adjusted net worth of the financial

82 

Table of Contents

institution in question; and (iii) once every 12 months, in all circumstances, except in the case of credit transactions with a customer whose total liability is lower than R$50,000, the classification of which may be reviewed as provided above. Such R$50,000 limit may be amended by the Brazilian Central Bank from time to time.

The provisions set forth above are not applicable to our IFRS consolidated financial statements, which are based on the criteria described under “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment Losses on Financial Assets.”

Regulation of the Transfer of Customer Data by Financial Institutions to Database Managers

Brazilian law regulates the formation and consultation of databases with information regarding performance, individuals or legal entities, for the formation of credit history.history, Resolution No. 4,737 determines that the history of the following operations should be provided: (i) credit operations; (ii) leasing operations; (iii) self-financing operations executed upon consortium groups; and (iv) other operations with characteristics of credit granting; and defines the criteria for the registration of database managers, such as the identification of the natural and legal persons that are part of the control group of the database manager.

Collection of Bank Fees

Bank services to individuals are divided into the following four groups: (i) essential services; (ii) priority services; (iii) special services; and (iv) specific or differentiated services.

Banks are not able to collect fees in exchange for supplying essential services to individuals with regard to checking accounts, such as (i) supplying a debit card; (ii) supplying 10 checks per month to account holders who meet the requirements to use checks, as per the applicable rules; (iii) supplying a second debit card (except in cases of loss, theft, damage and other reasons not caused by the bank); (iv) up to four withdrawals per month, which can be made at a branch of the bank, using checks or in ATM terminals; (v) supplying up to two statements describing the transactions during the month, to be obtained through ATM terminals; (vi) inquiries over the Internet;internet; (vii) up to two transfers of funds between accounts held by the same bank, per month, at a branch, through ATM terminals or over the Internet;internet; (viii) clearing checks; and (ix) supplying a consolidated statement describing, on a month-by-month basis, the fees charged over the preceding year with regard to checking accounts and savings accounts.

 104
Table of Contents

Certain services rendered to individuals with regard to savings accounts also fall under the category of essential services and therefore are exempt from the payment of fees. CMN prohibits banks from charging fees for supplying essential services in connection with deposit and savings accounts where customers agree to access and use their accounts by electronic means only (being authorized to charge fees for supplying essential services only when the customer voluntarily elects to obtain personal service at the banks’ branches or customer service locations).

,

Priority services are those rendered to individuals with regard to checking accounts, transfers of funds, credit transactions, leasing, standard credit cards, over-the-counter exchange transactions for the purchase or sale of foreign currency in respect of international travel, and records, and are subject to the collection of fees by the financial institutions only if the service and its nomenclature are listed in its regulations. Commercial banks must also offer to their individual customers a “standardized package” of priority services, whose content is defined, as well as the customers’ option to acquire individual services instead of adhering to the package.

The collection of fees in exchange for the supply of special services (including, among others, services relating to rural credit, currency exchange market and onlendingon lending of funds from the real estate financial system) is governed by the specific provisions found in the laws and regulations relating to such services. The regulation authorizes financial institutions to charge fees for the performance of specific services, provided either that the account holder or user is informed of the conditions for use

83 

Table of Contents

and payment or that the fee and charging method are defined in the contract.

It is worth pointing out: (i) the prohibition against charging fees in cases of adhesion contract amendments, except in the cases of asset replacement in leasing transactions, early liquidation or amortization, cancellation or termination; (ii) the prohibition against including services related to credit cards and other services not subject to fees in service packages that include priority, special and/or differentiated services; (iii) the requirement that subscription to service packages must be through a separate contract; (iv) the requirement that information given to the customer with respect to a service package must include the value of each service included in the package, the number of times that each service may be utilized per month, and the total price of the package; (v) the requirement that a customer’s annual banking statement must separately identify default interest, penalties and other costs charged on loans and leasing transactions; (vi) the requirement that registration fees cannot be cumulatively charged; and (vii) the requirement that overdraft fees can be charged, at most, once over the course of 30 days.

In addition, CMN regulations establish that all debits related to the collection of fees must be charged to a bank account only if there are sufficient funds to cover such debits in such account and thus forbid overdrafts caused by the collection of banking fees. Furthermore, a minimum of 30 days’ notice must precede any increase or creation of fees (except if related to credit card services, when a minimum of 45 days’ notice is required), while fees related to priority services and the “standardized package” can be increased only after 180 days from the date of the last increase (except if related to credit card services, when a minimum of 365 days’ notice is required) whereas reductions can take place at any time.

Late Payment Fees

The default payment fees charged by financial institutions, consumer credit companies (financeiras), and leasing companies are expressly limited to compensatory interest per day on the amount that is overdue, interest on arrears and fines on arrears.

Credit Cards

The banking regulations also have specific rules relative to the charging of credit card fees, the publication of information in the card invoices and the obligation to provide a package of basic services upon offering credit cards to customers. Credit card holders must pay monthly at least 15% of outstanding credit card balances. This minimum payment does not apply to credit cards with payment by means of direct payroll deductions.

 105
Table of Contents

Revolving credit for financings of credit card bills may only be extended to customers until the due date of the following credit card bill. After this term, financial institutions offer customers another product with conditions more favorable than the ones typically found in the credit card market. Banks are prohibited from offering this type of credit to customers who have already contracted one revolving credit for financing of credit card bills which were not repaid in a timely manner.

Payment Agents and Payment Arrangements

The regulation issued by the Brazilian Central Bank, determines, among other aspects: (i) consumer protection, anti-money laundering compliance and risk prevention systems that should be observed by payment agents and payment arrangers; (ii) the procedures for incorporation, organization, authorization and operation of payment agents, as well as transfer of shareholding control, subject to the Brazilian Central Bank’s prior approval; (iii) capital requirements; (iv) definition of arrangements excluded from the SPB; and (v) rules related to payment accounts, which are divided into prepaid and postpaid accounts and require the allocation of the totality of their balance to a special account at the Brazilian Central Bank or investment in government bonds.

84 

Table of Contents

Portability of Credit Transactions

Financial institutions’ customers can transfer their credit transactions from one institution to another. Such transfers must comply with the specific rules established by the Brazilian Central Bank, including, among others, the requirement that the amount and term of the transaction in the receiving financial institution must not be higher than the amount due and term of the original transaction.

Digitalization of Documents and Record Keeping

Financial institutions and other institutions authorized to operate by the Brazilian Central Bank may keep onin their records digital documents instead of physical documents, provided that certain requirements to ensure the documents’ authenticity and validity are met.

Anti-Money Laundering Regulations

Under the Brazilian Anti-Money Laundering Law, it is a crime to conceal or dissimulate the nature, origin, location, availability, transaction or ownership of assets, rights or amounts resulting, directly or indirectly, from any criminal offense, as well as their use in economic or financial activity and to participate in a group, association or office while being aware that its principal or secondary activities are directed toward the practice of such acts.

The Brazilian Anti-Money Laundering Law also created the Financial Intelligence UnitActivities Control Council (UnidadeConselho de InteligênciaControle de Atividades Financeiras or “UIF”“COAF”), which operates under the jurisdiction of the Ministry of Finance. The purpose of the UIFCOAF is to investigate, examine, identify and impose administrative sanctions in respect of any suspicious occurrences of illicit activities related to money laundering in Brazil.

The UIFCOAF is composed of individuals with recognized competence in this area, appointed by the Minister of Finance, all of whom are nominated by each of the following entities: (i) the Brazilian Central Bank; (ii) the CVM; (iii) the SUSEP; (iv) the NationalBrazilian Treasury Attorney-General’s Office; (v) the Brazilian Federal Revenue; (vi) the Federal Intelligence Agency; (vii) the Ministry of Foreign Affairs; (viii) the Ministry of Justice; (ix) the Federal Police Department; (x) the Ministry of Social Security; and (xi) the General Comptroller’s Office, one of whom will be the president, which shall be appointed by the President of Brazil on the basis of recommendations by the Minister of Finance.

Financial institutions must maintain specific records of (i) the transactions in cash (deposit, withdrawal, withdrawal by means of a prepaid card or request of provision for withdrawal) so as to enable the identification of a deposit in cash, withdrawal in cash, withdrawal in cash by means of a prepaid card, or request of provision for withdrawal, of (a) an amount equal to or greater than R$100,000.00 or (b) that presents evidence of concealment or dissimulation of the nature, of the origin, of the location, of the disposal, of the movement or of the ownership of assets, rights and valuables; and (ii) the issuances of cashier’s checks, funds electronic transfers (TED) or of any other instrument of transfer of funds upon payment in cash, for an amount equal to or greater than R$100,000.00.

Financial institutions must maintain records of all operations, products and services contracted, including withdrawals, deposits, contributions, payments, receipts and transfers of funds. Additionally, the institutions must also keep specific records of (i) transactions in cash with an individual value greater than R$2,000.00; (ii) deposit or cash transactions of an individual value equal to or greater than R$50,000.00; and (iii) withdrawal transactions, including those carried out by check or money order, with an individual value equal to or greater than R$50,000.00.

 106
Table of Contents

The regulations also impose an obligation on financial institutions to request that both clientscustomers and non-clients anon-customers are providing a withdrawal request at least three working days in advance for withdrawals (including those carried out by check or money order) in an amount equal to or greater than R$50,000.00.

On January 23, 2020, the Brazilian Central Bank published Circular No. 3,978, which improves

85 

Table of Contents

the regulation applicable to financial institutions, by expanding the adoption of a risk-based approach and will entercame into effect on July 1, 2020. Regulated institutions must carry out specific internal risk assessments in order to identify and measure the risk of using their products and services in the practice of money laundering and terrorist funding.

In connection with the aforementioned change, the Know-Your-Client procedures were also improved and includesinclude the identification, qualification and classification of the customer, compatible with the risk profile, the nature of the relationship with the AML policy and the institution'sinstitution’s internal risk assessment, which must be permanently reassessed, according to the evolution of the business relationship and the risk profile of the client. The procedures must also include the verification of the client's (their representatives,client’s (including their representatives’, family membersmembers’ or close collaborators) condition as a Politically Exposed Individual, as well as consider them in the monitoring, selection and analysis of operations and situations with indications of suspected money laundering or terrorist funding.

On July 27, 2021, the Brazilian Central Bank published Resolution No. 119, which came into effect on September 1, 2021 and introduced certain changes to Circular No. 3,978/2020, which establishes the regulations and procedures related to anti-money laundering and combating the financing of terrorism applicable to entities subject to the Brazilian Central Bank´s regulation and supervision.

On December 5, 2019,Among other changes brought by the new rule, financial institutions (and other entities regulated by the Brazilian Central Bank) are now required to obtain information about their customers’ place of residence, in the case of a natural person, or the location of the head office or branch, in the case of a legal entity, as part of their mandatory Know-Your-Client (KYC) procedure. The CVM also issued CVM InstructionResolution No. 617,50 in August 31, 2021, which establishes a newthe framework for the prevention of money laundering and the financing of terrorism in the Brazilian securities market. CVM InstructionResolution No. 61750 is in line with the practices currently implemented in the principal global securities markets, including with regard to the recommendations of the Financial Action Group against Money Laundering and the Financing of Terrorism (GAFI/FATF), as well as with the duties arising from Brazilian anti-money laundering laws.

Brazilian Anti-Corruption Law

Law No. 12,846/13 of August 1, 2013, or the “Brazilian Anti-Corruption Law” establishes that legal entities will have strict liability regardless of fault or willful misconduct for acts against the public administration carried out in their interest or for their benefit. The Law encompasses not only performance of acts of corruption but also performance of other injurious acts contrary to the Brazilian or foreign public administration.

Corporations that violate the Brazilian Anti-Corruption Law’s provisions will be subject to heavy penalties, some of which may be imposed through administrative proceedings and others solely through judicial channels. The Brazilian Anti-Corruption Law also creates a leniency program under which self-disclosure of violations and cooperation by corporations might result in the reduction of fines and other sanctions.

Politically Exposed Individuals

Financial institutions and other institutions authorized by the Brazilian Central Bank to operate must take certain actions and have certain controls in order to establish business relationships with and to follow up on the financial transactions of customers who are deemed to be politically exposed individuals (public agents and their immediate family members, spouses, life partners and stepchildren who occupy or have occupied a relevant public office or position over the past five years in Brazil or other countries, territories and foreign jurisdictions). The internal procedures developed and implemented for this purpose by financial institutions must be structured in such a way as to enable the identification of politically exposed individuals, as well as the origin of the funds involved in the transactions of such customers. One option is to verify the compatibility between the customer’s transactions and the net worth stated in such customer’s file.

 107
Table of Contents

Bank Secrecy

Brazilian financial and payment institutions shall also maintain the secrecy of their banking operations and services provided to their customers. The only circumstances in which information about customers, services or transactions of Brazilian financial and payment institutions may be disclosed to third parties are the following:

·●the disclosure of information with the express consent of the interested parties;

86 

Table of Contents

·●the exchange of information between financial institutions for record purposes;

·●the supplying to credit reference agencies of information based on data from the records of issuers of bank checks drawn on accounts without sufficient funds and defaulting debtors; and

·●the occurrence or suspicion that criminal or administrative illegal acts have been performed, in which case the financial institutions and the credit card companies may provide the pertinent authorities with information relating to such criminal acts when necessary for the investigation of such acts.

Complementary Law 105/01 also allows the Brazilian Central Bank or the CVM to exchange information with foreign governmental authorities, provided that a specific treaty has previously been executed.

The government of the Federal Republicgovernments of Brazil and the government of the United States of America executed an agreement on March 20, 2007, by means of which these governments established rules for the exchange of information relating to tax, or the “2007 Agreement”.Agreement.” Under the 2007 Agreement, the Brazilian tax authority would be able to send information it receives by virtue of Section 5 of the Bank Secrecy Law to the U.S. tax authority.

Data Protection Requirements

The GDPALGPD (Lei Geral de Proteção de Dados) was published in the Federal Official Gazette on August 15, 2018 and was amended by Law No. 13,853, issued on July 8, 2019 or “Law 13,853/2019”.19. The GDPA will takeLGPD came into effect in September 2020, except for administrative sanctions, which came into effect on August 2020.

1, 2021, pursuant to Law No. 14,010/20, which delayed the applicability of certain provisions of the LGPD.

Before the GDPA,LGPD, Brazil lacked regulations specific to data privacy and a data protection authority. Despite this, privacy has been generally protected through the Brazilian Federal Constitution, the Civil Code (Law No. 10,406 of January 10, 10,406/2002), the Consumer Protection Code (Law No. 8,078 of September 11, 8,078/1990) and the Civil Rights Framework for the Internet (Law No. 12,965 of April 23, 12,965/2014 and the Decree 8,771 of May 11, 2016, also known as the Internet Law)8,771/2016).

The GDPALGPD brings about profound changes in the rules and regulations applicable to the processing of personal data, processing, with a set of rules to be complied with in activities such as the collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons.

The GDPALGPD has a wide range of applications and extends to individuals as well as private and public entities, regardless of the country where they are headquartered or where data are hosted, as long as (i) the data processing takes place in Brazil; (ii) the data processing activity is intended to offer or supply goods or services to, or to process data of individuals located in Brazil; or (iii) the subjects of the data are located in Brazil at the time their personal data are collected. The GDPALGPD will apply irrespective of the industry or business when dealing with personal data and is not restricted to data processing activities performed through digital media and/or on the internet.

The GDPALGPD sets out several rules related to data processing such as principles, requirements and duties imposed to data controllers and data processors; rights of data subjects; requirements in connection with cross-border transfers of data; the obligation to appoint a data protection officer; data security and data breach notification; corporate governance practices; and the regime for civil liabilities and penalties in case of a breach of the provisions of the GDPA.LGPD. Penalties include warnings, blocking and erasure of data, public disclosure of the offense and fines of up to 2% of the economic group’s turnover in Brazil in the preceding year, capped at R$50 million per offense.

Moreover, Law 13,853/2019 created the Brazilian National Data Protection Authority, or “ANPD”,“ANPD,” which will have powers and responsibilities analogous to the European data protection authorities, exercising a triple role of (i) investigation, comprising the power to issue norms and procedures, deliberate on the interpretation of the GDPALGPD and request information of controllers and

87 

Table of Contents

processors; (ii) enforcement, in cases of noncompliance with the law, through an administrative process; and (iii) education, with the responsibility to disseminate information about and foster knowledge of the GDPALGPD and security measures, fostering standards for services and products that facilitate control of data, and elaborating studies on national and international practices for the protection of personal data and privacy, among others.

 108
Table of Contents

The ANPD has been assured technical independence, although it is subordinated to the Presidency of the Republic. It will be composed of five commissioners, to be appointed by the President of Brazil, and advised by a National Council for the Protection of Personal Data and Privacy, composed of 23 unpaid members.

Regulations on Cybersecurity

Financial institutions must follow certain cyber risk management and cloud outsourcing requirements which apply to the design and adaptation of internal controls.controls, namely CMN Resolution No. 4,893/2021, which requires financial institutions to institute a Cybersecurity Policy, as well as regulates the outsourcing of relevant data processing and storage and cloud computing services and CVM Ruling No. 35/2021, which sets forth the standards and procedures to be observed in security transactions carried out in regulated securities markets requiring the implementation of cybersecurity controls and data protection. Policies and action plans to prevent and respond to cybersecurity incidents must bewere fully compliant and in place before May 2019, and fully compliant by December 2021. Data location and processing may occur inside or outside Brazil, but access to data stored abroad must be granted at all times to the Brazilian Central Bank for inspection purposes. The contracting of relevant processing services must be communicated to the Brazilian Central Bank within 10 days from the execution of the agreement.

See “Item 3. Key Information—D. Risk Factors— Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”

Auditing Requirements

The legislation and regulations issued by the CMN, CVM and B3 determine that the periodic financial statements of financial institutions must be audited by independent auditors (individuals or legal entities) that are registered with the CVM and who meet the minimum requirements set forth by the Brazilian Central Bank, and that the financial statements must be presented together with an independent auditor’s report. Our financial statements are audited in accordance with International Standards on Auditing with regard to Brazilian GAAP and also with the standards of the Public Company Accounting Oversight Board with regard to IFRS as issued by the IASB, as required by the SEC. For purposes of the financial statements prepared according to Brazilian GAAP, as from January 2017 all financial institutions and other institutions authorized to operate by the Brazilian Central Bank are required to create provisions for all losses related to financial guarantees issued by them. As a result of the auditing work, the independent auditor must prepare the following reports: (i) an audit report, issuing an opinion regarding the accounting statements and the respective explanatory notes, including regarding the compliance with financial regulations issued by the CMN and the Brazilian Central Bank; (ii) an internal control system quality and adequacy evaluation report, including regarding electronic data processing and risk management systems, evidencing any identified deficiencies; (iii) a legal and regulatory provisions noncompliance report, regarding those which have, or may have, material impacts on the financial statements or on the audited financial institution’s operations; (iv) a limited assurance report, analyzing Santander Brasil’sour Annual and Sustainability Report pursuant to the guidelines and requirements of the Global Reporting Initiative, or “GRI”; and (v) any other reports required by the Brazilian Central Bank, CVM and B3. The reports issued by independent auditors must be available for consultation upon request by the overseeing authorities.

Independent auditors and the audit committee, when established, individually or jointly, must formally notify the Brazilian Central Bank of the existence or evidence of error or fraud, within three business days of the identification of the respective occurrence, including:

·●noncompliance with legal rules and regulations that place the continuity of the audited entity at risk;

·●frauds of any amount perpetrated by the management of the institution;

·●material frauds perpetrated by the institution’s employees or third parties; and

·●errors that result in major incorrectness in the financial statements of the audited entity.

88 

Table of Contents

The executive office of the financial institution must inform the independent auditor and the audit committee, when established, if any of the above situations occur.

 109
Table of Contents

CMN regulation also requires financial institutions and certain other entities holding Regulatory Capital equal to or greater than R$1 billion to create a corporate body designated as the “audit committee”.committee.” To obtain more information concerning the audit committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”

Internal Auditing of Financial Institutions

Financial institutions are required to establish and maintain internal audit activities compatible with their operational specifications, so that such internal bodies are able to perform an independent, autonomous and impartial audit of the quality and effectiveness of the institution’s internal systems. Such unit shall be directly controlled by the institution’s board of directors. Internal and external independent auditors are also liable for failures of the financial institution’s internal control mechanisms.

Socio-Environmental Responsibility Policy

Environmental, Social and Governance (ESG) requirements applicable to financial institutions

Financial institutions are currently required by CMN Resolution No. 4,327/14 to have a responsibility policy, which must guide the social and environmental actions in conducting their businesses, their relationship with their customers and other users of their products and services. The responsibility policy must also guide the financial institution’s relationship with its personnel and with any others affected by the financial institution’s activities. In addition, the responsibility policy must provide for the management of social and environmental risks (which, according to the Brazilian Central Bank, represent one of the several categories of risk to which financial institutions are exposed).

Following Public Consultations Nos. 82, 85 and 86, initiated by the Brazilian Central Bank in 2021 under the “Sustainability” pillar of the “Agenda BC#” (which consists of a list of goals to improve the Brazilian National Financial System), a new set of rules was published on September 15, 2021. These new rules aim to improve the disclosure of information, management and governance of social, environmental and climate risks by financial institutions, as well as to bring changes to the rural credit regulations in effect.

Resolution No. 140 establishes new conditions for the access to rural credit considering social, environmental and climatic aspects. Among them, it stands out the credit restriction for a producer who is not registered, or whose registration is canceled, in the Rural Environmental Registry (Cadastro Ambiental Rural – CAR). The new resolution also sets forth that rural credit shall not be granted to (i) an enterprise fully or partially inserted in a conservation unit, indigenous land already approved, an area of embargo in force resulting from the economic use of illegally deforested areas in the Amazon; nor (ii) an individual or legal entity registered in the official register of employers who have kept workers in conditions analogous to slavery.

CMN issued Resolution No. 4,943, which amended CMN Resolution No. 4,557/17 with the purpose of highlighting and distinguishing social, environmental and climate risks, as necessary for the identification, measurement, evaluation, monitoring, reporting, control and mitigation in connection with the risk management structure of financial institutions. The new rule provides for specific definitions to such risks, using new and modern concepts, such as the inclusion of the two main components of climate risks – physical and of transition – already recognized by international ESG standards. The amended rule also deals with the identification and monitoring of social, environmental and climate risks incurred by financial institutions, resulting not only from their products, services and activities, but also from the activities performed by their counterparties, controlled entities, suppliers and outsourced service providers.

Similar provisions were also included in the simplified structure of continuous risk management pertaining to the Simplified Reference Capital (Patrimônio de Referência Simplificado – PRS5) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.

The CMN issued Resolution No. 4,945, replacing CMN Resolution No. 4,327 of April 25, 2014 on the Social and Environmental Responsibility Policy (Política de Responsabilidade Socioambiental or PRSA). The new rule provides for the inclusion of a climate aspect to the PRSA, which will be henceforth named Social, Environmental and Climatic Responsibility Policy (Política de Responsabilidade Social, Ambiental e Climática – PRSAC). Such new policy to be implemented by financial institutions shall take into account the impacts, strategic goals and business opportunities for the financial institutions in connection with social, environmental and climate aspects. There was also a reduction in the period for reviewing the PRSA, from five to three years.

The Brazilian Central Bank issued Resolution No. 139, regulating the preparation of a Report on Social, Environmental and Climate Risks and Opportunities (Relatório de Riscos e Oportunidades Sociais, Ambientais e

 110
Table of Contents

Climáticas, or the “GRSAC Report”) by financial institutions classified in segments S1 (such as Banco Santander), S2, S3 and S4. Following the propositions of the Public Consultation, this new rule seeks to contemplate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) at the national regulatory level. The GRSAC Report must be published annually with the base date of December 31, within a maximum period of 90 days from December 31, and must be made available on the financial institutions' websites for a period of five years.

Finally, on October 6, 2021, the Brazilian Central Bank published Resolution No. 151, which regulates the remittance information regarding social, environmental, and climate risks addressed in CMN Resolution No. 4,557 and CMN Resolution No. 4,945 to the Brazilian Central Bank by authorized institutions. The rule applies to institutions classified in segments S1 (such as Santander Brasil), S2, S3, or S4; and the information that must be sent to the Brazilian Central Bank is related to the assessment of social, environmental and climate risks related to their exposures in credit and securities transactions, as well as those of the respective debtors under these transactions. The information to be remitted includes identification, economic sector, risk aggravating and mitigating factors, appraisal of social, environmental and climactic risks, among others.

In order to allow financial institutions to adapt their practices and policies to this new set of rules, CMN Resolution No. 4,943/21 and article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) will enter into effect on July 1, 2022, while CMN Resolution No. 4,944/21, the other provisions of CMN Resolution No. 4,945/21 and Central Bank Resolution No. 139/21 will enter into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 will enter into effect on July 1, 2022 and Central Bank Resolution No. 140, which specifically provides for rural credit, came into effect on October 1, 2021.

Policy for Succession of Financial Institutions Managers

Brazilian financial institutions and other institutions authorized to operate by the Brazilian Central Bank shall implement and maintain internal policies for succession of managers, applicable to higher levels of the institution’s management. The internal policy shall encompass the procedures related to recruitment, promotion, appointment and retention of managers in accordance with the institution’s rules for identification, evaluation, training and selection of the candidates to management offices.

Corporate Governance of Financial Institutions

Financial institutions must (i) remit to the Brazilian Central Bank information on the financial institution’s management, controlling group and relevant shareholders, including the obligation to communicate to the regulator any information that may affect the reputation of any such persons; (ii) make available a communication channel allowing employees, contributors, customers, users, associates, or services providers to report anonymously situations indicating illegalities of any nature related to the institution; and (iii) have an internal body responsible for receiving the information and complying with the reporting obligations.

Compliance Policy

Financial institutions must implement and maintain a compliance policy compatible with the nature, size, complexity, structure, risk profile and business model of the institution, which is intended to ensure an effective compliance risk management by the institution and may be established at the consolidated enterprise level (conglomerado prudencial). The compliance policy must establish the scope and purpose of the compliance function in the institution, set forth the organizational structure of the compliance function, specify which personnel is allocated to the compliance function, and establish a segregation of roles among personnel in order to avoid conflicts of interest.

The compliance policy must be approved by the board of directors and the regulation also assigns to the board the responsibility to ensure the following: adequate management of the compliance policy

89 

Table of Contents

throughout the institution, its effectiveness and continued application, its communication to all employees and services providers, as well as the dissemination of the integrity and ethical standards as part of the institution’s culture. The board of directors is also responsible for ensuring the application of measures in case of noncompliance, and for providing the necessary means for the activities related to the compliance functions to be adequately conducted.

Consumer Protection

Relationships between consumers and financial institutions are governed by Law 8,078, dated September 11, 1990, or the “Brazilian Consumer Protection Code”,Code,” which grants consumers certain rights and sets forth measures to be observed by suppliers, which must be complied with by financial institutions. The Brazilian Consumer Protection Code sets forth as consumer rights, among others, the assistance/facilitation in the defense of consumers’ rights, including through reverse burden of proof in their favor, and possibility of judicial review of contractual provisions deemed abusive.

Furthermore, banking regulation establishes procedures that financial institutions must observe when contracting any transactions, as well as when rendering services. We may highlight the following as examples of said procedures:

 111
Table of Contents
·●to timely provide the necessary information including rights, duties, responsibilities, costs or advantages, penalties and possible risks when carrying out a transaction or rendering a service to allow customers and users free choice and decision-making;

·●to timely provide, to the customer or user, agreements, receipts, statements, advice and other documents related to the transactions and services, as well as the possibility of timely cancellation of the agreements;

·●formalization of an adequate instrument setting forth the rights and obligations for opening, using and maintaining a postpaid payment account;

·●to forward a payment instrument to the customers’ or users’ residence or to enable the respective instrument only upon express request or authorization; and

·●identification of end users’ beneficiaries for payments or transfer in statements and bills of the payer, including in situations in which the payment service involves institutions participating in different payment arrangements.

Financial institutions operating exclusively via digital means are excluded from the scope of certain aspects of the regulation.

Law No. 14,181, which amends the Brazilian Consumer Protection Code and Senior Citizens' Statute (Law No. 10,741 of October 1, 2003) to improve provisions related to the offering of consumer credit and provide for the prevention and treatment of over-indebtedness, came into effect on July 2, 2021.

Regarding the prevention of over-indebtedness, such rule created a chapter in the Brazilian Consumer Protection Code dedicated to responsible credit and financial education. The amendments determine the presentation of specific information to the consumer in the granting of credit or installment sales, such as the effective monthly interest rate, late payment interest and the total charges foreseen in the event of late payment.

The new law also regulates informational conduct to be observed by the credit supplier regarding the nature and modality of the credit offered, considering the age of the consumer.

The law also included a new chapter in the Brazilian Consumer Protection Code dedicated to the conciliation between debtor and creditor with respect to over-indebtedness. According to the new law, the over-indebted consumer may request the initiation of a debt renegotiation process, with the consumer being responsible for submitting a payment plan proposal, preserving the existential minimum. The unjustified non-attendance of the creditor or his attorney at the conciliation hearing may suspend the payment of the credit, with the interruption of the late payment charges. In the case of a successful conciliation, the court decision that ratifies the agreement will describe the debt payment plan and will be enforceable. A new debt renegotiation request may only be submitted after two years, counting from the settlement of the obligations provided for in the payment plan. In the case of unsuccessful conciliation, the judge, at the consumer's request, will institute proceedings for over-indebtedness to review and integrate the contracts and renegotiate the remaining debts, through a compulsory judicial plan.

Further, on September 30, 2021, the CMN published Resolution No. 4,949. The rule provides the principles and procedures to be adopted in the relationship with clients and users of products and services of financial institutions and other institutions authorized to operate by the Brazilian Central Bank. On October 13, 2021, the Brazilian Central Bank published Resolution No. 155, which establishes almost identical principles and procedures to be adopted by payment institutions and consortium administrators, which are regulated and supervised solely by the Brazilian Central Bank.

 112
Table of Contents

CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 set forth new rules mainly with the goal of ensuring fair and equitable treatment at all stages of the relationship with institutions providing financial and payments services, as well as a convergence of the interests of such institutions with those of their consumers.

Under CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021, institutions authorized to operate by the Brazilian Central Bank shall prepare and implement an institutional policy for the relation with consumers and users. Such new policy should consolidate guidelines, strategic objectives and organizational values, so that the conduct of the institution’s activities is guided by the principles of ethics, responsibility, transparency and diligence.

CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 also provide that institutions authorized to operate by the Brazilian Central Bank and must indicate to such regulatory agency the officer responsible for complying with the obligations provided under the new rules.

The rules also impose other obligations to the regulated entities within their scope, such as the compliance with transparency and suitability rules. CMN Resolution No. 4,949 will enter into effect on March 1, 2022, and Central Bank Resolution No. 155 will enter into effect on October 10, 2022.

Policy for Relationship with Customers and Users of Financial Products and Services

Financial institutions and other institutions authorized to operate by the Brazilian Central Bank must have a policy governing the relationship with customers and users of financial products and services. In addition, such entities shall comply with the principles of ethics, liability, transparency and diligence promoting the convergence of interests and the consolidation of the institutional image of credibility, security and expertise.

Ombudsman

Financial institutions and other entities that are authorized to operate by the Brazilian Central Bank must have an ombudsman office. An ombudsman office has the following attributes according to the current regulation:

·●to provide last resort assistance in connection with customer claims that have not been resolved through the conventional customer service channels (including the banking correspondents and the customer service attendance channel-SAC)assistance channel (Serviço de Atendimento ao Consumidor), or SAC); and

90 

Table of Contents

·●to act as a communication channel between the financial institutions and their customers, including for dispute resolution; andresolution.

·to keep management informed of its activities.

Institutions that are part of a financial group are allowed to establish one ombudsman department to service the whole group. The officer in charge of the ombudsman office must prepare a report every six months, which must be provided to the management and auditing bodies, as well asbodies. The reports and recordings of interactions of the ombudsman unit with consumers must be available to the Brazilian Central Bank for a period of at least five years.

Investment Funds Industry Regulation

Investment funds are subject to the regulation and supervision of the CMN and the CVM and, in certain specific matters, the Brazilian Central Bank. Investment funds may be managed by full-service banks, commercial banks, savings banks, investment banks, credit, financing and investment companies and brokerage and dealer companies within certain operational limits.

Investment funds may invest in any type of financial instrument available in the financial and capital markets, including, for example, fixed income instruments, stocks, debentures and derivative products, provided that, in addition to the denomination of the fund, a reference to the relevant type of fund is included.

Broker-Dealer Regulation

Broker and dealer firms are part of the national financial system and are subject to CMN, Brazilian Central Bank and CVM regulation and supervision. Brokerage firms must be chartered by the Brazilian Central Bank and are the only institutions in Brazil authorized to trade on stock exchanges. Both brokers and dealers may act as underwriters in the public placement of securities and engage in the brokerage of foreign currency in any exchange market.

 113
Table of Contents

As ofSince August 29, 2019, securities brokers and dealers may loan their own securities to their clientscustomers as long as they use the funds as collateral for operations in which the institution itself intermediates. The loan transaction consists of the transfer of assets from the institution: (i) to the customer, in conjunction with the transfer of that asset to the clearinghouse or clearing and settlement service provider; or (ii) to the clearinghouse or clearing and settlement service provider on behalf of the customer through powers established in a formal written power of attorney. In either case, the assets or set of assets in question shall return to the positions originally held at the end of the period stipulated in the contract. To offer this new service, securities brokers and dealers must appoint a director responsible for the loan operations under consideration.

Since November 27, 2020, securities brokers and dealers may issue electronic currency and maintain payment accounts.

Foreign Exchange Market

Transactions involving the sale and purchase of foreign currency in Brazil may be conducted only by institutions duly authorized by the Brazilian Central Bank to operate in the foreign exchange market. There is no current limit to long or short positions in foreign currency for banks authorized to carry out transactions on the foreign exchange market. Other institutions within the national financial system are not allowed to have short positions in foreign currency, although there are no limits with respect to foreign exchange long positions.

 

The Brazilian Central Bank imposes a limit on the total exposure in foreign currency transactions and transactions subject to foreign exchange fluctuation undertaken by Brazilian financial institutions, including branches abroad, and their direct and indirect affiliates. The limit is currently equivalent to 30.0% of the financial institution’s Regulatory Capital (Patrimônio de Referência), on a consolidated basis. The CMN, the Brazilian Central Bank and the Brazilian government may change the regulation applicable to foreign currency and foreign exchange transactions undertaken by Brazilian financial institutions in accordance with Brazil’s economic policy (including its foreign exchange policy).

 

91 

TableOn December 20, 2021, the President of Contents

On October 7, 2019,Brazil sanctioned Law No. 14,286, approved by the Brazilian Senate on December 8, 2021, or the “New Foreign Exchange Law.” The New Foreign Exchange Law, an initiative of the Brazilian Central Bank, sentoverhauls the rules applicable to the President of Brazil a draft bill to change the way in which the Brazilian foreign exchange market (“New Foreign Exchange Bill”). The draft alsoand contains provisions regarding Brazilian capital abroad and foreign capital within Brazil. The initiative aims to modernize, simplify and reduce legal doubts associated with current Brazilian foreign exchange legislation.

 

The main aspects of the New Foreign Exchange BillLaw are: (i) ratification, at the legal level, that foreign exchange transactions may be carried out freely (provided such transactions are carried out by entities authorized to operate in this market and subject to applicable rules); (ii) granting of broad powers to the CMN and the Brazilian Central Bank to regulate the foreign exchange market and foreign exchange operations; (iii) expansion of international correspondence activities by Brazilian banks; (iv) possibility of Brazilian financial institutions investing and lending abroad funds that have been raised in Brazil or abroad; (v) the exclusion from its scope of foreign currency purchase and sale operations of up to US$1,000U.S.$500 carried out between individuals on an occasional and non-professional basis; and (vi) the granting of powers to the monetary authorities to establish situations in which the prohibition of the private offset of credits between residents and nonresidents, as well as payments in foreign currency in Brazil, would not apply. As

Law No. 14,286 will enter into effect in one year from the date of this date, the Brazilian Congress is still reviewing the proposal and it is not possible to estimate if and when it will be approved, or what changes will be proposed.

its publication (which occurred on December 30, 2021).

Foreign Investment in Brazilian Financial Institutions

According to the Brazilian federal constitution, the acquisition of equity interests by foreign individuals or legal entities in the capital stock of Brazilian financial institutions is forbidden, unless permitted by bilateral international treaties or by the Brazilian government by means of a presidential decree. A presidential decree issued on November 13, 1997, issued in respect of Banco Meridional do Brasil S.A. (our legal predecessor) allows 100% foreign participation in our capital stock. Foreign investors may acquire the shares issued by Santander Brasil as a result of this decree. In addition, foreign investors may acquire publicly traded nonvoting shares of Brazilian financial institutions traded on a stock exchange or securities depositary receipts offered abroad representing shares without specific authorization.

Following the enactment of Decree No. 10,029, the Brazilian Central Bank published, on January 22, 2020, Circular No.3,977No. 3,977 recognizing as an interest of the Brazilian government the foreign holding of equity or increase in equity interest of financial institutions headquartered in Brazil (which is still subject to the same requirements and procedures applicable to the any acquisition of equity in any Brazilian financial institution), as well as the opening of local branches of foreign financial institutions. However, since Santander Brasil had already been granted a specific presidential decree authorizing the foreign interest in its share capital, prior to Decree 10,029/19 being issued it does not affect its operations in Brazil.

 114
Table of Contents

A foreign financial institution duly authorized to operate in Brazil through a branch or a subsidiary is subject to the same rules, regulations and requirements that are applicable to any Brazilian financial institution.

Bank Correspondents

Financial institutions are allowed to provide specific services to customers, including customer services, through other entities. These entities are called “bank correspondents” and the relationship between the financial institution and the bank correspondent is ruled by a specific regulation published by CMN and is subject to the supervision of the Brazilian Central Bank.

On July 29, 2021, the CMN published Resolution No. 4,935, which will revoke CMN Resolution No. 3,954, of February 24, 2011, changing the regulation of banking correspondents in Brazil. Banking correspondents are companies contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank to provide services to their contracting institutions.

The new rule determines that these institutions set forth a policy for the operation and hiring of their correspondents, and it should formalized by a specific document and approved by the institution’s board of officers or board of directors. This operation and contracting policy should provide for the criteria required for contracting correspondents, internal controls related to the correspondent and remuneration rules for the provision of services.

The contracting institutions will continue to be required to maintain adequate internal control systems in order to monitor the public service activities carried out by the contracted correspondents and the contracting institution’s internal audit must annually assess the effectiveness of these quality control mechanisms.

In addition, with the inclusion of the express possibility of the correspondents acting in a digital setting, some provisions were improved, highlighting the need for the correspondent’s digital platform itself to have a minimum technical qualification that allows the offering of products and services suited to the needs, interests and goals of the contracting institution’s clients.

CMN Resolution 4,935 came into effect on February 1, 2022.

Regulation of Branches

Authorization by the Brazilian Central Bank is required for operations of branches or subsidiaries of Brazilian financial institutions, upon the compliance with certain term, capital and equity requirements, as well as the submission of an economic and financial feasibility analysis.

92 

Table of Contents

The Brazilian Central Bank’s prior authorization is also required in order to: (i) allocate new funds to branches or subsidiaries abroad; (ii) subscribe capital increases, directly or indirectly, in subsidiaries abroad; (iii) increase equity participation, directly or indirectly, in subsidiaries abroad; and/or (iv) merge or spin off, directly or indirectly, subsidiaries abroad.

The Brazilian Central Bank determines that financial institutions can install the following establishments in Brazil: (i) branches, (ii) teller booths, (iii) automatic teller machines, and (iv) segregated administrative units, provided that, for items (i) to (iii), conformity with requirements of minimum capital and operating limits are necessary.

Cayman Islands Banking Regulation

We have a branch in the Cayman Islands with its own staff and representative officers.officers, Banco Santander (Brasil) S.A. – Grand Cayman Branch is licensed under The Banks and Trust Companies Law (2013 Revision) of the Cayman Islands, or the “Banks and Trust Companies Law,” as a Category “B” Bank and it is duly registered as a Foreign Company with the Registrar of Companies in the Cayman Islands. The branch, therefore, is duly authorized to carry on banking business in the Cayman Islands. The branch was authorized by the local authorities to act as its own registered office and it is located at the Waterfront Centre Building, 28, North Church Street – 2nd floor, George Town, Grand Cayman, Cayman Islands, P.O. Box 10444 – KYI-1004, Phone: 1-345-769-4401 and Fax: 1-345-769-4601.

 115
Table of Contents

Our Grand Cayman Branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions with Brazil. The results of the operations of the Grand Cayman Branch are consolidated in our consolidated financial statements.

Banks and trust companies wishing to conduct business from within the Cayman Islands must be licensed by the Cayman Islands Monetary Authority under the Banks and Trust Companies Law, irrespective of whether the business is to be actually conducted in the Cayman Islands.

Under the Banks and Trust Companies Law, there are two main categories of banking license: a category “A” license, which permits unrestricted domestic and offshore banking business, and a category “B” license, which permits principally offshore banking business. The holder of a category “B” license may have an office in the Cayman Islands and conduct business with other licensees and offshore companies but, except in limited circumstances, may not do banking business locally with the public or residents of the Cayman Islands. We have an unrestricted category “B” license.

There are no specific ratio or liquidity requirements under the Banks and Trust Companies Law, but the Cayman Islands Monetary Authority will expect observance of prudent banking practices, and the Banks and Trust Companies Law imposes a minimum net worth requirement of an amount equal to CI$400,000 (or, in the case of licensees holding a restricted category “B” or a restricted trust license, CI$20,000). As of December 31, 2019,2020, CI$1 was equivalent to R$4.88,6.68, according to the Brazilian Central Bank.

Luxembourg Banking Regulation

Branches of credit institutions from outside the European Union (“non-EU credit institutions”) must be licensed by the Luxembourg Minister of Finance under the law of 5 April 1993 on the financial sector, as amended, in order to operate in Luxembourg.

We have a branch in Luxembourg with its own staff and representative officers. Our Luxembourg branch is licensed as a Luxembourg branch of a non-EU credit institution and is duly registered with the Luxembourg Trade and Companies’ Registry. The branch, therefore, is duly authorized to carry on banking business in Luxembourg. Its registered offices are at 35F, avenue J.F.J. F. Kennedy, 2nd floor, L-

93 

Table of Contents

1855L-1855 Luxembourg, Grand Duchy of Luxembourg.

Our Luxembourg branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions involving Brazil. The results of the operations of the Luxembourg branch are consolidated in our consolidated financial statements.

Luxembourg law requires the Luxembourg branch to have a minimum endowment capital of €8,700,000 and the solvency, and liquidity requirements deriving, among others, from EU Regulation No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms apply to it.

Foreign Subsidiary

We had established an independent subsidiary in Spain, Santander EFC, in order to complement our foreign trade strategy for corporate customers, which are composed of large Brazilian companies and their operations abroad. This allowshas allowed us to provide financial products and services by means of an offshore entity, which is not established in a “tax haven,” such as our Cayman Islands branch, in accordance with Law No. 12,249, of June 11, 2010, and Brazilian Federal Revenue Normative Ruling No. 1,037, of June 4, 2010.

The establishment of our foreign subsidiary was approved by the Brazilian Central Bank on September 26, 2011, by the SpanishMinisterio de Economia y Haciendaon February 6, 2012 and by the Bank of Spain on March 28, 2012. The remittance of resources to pay up the share capital of the subsidiary was carried out on March 5, 2012, totaling €748 million.million, Santander EFC has beenwas operational since March 2012.from 2012 to November 12, 2020, when we approved its liquidation. As a consequence of the liquidation, we, as sole shareholder of Santander EFC, have participated in the net assets of the corporation, in the net amount of €741 million.

 116
Table of Contents

U.S. Banking Regulation

Financial Regulatory Reform

Banking statutes and regulations are continually under review by the United States Congress. In addition to laws and regulations, the U.S. bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance. Many changes have occurred as a result of the 2010 Dodd-Frank Act and its implementing regulations, most of which are now in place. More recently, the President of the United States issued an executive order in 2017 that sets forth principles for financial regulatory and reform. In May 2018 the United States Congress passed, and President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) which, among other things, revised the thresholds for total consolidated assets at which certain enhanced prudential standards apply to bank holding companies. EGRRCPA made clear that theThe Board of Governors of the Federal Reserve System, (the "Federalor the “Federal Reserve Board")Board,” retains the right to apply enhanced prudential standards to FBOsforeign banking organizations, or “FBOs,” with greater than $100 billion in global total consolidated assets, such as Santander Spain.

In October 2019, the federal banking agencies issued final rules, (the "Tailoring Rules")or the “Tailoring Rules,” that pursuant to EGRRCPA, adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements apply to certain banking organizations, including large FBOs such as Santander Spain. As a result, Santander Spain is now generally subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under previously applicable regulations.

Under the current administration, however, banking organizations, including large FBOs, may become subject to increased scrutiny and more extensive legal and regulatory requirements than under the prior presidential and congressional regime. In addition, changes in key personnel at the agencies that regulate such banking organizations, including the federal banking regulators, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously.

Volcker Rule

Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and its implementing rules (collectively, the “Volker“Volcker Rule”) prohibits “banking entities” from engaging in certain forms of

94 

Table of Contents

proprietary trading or from sponsoring or investing in “covered funds,” in each case subject to certain exceptions. The Volcker Rule also limits the ability of banking entities and their affiliates to enter into certain transactions with covered funds with which they or their affiliates have certain relationships.relationships, Banking entities such as Santander Brasil and Santander Spain were required to bring their activities and investments into compliance with the requirements of the Volcker Rule by the end of the conformance period applicable to each requirement. Santander Spain has assessed how the Volcker Rule affects its businesses and subsidiaries, including Santander Brasil, and has brought its activities into compliance. Santander Brasil has adopted processes to establish, maintain, enforce, review and test the compliance program designed to achieve and maintain compliance with the Volcker Rule. The Volcker Rule contains exclusions and certain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations, as well as certain foreign government obligations, and trading solely outside the United States, and also permits certain ownership interests in certain types of funds to be retained. Santander Spain’s non-U.S. banking organization subsidiaries, including Santander Brasil, are largely able to continue their activities outside the United States in reliance on the “solely outside the U.S.” exemptions from the Volcker Rule. Those exemptions generally exempt proprietary trading, and sponsoring or investing in covered funds if, among other restrictions, the essential actions take place outside the United States and any transactions are not with U.S. persons.

On July 21, 2017, the five regulatory agencies charged with implementing the Volcker Rule announced the coordination of reviews of the treatment of certain foreign funds that are investment funds organized and offered outside of the United States and that are excluded from the definition of covered fund under the agencies’ implementing regulations. Also in July 2017, the Federal Reserve issued guidelines for banking entities seeking an extension to conform certain “seeding” investments in covered funds to the requirements of the Volcker Rule.

As of OctoberIn June 2019, the five regulatory agencies charged with implementing the Volcker Rule finalized amendments to the Volcker Rule. These amendments tailor the Volcker Rule’s compliance requirements to the amount of a firm’s trading activity, revise the definition of trading account, clarify certain key provisions in the Volcker Rule, and modify the information companies are required to provide the federal agencies. Santander Brasil will still largely rely on the “solely outside the U.S. exemption” to conduct its trading activities.

In earlyJune 2020, the five federal agencies proposedfinalized additional amendments to the Volcker Rule related to the restrictions on ownership interests, in sponsorship of and relationships with covered funds. These amendments became effective on October 1, 2020. Santander Spain will continue to monitor these Volcker Rule-related developments and assess their impact on its operations, including those of Santander Brasil, as necessary.

 117
Table of Contents

U.S. Anti-Money Laundering, Anti-Terrorist Financing, and Foreign Corrupt Practices Act Regulations

Santander Brasil, as a foreign private issuer whose securities are registered under the Exchange Act, is subject to the U.S. Foreign Corrupt Practices Act, or the “FCPA”.“FCPA.” The FCPA generally prohibits such issuers and their directors, officers, employees and agents from using any means or instrumentality of U.S. interstate commerce in furtherance of any offer or payment of money to any foreign official or political party for the purpose of influencing a decision of such person in order to obtain or retain business. It also requires that the issuer maintain books and records and a system of internal accounting controls sufficient to provide reasonable assurance that accountability of assets is maintained and accurate financial statements can be prepared. Penalties, fines and imprisonment of Santander Brasil’s officers and/or directors can be imposed for violations of the FCPA.

Furthermore, Santander Brasil is subject to a variety of U.S. anti-money laundering and anti-terrorist financing laws and regulations, such as the Bank Secrecy Act of 1970, as amended, and the USA Patriot Act of 2001, as amended, and a violation of such laws and regulations may result in substantial penalties, fines and imprisonment of Santander Brasil’s officers and/or directors.

The Anti-Money Laundering Act of 2020, or “AML Act,” enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and Patriot Act impose on banks. The AML Act also contains provisions that promote increased information-sharing and use of technology and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.

U.S. Sanctions

95 

Table of Contents

“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, OFAC), the United Nations Security Council, the European Union or Her Majesty’s Treasury. The Office of Foreign Assets Control, (“OFAC”)or “OFAC,” is responsible for administering economic sanctions imposed against designated foreign countries, governments, individuals and entities pursuant to various Executive Orders, statutes and regulations.

OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on U.S. persons’ trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) blocking of assets of targeted governments or “specially designated nationals,” by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. Blocked assets, such as property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. In addition, non-U.S. persons can be liable for “causing” a sanctions violation by a U.S. person or can violate U.S. sanctions by exporting services from the United States to a sanctions target, for example by engaging in transactions with targets of U.S. sanctions denominated in U.S. dollars that clear through U.S. financial institutions (including through U.S. branches or subsidiaries of non-U.S. banks).

Failure to comply with applicable U.S. sanctions could have serious legal and reputational consequences, including significant civil monetary penalties and, in the most severe cases, criminal penalties.

In addition, the U.S. government has implemented various sanctions that target non-U.S. persons, including non-U.S. financial institutions that engage in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”) that involve Iran, North Korea, Russia, or Hezbollah or other persons designated by the U.S.United States under the speciallySpecially Designated Global Terrorist, (SDGT)or “SDGT,” sanctions program. If a non-U.S. financial institution were determined to have engaged in activities targeted by certain secondary U.S. sanctions or used proceeds produced by such activities targeted, it could lose its ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential consequences.

 118
Table of Contents

Antitrust Regulation

According to the Brazilian antitrust law, actions that concentrate market share must be previously submitted to CADE for approval if the following criteria are met: (i) at least one of the groups involved in the deal has posted annual gross revenues or volume of business equal to or over R$750 million, in Brazil, in the year prior to the transaction; and (ii) at least another group has posted annual gross revenues or volume of business equal to or over R$75 million, in Brazil, in the year prior to the transaction. Closing of a transaction without CADE’s approval will subject the parties to fines ranging from R$60,000 to R$60 million.

The Brazilian Central Bank will also examine certain corporate reorganizations and other acts involving two or more financial institutions not only considering their potential effects on the financial system and its stability but also any potential impacts regarding market concentration and competition. Upon approval of the transaction, the Brazilian Central Bank may establish certain restrictions and require that the financial institutions execute an agreement of market concentration control, pursuant to which the terms and conditions of the sharing of the efficiency gain resulting from the act shall be set forth.

In December 2018, the Brazilian Central Bank and CADE approved a joint normative act establishing procedures with the purpose of increasing efficiency for their respective actions regarding antitrust matters. Pursuant to the joint normative act, the authorities are authorized to share information for the purposes of their respective activities and carry out meetings with each other to discuss matters requiring the regulatory cooperation between both authorities.

Insolvency Laws Concerning Financial Institutions

Financial institutions are subject to the proceedings established by Law 6,024 of March 13, 1974, or “Law 6024”,6024,” which establishes the applicable provisions in the event of intervention or extrajudicial

96 

Table of Contents

liquidation by the Brazilian Central Bank, as well as to bankruptcy proceedings.

Intervention and extrajudicial liquidation occur when the Brazilian Central Bank has determined that the financial institution is in bad financial condition or upon the occurrence of events that may impact the creditors’ situation. Such measures are imposed by the Brazilian Central Bank in order to avoid the bankruptcy of the entity.

Intervention

An intervention can be carried out at the discretion of the Brazilian Central Bank in the following cases:

·●risk to the creditors due to mismanagement;

·●consistent violation of Brazilian banking laws or regulations; or

·●if the intervention is a feasible alternative to the liquidation of the financial institution.

As of the date on which it is ordered, the intervention will automatically suspend the enforceability of the payable obligations; prevent early termination or maturity of any previously contracted obligations; and freeze deposits existing on the date on which the intervention is decreed.

The intervention will cease if interested parties undertake to continue the economic activities of the financial institution, by presenting the necessary guarantees, as determined by the Brazilian Central Bank, when the situation of the entity is regularized as determined by the Brazilian Central Bank; or when extrajudicial liquidation or bankruptcy of the entity is ordered.

Intervention may also be ordered upon the request of a financial institution’s management.

Extrajudicial Liquidation

Extrajudicial liquidation is an administrative proceeding decreed by the Brazilian Central Bank (except that it is not applicable to financial institutions controlled by the Brazilian federal government) and conducted by a liquidator appointed by the Brazilian Central Bank. This extraordinary measure aims at terminating the activities of the affected financial institution, liquidating its assets and paying its liabilities, as in a judicially decreed bankruptcy. The Brazilian Central Bank will place a financial institution in extrajudicial liquidation if:

 119
Table of Contents
·●the institution’s economic or financial situation is at risk, particularly when the institution ceases to meet its obligations as they become due, or upon the occurrence of an event that could indicate a state of insolvency under the rules of the Bankruptcy Law;

·●management seriously violates Brazilian banking laws, regulations or rulings;

·●the institution suffers a loss which subjects its unprivileged and unsecured creditors to severe risk; and/or

·●upon revocation of the authorization to operate, the institution does not initiate ordinary liquidation proceedings within 90 days or, if initiated, the Brazilian Central Bank determines that the pace of the liquidation may harm the institution’s creditors.

A request for liquidation procedures can also be filed on reasonable grounds by the officers of the respective financial institution or by the receiver appointed by the Brazilian Central Bank in the receivership procedure.

97 

Table of Contents

The decree of extrajudicial liquidation will: (i) suspend the actions or foreclose on rights and interests relating to the estate of the entity being liquidated, while no other actions or executions may be brought during the liquidation; (ii) accelerate the obligations of the entity; and (iii) interrupt the statute of limitations with regard to the obligations assumed by the institution.

Extrajudicial liquidation procedures may be terminated:

·●by discretionary decision of the Brazilian Central Bank if the parties involved undertake the administration of the financial institution after having provided the necessary guarantees; or

·●when the final accounts of the receiver are delivered and approved and subsequently registered in the relevant public records; or

·●when converted into ordinary liquidation; or

·●when a financial institution is declared bankrupt.

Temporary Special Administration Regime (Regime de Administração Especial Temporária or “RAET”)

In addition to the intervention procedures described above, the Brazilian Central Bank may also establish a RAET, under Law 9447, dated March 14, 1997 combined with Law 6,024/74, which is a less severe form of the Brazilian Central Bank intervention in private and nonfederal public financial institutions whichthat allows institutions to continue to operate normally. The RAET may be ordered in the case of an institution that:

·●continually enters into recurrent operations that are against economic or financial policies set forth in federal law;

·●faces a shortage of assets;

·●fails to comply with the compulsory reserves rules;

·●reveals the existence of hidden liabilities;

·●experiences the occurrence of situations that cause receivership pursuant to current legislation;

·●has reckless or fraudulent management; or

·●carries out activities which call for an intervention.

The main objective of a RAET is to assist the recovery of the financial condition of the institution under special administration and thereby avoid intervention and/or liquidation. Therefore, a RAET does not affect the day-to-day business, operations, liabilities or rights of the financial institution, which continues to operate in the ordinary course of business. Measures which may be adopted by the institution include the transfer of assets, rights and obligations to other entities, and corporate restructuring of these entities, with a view to the continuity of the institution’s business or activities.

 120
Table of Contents

There is no minimum term for a RAET, which ceases upon the occurrence of any of the following events: (i) acquisition by the Brazilian federal government of control of the financial institution, (ii) corporate restructuring, merger, spinoff, amalgamation or transfer of the controlling interest of the financial institution, (iii) decision by the Brazilian Central Bank, or (iv) declaration of extrajudicial liquidation of the financial institution.

Bankruptcy Law

Law No. 11,101, of February 9, 2005, as amended, or the “Bankruptcy Law”,Law,” regulates judicial reorganizations, out-of-court reorganizations and the bankruptcy of individuals and corporations that

98 

Table of Contents

have occurred since 2005 and applies to financial institutions only with respect to the matters not specifically regulated by the intervention and extrajudicial liquidation regimes described above.

On December 24, 2020, Law 14,112, or “Law 14,112/20,” was passed. Law 14,112/20 overhauls the current Bankruptcy Law in several material aspects. Law 14,112/20 came into effect on January 23, 2021. Certain changes arising from this new legislation may affect enforcement and priority matters, such as: (i) the possibility of creditors putting forward an alternative judicial reorganization plan; (ii) new rules on the approval of post-petition loans in judicial reorganization and on priority claims in case of conversion to bankruptcy liquidation; (iii) more flexible quorum and mechanics in the extrajudicial reorganization process; (iv) new rules to expedite the bankruptcy liquidation process; (v) new methods for restructuring of the debtor’s tax liabilities and installment payments, as well as new taxation schemes; and (vi) incorporation of rules on cross-border insolvency proceedings into the Brazilian framework.

Law 14,112/20 replicates, with some adjustments, the provisions of the UNCITRAL Model Law on Cross-Border Insolvency. As a result, Law 14,112/20 sets out some rules on access of foreign representatives to courts in Brazil, the method and requirements for recognition of foreign main and ancillary proceedings, authorization for the debtor and his representatives to act in other countries, methods of communication and cooperation between foreign authorities and representatives and the Brazilian jurisdiction, and the processing of concurrent proceedings.

Law 14,112/20 also sets forth, among other measures, (i) a protection for creditors that agree on the conversion of debt into equity against potential transfer of liability with regard to the debtor’s obligations; (ii) the stay period and constraints on the assets of the debtor under judicial reorganization; (iii) conciliation and mediation measures before and during judicial reorganization proceedings; and (iv) the rules on procedural and substantive consolidation. Law 14,112/20 also sets out that a bankruptcy decree does not reach beyond the bankrupt itself, save when the disregard doctrine is to apply.

Repayment of Creditors in a Liquidation or Bankruptcy

In the event of extrajudicial liquidation or bankruptcy of a financial institution, creditors are paid pursuant to their priorities and privileges. Prepetition claims are paid on a ratable basis in the following order: labor credits; secured credits; tax credits; credits with special privileges; credits with general privileges; unsecured credits; contractual fines and pecuniary penalties for breach of administrative or criminal laws, including those of a tax nature; and subordinated credits.

The current law confers immunity from attachment of compulsory deposits maintained by financial institutions with the Brazilian Central Bank. Such deposits may not be attached in actions by a bank’s general creditors for the repayment of debts and require that the assets of any insolvent bank funded by loans made by foreign banks under trade finance lines be used to repay amounts owing under such lines in preference to those amounts owing to the general creditors of such insolvent bank.

Recovery Plans for Systematically Important Financial Institutions

Systemically important Brazilian financial institutions must implement a recovery plan (plano de recuperação), with the aim of reestablishing adequate levels of capital and liquidity and to preserve the viability of such institutions. The recovery plans must identify their critical functions for the National Financial System, adopt stress-testing scenarios, define clear and transparent governance procedures, assess possible barriers to the entity’s recovery, as well as implement effective communication plans with key stakeholders.

Deposit Insurance -– FGC

The purpose of the FGC is to guarantee the payment of funds deposited with financial institutions in case of intervention, liquidation, bankruptcy or insolvency. The FGC is funded by ordinary contributions made by the financial institutions in the amount of up to 0.0125% of the total amount of outstanding balances of the accounts corresponding to guaranteed obligations, and certain special contributions as determined. Delay in performing such contributions is subject to a penalty of 2% over the amount of the contribution.

 121
Table of Contents

The total amount of credit in the form of demand deposits, savings deposits, time deposits, deposits maintained in accounts blocked for transactions with checks (for the registration and control of funds relating to the rendering of services of payment of salaries, earnings, pensions), bills of exchange, real estate bills, mortgage bills, real estate credit bills and repurchase and resale agreements whose objects are instruments issued after March 8, 2012 by a company of the same group due to each customer by a financial institution (or by financial institutions of the same financial group) will be guaranteed by the FGC for up to a maximum of R$250,000 per customer. When the assets of the FGC reach 2% of the total amounts they guarantee, the CMN may temporarily suspend or reduce the contribution of financial institutions to the FGC. As from February 2016, credits of financial institutions and other institutions authorized to operate by the Brazilian Central Bank, complementary welfare entities, insurance companies, capitalization companies, investment clubs and investment funds, as well as those representing any interest in or financial instrument held by such entities, are not protected by the ordinary guarantee of FGC. In December 2017, the CMN enacted a new rule amending certain provisions of the FGC regulation among which includes the establishment of a limit of R$1 million per four-year period for the coverage of the credits of a certain creditor against the group of associated financial institutions.

Amendments to the Administrative Proceedings in the Brazilian National Financial System, the Brazilian Payment System and Capital Markets

Law 13,506 of November 13, 2017 or “Law 13,506/17” applies to entities authorized or supervised by the Brazilian Central Bank or by the CVM, as well as to market participants. Some of the key aspects of Law 13,506 are that: (i) it increases

99 

Table of Contents

the maximum fine applicable by the Brazilian Central Bank from R$250,000 to R$2 billion or 0.5% of the revenues of the company arising from services and financial products in the year prior to the violation; (ii) it increases the maximum fine applicable by the CVM from R$500,000 to R$50 million; (iii) it makes additional types of violations subject to penalties; (iv) it provides that the penalty of “public admonition” may be cumulative to other penalties applicable by the Brazilian Central Bank; (v) it provides that Brazilian Central Bank may enter into cease-and-desist commitments; and (vi) it provides that the Brazilian Central Bank and the CVM may enter into administrative agreements similar to leniency agreements.

Opening, Maintenance and Closing of Deposit Accounts

CMN Resolution No. 4,7534,753/19 provides criteria for the opening, maintenance and closing of deposit accounts. The regulation determines that financial institutions must adopt procedures and controls that allow the verification and validation of the identity and qualification of the account holders and, if applicable, their representatives, as well as the authenticity of the information provided by the client. This information must be kept updated by the financial institution.

The rule also requires financial institutions to ensure, through the procedures and technology used for the opening, maintaining and closing of deposit accounts, the integrity authenticity and confidentiality, as well as the protection against unauthorized access, use, alteration, reproduction and destruction, of the information and the electronic documents used by them during the process.

Issuance of Credit Instruments Electronically

Provisional Measure No. 897, (“MPor “MP 897/2019”)2019,” among other provisions, (i) created a new credit instrument, the Rural Real Estate Note (Cédula Imobiliária Rural or “CIR”), with the purpose of advancing rural real estate financing by the creation of an instrument specifically designed to that end; (ii) changed the rules governing Bank Deposit Certificates (Certificado de Depósito Bancário or “CDB”), especially regarding their issuance and the transfer of their ownership, by providing among other changes that CDB issued in book-entry form should be transferred by electronic endorsement, exclusively by means of a specific notation in the issuing institution'sinstitution’s own electronic system or, when deposited in central depositary, by means of specific notation in the corresponding electronic system; and (iii) authorized that customary credit instruments such as the Agricultural Certificate of Deposit (Certificado de Depósito do Agronegócio - CDA), the Agricultural Warrant (Warrant Agropecuário - WA), the Real Estate Credit Certificate (Certificado de Crédito Imobiliário- CCI), the Bank Credit Note (Cédula de Crédito Bancário - CCB), the Rural Credit Note (Cédula de Crédito Rural - CCR), the Rural Promissory Note (Nota Promissória Rural - NPR), the Rural Trade Bill (Duplicata Rural - DR), may be issued in book-entry form through the electronic bookkeeping system held at a financial institution or other entity authorized by the Brazilian Central Bank to perform electronic bookkeeping activity.

 122
Table of Contents

Guidelines for Implementation of Open Banking in Brazil

The Brazilian Central Bank announced the initial guidelines for open banking regulation in Brazil through Notice No. 33,455 on April 25, 2019. Open Banking consists in the sharing of data and payment solutions by financial institutions and other authorized entities, upon customer’s authorization and via integration of information systems. Brazilian Central Bank has looked at open banking as an important tool for innovation in the financial market, making the banking industry more efficient and competitive.

The Brazilian open banking model will comprise financial institutions, payment institutions and other Brazilian Central Bank-licensed entities by making it possible to share, in a phased-in approach, (i) data on products and services, (ii) customer record data, and (iii) customer transaction data. Open banking will eventually cover the provision of payment services. The criteria and specifications of each phase will be specified byOn July 15, 2020, the Brazilian Central Bank on specific regulationregulated, through Circular No. 4,036/20, the electronic issuance of book-entry CCBs and self-regulation yetCCRs by financial institutions. A financial institution must render the following services in respect of the bookkeeping of CCBs and CCRs: (i) issue the instrument in book-entry form at the request of the borrower; (ii) include of all obligatory information related to be issued. Within this context, Brazilian Central Bank-licensed entities opting to joinCCBs and CCRs, as well as ancillary documents and/or information for the open banking ecosystem must sharepurposes of verifying the information listed above with other participating institutions. At its inceptionoutstanding balance of the open banking model will only be compulsoryunderlying credit transaction; (iii) verify the effective title or fiduciary title of the instruments; (iv) make the payment CCBs and CCRs for financial institutions belonging to prudential conglomerates in segments S1 and S2. With regard to customer data, customer authorization will always

100 

Tablethe settlement of Contents

be required.

On November 28, 2019, the Brazilian Central Bank launched Public Consultation No. 73/2019, which ended on January 21, 2020, which disclosed the draft resolution to implement Open Banking in Brazilobligations available to the public, so as to collect comments and suggestions ondebtor; (v) control the proposed resolution. Among other topics, the draft resolution deals with the duties and responsibilities of participants and the minimum requirements for the operationalization of the system. Accordingfinancial flow related to the draft,CCBs and CCRs, including prepayments; (vi) record security interests in an entity authorized to perform centralized registration or deposit of financial institutionsassets; (vii) make information about the CCBs and prudential conglomerates belongingCCRs available to debtors, holders, collateral beneficiaries or any other legally qualified interested party; and (viii) carry out the issuance of certificates regarding the instruments whenever required.

Limitation to the S1fees and S2 segments, as is the case of Santander Brasil, are required to participate in Open Banking.

Regulatory Sandbox

On November 28, 2019, the Brazilian Central Bank published Public Consultation No. 72/2019, which ended on January 31, 2020, regarding the Controlled Testing Environment for Financial Innovations (“Sandbox”) which is intended to enable institutions test innovative financial and payment projects for a specified period. The draft resolution released by the Brazilian Central Bank establishes the applicable conditions for the implementation of the Sandbox, among which are the specific rules for the first cycle of tests, such as duration and number of participants, required documentation, criteria for the classification of institutions and the schedule for registration, selection and authorization processes of such entities. The Public Consultation is set to end on January 31, 2019, and as of this date, the Brazilian Central Bank is yet to receive contributions from various market agents, which will result in alterations on the proposed draft.

Limitationsinterest rates on overdraft-secured checks

On November 27, 2019, the CMN issued Resolution No. 4,765 or “Resolution No. 4,765/2019”,2019,” providing for new rules on the overdraft granted by financial institutions in checking accounts held by individuals and individual micro entrepreneurs.microentrepreneurs. The new rule limits the charging of fees on overdraft-secured checks to: (i) 0% for the opening credit facilities of up to R$500.00; and (ii) 0.25% for the opening of credit facilities larger than R$500.00, calculated with the amount of the facility that exceeds R$500.00. It also limits interest rates over the overdraft-secured check to up to 8% per month, to which must be added a discount of the overdraft fees already charged monthly by the financial institution. If the interest is less than or equal to the overdraft fees, such interest rates must be equal to zero. In addition, Resolution No. 4,765/2019 establishes that the overdraft-secured check must be compatible with the customer’s risk profile.

Resolution No. 4,765/2019 has comecame into force on January 6, 2020, for agreements executed after the referred date, will comecame into force on June 1, 2020, for agreements executed prior to such date. Regarding the 8% limitation above, the rule applies to all contracts from January 6, 2020, regardless of the date the applicable contract was entered into.

On February 6, 2020, the Brazilian Central Bank issued Circular No. 3,981, which deals with the new information regarding overdraft facilities that must be highlighted in the statement of the checking accounts held by natural persons or MEIs. Circular No. 3,981 will entercame into effect on June 1, 2020.

Automatic debit of banking accounts

On December 19, 2018,March 26, 2020, CMN issued Resolution No. 4,771,4,790, which sets forth new rules for the automatic debit payments from checking account and accounts designated for the payment of an individual’s wages. The new rule sets forth that financial institutions should only process automatic debit payments upon prior and express authorization of the client, and provides for the procedures for the authorization and cancellation of automatic debit payments. The new rule will comecame into force on MayMarch 1,st, 2020. 2021, CMN Resolution No. 4,790 repealed CMN Resolution 4,771.

101 

Table of Contents

Taxation

Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)

The IRPJ is calculated at a rate of 15.0%, plus a surtax of 10.0% which is levied on profits exceeding the amount of R$240,000 per year and the CSLL is calculated at a rate of 15.0%20.0% (25.0% exceptionally in 2021, as per Law No. 14,183/2021) for financial institutions (until February, 2020) and 9.0% for companies, after adjustments determined by the tax legislation.

Constitutional amendment No. 103/2019 increased the CSLL tax rate for financial institutions from 15.0% to 20.0% from March 1, 2020.

Deferred tax assets and liabilities are measured based on temporary differences between the book basis and tax basis of assets and liabilities, tax losses, and adjustments to fair value of securities and derivatives.

According to the requirements in the current regulations, the expected realization of deferred tax assets is based on projections of future results and a technical study approved by the Directors of Santander Brasil.

Income tax (IRPJ) and Social Contribution Tax (CSLL) on Foreign Exchange Variation of Hedges for Investments Held Abroad (Law No. 14,031/2020)

Pursuant to Law No. 14,031/2020, which came in force in July 2020, exchange rate variations arising from hedges on investments held abroad are taxable starting in 2021. Accordingly, in 2021, 50% of the exchange rate variation shall be taxable under the IRPJ and CSLL, while, in 2022, 100% of the exchange rate variation will be considered as taxable.

 123
Table of Contents

 

Tax on Services (ISS)

Each of the Municipalities of Brazil and the Federal District are responsible for establishing the applicable ISS rate, which is charged on the value of services provided by the company, to the municipality where the service renderer is located. The rates vary from 2.0%2% to 5.0%5% and depend on the nature of the service.

On December 30, 2016, Complementary Law n°No. 157/2016 was enacted. This new legislation establishes a minimum rate of 2.0%2% for these types of taxes, no reductions or deductions being permitted. This Lawlegislation provides that the following services are subject to ISS in the municipality in which the service taker is located: (i) card management, including POS services, that may be paid to the municipality where the corresponding POS device has been registered; (ii) leasing; (iii) fund management; and (iv) consortium.

Before the aforementioned Law was enacted, the ISS was due in the municipality in which the service provider was located (irrespective of where the service taker was located). With this new legislation, ISS rates may vary depending on where the service taker is located.

There are several complications that may arise from this new legislation, including (i) as service takers are generally located in several municipalities, it is logistically difficult to comply and collect the taxes; and (ii) there are situations where the municipality of the service taker is not easily identifiable by the credit card company (as is the case for online transactions, for example).

Since the ISS is a municipal tax, the rule must be regulated by each municipality in order to be enforceable. This new rule is only applicable to triggering events occurring from 2018 onwards, when the municipal regulations applicable to the ComplementarySupplementary Law n°No. 157 come into force.

On March 23, 2018, the Brazilian Supreme Court suspended the application of the Complementary Law n°No. 157. It is still suspended. Although,suspended as of the Congress is discussingdate of this annual report. This suspension may be circumvented by the enactment of Complementary Law No. 175/20.

Complementary Law No. 175, published on September 24, 2020, was enacted to create a Complementary law propositionunified ISS collection system, in which taxpayers would be able to centralizecollect ISS in every municipality in Brazil. It’s an effort to facilitate tax collection in order to tackleconsidering the complexity regarding the multiple rulings on ISS, since each municipality can pass its own laws on ISS.

The system is currently under development, and it is expected that it would enable Complementary Law n°No. 157 suspension while making tax collection easier.to be brought back into effect.

PIS and COFINS Tax Rates

PIS and COFINS (respectively, the profit participation contribution and the social security financing contribution, both of which are social contributions due on financialcertain revenues and commissions, net of financial expenses, which arecertain expenses) payable by financial institutions. Theinstitutions and similar entities, as defined by law, are due at the rate isof 0.65% for PIS and 4% for COFINS., respectively. They are levied cumulatively on an accrual basis, and collected monthly.gross revenue billed, which is defined as the total revenues earned by the legal entity, net of certain expenses, such as funding costs.

102 

Table of Contents

The non-financialNon-financial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to non-cumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.

Tax on Financial Transactions (IOF)

IOF is a tax levied on credit, currency exchange, insurance and securities transactions and it is imposed on the following transactions and at the following rates:rates.

Decree No. 10,797/2021 temporarily increased IOF on credit transactions as follows:

 124
Table of Contents

 

Transaction(1)Transaction (1)

Maximum Legal Rate

Current Rate

Credit extended by financial institutions and non-financial entities1.5% or 3% (between 2.04% and 4.08% in 2021)0.0041% per day for loans contracted by legal entities and 0.0082% per day for individuals capped at 365 days. An additional 0.38% rate is applicable in both cases. (Exceptionally, in 2021, 0.00559% per day for legal entities and 0.01118% per day for individuals).
Transactions relating to securities(2)securities (2) 1.5% per day0.5% per day for certain investment funds.
  0% on transactions with equity securities and certain debt securities, such as debentures and real estate receivables and agribusiness receivables (CRI/CRA).
  1% per day on transactions with fixed income derived from federal, state, or municipal public and private bonds, and fixed income investment funds limited to certain percentages of the income raised from investment. This rate is reduced to zero from the 30th day following the acquisition date of the investment and on repurchase agreements carried out by financial institutions and other institutions authorized by the Brazilian Central Bank with debentures issued by institutions belonging to the same group (Decree 8,731/2016).
  0% on the assignment of securities to permit the issuance of Depositary Receipts abroad.
Transactions relating to derivatives25.0%25%Although the maximum rate is 25%, it has been reduced to zero at this moment.
Insurance transactions entered into by insurance companies25%2.38% for health insurance.
  0.38% for life insurance.
  7.38% for other types of insurance.
Foreign exchange transactions(2)25%0.38% (general rule).
  6.38% on credit card transactions as from April 27, 2011.
  6.38% on withdrawals abroad using

103 

Table of Contents

Transaction(1)

Maximum Legal Rate

Current Rate

credit or debit cards as from December 28, 2013.
  6.38% on purchase of travelers checks or loading of international prepaid card as from December 28, 2013.
  0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
  6% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is equal or less than 180 days.
  0% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is higher than 180 days.
  0% for interbank transactions.

  0% for exchange transactions in connection with the outflow of proceeds from Brazil for the remittance of interest on net equity and dividends to be received by foreign investors.
  0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors in the Brazilian financial and capital markets.
  0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors for purposes of initial or additional margin requirements in connection with transactions in stock exchanges.
  0% for exchange transactions for the outflow of funds invested by foreign investors in the Brazilian financial and capital markets.
  0% for exchange transactions for the inflow and outflow of funds invested by foreign investors, including by means of simultaneous foreign exchange transactions, in certificates of deposit of securities, known as Brazilian Depositary Receipts.Receipts (“BDRs”).
  0% for simultaneous exchange transactions, for the inflow of funds by

104 

Table of Contents

Transaction(1)

Maximum Legal Rate

Current Rate

foreign investors derived from the conversion of direct investments in Brazil made pursuant to Law 4,131/62 into investments in stock tradable in stock exchanges, as from May 2, 2016.
  0% for revenues related to the export of goods and services transactions.
  

The applicable rate is 1.10% for acquisitions of foreign currency (Decree 8,731/2016).

The applicable rate for credit on a

foreign bank account belonging to a

resident in Brazil is 1.10%, as from

March 3, 2018.

 

(1)The transactions mentioned in the table are for illustration purposes and do not reflect an exhaustive list of transactions subject to the IOF.

(2)There are some exemptions or specific cases in which the applicable rate is zero.

 

FATCA

The Foreign Account Tax Compliance Act, or “FATCA,” became law in the United States on March 18, 2010. The legislation requires foreign financial institutions, or “FFIs,” (such as Santander Brasil) to enter into an FFI agreement under which they agree to identify and provide the U.S. Internal Revenue Service, or “IRS,” with information on accounts held by U.S. persons and certain U.S.-owned foreign entities, or otherwise face a 30% withholding tax on certain U.S. source withholdable payments. In addition, FFIs that have entered into an FFI agreement will be required to withhold on such payments made to FFIs that have not entered into an FFI agreement, account holders who fail to provide sufficient information to classify an account as a U.S. or non-U.S. account, and U.S. account holders who do not agree to the FFI reporting their accounts to the IRS.

 125
Table of Contents

On September 23, 2014, Brazil and the United States announced that they entered into an intergovernmental agreement, or “IGA”,“IGA,” which became effective in Brazil by virtue of Decree No. 8,5068506 as of August 24, 2015. The aim of the IGA is to improve international tax compliance and implement FATCA. The IGA establishes an automatic annual bilateral exchange of information with the U.S. tax authorities. Under this agreement, Brazilian financial institutions will generally be required to provide certain information about their U.S. account holders to the Brazilian tax authorities (Receita(Receita Federal do Brasil)Brasil), which will share that information with the IRS.

Complying with the required identification, withholding, and reporting obligations requires significant investment in an FFI’s compliance and reporting framework. We are continuing to follow developments regarding FATCA closely and are coordinating with all relevant authorities.

Common Reporting Standard

On December 28, 2016, Normative Ruling n° 1,680No. 1680 was enacted, introducing the Common Reporting Standard in Brazil. The Common Reporting Standard provides for certain account reporting obligations similar to those existing under FATCA. It was created in the context of the OrganisationOrganization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project, which is aimed at reducing tax avoidance. Normative Ruling n°No. 1,680 applies to legal entities required to present the e-Financeira pursuant to Normative Ruling n° 1,571,No. 1571, dated July 2, 2016.

105 

Table of Contents

On the same date, the Normative Ruling n° 1,681No. 1681 was enacted providing for the obligation to annually deliver the “Country to Country Statement,” an ancillary obligation also arising from the discussions under the BEPS Project, before the Brazilian Federal Revenue Service, or “RFB”“RFB,” as a measure to expand information exchange and improve the level of international tax transparency. This new regulation should not have any impact on Santander Brasil, since, as it is controlled by a legal entity resident in Spain, it is not required by the Brazilian regulation to present such statement.

Income Tax Levied on Capital Gains

Law No. 13,259, of March 16, 2016 (“Lawor “Law 13,259/16”) introduced the application of progressive tax rates for income taxation over capital gains recognized by Brazilian individuals and by holders that are not domiciled in Brazil for purposes of Brazilian taxation (“Non-Resident Holders”) on the disposition of assets in general.general, Under Law 13,259/16, the income tax rates applicable to capital gains realized by these investors would be: (i) 15% for the portion of the gains up to R$5 million, (ii) 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million.

The provisions of Law 13,259/16 may apply to Non ResidentNon-Resident Holders pursuant to CMN Resolution 4,373, provided such Non Resident Holders are not located in a Tax Haven. However, Non Resident Holders (whether they are considered to be Non-Resident Holders as a result of CMN Resolution 43734,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and will continue to be taxed at a rate of 25.0%25%.

Most transactions carried out by Non-Resident Holders pursuant to CMN Resolution 4,373 and that result in capital gains are subject to taxation at a fixed 15% rate, provided they are not located in a Tax Haven.

The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.

New Income Tax Bylaw (RIR/18)

Decree 9,580/18, published in November, 2018, revoked and replaced RIR/99 (Decree 3,000/99).

The new RIR/18 consolidates rules regarding Income Tax published until December 31st, 2016.

It includes several rule changes which occurred over time, such as transfer pricing and thin capitalization rules, financial products’ taxation and corporate income tax changes brought by Law 12973/2014, listed below:

·Tax effects connected to IFRS;

·Transitional Tax Regime (RTT) revocation, which was implemented in order to neutralize temporarily the effects related to IFRS until Law 12,973 was enacted;

·Equity-method company valuation, including new provision to tax treatment on goodwill or the discount paid on these entities investments;

·Tax regimen applicable to profits, dividends and interests on equity by Brazilian companies;

·Creation of new tax regimen regarding foreign controlled companies (CFC rules) e its effects on taxation arising from the profits earned abroad by these companies; and

·A new PIS/COFINS calculation basis for financial institutions, including income from essential activity.

Disclosure pursuant to Section 219 of the Iran threat reductionThreat Reduction and Syria Human Rights Act

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.

106 

 126

Table of Contents

Table of Contents

As we are part of the Santander Group, we must also disclose the exposure of other entities of the Santander Group to Iran. The following activities are disclosed in response to Section 13(r) with respect to the Santander Group and its affiliates. During the period covered by this annual report:

(a)       Santander UK holds accounts for two customers, with the first customer holding one GBP Savings Account and one GBP Current Account, and the second customer holding one GBP Savings Account. Both customers, who are resident in the UK, are currently designated by the US under the SDGT sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2019 were negligible relative to the overall profits of Banco Santander S.A.

(b)       During the period covered by this annual report, Santander UK held one savings account with a balance of £1.24, and one current account with a balance of £1,884.53 for another customer resident in the UK who is currently designated by the US under the SDGT sanctions program. The customer relationship pre-dates the designations of the customer under these sanctions. The United Nations and European Union removed this customer from their equivalent sanctions lists in 2008. Santander UK determined to put a block on these accounts and the accounts were subsequently closed on 14 January 2019. Revenues and profits generated by Santander UK on these accounts in the year ended 31 December 2019 were negligible relative to the overall profits of Banco Santander S.A.

(c)       Santander UK holds two frozen current accounts for two UK nationals who are designated by the US under the SDGT sanctions program. The accounts held by each customer have been frozen since their designation and have remained frozen through 2019. The accounts are in arrears (£1,844.73 in debit combined) and are currently being managed by Santander UK Collections & Recoveries department. No revenues or profits were generated by Santander UK on these accounts in the year ended December 31, 2019.

(d)       The Santander Group also has certain legacy performance guarantees for the benefit of Bank Sepah and Bank Mellat (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.

(e)       During the period covered by this annual report, Santander Brasil held one current account with a balance of R$100.0 for a customer resident in Brazil who is currently designated by the U.S. under the SDGT sanctions program. The customer relationship pre-dates the designation of the customer under these sanctions. Santander Brasil determined to terminate the account even prior to the customer being formally designated under the SDGT sanctions program on September 10, 2019, and the account was subsequently closed on October 9, 2019. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2019 were negligible relative to the overall profits of Banco Santander S.A.

(a)Santander UK holds seven blocked accounts for five customers that are currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(b)Santander Consumer Finance, S.A. holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by Santander Consumer Bank, S.A. on these accounts in the year ended December 31, 2021.
(c)Santander Brasil holds a blocked account for a customer with domicile in Brazil designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship with the customer preceded its designation under the sanctions program. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(d)The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.

In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the year ended December 31, 2019,2021 which were negligible relative to the overall revenues and profits of Banco Santander, S.A. The Santander Group has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, deposit taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. The Santander Group is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, the Santander Group intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.

Regulatory Developments Related to COVID-19

The following section summarizes the measures implemented by the CMN and the Brazilian Central Bank to mitigate the consequences of the COVID-19 pandemic on the Brazilian financial system.

Temporary Suspension of Dividend Distributions and Other Payments

On May 29, 2020 the CMN enacted Resolution No. 4,820 in response to the COVID-19 pandemic. Resolution No. 4,820 prohibits financial institutions, such as us, to: (i) offset their capital, including by means of early payment, in excess of amounts equivalent to the minimum mandatory dividend required by the Brazilian Corporate Law, including as interest on capital (ii) repurchase their own shares, subject to certain exceptions as authorized by the Brazilian Central Bank; (iii) reduce their capital stock, except if such reduction is required by law or approved by the Brazilian Central Bank; and (iv) increase the compensation of their officers, directors and members of the board of directors and audit committee, including fixed and variable compensation, CMN Resolution No. 4,280 repealed CMN Resolution No. 4,797.

On December 23, 2020, the CMN enacted Resolution No. 4,885, which made the payment of dividends or interest on capital more flexible. As a result, financial institutions were not allowed to pay in excess of the greater of (x) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (y) the amount equivalent to the mandatory dividends as set forth in article 202 of the Brazilian Corporate Law. This is the only restriction still in force as a result of Resolution No. 4,820.

As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This measure was not applied by the Brazilian Central Bank in 2021.

 127
Table of Contents

Reduction of Capital Conservation Buffer

On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduces the Capital Conservation Buffer (where all rates relate to the total amount of risk weighted assets) required from financial institutions, from 2.5% to 1.25%. The rate of 1.25% will remain in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the Capital Conservation Buffer requirement will gradually be restored to 2.5%. The measure aims to increase the ability of banks to renegotiate credit transactions and maintain engagement in new transactions, considering the current scenario of increased demand for financial services. CMN Resolution No. 4,783 was replaced by CMN Resolution No. 4,958/2021, which maintains the same rates for the periods set forth in the previous rule.

Repos on Sovereign Bonds Denominated in U.S. Dollars

On March 18, 2020, the Brazilian Central Bank issued Circular No. 3,990, which allowed the repurchase transactions of U.S. Dollar denominated federal bonds between the Brazilian Central Bank and Brazilian financial institutions. The Brazilian Central Bank can purchase such bonds with a discount of 10% in comparison to market prices and the financial institution assumes the obligation to purchase the bonds in a future date. The rules also set out a margin transfer during the term of the transaction whenever the exposure is equal or greater than U.S.$500,000. The purpose of this measure is to provide liquidity to the Brazilian sovereign bonds market, by offering liquidity in U.S. Dollars to Brazilian banks and reducing trading volatility of such bonds. Circular No. 3,990 was revoked by Brazilian Central Bank Resolution No. 76, of February 23, 2021, which essentially maintains the same wording established in the previous rule.

Changes to Provision Requirements

On March 16, 2020 CMN enacted Resolution No. 4,782/20, which was amended by Resolution No. 4,856/20, exempting financial institutions from considering certain restructuring of contracts as an indicative that a counterparty may default. Therefore, the measure allows loans to be granted to solvent companies without requiring additional provisions through December 31, 2020. These measures were not applied in 2021.

New Time Deposits with Special Collateral

CMN Resolution No. 4,799/20 has regulated funding through new Time Deposits with Special Collateral (Novo Depósito a Prazo com Garantias Especiais or “DPGEs”), which are deposits taken by financial institutions and guaranteed by the Credit Guarantee Fund (Fundo Garantidor de Crédito or “FGC”). The resolution increased the cap from R$20 million to R$40 million and is intended to strengthen the liquidity strength of smaller financial institutions. The current limit, set forth 4,964/2021, is set at R$90 million.

Central Bank Loans Backed by Debentures and Financial Bills Held by Financial Institutions

On March 23, 2020, the CMN enacted Resolution No. 4,786, which authorized the Brazilian Central Bank to grant loans to multiservice banks, commercial banks, investment banks and saving banks, backed by debentures (corporate debt instruments) held by such institutions and acquired in the secondary market, provided that certain provisions set forth in the ruling are complied with. It is worth mentioning the ruling sets forth that said loans will also be secured by mandatory deposits in Bank Reserve Accounts, in amount equivalent to, at least, the total amount of the transactions, as well as by the debenture collateral.

This is considered a Temporary Special Liquidity Credit Facility, and was another measure to offer financial institutions more liquidity in their transactions. The loans established in Resolution No. 4,786/20 will be available to financial institutions until April 30, 2020 and could be engaged for a 125 business day term, which could be extended, at the Brazilian Central Bank’s discretion, for more 125 business days, provided the maximum term of 359 calendar days.

On April 2, 2020, the CMN enacted Resolution No. 4,795, which authorized the Brazilian Central Bank to grant loans to financial institutions under specific conditions, by means of a Temporary Special Liquidity Credit Facility, upon direct acquisition, in the primary market, of Financial Bills secured by financial assets or securities. The loan was available in tranches, and could reach 100% of the Reference Assets of such financial institutions. The facility became available to financial institutions through December 31, 2020 and the Financial Bills issued thereunder had a term between 30 and 359 calendar days. The first tranche was approved on May 12, 2020, in a total amount of R$17.5 billion. Both rules were revoked on November 1, 2021.

 128
Table of Contents

Flexibilization of Funding Requirements Through Agribusiness Credit Notes (Letras de Crédito do Agronegócio or “LCAs”)

On March 23, 2020, the CMN issued Resolution No. 4,787, which adjusted the assessment base of the mandatory reserve requirements of funds raised through LCAs, which are credit notes issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain, with the purpose of increasing their liquidity. As a result, the rules for applying funds originated from agribusiness activities were relaxed. The Brazilian Central Bank expects an increase in credit extension directed to agribusiness of R$6.3 billion as a result of the measure. The measure was revoked on April 29, 2021.

Employment Support Program providing emergency payroll financing for small and medium-sized businesses

The CMN enacted Resolution No. 4,846 on August 24, 2020, which regulates the granting of loans under the Emergency Employment Support Program (Programa Emergencial de Suporte a Empregos or “PESE”), established through Provisional Measure No. 944/2020. PESE sets forth the offering of an emergency credit line of R$40 billion to finance, for two months, the payroll of small and medium-sized companies that adhere to the program, with the purpose of preserving jobs. Regarding the funding of said credit line, 85% will derive from the National Treasury and the remaining 15% from participating financial institutions, including Santander Brasil. The adhering small and medium-sized businesses will not be able to dismiss workers during the period that the loan is taken out and up to the 60th day after the business receives its last installment. The maximum amount financed per worker will be up to two minimum wages. The funding will go directly to the worker’s account, as is done today through payrolls operated by financial institutions. PESE came into effect on April 6, 2020. CMN Resolution No. 4,846 repealed CMN Resolution No. 4,800.

FX overhedge of equity interests abroad

On March 18, 2020, the CMN enacted Resolution No. 4,784, which amended CMN Resolution No. 4,192, of March 1, 2013. The rule sets forth that the tax credits arising from losses on excess FX position aimed at hedging of investments held abroad by financial institutions will not be deducted from their regulatory capital (patrimônio de referência). The measure aims at providing further capital relief and hence additional comfort for financial institutions to maintain and extend credit.

The changes were incorporated into CMN Resolution No. 4,955, of 2021, which repealed and replaced Resolution No. 4,192.

Higher ceiling for repurchase of financial bills (letras financeiras) by financial institutions

Pursuant to CMN Resolution No. 4,788, issued on March 23, 2020, financial institutions classified as Segment 1 for the proportional application of the prudential regulation, as is our case, may, from March 23 to April 30, 2020, repurchase up to 20% of financial bills of their own issuance, a substantial increase from the previous ceiling of 5%.

Brazilian Central Bank authorized to buy and sell government bonds and private financial assets and securities in the secondary market

Constitutional Amendment No. 106, enacted on May 7, 2020, sets forth emergency economic and budget measures for the Brazilian government during the COVID-19 pandemic. Among them, the Amendment authorizes the Brazilian Central Bank, for the duration of the pandemic, to buy and sell (i) government bonds in local and foreign secondary markets; and (ii) other assets, in domestic secondary financial, capital and payments markets, provided that, at the time of purchase, they have a credit risk rating in the local market equivalent to BB- or higher, conferred by at least one of the three largest international rating agencies, as well as a reference price published by a financial market entity accredited by the Brazilian Central Bank.

 129
Table of Contents

SELECTED STATISTICAL INFORMATION

The following information for Santander Brasil is included for analytical purposes and is derived from, and should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 5. Operating and Financial Review and Prospects.”

107 

Table of Contents

Average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31, of the prior year and each of the month-end balances of the 12 subsequent months. Average income statement and balance sheet data and other related statistical information have been prepared on a consolidated annual basis.

The selected statistical information set forth below includes information atas of and for the years ended December 31, 2019, 2018, 2017, 20162021, 2020, and 20152019 extracted from the audited financial statements prepared in conformity with IFRS as issued by the IASB. See “Presentation of Financial and Other Information” and “Item 3. Key Information-A.Information— A. Selected Financial Data.”

Average Balance Sheet and Interest Rates

 

The following tables show our average balances and interest rates for each of the periods presented. With respect to the tables below and the tables under “—Changes in Net Interest Income – Volume and Rate Analysis” and “—Assets—Earning Assets–Assets – Yield Spread,” (i) we have stated average balances on a gross basis, before netting impairment losses, except for the total average asset figures, which include such netting, and (ii) all average data have been calculated using month-end balances, which is not significantly different from having used daily averages. We stop accruing interest on loans once they are more than 60 days past due. All our non-accrual loans are included in the table below under “Other assets.”

  For the Year Ended December 31,
  2021 2020 2019
  Average Balance(1) Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
  (in millions of R$, except percentages)
Assets and Interest            
Income                
Cash and balances with the Brazilian Central Bank  58,494   2,581   4.4%  54,531   1,552   2.8%  48,670   3,828   7.9%
Loans and amounts due from credit institutions  95,513   5,191   5.4%  104,759   1,519   1.4%  101,981   3,844   3.8%
Of which:                                    
  Reverse repurchase
agreements		  45,458   2,154   4.7%  -     -     -     -     -     -   
Loans and advances to customers  461,141   49,538   10.7%  384,389   44,104   11.5%  323,180   50,406   15.6%
Debt instruments  224,890   19,042   8.5%  203,578   13,556   6.7%  178,811   13,528   7.6%
Other interest – earning assets  -     1,636   -     -     2,044   -     -     1,235   -   
Total interest – earning assets  840,038   77,988   9.3%  747,257   62,775   8.4%  652,642   72,841   11.2%
Equity instruments  2,279   90   3.9%  1,730   34   2.0%  1,464   19   1.3%
Investments in associates  952   -     -     1,098   -     -     1,060   -     -   
Total earning assets  843,269   78,077   9.3%  750,085   62,809   8.4%  655,166   72,860   11.1%
Cash and balances with the Brazilian Central Bank  4,633   -     -     4,800   -     -     4,538   -     -   
Loans and amounts due from credit institutions  441   -     -     6,668   -     -     2,258   -     -   
Impairment losses  (26,908)  -     -     (23,936)  -     -     (22,528)  -     -   
Other assets  81,669   -     -     76,642   -     -     56,912   -     -   
                                     
 130
Table of Contents

 

  For the Year Ended December 31,
  2019 2018 2017
  Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
  (in millions of R$, except percentages)
Assets and Interest                
Income                
Cash and balances with the Brazilian Central Bank  48,670   3,828   7.9%  81,018   5,096   6.3%  105,301   5,954   5.7%
Loans and amounts due from credit institutions  101,981   3,844   3.8%  56,093   2,978   5.3%  23,460   5,107   21.8%
Loans and advances to customers  323,180   50,406   15.6%  304,633   46,471   15.3%  277,797   44,507   16.0%
Debt instruments  178,811   13,528   7.6%  164,111   13,629   8.3%  146,822   13,457   9.2%
Other interest – earning assets  -     1,235   -     -     2,304   -     -     2,393   -   
Total interest – earning assets  652,642   72,841   11.2%  605,855   70,478   11.6%  553,380   71,418   12.9%
Equity instruments  1,464   19   1.3%  1,213   33   2.7%  1,871   83   4.4%
Investments in associates  1,060   -     -     963   -     -     987   -     -   
Total earning assets  655,166   72,860   11.1%  608,031   70,511   11.6%  556,238   71,501   12.9%
Cash and balances with the Brazilian Central Bank  4,538   -     -     4,351   -     -     4,569   -     -   
Loans and amounts due from credit institutions  2,258   -     -     1,676   -     -     2,455   -     -   
Impairment losses  (22,528)  -     -     (21,056)  -     -     (18,169)  -     -   
Other assets  56,912   -     -     56,276   -     -     55,648   -     -   
Tangible assets  9,091   -     -     6,414   -     -     6,484   -     -   
Intangible assets  30,070   -     -     29,839   -     -     30,286   -     -   
Total average assets  735,507   72,860   9.9%  685,531   70,511   10.3%  637,511   71,501   11.2%
Liabilities and Interest Expense                                    
Deposits from the Brazilian Central Bank and
  Deposits from credit institutions		  100,473   4,866   4.8%  95,217   5,367   5.6%  81,797   3,783   4.6%
Property, plant and equipment  8,823   -     -     9,587   -     -     9,091   -     -   
Intangible assets  30,250   -     -     30,769   -     -     30,070   -     -   
Total average assets  942,177   78,077   8.3%  854,615   62,809   7.3%  735,507   72,860   9.9%
Liabilities and Interest Expense                                    
Deposits from the Brazilian Central Bank and Deposits from credit institutions  149,111   4,712   3.2%  111,684   4,327   3.9%  100,473   4,866   4.8%
Of which:                                    
   Repurchase agreements  103,809   4,567   4.4%  -     -     -     -     -     -   
Customer deposits  420,185   13,188   3.1%  380,058   7,504   2.0%  303,741   14,966   4.9%
Of which:                                    
   Repurchase agreements  58,264   -     -    -     -     -     -     -     -   
Marketable debt securities  63,906   4,537   7.1%  68,585   2,786   3.7%  76,194   5,138   6.7%
Subordinated debts  14,550   955   6.6%  13,102   909   6.6%  10,779   660   6.1%
Other interest-bearing liabilities  -     3,277   -     -     2,806   -     -     2,890   -   
Total interest-bearing liabilities  647,752   26,669   4.2%  573,429   18,332   3.2%  491,187   28,520   5.8%
Noninterest bearing demand deposits  33,893   -     -     28,581   -     -     14,612   -     -   
Other liabilities  155,133   -     -     150,759   -     -     133,255   -     -   
Non-controlling interests  329   -     -     315   -     -     617   -     -   
Stockholders’ Equity  105,070   -     -     101,531   -     -     95,836   -     -   
Total average liabilities and equity  942,177   26,669   2.8%  854,615   18,332   2.1%  735,507   28,520   3.9%

 

108 

Table(1)     In the year ended December 31, 2021, we revisited the accounting treatment of Contents

Customer deposits  303,741   14,966   4.9%  285,694   13,577   4.8%  244,364   19,491   8.0%
Marketable debt securities  76,194   5,138   6.7%  71,525   4,607   6.4%  82,055   7,901   9.6%
Subordinated debts  10,779   660   6.1%  10,952   630   5.8%  8,599   548   6.4%
Other interest-bearing liabilities  -     2,890   -     -     4,376   -     -     4,749   -   
Total interest-bearing liabilities  491,187   28,520   5.8%  463,388   28,557   6.2%  416,815   36,472   8.8%
Noninterest bearing demand deposits  14,612   -     -     11,127   -     -     16,394   -     -   
Other liabilities  133,255   -     -     121,198   -     -     115,689   -     -   
Non-controlling interests  617   -     -     555   -     -     745   -     -   
Stockholders’ Equity  95,836   -     -     89,263   -     -     87,868   -     -   
Total average liabilities and equity  735,507   28,520   3.9%  685,531   28,557   4.2%  637,511   36,472   5.7%

electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.

 

Changes in Net Interest Income – Volume and Rate Analysis

The following tables present the changes in our net interest income allocated between changes in average volume and changes in average rate for the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, and for the year ended December 31, 20182020 compared to the year ended December 31, 2017.2019. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

  For the Years Ended 2019/2018 For the Years Ended 2018/2017
  Increase (decrease) due to changes in
  Volume Rate Net change Volume Rate Net change
  (in millions of R$)
Interest and Similar Income
Interest-earning assets            
Cash and balances with the Brazilian Central Bank  (2,348)  1,080   (1,268)  (1,477)  619   (858)
Loans and amounts due from credit institutions  1,915   (1,049)  866   3,624   (5,753)  (2,129)
Loans and advances to customers  2,876   1,059   3,935   4,162   (2,198)  1,964 
Debt instruments  1,166   (1,267)  (101)  1,502   (1,330)  172 
Other interest-earning assets  (1,069)  -     (1,069)  (89)  -     (89)
Total interest-earning assets  2,540   (177)  2,363   7,722   (8,662)  (940)
Equity Instruments  6   (20)  (14)  (24)  (26)  (50)
Total earning assets  2,546   (197)  2,349   7,698   (8,688)  (990)
Interest Expense and Similar Charges
Interest-bearing liabilities                        
Deposits from the Brazilian Central Bank and Deposits from credit institutions  285   (786)  (501)  679   905   1,584 
Customer deposits  878   511   1,389   2,903   (8,817)  (5,914)
Marketable debt securities  309   222   531   (920)  (2,374)  (3,294)
Subordinated liabilities  (10)  40   30   139   (57)  82 
Other interest-bearing liabilities  (1,486)  -     (1,486)  (80)  -     (80)

  For the Years Ended 2021/2020 For the Years Ended 2020/2019
  Increase (decrease) due to changes in
  Volume Rate Net change Volume Rate Net change
  (in millions of R$)
Interest and Similar Income                        
Interest-earning assets                        
Cash and balances with the Brazilian Central Bank   113   854   1,029   414   (2,690)  (2,276)
Loans and amounts due from credit institutions   (134)  4,175   3,672   102   (2,427)  (2,325)
Loans and advances to customers   8,806   (2,809)  5,436   8,493   (14,797)  (6,304)
Debt instruments   1,419   3,681   5,486   1,753   (1,725)  28 
Other interest-earning assets   (408)  —     (408)  809   —     809 
Total interest-earning assets   9,796   5,901   15,215   11,571   (21,639)  (10,068)
Equity Instruments   11   34   56   4   11   15 
Total earning assets   9,807   5,935   15,271   11,575   (21,628)  (10,053)
Interest Expense and Similar Charges                        
Interest-bearing liabilities                        
Deposits from the Brazilian Central Bank and Deposits from credit institutions   1,450   (798)  385   504   (1,043)  (539)
Customer deposits   792   4,431   5,690   3,095   (10,563)  (7,468)
Marketable debt securities   (172)  2,355   2,023   (471)  (2,153)  (2,624)
Subordinated liabilities   95   (51)  39   150   53   203 
Other interest-bearing liabilities   2,421   —     2,421   235   —     235 
Total interest-bearing liabilities   4,587   5,937   10,558   3,513   (13,706)  (10,193)

 

109 

 131

Table of Contents

Table of Contents

Total interest-bearing liabilities(24)(13)(37)2,721(10,343)(7,622)

Assets

Earning Assets – Yield Spread

The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

  For the Year Ended December 31,
  2019 2018 2017
  (in millions of R$, except percentages)
Average total interest – earning assets  652,642   605,855   553,380 
Interest and dividends on equity securities(1)  72,860   70,511   71,501 
Net interest income  44,340   41,954   35,029 
Gross yield(2)  11.2%  11.6%  12.9%
Net yield(3)  6.8%  6.9%  6.3%
Yield spread(4)  5.3%  5.4%  4.0%

  For the Year Ended December 31,
  2021 2020 2019
  (in millions of R$, except percentages)
Average earning assets  840,038   747,257   652,642 
Interest and dividends on equity securities(1)  78,078   62,807   72,860 
Net interest income  49,193   44,480   44,340 
Gross yield(2)(*)  9.3%  8.4%  11.2%
Net yield(3)(*)  5.9%  6.0%  6.8%
Yield spread(4)(*)  4.8%  5.2%  5.3%
 

(*)Yield information does not give effect to changes in fair value that are reflected as a component of stockholder’s equity.

(1)Total earning assets plus dividends from companies accounted for by the equity method (equity instruments).

(2)Gross yield is the amount of “Interest and dividends on equity securities” divided by “Average earning assets.”

(3)Net yield is the amount of “Net interest income” divided by “Average earning assets.”

(4)Yield spread is the difference between the average rate of “Total earning asset” and the average rate of “Total interest-bearing liabilities.”

 

Return on Equity and Assets

The following table presents our selected financial ratios for the periods indicated.

 132
Table of Contents

 

  For the Year Ended December 31,
  2019 2018 2017
ROA: Return on average total assets  2.3%  1.9%  1.4%
ROE: Return on average stockholders’ equity  17.4%  14.3%  10.4%
ROE (adjusted) (1)  24.6%  21.0%  15.4%
Average stockholders’ equity as a percentage of average total assets  13.0%  13.0%  13.8%
Payout(2)  65.8%  52.5%  70.7%

  For the Year Ended December 31,
  2021 2020 2019
ROA: Return on average total assets   1.7%  1.6%  2.3%
ROE: Return on average stockholders’ equity   14.8%  13.3%  17.4%
ROE (adjusted) (1)   20.2%  18.5%  24.6%
Average stockholders’ equity as a percentage of average total assets   11.2%  11.9%  13.0%
Payout(2)   62.0%  24.7%  64.9%
             
 

(1)“Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” is a non-GAAP financial measure which adjusts “Return on average stockholders’ equity” to exclude the goodwill arising from the acquisition of Banco Real in 2008, Getnet and Super, both in 2014, and Banco Olé Bonsucesso Consignado S.A. in 2015, 60%, and the remaining 40% in 2020. See “Item 3. Key Information—A. Selected Financial Data—Selected Consolidated Ratios” for a reconciliation of “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” to “Return on average stockholders’ equity.”

110 

Table of Contents

equity” to exclude the goodwill arising from the acquisition of Banco Real in 2008. See “Item 3. Key Information—A. Selected Financial Data—Selected Consolidated Ratios” for a reconciliation of “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” to “Return on average stockholders’ equity.”

(2)Dividend payout ratio (dividends declared per preferred share divided by net income per preferred share).

 

Interest-Earning Assets

(other than Loans)

The following table shows the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

 For the Year Ended December 31, For the Year Ended December 31,
 2019 2018 2017 2021 2020 2019
Cash and balances with the Brazilian Central Bank  7.5%  13.4%  19.0%  7.0%  7.3%  7.5%
Loans and amounts due from credit institutions  15.6%  9.3%  4.2%  11.4%  14.1%  15.6%
Loans and advances to customers  49.5%  50.3%  50.2%  54.9%  51.4%  49.5%
Debt instruments  27.4%  27.0%  26.5%  26.8%  27.2%  27.4%
Total interest-earning assets  100%  100%  100%  100%  100%  100%
            

 

Loans and Amounts Due from Credit Institutions

For further information about Loans and Amounts Due from Credit Institutions, see note “5 – Loans and amounts due from credit institutions”5 to our audited consolidated financial statements included elsewhere in “Item 18. Financial Statements” of this annual report.

Investment Securities

As of December 31, 20192021 and 2018,2020, the book value of investment securities was R$176228 billion and R$177232 billion, respectively (representing 23%24.5% and 24.9%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$136171 billion, or 77.3%75.3% and R$117192 billion, or 66.0%82.8% of our investment securities as of December 31, 20192021 and 2018,2020, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements.

statements included elsewhere in this annual report.

The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:

 

 As of December 31, As of December 31,
 2019 2018 2017 2021 2020 2019
 (in millions of R$) (in millions of R$)
Debt securities                  
Government securities—Brazil  135,848   116,531   122,362   171,437   191,896   135,848 
Debentures and promissory notes  13,875   10,556   12,097   19,882   17,072   13,875 
Other debt securities  23,609   48,346   14,626   33,894   21,134   23,609 
Total domestic/debt securities  173,332   175,433   149,086   225,212   230,102   173,332 
                        
Equity securities                        
Shares of Brazilian companies  665   783   389   1,870   1,953   665 
Shares of foreign companies  -     2   5   49   14   —   
Investment fund units and shares  1,693   320   1,235   609   363   1,693 
Total equity securities  2,358   1,106   1,629   2,528   2,329   2,358 
Total investment securities  175,690   176,539   150,715   227,740   232,432   175,690 

 

 133
Table of Contents

As of December 31, 20192021 and 2018,2020, we held no securities of single issuers or related groups of companies whose aggregate book or market value exceedexceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented 140%151.5% and 127%180.5%, respectively of our stockholders’ equity. As of December 31, 20192021 and 2018,2020, the total value of our debt securities was

111 

Table of Contents

approximately 179%212.5% and 191%217.4%, respectively, of stockholders’ equity.

The following table analyzes the maturities and weighted average yields of our debt investment securities not carried at fair value (before impairment allowance) as of December 31, 2019.2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.

  Maturing within 1 year Maturing between 1 and 5 years Maturing between 5 and 10 years Maturing after 10 years Total
  (in R$ millions)
Debt securities                    
Government securities—Brazil (1)  107,450   41,694   22,293   -     171,437 
Other debt securities (2)  34,295   3,045   16,435   -     53,776 
Total debt investment securities  141,745   44,739   38,728   -     225,212 

 

  Maturing within 1 year Maturing between 1 and 5 years Maturing between 5 and 10 years Maturing after 10 years Total
  (in R$ millions)
Debt securities          
Government securities—Brazil  20,263   90,716   20,476   8,775   135,848 
Other debt securities  -     25,031   8,071   -     37,484 
Total debt investment securities  20,263   115,747   28,547   8,775   173,332 
(1)Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and NTN-F).
(2)Includes balances of debentures and promissory notes.

 

The average rate for debt investment securities is 7.6%7.1%.

Investment Portfolio – Yields

The following table shows the balances and weighted-average yields for our debt securities not carried at fair value through earnings, for each range of maturities, as of December 31, 2021. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.

  Maturing within 1 year Yield within 1 year Maturing between 1 and 5 years Yield between 1 and 5 years Maturing between 5 and 10 years Yield between 5 and 10 years Maturing after 10 years Yield after 10 years
  (in R$ millions, except percentages)
Weighted-average yields      %       %       %       % 
Domestic:                                
Brazilian Government   16,969   9.8   61,237   8.4   19,282   6.8   5,297   6.8 
Other fixed-income securities   25,793   8.4   27,239   9.0   207   7.8   369   9.2 
Impaired financial assets   829   8.4   257   9.0   842   7.8   -     -   
Impairment losses   (13)  8.4   (267)  9.0   (784)  7.8   -     -   
Total domestic   43,578   6.4   88,466   7.2   19,547   6.8   5,666   6.7 
International:                                
Foreign government   1,588   5.0   7,756   5.0   1,917   4.7   -     -   
Other fixed-income securities   720   4.3   5,122   2.7   -     2.7   -     -   
Impaired financial assets   105   4.3   -     2.7   -     2.7   -     -   
Impairment losses   (32)  4.3   (31)  2.7   (64)  2.7   -     -   
Total international   2,381   4.1   12,847   3.6   1,853   2.7   -     -   
Total weighted-average yields       8.7       8.0       6.6       6.7 
                                 

 

Domestic and Foreign Currency

The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.

 134
Table of Contents

 

  As of December 31,
  2019 2018 2017
  Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
  (in millions of R$)
Assets            
Cash and balances with the Brazilian Central Bank (1)  4,878   15,250   16,651   15,065   18,144   15,981 
Debt instruments  164,447   8,885   166,743   8,690   137,420   11,666 
Loans and amounts due from credit institutions, gross (1)  107,694   1,553   79,166   454   65,279   -   
Loans and advances to customers, gross  326,421   20,835   304,031   17,902   269,126   18,703 
Equity Instruments  2,358   -     1,106   -     1,624   6 
Total assets  605,798   46,523   567,697   42,111   491,593   46,356 
Liabilities                        
Financial Liabilities at Amortized cost:                        
Deposits from the Brazilian Central Bank and Deposits from credit institutions  58,283   40,988   74,160   24,863   56,563   22,812 
Customer deposits  336,515   -     304,198   -     276,042   -   
Marketable debt securities  64,987   8,715   70,109   4,517   68,335   1,912 
Subordinated debts  -     -     9,886   -     519   -   
Debt instruments eligible to compose capital  -     10,176   -     9,780   8,435   -   
Other financial liabilities  60,885   -     51,729   -     44,261   -   
Total liabilities  520,670   59,879   510,082   39,160   454,155   24,724 

(1)In the fiscal year ended December 31, 2019, the balances related to compulsory deposits were reclassified from cash and reserves at the Brazilian Central Bank to the item Loans and other amounts with credit institutions for better presentation and, consequently, the respective comparative balances also have been reclassified.
  As of December 31,
  2021 2020 2019
  Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
  (in millions of R$)
Assets            
Cash and balances with the Brazilian Central Bank  21,543   10,851   4,531   15,617   4,878   15,250 
Debt instruments  208,133   17,080   226,787   3,315   164,447   8,885 
Loans and amounts due from credit institutions, gross  91,868   3,797   109,339   3,520   107,694   1,553 
Loans and advances to customers, gross  398,335   66,509   396,950   20,822   326,421   20,835 
Equity Instruments  2,078   45   1,675   -     2,358   -   
Total assets   721,957   98,282   739,283   43,275   605,798   46,523 
Liabilities                        
Financial Liabilities at Amortized cost:                        
Deposits from the Brazilian Central Bank and Deposits from credit institutions  62,332   58,674   86,564   45,093   58,283   40,988 
Customer deposits  470,973   -     445,900   -     336,515   -   
Marketable debt securities  66,027   13,009   47,476   9,399   64,987   8,715 
Debt instruments eligible to compose capital  -     12,781   -     13,120   -     10,176 
Other financial liabilities  68,496   413   66,727   153   60,885   -   
Total liabilities   667,828   84,877   646,667   67,766   520,670   59,879 

 

Loan Portfolio

As of December 31, 2019,2021, our total loans and advances to customers weretotaled R$347493 billion (45.6%(53.0% of our total assets). Net impairment losses, loans and advances to customers weretotaled R$327465 billion as ofDecember 31, 2019 (42.9%2021 (49.9% of our total assets). In addition to loans, we had outstanding as of December

112 

Table of Contents

31, 2019, 2018, 2017, 2016 and 2015, R$125.9 billion, R$122.7 billion, R$106.9 billion, R$91.2 billion and R$91.9 billion respectively, of loan commitments drawable by third parties.parties totaling R$146.0 billion, R$131.7 billion, R$125.9 billion as of December 31, 2021, 2020, 2019, respectively.

Types of Loans by Type of Customer

Substantially allThe majority of ourthe loans we have outstanding are to borrowers domiciled in Brazil and are denominated inreais. The table below analyzes our loans and advances to customers (including securities purchased under agreements to resell), by type of customer loan, at each of the dates indicated. reais. For each loan category, of loan, we maintain specific risk management policies that are in line with the standards of the Santander Group, and aswhich in turn, are managed and monitored by our board of officers through the credit committee. Ourcommittee, The credit approval processesprocess for each loan category of loan areis structured primarily around our business segments. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk” for details on our credit approval policies for retail and wholesale lending.

We have a diversified loan portfolio, with no specific concentration exceeding 10% of our total loans. Furthermore, currently, 1.01%loans, Currently, 1.2% of our loan portfolio is allocated to our largest debtor and 6.79%7.4% to ourthe next 10 largest debtors.

For further information about the breakdown of our Loans breakdown and Maturity see note “9 – Loans and advances to clients” sections “a - Breakdown” and “b – Detail” in “Item 18. Financial Statements,” which containsof note “9 – Loans and advances to customers” to our audited consolidated financial statements preparedincluded in accordance with IFRSthis annual report.

Maturity

The following table sets forth an analysis by maturity of our loans, by type and status, as issued by the IASB.of December 31, 2021.

  As of December 31, 2021
Debt Sector by Maturity Less than 1 year % of
total		 Between 1 and 5 years % of
total		 Between 5 and 15 years % of
total		 More than 15 years % of
total		 Total % of
total
Commercial and industrial   165,729   61.37%  73,723   45.81%  8,222   20.16%  -     -     247,674   50.20%
Real estate   3,986   1.48%  10,138   6.30%  19,337   47.41%  21,278   98.58%  54,739   11.10%
Installment loans to
individuals 		  99,051   36.68%  75,833   47.12%  13,219   32.41%  306   1.42%  188,409   38.19%
Lease financing   1,285   0.48%  1,238   0.77%  10   0.02%  -     -     2,533   0.51%
Loans and advances to customers, gross   270,051   100.00%  160,932   100.00%  40,787   100.00%  21,585   100.00%  493,355   100.00%

 135
Table of Contents

 

Fixed and Variable Rate Loans

The following table sets forth a breakdown of our fixed and variable rate loans by maturitytype and status as of December 31, 2019.2021.

 Fixed and variable rate loans with maturity
 Less than one year One to five years Over five years Total Fixed and variable rate loans maturing in
 Balance % of Total Balance % of Total Balance % of Total Balance % of Total Less than one year Between one and five years Between five and 15 years Over 15 years Sub-total more than one year Total
 (in millions of R$, except percentages) (in millions of R$, except percentages)
Fixed rate  155,506   84   91,283   77   11,972   28   258,761   75                         
Commercial and industrial   111,499   29,745   1,941   -     31,865   143,185 
Real estate   24   73   62   18   153   177 
Installment loans to individuals   105,045   74,689   12,965   306   87,961   193,005 
Lease financing   522   694   -     -     695   1,217 
Total Fixed rate   217,090   105,201   14,968   324   120,493   337,583 
Variable rate  30,691   16   26,558   23   31,247   72   88,496   25                         
Commercial and industrial   37,149   33,524   2,109   -     35,633   72,782 
Real estate   3,962   10,065   19,274   21,260   50,600   54,562 
Installment loans to individuals   11,087   11,598   4,426   -     16,024   27,111 
Lease financing   763   544   9   -     553   1,316 
Total Variable rate   52,961   55,731   25,819   21,261   102,810   155,771 
Total  186,197   100   117,841   100   43,218   100   347,256   100   270,051   160,932   40,787   21,585   223,304   493,355 

 

Cross-Border Outstandings

The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.

      As of December 31,    
  2019   2018   2017  
  Balance % of Total Assets Balance % of Total Assets Balance % of Total Assets
  (in millions of R$, except percentages)          
OECD countries(1)            
Spain  2,589   0.3   1,984   0.3   1,217   0.2 
United States  9,081   1.2   3,721   0.5   3,304   0.5 
Netherlands  2,355   0,3   1,531   0.2   3,853   0.6 
United Kingdom()  158   0.0   1,003   0.1   6,508   1.0 

113 

Table of Contents

Other OECD countries(2)  218   0.0   16,264   2.4   1,072   0.1 
Total OECD  14,401   1.9   24,503   3.6   15,954   2.5 
Non-OECD countries                        
Latin American countries(2)  189   0.0   1,382   0.2   314   -   
Cayman Islands  467   0.1   3,528   0.5   (8,304)  (1.3)
Other(2)  483   0.1   2,397   0.3   100   -   
Total non-OECD  1,139   0.1   7,307   1.1   (7,890)  (1.3)
Total  15,540   2.0   31,810   4.6   8,064   1.2 

  As of December 31,
  2021 2020 2019
  Balance % of Total Assets Balance % of Total Assets Balance % of Total Assets
  (in millions of R$, except percentages)
OECD countries(1)            
Spain  108   -   437   -   1,984   0.3 
United States  835   0.1   12,674   1.4   3,721   0.5 
Netherlands  -   -   80   -   1,531   0.2 
United Kingdom  20   -   29   -   1,003   0.1 
Luxembourg  13,058   1.4   -   -   -   - 
Other OECD countries(2)  1,958   0.2   3,534   0.4   16,264   2.4 
Total OECD  15,979   1.7   16,754   1.8   24,503   3.6 
Non-OECD countries                        
Latin American countries(2)  560   0.1   1,204   0.1   1,382   0.2 
Cayman Islands  1,679   0.2   2,917   0.3   3,528   0.5 
Other(2)  282   -   1,189   0.1   2,397   0.3 
Total non-OECD  2,521   0.3   5,310   0.6   7,307   1.1 
Total  18,500   2.0   22,064   2.4   31,810   4.6 

 

(1)The Organization for Economic Cooperation and Development.

(2)Aggregate outstandings in any single country in this category do not exceed 1.2%1.5% of our total assets.
 136
Table of Contents

 

The following table presents the amounts of our cross-border outstandings as of December 31, 2019, 20182021, 2020 and 20172019 by type of borrower where outstandings in the borrower’s country exceeded 1.2% of our total assets.

  Government Banks and Other Financial Institutions Commercial and Industrial Other Loans Total
  (in millions of R$)
2017          
United States  -     3,168   20   115   3,303 
Netherlands  -     -     3,853   -     3,853 
Austria  -     -     280   (5)  275 
United Kingdom  -     5   247   6,256   6,508 
Cayman Islands  5,656   -     1,485   (15,445)  (8,304)
Total  5,656   3,172   5,885   (9,079)  5,634 
2018                    
United States  -     3,569   23   130   3,722 
Netherlands  -     -     1,531   -     1,531 
Austria  -     -     197   (4)  193 
United Kingdom  -     1   38   964   1,003 
Cayman Islands  3,541   1,987   3,685   (5,685)  3,528 
Total  3,541   5,557   5,474   (4,595)  9,977 
2019                    
United States  -     8,710   55   316   9,081 
Netherlands  -     -     2,355   -     2,355 
Austria  -     -     127   (2)  125 
United Kingdom  -     -     7   151   158 
Cayman Islands  469   263   488   (752)  467 
Total  469   8,973   3,030   (287)  12.185 

  Government Banks and Other Financial Institutions Commercial and Industrial Other Loans Total
  (in millions of R$)
2019          
United States  -     8,710   55   316   9,081 
Netherlands  -     -     2,355   -     2,355 
Austria  -     -     127   (2)  125 
United Kingdom  -     -     7   151   158 
Cayman Islands  469   263   488   (752)  468 
Total  469   8,973   3,032   (287)  12,187 
2020                    
United States  -     12,653   9   12   12,674 
Netherlands  -     -     80   -     80 
Austria  -     -     -     444   444 
United Kingdom  -     28   -     1   29 
Cayman Islands  -     1,341   (1)  1,577   2,917 
Total  -     14,022   86   2,034   16,144 
2021                    
United States  -     3,943   1   12   3,956 
Netherlands  -     -     3   -     3 
Austria  -     -     -     595   595 
United Kingdom  -     28   -     -     28 
Cayman Islands  -     2,815   -     1,290   4,105 
Total  -     6,786   4   1,897   8,687 

 

Non-current assets held for sale

For further information, see note “10 - Non-current assets held for sale” in “Item 18. Financial Statements,” which contains10 to our audited consolidated financial statements preparedincluded elsewhere in accordance with IFRS as issued by the IASB.

this annual report.

Liabilities

Deposits

The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.

For further information, see note “16 – Deposits from the Brazilian Central Banknotes 16 and Deposits from Credit Institutions” and “17 – Client deposits” in “Financial Statements” in “Item 18. Financial

114 

Table of Contents

Statements,” which contains17 to our audited consolidated financial statements preparedincluded elsewhere in accordance with IFRS as issued by the IASB.this annual report.

 

The following table shows the maturity of time deposits (excluding inter-bank deposits) in denominations of U.S.$100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.

  As of December 31, 20192021
  Domestic International
  (in millions of R$)
Under 3 months  216,896255,120   - 
3 to 6 months  62,67225,742   - 
6 to 12 months  62,67151,483   - 
Over 12 months  93,547257,622   - 
Total  435,786589,967   - 

 

 137
Table of Contents

The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2021.

 

As of
December 31, 2021

Maturing

Three Months or Less

Over Three Months Through Six Months

Over Six Months Through
12 Months

Over 12 months

 (in millions of R$)
Total uninsured deposits 285,96796,14620,89668,96099,965

Short-Term Borrowings

The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.

  As of December 31,
  2019 2018 2017
  Amount Average Rate Amount Average Rate Amount Average Rate
  (in millions of R$, except percentages)
Securities sold under agreements to repurchase            
As of December 31  123,941   5.00%  99,379   7.34%  97,421   8.33%
Average during the period (1)  100,473   4.84%  102,051   9.67%  98,567   10.63%
Maximum month-end balance  123,941       113,691       119,007     
Total short-term borrowings at year end  123,941       99,379       97,421     

  As of December 31,
  2021 2020 2019
  Amount Average Rate Amount Average Rate Amount Average Rate
  (in millions of R$, except percentages)
Securities sold under agreements to repurchase                        
As of December 31  115,964   1.76%  112,477   1.90%  123,941   5.00%
Average during the period (1)  114,484   2.58%  112,096   2.71%  100,473   4.84%
Maximum month-end balance  155,484       155,174       123,941     
Total short-term borrowings at year end  115,964       112,477       123,941     
 

(1)The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.

 

Allowance for Loan Losses

Changes in Allowances for Impairment Losses on the Balances of “Loans and receivables”

The following tables analyze changes in our allowances for impairment losses for the periods indicated. For further discussion of movements in the allowances for impairment losses,information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2019, 20182021, 2020 and 2017—2019—Results of Operations—Impairment Losses on Financial Assets (Net).”

  As of December 31,
  2019 2018 2017 2016 2015
  (in millions of R$)
Balance at beginning of year  22,969   18,262   18,191   15,412   13,563 
Initial adoption of IFRS 9  -     2,461   -     -     -   
Balance adjusted  22,969   20,723   18,191   15,412   13,563 
Impairment losses charged to income for the year  14,361   13,540   13,493   14,383   13,723 
Write-off of impaired balances against recorded impairment allowance  (14,705)  (11,294)  (13,422)  (11,605)  (11,874)
Balance at end of year  22,625   22,969   18,262   18,191   15,412 
Of which:                    
Loans and advances to customers  20,557   20,242   15,409   16,435   15,233 
Loans and amounts due from credit institutions  14   14   69   201   179 

115 

Table of Contents

Provision for Debt Instruments  2,055   2,714   2,784   1,555   144 
Recoveries of loans previously charged off(1)  991   827   1,154   994   757 

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$)
Balance at beginning of year  25,640   22,626   22,969   18,262   18,191 
Initial adoption of IFRS 9  -     -     -     2,461   -   
Balance adjusted  25,640   22,626   22,969   20,723   18,191 
Impairment losses charged to income for the year  16,987   18,311   14,361   13,540   13,493 
Write-off of impaired balances against recorded impairment allowance  (12,904)  (15,297)  (14,705)  (11,294)  (13,422)
Balance at end of year  29,723   25,640   22,626   22,969   18,262 
Of which:                    
Loans and advances to customers  28,511   24,053   20,557   20,242   15,409 
Loans and amounts due from credit institutions  22   9   14   14   69 
Debt Instruments  1,191   1,577   2,055   2,714   2,784 
Recoveries of loans previously written off(1)  1,536   861   991   827   1,154 
 

(1)Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.

 

 138
Table of Contents

Allowance by Type of Borrower

The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.

  For the Year Ended December 31,
  2019 2018 2017 2016 2015
  (in millions of R$)
Recoveries of loans previously charged  off(1)  991   827   1,154   994   757 
Commercial and industrial  481   345   413   563   294 
Real estate – construction  47   103   210   103   86 
Installment loans to individuals  456   370   521   314   348 
Lease finance  8   9   10   14   29 
Impairment losses charged to income for the year(1)  14,361   13,540   13,492   14,383   13,723 
Commercial and industrial  2,377   3,620   5,499   6,523   6,634 
Real estate – construction  95   193   471   369   91 
Installment loans to individuals  11,866   9,708   7,461   7,617   6,766 
Lease finance  23   19   61   (125)  232 
Write-off of impaired balances against recorded impairment allowance  (14,705)  (11,294)  (13,422)  (11,605)  (11,874)
Commercial and industrial  (4,101)  (3,981)  (5,716)  (4,553)  (4,953)
Real estate – construction  (93)  (191)  (342)  (190)  (77)
Installment loans to individuals  (10,462)  (7,100)  (7,312)  (6,811)  (6,622)
Lease finance  (49)  (22)  (52)  (51)  (222)

  For the Year Ended December 31,
  2021 2020 2019 2018 2017
  (in millions of R$)
Recoveries of loans previously charged off(1)  1,536   861   991   827   1,154 
Commercial and industrial  463   422   520   345   413 
Real estate – construction  64   56   47   103   210 
Installment loans to individuals  1,002   370   417   370   521 
Lease finance  7   13   8   9   10 
Impairment losses charged to income for the year(1)  16,987   18,312   14,361   13,540   13,491 
Commercial and industrial  3,340   6,919   2,377   3,620   5,499 
Real estate – construction  116   81   95   193   471 
Installment loans to individuals  13,532   11,309   11,866   9,708   7,461 
Lease finance  (1)  3   23   19   61 
Write-off of impaired balances against recorded impairment allowance  (12,904)  (15,297)  (14,705)  (11,294)  (13,422)
Commercial and industrial  (5,153)  (4,617)  (5,713)  (3,981)  (5,716)
Real estate – construction  (167)  (232)  (108)  (191)  (342)
Installment loans to individuals  (7,576)  (10,433)  (8,834)  (7,100)  (7,312)
Lease finance  (8)  (15)  (49)  (22)  (52)
 

(1)Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.

 

The table below shows a breakdown of allowances for credit losses by type of borrowers and the percentage of loans in each category as a share of total loans at the date indicated.

  As of December 31,
  2021 % of Total Loans 2020 % of Total Loans 2019 % of Total Loans
  (in millions of R$, except percentages)
Borrowers            
Commercial and industrial  8,325   28.0   9,757   38.1   7,455   33.0 
Real estate  154   0.5   194   0.8   345   1.5 
Installment loans to individuals  21,240   71.5   15,676   61.1   14,800   65.4 
Lease financing  4   -   14   0.1   26   0.1 
Total  29,723   100   25,640   100.0   22,626   100.0 
                         

 

  As of December 31,
  2019 % of Total Loans 2018 % of Total Loans 2017 % of Total Loans
  (in millions of R$, except percentages)
Borrowers            
Commercial and industrial  7,836   35   10,792   47   10,338   56.6 
Real estate – construction  355   2   358   2   493   2.7 
Installment loans to individuals  14,409   64   11,768   51   7,374   40.4 
Lease financing  25   0   51   0   56   0.3 
Total  22,625   100   22,969   100.0   18,261   100.0 

 

Internal Risk Rating

The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:

  As of December 31,
  2021 2020 2019
  (in millions of R$)
Internal Risk Rating            
Low  374,505   347,315   257,133 
Medium-low  79,217   24,277   56,549 
Medium  14,590   26,232   11,755 
Medium-high  9,413   3,896   8,512 
High  15,630   16,101   13,307 
Loans and advances to customers, gross  493,355   417,822   347,257 

 

116 

 139

Table of Contents

Table of Contents

  As of
  December 31,
  2019 2018 2017
  (in millions of R$)
Internal Risk Rating      
             

Low  257,133   240,440   226,098 
Medium-low  56,549   50,486   33,635 
Medium  11,755   11,967   10,423 
Medium-high  8,513   7,722   8,215 
High  13,307   11,318   9,457 
Loans and advances to customers, gross  347,257   321,933   287,829 

For further information on our internal risk rating levels and their corresponding probability of default, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk—Credit Monitoring.”

Renegotiation Portfolio

The renegotiation portfolio for the year ended on December 31, 20192021 amounted to R$1521.7 billion, compared to R$1420.5 billion for the same period in 2018,2020, an increase of R$1,9661,193 million or 14.5%.5.8%, This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.

The renegotiation portfolio was covered by allowances for impairment losses of 48.5%44.7% as of December 31, 20192021 and 53.9%44.0% as of December 31, 2018.2020. These levels are considered appropriate for the characteristics of these loans and advances to customers.

The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:

 2019 2018 2017 2021 2020 2019
 (in millions of R$, except percentages) (in millions of R$, except percentages)
Renegotiation Portfolio by type of customer            
Commercial and industrial  5,141   5,949   6,086   5,322   5,862   5,141 
Real Estate  -     -     1 
Installment loans to individuals  10,102   7,492   6,047   16,356   14,623   10,102 
Financial leasing  239   75   79   5   5   239 
Total  15,482   13,516   12,213   21,683   20,490   15,482 
Allowances for impairment losses  7,501   7,279   6,596   9,698   9,019   7,501 
Coverage ratio  48.45%  53.85%  54.0%  44.7%  44.0%  48.4%

 

Balances are deemed to be impaired when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts on the dates indicated in the loan agreement, after taking into account the collateral guarantees received to secure (fully or partially) collection of the related balances.

In relation to renegotiated products, we, throughAs established in our internal renegotiation policy, require at least a minimum amount of payment of quotasin order for any renegotiated products to be consideredclassified as performing, we must, receive an amount equivalent to at least 10% of the total amount outstanding in the six months which follow the renegotiation date (note that the classification of suchthese transactions will remain classified as renegotiated operations will remain even after receiving such payments). Renegotiated loans that are more than 60 days later than due dateoverdue are also accounted for as impaired.

Since 2015, weWe increased our efforts regarding the collection of loans that are less than 60 days past due and also in relation to written off loans. We are also continuing with our strategy (in place since 2012) of granting loans to persons with low risk profile and higher levels of collaterals and guarantees.

Impaired Assets

The following table shows our impaired assets. assets, excluding country risk.

117 

Table of Contents

  As of December 31,
  2019 2018 2017 2016 2015
  (in millions of R$, except percentages)
Impaired assets          
                     

Past due and other impaired assets(1)  23,426   22,426   19,145   18,887   18,599 
Impaired assets as a percentage of total loans  6.7%  7.0%  6.7%  7.0%  7.0%
Net loan charge-offs as a percentage of total loans  4.3%  3.5%  4.7%  4.3%  4.4%
Net loan charge-offs as a percentage of average total loans  5.3%  3.8%  4.8%  4.5%  4.5%

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$, except percentages)
Impaired assets                    
Past due and other impaired assets(1)  26,923   23,176   23,426   22,426   19,145 
Impaired assets as a percentage of total loans  5.5%  5.5%  6.7%  7.0%  6.7%
Net loan charge-offs as a percentage of total loans  2.6%  3.7%  4.2%  3.5%  4.7%
Net loan charge-offs as a percentage of average total loans  2.8%  3.8%  4.6%  3.8%  4.8%
 

(1)Includes as of December 31, 2019,2021, R$2,7882,528 million of doubtful loans (R$2,028 million in 2020, R$2,788 million in 2019, R$3,754 million in 2018 and R$5,439 million in 2017, R$5,576 million in 2016 and R$5,549 million in 2015)2017) that were not past-due.

 

 140
Table of Contents

Evolution of Impaired Assets

Our impaired assets increased by 4.5%16.2%, or R$1,0003,747 million, to R$23,42626,923 million as of December 31, 2019,2021, compared to R$22,42623,176 million as of December 31, 2018.2020. Provisions for impairment losses, including total recoveries of loans previously charged off, decreased 1.5%increased 15.9%, or R$3444,083 million, to R$22,626 29,723 million as of December 31, 2019,2021, compared to R$22,969 25,640 million as of December 31, 2018.2020. Offsetting these effects were recoveries of R$9911,536 million on loans previously written off as of December 31, 20192021 and R$ 827861 million as of December 31, 2018.2020.

We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2021.

The following table shows the changes in our impaired assets at the dates indicated:

  As of December 31,
  2019 2018 2017 2016 2015
  (in millions of R$)
Balance at beginning of year  22,426   19,145   18,887   18,599   14,011 
Initial Adoption of IFRS9(1)  -     703   -     -     -   
Adjusted Balance  22,426   19,848   18,887   18,599   14,011 
Net additions  16,001   13,872   13,679   11,893   16,462 
Write-offs  (15,001)  (11,294)  (13,422)  (11,605)  (11,874)
Balance at end of year  23,426   22,426   19,145   18,887   18,599 

  As of December 31,
  2021 2020 2019 2018 2017 2016
    (in millions of R$)
Balance at beginning of year  23,176   23,426   22,426   19,145   18,887   18,599 
Initial Adoption of IFRS9 (1)  -     -     -     703   -     -   
Adjusted Balance  23,176   23,426   22,426   19,848   18,887   18,599 
Net additions  18,429   14,758   16,001   13,872   13,679   11,893 
Write-offs  (14,681)  (15,008)  (15,000)  (11,294)  (13,422)  (11,605)
Balance at end of year  26,923   23,176   23,426   22,426   19,145   18,887 
(1)(1)Further information, see Financial Statements notes 1 and 9.9 to our audited consolidated financial statements included elsewhere in this annual report. 

 

The amount of “net additions” for any period is assets that became impaired in that period less assets that were impaired but became performing in that period. In 2019, better2021, the debt restructuring options to restructure debts collaboratedwere improved to maintain theconsistent levels of “net additions” relatively at the same level.

and “write-offs.”

Impaired Assets by Type of Customer

The following table shows the amount of our impaired assets by type of customers at the dates indicated:

 As of December 31, As of December 31,
 2019 2018 2021 2020
 (in millions of R$) (in millions of R$)
Commercial and industrial  10,073   11,832   11,440   10,558 
Real estate – construction  827   1,036 
Real estate  470   456 
Installment loans to individuals  12,497   9,499   14,996   12,144 
Lease financing  29   59   17   17 
Total  23,426   22,426   26,923   23,176 
        

 

Commercial and Industrial

Impaired assets in the portfolio of commercial and industrial loans portfolio amounted to R$10,07311,440 million as of December 31, 2019, a decrease2021, an increase of R$1,759881 million, or 15%8.3%, compared to R$11,83210,558 million as of December 31, 2018.2020. The decreaseincrease in impaired assets in this portfolio was primarily due to the measures that Santander Brasil put in place to manage impaired assets, including collection practices with respect to our borrowers whereby we offered certain customersresult of growth of the chance to negotiate a restructuringcredit portfolio and the deterioration of their debts or asset disposal.the macroeconomic situation caused by the COVID-19 pandemic.

118 

Table of Contents

Real Estate

Impaired assets in the real estate lending portfolio totaled R$827470 million on December 31, 2019, a decrease2021, an increase of R$20914 million, or 20.2%3.1%, compared to R$1,036456 million as of December 31, 2018.2020. The decreaseincrease in impaired assets in this portfolio was primarily due to change on macroeconomic conditions lead to reduction on the interest rates on real estate portfolio in Brazil.result of the recurrent growth of the credit portfolio.

 141
Table of Contents

Installment Loans to Individuals

Impaired assets in the installment loans to individuals lending portfolio totaled R$12,49714,996 million as of December 31, 2019,2021, with an increase of R$2,9982,852 million, or 31.6%23.5%, compared to 2018. This2020. The increase in impaired assets in this portfolio was a consequencethe result of growth of the recurrent growth thecredit portfolio and the weakdeterioration of the macroeconomic conditions related tosituation caused by the portfolio in Brazil, such as unemployment rate and degree of income commitment.COVID-19 pandemic.

Lease Financing

Financial Leasing

Impaired assets in the lease financing lending portfolio totaled R$2917 million on December 31, 2019, a decrease of R$30 million compared2021, remaining similar to December 31, 2018.2020.

Methodology for Impairment Losses

We evaluate all loans regarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or collectively evaluated by grouping similar risk characteristics. Loans that are individually evaluated for impairment losses are not evaluated collectively.

To measure the impairment loss on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and financial situation, level of indebtedness, ability to generate income, cash flow, management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.

To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.

The expected loss measurement is made through the following factors:

·●Exposure at Default (EAD): is the amount of a transaction exposed to credit risk including the ratio of current outstanding balance exposure that could be provided at default. Developed models incorporate hypotheses considering possible modifications to the payment schedule.

·●Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered.

·●Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.

119 

Table of Contents

and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.

·●Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value.

In order to estimate the above parameters, the Bank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.

Loans Past Due for Less Than 90 Days but Not Classified as Impaired

The following table shows the loans past due for less than 90 days but not classified as impaired at the dates indicated:

 142
Table of Contents

 

  As of December 31,
  2019 % of total 2018 % of total
  (in millions of R$, except percentages)
Commercial and industrial  3,517   15.4   4,424   19.8 
Mortgage loans  5,782   25.3   4,527   20.2 
Installment loans to individuals  13,489   59.1   13,256   59.2 
Lease financing  24   0.1   168   0.8 
Total (*)  22,812   100.0   22,375   100.0 

  As of December 31,
  2021 % of total 2020 % of total
  (in millions of R$, except percentages)
Commercial and industrial   4,892   20.7   5,132   25.8 
Mortgage loans   3,606   15.2   3,085   15.5 
Installment loans to individuals   15,150   64.0   11,661   58.6 
Lease financing   11   0.1   13   0.1 
Total (*)   23,659   100.0   19,891   100.0 
 

(*)Refers only to loans past due between 1 and 90 days.

 

Impaired Asset Ratios

Our Creditcredit risk exposure portfolio increased by R$27.474.8 billion to R$391.6540.9 billion as of December 31, 2019,2021, compared to R$364.2466.1 billion as of December 31, 2018.2020. Our impaired assets increased by approximately R$13,747 billion in the same period, from R$22.423.2 billion to R$23.426.9 billion. The default rate decreased by 2030 basis points in 20192021 in comparison to 2018, explained in part by2020, primarily due to the recurrent growth of the portfolio and measures that Santander Brasil put in place to manage impaired assets.

credit portfolio.

The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$ except percentages)
Loans and advances to customers, gross  493,355   417,822   347,257   321,933   287,829 
Impaired assets  26,923   23,176   23,426   22,426   19,145 
Provisions for impairment losses  29,723   25,640   22,626   22,969   18,262 
Credit risk exposure Non-GAAP – customers (1)  540,873   466,104   391,569   364,194   330,474 
Ratios                    
Impaired assets to credit risk exposure  5.0%  5.0%  6.0%  6.2%  5.8%
Coverage ratio (2)  110.4%  110.6%  96.6%  102.4%  95.4%
Impairment losses  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)
Losses on other financial instruments not
  measured at fair value (3)		  -     -     -     -     -   
Impairment losses on financial assets (net) (4)  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)
                     
                     

  As of December 31,
  2019 2018 2017 2016 2015
  (in millions of R$ except percentages)
Loans and advances to customers, gross  347,257   321,933   287,829   268,438   267,266 
Impaired assets  23,426   22,426   19,145   18,887   18,599 
Provisions for impairment losses  22,626   22,969   18,262   18,191   15,412 
Credit risk exposure Non-GAAP – customers(1)  391,569   364,194   330,474   301,703   310,877 
Ratios                    
Impaired assets to credit risk exposure  6.0%  6.2%  5.8%  6.3%  6.0%
Coverage ratio(2)  96.6%  102.4%  95.4%  96.3%  82.9%
Impairment losses  (13,370)  (12,713)  (12,338)  (13,389)  (12,966)

Gains (losses) due to derecognition of financial assets measured at amortized cost(3)		  -     -     -  88   (524)
Impairment losses on financial assets (net) (4)  (13,370)  (12,713)  (12,338)  (13,301)  (13,490)

(1)(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$347 billion as of December 31, 2019 and guarantees and documentary credits amounting to R$44 billion as of December 31, 2019. We include off-balance sheet information in this measure

120 

Table of Contents

the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk.

For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

(2)Provisions for impairment losses as a percentage of impaired assets.

(3)Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).”

(4)As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial assets (net)instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments.

 

The following chart shows our impaired assets to credit risk ratio from 20142017 through 2019:2021:

 143
Table of Contents

 

Selected Credit Ratios

 

The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.

The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

     
 As of December 31,
 2019 2020 2021
 (in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding            
Allowance for credit losses  22,626   25,640   29,723 
Total loans outstanding  347,257   417,822   493,355 
Credit ratio  6.52%  6.14%  6.02%
Nonaccrual loans to total loans outstanding            
Total nonaccrual loans outstanding  23,426   23,176   26,923 
Total loans outstanding  347,257   417,822   493,355 
Credit ratio  6.75%  5.55%  5.46%
Allowance for credit losses to nonaccrual loans            
Allowance for credit losses  22,626   25,640   29,723 
Total nonaccrual loans outstanding  23,426   23,176   26,923 
Credit ratio  96.6%  110.6%  110.4%
Net charge-offs during the period to average loans outstanding            
Net charge-offs during the period  (14,705)  (15,297)  (12,904)
Average amount outstanding  324,190   394,542   471,068 
Credit ratio  4.5%  3.9%  2.7%
Commercial and industrial:            
Net charge-offs during the period  (5,713)  (4,617)  (5,153)
Average amount outstanding  132,372   176,750   214,286 
Credit ratio  4.3%  2.6%  2.4%
Real estate:            
Net charge-offs during the period  (108)  (232)  (167)
Average amount outstanding  38,107   42,368   51,883 
Credit ratio  0.3%  0.5%  0.3%
Installment loans to individuals:            
             
 144
Table of Contents4C.

Net charge-offs during the period  (8,834)  (10,433)  (7,576)
Average amount outstanding  151,735   173,336   202,578 
Credit ratio  5.8%  6.0%  3.7%
Lease financing:            
Net charge-offs during the period  (49)  (15)  (8)
Average amount outstanding  1,975   2,089   2,321 
Credit ratio  2.5%  0.7%  0.3%

Allowance for credit losses to total loans outstanding

In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.

In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.

Nonaccrual loans to total loans outstanding

In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.

In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.

Allowance for credit losses to nonaccrual loans

In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.

In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.

Net charge-offs during the period to average loans outstanding

In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.

Commercial and Industrial Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.

 145
Table of Contents

Real Estate Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.

Installment Loans to Individuals

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.

Lease Financing Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.

4C. Organizational Structure

Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck”,“Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2019,2021, Santander Spain held, directly and indirectly, 89.5%89.53% of our voting stock (not including the shares held by Banco Madesant - Sociedade Unipessoal).

As of December 31, 2019, Santander Spain was the largest bank in the euro zone by market capitalization, with a market capitalization of approximately €61,986 million. As of December 31, 2019, Santander Spain’s attributable profit totaled €6,515 million, 17% lower than the previous year, and the total shareholder remuneration on account of the earnings for the 2019 financial year is €0.23 per share (subject to the approval by the 2020 annual shareholders’ meeting). The Santander Group operates principally in Spain, the United Kingdom, other European countries, Brazil and other Latin American countries and the United States, offering a wide range of financial products. In Latin America, the Santander Group has majority shareholdings in financial institutions in Argentina, Brazil, Chile, Mexico, Peru, Puerto Rico and Uruguay. As of December 31, 2019, Santander Brasil contributed 28% of the profit attributable to the Santander Group.

stock.

The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:

121 

Table of Contents

 ActivityCountry of IncorporationOwnership Interest

Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1)   
Banco Bandepe S.A.BankBrazil100.00%
Santander Leasing S.A. Arrendamento MercantilLeasingBrazil99.99%
Aymoré Crédito, Financiamento e Investimento S.A.FinancialBrazil100.00%
Santander Brasil Administradora de Consórcio Ltda.Buying clubBrazil100.00%
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.)Credit Recovery ServicesBrazil100.00%
Santander Leasing S.A. Arrendamento Mercantil LeasingBrazil100.00%
Aymoré Crédito, Financiamento e Investimento S.A. FinancialBrazil100.00%
Santander Brasil Administradora de Consórcio Ltda. Buying clubBrazil100.00%
Santander Corretora de Câmbio e Valores Mobiliários S.A.BrokerBrazil100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A.HoldingBrazil100.00%
Getnet Adquirência e Serviços para Meios de Pagamento S.A.(1)Payment InstitutionBrazil100.00%
Sancap Investimentos e Participações S.A.HoldingBrazil100.00%
 146
Table of Contents
Santander Brasil, EFCFinancialSpain100.00%

Santander Holding Imobiliária S.A. (current name of Webcasas S.A.)HoldingBrazil100.00%
Santander BrasilF1RST Tecnologia S.A.e Inovação Ltda.TechnologyBrazil100.00%
Rojo Entretenimento S.A.Other ActivitiesBrazil94.60%
Sanb Promotora de Vendas e Cobrança Ltda.Other ActivitiesBrazil100.00%
BEN Benefícios e Serviços S.A.Other ActivitiesBrazil100.00%
Esfera Fidelidade S.A.Other ActivitiesBrazil100.00%
Super Pagamentos e AdministraçãGIRA - Gestão Integrada de Meios EletrônicosRecebíveis do Agronegócio S.A.(2).Other ActivitiesTechnologyBrazil100.00%80.00%
Banco Olé Consignado S.A. (current name of Banco Bonsucesso Consignado S.A.)(3).Paytec Tecnologia em Pagamentos Ltda.BankOther ActivitiesBrazil60.00%100.00%
SX Negócios Ltda.Other ActivitiesBrazil100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.)   
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)Credit Recovery ServicesBrazil100.00%
Liderança Serviços Especializados em Cobranças Ltda.Credit Recovery ServicesBrazil100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)   
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.)Asset ManagementBrazil100.00%
Controlled by Sancap Investimentos e Participações S.A.   
Santander Capitalização S.A.Savings and annuitiesBrazil100.00%
Evidence Previdência S.A.Social SecuritiesBrazil100.00%
Controlled by Getnet Adquirência e Serviços para Meios de Pagamento S.A.
Auttar HUT Processamento de Dados Ltda.Other ActivitiesBrazil100.00%
Toque Fale Serviços de Telemarketing Ltda.Other ActivitiesBrazil100.00%
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.   
Banco PSA Finance Brasil S.A. (6) BankBrazil50.00%
Banco Hyundai Capital Brasil S.A. (current name of BHJV Assessoria e Consultoria Empresarial Ltda.)BankBrazil50.00%
Solutions 4 Fleet.Other ActivitiesBrazil80.00%
Controlled by Banco Olé ConsignadoSantander Leasing S.A. Arrendamento Mercantil   
Crediperto Promotora de Vendas e Cobrança Ltda.Banco Bandepe S.A.Other ActivitiesBankBrazil100.00%

122 

Table of Contents

Olé Tecnologia Ltda.Other ActivitiesBrazil100.00%
Controlled by Santander Leasing S.A. Arrendamento Mercantil
PiPI Distribuidora de Títulos e Valores Mobiliários S.A. (current name of Santander Finance Arrendamento Mercantil)LeasingBrazil100.00%
Consolidated Investment FundsControlled by PI Distribuidora de Títulos e Valores Mobiliários S.A.    
Santander FIC FI Contract I Referenciado DIToro Corretora de Títulos de Valores Mobiliários Ltda.Investment FundBrokerBrazil(a)60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A.BrokerBrazil100.00%
Controlled by Sancap 
 147
Table of Contents

Santander Auto S.A. Other ActivitiesBrazil50.00%
Consolidated Investment Funds
Santander Fundo de Investimento Unix Multimercado Crédito PrivadoInvestment FundBrazil(a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no ExteriorInvestment FundBrazil(a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no ExteriorInvestment FundBrazil(a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito PrivadoInvestment FundBrazil(a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no ExteriorInvestment FundBrazil(a)
Santander Fundo de Investimento Financial Curto PrazoInvestment FundBrazil(a)
Santander Fundo de Investimento Capitalization Renda FixaInvestment FundBrazil(a)
Santander Paraty QIF PLC (5)(2) Investment FundBrazil(a)
Santander FI Hedge Strategies Fund (5)(2) Investment FundBrazil(a)
BRL V - Fundo de Investimento Imobiliário-FII (4)Real Estate Investment FundBrazil(a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não PadronizadoInvestment FundBrazil(a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de InvestimentosInvestment FundBrazil(a)
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior Investment FundBrazil(a)
Verbena FCVS - Fundo de Investimento em Direitos Creditórios Investment FundBrazil(a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não PadronizadoInvestment FundBrazil(a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de InvestimentosInvestment FundBrazil(a)

 

(a)Company to which we are exposed or have rights to variable returns and have the ability to affect those returns by making certain decisions in accordance with IFRS 10 - Consolidated Financial Statements. We and/or our subsidiaries hold 100% of the quotas of these investment funds.

(1)In May 2016, Super received approval fromThis table reflects the Brazilian Central BankSpin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to operate as a payment institution.our audited consolidated financial statements included elsewhere in this annual report.

(2)On February 28, 2020, we sold to Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain, our entire equity interest in Super Pagamentos e Administração de Meios Eletrônicos S.A. (“Superdigital”). We received consideration of R$ 270 million for our interest in Superdigital. As a result, we are no longer a shareholder of Superdigital.

(3)On December 31, 2020, Santander Brasil and the shareholders of Bosan Participações S.A. (holding company whose single asset are the shares representing 40% of the corporate capital of Banco Olé) have entered into the definitive agreements and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon transferring Bosan’s shares to Santander Brasil and the payment to the sellers of the total price of R$1,608,772,783.47. As a result, Santander Brasil became, directly and indirectly, the holder of all shares issued by Banco Olé.

(4)This fund was established and became consolidated from August 2016. It is a structure in which Santander Brasil is the creditor of certain debts guaranteed by real estate. The real estate provided as guarantee was converted into capital contributions to the fund. Simultaneously with this, the shares in the fund were transferred to Santander Brasil.

(5)Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund.

 

(6)Investment acquired on August 1, 2016.

 

4D.

4D. Property, Plant and Equipment

We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 405385 properties for the activities of our banking network and rent 2,1301,719 properties

123 

Table of Contents

for the same purpose. Furthermore, in 2014, we opened and concluded the migration oftransferred our operation to thea new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—Item 4. Information on the Company—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Av.Avenida Presidente Juscelino Kubitschek, 2,041 and 2,2352041, Suite 281, Block A, Condomínio WTORRE JK, Vila Olímpia, SãNova Conceição, Paulo, State04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

 148
Table of Contents

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5A.5A. Operating Results

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2019, 20182021, 2020 and 20172019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated as a resultbecause of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”

Financial Presentation

We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.

The Getnet Spin-Off

We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.

Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.

For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

Principal Factors Affecting Our Financial Condition and Results of Operations

 

Impact of COVID-19

We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”

Brazilian Macroeconomic Environment

Overview

As a Brazilian bank, we are significantly affected by the general economic environment in Brazil.Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:

 149
Table of Contents

 

  For the year ended December 31,
  2019 2018 2017
GDP growth (1)  1.2%  1.1%  1.0%
CDI rate (2)  6.0%  6.4%  9.9%
TJLP (3)  5.6%  7.0%  7.0%
SELIC rate (4)  4.5%  6.5%  7.00%
Increase (decrease) in real rate against the U.S. dollar  4.0%  17.1%  -16.5%
Selling exchange rate (at period end) R$ per U.S.$1.00  4.03   3.87   3.31 
Average exchange rate R$ per U.S.$1.00 (5)  3.94   3.65   3.19 
Inflation (IGP-M) (6)  7.3%  7.6%  -0.5%
Inflation (IPCA) (7)  4.3%  3.8%  2.9%

  As of and For the Year Ended December 31,
  2021 2020 2019
GDP growth(1)   4.6%  (4.1%)  1.2%
CDI Rate   4.4%  2.1%  6.0%
TJLP   5.3%  4.6%  5.6%
SELIC rate   9.25%  2.0%  4.5%
Selling exchange rate (at period end) R$ per U.S.$1.00   5.58   5.20   4.03 
Decrease (increase) in real rate against the U.S. dollar   7.4%  28.9%  4.0%
Average exchange rate R$ per U.S.$1.00(2)   5.40   5.16   3.94 
Inflation (IGP-M)   17.8%  23.1%  7.3%
Inflation (IPCA)   10.06%  4.5%  4.3%
 

Sources: BNDES, Brazilian Central Bank, FGV and IBGE.

(1)RevisedGDP growth for 2021 is based on Santander Brasil’s internal estimates. For 2020 the source is the IBGE’s revised series. Source: IBGE.

(2)The overnight interbank deposit rate (Certificado de Depósito Interbancário), or “CDI” is the average daily interbank deposit rate in Brazil (at the end of each month and annually). This is the average rate for the given year.

(3)Represents the interest rate applied by the BNDES for long-term financing (at the end of the period).

(4)The benchmark interest rate payable to holders of some securities, such as treasury financial letters, issued by the Brazilian government and traded on the SELIC rate at the end of the applicable period.

(5)Average of the selling exchange rate for the business days during the period.

124 

Table of Contents

(6)The inflation rate is the general index of market prices (Índice Geral de Preços-Mercado, or “IGP-M”), as calculated by FGV.

(7)The inflation rate is the consumer price index (Índice de Preços ao Consumidor – Amplo, or “IPCA”), as calculated by the IBGE.

 

General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank has been reducingreduced interest rates since then,between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, and 4.50% as of December 31, 2019.

Presidential elections were held2019 and 2.0% as of December 31, 2020. In 2021, in Brazil in October 2018. The resolutionresponse to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the politicalmonetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and economic crisisit has increased the SELIC rate to 10.75% p.a. as of the date of this annual report..

The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in Brazil depends ona significant risk premium, a depreciation of the approval of reforms that are expected to be promotedreal and volatility in financial asset prices. Brazil’s economy has been severely affected by the PresidentCOVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil.TheBrazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and political crisis in Brazil may adversely affect the performanceseverity of the Brazilian economy. AsCOVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a result, our credit portfolio, which is focused on Brazil, may not grow or could decrease and our provisions for loan losses could increase.

slow recovery cycle.

Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.

Impact of COVID-19 on the Brazilian Economy

The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December

 150
Table of Contents

31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.

 

Interest Rates

AAn increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.

The following table presents the low, high, average and period-end SELIC rate since 2015,2016, as reported by the Brazilian Central Bank:

  Low High(1) Average(2) Period-End
Year        
2015  11.75   14.25   13.58   14.25 
2016  13.75   14.25   14.15   13.75 
2017  7.00   13.75   9.83   7.00 
2018  6.50   7.00   6.75   6.50 
2019  4.50   6.50   6.13   4.50 
2020 (through March 5, 2020)  4.25   4.50   4.38   -   

 

Low

High(1)

Average(2)

Period-End

Year    
2016 13.7514.2514.1513.75
2017 7.0013.759.837.00
2018 6.507.006.756.50
2019 4.506.506.134.50
2020 2.004.502.812.00
2021  2.009.25 4.819.25
2022 (through February 22, 2022)  9.2510.759.86 10.75
 

(1)Highest month-end rate.

(2)Average of month-end rates during the period.

 

Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2019,2021, a 100 basis100-basis point increase in the yield curve would have resulted in R$334 553 million decline in the net interest income over a one-year period.

Credit Volume and Quality in Brazil

 

Our annual growth of outstanding credit of 6.7%, a ratio of nonperforming loans to individuals increased to 4.2% and a decrease of the household debt burden to 21.2%. In 2016, outstanding credit contracted 3.5% in nominal terms, but delinquency continued to fall: the ratio of nonperforming loans to individuals reached 6.1%. Subsequently, in 2017, 2018 and 2019, the ratio of nonperforming loans to individuals reached 5.3%, 4.8%3.5% and 5.0%, respectively.the household debt burden reached 23.9% of household income. In 2020, outstanding credit increased 15.6% as a result of credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).

 

The total outstanding credit to GDP increased from 34.7% in December 2007 to 49.7% in December 2016, and fell to 47.1% in 2017. The ratio increased to 47.3% in 2018 and climbed to 47.8% in 2019.

125 

Table of Contents

  2019 2018 2017
             

  (in billions of R$)
Total Credit Outstanding (*)  3,471   3,261   3,064 
Earmarked credit  1,465   1,500   1,511 
Non-earmarked based credit  2,006   1,761   1,553 
of which:            
Corporate  905   814   705 
Individuals (retail)  1,101   948   847 

 

2021

2020

2019

 (in billions of R$)
Total Credit Outstanding (*) 4,6843,2613,471
Earmarked credit 1,8811,5001,465
Non-earmarked based credit 2,8031,7612,006
of which:   
Corporate 1,291814905
Individuals (retail) 1,5139481,101
 

(*)(*) Some figures may be subject to revision by the Brazilian Central Bank.

Source: Brazilian Central Bank.

 

 151
Table of Contents

Foreign Exchange Rates

Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2019,2021, we recorded foreign exchange expensesexposure of R$2,789117,400 million, foreign exchange expensesexposure of R$2,806 (124,437) million in 20182020 and foreign exchange revenuesexposure of R$60511,208 million in 2017.2019. These results are due to the variation of the U.S. dollar against thereal on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”

The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, thereal appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 therealremained relatively stable against the U.S. dollar, with a small depreciation of 1.5% to R$3.31 per U.S.$1.00 as of December 31, 2017. Therealdepreciated further against the U.S. dollar throughout 2018, with a depreciation of 17%., On December 31, 2018, the exchange rate was R$3.87 per U.S.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through to the date of this annual report, the real has depreciated appreciated against the U.S. dollar.dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of December 31, 2019,February 22, 2022, the exchange rate was R$4.035.06 per U.S.$1.00.

Depreciation of thereal relative to the U.S. dollar has created additional inflationary pressures in Brazil, which havehas led to decreasesincreases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government.government, Depreciation of thereal may also, in the context of an economic slowdown, lead to decreased consumer spending, inflationarydeflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of thereal could make our foreign currency-linkedforeign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of thereal relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency accounts,balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of thereal could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.

Inflation

In recent years, inflation hashad been oscillating around the target, which is set by the CMN.CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases have already beenwere defined for the targets until 2022 (4.00% for 2020, 3.75% for 2021 and 3.50% for 2022)2024, when the goal will be 3.00%.

Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was close to the top of the fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the indexation of a significant portion of contracts for services to the inflation levels of the previous years,

126 

Table of Contents

the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, the inflation rate reached a level of 10.7%, the highest on record since May 2005 and well above the Brazilian Central Bank’s inflation target of 4.5%. In 2017, inflation fell substantially as a result of the consistent efforts of the Brazilian Central Bank to reduce the inflation rate, ending the year at 2.95% (12-month accumulated rate). As a result, the Brazilian Central Bank was required to send a letter to the CMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018would2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the monetary policy in the country.Brazil. In 2019, as a result of temporary price shocks affecting edible items, inflation ended the year slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and throughreached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which

 152
Table of Contents

increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the date of this annual report,CMN explaining why it failed to meet the inflation reached 3.3%target and what are the actions to be implemented in 12-month accumulated terms.

order to ensure that inflation will converge to the targeted levels in the coming years.

The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are significantly affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2019,2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$443553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.

Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, generallysuch as the consumer price index (Índice de Preços ao Consumidor – Amplo), or “IPCA,”IPCA and the general index of market prices (Índice Geral de Preços-Mercado), or “IGPM.”IGPM. For example, considering the amounts in 2019,2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$9390 million and R$7683 million, respectively.

Reserve and Lending Requirements

The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the operational results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our operational results of operations by limiting or expanding the amounts available for commercial credit transactions.

The table below shows the requirements for reserves and credit to which we are subject for each financing category:

Product As of December 31, 2019 As of December 31, 2018 Form of Required Reserve Yield
Demand deposits        
Rural credit loans (1)  30.00%  30.00% Loans Cap rate: 7.0% p.a.
Microcredit loans (2)  2.00%  2.00% Loans Cap rate: 2.0% p.m.
Reserve requirements (4)  21.00%  21.00% Cash Zero
Additional reserve requirements  0.00%  0.00% Cash SELIC
Free funding (3)  47.00%  47.00%    
             
Savings accounts            
Mortgage loans  65%  65% Loans TR + 12.0% p.a.
Reserve requirements (4)  20.00%  20.00% Cash TR + 70.0% of the target SELIC
Additional reserve requirements  0.00%  0.00% Cash SELIC
Free funding (3)  15.00%  15.00%    
             
Time deposits            
Reserve requirements (4)  31%  33% Cash SELIC

127 

Table of Contents

In cash or other instruments  0.00%  0.00% Cash or other instruments SELIC for Cash
In cash  0.00%  0.00% Cash SELIC
Additional reserve requirements  0.00%  0.00% Cash SELIC
Free funding(3)  69.00%  67.00%    

Product As of December 31, 2021 As of December 31, 2020 Form of Required Reserve Yield
Demand deposits            
Rural credit loans(1)   25.00%  27.50% Loans Cap rate: 7.5% p.a.
Microcredit loans(2)   2.00%  2.00% Loans Cap rate: 4.0% p.m.
Reserve requirements(3)   21.00%  21.00% Cash Zero
Additional reserve requirements   0.00%  0.00% Cash n/a
Free funding(4)   52.00%  49.50%    
             
Savings Accounts            
Mortgage loans   65.00%  65.00% Loans Cap rate (SFH): TR + 12.0% p.a.
Reserve requirements(2)   20.00%  20.00% Cash TR + 6.17% or TR + 70.00% of the target SELIC
Additional reserve requirements   0.00%  0.00  Cash n/a
Free funding(4)   15.00%  15.00%    
             
Time deposits            
Reserve requirements(3)   20.00%  17.00% Cash SELIC
In cash or other instruments   0.00%  0.00% Cash or other instruments n/a
In cash   0.00%  0.00% Cash n/a
Additional reserve requirements   0.00%  0.00% Cash n/a
Free funding(4)   80.00%  83.00%    
 

 

(1)Rural credits are credits granted to farmers in the amount of R$12.9 billion and R$11.813.6 billion on December 31, 20192021 and December 31, 2018,2020, respectively.

(2)Microcredit is a credit granted to very small businesses, with an open position of R$1.21.3 billion and R$642.0 million on December 31, 20192021 and December 31, 2018,2020, respectively.

(3)Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145.
(4)Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category.

 

 153
(4)According to Circular No. 3,823Table of the CMN, the Brazilian Central Bank replaced the reserve requirement deduction of time deposits and demand deposits by a fixed amount, based on total deductions as of January 20, 2017. From 2020, no deductions will be allowed. No deductions are allowed to meet reserve requirements for saving accounts.Contents

Taxes

See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation —Taxation.Regulation—Taxation.”

HedgingIssuance of Notes

In November and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our Tier 2 regulatory capital, in Foreign Investmentsthe total amount of R$5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.

Acquisition of Equity Interest in CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A.

On January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A., or “Santander Corretora,” together with other investors (including Banco BTG Pactual S.A. and CBOE III, LLC) entered into an investment agreement with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A., or “CSD BR,” and its shareholders for the acquisition of a minority equity interest in CSD BR. CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Brazilian Central Bank, the CVM and the SUSEP. Subject to closing, Santander Corretora’s interest in CSD BR will be 20%. The closing of the transaction is subject to the conclusion of definitive agreements and the implementation of certain customary conditions precedent, including the receipt of applicable regulatory approvals.

The Getnet Spin-Off

On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which was undertaken by our then-subsidiary Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. As a result of the Spin-Off, each holder of our common shares, preferred shares and Santander Brasil units, including the custodian for the Santander Brasil ADS facility, received Getnet common shares, preferred shares and Getnet units, at the rate of 0.25 common share, preferred share or Getnet Unit, as the case may be, for each one common share, preferred share or Santander Brasil Unit issued by us held at close of trading on the B3 on the relevant record date. Additionally, each holder of Santander Brasil ADSs representing Santander Brasil units received Getnet ADSs, each representing two Getnet units, at a rate of 0.125 Getnet ADS for each Santander Brasil ADS held at the close of trading on the NYSE on the relevant ADS record date. The Getnet common shares, preferred shares and Getnet units are traded on B3, and Getnet ADSs are traded on Nasdaq under the symbol “GET.” The Spin-Off was completed on October 26, 2021.

As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. On April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “ Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.”

The charts below set forth a summary of our simplified corporate structure before and after the Spin-Off and after the reorganization of the PagoNxt group, of which Getnet forms part:

 67
Table of Contents

Corporate Structure Prior to the Spin-Off

 

Corporate Structure After the Spin-Off

 68
Table of Contents

Corporate Structure After the Reorganization of the PagoNxt Group

Impact of COVID-19

We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. Based on the information available as of the date of this annual report, we present below a summary of the main effects of the COVID-19 pandemic on our business and results of operations:

●As the COVID-19 pandemic escalated in Brazil starting March 2020, we adjusted our operations to be able to continue providing our products and services to our customers while ensuring the health and safety of our employees. We have prioritized the safety and health of our employees and customers by adhering to prevention and care measures recommended by the Brazilian health and labor ministries, while striving to minimize the impact on our business. From the beginning, we implemented remote working arrangements to safeguard employees most at risk from COVID-19. We have also provided telemedicine services in addition to standard medical support to support the care of our employees and their families. Furthermore, we have instituted a protocol for mapping, protecting, and monitoring all contaminated individuals and those in contact with them, as well as a remote working strategy that evolved in lockstep with the pandemic. We supported our employees throughout the COVID-19 pandemic by offering them and their dependent remote medical care through an agreement with a leading Brazilian hospital. We also provided advance payment of thirteenth salary installments in April 2020 (these are normally paid in April and November of each year).
●From March 2020 to October 2021, our branches operated with reduced service hours; from 9:00 a.m. to 2:00 p.m. from March 2020 to July 2020 and then from 9:00 a.m. to 3:00 p.m. until October 2021. From November 2021 through to the date of this annual report, we have been expanding our service hours in our branches from 9:00 a.m. to 4:00 p.m. We adopted a staggered entry system in branches with heavy customer traffic in order to reduce the total number of customers in the branch at any given time. We also reserved the period from 9:00 a.m. to 10:00 a.m. for customers who would are more vulnerable to COVID-19. To provide continuous service and meet the increased demand of our call centers, we temporarily relocated retail employees to our call centers to help deal with the increased demand for remote banking services. In line with our commitment to clear customer communication, we launched the “Overcome Together” and “Santander Supports You” websites, which gathered resources and initiatives related to our business.
 69
Table of Contents
●We have offered individual, microentrepreneur and SME customers the possibility of deferring their loan payments for up to 60 days. In May 2020, we allowed an extension for an additional 30 days, as a result of which our deferred loan portfolio reached a total of R$49.8 billion as of June 30, 2020, R$40.6 million as of December 31, 2020 and R$25.9 million as of December 31, 2021. At the same time, we continuously monitored our loan quality indicators, which remained at acceptable levels throughout the COVID-19 pandemic and through the date of this annual report. We also participated in government programs created in 2020 that granted special credit lines for businesses, particularly in retail, to minimize the negative effects of the pandemic including CMN Resolution No. 4,846, which was published on August 24, 2020 and regulated lending under the Emergency Employment Support Program, initially established by Provisional Measure No. 944/2020. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” As a result, our total portfolio balance of government-sponsored loans reached R$10.3 billion as of December 31, 2021.
●The onset of COVID-19 had a negative impact on our net fee and commission income, especially in the first half of 2020, due to a lower volume of customer transactions, which adversely affected the total amounts we were able to charge in credit and debit card fees. As a result, we experienced reductions in the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2019 to the six months ended June 30, 2020, as compared to the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2018 to the six months ended June 30, 2019. These reductions were due to the abovementioned lower transaction volumes, a higher share of global wholesale banking in the loan portfolio, alongside a shift in the product mix, with a decreased share of higher risk products, such as credit cards and overdrafts. In 2021, in particular in the second half of the year, there was a recovery in economic activity. As a result, in the year ended December 31, 2021, our net interest income increased by 15.5% compared to the year ended December 31, 2020 (although our net fee and commission income decreased by 5.9% in the same period), our sales through physical distribution channels increased (by 46% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and so did our sales through digital channels (which increased by 45% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and we added 784,000 new customers in December 2021 (which is 78% more than in December 2020). For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Interest Income” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Fee and Commission Income.”
●In 2020, we constituted an additional provision in the amount of R$3,200 million. This provision was calculated based on the analysis of the potential macroeconomic effects and took into account not only quantitative and qualitative indicators, but also the adequate and accurate identification of risks and a collective assessment of exposures. In 2021 as a response to the macroeconomic shock of the COVID-19 pandemic, we used a part of the provision overlay on expected credit losses created in 2020, as further explained under “Item 5. Operating and Financial Review and Prospects—A. Operating Results— Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).” However, we also experienced an improvement in our loan portfolio, in particular with respect to individuals as loans to individuals increased by 17% in the year ended December 31, 2021 compared to the year ended December 31, 2020. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019— Results of Operations—Impairment Losses on Financial Assets (Net).”
●In 2020, the National Monetary Council, or “CMN,” and the Brazilian Central Bank introduced measures to minimize the impact of COVID-19 on the financial system. With respect to liquidity, these changes included: (i) a reduction in the time deposit reserve requirement from 31% to 17%; and (ii) an increase in the additional limit on the reserve requirement treated as High Quality Liquidity Assets from 15% to 30%, ensuring greater liquidity in a stress scenario. In addition, a temporary suspension on dividends and other distributions was enacted through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This suspension on the payment of dividends was not renewed in 2021. The CMN also published Resolution No. 4,783, which temporarily reduced the capital conservation buffer (where all rates relate
 70
Table of Contents

to the total amount of risk-weighted assets) required from financial institutions from 2.5% to 1.25% as of the second quarter of 2020, leading our Basel ratio to reach 15.3% as of December 31, 2020. In 2021, the time deposit reserve requirement increased from 17% to 20% as of November 2021, and the capital conservation buffer required from financial institutions rose from 1.25% to 1.625% as of April, 2021, with this percentage increasing gradually until April 2022, when it will reach 2.5%. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” and “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”

●We experienced an increase in digital business. Specifically, we recorded an increase of 45% in the number of new contracts originated through digital channels in the year ended December 31, 2021 compared to the year ended December 31, 2020.

See also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”

Capital Expenditures and Divestitures

Our main capital expenditures include investments in our information technology platform. Our information technology platform focuses on our customers and supports our business model. In 2021, 2020 and 2019, total investments in information technology were R$1,905 million, R$1,432 million, and R$1,858 million, respectively.

In 2021, 2020 and 2019, we continually improved in our technology platforms by means of investment in our digital applications, especially through the implementation of new solutions in the areas of artificial intelligence (machine learning, AIOPs), micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. The application of these new technologies improved our interaction with our customers enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness, investments to better address client needs. We also continued to invest in our physical distribution network (branches, PABs and PAEs), including: biometric identification for corporate customers, digital purchase and payment of exchange, among other initiatives. For more details about our technology and infrastructure, see the item “—B. Business Overview—Technology and Infrastructure.”

Our ongoing capital expenditures consist primarily of investments in information technology. We expect to fund our ongoing capital expenditures principally from our cash flow from operations.

Our major divestitures in the past three fiscal years and until the date of this annual report were the Spin-Off of Getnet and the sale of Super Pagamentos.

For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations.”

4B. Business Overview

Our Strategy

Our strategy is centered on endeavoring to generate profitable, recurring, and sustainable growth. We believe the expansion of our customer base over the years is due to our ability to capture new customers and increase their loyalty. We have achieved this by offering a comprehensive portfolio of products and services, with a particular emphasis on quality and a constant drive to improve customer satisfaction. We serve our customers through multi-channel solutions which we believe enable us to provide a tailored and human service which is responsive to the needs of our customers. We rely on our four integrated service channels to do offer our services to our customers: digital, remote, physical and external channels.

We recorded net income of R$15,559 million, R$13,451 millionand R$16,631 million in the years ended December 31, 2021, 2020 and 2019, an increase of 15.7% in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the years ended December 31, 2021, 2020 and 2019 we achieved capital adequacy ratios of 14.9%, 15.3% and 15.0% respectively. In the years ended December 31, 2021, 2020 and 2019, we have achieved efficiency ratios of 27.1%, 35.5% and 28.8%, and adjusted efficiency ratios of 28.2%, 27.7% and 28.2%, respectively. In addition, we achieved an adjusted return on average stockholders’ equity of 20.2%, 18.4% and 24.6% in 2021, 2020 and 2019, respectively. Adjusted return on average stockholders’ equity is a non-GAAP financial measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” We believe these metrics demonstrate our track record of consistent performance and the results of our constant efforts to improve our productivity.

 71
Table of Contents

In recent years, we have undergone significant transformations, thereby enabling us to identify and capitalize on business opportunities. We have expanded our platform to diversify our offering of products and services:

●In 2016, we initiated our commercial transformation by implementing new work models, streamlining processes and digitalizing our operations. We have sought to introduce a culture of innovation, while remaining cognizant of our surroundings and customer demands. This led us to expand our vehicle financing offering at a time when the market was moving in the opposite direction.
●In 2017, we took steps to improve service quality and we placed customer satisfaction to the core of our strategy. We believe we were industry pioneers in implementing and publicly disclosing our net promoter score, or NPS, as a measure of customer satisfaction.
●In 2018, alongside our culture of service, we advanced our pursuit of efficiency by bringing an industrial cost approach into our banking business, covering three critical fronts: organization, technology, and culture. We believe this strategy has already yielded positive results and that it will enable us to further optimize our productivity while also improving customer experience on our platforms.
●In 2019, we expanded our ecosystem by introducing new, innovative products into the market. We launched Sim, emDia, Santander Auto, Auto Compara and Ben Visa Vale while repositioning ourselves in the card market, as well as refocusing our efforts on customer and account holder loyalty.
●In 2020, we focused our efforts on assisting customers in facing the challenges posed by the COVID-19 pandemic by providing products and services adapted to the new reality brought in by the pandemic. We did so by improving and expanding our digital channels in order to deliver to our customers robust self-service banking at a time when in-person service delivery was not possible. We also reaffirmed our commitment to efficiency and rapid response to emerging market trends by launching SX Santander to offer customers exclusive benefits, differentiating ourselves from the Brazilian Central Bank’s PIX instant payment solution.
●Finally, in 2021 we redoubled our efforts to improve customer experience and satisfaction across all channels. Our strategy is to convert new customers into loyal customers (we define loyal customers as those who purchase six or more products), thus, generating profitability for the bank and satisfaction in using the bank for our customers. We seized on the opportunities we saw in the market and managed to reach 53.4 million customers as of December 31, 2021, including adding more than 784,000 new customers in December 2021. We achieved this while also maintaining high levels of customer loyalty, reaching eight million loyal customers as of December 31, 2021 (an increase of 32% compared to December 31, 2020). The combined effect of the growth in our customer base and our levels of customer loyalty enabled us to increase our customer base by 11% as of December 31, 2021 compared to December 31, 2020. We also further improved our digital operations by expanding our offerings through this channel, which has grown significantly, as evidenced by an increase of 45% in financial products and services purchased through this channel in the year ended December 31, 2021 compared to the year ended December 31, 2020. In addition, we continued to focus on streamlining processes, digitalizing our operations, and reducing paper consumption to enable us to operate faster and more efficiently. As a result, we have achieved: (i) faster service, as the lead time to open a business current account decreased by 78% in the year ended December 31, 2021 compared to the year ended December 31, 2020 and (ii) improved efficiency, with 87.0% of credit card bills issued in digital or email format in the year ended December 31, 2021, an increase of 13 p.p. compared to the year ended December 31, 2020.
●We strive to continuously improve our customer experience through the addition of new services, the expansion of our offering, and the enhancement and deeper integration of our channels.

We have consolidated and improved our four service channels through which customers can select the product or solution that best meets their needs. Our digital channel averaged 442 million total visits per month in 2021, adding 554,000 new accounts in December 2021. Similarly, the physical channel, which consists of our branch network that is expanding into Brazil’s rural areas, recorded a monthly average of more than 15 million visits by customers and potential customers, serving as a crucial pillar for business origination. In the remote channel, with the implementation of SX Negócios, a new service model, we have redefined our model to move away from a call center and toward a business channel. We have built a platform to capture new business, processing over 25 million support requests per month in the year ended December 31, 2021, 4.6 million of which are handled by humans. The external channel is comprised of bank correspondents, which are entities allowed to provide specific services to customers, including customer services, on behalf of another financial institutions, and our business verticals, such as payroll-deductible loans, Prospera and Olé Consignado.

 72
Table of Contents

We believe that our digital platform enables us not only to offer our customers a comprehensive set of services but also to benefit from the business generation potential which arises from the ease with which customers are able to purchase our products and services through our digital sales channels. Sales of our products and services through our digital channels increased by 45% in the year ended December 31, 2021, compared to the year ended December 31, 2020, including an increase in the number of premium bonds (capitalização) contracts of 360% and 23% in premiums written in open insurance contracts (considering life insurance, personal accident insurance, home insurance, and other types of insurance) in each case in the year ended December 31, 2021 compared to the year ended December 31, 2020. GENT&, our artificial intelligence channel, recorded over 18.5 million interactions in December 2021 and is currently capable of answering more than 26,000 questions.

We believe that our business has the potential to grow by means of innovation and technology, in conjunction with user experience enhancements and steady evolution in the quality of our services. Our products, services, and businesses form part of the daily lives of all our customers, whether businesses or individuals, and include, among others, payment solutions (i.e., payment platforms), investment and advisory services, vehicle and consumer goods financing, mortgage loans, payroll-deductible and agribusiness loans, as well as the products and services offered through our wholesale unit. We also endeavor to maintain sound risk management, which entails continuously improving our credit granting models to maintain our credit risk indicators at acceptable levels.

In order to strengthen our platform, we have launched new businesses that continue to evolve and support our customer loyalty strategy, such as (i) Ben, which grew its customer base to 565,000 cards as of December 31, 2021 along with 2,675 human resources customers and 365,432 partner establishments as of the same date; (ii) Sim, which surpassed the five million customer mark and reached a loan portfolio of R$1.6 billion as of December 31, 2021; (iii) emDia, which increased recovered credit volume by 12% in the year ended December 31, 2021 compared to the year ended December 31, 2020, and (iv) Santander Auto, where the percentage of new consumer finance contract purchasers who also acquired insurance reached 20% in 2021, resulting in over R$210 million in written premiums in 2021. In 2020, we also announced the acquisition of securities brokerage firm Toro Corretora to complement our investment platform and broaden our product offering. Finally, in 2021, we launched Auto Compara, a fully online auto insurance comparison and offering platform that is now also available to non-customers. Auto Compara had an average of 350,000 website visits in the year ended December 31, 2021 and we increased by 26% in premiums written during the year. Additionally, we reinforced our position in the automotive and real estate industries by completing acquisitions of businesses and solutions to expand our business and build a more comprehensive platform.

As a result of our efforts to constantly improve our business, we were recognized the Best Bank in Brazil in 2021 by The Banker Magazine.

Our People

Our people are a key pillar of our strategy, supported by a culture that values employees, promotes diversity, encourages efficiency, and fosters innovation, while also preparing us for a new cycle and enabling us to continue anticipating market trends. Our performance is the embodiment of our culture, with our people serving as the catalyst for the transformation. Thus, we have built a diverse and engaged team. We value meritocracy, diversity, and inclusion, as evidenced by the fact that, as of December 31, 2021, 31% of our leadership positions were held by women, 27% of our employees were black employees, and 5% were held by people with disabilities. We also place a premium on proactive knowledge acquisition: in 2021, over 3,200 courses were held on the Santander Academy platform, with 78% of them being taught by employees. Close leadership and open communication are ingrained in our DNA. Our actions are backed by a culture that is increasingly centered on our people – 94% of whom are proud to work for Santander, according to the Great Place to Work, or “GPTW,” survey from 2021. As a result of our efforts, we have been named one of the top 10 best companies to work for in Brazil by GPTW 2021, appearing in the following categories: Ethnic-Racial, Women, LGBTQI+, Early Childhood, 50+, and Healthy Management. Additionally, we were honored with the following awards: (i) Ethnic-Racial by Exame magazine’s Diversity Guide, (ii) Diversity and Inclusion by Euromoney’s Awards for Excellence, and (iii) Bloomberg’s Gender Equality Index. Finally, we were also included on the GPTW B3 index.

 73
Table of Contents

Social and Environmental Initiatives

Similarly, and consistent with our strategy of responsible growth, we recognize our role as a financial institution in Brazil’s development. Hence, for twenty years, we have sought to foster sustainable businesses. We highlight our Amigo de Valor program, one of the main social programs in Brazil today, started in 2002. In 2021, we continued to advance initiatives that reflect how sustainability and social issues are embedded in every layer of our organization:

●In the social realm, we lead initiatives that have impacted more than one million people over the last three years. For the past 19 years, we have worked to protect, promote, and defend the rights of children and adolescents in vulnerable situations through the Amigo de Valor program, benefiting thousands of people and raising R$20 million in 2021 through employee and customer contributions. Since 2002, we have been promoting financial inclusion by means of Prospera Santander Microfinance (Prospera Santander Microfinanças), which had 708,000 active customers and a R$1.9 billion portfolio as of December 31, 2021, with the goal of helping microentrepreneurs thrive and thereby develop the communities in which they operate, while also providing business management guidance. Likewise, for more than two decades, we have consistently invested in education, as we believe that it is the foundation for societal transformation. Finally, we have awarded higher education scholarships since 2005, including 33,000 scholarships in 2021 alone.
●With respect to our environmental initiatives, we offer a comprehensive suite of financing solutions for the development of sustainable businesses, both for individuals and businesses, which we accelerated in 2021, generating R$ 51.6 billion in sustainable businesses in the year ended December 31, 2021. We pioneered green financing, with over R$ 1.3 billion loans linked to environmental, social and governance, or “ESG,” goals and green loans in our portfolio as of December 31,2021, in addition to being among the leaders in CBIOs (decarbonization credit). We are also active solar energy loans, financing photovoltaic panels for individuals, companies, and agribusinesses, disbursing R$ 2.3 billion in the year ended December 31, 2021. In 2021, we also launched a financing facility exclusively for bicycles.

We implement routine socioenvironmental risk assessment, for which we rely on a Socioenvironmental Questionnaire, or “QSA,” by means of which we collect information on customers that have environmental practices, including data on carbon emissions, management of offsets and extreme weather events. The QSA is applied to the Wholesale and Business 3 segments, as well as to Retail customers. This analysis is part of the annual credit review for 14 sectors in which we operate, all of which are potentially affected by climate change according to the Task Force on Climate-related Financial Disclosures, or “TCFD.”

Since 2016, we have taken climate change issues into consideration in the credit rating of Wholesale customers, and, since 2020, we have used a water stress calculator in our socioenvironmental assessments. This tool considers our customers’ economic activity, watershed location and measures taken to save water. It has been developed considering customer vulnerability to climate change in general, even as a result of changes in legislation or consumer preferences.

Regarding decarbonization targets, in 2021 we announced our intention to achieve net zero carbon emissions by 2050 to support the goals of the Paris Agreement on climate change using 100% renewable energy sources by 2025 and eradicating single-use plastic from all our operations. We have been carbon neutral since 2010, fully offsetting our emission sources.

In July 2021, we established a forum with the goal of preventing greenwashing by seeking to ensure that operations which we describe as green, social, or sustainable comply with Santander Group’s taxonomy and market standards. The forum, which is composed of senior executives from the Sustainability, Risk, Social and Environmental Risk, Business, Compliance, and Legal departments, also assesses reputational risks associated with our operations. Out of a total of 40 proposals to label a particular service of product as being “green” which were reviewed by the forum in 2021, 31 have been approved.

In addition, we have developed products that contribute to lowering the impact on climate change, such as:

 74
Table of Contents
●Low Carbon CDB, we launched the Low Carbon CDB, a sustainable, low risk investment aimed at companies that want to have more sustainable investments in their portfolio capable of reducing their greenhouse gas emissions. The resources of the investments in CDB will be used to finance sustainable projects of companies that promote actions to reduce greenhouse gas emissions.
●Carbonômetro (Carbon meter), a tool that calculates the daily greenhouse gas emissions of our operations.
●Carbon Calculator, which encourages employees of Santander Brasil and affiliates to calculate their carbon footprint.
●"The Future of the Carbon Market in Brazil” live video. We produced a live video to discuss the future of the carbon market in Brazil and the challenges and opportunities for the business sector.

In July 2020, we announced a plan to promote sustainable development in the Amazon, in collaboration with two other largest private-sector banks in Brazil. Part of this plan, named “Plano Amazônia,” aims to eliminate deforestation in the supply chain for cattle farms for beef processors in the Amazon, aiming to finance the cultivation of local crops, such as açaí, Brazilian nuts and cocoa, and to identify opportunities for the development of bioeconomy chains. In 2021, we also launched the new commercial network Rede Norte Amazônica, in order to expand our operations in the region, and we have established the North Amazon Network, a business unit comprised of four Brazilian states (Amazonas, Acre, Rondônia, and Roraima), with the objective of fostering business in the region and a particular focus on sustainability. Since its creation, we have made over R$ 270 million in credit lines available to cooperatives and agribusinesses, as well as to producers of Amazonian products who adopt sustainable practices.

In 2021, we inaugurated Brazil’s first sustainable train station in partnership with the State Government of São Paulo, maximizing on-site natural resource efficiency by means of solar energy panels and a water reuse system. Furthermore, in collaboration with the International Finance Corporation, a World Bank Group institution, and the State Government of São Paulo, we supported the Pinheiros River clean-up program.

We also use ESG as one of the criteria for evaluating our executives, evidencing how deeply embedded the subject is in our culture.

In recognition of our efforts, we have received several ESG accolades in 2021, including Exame magazine’s Best ESG Bank, the Eco Brazil Award, Época Negócios 360°’s Most Sustainable Company, in addition to being named to Fortune magazine’s Change the World list.

Our Business

We provide our complete portfolio of products and services to our 30 million active customers as of December 31, 2021 through the following business segments:

●Commercial Banking: provides services and products to individuals and companies (except for global corporate customers who are managed by our Global Wholesale Banking). The revenue from this segment is derived from the banking and financial products and services available to our account and non-account holders.
●Global Wholesale Banking: offers a wide range of national and international tailored financial services and structured solutions for our global corporate customers, comprised mostly of local and multinational corporations.

We outline below the business divisions for each of our operating segments, as well as the breakdown of our net interest income and operating income before tax by segment:

Commercial Banking

Global Wholesale Banking

●Retail Banking●Santander Corporate & Investment Banking (“SCIB”)
●Individuals
●SMEs
●Consumer Finance
●Corporate
 75
Table of Contents
  For the Year Ended December 31,
  Net interest income Operating income before tax
  2021 2020 2019 2021 2020 2019
  (R$ millions)
Commercial Banking(1)   46,236   41,457   42,044   19,491   4,666   18,375 
Global Wholesale Banking   5,082   2,985   2,277   5,260   4,998   3,898 
Total   51,318   44,443   44,321   24,750   9,664   22,273 
(1)Operating income before tax reported under commercial banking includes the effects of the hedge for investments held abroad (offset in the same amount in the “Income Tax” line). The effect of the hedge for investments held abroad in 2021, 2020 and 2019 amounted to loss of R$2,512 million, R$13,583 million and loss of R$1,264 million, respectively. 

The following table shows a managerial breakdown of our loans and advances by customer type at the dates indicated:

  As of December 31, 

Change between

2020 and 2021

 

Change between

2019 and 2020

  2021 2020 2019    
    (R$ millions)      
Individuals   203,678   174,042   156,177   17.0%  11.4%
Consumer Finance   55,441   51,637   48,421   7.4%  6.6%
SMEs   59,602   54,525   53,119   9.3%  2.6%
Corporate(1)   174,634   137,618   89,539   26.9%  53.7%
Total Credit Portfolio   493,355   417,822   347,257   18.1%  20.3%
(1)For purposes of loan portfolio presentation, “corporate” includes companies with annual gross revenues exceeding R$200 million, including our Global Corporate Banking customers.

Commercial Banking

Retail

Individuals

We have structured the individual customer service segment as follows:

●Private Banking – is responsible for customers with at least R$5.0 million in assets available for investment. In this segment, we offer a complete and tailored portfolio of financial products and services, investment advice, loans and asset management through a dedicated manager for investments and banking services.

●Santander Select – is responsible for customers with a monthly income above R$10,000, and R$30,000 in investments, or more than R$100,000 in investments. The offer here consists of a value proposition with differentiated products and services, exclusive service spaces, relationship managers who serve a small number of customers and provide asset management advisory services,

●Santander Van Gogh – is responsible for customers with a monthly income ranging from R$4,000 to R$10,000, or with investments above R$40,000. Our goal is to understand the needs of our customers at each stage of their lives and provide them with financial advice through a multi-channel solution, including financial products and services, as well as financial advice,

●Santander Especial – is responsible for customers who earn up to R$4,000 per month. Our business model offers simple and efficient solutions with an attractive cost benefit to the customer, primarily through electronic channels.

Furthermore, we also support our Select and Van Gogh customers through our Santander Direct channel, Santander Direct is suited to customers who want more flexible service hours, from 8:00 a.m., to 10:00 p.m. and who prefer using a remote method, such as telephone, e-mail or chat, as well as access to digital channels. This service complements our offering and broadens our capillarity by catering to regions where we do not have a physical presence.

 76
Table of Contents

We launched the following products or functionalities for retail customers in 2021:

●Santander Especial – New customers who opened their accounts on our digital channels have access to Santander Direct.

●New account digital process - We endeavor to simplify the account opening process using internal and external information and making the experience quick and simple for new customers.

Small and Medium Enterprises (SMEs)

We serve SMEs under the “Santander Negócios e Empresas” brand, with the following customer service segmentation model:

●Empresas 3 Núcleos (Core Companies) – responsible for companies with annual revenues between R$30 million and R$200 million. Our service model is based on dedicated relationship managers, a team of experts for more complex demands and loan managers specializing in risk management. We also provide specialized services to multinational, technology companies and other major corporations in order to meet their specific needs.
●Empresas 2 Polo (Hub Companies) – responsible for companies with annual revenues between R$3 million and R$30 million. We offer these customers a comprehensive range of products and services through a user-friendly interface, as well as dedicated relationship managers that work in specialized hubs.
●Empresas 1 Agência (Branch Businesses) – responsible for companies with annual revenues of up to R$3 million. We offer these customers a simple banking solution through an integrated account that combines a corporate account with a point of sale, or “POS,” terminal hosted by our former subsidiary Getnet. Through this arrangement, our customers receive benefits for using the Getnet solution to process their credit card sales, with receipts being posted to a Santander Brasil checking account.
●Negócios Direct - for companies with annual revenues of up to R$300 thousand. We offer these customers direct access to a relationship manager who is available during extended service hours and via remote channels, such as telephone, e-mail or chat, as well as access to digital channels that facilitate the client’s day to day needs.
●Empresas MEI (Individual Microentrepreneur) – responsible for companies with annual revenues of up to R$81 thousand. We offer these customers a simplified and cost-effective option through our Santander Conta MEI, a remote service, and digital solutions such as Gent& Santander – the artificial intelligence solution for service and sales.

Consumer Finance

We provide consumer credit to finance motor vehicles, goods and services directly or through intermediate agencies, Santander Financiamentos is our main service channel, but we also operate under multiple brands.

The following table sets forth certain key financial and operating data regarding our consumer finance business for the periods indicated:

 

As of December 31,

Change between 2020 and 2021

Change between 2019 and 2020

 

2021

2020

2019

Individual consumer finance loan portfolio market share (1) (%) 24.4%25.1%25.0%(1.1) p.p.0.1 p.p.
(1)Source: Brazilian Central Bank.

Corporate

Our corporate banking segment aims to be the main distribution channel of the Santander Group to Brazilian and foreign and/or multinational corporate clients. The product offering ranges from simple cash accounts to

 77
Table of Contents

mergers and acquisitions advisory services. We leverage our strength in consumer finance, asset and wealth management, payments and markets to serve our clients and their shareholders, employees, clients and suppliers. We serve companies with annual gross revenues in excess of than R$200 million located across Brazil by physical and digital channels. Our corporate banking segment has been constantly evolving as a segment relying on a disciplined analytical toolkit, consistent communication and workforce upskilling.

Global Wholesale Banking

Santander Corporate & Investment Banking (SCIB)

SCIB is the global business unit that serves customers, who, due to their size and complexity, require tailored services or high-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customer portfolio comprises a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.

Our customers in the SCIB segment benefit from Santander Group’s global structure of services, which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and provision of integrated services.

Our Portfolio of Products and Services

Payments

Credit and Debit Cards

We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.

In order to reach a greater number of customers and remain competitive, we launched the SX card in November 2020, as part of the SX strategy detailed below. This product benefits highly engaged and transactional customers, facilitating the exemption from annual card fees. In addition, we also took the opportunity with the SX card to launch a more modern and ambitious card design for our customers.

To improve customer experience for the high-income segment, where we are aiming to increase market share and brand awareness, we launched the Gold, Platinum and Centurion products with American Express which include NFC technology, the accumulation of Esfera points that do not expire and still allow access to Membership Rewards, an exclusive American Express program.

In line with Santander Brasil’s global purpose of becoming NetZero by 2050, we launched cards made from recycled material in July 2021. The new cards made of recycled material were issued to customers who already had an SX or Elite card, close to expiry. We expect to make the official launch for the first quarter of 2022, with the issuance of 100% of SX and Elite cards with recycled material. Currently, we are the only bank in Brazil that issues cards made from recycled material.

In the SMEs segment, believing in the great potential of microentrepreneurs, or “MEI,” who represent more than half of the companies in Brazil, we developed an exclusive card for this segment. The MEI card grants customers discounts on purchases made with partners, chosen according to the microentrepreneurs field of activity, as a result of which cardholders have access to exclusive offers for the purchase of input for their companies. In addition, there is the possibility of an annual fee waiver by binding the card by using the card on a monthly basis or by registering with the PIX system.

In line with the objective of becoming an open financial services platform, in November 2021 we launched a partnership with Samsung, a solution that offers digital account opening, card sales and SIM loans on the first screen of Samsung pay. The objective is to provide a simple and fluid journey within the app that is already used on a daily basis to pay for on-the-go purchases.

We also improved our digital journey to provide better customer self-service, which we believe is a key component for higher customer engagement. A recent novelty is “Clique e Retire,” a new physical card delivery system that provides a quick, autonomous solution for customers by allowing them to opt to collect their cards from self-service machines.

 78
Table of Contents

The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.

  As of and For the Year Ended
December 31,		 Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
Credit card portfolio market share (1)   12.4%  13.4%  12.9%  (1.0 p.p.)   0.5 p.p. 
Credit card portfolio (R$ billion) (2)    48   37.8   36.1   27.0   (100.0%)
Total card turnover (R$ billion) (2)    306.0   242.0   236.4   26.4   2.4%
Credit card turnover (R$ billion) (2)    203   158.7   161.0   27.9   (1.4%)
Total card transactions (in millions) (2)    3,555.3   2,570.8   2,725.4   38.3   (5.7%)
Credit card transactions (in millions) (2)    1,859.1   1,300.0   1,450.9   43.0   (10.4%)
Participation of credit card in the household consumption (only debit)– Market overview (2)(%)   24.1%  17.4%  13.8%  6.7 p.p.   3.6 p.p. 
Participation of credit card in the household consumption (only credit) – Market overview (2)(%)   42.1%  25.2%  24.0%  16.9 p.p.   1.2 p.p. 
Participation of credit card in the household consumption (total, debit and credit) – Market overview (2)(%)   69.3%  43.5%  38.2%  25.8 p.p.   5.3 p.p. 
(1)Source: Brazilian Central Bank, as of September 31, 2021. Data for the year ended December 31, 2021 was not available as of the date of this annual report.
(2)Source ABECS – “Monitor bandeiras,” The data relating for the year ended December 2021 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS.

Santander Way

Santander Way is an app available to our cardholders that allows them to manage their Santander Brasil cards at any time and place. This complete payment platform also works as a digital wallet, enabling customers to conduct instant contactless payments. The app is frequently updated with new features. Some of the most notable features launched in 2021 included: (i) extra loan and installment offers, (ii) virtual cards that allow purchases before the physical card arrives, (iii) functions for safer online purchases without a physical card, (iv) possibility for the customer to update his or her income to obtain a higher credit limit, and (v) chargeback from unrecognized purchases. In 2021, we have nine million active customers using Santander Way.

Merchant Acquiring Market | Getnet

Getnet is a technology company that offers payment solutions to a range of merchants, from large businesses to the small entrepreneurs, both physically and digitally. Getnet was our subsidiary until the completion of the Spin-Off on October 26, 2021. For more information on the Spin-Off of Getnet, see “—A. History and Development of the Company—The Getnet Spin-Off.”

The following table sets forth certain historical key financial and operating data regarding Getnet’s business for the periods indicated. 

  As of and For the Year Ended December 31, Change between 2020 and 2021 Change between 2019 and 2020
   2021 (1)  2020   2019         
   (R$ millions, except as otherwise indicated)
Market share of total turnover (2)  15.3%  14.9%  11.3%  0.4 p.p.   3.6 p.p. 
Debit turnover (3)  105.8   105.8   80.9   0%  30.8%
Credit turnover (3)  182.7   167.9   126.6   8.8%  32.6%
                     
(1)We completed the Spin-Off of Getnet on October 26, 2021 and, as a result, Getnet is no longer a subsidiary of Santander Brasil. We stopped consolidating Getnet within our results of operations on March 31, 2021. For additional information on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
 79
Table of Contents
(2)  Source: Data for 2021 relates to the nine-month period ended September 30, 2021 and is based on ABECS Monitor Bandeiras - Acquirers. Data for the year ended December 31, 2021 was not available as of the date of this annual report. For comparison purposes, the difference between September 30, 2021 and September 30, 2020 would be an increase of 1.7 percentage points.
(3) Considers data until September, 2021.

We completed the Spin-Off of Getnet in October 2021, and Getnet is no longer our subsidiary. However, on April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.

Following the Spin-Off, Getnet is operating as the Brazilian leg and regional acquirer of the Santander Group’s PagoNxt merchant solutions. PagoNxt is a strategic initiative that seeks to promote sustainable and profitable growth by integrating various payment solutions for businesses and consumers using the latest technology. PagoNxt is an autonomous company within the Santander Group. Through its three lines of business, namely merchant solutions for businesses, trade solutions for international trade and consumer solutions for consumers, it provides solutions not only to banking clients of the Santander Group but also to third-party customers, financial institutions and fintechs.

Esfera

Esfera is our loyalty program, which can be accessed through its own website and mobile app. Our loyalty platforms enable our credit card holders to exchange their reward points for many products, services and travel benefits, including exclusive deals and discounts with a broader selection of partners such as some of Brazil’s largest retailers and a cinema chain, among others. Esfera also operates a marketplace offering cashback to is clients on purchases of products that aggregate more than sixty partners as of the date of this annual report.

Ben

Ben is an employee benefits company that provides greater flexibility, purchasing power and quality of life to its users by creating, supplying and managing types of employee benefit vouchers (e.g. meals, such as Vale Alimentação and Vale Refeição, as well as transportation) in the form of magnetic cards. These benefits are offered through an integrated digital platform.

Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.

Ben is currently working on development of new products, such as fuel cards and other benefit options to expand its portfolio.

Ben added Ben Único to its portfolio. This product allows customers to have two kinds of benefits in a single card, reducing the cost with card emission and logistics, contributing with ESG metrics,

According with new products developing planning, Ben submitted a request to the Brazilian Central Bank to issue a license to operate as a payment institution (instituição de pagamento) and it was granted in December 2021.

The following table sets forth certain key financial and operating data regarding Ben´s business for the periods indicated.

  As of and For the Year Ended December 31,
  2021 2020 2019
  (in R$ millions, except as otherwise indicated)
Card Purchases   1,484   946   560 
Number of Cards (in thousands)   565   217   98 
Number of Transactions (in thousands)   20,477   12,192   9,534 
Merchant accredited (in thousands)   365   338   253 

For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”

 80
Table of Contents

Payroll Loans

Payroll loans support both account and non-account holders in the execution of projects and financial organization. Under these loans, monthly installments are deducted directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, significantly reducing our credit risk. We offer these payroll loans to our customers through our mobile banking platform and our branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts. Furthermore, these loans are also offered to non-account holders through Olé Consignado. For further information on relevant events, relating to Olé Consignado’s corporate events, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”

The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.

  As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
Market share in origination (1)   16.96%  18.90%  13.2%  (1.94)p.p  9.09 p.p 
Payroll loan portfolio (R$ billion)   53.3   48.1   43.0   10.85%  11.9%
(1)Source: Brazilian Central Bank, as of December 31, 2021, 2020 and 2019, as applicable

SIM

SIM is a digital lending platform for individuals through which customers can apply, and be approved, for a loan completely online. After two years of operation, SIM has already achieved a positive net profit, a loan portfolio of R$1.6 billion as of December 31, 2021 and a market share of 0.7%, in the year ended December 31, 2021, as well as a total of 6.5 million registered users as of December 31, 2021. SIM also has a high level of customer satisfaction, with an NPS of 80 points in the year ended December 31, 2021.

emDia

emDia is an online debt renegotiation platform. It provides customers with a simple platform to access debt renegotiation services on a 24/7 basis, As of December 31, 2021, emDia had 6.5 million customers and had contributed to the recovery of R$78 million in credit volume in 2021.

Mortgages

We offer long-term financing to our customers for real estate purchases, secured by deeds of trust. We consider mortgages to be a strategic product due to their lower risk (since the acquired property serves as collateral) and their ability to increase our customer loyalty (especially since we offer customers more attractive rates if they choose to bank with us). In this market, our customers, and those of our competitors, are primarily individuals.

We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 90% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of the borrower’s monthly gross income,

To facilitate the process for our customers, we provide a real estate digital platform where customers can obtain mortgages completely online. We were the first bank in Brazil to offer customers the opportunity to secure a mortgage without being physically present, except for the signing of the agreement and returning it duly registered. We have a partnership with the largest real estate platform in Brazil in order to improve our sales network and strengthen our digital presence.

The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated:

 81
Table of Contents

  As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
   (in R$ billions, except percentages)
Mortgage loan portfolio   54.8   45.8   39.7   19.7%  15.4%
Individual sector mortgage loans   53.0   44.0   37.2   20.5%  18.3%
Loan to value(1) – Production (% quarterly average)   65.5%  64.9%  62.9%  0.06 p.p.   2.0 p.p. 
Loan to value – Portfolio (%)   52.5%  52.2%  49.4%  0.30 p.p.   2.75 p.p. 
(1)Ratio between loans and the value of the collateral, excluding home equity.

Home Equity

In our portfolio of loan products, we also offer a “home equity” financing product called “UseCasa” in which clients can receive a loan if they provide real estate as collateral. This product enables clients to access financing to pursue their personal objectives. “UseCasa” has increased its market share to 23.5% in 2021, maintaining our position as the leading private sector bank for these types of loans in Brazil. Our portfolio was R$3.2 billion in 2021, an increase of 27% in the year ended December 31, 2021 compared to the year ended December 31, 2020. Efficiency has also improved as approximately 50% of loans are now approved in less than 10 days. We do not offer home equity loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 60% of the value of the property, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of borrowers’ monthly gross income.

To facilitate the process, customers can obtain home equity loans completely online through our real estate digital platform. When using this option, customers only need to be physically present when signing the contract and when returning it once it is duly registered.

Tailored Products and Services

As mentioned above, we offer a complete set of services and products worldwide. In this way, we have a portfolio that ranges from basic to tailor-made and highly complex solutions in the following areas:

●Global Transaction Banking – Responsible for the sale and management of local transactional banking products, which include local loans, commercial financing such as on-lending of funds from development banks, structuring of local loans and cash management solutions).
●Global Transactional Services – Responsible for the sale of global transactional products, financing for export and import, guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
●Global Debt Financing – Responsible for the provision of financing and financial advice on infrastructure projects, origination, and distribution of fixed income instruments in capital markets both locally and internationally, financing for acquisitions and syndicated loans in local and foreign currency.
●Investment Banking – Advice on mergers and acquisitions and equity transactions in the capital markets.
●Equities – It operates brokerage services for individual, corporate and institutional investors in stocks, listed derivatives and research.
●Treasury Customers – Responsible for structuring and offering foreign exchange products, derivatives and investments to clients in our various segments, including institutional investors, corporate clients and individuals.
●Market Making – Responsible for the pricing of operations (foreign exchange and derivatives) for customers originating from the sales efforts of our corporate, institutional, corporate, private banking and retail. This area is also responsible for managing our proprietary books.
 82
Table of Contents
●Energy Trader – Performs transaction with qualified customers and end consumers, and also acts as a hedge and market making provider in the energy markets.

We are one of the leading banks in capital markets and financial advisory services in the Brazilian and international markets as evidenced by the awards we have received, of which the most significant are listed in the table below.

Company

Acknowledgments

Dealogic

Full Year 2021

#8 Latin America & Caribbean ECM Revenue

#9 Latin America ECM Volume by Bookrunner

#10 Brazil M&A Revenue by Advisor

#6 Brazil M&A Volume by Advisor

#4 Latin America & Caribbean DCM Volume by Bookrunner

#8 Latin America and Caribbean Loans Volume by Bookrunner

#8 Latin America and Caribbean IB Revenue by Bookrunner

#5 Brazil Investment Banking by Bank¹

#1 Latin American & Caribbean Project Finance Loans Volume by MLA²

#1 Americas Project Finance Volume by Finance Adviser to Consortium²

#1 Americas Project Finance Volume by Finance Adviser²

#4 Americas Renewable Energy Project Finance Volume by MLA²

¹ For the third quarter of 2021

² For the first half of 2021

Global FinanceBest New Measures to Support Trade Finance Customers during Pandemic 2021

Best Supply Chain Finance Bank Global 2021

Best Post-Shipment Financing Solution 2021

Best Provider of Short-Term Investments Money 2021

Market Funds in Latin America 2020

Best Trade Finance Bank in LatAm 2020

World’s Best Payment Hub Solution 2020

Best Trade Finance Provider for LatAm 2020

Institutional Investors

#1 The Latin America Strategy Team 

#4 The Latin America Sales Team

# Sales Trading Institutional Team

#5 Research Team

First Quarter of 2020
TMI AwardsBest Trade & Supply Chain Finance Bank in South America 2020
Euromoney

The Best Bank for SMEs Award in LatAm.

October 2020
FX Markets

Best Bank for emerging LatAm currencies 2020

Best Bank for LatAm 2020

Best Bank for USD/BRL 2020

Global Trade Review

Best Trade Finance Bank in LatAm 2020

Best Deal Award Route 2020

Best Supply Chain Bank 2020

First Quarter of 2020
Bond Radar

#1 DCM Distributed in the International Market 

Brasil Bonds & Corporate Bonds

Full Year 2020

Trade Finance an IJ Global

Best Supply Chain Finance Bank 2020

Best Receivables Financier 2020

PFI Awards

Global Adviser of the year

First Quarter of 2020

Anbima

#2 DCM Distributed in the Local Markets 

#4 DCM Originated in Local Markets– Fixed Income Consolidation

Project Finance 

Financing advisory #1 Announced value

First Quarter of 2021

Full Year 2020

Risk Net

Risk Solutions House of the Year 2020

Deals: Cosan (EDQ) / Syngenta (Special Sits)

 83
Table of Contents

Latin Finance

Corporate High-Grade Bond of the Year: Suzano FY2020

Equity Follow-On of The Year: Via Varejo

Infrastructure Bank of the Year – Brazil

Syndicated Loan of the Year: LD Celulose

Domestic M&A Deal of the Year: Grupo Notre Dame Intermédica purchases Clinipam

Corporate High-Yield Bond of the Year: Braskem

Bank of the Year: Southern Cone

Bacen

#1 Total FX 

September 2021
The BankerBest Transaction Bank for Latam 2021

Customer Solutions

Agribusiness

Agribusiness remains one of our key areas of expansion, and we believe that expanding our agribusiness network will help broaden our reach into the Brazilian countryside to strategic areas in which we are not yet present. We provide a full range of products and services focused on the agribusiness sector. Our approach towards rural producers differs from the one taken with our other customers in that we offer a specialized relationship to our rural producers. We believe that a network of physical stores and digital solutions will result in a more agile and efficient communication with these customers.

The following table sets forth certain key financial and operating data regarding our agribusiness for the periods indicated.

  As of and For the Year Ended December 31, 

Change between

2020 and 2021

 Change between 2019 and 2020
  2021 2020 2019    
Number of agribusiness-focused stores   42   40   34   5%  6%
Agribusiness loan portfolio (R$ billion)   13.9   13.7   10.9   1.5%  26.2%

Microfinance

We believe that Prospera Santander Microfinance is a leading microcredit-oriented operation among privately owned banks in Brazil, based on market share and portfolio value. This product aims to support formal and informal microentrepreneurs by generating business and income with a 100% digitalized service process, in addition to products intended to improve business management skills, we have customers who hire us for services previously not available to them, because they do otherwise have access to financial services, such as property finance, consortium and investment services.

  As of and For the Year Ended December 31, Change between 2020 and 2021 

Change between

2019 and 2020

  2021 2020 2019    
Number of Prospera stores   119   99   100   20.02   (1.0%)
Microfinance loan portfolio (R$ billion)   1.9   1.3   1.2   49.2%  8.3%

Webmotors

Webmotors is the first and largest Brazilian technology company focused on providing automotive purchase and sale solutions for dealers, original equipment manufacturers and private sellers, holding the largest online automotive listing in Brazil.

Webmotors received an average of more than 30 million visits per month in 2021. Through Cockpit, a pioneering and disruptive platform for utilities, which brings together solutions for the entire network described above, we offer the following solutions: business management/ performance, buyer profile (CRM), data intelligence, predictive pricing models and market data (AutoGuru).

Webmotors endeavors to be a platform that accompanies private and corporate users throughout the life of their vehicle, from purchase, to use and sale. In order to do so, Webmotors reformulated the business of its subsidiary Loop, which was a traditional auctioning business, into an omnichannel dealer which is able to increase the sale value of demobilized fleets in its digital and physical stores. Webmotors also launched “Agenda Fácil,” a product focused on scheduling services through WhatsApp.

 84
Table of Contents

Santander Auto

In 2019, we launched Santander Auto, a fully digital car insurance solution which relies on the use of big data analytics for pricing.

The Brazilian insurance market is characterized by: (i) low insurance penetration in proportion to its GDP; (ii) low technological evolution, dominated by companies with low innovation rates, still focused on financial results (due to a history of high interest rates); and (iii) retail brokers as the main distribution channel. As a result, the subscription process still requires that the customer complete a question form (approximately 40 questions). As a result, only approximately 20% of Brazilian vehicles are insured.

Actuarial techniques and behavioral models enable Santander Auto to make an insurance proposal, without making additional information requests from the customer, based on information already available to us.

During 2019, its first year of operation, almost 110 thousand policies were sold, which represents a penetration rate of 16% (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos). These results are based on a pricing system based on information bureaus which provides have a more accurate price, which makes it possible to make an offer at the time the vehicle is purchased, and which enables customers to include insurance in their purchase with a single click.

During 2020, we focused on consolidating our insurance offer, by ensuring that all customers have at least one insurance offer, while also covering the most diverse types of risk. We intend to expand the business through the optimization of our ecosystem and penetration in our customer base.

In 2021, Santander Auto expanded its product offering to cover 95% of all vehicles financed by Santander Financiamentos, reaching a penetration rate of 20% in the year ended December 31, 2021 (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos), and registering an increase of 80% in the number of policies sold in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the fourth quarter of 2021, Santander Auto started to offer car insurance to customers who are not financing their vehicle with Santander Financiamentos in order to expand its distribution channel further.

Solution4fleet and Car10

In 2021, we acquired Solution4fleet, a company specialized in leasing vehicles to third parties. Solution4fleet offers services such as assistance, fleet management, inspection, vehicle maintenance and fine management. It is the only company in the Brazilian market that has a complete ecosystem for fleet management and leasing operations.

We also acquired Car10, a company which provides a marketplace to simplify auto repair shops and services with over 7,000 registered garages across Brazil.

+ Negócios and +Vezes | Santander Financiamentos

In 2017, we launched “+Negócios,” which we believe to be an innovative digital trading platform. This simple and intuitive platform enables faster execution of loan simulations, receipt of credit approval and proposal formalization for vehicles, in addition to providing portfolio management reports. In the same year, we also introduced “+Vezes,” a digital trading platform allowing retailers to offer installment payment options for the sale of goods and services.

In 2021, approximately 15 million separate Brazilian individual taxpayer identification numbers were used to simulate vehicle leasing through the “+Negocios” platform, which makes it one of the most widely used platform in Brazil’s vehicle leasing market.

+Vezes has a strong focus on digital channels. With the use of +Vezes website, two editions of “Decora +” and “Energia +” have been launched, both focused on the development of digital showcases to bring main resellers closer to the end customers, mostly on the furniture and photovoltaic segments. Additionally, Crédito Pessoal +Vezes has also been launched, which is a complementary offer of credit for end customers in their checking account, without a specifically required purpose. We have also advanced multiplying +Vezes presence and service throughout the national territory for the implementation of the CONSULTANT + Model, strengthening the relationship with intermediary customers.

 85
Table of Contents

Moreover, “+Fidelidade” is a loyalty program with the objective of offering incentives to agents based on their relationship with Santander Brasil and Webmotors. Accordingly, we have sought to improve the customer’s post-sales experience by implementing several features on +Fidelidade’s online portal.

Cash Management

We offer cash management solutions to corporate customers and SMEs online through our Internet banking and mobile banking services.

Our revenues from cash management include fees charged for offering the following products: (i) collections, in which we assist customers in carrying out commercial transactions using printed or online payment slips; (ii) payments, consisting of simple and automatic management of our customers’ accounts payable activities through individual transactions or via electronic file transfer; (iii) instant Payments, in which our customer pays and receives funds online with an immediate credit or debit to the account (this can be added to our collection, payments or acquiring products); (iv) payroll, which is intended to facilitate the management of salary and benefits payments to our customers’ employees via an online tool;(v) collection of values, which consists of the payment of cash values and checks at the customer’s points of sale; and (vi) custody, by which we perform the custody, control and deposit of predated checks up to the date of clearing.

In addition, we also provide other revenue-generating products which are structured and tailored to the customer’s operation.

Customer Funding

Our main sources of liquidity are customer funding through deposits and other bank funding instruments. These deposits, combined with equity and other instruments, enable us to meet most of our liquidity and legal reserve requirements.

For further information, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”

Investments

Our investment process for retail customers seeks to provide qualified guidance and help them achieve their financial objectives based on five major pillars:

●Client investment profile – We assess our customer’s situation to understand their level of financial knowledge, investment horizons, liquidity needs and the levels of risk they are willing to assume, among other factors. This analysis is reviewed periodically, according to the customer’s needs and local regulations;
●Investment strategy – Our investment philosophy aims to provide long-term returns through a structured asset allocation process and mitigate market risks by diversifying among different asset classes;
●Model Portfolio – We define strategic portfolios for each customer profile and build our “Model Portfolio” on a monthly basis according to market conditions and trends. This tactical view arises from the Asset Allocation Committee, which consists of our advisory team and economists from our economics department, our Santander Asset Management division, our Private Banking unit and our brokerage house (Santander Corretora);
●Execution and implementation – To assure a successful execution of investment strategy, we provide a complete array of financial products, ranging from banking instruments, bonds, stocks, structured notes, investment funds with an open architecture and selected investment providers, real estate funds and exchange traded funds, among other capital markets instruments. Our partnership with Zurich Santander completes this offering with a wide range of private pension plans. Furthermore, our recent acquisition of Toro Corretora has further enhanced our PI DTVM investment platform by expanding our product offering. For more information regarding this acquisition, see “—A. History and Development of the Company—Important Events—Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.;” and
 86
Table of Contents
●Follow-up – Our advisory team performs a thorough and frequent review of our clients’ profile, objectives and results alongside each client in order to maintain the client’s investment within the parameters established and the guidance provided by the model portfolio.

In order to identify possible deviations from the investment profile’s recommended positions, we also rely on automated monitoring systems. These controls alert customers of any transactions that compromise the suitability of their portfolio and are in line with our commitment to protect our customers’ interests.

Furthermore, each customer has direct access to their positions through a private access on the internet and mobile app, where they can view the evolution of their investment strategies.

Programa Avançar

We also have a non-financial solution, known as “Programa Avançar,” which is aimed at entrepreneurial customers. By means of this solution, SMEs can access content and solutions related to management and innovation, internationalization, team building, and other topics relevant to businesses via a web platform. We see this program as a key component of our offering to Brazilian entrepreneurs.

In addition, we offer a digital account solution where individual entrepreneurs can purchase banking products and services in a 100% digital experience.

Similarly, we offer “Santander Copiloto,” an enterprise resource planning tool designed for our SME customers. This tool is integrated with the Santander Digital channels, and provides solutions such as e-commerce, sales point software and tax compliance.

Service Channels

We offer our financial services and products to our customers through our multichannel distribution network composed of: (i) physical channels, such as branches, mini-branches and ATMs; (ii) call centers; and (iii) digital channels, such as Internet banking and mobile banking.

Physical Distribution Network

Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network as of the dates indicated.

  As of December 31,
  2021 2020 2019
Branches   1,987   2,153   2,328 
Mini-branches   1,384   1,411   1,512 
Own ATMs   12,561   12,949   13,296 
Shared ATMs   24,255   23,798   23,780 

Branch Network

Our branch network offers our entire portfolio of products and services to our customers through a personal and customized approach. The table below shows the geographic distribution of our branch network as of the dates indicated.

  As of December 31,
  2021 2020 2019
Northeast   9.74%  9%  9%
North and Midwest   8.42%  7%  7%
Southeast   67.31%  70%  70%
South   14.53%  14%  14%

PABs (Mini-branches)

We offer daily banking services to our SMEs, as well as corporate customers and their employees through our PABs (“Postos de Atendimento Bancário”), which are exclusive sales points located at our customers’ buildings, as well as in hospitals and universities. The presence of PABs in our customers’ offices strengthens our relationship and builds loyalty with those customers, who benefit from the convenience of conducting their banking transactions at their workplace.

 87
Table of Contents

ATMs

We operate an extensive network of 12,561 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 24,255 ATM units. Through this network, our customers can access their accounts and conduct banking transactions, as well as purchase most of the products and services available in our portfolio.

Remote Channel

Our remote channel consists of call centers, online messaging services and contact emails available to all our customers. These allow customers to solve issues, engage new products and services and generally interact with us to fulfil their banking requirements. We received over 25 million contacts per month through our remote channel in the year ended December 31, 2021.

In, we began a process to reshape the way in which we interact with customers through our remote channel. In 2021, this transformation allowed us to achieve more than 740,000 sales in December 31, 2021.

Digital Channels

Our digital channels include Internet banking, mobile banking and other digital solutions aimed at facilitating our customers’ access to the products and services that we offer.

The last few years have been marked by a significant digital transformation for us. We believe that in 2021 we have strengthened our focus on customers with a digital mindset while also leveraging digital tools to enhance our efficiency and scalability. In this context, we highlight the following:

●We have created an online store to receive and serve our customers on an ongoing basis. In the year ended December 31, 2021 we recorded an average of approximately 442 million total visits per month and we increased the number of digital buyers in comparison with the year ended December 31, 2020.
●We added 557,000 new accounts in December 2021, an increase of 190% when compared to December 2020. We believe this growth is due to our streamlined account opening process, which improved our customers’ experience, and to an increase in our approval rates as a result of improvements in our fraud detection and offline processes.
●We have performed an average of approximately 3.2 million sales per month in the year ended December 31, 2021, an increase of 45% when compared to the year ended December 31, 2020. This increase has been primarily driven by an increase in credit cards sales, representing an average of 297,000 sales per month in the year ended December 31, 2021, an increase of 99% when compared to the year ended December 31, 2020. We have consolidated our position as a leading credit and digital recovery platform in Brazil, with more than 2.4 million contracts per quarter in the year ended December 31, 2021 (considering only individuals) an increase of 69% when compared to the year ended December 31, 2020, and with a share of sales amounting to 64% in loans in the year ended December 31, 2021.
●We have also taken steps to improve our digital customer service, in the form of Gent&, our virtual assistant. Gent& is an artificial intelligence launched in 2020. This solution offers a more personalized digital service that provides greater autonomy for our customers.

The following table provides certain key operating information with regards to our digital channels as of the dates indicated.

  For the Year Ended December 31,
  2021 2020 2019
  (in millions)
Number of digital customers (1)   18.8   15.6   13.4 
Number of digital channel transactions (2)   7,482   5,262   4,311 

(1)We define digital customers as those who used at least one of Santander Brasil’s digital channels (e.g., mobile banking and internet banking) in the 30 days preceding the end of the applicable year.
(2)Refers to transactions carried out through internet banking, mobile banking and other digital platforms. The data refers to the year ended December 31.

 88
Table of Contents

The following table provides an overview of the weight of each key distribution channel in our overall distribution system.

  

For the Year Ended

December 31,

  2021 2020 2019
   (%)
Internet banking  27.7   37.8   39.7 
ATMs  3.6   5.9   8.9 
Mobile (1)  62.3   46.9   39.0 
Branch  1.1   2.2   4.1 
IVR (2)  4.6   6.4   7.4 
Call Center  0.7   0.9   0.9 

(1)Refers to total transactions (account holder and unique product-holder).
(2)Interactive voice response is an automated telephone system in which a computer interacts with callers (who can use their voice or the telephone keypad to communicate with the computer), gathers information and transfers caller to the appropriate representative.

Technology and Infrastructure

In 2021, we have performed significant investments in our technology systems. We put customers at the center of our strategy. We are continuously seeking improvements in customer experience and satisfaction by launching new services, as well as combining self-service features with human and personalized services and channels.

Therefore, we have strengthened our technological culture and our business systems capacity, which supports an intense flow of more than 53 million customers as of December 31, 2021 and an average of 442 million total visits per month to our digital channels in the year ended December 31, 2021, along with an efficient and secure processing of an average of more than 367 million transactions per day in the year ended December 31, 2021. We believe that this continuous improvement of our customer services, combined with the offer of new solutions and the expansion of the range of our channels contributed to the growth of our customer base by 11% in the year ended December 31, 2021 compared to the year ended December 31, 2020.

We have increased our operational efficiency and scalability, expanding the use of computing to over 75% of operations, and improving the time-to-market of products and services, by using Agile and DevOps methodologies in the execution of 85% of our projects. Furthermore, we have reduced the number of relevant incidents (which we define as high priority incidents, i.e., those that could result in the unavailability of a wide range of critical services) in the last three years by more than 90% on average, ensuring greater availability of our products and services to our customers. We have listed below other initiatives carried on throughout 2021:

●Investments: We have launched the Algo+ service (stands for “algorithm”), which simplifies the investment process to our customers, allowing them to invest in stocks from the bank’s recommended portfolios without having to sign-in to the home broker. This initiative ensures diversification and time saving in investments, also protecting investors from cognitive biases and human failures.
●Open Banking: We have started to provide the “Open Finance” service to our customers, which allows them to authorize the sharing of their financial data to other financial institutions. This enables us to understand customers’ profiles better, so we can offer personalized products, services, and other benefits, such as increases in credit card limits and competitive banking fees. Customers can also concentrate the management of their finances in a single place, and they will soon be able to manage all their accounts from other banking institutions (e.g., balance and statement checking, making payments and investments) by means of our digital channels. We have also implemented resources and mechanisms to ensure data privacy and security to conform to government regulations.
 89
Table of Contents
●Security: Aiming to provide our customers with a streamlined digital experience, we have offered authentication via facial recognition, eliminating the need to authorize mobile devices at an ATM in order to use all the features of our digital channels. The new security system recognizes the customer with the use of artificial intelligence, including legitimacy checks through advanced Machine and Deep Learning models developed internally, ensuring proof of life and facial verification. Customers only need to register face biometrics when opening an account and afterwards in their mobile application, which grants our customers with a more digital and secure experience.
●Individual Bank Account (Mobile): We have added new resources and features in order to provide a better experience for our customers. Regarding customer service, we provide the DialMyApp service. When the customers access our call center, they are guided to online services (App, Website and Virtual Assistant) through a graphic menu displayed on his cell phone concurrently with the phone call they have placed, which improves engagement and reduces customer service costs. With respect to foreign exchange, we have included a new feature for uploading documents through the OnePay service, optimizing the time of carrying out exchange transactions, in addition to improvements in exchange rates checking for the main currencies. With respect to investments, we have offered our customers a new feature to monitor and analyze the evolution of their investment portfolio for a given period of time by means of the Investment Profitability Chart (GRENT).
●Corporate Bank Account (Mobile): In order to ensure greater support to our corporate customers, we offer new assistance service channels, such as our AI virtual assistant, as well as direct contact with one of our managers in our corporate mobile App. This service also includes a feature that enables our customers to contract our business management system (Santander CoPilot), by means of which they can control their business sales and inventory. Moreover, the Open Banking feature gives customers an opportunity to share their company data, which ensures a better understanding of their business profiles.
●Credit Cards: In the context of the COVID-19 pandemic, we have expanded the digitalization of our card transactional services, enabling customers to self-serve through digital channels for acquisition and post-sales purposes, such as invoice checking via WhatsApp. Another disruptive initiative is the generation of the online card before the physical card, allowing customers to make their purchases in e-commerce and also by cell phone approximation before they receive their physical card by mail.
●Customer Service: Combining entrepreneurship, technology and focus on customer experience, we developed a Voice Analytics solution to scale our capabilities of listening to our customers by means of the use of machine learning, Graphics Processing Units (GPU) and cloud computing, which accelerates our deliveries and adds value to our shareholders. Currently, we have already studied and addressed the needs of our customers going through credit recovery processes and with reduced investments.
●Software Development Agility: We have transformed our software deployment process through the adoption of a new solution focused on the integration of software development lifecycle tools, providing greater autonomy to the development teams, in addition to ensuring production environment stability through automatic deploy and rollback processes without manual interventions (Zero Touch). As a result, our development teams are able to better meet customer needs, delivering new features with more assertiveness, speed and quality. In just nine months after the process was implemented, twice as many software deploys were made compared to the entire year of 2020.
●Cloud: In order to improve the availability and resilience of our main applications, we expanded the use of our computing capacity with two public cloud services providers, extended our on-premises datacenter network using these cloud providers, and created a full mesh connectivity model. Using this model, we have updated software applications to use cloud capabilities adopting an abstraction strategy for the providers’ Cloud products (for example: accessing products through open and common protocols), ensuring code standardization and reduction of lock-in (dependency on a single cloud provider technology implementation), in addition to the implementation of normal/peak/special day auto-scaling strategies and the creation of automated capacity to balance applications in multi-cloud service.

Communications and Marketing

We use and monitor several tools in order to communicate effectively with our customers. These include not only traditional media, such as television and printed media, but also the internet, mobile advertising and social networks.

 90
Table of Contents

We regularly provided information through all available media, seeking to make a real and positive difference in the lives of our clients. Such information includes guidance on what open finance is, i.e., an ecosystem that allows financial institution customers to share their information to other banks which enables banks to develop more tailored products. We publicized updated solutions, like Gent& and Algo+, an algorithm that helps investors to follow our monthly portfolio recommendations. Internally, we released more than 200 videos aimed at instructing our teams on how to best-serve our customers, and guidelines to prevent COVID-19 in the workplace. Externally, we ran 297 video advertisements on TV and social networks. Our communications campaign generated significant feedback, with 100,000 articles published in newspapers and magazines, and 120 stories featured in Brazilian national media outlets as well. On social media, we averaged 10 posts per day, with 2.6 million impressions. We have also joined new media formats on networks such as Telegram, WhatsApp and games. Additionally, we conducted more than 120 live broadcasts and events where our senior management, as well as experts and government officials were invited to address several topics, including the current economic scenario, social investment, sustainability, diversity, women’s leadership, entrepreneurship, and culture and entertainment, The Fourth Edition of Global Citizen, organized in collaboration with newspaper Valor Econômico and featuring Al Gore, the 2007 Nobel Peace Prize winner, received more than 935,338 views. Also, the 22nd Annual Santander Conference showed discussions on politics, sustainable businesses, health and technology, with the participation of major chief executive officers, public authorities and our leadership. The conference was broadcasted on YouTube, garnering a total of 7.1 million views.

Sustainability

In Brazil, sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through the Board of Directors, the Executive Committee and the Sustainability Executive Superintendents. The Sustainability Committee is responsible for providing clarification and recommendations to the Board of Directors regarding the development of sustainability-related guidelines.

Our sustainability strategy is based on three pillars: (i) strategic and efficient use of environmental resources, (ii) developing potential and (iii) resilient and inclusive economy. Our vision, based on these three pillars, is to contribute to a better society, while maintaining management excellence and responsibility, in accordance with our ethical values and using our technology to serve people and businesses.

Resilient and Inclusive Economy

Our broad commercial activity allows us to advise and support of our customers and projects. We believe we can play a role as facilitator and contribute to the generation of jobs and income, and the improvement of logistics and infrastructure for Brazil’s development.

Through this pillar, for example, we offer access to banking services, products and non-financial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the “Prospera Santander Microfinanças,” “Programa Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include the topic of financial management in the client's relationship with the Bank, using tools such as Santander On.

In 2021, we helped 341,000 people through financial inclusion products and financial education guidance.

Development of Potentials

Our commitment to the development of potential begins with our employees. We have ranked as one of the best companies to work for in the GPTW survey since 2016, ranking top ten in 2021. Guided by our corporate culture and internal policies, we offer opportunities that promote development and professional growth, in order to build a culture of delivering results, respect, innovation, inclusion and diversity.

We work to create a culture of respect, inclusion and equity, where everyone can develop their talents with their unique attributes. Diversity is one of the five principles of our Code of Ethical Conduct. Our priorities are gender and racial equity, inclusion of LGBTI+ and people with disabilities, as well as diversity of experience and generational diversity. Since 2018, we have set inclusion targets for black employees in the bank and female employees in leadership, which in 2021, were 27.3% and 31.4%, respectively. Additionally, in 2021, we received two diversity awards from GPTW: one for our ethnic-racial practices and another, for the fourth time, as one of the best companies for women to work.

Through the Santander Universities Program, we offer initiatives focused on granting national and international scholarships, programs for entrepreneurial development, as well as internship and employment programs.

 91
Table of Contents

As of December 31, 2021, about 33,000 scholarships and entrepreneurships were granted with a total investment of approximately R$33 million.

We maintained our actions to support society and continued with our private social investment strategy with our programs to support children, teenagers, the elderly and entrepreneurs.

●In the 19th edition of the Amigo de Valor Program, we raised R$19.8 million to support 100 initiatives throughout Brazil, benefiting over 12,400 people.
●Campanha Brasil sem Fome: we are responsible for the donation of 200,351 baskets of staple food.

Our initiatives, including Amigo de Valor, Parceiro do Idoso, Blood Donation Campaign and Volunteer Program, had an impact on 542,545 people in 2021.

Efficient and Strategic Use of Natural Resources

We are implementing changes to our business that contribute to a responsible and more efficient use of our national environmental resources, including with respect to a reduction in carbon emissions. In this sense, in addition to the responsible environmental management of our operations, we finance and advise companies in the fields of infrastructure and renewable energy, while also providing support for sustainable agribusiness.

In the year ended December 31, 2021, we have destined R$ 51.6 billion to foster sustainable businesses, 96% more than in the year ended December 31, 2020. We believe these operations are in line with market benchmarks and include the issuance of green bonds, advisory services to sanitation businesses and financing for renewable energy (such as CDC Solar). For instance, we have transformed the Vila Olímpia station, at the city ​​of São Paulo, into the first sustainable station in Brazil, increasing its efficiency in the use of natural resources on site. As a consequence of our investments, 70% of the energy now used by the station derives from solar panels and it has implemented a system to recycle its water usage.

One year after the launch of Plano Amazônia, a commitment signed by Santander Brasil, Bradesco and Itaú in connection with measures to enhance and scale up solutions that promote the sustainable regional development, we highlight the following initiatives from Santander Brasil:

●We made available over R$ 270 million in credit lines directed to cooperatives and agribusinesses in the Amazon region.
●We held the Bioeconomy in the Spotlight conference that has promoted a debate related to bioeconomy, preservation and sustainable development of the Amazon region, with market specialists and the CEOs of Santander, Bradesco and Itaú.
●We have been in contact with regional meatpacking companies to inform them about credit restrictions starting in 2025.
●In early 2021, we have announced our commitment to achieve zero net carbon emissions by 2050. The commitment applies to the Santander Group’s and also to Santander Brasil’s activities, as well as to all emissions from customers from any financial, advisory or investment service the bank offers.

Since 2002, we have adopted social and environmental parameters in the credit risk analysis for projects and companies. Our analyses seek to identify issues such as contaminated land, deforestation, labor practices in conditions analogous to slavery and child labor, among other matters that would prevent us from doing business with such projects and companies.

We have been carbon neutral since 2010, by completely offsetting our Scope 1 and 2 emissions. Since 2013, we follow a methodology for selecting projects from which to purchase Verified Emission Reductions, or “VERs,” in order to ensure the social and environmental benefits for the Amazon region. In recent years, we bought VERs from reforestation and renewable energy ventures.

In addition, we have made a commitment to supply 100% of our operations with renewable energy by 2025, establishing specific metrics for electricity, water, paper and internal renewable energy consumption. In the year ended December 31, 2021, 53% of our energy consumption came from renewable sources.

 92
Table of Contents

In 2021, we will renew our ISO 14,001 certification in our administrative buildings, including our headquarters, Campinas radar and data center, and we will also implement the Zero Landfill Program, with the objective of giving a more sustainable destination for our waste.

Socio-Environmental Responsibility Policy

Our Socio-Environmental Responsibility Policy, or “PRSA,” meets the requirements of CMN Resolution No. 4,327/14 and SARB Regulation 14 of FEBRABAN. These regulations define guidelines and consolidate specific policies for socio-environmental practices in business and relationships with certain parties. These practices include socio-environmental opportunities and impacts, and risk management such as suitability in granting and using credits, management of suppliers and socio-environmental risk analysis. We also have a PRSA Senior Group, which consists of our vice-presidents of Risks, Legal Issues, Corporate, Human Resources, Finance and Communication, Marketing, Institutional Relationships and Sustainability, and officers of Agribusiness and Compliance. This Group is involved in decision-making related to the PRSA and operates in connection with our Executive Committee.

On September 2021, the Brazilian Central Bank published the new CMN Resolution No. 4.945, which provides for the Social, Environmental and Climate Responsibility Policy (PRSAC) and the actions aimed at its effectiveness. As of July 1, 2022, the PRSA will be revoked and the PRSAC will come into effect.

Competition and Industry Transformation

Currently, there are five commercial financial institutions at the forefront of the Brazilian financial industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal, Together, these financial institutions accounted for 71.7% of the credit and 73.9% of the deposits available in Brazil as of September 30, 2021, according to the Brazilian Central Bank and the financial statements of the aforementioned banks,

The following table shows the total loans and deposits of the five leading financial institutions in Brazil at the dates indicated:

  Santander Brasil Bradesco Itaú
Unibanco		 Banco
do Brasil		 Caixa Econômica Federal Financial System
  September 2021 (R$ billion)
Total loans (1)  450.3   581.3   567.4   745.3   842.0   4,442.0 
Total deposits (1)  389.8   559.8   792.6   475.2   472.5   3,641.7 
                         
(1)According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 2021).

Insurance Coverage

We maintain insurance policies that are renewed annually in order to protect our assets. All of our branches, affiliates and administrative buildings are insured against losses caused by fire, lightning, explosions and other risks. Such coverage establishes reimbursement for the asset replacement value.

●In addition, we also maintain the following insurance policies:
●policies against material and/or bodily damage caused to third parties for which we are held responsible;
●policies against financial losses due to fraud or employee misconduct, among others;
●directors’ and officers’ insurance policy for our management against third-party complaints regarding management acts. There are insurance policies against crimes, employee dishonesty and damages arising out of public offerings; and
●policies against hacker attacks and cyber-crimes.
 93
Table of Contents

Dependence on Patents, Licenses, Contracts and Processes

The major trademarks we use, including, among others, the “Santander” trademark, are owned by Santander Investment Bank. Santander Brasil has a license to use this trademark. All trademarks of our business are registered or applied through the Brazilian Patent and Trademark Office (Instituto Nacional de Propriedade Industrial, or “INPI”), the agency responsible for registering trademarks, patents and designs in Brazil. After registration, the owner has exclusive rights to use of the trademark in Brazil for a 10-year period that can be successively renewed for equal periods.

As of the date of this annual report, we own a total of 568 trademarks in Brazil, with Santander Brasil owning over 117 of these trademarks, while the remaining are owned by other companies of the Santander Group.

REGULATION AND SUPERVISION

The basic institutional framework of the Brazilian financial system was established by Law 4,595/64, as amended from time to time, or the “Banking Reform Law.” The Banking Reform Law created the CMN, responsible for establishing the general guidelines of monetary, foreign currency and credit policies, as well as regulating the institutions of the financial system.

Principal Regulatory Agencies

CMN

The CMN oversees the Brazilian monetary, credit, budgetary, fiscal and public debt policies. The board of the CMN is composed of the president of the Brazilian Central Bank, the Minister of Planning and the Minister of Finance, who also chairs the Board, Pursuant to the Banking Reform Law, the CMN is the highest regulatory entity within the Brazilian financial system, and is authorized to regulate the credit operations of Brazilian financial institutions, to regulate the Brazilian currency, to supervise Brazil’s gold reserves and foreign exchange, to determine Brazilian savings and investment policies and to regulate the Brazilian capital markets with the purpose of promoting the economic and social development of Brazil. In this regard, the CMN also oversees the activities of the Brazilian Central Bank and the CVM.

Brazilian Central Bank

The Brazilian Central Bank is an autonomous authority responsible for the implementation of CMN policies related to foreign currency and credit, the regulation of Brazilian financial institutions, particularly in regards to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out by financial institutions and their financial information. The Brazilian Central Bank addresses specific issues through the Monetary Policy Committee (COPOM), a committee responsible for adopting measures to meet inflation targets defined by the CMN and establishing monetary policy guidelines. In order to meet inflation targets, the COPOM must set the target for the SELIC rate (the average rate for daily financing, backed by federal instruments, as assessed under the SELIC) and publish reports on the Brazilian economic and financial environment and projections for the inflation rate.

CVM

The CVM is responsible for the implementation of CMN policies related to securities, with the purpose of regulating, developing, controlling and inspecting the securities market and its participants (companies with securities traded in the market, investment funds, investors, financial agents, such as custodians of instruments and securities, asset managers, independent auditors, consultants, as well as instruments and securities analysts).

Self-Regulating Entities

The Brazilian financial and capital markets are also subject to the regulation of self-regulating entities that are divided by field of activity. These self-regulating entities include, among others, the ANBIMA, the ABECS, the FEBRABAN, the Brazilian Association of Publicly-Held Companies – ABRASCA and the B3.

Principal Limitations and Obligations of Financial Institutions

In line with leading international standards of regulation, Brazilian financial institutions are subject to a series of limitations and obligations. In general, such limitations and obligations concern the offering of credit, the concentration of risk, investments, operating procedures, loans and other transactions in foreign currency, and the

 94
Table of Contents

administration of third-party funds and microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:

●No financial institution may operate in Brazil without the prior approval of the Brazilian Central Bank, In December 2017, the CMN enacted a new rule establishing that all such requests submitted to the Brazilian Central Bank must be approved within 12 months (subject to suspension of the term in some instances);
●A Brazilian financial institution may not hold direct or indirect equity interests in any company located in Brazil or abroad registered as permanent assets without prior approval of the Brazilian Central Bank. The corporate purpose of such company shall be complementary or subsidiary to the activities carried out by the financial institution;
●Brazilian financial institutions must submit for prior approval by the Brazilian Central Bank the corporate documents that govern their organization and operation, such as capital increases, transfer of headquarters, opening, transfer or closing of branches (whether in Brazil or abroad), election of the members of the statutory bodies and any corporate restructuring or alteration in the composition of their equity control. The requests for changes in control submitted to the Brazilian Central Bank must be approved within 12 months and requests for changes to organizational documents must be approved within three months (in both cases subject to suspension of the term in some instances);
●Brazilian financial institutions must fulfill minimum capital and compulsory deposit requirements and must comply with certain operational limits;
●A Brazilian financial institution may not own real estate, except for properties it occupies and subject to certain limitations imposed by the CMN. If a financial institution receives real estate, for example, in satisfaction of a debt, such property must be sold within one year, unless otherwise authorized by the Brazilian Central Bank;
●Brazilian financial institutions must comply with the principles of selectivity, guarantee, liquidity and risk diversification;
●A Brazilian financial institution belonging to the S1 segment, as is the case of Santander Brasil, cannot lend more than 25% of its Tier 1 Regulatory Capital (patrimônio de referência) to a single person or a group and the maximum exposure to concentrated individual customers or group of connected customers of such Segment 1 financial institution is 600% of its Tier 1 Regulatory Capital (a concentrated individual client would mean, for the purpose of the proposed rule, as any one client to which exposure is equal to or higher than 10% of its Tier 1 Regulatory Capital);
●According to the Banking Reform Law, a Brazilian financial institution cannot carry out credit transactions with (i) its controlling shareholders, directors and members of other statutory bodies (fiscal, advisory and other) and their respective spouses and relatives up to second degree, (ii) the individuals or legal entities that hold a qualified interest (15% of the capital stock) in their capital, (iii) the legal entities in which they have qualified interest (direct or indirect), (iv) the legal entities in which they have effective operational control or preponderance in the deliberations, regardless of the equity interest, and (v) the legal entities with common directors or members of the board of directors. Such prohibition does not apply, subject to limits and conditions established by the CMN through the enactment of Resolution No. 4,693 in October 2018, to: (i) transactions with a counterparty that has an officer or director in common with the financial institution providing credit, provided that the officer or director is considered an independent member in both entities; (ii) transactions carried out under market-compatible conditions, without additional benefits or different benefits when compared to the operations deferred to the institution to other customers with the same profile, (iii) credit operations that have as counterparty a financial institution that is part of the institution prudential conglomerate, provided that they contain contractual clauses of subordination, except in the case of overnight and loan transactions with other financial institutions specified by the law, (iv) the interbank deposits, according to the law, (v) the obligations assumed by related parties under the compensation and settlement services authorized by the Brazilian Central Bank or by the CVM and their respective counterparties, and (vi) other cases authorized by the CMN; the management of third-party assets must be segregated from other activities and must follow the regulations issued by the CVM;
 95
Table of Contents
●The total amount of funds applied in permanent assets of the financial institutions cannot exceed 50% of their adjusted stockholders’ equity;
●Brazilian financial institutions must comply with anti-money laundering, combating the financing of terrorism and anti-corruption regulations;
●Brazilian financial institutions must implement policies and internal procedures to control their systems of financial, operating and management of information, as well as their conformity to all applicable regulations;
●Brazilian financial institutions must implement a policy for remuneration of board members and executive officers that is compatible with their risk management policies; and
●The Banking Reform Law and specific regulations enacted by the CMN impose penalties on financial institutions in certain situations where applicable requirements, controls and requisites have not been observed. In addition, the Brazilian Central Bank may cancel the financial institution’s authorization to operate in certain situations. The cancellation of an authorization for operation of a financial institution may only occur upon the establishment and processing of the appropriate administrative proceeding by the Brazilian Central Bank.

Additionally, as part of the Santander Group and due to the global nature of our organization we are subject to related international rules.

Capital Adequacy and Leverage – Basel

Current Requirements

The Brazilian Central Bank supervises the Brazilian banking system in accordance with the Basel Committee on Banking Supervision, or “Basel Committee,” guidelines and other applicable regulations. For this purpose, banks provide the Brazilian Central Bank with any information which it deems useful in performing its supervisory functions, which includes supervising changes in solvency and capital adequacy of banks.

The main principle that guides the directives set forth in the Basel Committee is that a bank’s own resources must cover its principal risks, including credit risk, market risk and operational risk.

Brazilian financial institutions are subject to capital measurement and standards based on a risk weighted asset ratio. The parameters of this methodology resemble the international framework for minimum capital measurements adopted by Basel III.

Basel III

On December 16, 2010, the Basel Committee issued its Basel III framework, which was revised and republished on June 1, 2011. The Basel III framework increases minimum capital requirements, creates new conservation and countercyclical buffers, changes risk-based capital measures, and introduces a new leverage limit and new liquidity standards in comparison to the former framework. The rules were phased in gradually and were fully implemented by January 1, 2019. Regulatory Capital is composed by Core Capital and two additional tiers:

Tier I capital will have to reach a minimum ratio of 6.0% (according to the schedule established by the Brazilian Central Bank), divided into two portions: (i) Core Capital consisting mainly of corporate capital and profit reserves (shares, units of ownership, reserves and earned income) of at least 4.5%, and (ii) Additional Tier I consisting mainly of perpetual hybrid securities and capital instruments authorized by the Brazilian Central Bank (but excluding amounts relating to funding instruments issued by other local or foreign financial institutions) and any of our own shares purchased by us and the integration of which into the Additional Tier I Capital is permitted. To improve the quality of the capital of financial institutions, Basel III restricts the acceptance of financial instruments that fail to demonstrate effective capability of absorbing losses and requires the reduction of assets that in certain situations could jeopardize the financial institution’s capital value due to the instruments’ low liquidity, dependence on future profits for realization or difficulty of value measurement.

There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debt approved by the Brazilian Central Bank as additional capital requirements, or Tier II, are expected to be maintained if they also comply with requirements introduced by Basel III, including the mandatory conversion clauses into equity or write-off upon the occurrence of triggering events provided for in the regulations.

 96
Table of Contents

In accordance with the Basel III standards, the Brazilian Central Bank created the Additional Core Capital buffer (Adicional de Capital Principal), which is composed by the sum of three buffers:

●Core Capital Conservation buffer (Adicional de Capital Principal de Conservação), which was introduced to ensure that banks have an additional layer of usable capital that can be drawn down when losses are incurred. Whenever the buffer falls below 2.5%, automatic constraints on capital distribution (for example, dividends, share buybacks and discretionary bonus payments) will be imposed so that the buffer can be replenished. Countercyclical capital buffer (Adicional Contracíclico de Capital Principal), which aims to protect the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risks. The countercyclical capital buffer is fixed by the Financial Stability Committee (Comitê de Estabilidade Financeira) based on discussions about the pace of credit expansion, and currently is set zero (Brazilian Central Bank Communication No. 36,830/21). Should the requirement increase, the new percentage takes effect twelve months after the announcement,
●Core Capital Systemic buffer (Adicional de Importância Sistêmica de Capital Principal), which is applicable to the S1 bank segment (banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity).

On March 16, 2020, due to the challenging macroeconomic environment resulting from the COVID-19 pandemic, the Brazilian Central Bank issued Resolution No. 4,783 which establishes the percentage to be applied to the risk-weighted assets value for the purpose of calculating the capital conservation buffer. This percentage increases gradually until April 2022, when it reaches 2.5%.

This level will phase-in towards the 2019 level by 2022, as shown in the image below. This buffer change decreased the minimum Core Capital requirements, reaching 6.75% to 10.5%, as of December 31, 2021.

The Basel III rules also provide for the implementation of a leverage ratio calculated by dividing the Tier I capital by the bank’s total exposure. In early 2015, the Brazilian Central Bank issued a new regulation governing the calculation and reporting of the leverage ratio of Brazilian financial institutions in line with the Basel III rules, which became effective in October 2015. Financial institutions classified as segment 1 (S1), as is the case for Santander Brasil, or segment 2 (S2), for purposes of the application of prudential rules, are required to maintain a minimum RA of 3% as from January 1, 2018.

Additionally, in order to enable the implementation of the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No. 12,838, enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.

 97
Table of Contents

In 2015, the CMN and the Brazilian Central Bank also issued a set of rules for the implementation of the liquidity coverage ratio or “LCR,” a short-term liquidity index. The purpose of the LCR is to demonstrate that financial institutions have sufficient liquid assets to make it through a stress scenario lasting one month. According to these rules, the largest Brazilian banks were required to maintain an LCR of at least 60% since October 2015. This ratio increased 10% annually until it reached 100% in 2019. The Brazilian Central Bank also released, in 2015, the local methodology for calculating the LCR so as to align the existing rules with the guidelines of the document “Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools” issued by the Bank for International Settlements in January 2013. In January 2017, the Brazilian Central Bank enacted a new rule amending the calculation method and procedures for disclosure of LCR information. The new regulation establishes a new possible stress scenario and, for purposes of LCR retail, includes spot and forward deposits.

As mentioned above, the LCR is a short-term liquidity ratio for a 30-day stress scenario. It represents the ratio of high-quality liquidity assets to net outflows. High Quality Liquidity Assets are composed mainly of Brazilian federal government bonds and reserve requirement returns. Net Outflows are mainly composed of losses on deposits, offset in part by Inflows, which are mainly credits.

In November 2017, the CMN established a minimum limit for the Net Stable Funding Ratio (Índice de Liquidez de Longo Prazo, or “NSFR”) and the Leverage Ratio (Razão de Alavancagem, or “RA”) with which Brazilian financial institutions are required to comply. The NSFR corresponds to the ratio between the Available Stable Funds (Recursos Estáveis Disponíveis, or “ASF”) and the Required Stable Funds (Recursos Estáveis Requeridos, or “RSF”) of the financial institution. The financial institutions classified as “segment 1” for purposes of the application of prudential rules, as we are, must maintain, as from October 1, 2018, a minimum NSFR of 1.00. Regarding the leverage ratio, the financial institutions classified as “segment 1,” as we are, or “segment 2” for purposes of the application of prudential rules are required to maintain a minimum RA of 3% as from January 1, 2018.

Other Applicable Laws and Regulations

Consolidated Enterprise Level (conglomerado prudencial)

Financial institutions must submit to the Brazilian Central Bank, monthly and semiannually, consolidated financial statements based on the “consolidated enterprise level” (conglomerado prudencial) of which the financial institution is a member. Such information serves as the basis for calculation of the required Regulatory Capital of the Brazilian institutions. The “consolidated enterprise level” includes data relative to the financial institutions and other institutions authorized to operate by the Brazilian Central Bank, consortium administrators, payment institutions and credit factoring companies, including real estate credit, or of credit rights, such as mercantile foment companies, securitization companies and specific purpose companies, located in Brazil or abroad, as well as other legal entities headquartered in Brazil that have equity participation in the mentioned entities as their exclusive business purpose.

On January 29, 2020, the CMN published Resolution No. 4,818, which requires financial institutions categorized as S1, S2 and S3 to publish IFRS financial statements. The requirement is already in force for publicly held financial institutions and financial institutions which are leaders of a prudential conglomerate and came into effect for all remaining financial institutions on January 1, 2022.

New accounting criteria applicable to financial instruments, hedging and leasing agreements

On November 25, 2021 and December 16, 2021, the CMN issued Resolution No. 4,966/2021 and Resolution No. 4,975/2021. These rules establish, respectively, new accounting principles and criteria applicable to financial instruments, as well as to hedging and financial leasing transactions contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank.

The rules intend to align the accounting criteria applicable to financial instruments and leasing agreements contracted by financial institutions and other entities supervised by the Brazilian Central Bank with best international practices, including the “IFRS 9 – Financial Instruments” and “IFRS 16 – Leases” standards issued by the IASB.

 98
Table of Contents

CMN Resolution No. 4,966/2021 and Resolution No. 4,975/2021 will enter into effect on January 1, 2025, ensuring a transition period for the institutions subject to the changes.

Segmentation for the Proportional Application of Prudential Regulation

In January 2017, the CMN enacted a resolution establishing segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for the purposes of proportional application of the prudential regulation. The segmentation is based on the size, international activity and risk profile of members of each segment. Pursuant to the resolution, the segments are as follows:

●Segment 1 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base equivalent or superior to 10% of Brazil’s GDP; or (b) which perform relevant international activities, irrespective of the size of the institution;
●Segment 2 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base lower than 10% of Brazil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brazil’s GDP;
●Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brazil’s GDP;
●Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and
●Segment 5 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP, that apply a simplified optional method for verifying the regulatory capital’s minimum requirements, except for multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks.

We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.

Regulation of Risk and Capital Management Structure

The rules enacted by the CMN and the Brazilian Central Bank provide that risk management must be conducted through an integrated effort by the relevant entity (i.e., not only must risks be analyzed on an individual basis, but must also control and mitigate the adverse effects caused by the interaction between different risks). The rules set out different structures for risk and capital management, which are applicable for different risk profiles. This means that a financial institution of limited systemic importance can have a simplified structure of management, while institutions of larger complexity have to follow stricter protocols.

Compulsory Reserve Requirements

Currently, the Brazilian Central Bank imposes a series of compulsory reserves requirements. Financial institutions must deposit these reserves with the Brazilian Central Bank. The Brazilian Central Bank uses these reserve requirements as a mechanism to control the liquidity of the Brazilian financial system for both monetary policy and risk mitigation purposes. Reserves imposed on time deposits, demand deposits and saving accounts represent almost the entirety of the amount that must be deposited at the Brazilian Central Bank.

●Time Deposits (CDBs), The Brazilian Central Bank imposes a reserve requirement of 20% in relation to time deposits. Financial institutions must deposit an amount equivalent to the surplus of (i) R$3.6 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2.4 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1.2 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with a Regulatory Capital greater than R$15 billion.

Additionally, as from the issuing of Brazilian Central Bank Resolution No. 145 on September 24, 2021, collateral deposit for the new funding mechanism for financial institutions (called Linhas Financeiras de Liquidez) can be used to deduct up to three percentage points of this type of reserve requirements.

●Demand Deposits. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits.
 99
Table of Contents
●Savings Deposits. The Brazilian Central Bank imposes a reserve requirement of 20% in relation to general savings deposits and to rural savings deposits.

Asset Composition Requirements

Permanent assets (defined as property and equipment other than commercial leasing operations, unconsolidated investments and deferred charges) of Brazilian financial institutions may not exceed 50% of their adjusted net equity, calculated in accordance with the criteria established by the Brazilian Central Bank.

Brazilian financial institutions, as a general rule, may not have more than 25% of their Tier 1 Regulatory Capital allocated to credit and leasing transactions and guarantees extended to the same customer or group of customers acting jointly or representing the same economic interest. In addition, Brazilian financial institutions must comply with an exposure limit of 25% of their Regulatory Capital in connection with underwriting for or investments in securities of the same entity, its affiliates, or controlled or controlling companies. Repurchase transactions executed in Brazil are subject to operational capital limits based on the financial institution’s Regulatory Capital, as adjusted in accordance with Brazilian Central Bank regulations. A financial institution may carry out repurchase transactions in an amount of up to 30 times its Regulatory Capital. Within that limit, repurchase transactions involving private securities may not exceed five times the Regulatory Capital. Limits on repurchase transactions involving securities backed by Brazilian governmental authorities vary in accordance with the type of security involved in the transaction and the perceived risk of the issuer as determined by the Brazilian Central Bank.

The regulation issued by the Brazilian Central Bank with respect to the classification and valuation of securities and derivative financial instruments - including government securities - owned by financial institutions, based on the investment strategy of the financial institution, determined that securities and derivatives are to be classified into three categories: (i) trading; (ii) available for sale; and (iii) held to maturity.

“Trading” and “available for sale” securities are to be marked-to-market with effects in income and stockholders’ equity, respectively. Securities classified as “held to maturity” are recorded at amortized cost, Derivatives are marked-to-market and recorded as assets and liabilities in the balance sheet. Changes in the market value of derivatives are generally recognized in income with certain modifications, if these are designated as hedges and qualify for hedge accounting under the regulations issued by the Brazilian Central Bank. Securities and derivatives in the “held to maturity” portfolio may be hedged for accounting purposes but their increase or decrease in value as derived from the marked-to-market accounting method should not be taken into account.

On June 31, 2018, the CMN enacted a rule providing that financial institutions categorized as “Segment 1” as per the Brazilian Central Bank’s classification system established in 2017 (which is our case) (1) may not have more than 25.0% of their Regulatory Capital allocated to a single legal or natural person, and (2) that the total exposure of such financial institutions to one individual customer may not exceed 600% of their Regulatory Capital allocated to focused exposure, that is 10% of their Regulatory Capital – Tier 1. The rule also subjects financial institutions categorized as segment 2, segment 3 or segment 4 to less restrictive rules.

Centralized Registration and Deposit of Financial Assets and Securities

Law No. 13,476/17 consolidates the provisions on creation of liens over financial assets and securities, CMN Resolution No. 4,593/2017, as amended, regulates the registration and deposit of financial instruments and securities by financial institutions as well as the provision of custody services by such institutions.

Resolution 4,734/19 sets out the guidelines applicable to the establishment of liens and encumbrances on credit and debit payment instruments due to credit operations with financial institutions and regulates credit operations guaranteed by receivables from payment arrangements. The amount of receivables perfected into guarantees for a certain credit transaction will be reduced, whenever applicable, so that they are limited to the outstanding balance of the transaction or to the maximum limit extended, in the case of an extension of a non-dischargeable credit facility by a financial institution on an absolute and unilateral basis.

Circular 3,952/19, deals in particular with the procedures for the registration of receivables, and requires a convention between market infrastructures to guarantee the uniqueness of the receivables as financial assets that can be registered, interoperability, exchange of information between registration systems and participants in the structure. Circular 3,952/19 came into effect on June 7, 2021.

 100
Table of Contents

Brazilian Payment and Settlement System

The rules for the settlement of payments in Brazil are based on the guidelines adopted by the Bank of International Settlements, or “BIS,” and the current Brazilian Payment and Settlement System (Sistema de Pagamentos Brasileiro or the “SPB”). The Brazilian Central Bank and CVM (in relation to transactions with securities) have the power to regulate and supervise this system, SPB is composed of systems for the clearing of checks, clearing and settlement of debit and credit electronic orders, transfer of funds and other financial assets, clearing and settlement of transactions involving securities, clearing and settlement of transactions carried out in commodities and futures, and others, collectively designated as Financial Market Infrastructures, as well as the payment arrangements and payment institutions.

Within the scope of SPB, the Brazilian Central Bank operates the Reserves Transfer System, or “STR,” and the SELIC. STR is a system of transfer of funds with real-time gross settlement, which means that transfers are made at the processing time, one by one, and are subject to the existence of outstanding balance in the account. STR is composed of financial institutions, clearing and settlement houses and the National Treasury Office. SELIC is the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.

Instant Payment System

The Brazilian Central Bank also implemented an instant payment ecosystem in November 2020. The settlement of the system is centralized at the Brazilian Central Bank. In addition to increasing the speed at which payments or transfers are made and received, available 24 hours a day, seven days a week in all days of the year, the ecosystem has the potential to increase market competitiveness and efficiency; lower costs; and enhance customer experience.

On June 12, 2020, the Brazilian Central Bank issued Circular 4,027/20, which established the Brazilian Instant Payment System (Sistema de Pagamentos Instantâneos, or “SPI”). Circular 4,027/20 also approved the regulation with which the direct and indirect participants in the SPI must comply, and provided that the SPI started operating on November 3, 2020 with certain features and becoming available gradually until it was fully operational on November 16, 2020. Brazilian Central Bank Normative Ruling No. 47/20 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 129/21, in turn, establishes the procedures for the adherence to the instant payment arrangement (PIX).

According to the by-laws of the SPI, the participation in the SPI is mandatory for the participants of the PIX arrangement, and optional for (i) the clearing houses and other providers of clearing services, and (ii) the National Treasury Department.

There are two types of participation in the SPI: (i) direct, in which the participant holds an instant payment account and is directly connected to the SPI; and (ii) indirect, in which the participant institution does not hold an instant payment account and its participation occurs via a direct participant to the SPI, responsible for registering the indirect participant in the SPI and to act as its clearing agent in the SPI for instant payments, Circular 4,027/20 came into effect on July 1, 2020.

On August 12, 2020, the Brazilian Central Bank issued Central Bank Resolution No. 1, or “Central Bank Resolution 1/2020,” establishing the PIX System payment arrangement and approving the regulation governing it, or (the “PIX Regulation”).

Pursuant to Central Bank Resolution 1/2020, participation in the PIX System is mandatory for financial institutions and payment institutions authorized to operate by the Brazilian Central Bank that have more than 500,000 active customer accounts, considering cash deposit accounts, savings deposit accounts and prepaid payment accounts. Participation in the PIX System is optional for financial institutions and payment institutions that do not meet this threshold, as well as for the National Treasury Secretariat.

The PIX Regulation applies to all PIX System participants. According to the PIX Regulation, there are three types of participation: (i) transactional account provider, which is a financial institution or a payment institution that offers deposit accounts or payment accounts to end users; (ii) government entity, which is the National Treasury Secretariat, with the exclusive purpose of making collections and payments related to its activities; and (iii) special clearing houses, that are the financial institutions and payment institutions that (a) within the scope of the PIX System, have the exclusive purpose of providing settlement services to other participants, (b) meet the requirements to act as settlement participant in the Brazilian Central Bank’s SPI, and (c) do not meet the criteria of mandatory participation in the PIX System.

 101
Table of Contents

Brazilian Central Bank Resolution 1/2020 came into effect on September 1, 2020. PIX System transactions started operating on a restricted basis through to November 3, 2020 and was fully as of November 16, 2020.

Furthermore, on September 2, 2021, the Brazilian Central Bank issued Resolutions No. 135 and 136, which regulate the offering of the PIX Withdrawal and PIX Change services by regulated institutions that participate in the Brazilian Instant Payments System. Both rules came into effect on November 1, 2021. The new services were established by the Brazilian Central Bank on August 24, 2021, in a meeting of its Collegiate Board, which approved changes to the PIX Regulations.

PIX Withdrawal will allow all the clients of any participating institution to make a withdrawal in kind at one of the points that offer the service. Merchants, shared ATM networks and PIX participants, through their own ATMs, may offer the service. In order to withdraw funds in kind through PIX, the client simply executes a PIX transaction to the withdrawal agent, in a similar dynamic to a normal PIX transaction, by reading a QR Code or through the service provider's API.

With the PIX Change, the dynamic is almost identical. The difference is that the withdrawal of cash can be carried out during a purchase transaction with a merchant that offers PIX as a mean of payment. In this case, the PIX transaction is executed for the total amount (purchase + cash withdrawal). The customer's invoice will show the amount corresponding to the cash withdrawal and the purchase amount.

The offer of the two new products on PIX’s evolving agenda to users is optional, and the final decision to implement PIX Withdrawal and PIX Change is up to the merchants that accept PIX, the companies that own ATM networks, and the financial institutions that have their own ATMs.

Further, on September 23, 2021, the Brazilian Central Bank issued Resolution No. 142, introducing security measures to be adopted by institutions under its regulation and supervision to prevent frauds in the provision of payment services.

Resolution No. 142 establishes that financial and payment institutions must limit the provision of payment services for the period from 8 p.m. to 6 a.m. to a maximum of R$1,000 per deposit or prepaid payment account, as applicable. This limit may be increased at the client's request, which must be submitted formally through the relevant electronic service channels, but the institution must establish a minimum period of 24 hours for the change to take effect. Resolution No. 142 required payment service providers to implement the new transaction limit by October 4, 2021.

Pursuant to Resolution No. 142, financial and payment institutions must also implement, by November 16, 2021: (i) procedures aimed at evaluating the customer prior to offering the anticipation of the settlement of payment receivables on the same date of the execution of a payment transaction within the scope of payment schemes in which the institutions participate; and (ii) daily registration of the occurrence of fraud or attempted fraud in the rendering of payment services, including the corrective measures adopted by the institution. Based on these records, the institutions must prepare a monthly report consolidating the occurrences and the preventive and corrective measures adopted. This report must be forwarded to the institution audit and risk committees (if instituted), internal audit unit, Executive Board and Board of Directors (if instituted).

Furthermore, on September 28, 2021, the Brazilian Central Bank issued Resolution No. 147, which established security mechanisms specific to PIX transactions. The rule also details, within the scope of PIX, the measures established by Resolution No. 142, which applies to all electronic payment methods (including other types of electronic transfers available in Brazil, such as Transferência Eletrônica Disponível – TED or Documento de Ordem de Crédito – DOC). The security measures came into effect on November 16, 2021, with the exception of the new transaction limits, which came into effect on October 4, 2021.

Open Banking Regulation in Brazil

On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open banking. Open banking consists of the sharing of data and payment initiation services and forwarding credit transaction proposals, by financial institutions and other authorized entities (with customers permission) and the integration of information systems.

 102
Table of Contents

Among other topics, the resolution sets forth the mandatory and voluntary participating institutions, the data and services covered, the requirements for sharing, the responsibilities for sharing, the implementation schedule and the form of agreement to be entered into by the participating institutions.

According to the resolution, financial institutions and prudential conglomerates belonging to the S1 and S2 segments, as is our case, are required to participate in open banking.

Open banking has a four-stage implementation plan, as follows:

●Stage 1 (completed on February 1, 2021): public access to participating institutions’ data on their access channels and product/service channels related to checking, savings, prepaid payment accounts and to lending transactions.
●Stage 2 (completed on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
●Stage 3 (completed October 29, 2021): start of PIX transactions by payment transaction initiators, as well as the gradual entry of other payment arrangements.
●Stage 4 (starting on December 15, 2021): sharing of customer transactional data related to additional products, pursuant to the following deadlines: (i) insurance, open-end private pension and capitalization products: until March 4, 2022; (ii) merchant acquiring services: until March 11, 2022; (iii) foreign exchange transactions: until March 18, 2022; and (iv) time deposit accounts and other investment products: until March 25, 2022.

On October 29, 2020, the Brazilian Central Bank issued Central Bank Resolution 32/2020, which sets forth the technical and operational requirements to be observed by institutions which participate in the Brazilian Open Banking System.

The new rule lays out, among others, rules relating to (i) the scope of the data and services to be shared by participating institutions within Open Banking, detailed in a specific manual; (ii) the standards for the development of application programming interfaces (APIs) by participating institutions, detailed in a specific manual, which deals with their design, data transmission protocols, data exchange formats, control accesses, version control systems and specification parameters; among other things; (iii) criteria for registration and cancellation of registration in Open Banking; (iv) services to be rendered by the Open Banking Governance Structure, which also is detailed in a specific manual, including the maintenance of a repository of participating institutions and a website containing updated information about Open Banking and its implementation; and (v) minimal security standards and certifications.

Additionally, on September 9, 2021, the Brazilian Central Bank published Resolution No. 138, which disclosed the minimum scope of data to be available for sharing on Stage 4 of Open Banking, to be further detailed by the Open Banking Governance Body. The fourth stage of the ecosystem, which covers data on foreign exchange, investment, insurance, and open-end private pension transactions, as well as merchant acquiring services, began on December 15, 2021, when the participating institutions must make the information about the mentioned products and services available to other financial institutions.

Regarding investment transactions, the main financial and capital market products offered in Brazil were included in the scope of Stage 4, such as: (i) Banking Time Deposit Certificates (Certificados de Depósito Bancário or CDBs); (ii) Banking Time Deposit Receipts (Recibos de Depósito Bancário or RDBs); (iii) Real Estate Credit Bills (Letras de Crédito Imobiliário or LCIs); (iv) Agribusiness Credit Bills (Letras de Crédito do Agronegócio or LCAs); (v) investment fund quotas; (vi) direct treasury government bonds (títulos do tesouro direto); (vii) stock; (viii) quotas of exchange-traded investment funds (ETFs); (ix) debentures; (x) Certificates of Real Estate Receivables (Certificados de Recebíveis Imobiliários or CRIs); and (xi) Certificates of Agribusiness Receivables (Certificados de Recebíveis do Agronegócio or CRAs).

With regard to foreign exchange transactions, effective total value of transactions (VET) and commercial exchange rates will need to be made available. The data referring to merchant acquiring services will cover applied service fees and rates.

 103
Table of Contents

Finally, the data referring to insurance products and pension plans will follow the scope defined by the CNSP and the SUSEP in CNSP Resolution No. 415/2021 and SUSEP Circular No. 635/2021, respectively, which establish a specific timeline for the implementation of Open Insurance, an exclusive governance body responsible for Open Insurance, as well as specific implementation manuals.

Stage 4 of Open Banking introduced information sharing beyond traditional banking products and services, marking the beginning of the migration from Open Banking to Open Finance in Brazil.

Regulatory Sandbox

On November 28, 2019, the Brazilian Central Bank published Public Consultation No. 72/2019, which ended on January 31, 2020, regarding the Controlled Testing Environment for Financial Innovations or “Sandbox” which is intended to enable institutions test innovative financial and payment projects for a specified period.

After receiving comments on such Public Consultation, the CMN and the Brazilian Central Bank issued, on November 26, 2020, CMN Resolution 4,865/20 and BCB Resolution 29/20, to regulate the Sandbox. These rules set forth the applicable conditions for the implementation of the Sandbox, among which are the specific rules for the first cycle of tests, such as duration and number of participants, required documentation, criteria for the classification of institutions and the schedule for registration, selection and authorization processes of such entities. In November 2021, the Brazilian Central Bank selected developers’ projects for the first cycle, which will last for one year and may be extended for another year.

Treatment of Overdue Debts

The Brazilian Central Bank requires financial institutions to classify credit transactions in accordance with their level of credit risk and to make provisions according to the level attributed to each transaction. Such credit classifications shall be determined in accordance with criteria set forth from time to time by the Brazilian Central Bank, relating to the conditions of the debtor and the guarantor and the transaction terms. Where there are several credit transactions involving the same customer, economic group or group of companies, the credit risk must be determined by analyzing the particular credit transaction of such customer or group that represents the greatest credit risk to the financial institution.

Credit transactions of up to R$50,000 may be classified either by the financial institution’s own evaluation method or according to the number of days such transaction is past due, whichever is the more stringent. Credit classifications are required to be reviewed (i) monthly, in the event of a delay in the payment of any installment of principal or interest, in accordance with the maximum risk classifications; (ii) every six months, in the case of transactions involving the same customer, economic group or group of companies, the amount of which exceeds 5% of the adjusted net worth of the financial institution in question; and (iii) once every 12 months, in all circumstances, except in the case of credit transactions with a customer whose total liability is lower than R$50,000, the classification of which may be reviewed as provided above. Such R$50,000 limit may be amended by the Brazilian Central Bank from time to time.

The provisions set forth above are not applicable to our IFRS consolidated financial statements, which are based on the criteria described under “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment Losses on Financial Assets.”

Regulation of the Transfer of Customer Data by Financial Institutions to Database Managers

Brazilian law regulates the formation and consultation of databases with information regarding performance, individuals or legal entities, for the formation of credit history, Resolution No. 4,737 determines that the history of the following operations should be provided: (i) credit operations; (ii) leasing operations; (iii) self-financing operations executed upon consortium groups; and (iv) other operations with characteristics of credit granting; and defines the criteria for the registration of database managers, such as the identification of the natural and legal persons that are part of the control group of the database manager.

Collection of Bank Fees

Bank services to individuals are divided into the following four groups: (i) essential services; (ii) priority services; (iii) special services; and (iv) specific or differentiated services.

Banks are not able to collect fees in exchange for supplying essential services to individuals with regard to checking accounts, such as (i) supplying a debit card; (ii) supplying 10 checks per month to account holders who meet the requirements to use checks, as per the applicable rules; (iii) supplying a second debit card (except in cases of loss, theft, damage and other reasons not caused by the bank); (iv) up to four withdrawals per month, which can be made at a branch of the bank, using checks or in ATM terminals; (v) supplying up to two statements describing the transactions during the month, to be obtained through ATM terminals; (vi) inquiries over the internet; (vii) up to two transfers of funds between accounts held by the same bank, per month, at a branch, through ATM terminals or over the internet; (viii) clearing checks; and (ix) supplying a consolidated statement describing, on a month-by-month basis, the fees charged over the preceding year with regard to checking accounts and savings accounts.

 104
Table of Contents

Certain services rendered to individuals with regard to savings accounts also fall under the category of essential services and therefore are exempt from the payment of fees. CMN prohibits banks from charging fees for supplying essential services in connection with deposit and savings accounts where customers agree to access and use their accounts by electronic means only (being authorized to charge fees for supplying essential services only when the customer voluntarily elects to obtain personal service at the banks’ branches or customer service locations),

Priority services are those rendered to individuals with regard to checking accounts, transfers of funds, credit transactions, leasing, standard credit cards, over-the-counter exchange transactions for the purchase or sale of foreign currency in respect of international travel, and records, and are subject to the collection of fees by the financial institutions only if the service and its nomenclature are listed in its regulations. Commercial banks must also offer to their individual customers a “standardized package” of priority services, whose content is defined, as well as the customers’ option to acquire individual services instead of adhering to the package.

The collection of fees in exchange for the supply of special services (including, among others, services relating to rural credit, currency exchange market and on lending of funds from the real estate financial system) is governed by the specific provisions found in the laws and regulations relating to such services. The regulation authorizes financial institutions to charge fees for the performance of specific services, provided either that the account holder or user is informed of the conditions for use and payment or that the fee and charging method are defined in the contract.

It is worth pointing out: (i) the prohibition against charging fees in cases of adhesion contract amendments, except in the cases of asset replacement in leasing transactions, early liquidation or amortization, cancellation or termination; (ii) the prohibition against including services related to credit cards and other services not subject to fees in service packages that include priority, special and/or differentiated services; (iii) the requirement that subscription to service packages must be through a separate contract; (iv) the requirement that information given to the customer with respect to a service package must include the value of each service included in the package, the number of times that each service may be utilized per month, and the total price of the package; (v) the requirement that a customer’s annual banking statement must separately identify default interest, penalties and other costs charged on loans and leasing transactions; (vi) the requirement that registration fees cannot be cumulatively charged; and (vii) the requirement that overdraft fees can be charged, at most, once over the course of 30 days.

In addition, CMN regulations establish that all debits related to the collection of fees must be charged to a bank account only if there are sufficient funds to cover such debits in such account and thus forbid overdrafts caused by the collection of banking fees. Furthermore, a minimum of 30 days’ notice must precede any increase or creation of fees (except if related to credit card services, when a minimum of 45 days’ notice is required), while fees related to priority services and the “standardized package” can be increased only after 180 days from the date of the last increase (except if related to credit card services, when a minimum of 365 days’ notice is required) whereas reductions can take place at any time.

Late Payment Fees

The default payment fees charged by financial institutions, consumer credit companies (financeiras), and leasing companies are expressly limited to compensatory interest per day on the amount that is overdue, interest on arrears and fines on arrears.

Credit Cards

The banking regulations also have specific rules relative to the charging of credit card fees, the publication of information in the card invoices and the obligation to provide a package of basic services upon offering credit cards to customers.

 105
Table of Contents

Revolving credit for financings of credit card bills may only be extended to customers until the due date of the following credit card bill. After this term, financial institutions offer customers another product with conditions more favorable than the ones typically found in the credit card market. Banks are prohibited from offering this type of credit to customers who have already contracted one revolving credit for financing of credit card bills which were not repaid in a timely manner.

Payment Agents and Payment Arrangements

The regulation issued by the Brazilian Central Bank, determines, among other aspects: (i) consumer protection, anti-money laundering compliance and risk prevention systems that should be observed by payment agents and payment arrangers; (ii) the procedures for incorporation, organization, authorization and operation of payment agents, as well as transfer of shareholding control, subject to the Brazilian Central Bank’s prior approval; (iii) capital requirements; (iv) definition of arrangements excluded from the SPB; and (v) rules related to payment accounts, which are divided into prepaid and postpaid accounts and require the allocation of the totality of their balance to a special account at the Brazilian Central Bank or investment in government bonds.

Portability of Credit Transactions

Financial institutions’ customers can transfer their credit transactions from one institution to another. Such transfers must comply with the specific rules established by the Brazilian Central Bank, including, among others, the requirement that the amount and term of the transaction in the receiving financial institution must not be higher than the amount due and term of the original transaction.

Digitalization of Documents and Record Keeping

Financial institutions and other institutions authorized to operate by the Brazilian Central Bank may keep in their records digital documents instead of physical documents, provided that certain requirements to ensure the documents’ authenticity and validity are met.

Anti-Money Laundering Regulations

Under the Brazilian Anti-Money Laundering Law, it is a crime to conceal or dissimulate the nature, origin, location, availability, transaction or ownership of assets, rights or amounts resulting, directly or indirectly, from any criminal offense, as well as their use in economic or financial activity and to participate in a group, association or office while being aware that its principal or secondary activities are directed toward the practice of such acts.

The Brazilian Anti-Money Laundering Law also created the Financial Activities Control Council (Conselho de Controle de Atividades Financeiras or “COAF”), which operates under the jurisdiction of the Ministry of Finance. The purpose of the COAF is to investigate, examine, identify and impose administrative sanctions in respect of any suspicious occurrences of illicit activities related to money laundering in Brazil.

The COAF is composed of individuals with recognized competence in this area, appointed by the Minister of Finance, all of whom are nominated by each of the following entities: (i) the Brazilian Central Bank; (ii) the CVM; (iii) the SUSEP; (iv) the Brazilian Treasury Attorney-General’s Office; (v) the Brazilian Federal Revenue; (vi) the Federal Intelligence Agency; (vii) the Ministry of Foreign Affairs; (viii) the Ministry of Justice; (ix) the Federal Police Department; (x) the Ministry of Social Security; and (xi) the General Comptroller’s Office, one of whom will be the president, which shall be appointed by the President of Brazil on the basis of recommendations by the Minister of Finance.

Financial institutions must maintain specific records of (i) the transactions in cash (deposit, withdrawal, withdrawal by means of a prepaid card or request of provision for withdrawal) so as to enable the identification of a deposit in cash, withdrawal in cash, withdrawal in cash by means of a prepaid card, or request of provision for withdrawal, of (a) an amount equal to or greater than R$100,000.00 or (b) that presents evidence of concealment or dissimulation of the nature, of the origin, of the location, of the disposal, of the movement or of the ownership of assets, rights and valuables; and (ii) the issuances of cashier’s checks, funds electronic transfers (TED) or of any other instrument of transfer of funds upon payment in cash, for an amount equal to or greater than R$100,000.00.

Financial institutions must maintain records of all operations, products and services contracted, including withdrawals, deposits, contributions, payments, receipts and transfers of funds. Additionally, the institutions must also keep specific records of (i) transactions in cash with an individual value greater than R$2,000.00; (ii) deposit or cash transactions of an individual value equal to or greater than R$50,000.00; and (iii) withdrawal transactions, including those carried out by check or money order, with an individual value equal to or greater than R$50,000.00.

 106
Table of Contents

The regulations also impose an obligation on financial institutions to request that both customers and non-customers are providing a withdrawal request at least three working days in advance for withdrawals (including those carried out by check or money order) in an amount equal to or greater than R$50,000.00.

On January 23, 2020, the Brazilian Central Bank published Circular No. 3,978, which improves the regulation applicable to financial institutions, by expanding the adoption of a risk-based approach and came into effect on July 1, 2020. Regulated institutions must carry out specific internal risk assessments in order to identify and measure the risk of using their products and services in the practice of money laundering and terrorist funding.

In connection with the aforementioned change, the Know-Your-Client procedures were also improved and include the identification, qualification and classification of the customer, compatible with the risk profile, the nature of the relationship with the AML policy and the institution’s internal risk assessment, which must be permanently reassessed, according to the evolution of the business relationship and the risk profile of the client. The procedures must also include the verification of the client’s (including their representatives’, family members’ or close collaborators) condition as a Politically Exposed Individual, as well as consider them in the monitoring, selection and analysis of operations and situations with indications of suspected money laundering or terrorist funding.

On July 27, 2021, the Brazilian Central Bank published Resolution No. 119, which came into effect on September 1, 2021 and introduced certain changes to Circular No. 3,978/2020, which establishes the regulations and procedures related to anti-money laundering and combating the financing of terrorism applicable to entities subject to the Brazilian Central Bank´s regulation and supervision.

Among other changes brought by the new rule, financial institutions (and other entities regulated by the Brazilian Central Bank) are now required to obtain information about their customers’ place of residence, in the case of a natural person, or the location of the head office or branch, in the case of a legal entity, as part of their mandatory Know-Your-Client (KYC) procedure. The CVM also issued CVM Resolution No. 50 in August 31, 2021, which establishes the framework for the prevention of money laundering and the financing of terrorism in the Brazilian securities market. CVM Resolution No. 50 is in line with the practices currently implemented in the principal global securities markets, including with regard to the recommendations of the Financial Action Group against Money Laundering and the Financing of Terrorism (GAFI/FATF), as well as with the duties arising from Brazilian anti-money laundering laws.

Brazilian Anti-Corruption Law

Law No. 12,846/13 of August 1, 2013, or the “Brazilian Anti-Corruption Law” establishes that legal entities will have strict liability regardless of fault or willful misconduct for acts against the public administration carried out in their interest or for their benefit. The Law encompasses not only performance of acts of corruption but also performance of other injurious acts contrary to the Brazilian or foreign public administration.

Corporations that violate the Brazilian Anti-Corruption Law’s provisions will be subject to heavy penalties, some of which may be imposed through administrative proceedings and others solely through judicial channels. The Brazilian Anti-Corruption Law also creates a leniency program under which self-disclosure of violations and cooperation by corporations might result in the reduction of fines and other sanctions.

Politically Exposed Individuals

Financial institutions and other institutions authorized by the Brazilian Central Bank to operate must take certain actions and have certain controls in order to establish business relationships with and to follow up on the financial transactions of customers who are deemed to be politically exposed individuals (public agents and their immediate family members, spouses, life partners and stepchildren who occupy or have occupied a relevant public office or position over the past five years in Brazil or other countries, territories and foreign jurisdictions). The internal procedures developed and implemented for this purpose by financial institutions must be structured in such a way as to enable the identification of politically exposed individuals, as well as the origin of the funds involved in the transactions of such customers. One option is to verify the compatibility between the customer’s transactions and the net worth stated in such customer’s file.

 107
Table of Contents

Bank Secrecy

Brazilian financial and payment institutions shall also maintain the secrecy of their banking operations and services provided to their customers. The only circumstances in which information about customers, services or transactions of Brazilian financial and payment institutions may be disclosed to third parties are the following:

●the disclosure of information with the express consent of the interested parties;
●the exchange of information between financial institutions for record purposes;
●the supplying to credit reference agencies of information based on data from the records of issuers of bank checks drawn on accounts without sufficient funds and defaulting debtors; and
●the occurrence or suspicion that criminal or administrative illegal acts have been performed, in which case the financial institutions and the credit card companies may provide the pertinent authorities with information relating to such criminal acts when necessary for the investigation of such acts.

Complementary Law 105/01 also allows the Brazilian Central Bank or the CVM to exchange information with foreign governmental authorities, provided that a specific treaty has previously been executed.

The governments of Brazil and the United States executed an agreement on March 20, 2007, by means of which these governments established rules for the exchange of information relating to tax, or the “2007 Agreement.” Under the 2007 Agreement, the Brazilian tax authority would be able to send information it receives by virtue of Section 5 of the Bank Secrecy Law to the U.S. tax authority.

Data Protection Requirements

The LGPD (Lei Geral de Proteção de Dados) was published in the Federal Official Gazette on August 15, 2018 and was amended by Law 13,853/19. The LGPD came into effect in September 2020, except for administrative sanctions, which came into effect on August 1, 2021, pursuant to Law No. 14,010/20, which delayed the applicability of certain provisions of the LGPD.

Before the LGPD, Brazil lacked regulations specific to data privacy and a data protection authority. Despite this, privacy has been generally protected through the Brazilian Federal Constitution, the Civil Code (Law No. 10,406/2002), the Consumer Protection Code (Law No. 8,078/1990) and the Civil Rights Framework for the Internet (Law No. 12,965/2014 and the Decree 8,771/2016).

The LGPD brings about profound changes in the rules and regulations applicable to the processing of personal data, with a set of rules to be complied with in activities such as the collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons.

The LGPD has a wide range of applications and extends to individuals as well as private and public entities, regardless of the country where they are headquartered or where data are hosted, as long as (i) the data processing takes place in Brazil; (ii) the data processing activity is intended to offer or supply goods or services to, or to process data of individuals located in Brazil; or (iii) the subjects of the data are located in Brazil at the time their personal data are collected. The LGPD will apply irrespective of the industry or business when dealing with personal data and is not restricted to data processing activities performed through digital media and/or on the internet.

The LGPD sets out several rules related to data processing such as principles, requirements and duties imposed to data controllers and data processors; rights of data subjects; requirements in connection with cross-border transfers of data; the obligation to appoint a data protection officer; data security and data breach notification; corporate governance practices; and the regime for civil liabilities and penalties in case of a breach of the provisions of the LGPD. Penalties include warnings, blocking and erasure of data, public disclosure of the offense and fines of up to 2% of the economic group’s turnover in Brazil in the preceding year, capped at R$50 million per offense.

Moreover, Law 13,853/2019 created the Brazilian National Data Protection Authority, or “ANPD,” which will have powers and responsibilities analogous to the European data protection authorities, exercising a triple role of (i) investigation, comprising the power to issue norms and procedures, deliberate on the interpretation of the LGPD and request information of controllers and processors; (ii) enforcement, in cases of noncompliance with the law, through an administrative process; and (iii) education, with the responsibility to disseminate information about and foster knowledge of the LGPD and security measures, fostering standards for services and products that facilitate control of data, and elaborating studies on national and international practices for the protection of personal data and privacy, among others.

 108
Table of Contents

The ANPD has been assured technical independence, although it is subordinated to the Presidency of the Republic. It will be composed of five commissioners, to be appointed by the President of Brazil, and advised by a National Council for the Protection of Personal Data and Privacy, composed of 23 unpaid members.

Regulations on Cybersecurity

Financial institutions must follow certain cyber risk management and cloud outsourcing requirements which apply to the design and adaptation of internal controls, namely CMN Resolution No. 4,893/2021, which requires financial institutions to institute a Cybersecurity Policy, as well as regulates the outsourcing of relevant data processing and storage and cloud computing services and CVM Ruling No. 35/2021, which sets forth the standards and procedures to be observed in security transactions carried out in regulated securities markets requiring the implementation of cybersecurity controls and data protection. Policies and action plans to prevent and respond to cybersecurity incidents were fully compliant and in place by December 2021. Data location and processing may occur inside or outside Brazil, but access to data stored abroad must be granted at all times to the Brazilian Central Bank for inspection purposes. The contracting of relevant processing services must be communicated to the Brazilian Central Bank within 10 days from the execution of the agreement. See “Item 3. Key Information—D. Risk Factors— Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”

Auditing Requirements

The legislation and regulations issued by the CMN, CVM and B3 determine that the periodic financial statements of financial institutions must be audited by independent auditors (individuals or legal entities) that are registered with the CVM and who meet the minimum requirements set forth by the Brazilian Central Bank, and that the financial statements must be presented together with an independent auditor’s report. Our financial statements are audited in accordance with International Standards on Auditing with regard to Brazilian GAAP and also with the standards of the Public Company Accounting Oversight Board with regard to IFRS as issued by the IASB, as required by the SEC. For purposes of the financial statements prepared according to Brazilian GAAP, as from January 2017 all financial institutions and other institutions authorized to operate by the Brazilian Central Bank are required to create provisions for all losses related to financial guarantees issued by them. As a result of the auditing work, the independent auditor must prepare the following reports: (i) an audit report, issuing an opinion regarding the accounting statements and the respective explanatory notes, including regarding the compliance with financial regulations issued by the CMN and the Brazilian Central Bank; (ii) an internal control system quality and adequacy evaluation report, including regarding electronic data processing and risk management systems, evidencing any identified deficiencies; (iii) a legal and regulatory provisions noncompliance report, regarding those which have, or may have, material impacts on the financial statements or on the audited financial institution’s operations; (iv) a limited assurance report, analyzing our Annual and Sustainability Report pursuant to the guidelines and requirements of the Global Reporting Initiative, or “GRI”; and (v) any other reports required by the Brazilian Central Bank, CVM and B3. The reports issued by independent auditors must be available for consultation upon request by the overseeing authorities.

Independent auditors and the audit committee, individually or jointly, must formally notify the Brazilian Central Bank of the existence or evidence of error or fraud, within three business days of the identification of the respective occurrence, including:

●noncompliance with legal rules and regulations that place the continuity of the audited entity at risk;
●frauds of any amount perpetrated by the management of the institution;
●material frauds perpetrated by the institution’s employees or third parties; and
●errors that result in major incorrectness in the financial statements of the audited entity.

The executive office of the financial institution must inform the independent auditor and the audit committee, if any of the above situations occur.

 109
Table of Contents

CMN regulation also requires financial institutions and certain other entities holding Regulatory Capital equal to or greater than R$1 billion to create a corporate body designated as the “audit committee.” To obtain more information concerning the audit committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”

Internal Auditing of Financial Institutions

Financial institutions are required to establish and maintain internal audit activities compatible with their operational specifications, so that such internal bodies are able to perform an independent, autonomous and impartial audit of the quality and effectiveness of the institution’s internal systems. Such unit shall be directly controlled by the institution’s board of directors. Internal and external independent auditors are also liable for failures of the financial institution’s internal control mechanisms.

Environmental, Social and Governance (ESG) requirements applicable to financial institutions

Financial institutions are currently required by CMN Resolution No. 4,327/14 to have a responsibility policy, which must guide the social and environmental actions in conducting their businesses, their relationship with their customers and other users of their products and services. The responsibility policy must also guide the financial institution’s relationship with its personnel and with any others affected by the financial institution’s activities. In addition, the responsibility policy must provide for the management of social and environmental risks (which, according to the Brazilian Central Bank, represent one of the several categories of risk to which financial institutions are exposed).

Following Public Consultations Nos. 82, 85 and 86, initiated by the Brazilian Central Bank in 2021 under the “Sustainability” pillar of the “Agenda BC#” (which consists of a list of goals to improve the Brazilian National Financial System), a new set of rules was published on September 15, 2021. These new rules aim to improve the disclosure of information, management and governance of social, environmental and climate risks by financial institutions, as well as to bring changes to the rural credit regulations in effect.

Resolution No. 140 establishes new conditions for the access to rural credit considering social, environmental and climatic aspects. Among them, it stands out the credit restriction for a producer who is not registered, or whose registration is canceled, in the Rural Environmental Registry (Cadastro Ambiental Rural – CAR). The new resolution also sets forth that rural credit shall not be granted to (i) an enterprise fully or partially inserted in a conservation unit, indigenous land already approved, an area of embargo in force resulting from the economic use of illegally deforested areas in the Amazon; nor (ii) an individual or legal entity registered in the official register of employers who have kept workers in conditions analogous to slavery.

CMN issued Resolution No. 4,943, which amended CMN Resolution No. 4,557/17 with the purpose of highlighting and distinguishing social, environmental and climate risks, as necessary for the identification, measurement, evaluation, monitoring, reporting, control and mitigation in connection with the risk management structure of financial institutions. The new rule provides for specific definitions to such risks, using new and modern concepts, such as the inclusion of the two main components of climate risks – physical and of transition – already recognized by international ESG standards. The amended rule also deals with the identification and monitoring of social, environmental and climate risks incurred by financial institutions, resulting not only from their products, services and activities, but also from the activities performed by their counterparties, controlled entities, suppliers and outsourced service providers.

Similar provisions were also included in the simplified structure of continuous risk management pertaining to the Simplified Reference Capital (Patrimônio de Referência Simplificado – PRS5) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.

The CMN issued Resolution No. 4,945, replacing CMN Resolution No. 4,327 of April 25, 2014 on the Social and Environmental Responsibility Policy (Política de Responsabilidade Socioambiental or PRSA). The new rule provides for the inclusion of a climate aspect to the PRSA, which will be henceforth named Social, Environmental and Climatic Responsibility Policy (Política de Responsabilidade Social, Ambiental e Climática – PRSAC). Such new policy to be implemented by financial institutions shall take into account the impacts, strategic goals and business opportunities for the financial institutions in connection with social, environmental and climate aspects. There was also a reduction in the period for reviewing the PRSA, from five to three years.

The Brazilian Central Bank issued Resolution No. 139, regulating the preparation of a Report on Social, Environmental and Climate Risks and Opportunities (Relatório de Riscos e Oportunidades Sociais, Ambientais e

 110
Table of Contents

Climáticas, or the “GRSAC Report”) by financial institutions classified in segments S1 (such as Banco Santander), S2, S3 and S4. Following the propositions of the Public Consultation, this new rule seeks to contemplate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) at the national regulatory level. The GRSAC Report must be published annually with the base date of December 31, within a maximum period of 90 days from December 31, and must be made available on the financial institutions' websites for a period of five years.

Finally, on October 6, 2021, the Brazilian Central Bank published Resolution No. 151, which regulates the remittance information regarding social, environmental, and climate risks addressed in CMN Resolution No. 4,557 and CMN Resolution No. 4,945 to the Brazilian Central Bank by authorized institutions. The rule applies to institutions classified in segments S1 (such as Santander Brasil), S2, S3, or S4; and the information that must be sent to the Brazilian Central Bank is related to the assessment of social, environmental and climate risks related to their exposures in credit and securities transactions, as well as those of the respective debtors under these transactions. The information to be remitted includes identification, economic sector, risk aggravating and mitigating factors, appraisal of social, environmental and climactic risks, among others.

In order to allow financial institutions to adapt their practices and policies to this new set of rules, CMN Resolution No. 4,943/21 and article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) will enter into effect on July 1, 2022, while CMN Resolution No. 4,944/21, the other provisions of CMN Resolution No. 4,945/21 and Central Bank Resolution No. 139/21 will enter into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 will enter into effect on July 1, 2022 and Central Bank Resolution No. 140, which specifically provides for rural credit, came into effect on October 1, 2021.

Policy for Succession of Financial Institutions Managers

Brazilian financial institutions and other institutions authorized to operate by the Brazilian Central Bank shall implement and maintain internal policies for succession of managers, applicable to higher levels of the institution’s management. The internal policy shall encompass the procedures related to recruitment, promotion, appointment and retention of managers in accordance with the institution’s rules for identification, evaluation, training and selection of the candidates to management offices.

Corporate Governance of Financial Institutions

Financial institutions must (i) remit to the Brazilian Central Bank information on the financial institution’s management, controlling group and relevant shareholders, including the obligation to communicate to the regulator any information that may affect the reputation of any such persons; (ii) make available a communication channel allowing employees, contributors, customers, users, associates, or services providers to report anonymously situations indicating illegalities of any nature related to the institution; and (iii) have an internal body responsible for receiving the information and complying with the reporting obligations.

Compliance Policy

Financial institutions must implement and maintain a compliance policy compatible with the nature, size, complexity, structure, risk profile and business model of the institution, which is intended to ensure an effective compliance risk management by the institution and may be established at the consolidated enterprise level (conglomerado prudencial). The compliance policy must establish the scope and purpose of the compliance function in the institution, set forth the organizational structure of the compliance function, specify which personnel is allocated to the compliance function, and establish a segregation of roles among personnel in order to avoid conflicts of interest.

The compliance policy must be approved by the board of directors and the regulation also assigns to the board the responsibility to ensure the following: adequate management of the compliance policy throughout the institution, its effectiveness and continued application, its communication to all employees and services providers, as well as the dissemination of the integrity and ethical standards as part of the institution’s culture. The board of directors is also responsible for ensuring the application of measures in case of noncompliance, and for providing the necessary means for the activities related to the compliance functions to be adequately conducted.

Consumer Protection

Relationships between consumers and financial institutions are governed by Law 8,078, dated September 11, 1990, or the “Brazilian Consumer Protection Code,” which grants consumers certain rights and sets forth measures to be observed by suppliers, which must be complied with by financial institutions. The Brazilian Consumer Protection Code sets forth as consumer rights, among others, the assistance/facilitation in the defense of consumers’ rights, including through reverse burden of proof in their favor, and possibility of judicial review of contractual provisions deemed abusive.

 111
Table of Contents
●to timely provide the necessary information including rights, duties, responsibilities, costs or advantages, penalties and possible risks when carrying out a transaction or rendering a service to allow customers and users free choice and decision-making;
●to timely provide, to the customer or user, agreements, receipts, statements, advice and other documents related to the transactions and services, as well as the possibility of timely cancellation of the agreements;
●formalization of an adequate instrument setting forth the rights and obligations for opening, using and maintaining a postpaid payment account;
●to forward a payment instrument to the customers’ or users’ residence or to enable the respective instrument only upon express request or authorization; and
●identification of end users’ beneficiaries for payments or transfer in statements and bills of the payer, including in situations in which the payment service involves institutions participating in different payment arrangements.

Financial institutions operating exclusively via digital means are excluded from the scope of certain aspects of the regulation.

Law No. 14,181, which amends the Brazilian Consumer Protection Code and Senior Citizens' Statute (Law No. 10,741 of October 1, 2003) to improve provisions related to the offering of consumer credit and provide for the prevention and treatment of over-indebtedness, came into effect on July 2, 2021.

Regarding the prevention of over-indebtedness, such rule created a chapter in the Brazilian Consumer Protection Code dedicated to responsible credit and financial education. The amendments determine the presentation of specific information to the consumer in the granting of credit or installment sales, such as the effective monthly interest rate, late payment interest and the total charges foreseen in the event of late payment.

The new law also regulates informational conduct to be observed by the credit supplier regarding the nature and modality of the credit offered, considering the age of the consumer.

The law also included a new chapter in the Brazilian Consumer Protection Code dedicated to the conciliation between debtor and creditor with respect to over-indebtedness. According to the new law, the over-indebted consumer may request the initiation of a debt renegotiation process, with the consumer being responsible for submitting a payment plan proposal, preserving the existential minimum. The unjustified non-attendance of the creditor or his attorney at the conciliation hearing may suspend the payment of the credit, with the interruption of the late payment charges. In the case of a successful conciliation, the court decision that ratifies the agreement will describe the debt payment plan and will be enforceable. A new debt renegotiation request may only be submitted after two years, counting from the settlement of the obligations provided for in the payment plan. In the case of unsuccessful conciliation, the judge, at the consumer's request, will institute proceedings for over-indebtedness to review and integrate the contracts and renegotiate the remaining debts, through a compulsory judicial plan.

Further, on September 30, 2021, the CMN published Resolution No. 4,949. The rule provides the principles and procedures to be adopted in the relationship with clients and users of products and services of financial institutions and other institutions authorized to operate by the Brazilian Central Bank. On October 13, 2021, the Brazilian Central Bank published Resolution No. 155, which establishes almost identical principles and procedures to be adopted by payment institutions and consortium administrators, which are regulated and supervised solely by the Brazilian Central Bank.

 112
Table of Contents

CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 set forth new rules mainly with the goal of ensuring fair and equitable treatment at all stages of the relationship with institutions providing financial and payments services, as well as a convergence of the interests of such institutions with those of their consumers.

Under CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021, institutions authorized to operate by the Brazilian Central Bank shall prepare and implement an institutional policy for the relation with consumers and users. Such new policy should consolidate guidelines, strategic objectives and organizational values, so that the conduct of the institution’s activities is guided by the principles of ethics, responsibility, transparency and diligence.

CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 also provide that institutions authorized to operate by the Brazilian Central Bank and must indicate to such regulatory agency the officer responsible for complying with the obligations provided under the new rules.

The rules also impose other obligations to the regulated entities within their scope, such as the compliance with transparency and suitability rules. CMN Resolution No. 4,949 will enter into effect on March 1, 2022, and Central Bank Resolution No. 155 will enter into effect on October 10, 2022.

Policy for Relationship with Customers and Users of Financial Products and Services

Financial institutions and other institutions authorized to operate by the Brazilian Central Bank must have a policy governing the relationship with customers and users of financial products and services. In addition, such entities shall comply with the principles of ethics, liability, transparency and diligence promoting the convergence of interests and the consolidation of the institutional image of credibility, security and expertise.

Ombudsman

Financial institutions and other entities that are authorized to operate by the Brazilian Central Bank must have an ombudsman office. An ombudsman office has the following attributes according to the current regulation:

●to provide last resort assistance in connection with customer claims that have not been resolved through the conventional customer service channels (including the banking correspondents and the customer service assistance channel (Serviço de Atendimento ao Consumidor), or SAC); and
●to act as a communication channel between the financial institutions and their customers, including for dispute resolution.

Institutions that are part of a financial group are allowed to establish one ombudsman department to service the whole group. The officer in charge of the ombudsman office must prepare a report every six months, which must be provided to the management and auditing bodies. The reports and recordings of interactions of the ombudsman unit with consumers must be available to the Brazilian Central Bank for a period of at least five years.

Investment Funds Industry Regulation

Investment funds are subject to the regulation and supervision of the CMN and the CVM and, in certain specific matters, the Brazilian Central Bank. Investment funds may be managed by full-service banks, commercial banks, savings banks, investment banks, credit, financing and investment companies and brokerage and dealer companies within certain operational limits.

Investment funds may invest in any type of financial instrument available in the financial and capital markets, including, for example, fixed income instruments, stocks, debentures and derivative products, provided that, in addition to the denomination of the fund, a reference to the relevant type of fund is included.

Broker-Dealer Regulation

Broker and dealer firms are part of the national financial system and are subject to CMN, Brazilian Central Bank and CVM regulation and supervision. Brokerage firms must be chartered by the Brazilian Central Bank and are the only institutions in Brazil authorized to trade on stock exchanges. Both brokers and dealers may act as underwriters in the public placement of securities and engage in the brokerage of foreign currency in any exchange market.

 113
Table of Contents

Since August 29, 2019, securities brokers and dealers may loan their own securities to their customers as long as they use the funds as collateral for operations in which the institution itself intermediates. The loan transaction consists of the transfer of assets from the institution: (i) to the customer, in conjunction with the transfer of that asset to the clearinghouse or clearing and settlement service provider; or (ii) to the clearinghouse or clearing and settlement service provider on behalf of the customer through powers established in a formal written power of attorney. In either case, the assets or set of assets in question shall return to the positions originally held at the end of the period stipulated in the contract. To offer this new service, securities brokers and dealers must appoint a director responsible for the loan operations under consideration.

Since November 27, 2020, securities brokers and dealers may issue electronic currency and maintain payment accounts.

Foreign Exchange Market

Transactions involving the sale and purchase of foreign currency in Brazil may be conducted only by institutions duly authorized by the Brazilian Central Bank to operate in the foreign exchange market. There is no current limit to long or short positions in foreign currency for banks authorized to carry out transactions on the foreign exchange market. Other institutions within the national financial system are not allowed to have short positions in foreign currency, although there are no limits with respect to foreign exchange long positions.

The Brazilian Central Bank imposes a limit on the total exposure in foreign currency transactions and transactions subject to foreign exchange fluctuation undertaken by Brazilian financial institutions, including branches abroad, and their direct and indirect affiliates. The limit is currently equivalent to 30.0% of the financial institution’s Regulatory Capital (Patrimônio de Referência), on a consolidated basis. The CMN, the Brazilian Central Bank and the Brazilian government may change the regulation applicable to foreign currency and foreign exchange transactions undertaken by Brazilian financial institutions in accordance with Brazil’s economic policy (including its foreign exchange policy).

On December 20, 2021, the President of Brazil sanctioned Law No. 14,286, approved by the Brazilian Senate on December 8, 2021, or the “New Foreign Exchange Law.” The New Foreign Exchange Law, an initiative of the Brazilian Central Bank, overhauls the rules applicable to the Brazilian foreign exchange market and contains provisions regarding Brazilian capital abroad and foreign capital within Brazil. The initiative aims to modernize, simplify and reduce legal doubts associated with current Brazilian foreign exchange legislation.

The main aspects of the New Foreign Exchange Law are: (i) ratification, at the legal level, that foreign exchange transactions may be carried out freely (provided such transactions are carried out by entities authorized to operate in this market and subject to applicable rules); (ii) granting of broad powers to the CMN and the Brazilian Central Bank to regulate the foreign exchange market and foreign exchange operations; (iii) expansion of international correspondence activities by Brazilian banks; (iv) possibility of Brazilian financial institutions investing and lending abroad funds that have been raised in Brazil or abroad; (v) the exclusion from its scope of foreign currency purchase and sale operations of up to U.S.$500 carried out between individuals on an occasional and non-professional basis; and (vi) the granting of powers to the monetary authorities to establish situations in which the prohibition of the private offset of credits between residents and nonresidents, as well as payments in foreign currency in Brazil, would not apply.

Law No. 14,286 will enter into effect in one year from the date of its publication (which occurred on December 30, 2021).

Foreign Investment in Brazilian Financial Institutions

According to the Brazilian federal constitution, the acquisition of equity interests by foreign individuals or legal entities in the capital stock of Brazilian financial institutions is forbidden, unless permitted by bilateral international treaties or by the Brazilian government by means of a presidential decree. A presidential decree issued on November 13, 1997, issued in respect of Banco Meridional do Brasil S.A. (our legal predecessor) allows 100% foreign participation in our capital stock. Foreign investors may acquire the shares issued by Santander Brasil as a result of this decree. In addition, foreign investors may acquire publicly traded nonvoting shares of Brazilian financial institutions traded on a stock exchange or securities depositary receipts offered abroad representing shares without specific authorization.

Following the enactment of Decree No. 10,029, the Brazilian Central Bank published, on January 22, 2020, Circular No. 3,977 recognizing as an interest of the Brazilian government the foreign holding of equity or increase in equity interest of financial institutions headquartered in Brazil (which is still subject to the same requirements and procedures applicable to the acquisition of equity in any Brazilian financial institution), as well as the opening of local branches of foreign financial institutions. However, since Santander Brasil had already been granted a specific presidential decree authorizing the foreign interest in its share capital, prior to Decree 10,029/19 being issued it does not affect its operations in Brazil.

 114
Table of Contents

A foreign financial institution duly authorized to operate in Brazil through a branch or a subsidiary is subject to the same rules, regulations and requirements that are applicable to any Brazilian financial institution.

Bank Correspondents

Financial institutions are allowed to provide specific services to customers, including customer services, through other entities. These entities are called “bank correspondents” and the relationship between the financial institution and the bank correspondent is ruled by a specific regulation published by CMN and is subject to the supervision of the Brazilian Central Bank.

On July 29, 2021, the CMN published Resolution No. 4,935, which will revoke CMN Resolution No. 3,954, of February 24, 2011, changing the regulation of banking correspondents in Brazil. Banking correspondents are companies contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank to provide services to their contracting institutions.

The new rule determines that these institutions set forth a policy for the operation and hiring of their correspondents, and it should formalized by a specific document and approved by the institution’s board of officers or board of directors. This operation and contracting policy should provide for the criteria required for contracting correspondents, internal controls related to the correspondent and remuneration rules for the provision of services.

The contracting institutions will continue to be required to maintain adequate internal control systems in order to monitor the public service activities carried out by the contracted correspondents and the contracting institution’s internal audit must annually assess the effectiveness of these quality control mechanisms.

In addition, with the inclusion of the express possibility of the correspondents acting in a digital setting, some provisions were improved, highlighting the need for the correspondent’s digital platform itself to have a minimum technical qualification that allows the offering of products and services suited to the needs, interests and goals of the contracting institution’s clients.

CMN Resolution 4,935 came into effect on February 1, 2022.

Regulation of Branches

Authorization by the Brazilian Central Bank is required for operations of branches or subsidiaries of Brazilian financial institutions, upon the compliance with certain term, capital and equity requirements, as well as the submission of an economic and financial feasibility analysis.

The Brazilian Central Bank’s prior authorization is also required in order to: (i) allocate new funds to branches or subsidiaries abroad; (ii) subscribe capital increases, directly or indirectly, in subsidiaries abroad; (iii) increase equity participation, directly or indirectly, in subsidiaries abroad; and/or (iv) merge or spin off, directly or indirectly, subsidiaries abroad.

The Brazilian Central Bank determines that financial institutions can install the following establishments in Brazil: (i) branches, (ii) teller booths, (iii) automatic teller machines, and (iv) segregated administrative units, provided that, for items (i) to (iii), conformity with requirements of minimum capital and operating limits are necessary.

Cayman Islands Banking Regulation

We have a branch in the Cayman Islands with its own staff and another onerepresentative officers, Banco Santander (Brasil) S.A. – Grand Cayman Branch is licensed under The Banks and Trust Companies Law (2013 Revision) of the Cayman Islands, or the “Banks and Trust Companies Law,” as a Category “B” Bank and it is duly registered as a Foreign Company with the Registrar of Companies in Luxemburg,the Cayman Islands. The branch, therefore, is duly authorized to carry on banking business in the Cayman Islands. The branch was authorized by the local authorities to act as its own registered office and have a subsidiary named Santander Brasil Establecimiento Financiero de Credito, EFC, or “Santander EFC” (an independent wholly-owned subsidiaryit is located at the Waterfront Centre Building, 28, North Church Street – 2nd floor, George Town, Grand Cayman, Cayman Islands, P.O. Box 10444 – KYI-1004, Phone: 1-345-769-4401 and Fax: 1-345-769-4601.

 115
Table of Contents

Our Grand Cayman Branch is currently engaged in Spain) which are used primarily forthe business of sourcing funds in the international banking and capital markets to provide credit lines for us, thatwhich are then extended to our customers for working capital and trade-related financings. UnderIt also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian income tax rules, the gains or losses resulting from the impact of appreciation or devaluation of thereal on foreign investments are non-taxable or non-deductible. This tax treatmentand non-Brazilian customers, mainly to support trade transactions with Brazil. The results in volatility of the income tax line item in our income statement. This asymmetry is offset through a derivative position in U.S. dollar futures, which generates gains or losses dependent on any devaluation or appreciationoperations of thereal, which is our strategy to protect our after-tax results. The reconciliation of our effective tax rate to the statutory tax rate is set forth Grand Cayman Branch are consolidated in note 23b to our consolidated financial statements asstatements.

Banks and trust companies wishing to conduct business from within the Cayman Islands must be licensed by the Cayman Islands Monetary Authority under the Banks and Trust Companies Law, irrespective of whether the business is to be actually conducted in the Cayman Islands.

Under the Banks and forTrust Companies Law, there are two main categories of banking license: a category “A” license, which permits unrestricted domestic and offshore banking business, and a category “B” license, which permits principally offshore banking business. The holder of a category “B” license may have an office in the year endedCayman Islands and conduct business with other licensees and offshore companies but, except in limited circumstances, may not do banking business locally with the public or residents of the Cayman Islands. We have an unrestricted category “B” license.

There are no specific ratio or liquidity requirements under the Banks and Trust Companies Law, but the Cayman Islands Monetary Authority will expect observance of prudent banking practices, and the Banks and Trust Companies Law imposes a minimum net worth requirement of an amount equal to CI$400,000 (or, in the case of licensees holding a restricted category “B” or a restricted trust license, CI$20,000). As of December 31, 2019.2020, CI$1 was equivalent to R$6.68, according to the Brazilian Central Bank.

Luxembourg Banking Regulation

GoodwillBranches of Banco Real

credit institutions from outside the European Union (“non-EU credit institutions”) must be licensed by the Luxembourg Minister of Finance under the law of 5 April 1993 on the financial sector, as amended, in order to operate in Luxembourg.

We generated goodwill of R$27 billionhave a branch in Luxembourg with its own staff and representative officers. Our Luxembourg branch is licensed as a resultLuxembourg branch of a non-EU credit institution and is duly registered with the Luxembourg Trade and Companies’ Registry. The branch, therefore, is duly authorized to carry on banking business in Luxembourg. Its registered offices are at 35F, avenue J. F. Kennedy, 2nd floor, L-1855 Luxembourg, Grand Duchy of Luxembourg.

Our Luxembourg branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions involving Brazil. The results of the operations of the Luxembourg branch are consolidated in our consolidated financial statements.

Luxembourg law requires the Luxembourg branch to have a minimum endowment capital of €8,700,000 and the solvency, and liquidity requirements deriving, among others, from EU Regulation No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms apply to it.

Foreign Subsidiary

We had established an independent subsidiary in Spain, Santander EFC, in order to complement our foreign trade strategy for corporate customers, which are composed of large Brazilian companies and their operations abroad. This has allowed us to provide financial products and services by means of an offshore entity, which is not established in a “tax haven,” such as our Cayman Islands branch, in accordance with Law No. 12,249, of June 11, 2010, and Brazilian Federal Revenue Normative Ruling No. 1,037, of June 4, 2010.

The establishment of our acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill for impairment at least annually or whenever there are indications of impairment. In 2019, 2018 and 2017, the recoverable goodwill amounts are determined from “value in use” calculations. For this purpose, we estimate cash flow for a period of five years. We prepare cash flow estimates considering several factors, including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate of, and long-term adjustments to, cash flows. These estimates rely on assumptions regarding the likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by an independent research company, which is reviewed and approved by the board of directors. Therefore, amortization of goodwill for tax purposes generates a permanent difference and, as a result, no record of the deferred tax liability.

The following table shows the main assumptions for the basis of valuation as of the dates indicated.

  2019 2018 2017
  (Value in use: cash flows)
Main Assumptions(*)      
Basis of valuation      
Period of the projections of cash flows(1)  5 years   5 years   5 years 
Growth rate(2)  4.8%  5.1%  8.3%
Discount rate(3)  12.5%  13.6%  14.6%

128 

Table of Contents

(1)The projections of cash flow are prepared using internal budget and growth plans of management, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.

(2)The growth rate is calculated based on areal growth rate of 1% p.a. plus annual long-term inflation in 2019.

(3)The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 17,78% in 2019, 19.33% in 2018 and 20.42% in 2017.

(*)The recoverability test was performed during the second half of 2017. Goodwill is tested for impairment at the end of each reportable period or whenever there is any indication of a potential impairment.

We performed a sensitivity test in the goodwill impairment analysis considering the main assumptions that could reasonably be expected to possibly change, as required by the IFRS. Accordingly, we applied such a test considering the discount rate and perpetuity growth rate as the main assumption subject to reasonably possible change and we did not identify any impairment to goodwill.

Other Factors Affecting the Comparability of Our Results of Operations

Acquisition of residual equity stake in Getnet

On December 19, 2018, the minority shareholders of Getnet Put Option, pursuant to the applicable Share Purchase Agreement, or SPA. On the exercise date of the Put Option, we entered into a binding amendment to the SPA, to acquire all of the Getnet shares owned by minority shareholders, corresponding to 11.5% Getnet’s share capital, for an amount of R$1.431 billion. The acquisition transactionforeign subsidiary was approved by the Brazilian Central Bank on February 18, 2019 and settled September 26, 2011, by the Spanish Ministerio de Economia y Hacienda on February 25, 2019,6, 2012 and by the Bank of Spain on March 28, 2012. The remittance of resources to pay up the share capital of the subsidiary was carried out on March 5, 2012, totaling €748 million, Santander EFC was operational from 2012 to November 12, 2020, when we becameapproved its liquidation. As a consequence of the holdersliquidation, we, as sole shareholder of 100%Santander EFC, have participated in the net assets of Getnet’s shares.the corporation, in the net amount of €741 million.

 116
Table of Contents

U.S. Banking Regulation

FormationFinancial Regulatory Reform

Banking statutes and regulations are continually under review by the United States Congress. In addition to laws and regulations, the U.S. bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance. Many changes have occurred as a result of Esfera Fidelidade S.A.

Esfera Fidelidade was incorporated on August 14, 2018the 2010 Dodd-Frank Act and its implementing regulations, most of which are now in place. The Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” retains the right to apply enhanced prudential standards to foreign banking organizations, or “FBOs,” with greater than $100 billion in global total consolidated assets, such as our wholly-owned subsidiary. Esfera Fidelidade was formed to develop and manage customer loyalty programs. The company started its operations in November 2018.

Investment in Loop Gestão de Pátios S.A.

Santander Spain.

In 2018, Webmotors S.A.,October 2019, the federal banking agencies issued final rules, or the “Tailoring Rules,” that adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements apply to certain banking organizations, including large FBOs such as Santander Spain. As a companyresult, Santander Spain is now generally subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under previously applicable regulations.

Under the current administration, however, banking organizations, including large FBOs, may become subject to increased scrutiny and more extensive legal and regulatory requirements than under the prior presidential and congressional regime. In addition, changes in key personnel at the agencies that regulate such banking organizations, including the federal banking regulators, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously.

Volcker Rule

Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and its implementing rules (collectively, the “Volcker Rule”) prohibits “banking entities” from engaging in certain forms of proprietary trading or from sponsoring or investing in “covered funds,” in each case subject to certain exceptions. The Volcker Rule also limits the ability of banking entities and their affiliates to enter into certain transactions with covered funds with which we ownthey or their affiliates have certain relationships, Banking entities such as Santander Brasil and Santander Spain were required to bring their activities and investments into compliance with the requirements of the Volcker Rule by the end of the conformance period applicable to each requirement. Santander Spain has assessed how the Volcker Rule affects its businesses and subsidiaries, including Santander Brasil, and has brought its activities into compliance. Santander Brasil has adopted processes to establish, maintain, enforce, review and test the compliance program designed to achieve and maintain compliance with the Volcker Rule. The Volcker Rule contains exclusions and certain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations, as well as certain foreign government obligations, and trading solely outside the United States, and also permits certain ownership interests in certain types of funds to be retained. Santander Spain’s non-U.S. banking organization subsidiaries, including Santander Brasil, are largely able to continue their activities outside the United States in reliance on the “solely outside the U.S.” exemptions from the Volcker Rule. Those exemptions generally exempt proprietary trading, and sponsoring or investing in covered funds if, among other restrictions, the essential actions take place outside the United States and any transactions are not with U.S. persons.

On July 21, 2017, the five regulatory agencies charged with implementing the Volcker Rule announced the coordination of reviews of the treatment of certain foreign funds that are investment funds organized and offered outside the United States and that are excluded from the definition of covered fund under the agencies’ implementing regulations. Also in July 2017, the Federal Reserve issued guidelines for banking entities seeking an indirect 70% equity interest, entered into an agreementextension to conform certain “seeding” investments in covered funds to the requirements of the Volcker Rule.

In June 2019, the five regulatory agencies charged with Allpark Empreendimentos, Participações e Serviços S.A. and Celta L.A. Participações S.A.implementing the Volcker Rule finalized amendments to acquire a 51% stake in Loop through a capital increase and issuance of new shares by Loop which were fully subscribed and paid-in by Webmotors. Loop conducts physical and virtual car auctions. This acquisition has enabled Webmotorsthe Volcker Rule. These amendments tailor the Volcker Rule’s compliance requirements to expand its service portfolio and strengthen its competitive position. The transaction was completed on September 25, 2018 for the amount of a firm’s trading activity, revise the definition of trading account, clarify certain key provisions in the Volcker Rule, and modify the information companies are required to provide the federal agencies. Santander Brasil will still largely rely on the “solely outside the U.S. exemption” to conduct its trading activities.

In June 2020, the five federal agencies finalized additional amendments to the Volcker Rule related to the restrictions on ownership interests, in sponsorship of and relationships with covered funds. These amendments became effective on October 1, 2020. Santander Spain will continue to monitor these Volcker Rule-related developments and assess their impact on its operations, including those of Santander Brasil, as necessary.

 117
Table of Contents

U.S. Anti-Money Laundering, Anti-Terrorist Financing, and Foreign Corrupt Practices Act Regulations

Santander Brasil, as a foreign private issuer whose securities are registered under the Exchange Act, is subject to the U.S. Foreign Corrupt Practices Act, or the “FCPA.” The FCPA generally prohibits such issuers and their directors, officers, employees and agents from using any means or instrumentality of U.S. interstate commerce in furtherance of any offer or payment of money to any foreign official or political party for the purpose of influencing a decision of such person in order to obtain or retain business. It also requires that the issuer maintain books and records and a system of internal accounting controls sufficient to provide reasonable assurance that accountability of assets is maintained and accurate financial statements can be prepared. Penalties, fines and imprisonment of Santander Brasil’s officers and/or directors can be imposed for violations of the FCPA.

Furthermore, Santander Brasil is subject to a variety of U.S. anti-money laundering and anti-terrorist financing laws and regulations, such as the Bank Secrecy Act of 1970, as amended, and the USA Patriot Act of 2001, as amended, and a violation of such laws and regulations may result in substantial penalties, fines and imprisonment of Santander Brasil’s officers and/or directors.

The Anti-Money Laundering Act of 2020, or “AML Act,” enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and Patriot Act impose on banks. The AML Act also contains provisions that promote increased information-sharing and use of technology and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.

U.S. Sanctions

“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, OFAC), the United Nations Security Council, the European Union or Her Majesty’s Treasury. The Office of Foreign Assets Control, or “OFAC,” is responsible for administering economic sanctions imposed against designated foreign countries, governments, individuals and entities pursuant to various Executive Orders, statutes and regulations.

OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on U.S. persons’ trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) blocking of assets of targeted governments or “specially designated nationals,” by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. Blocked assets, such as property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. In addition, non-U.S. persons can be liable for “causing” a sanctions violation by a U.S. person or can violate U.S. sanctions by exporting services from the United States to a sanctions target, for example by engaging in transactions with targets of U.S. sanctions denominated in U.S. dollars that clear through U.S. financial institutions (including through U.S. branches or subsidiaries of non-U.S. banks).

Failure to comply with applicable U.S. sanctions could have serious legal and reputational consequences, including significant civil monetary penalties and, in the most severe cases, criminal penalties.

In addition, the U.S. government has implemented various sanctions that target non-U.S. persons, including non-U.S. financial institutions that engage in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”) that involve Iran, North Korea, Russia, or Hezbollah or other persons designated by the United States under the Specially Designated Global Terrorist, or “SDGT,” sanctions program. If a non-U.S. financial institution were determined to have engaged in activities targeted by certain secondary U.S. sanctions or used proceeds produced by such activities targeted, it could lose its ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential consequences.

 118
Table of Contents

Antitrust Regulation

According to the Brazilian antitrust law, actions that concentrate market share must be previously submitted to CADE for approval if the following criteria are met: (i) at least one of the groups involved in the deal has posted annual gross revenues or volume of business equal to or over R$23.9750 million, in Brazil, in the year prior to the transaction; and (ii) at least another group has posted annual gross revenues or volume of business equal to or over R$75 million, in Brazil, in the year prior to the transaction. Closing of a transaction without CADE’s approval will subject the parties to fines ranging from R$60,000 to R$60 million.

The Brazilian Central Bank will also examine certain corporate reorganizations and other acts involving two or more financial institutions not only considering their potential effects on the financial system and its stability but also any potential impacts regarding market concentration and competition. Upon approval of the transaction, the Brazilian Central Bank may establish certain restrictions and require that the financial institutions execute an agreement of market concentration control, pursuant to which the terms and conditions of the sharing of the efficiency gain resulting from the act shall be set forth.

FormationIn December 2018, the Brazilian Central Bank and CADE approved a joint normative act establishing procedures with the purpose of BEN Benefícios e Serviços S.A.increasing efficiency for their respective actions regarding antitrust matters. Pursuant to the joint normative act, the authorities are authorized to share information for the purposes of their respective activities and carry out meetings with each other to discuss matters requiring the regulatory cooperation between both authorities.

Insolvency Laws Concerning Financial Institutions

Financial institutions are subject to the proceedings established by Law 6,024 of March 13, 1974, or “Law 6024,” which establishes the applicable provisions in the event of intervention or extrajudicial liquidation by the Brazilian Central Bank, as well as to bankruptcy proceedings.

Intervention and extrajudicial liquidation occur when the Brazilian Central Bank has determined that the financial institution is in bad financial condition or upon the occurrence of events that may impact the creditors’ situation. Such measures are imposed by the Brazilian Central Bank in order to avoid the bankruptcy of the entity.

Intervention

An intervention can be carried out at the discretion of the Brazilian Central Bank in the following cases:

●risk to the creditors due to mismanagement;
●consistent violation of Brazilian banking laws or regulations; or
●if the intervention is a feasible alternative to the liquidation of the financial institution.

As of the date on which it is ordered, the intervention will automatically suspend the enforceability of the payable obligations; prevent early termination or maturity of any previously contracted obligations; and freeze deposits existing on the date on which the intervention is decreed.

The intervention will cease if interested parties undertake to continue the economic activities of the financial institution, by presenting the necessary guarantees, as determined by the Brazilian Central Bank, when the situation of the entity is regularized as determined by the Brazilian Central Bank; or when extrajudicial liquidation or bankruptcy of the entity is ordered.

Intervention may also be ordered upon the request of a financial institution’s management.

Extrajudicial Liquidation

Extrajudicial liquidation is an administrative proceeding decreed by the Brazilian Central Bank (except that it is not applicable to financial institutions controlled by the Brazilian federal government) and conducted by a liquidator appointed by the Brazilian Central Bank. This extraordinary measure aims at terminating the activities of the affected financial institution, liquidating its assets and paying its liabilities, as in a judicially decreed bankruptcy. The Brazilian Central Bank will place a financial institution in extrajudicial liquidation if:

 119
Table of Contents
●the institution’s economic or financial situation is at risk, particularly when the institution ceases to meet its obligations as they become due, or upon the occurrence of an event that could indicate a state of insolvency under the rules of the Bankruptcy Law;
●management seriously violates Brazilian banking laws, regulations or rulings;
●the institution suffers a loss which subjects its unprivileged and unsecured creditors to severe risk; and/or
●upon revocation of the authorization to operate, the institution does not initiate ordinary liquidation proceedings within 90 days or, if initiated, the Brazilian Central Bank determines that the pace of the liquidation may harm the institution’s creditors.

A request for liquidation procedures can also be filed on reasonable grounds by the officers of the respective financial institution or by the receiver appointed by the Brazilian Central Bank in the receivership procedure.

The decree of extrajudicial liquidation will: (i) suspend the actions or foreclose on rights and interests relating to the estate of the entity being liquidated, while no other actions or executions may be brought during the liquidation; (ii) accelerate the obligations of the entity; and (iii) interrupt the statute of limitations with regard to the obligations assumed by the institution.

Extrajudicial liquidation procedures may be terminated:

●by discretionary decision of the Brazilian Central Bank if the parties involved undertake the administration of the financial institution after having provided the necessary guarantees; or
●when the final accounts of the receiver are delivered and approved and subsequently registered in the relevant public records;
●when converted into ordinary liquidation; or
●when a financial institution is declared bankrupt.

Temporary Special Administration Regime (Regime de Administração Especial Temporária or “RAET”)

In addition to the intervention procedures described above, the Brazilian Central Bank may also establish a RAET, under Law 9447, dated March 14, 1997 combined with Law 6,024/74, which is a less severe form of the Brazilian Central Bank intervention in private and nonfederal public financial institutions that allows institutions to continue to operate normally. The RAET may be ordered in the case of an institution that:

●continually enters into recurrent operations that are against economic or financial policies set forth in federal law;
●faces a shortage of assets;
●fails to comply with the compulsory reserves rules;
●reveals the existence of hidden liabilities;
●experiences the occurrence of situations that cause receivership pursuant to current legislation;
●has reckless or fraudulent management; or
●carries out activities which call for an intervention.

The main objective of a RAET is to assist the recovery of the financial condition of the institution under special administration and thereby avoid intervention and/or liquidation. Therefore, a RAET does not affect the day-to-day business, operations, liabilities or rights of the financial institution, which continues to operate in the ordinary course of business. Measures which may be adopted by the institution include the transfer of assets, rights and obligations to other entities, and corporate restructuring of these entities, with a view to the continuity of the institution’s business or activities.

 120
Table of Contents

There is no minimum term for a RAET, which ceases upon the occurrence of any of the following events: (i) acquisition by the Brazilian federal government of control of the financial institution, (ii) corporate restructuring, merger, spinoff, amalgamation or transfer of the controlling interest of the financial institution, (iii) decision by the Brazilian Central Bank, or (iv) declaration of extrajudicial liquidation of the financial institution.

Bankruptcy Law

Law No. 11,101, of February 9, 2005, as amended, or the “Bankruptcy Law,” regulates judicial reorganizations, out-of-court reorganizations and the bankruptcy of individuals and corporations that have occurred since 2005 and applies to financial institutions only with respect to the matters not specifically regulated by the intervention and extrajudicial liquidation regimes described above.

On June 11, 2018, Santander Brasil incorporated BEN Beneficios. BEN Beneficios is engagedDecember 24, 2020, Law 14,112, or “Law 14,112/20,” was passed. Law 14,112/20 overhauls the current Bankruptcy Law in create, supplyseveral material aspects. Law 14,112/20 came into effect on January 23, 2021. Certain changes arising from this new legislation may affect enforcement and administer various typespriority matters, such as: (i) the possibility of voucherscreditors putting forward an alternative judicial reorganization plan; (ii) new rules on the approval of post-petition loans in judicial reorganization and tickets usedon priority claims in case of conversion to bankruptcy liquidation; (iii) more flexible quorum and mechanics in the extrajudicial reorganization process; (iv) new rules to expedite the bankruptcy liquidation process; (v) new methods for restructuring of the debtor’s tax liabilities and installment payments, as well as new taxation schemes; and (vi) incorporation of rules on cross-border insolvency proceedings into the Brazilian framework.

Law 14,112/20 replicates, with some adjustments, the provisions of the UNCITRAL Model Law on Cross-Border Insolvency. As a result, Law 14,112/20 sets out some rules on access of foreign representatives to courts in Brazil, the method and requirements for recognition of foreign main and ancillary proceedings, authorization for the provisiondebtor and his representatives to act in other countries, methods of employee benefits (suchcommunication and cooperation between foreign authorities and representatives and the Brazilian jurisdiction, and the processing of concurrent proceedings.

Law 14,112/20 also sets forth, among other measures, (i) a protection for creditors that agree on the conversion of debt into equity against potential transfer of liability with regard to the debtor’s obligations; (ii) the stay period and constraints on the assets of the debtor under judicial reorganization; (iii) conciliation and mediation measures before and during judicial reorganization proceedings; and (iv) the rules on procedural and substantive consolidation. Law 14,112/20 also sets out that a bankruptcy decree does not reach beyond the bankrupt itself, save when the disregard doctrine is to apply.

Repayment of Creditors in a Liquidation or Bankruptcy

In the event of extrajudicial liquidation or bankruptcy of a financial institution, creditors are paid pursuant to their priorities and privileges. Prepetition claims are paid on a ratable basis in the following order: labor credits; secured credits; tax credits; credits with special privileges; credits with general privileges; unsecured credits; contractual fines and pecuniary penalties for breach of administrative or criminal laws, including those of a tax nature; and subordinated credits.

The current law confers immunity from attachment of compulsory deposits maintained by financial institutions with the Brazilian Central Bank. Such deposits may not be attached in actions by a bank’s general creditors for the repayment of debts and require that the assets of any insolvent bank funded by loans made by foreign banks under trade finance lines be used to repay amounts owing under such lines in preference to those amounts owing to the general creditors of such insolvent bank.

Recovery Plans for Systematically Important Financial Institutions

Systemically important Brazilian financial institutions must implement a recovery plan (plano de recuperação), with the aim of reestablishing adequate levels of capital and liquidity and to preserve the viability of such institutions. The recovery plans must identify their critical functions for the National Financial System, adopt stress-testing scenarios, define clear and transparent governance procedures, assess possible barriers to the entity’s recovery, as for meals, transportationwell as implement effective communication plans with key stakeholders.

Deposit Insurance – FGC

The purpose of the FGC is to guarantee the payment of funds deposited with financial institutions in case of intervention, liquidation, bankruptcy or insolvency. The FGC is funded by ordinary contributions made by the financial institutions in the amount of up to 0.0125% of the total amount of outstanding balances of the accounts corresponding to guaranteed obligations, and cultural events)certain special contributions as determined. Delay in performing such contributions is subject to a penalty of 2% over the amount of the contribution.

 121
Table of Contents

The total amount of credit in the form of printed electronicdemand deposits, savings deposits, time deposits, deposits maintained in accounts blocked for transactions with checks (for the registration and magnetic cards. Thecontrol of funds relating to the rendering of services of payment of salaries, earnings, pensions), bills of exchange, real estate bills, mortgage bills, real estate credit bills and repurchase and resale agreements whose objects are instruments issued after March 8, 2012 by a company began its operationsof the same group due to each customer by a financial institution (or by financial institutions of the same financial group) will be guaranteed by the FGC for up to a maximum of R$250,000 per customer. When the assets of the FGC reach 2% of the total amounts they guarantee, the CMN may temporarily suspend or reduce the contribution of financial institutions to the FGC. As from February 2016, credits of financial institutions and other institutions authorized to operate by the Brazilian Central Bank, complementary welfare entities, insurance companies, capitalization companies, investment clubs and investment funds, as well as those representing any interest in or financial instrument held by such entities, are not protected by the ordinary guarantee of FGC. In December 2017, the CMN enacted a new rule amending certain provisions of the FGC regulation among which includes the establishment of a limit of R$1 million per four-year period for the coverage of the credits of a certain creditor against the group of associated financial institutions.

Administrative Proceedings in the second quarterBrazilian National Financial System, the Brazilian Payment System and Capital Markets

Law 13,506 of 2019.November 13, 2017 or “Law 13,506/17” applies to entities authorized or supervised by the Brazilian Central Bank or by the CVM, as well as to market participants. Some of the key aspects of Law 13,506 are that: (i) it increases the maximum fine applicable by the Brazilian Central Bank from R$250,000 to R$2 billion or 0.5% of the revenues of the company arising from services and financial products in the year prior to the violation; (ii) it increases the maximum fine applicable by the CVM from R$500,000 to R$50 million; (iii) it makes additional types of violations subject to penalties; (iv) it provides that the penalty of “public admonition” may be cumulative to other penalties applicable by the Brazilian Central Bank; (v) it provides that Brazilian Central Bank may enter into cease-and-desist commitments; and (vi) it provides that the Brazilian Central Bank and the CVM may enter into administrative agreements similar to leniency agreements.

Opening, Maintenance and Closing of Deposit Accounts

CMN Resolution No. 4,753/19 provides criteria for the opening, maintenance and closing of deposit accounts. The regulation determines that financial institutions must adopt procedures and controls that allow the verification and validation of the identity and qualification of the account holders and, if applicable, their representatives, as well as the authenticity of the information provided by the client. This information must be kept updated by the financial institution.

The rule also requires financial institutions to ensure, through the procedures and technology used for the opening, maintaining and closing of deposit accounts, the integrity authenticity and confidentiality, as well as the protection against unauthorized access, use, alteration, reproduction and destruction, of the information and the electronic documents used by them during the process.

Issuance of Credit Instruments Electronically

Provisional Measure No. 897, or “MP 897/2019,” among other provisions, (i) created a new credit instrument, the Rural Real Estate Note (Cédula Imobiliária Rural or “CIR”), with the purpose of advancing rural real estate financing by the creation of an instrument specifically designed to that end; (ii) changed the rules governing Bank Deposit Certificates (Certificado de Depósito Bancário or “CDB”), especially regarding their issuance and the transfer of their ownership, by providing among other changes that CDB issued in book-entry form should be transferred by electronic endorsement, exclusively by means of a specific notation in the issuing institution’s own electronic system or, when deposited in central depositary, by means of specific notation in the corresponding electronic system; and (iii) authorized that customary credit instruments such as the Agricultural Certificate of Deposit (Certificado de Depósito do Agronegócio - CDA), the Agricultural Warrant (Warrant Agropecuário - WA), the Real Estate Credit Certificate (Certificado de Crédito Imobiliário - CCI), the Bank Credit Note (Cédula de Crédito Bancário - CCB), the Rural Credit Note (Cédula de Crédito Rural - CCR), the Rural Promissory Note (Nota Promissória Rural - NPR), the Rural Trade Bill (Duplicata Rural - DR), may be issued in book-entry form through the electronic bookkeeping system held at a financial institution or other entity authorized by the Brazilian Central Bank to perform electronic bookkeeping activity.

 122
Table of Contents

On July 15, 2020, the Brazilian Central Bank regulated, through Circular No. 4,036/20, the electronic issuance of book-entry CCBs and CCRs by financial institutions. A financial institution must render the following services in respect of the bookkeeping of CCBs and CCRs: (i) issue the instrument in book-entry form at the request of the borrower; (ii) include of all obligatory information related to CCBs and CCRs, as well as ancillary documents and/or information for the purposes of verifying the outstanding balance of the underlying credit transaction; (iii) verify the effective title or fiduciary title of the instruments; (iv) make the payment CCBs and CCRs for the settlement of obligations available to the debtor; (v) control the financial flow related to the CCBs and CCRs, including prepayments; (vi) record security interests in an entity authorized to perform centralized registration or deposit of financial assets; (vii) make information about the CCBs and CCRs available to debtors, holders, collateral beneficiaries or any other legally qualified interested party; and (viii) carry out the issuance of certificates regarding the instruments whenever required.

Limitation to the fees and interest rates on overdraft-secured checks

On November 27, 2019, the CMN issued Resolution No. 4,765 or “Resolution No. 4,765/2019,” providing for new rules on the overdraft granted by financial institutions in checking accounts held by individuals and individual microentrepreneurs. The new rule limits the charging of fees on overdraft-secured checks to: (i) 0% for the opening credit facilities of up to R$500.00; and (ii) 0.25% for the opening of credit facilities larger than R$500.00, calculated with the amount of the facility that exceeds R$500.00. It also limits interest rates over the overdraft-secured check to up to 8% per month, to which must be added a discount of the overdraft fees already charged monthly by the financial institution. If the interest is less than or equal to the overdraft fees, such interest rates must be equal to zero. In addition, Resolution No. 4,765/2019 establishes that the overdraft-secured check must be compatible with the customer’s risk profile.

Resolution No. 4,765/2019 came into force on January 6, 2020, for agreements executed after the referred date, came into force on June 1, 2020, for agreements executed prior to such date. Regarding the 8% limitation above, the rule applies to all contracts from January 6, 2020, regardless of the date the applicable contract was entered into.

On February 6, 2020, the Brazilian Central Bank issued Circular No. 3,981, which deals with the new information regarding overdraft facilities that must be highlighted in the statement of the checking accounts held by natural persons or MEIs. Circular No. 3,981 came into effect on June 1, 2020.

Automatic debit of banking accounts

On March 26, 2020, CMN issued Resolution No. 4,790, which sets forth new rules for the automatic debit payments from checking account and accounts designated for the payment of an individual’s wages. The new rule sets forth that financial institutions should only process automatic debit payments upon prior and express authorization of the client, and provides for the procedures for the authorization and cancellation of automatic debit payments. The new rule came into force on March 1, 2021, CMN Resolution No. 4,790 repealed CMN Resolution 4,771.

Taxation

Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)

The IRPJ is calculated at a rate of 15.0%, plus a surtax of 10.0% which is levied on profits exceeding the amount of R$240,000 per year and the CSLL is calculated at a rate of 20.0% (25.0% exceptionally in 2021, as per Law No. 14,183/2021) for financial institutions and 9.0% for companies, after adjustments determined by the tax legislation.

Deferred tax assets and liabilities are measured based on temporary differences between the book basis and tax basis of assets and liabilities, tax losses, and adjustments to fair value of securities and derivatives.

According to the requirements in the current regulations, the expected realization of deferred tax assets is based on projections of future results and a technical study approved by the Directors of Santander Brasil.

Income tax (IRPJ) and Social Contribution Tax (CSLL) on Foreign Exchange Variation of Hedges for Investments Held Abroad (Law No. 14,031/2020)

Pursuant to Law No. 14,031/2020, which came in force in July 2020, exchange rate variations arising from hedges on investments held abroad are taxable starting in 2021. Accordingly, in 2021, 50% of the exchange rate variation shall be taxable under the IRPJ and CSLL, while, in 2022, 100% of the exchange rate variation will be considered as taxable.

 123
Table of Contents

 

CreationTax on Services (ISS)

Each of PI Distribuidora de Títulos e Valores Mobiliáriosthe Municipalities of Brazil and the Federal District are responsible for establishing the applicable ISS rate, which is charged on the value of services provided by the company, to the municipality where the service renderer is located. The rates vary from 2% to 5% and depend on the nature of the service.

On December 30, 2016, Complementary Law No. 157/2016 was enacted. This legislation establishes a minimum rate of 2% for these types of taxes, no reductions or deductions being permitted. This legislation provides that the following services are subject to ISS in the municipality in which the service taker is located: (i) card management, including POS services, that may be paid to the municipality where the corresponding POS device has been registered; (ii) leasing; (iii) fund management; and (iv) consortium.

Before the aforementioned Law was enacted, the ISS was due in the municipality in which the service provider was located (irrespective of where the service taker was located). With this new legislation, ISS rates may vary depending on where the service taker is located.

There are several complications that may arise from this new legislation, including (i) as service takers are generally located in several municipalities, it is logistically difficult to comply and collect the taxes; and (ii) there are situations where the municipality of the service taker is not easily identifiable by the credit card company (as is the case for online transactions, for example).

Since the ISS is a municipal tax, the rule must be regulated by each municipality in order to be enforceable. This new rule is only applicable to triggering events occurring from 2018 onwards, when the municipal regulations applicable to Supplementary Law No. 157 come into force.

On March 23, 2018, the Brazilian Supreme Court suspended the application of the Complementary Law No. 157. It is still suspended as of the date of this annual report. This suspension may be circumvented by the enactment of Complementary Law No. 175/20.

Complementary Law No. 175, published on September 24, 2020, was enacted to create a unified ISS collection system, in which taxpayers would be able to collect ISS in every municipality in Brazil. It’s an effort to facilitate tax collection considering the complexity regarding the multiple rulings on ISS, since each municipality can pass its own laws on ISS.

The system is currently under development, and it is expected that it would enable Complementary Law No. 157 to be brought back into effect.

PIS and COFINS Tax Rates

PIS and COFINS (respectively, the profit participation contribution and the social security financing contribution, both of which are social contributions due on certain revenues net of certain expenses) payable by financial institutions and similar entities, as defined by law, are due at the rate of 0.65% and 4%, respectively. They are levied cumulatively on gross revenue billed, which is defined as the total revenues earned by the legal entity, net of certain expenses, such as funding costs.

Non-financial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to non-cumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.

Tax on Financial Transactions (IOF)

IOF is a tax levied on credit, currency exchange, insurance and securities transactions and it is imposed on the following transactions and at the following rates.

Decree No. 10,797/2021 temporarily increased IOF on credit transactions as follows:

 124
Table of Contents

Transaction (1)

Maximum Legal Rate

Current Rate

Credit extended by financial institutions and non-financial entities 1.5% or 3% (between 2.04% and 4.08% in 2021)0.0041% per day for loans contracted by legal entities and 0.0082% per day for individuals capped at 365 days. An additional 0.38% rate is applicable in both cases. (Exceptionally, in 2021, 0.00559% per day for legal entities and 0.01118% per day for individuals).
Transactions relating to securities (2) 1.5% per day0.5% per day for certain investment funds.
0% on transactions with equity securities and certain debt securities, such as debentures and real estate receivables and agribusiness receivables (CRI/CRA).
1% per day on transactions with fixed income derived from federal, state, or municipal public and private bonds, and fixed income investment funds limited to certain percentages of the income raised from investment. This rate is reduced to zero from the 30th day following the acquisition date of the investment and on repurchase agreements carried out by financial institutions and other institutions authorized by the Brazilian Central Bank with debentures issued by institutions belonging to the same group (Decree 8,731/2016).
0% on the assignment of securities to permit the issuance of Depositary Receipts abroad.
Transactions relating to derivatives 25%Although the maximum rate is 25%, it has been reduced to zero at this moment.
Insurance transactions entered into by insurance companies 25%2.38% for health insurance.
0.38% for life insurance.
7.38% for other types of insurance.
Foreign exchange transactions(2) 25%0.38% (general rule).
6.38% on credit card transactions as from April 27, 2011.
6.38% on withdrawals abroad using credit or debit cards as from December 28, 2013.
6.38% on purchase of travelers checks or loading of international prepaid card as from December 28, 2013.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
6% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is equal or less than 180 days.
0% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is higher than 180 days.
0% for interbank transactions.

0% for exchange transactions in connection with the outflow of proceeds from Brazil for the remittance of interest on net equity and dividends to be received by foreign investors.
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors in the Brazilian financial and capital markets.
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors for purposes of initial or additional margin requirements in connection with transactions in stock exchanges.
0% for exchange transactions for the outflow of funds invested by foreign investors in the Brazilian financial and capital markets.
0% for exchange transactions for the inflow and outflow of funds invested by foreign investors, including by means of simultaneous foreign exchange transactions, in certificates of deposit of securities, known as Brazilian Depositary Receipts (“BDRs”).
0% for simultaneous exchange transactions, for the inflow of funds by foreign investors derived from the conversion of direct investments in Brazil made pursuant to Law 4,131/62 into investments in stock tradable in stock exchanges, as from May 2, 2016.
0% for revenues related to the export of goods and services transactions.

The applicable rate is 1.10% for acquisitions of foreign currency (Decree 8,731/2016).

The applicable rate for credit on a foreign bank account belonging to a resident in Brazil is 1.10%, as from March 3, 2018.

(1)The transactions mentioned in the table are for illustration purposes and do not reflect an exhaustive list of transactions subject to the IOF.
(2)There are some exemptions or specific cases in which the applicable rate is zero.

FATCA

The Foreign Account Tax Compliance Act, or “FATCA,” became law in the United States on March 18, 2010. The legislation requires foreign financial institutions, or “FFIs,” (such as Santander Brasil) to enter into an FFI agreement under which they agree to identify and provide the U.S. Internal Revenue Service, or “IRS,” with information on accounts held by U.S. persons and certain U.S.-owned foreign entities, or otherwise face a 30% withholding tax on certain U.S. source withholdable payments. In addition, FFIs that have entered into an FFI agreement will be required to withhold on such payments made to FFIs that have not entered into an FFI agreement, account holders who fail to provide sufficient information to classify an account as a U.S. or non-U.S. account, and U.S. account holders who do not agree to the FFI reporting their accounts to the IRS.

 125
Table of Contents

On September 23, 2014, Brazil and the United States announced that they entered into an intergovernmental agreement, or “IGA,” which became effective in Brazil by virtue of Decree No. 8506 as of August 24, 2015. The aim of the IGA is to improve international tax compliance and implement FATCA. The IGA establishes an automatic annual bilateral exchange of information with the U.S. tax authorities. Under this agreement, Brazilian financial institutions will generally be required to provide certain information about their U.S. account holders to the Brazilian tax authorities (Receita Federal do Brasil), which will share that information with the IRS.

Complying with the required identification, withholding, and reporting obligations requires significant investment in an FFI’s compliance and reporting framework. We are continuing to follow developments regarding FATCA closely and are coordinating with all relevant authorities.

Common Reporting Standard

On December 28, 2016, Normative Ruling No. 1680 was enacted, introducing the Common Reporting Standard in Brazil. The Common Reporting Standard provides for certain account reporting obligations similar to those existing under FATCA. It was created in the context of the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project, which is aimed at reducing tax avoidance. Normative Ruling No. 1,680 applies to legal entities required to present the e-Financeira pursuant to Normative Ruling No. 1571, dated July 2, 2016.

On the same date, the Normative Ruling No. 1681 was enacted providing for the obligation to annually deliver the “Country to Country Statement,” an ancillary obligation also arising from the discussions under the BEPS Project, before the Brazilian Federal Revenue Service, or “RFB,” as a measure to expand information exchange and improve the level of international tax transparency. This new regulation should not have any impact on Santander Brasil, since, as it is controlled by a legal entity resident in Spain, it is not required by the Brazilian regulation to present such statement.

Income Tax Levied on Capital Gains

Law No. 13,259, of March 16, 2016 or “Law 13,259/16” introduced the application of progressive tax rates for income taxation over capital gains recognized by Brazilian individuals and by holders that are not domiciled in Brazil for purposes of Brazilian taxation (“Non-Resident Holders”) on the disposition of assets in general, Under Law 13,259/16, the income tax rates applicable to capital gains realized by these investors would be: (i) 15% for the portion of the gains up to R$5 million, (ii) 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million.

The provisions of Law 13,259/16 may apply to Non-Resident Holders pursuant to CMN Resolution 4,373, provided such Non Resident Holders are not located in a Tax Haven. However, Non Resident Holders (whether they are considered to be Non-Resident Holders as a result of CMN Resolution 4,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and will continue to be taxed at a rate of 25%.

Most transactions carried out by Non-Resident Holders pursuant to CMN Resolution 4,373 and that result in capital gains are subject to taxation at a fixed 15% rate, provided they are not located in a Tax Haven.

The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.

Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.

 126
Table of Contents

As we are part of the Santander Group, we must also disclose the exposure of other entities of the Santander Group to Iran. The following activities are disclosed in response to Section 13(r) with respect to the Santander Group and its affiliates. During the period covered by this report:

(a)Santander UK holds seven blocked accounts for five customers that are currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(b)Santander Consumer Finance, S.A. holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by Santander Consumer Bank, S.A. on these accounts in the year ended December 31, 2021.
(c)Santander Brasil holds a blocked account for a customer with domicile in Brazil designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship with the customer preceded its designation under the sanctions program. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(d)The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.

In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the year ended December 31, 2021 which were negligible relative to the overall revenues and profits of Banco Santander, S.A. The Santander Group has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, deposit taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. The Santander Group is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, the Santander Group intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.

Regulatory Developments Related to COVID-19

The following section summarizes the measures implemented by the CMN and the Brazilian Central Bank to mitigate the consequences of the COVID-19 pandemic on the Brazilian financial system.

Temporary Suspension of Dividend Distributions and Other Payments

On May 3, 2018, Santander Finance Arrendamento Mercantil S.A., one29, 2020 the CMN enacted Resolution No. 4,820 in response to the COVID-19 pandemic. Resolution No. 4,820 prohibits financial institutions, such as us, to: (i) offset their capital, including by means of our indirect subsidiaries, was converted into a securities brokerage and changed its corporate nameearly payment, in excess of amounts equivalent to SI Distribuidora de Títulos e Valores Mobiliários S.A. The conversion process wasthe minimum mandatory dividend required by the Brazilian Corporate Law, including as interest on capital (ii) repurchase their own shares, subject to certain exceptions as authorized by the Brazilian Central Bank; (iii) reduce their capital stock, except if such reduction is required by law or approved by the Brazilian Central Bank on November 21, 2018. On December 17, 2018, SI Distribuidora de Títulos e Valores Mobiliários S.A. changed its corporate name to PI Distribuidora de Títulos e Valores Mobiliários S.A.. On January 22, 2019 it received approval forBank; and (iv) increase the aforementioned name change fromcompensation of their officers, directors and members of the Brazilian Central Bank. The

129 

Tableboard of Contents

company begun its operations in March 2019.

Acquisition of Isban Brasil S.A.directors and Produban Serviços de Informática S.A. Companies

On February 19audit committee, including fixed and 28, 2018, respectively, we purchased all shares issued by Isban Brasil from Ingenería de Software Bancário, S.L., and all shares issued by Produban Serviços de Informática from Produban Servicios Informáticos Generales, S.L., for R$61,078 thousand and R$42,731 thousand, respectively. While all parties to these transactions are ultimately controlled by Santander Spain, the transactions were conducted on an arm’s length basis. On February 28, 2018, Isban Brasil was merged into Produban Serviços de Informática S.A. and on the same date, Produban Serviços de Informática changed its corporate name to Santander Brasil Tecnologia S.A

Sale of equity interest in BW Guirapá I S.A.

variable compensation, CMN Resolution No. 4,280 repealed CMN Resolution No. 4,797.

On December 22, 2017, Santander Corretora de Seguros, Cia. de Ferro Ligas da Bahia – Ferbasa S.A. and Brazil Wind S.A. entered into an agreement for23, 2020, the saleCMN enacted Resolution No. 4,885, which made the payment of 100% of the shares issued by BW Guirapá I S.A. held by Santander Corretora de Seguros and Brazil Wind to Cia. de Ferro Ligas da Bahia – Ferbasa S.A. The transaction also encompassed the seven wind farms organized as special purpose companies held by BW I. The base consideration paid was R$414 million, and an additional amount of up to R$35 million may be paid if certain contractual targets are met. The transaction closeddividends or interest on April 2, 2018.

Formation of Santander Auto S.A.

On December 20, 2017, we entered into binding agreements with HDI Seguros for the formation of a partnership through the creation of a new insurance company called Santander Auto S.A., or “Santander Auto”. Sancap Investimentos e Participações S.A., a company controlled by Santander Brasil, will hold 50% of the issued share capital of Santander Auto with the remaining 50% being held by HDI Seguros. Santander Auto will focus on offering motor insurance policies through a 100% digital platform. The transaction closed on October 9, 2018 for the amount of R$15 million when the documentation to form Santander Auto S.A. was executed. On January 9, 2019, SUSEP granted Santander Auto the regulatory authorization to operate. Santander Auto began its operation on August 2019.

Acquisition of equity stake in the Returns Entities

On October 16, 2017, Santander Brasil, through its wholly-owned subsidiary Atual Companhia Securitizadora de Créditos Financeiros or “Atual”, acquired a direct equity interest in Return Credit Management, and an indirect equity interest in Return Asset corresponding to 70% of Return Entities’ share capital.

On October 16, 2019, Atual informed the remaining shareholders of its decision to exercise the call option for the shares representing the remaining 30% the Return Entities’s total voting capital owned by them, for a value of approximately R$17 million. The transaction was completed on November 1, 2019.more flexible. As a result, of this transaction, Atual currently owns 100%financial institutions were not allowed to pay in excess of the Return Entities’ issuedgreater of (x) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and outstanding share capital.

Joined Certain Tax Payment Plans

In August 2017, we joined(y) the PERT. The program allows for certain tax debtsamount equivalent to be repaidthe mandatory dividends as set forth in installments. In connection with our participationarticle 202 of the Brazilian Corporate Law. This is the only restriction still in this program, we are repaying in installments certain amounts dueforce as a result of lawsuitsResolution No. 4,820.

As a result, we only distributed R$3,837 million as dividends and administrative proceedings relatinginterest on equity in 2020 compared to corporate income taxR$10,800 million in 2019. This measure was not applied by the Brazilian Central Bank in 2021.

 127
Table of Contents

Reduction of Capital Conservation Buffer

On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduces the Capital Conservation Buffer (where all rates relate to the total amount of risk weighted assets) required from financial institutions, from 2.5% to 1.25%. The rate of 1.25% will remain in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the Capital Conservation Buffer requirement will gradually be restored to 2.5%. The measure aims to increase the ability of banks to renegotiate credit transactions and social security contributionsmaintain engagement in new transactions, considering the current scenario of increased demand for financial services. CMN Resolution No. 4,783 was replaced by CMN Resolution No. 4,958/2021, which maintains the same rates for the periods set forth in the previous rule.

Repos on Sovereign Bonds Denominated in U.S. Dollars

On March 18, 2020, the Brazilian Central Bank issued Circular No. 3,990, which allowed the repurchase transactions of U.S. Dollar denominated federal bonds between the Brazilian Central Bank and Brazilian financial institutions. The Brazilian Central Bank can purchase such bonds with a discount of 10% in comparison to market prices and the financial institution assumes the obligation to purchase the bonds in a future date. The rules also set out a margin transfer during the term of the transaction whenever the exposure is equal or greater than U.S.$500,000. The purpose of this measure is to provide liquidity to the Brazilian sovereign bonds market, by offering liquidity in U.S. Dollars to Brazilian banks and reducing trading volatility of such bonds. Circular No. 3,990 was revoked by Brazilian Central Bank Resolution No. 76, of February 23, 2021, which essentially maintains the same wording established in the previous rule.

Changes to Provision Requirements

On March 16, 2020 CMN enacted Resolution No. 4,782/20, which was amended by Resolution No. 4,856/20, exempting financial institutions from 1999considering certain restructuring of contracts as an indicative that a counterparty may default. Therefore, the measure allows loans to 2005be granted to solvent companies without requiring additional provisions through December 31, 2020. These measures were not applied in 2021.

New Time Deposits with Special Collateral

CMN Resolution No. 4,799/20 has regulated funding through new Time Deposits with Special Collateral (Novo Depósito a Prazo com Garantias Especiais or “DPGEs”), which are deposits taken by financial institutions and guaranteed by the Credit Guarantee Fund (Fundo Garantidor de Crédito or “FGC”). The resolution increased the cap from R$20 million to R$40 million and is intended to strengthen the liquidity strength of smaller financial institutions. The current limit, set forth 4,964/2021, is set at R$90 million.

Central Bank Loans Backed by Debentures and Financial Bills Held by Financial Institutions

On March 23, 2020, the CMN enacted Resolution No. 4,786, which authorized the Brazilian Central Bank to grant loans to multiservice banks, commercial banks, investment banks and saving banks, backed by debentures (corporate debt instruments) held by such institutions and acquired in the secondary market, provided that certain provisions set forth in the ruling are complied with. It is worth mentioning the ruling sets forth that said loans will also be secured by mandatory deposits in Bank Reserve Accounts, in amount equivalent to, at least, the total amount of the transactions, as well as by the debenture collateral.

This is considered a Temporary Special Liquidity Credit Facility, and was another measure to offer financial institutions more liquidity in their transactions. The loans established in Resolution No. 4,786/20 will be available to financial institutions until April 30, 2020 and could be engaged for a 125 business day term, which could be extended, at the Brazilian Central Bank’s discretion, for more 125 business days, provided the maximum term of 359 calendar days.

On April 2, 2020, the CMN enacted Resolution No. 4,795, which authorized the Brazilian Central Bank to grant loans to financial institutions under specific conditions, by means of a Temporary Special Liquidity Credit Facility, upon direct acquisition, in the primary market, of Financial Bills secured by financial assets or securities. The loan was available in tranches, and could reach 100% of the Reference Assets of such financial institutions. The facility became available to financial institutions through December 31, 2020 and the Financial Bills issued thereunder had a term between 30 and 359 calendar days. The first tranche was approved on May 12, 2020, in a total amount of R$49217.5 billion. Both rules were revoked on November 1, 2021.

 128
Table of Contents

Flexibilization of Funding Requirements Through Agribusiness Credit Notes (Letras de Crédito do Agronegócio or “LCAs”)

On March 23, 2020, the CMN issued Resolution No. 4,787, which adjusted the assessment base of the mandatory reserve requirements of funds raised through LCAs, which are credit notes issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain, with the purpose of increasing their liquidity. As a result, the rules for applying funds originated from agribusiness activities were relaxed. The Brazilian Central Bank expects an increase in credit extension directed to agribusiness of R$6.3 billion as a result of the measure. The measure was revoked on April 29, 2021.

Employment Support Program providing emergency payroll financing for small and medium-sized businesses

The CMN enacted Resolution No. 4,846 on August 24, 2020, which regulates the granting of loans under the Emergency Employment Support Program (Programa Emergencial de Suporte a Empregos or “PESE”), established through Provisional Measure No. 944/2020. PESE sets forth the offering of an emergency credit line of R$40 billion to finance, for two months, the payroll of small and medium-sized companies that adhere to the program, with the purpose of preserving jobs. Regarding the funding of said credit line, 85% will derive from the National Treasury and the remaining 15% from participating financial institutions, including Santander Brasil. The adhering small and medium-sized businesses will not be able to dismiss workers during the period that the loan is taken out and up to the 60th day after the business receives its last installment. The maximum amount financed per worker will be up to two minimum wages. The funding will go directly to the worker’s account, as is done today through payrolls operated by financial institutions. PESE came into effect on April 6, 2020. CMN Resolution No. 4,846 repealed CMN Resolution No. 4,800.

FX overhedge of equity interests abroad

On March 18, 2020, the CMN enacted Resolution No. 4,784, which amended CMN Resolution No. 4,192, of March 1, 2013. The rule sets forth that the tax credits arising from losses on excess FX position aimed at hedging of investments held abroad by financial institutions will not be deducted from their regulatory capital (patrimônio de referência). The measure aims at providing further capital relief and hence additional comfort for financial institutions to maintain and extend credit.

The changes were incorporated into CMN Resolution No. 4,955, of 2021, which repealed and replaced Resolution No. 4,192.

Higher ceiling for repurchase of financial bills (letras financeiras) by financial institutions

Pursuant to CMN Resolution No. 4,788, issued on March 23, 2020, financial institutions classified as Segment 1 for the proportional application of the prudential regulation, as is our case, may, from March 23 to April 30, 2020, repurchase up to 20% of financial bills of their own issuance, a substantial increase from the previous ceiling of 5%.

Brazilian Central Bank authorized to buy and sell government bonds and private financial assets and securities in the secondary market

Constitutional Amendment No. 106, enacted on May 7, 2020, sets forth emergency economic and budget measures for the Brazilian government during the COVID-19 pandemic. Among them, the Amendment authorizes the Brazilian Central Bank, for the duration of the pandemic, to buy and sell (i) government bonds in local and foreign secondary markets; and (ii) other assets, in domestic secondary financial, capital and payments markets, provided that, at the time of purchase, they have a credit risk rating in the local market equivalent to BB- or higher, conferred by at least one of the three largest international rating agencies, as well as a reference price published by a financial market entity accredited by the Brazilian Central Bank.

 129
Table of Contents

SELECTED STATISTICAL INFORMATION

The following information for Santander Brasil is included for analytical purposes and is derived from, and should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 5. Operating and Financial Review and Prospects.”

Average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31, of the prior year and each of the month-end balances of the 12 subsequent months. Average income statement and balance sheet data and other related statistical information have been prepared on a consolidated annual basis.

The selected statistical information set forth below includes information as of and for the years ended December 31, 2021, 2020, and 2019 extracted from the audited financial statements prepared in conformity with IFRS as issued by the IASB. See “Presentation of Financial and Other Information” and “Item 3. Key Information— A. Selected Financial Data.”

Average Balance Sheet and Interest Rates

The following tables show our average balances and interest rates for each of the periods presented. With respect to the tables below and the tables under “—Changes in Net Interest Income – Volume and Rate Analysis” and “—Assets—Earning Assets – Yield Spread,” (i) we have stated average balances on a gross basis, before netting impairment losses, except for the total average asset figures, which include such netting, and (ii) all average data have been calculated using month-end balances, which is not significantly different from having used daily averages. We stop accruing interest on loans once they are more than 60 days past due. All our non-accrual loans are included in the table below under “Other assets.”

  For the Year Ended December 31,
  2021 2020 2019
  Average Balance(1) Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
  (in millions of R$, except percentages)
Assets and Interest            
Income                
Cash and balances with the Brazilian Central Bank  58,494   2,581   4.4%  54,531   1,552   2.8%  48,670   3,828   7.9%
Loans and amounts due from credit institutions  95,513   5,191   5.4%  104,759   1,519   1.4%  101,981   3,844   3.8%
Of which:                                    
  Reverse repurchase
agreements		  45,458   2,154   4.7%  -     -     -     -     -     -   
Loans and advances to customers  461,141   49,538   10.7%  384,389   44,104   11.5%  323,180   50,406   15.6%
Debt instruments  224,890   19,042   8.5%  203,578   13,556   6.7%  178,811   13,528   7.6%
Other interest – earning assets  -     1,636   -     -     2,044   -     -     1,235   -   
Total interest – earning assets  840,038   77,988   9.3%  747,257   62,775   8.4%  652,642   72,841   11.2%
Equity instruments  2,279   90   3.9%  1,730   34   2.0%  1,464   19   1.3%
Investments in associates  952   -     -     1,098   -     -     1,060   -     -   
Total earning assets  843,269   78,077   9.3%  750,085   62,809   8.4%  655,166   72,860   11.1%
Cash and balances with the Brazilian Central Bank  4,633   -     -     4,800   -     -     4,538   -     -   
Loans and amounts due from credit institutions  441   -     -     6,668   -     -     2,258   -     -   
Impairment losses  (26,908)  -     -     (23,936)  -     -     (22,528)  -     -   
Other assets  81,669   -     -     76,642   -     -     56,912   -     -   
                                     
 130
Table of Contents

Property, plant and equipment  8,823   -     -     9,587   -     -     9,091   -     -   
Intangible assets  30,250   -     -     30,769   -     -     30,070   -     -   
Total average assets  942,177   78,077   8.3%  854,615   62,809   7.3%  735,507   72,860   9.9%
Liabilities and Interest Expense                                    
Deposits from the Brazilian Central Bank and Deposits from credit institutions  149,111   4,712   3.2%  111,684   4,327   3.9%  100,473   4,866   4.8%
Of which:                                    
   Repurchase agreements  103,809   4,567   4.4%  -     -     -     -     -     -   
Customer deposits  420,185   13,188   3.1%  380,058   7,504   2.0%  303,741   14,966   4.9%
Of which:                                    
   Repurchase agreements  58,264   -     -    -     -     -     -     -     -   
Marketable debt securities  63,906   4,537   7.1%  68,585   2,786   3.7%  76,194   5,138   6.7%
Subordinated debts  14,550   955   6.6%  13,102   909   6.6%  10,779   660   6.1%
Other interest-bearing liabilities  -     3,277   -     -     2,806   -     -     2,890   -   
Total interest-bearing liabilities  647,752   26,669   4.2%  573,429   18,332   3.2%  491,187   28,520   5.8%
Noninterest bearing demand deposits  33,893   -     -     28,581   -     -     14,612   -     -   
Other liabilities  155,133   -     -     150,759   -     -     133,255   -     -   
Non-controlling interests  329   -     -     315   -     -     617   -     -   
Stockholders’ Equity  105,070   -     -     101,531   -     -     95,836   -     -   
Total average liabilities and equity  942,177   26,669   2.8%  854,615   18,332   2.1%  735,507   28,520   3.9%

(1)     In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.

Changes in Net Interest Income – Volume and Rate Analysis

The following tables present the changes in our net interest income allocated between changes in average volume and changes in average rate for the year ended December 31, 2021, compared to the year ended December 31, 2020, and for the year ended December 31, 2020 compared to the year ended December 31, 2019. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

  For the Years Ended 2021/2020 For the Years Ended 2020/2019
  Increase (decrease) due to changes in
  Volume Rate Net change Volume Rate Net change
  (in millions of R$)
Interest and Similar Income                        
Interest-earning assets                        
Cash and balances with the Brazilian Central Bank   113   854   1,029   414   (2,690)  (2,276)
Loans and amounts due from credit institutions   (134)  4,175   3,672   102   (2,427)  (2,325)
Loans and advances to customers   8,806   (2,809)  5,436   8,493   (14,797)  (6,304)
Debt instruments   1,419   3,681   5,486   1,753   (1,725)  28 
Other interest-earning assets   (408)  —     (408)  809   —     809 
Total interest-earning assets   9,796   5,901   15,215   11,571   (21,639)  (10,068)
Equity Instruments   11   34   56   4   11   15 
Total earning assets   9,807   5,935   15,271   11,575   (21,628)  (10,053)
Interest Expense and Similar Charges                        
Interest-bearing liabilities                        
Deposits from the Brazilian Central Bank and Deposits from credit institutions   1,450   (798)  385   504   (1,043)  (539)
Customer deposits   792   4,431   5,690   3,095   (10,563)  (7,468)
Marketable debt securities   (172)  2,355   2,023   (471)  (2,153)  (2,624)
Subordinated liabilities   95   (51)  39   150   53   203 
Other interest-bearing liabilities   2,421   —     2,421   235   —     235 
Total interest-bearing liabilities   4,587   5,937   10,558   3,513   (13,706)  (10,193)

 131
Table of Contents

Assets

Earning Assets – Yield Spread

The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

  For the Year Ended December 31,
  2021 2020 2019
  (in millions of R$, except percentages)
Average earning assets  840,038   747,257   652,642 
Interest and dividends on equity securities(1)  78,078   62,807   72,860 
Net interest income  49,193   44,480   44,340 
Gross yield(2)(*)  9.3%  8.4%  11.2%
Net yield(3)(*)  5.9%  6.0%  6.8%
Yield spread(4)(*)  4.8%  5.2%  5.3%
(*)Yield information does not give effect to changes in fair value that are reflected as a component of stockholder’s equity.
(1)Total earning assets plus dividends from companies accounted for by the equity method (equity instruments).
(2)Gross yield is the amount of “Interest and dividends on equity securities” divided by “Average earning assets.”
(3)Net yield is the amount of “Net interest income” divided by “Average earning assets.”
(4)Yield spread is the difference between the average rate of “Total earning asset” and the average rate of “Total interest-bearing liabilities.”

Return on Equity and Assets

The following table presents our selected financial ratios for the periods indicated.

 132
Table of Contents

  For the Year Ended December 31,
  2021 2020 2019
ROA: Return on average total assets   1.7%  1.6%  2.3%
ROE: Return on average stockholders’ equity   14.8%  13.3%  17.4%
ROE (adjusted) (1)   20.2%  18.5%  24.6%
Average stockholders’ equity as a percentage of average total assets   11.2%  11.9%  13.0%
Payout(2)   62.0%  24.7%  64.9%
             
(1)“Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” is a non-GAAP financial measure which adjusts “Return on average stockholders’ equity” to exclude the goodwill arising from the acquisition of Banco Real in 2008, Getnet and Super, both in 2014, and Banco Olé Bonsucesso Consignado S.A. in 2015, 60%, and the remaining 40% in 2020. See “Item 3. Key Information—A. Selected Financial Data—Selected Consolidated Ratios” for a reconciliation of “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” to “Return on average stockholders’ equity.”
(2)Dividend payout ratio (dividends declared per preferred share divided by net income per preferred share).

Interest-Earning Assets (other than Loans)

The following table shows the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

  For the Year Ended December 31,
  2021 2020 2019
Cash and balances with the Brazilian Central Bank   7.0%  7.3%  7.5%
Loans and amounts due from credit institutions   11.4%  14.1%  15.6%
Loans and advances to customers   54.9%  51.4%  49.5%
Debt instruments   26.8%  27.2%  27.4%
Total interest-earning assets   100%  100%  100%
             

Loans and Amounts Due from Credit Institutions

For further information about Loans and Amounts Due from Credit Institutions, see note 5 to our audited consolidated financial statements included elsewhere in this annual report.

Investment Securities

As of December 31, 2021 and 2020, the book value of investment securities was R$228 billion and R$232 billion, respectively (representing 24.5% and 24.9%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$171 billion, or 75.3% and R$192 billion, or 82.8% of our investment securities as of December 31, 2021 and 2020, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.

The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:

  As of December 31,
  2021 2020 2019
  (in millions of R$)
Debt securities            
Government securities—Brazil  171,437   191,896   135,848 
Debentures and promissory notes  19,882   17,072   13,875 
Other debt securities  33,894   21,134   23,609 
Total domestic/debt securities   225,212   230,102   173,332 
             
Equity securities            
Shares of Brazilian companies  1,870   1,953   665 
Shares of foreign companies  49   14   —   
Investment fund units and shares  609   363   1,693 
Total equity securities  2,528   2,329   2,358 
Total investment securities   227,740   232,432   175,690 

 133
Table of Contents

As of December 31, 2021 and 2020, we held no securities of single issuers or related groups of companies whose aggregate book or market value exceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented 151.5% and 180.5%, respectively of our stockholders’ equity. As of December 31, 2021 and 2020, the total value of our debt securities was approximately 212.5% and 217.4%, respectively, of stockholders’ equity.

The following table analyzes the maturities and weighted average yields of our debt investment securities not carried at fair value (before impairment allowance) as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.

  Maturing within 1 year Maturing between 1 and 5 years Maturing between 5 and 10 years Maturing after 10 years Total
  (in R$ millions)
Debt securities                    
Government securities—Brazil (1)  107,450   41,694   22,293   -     171,437 
Other debt securities (2)  34,295   3,045   16,435   -     53,776 
Total debt investment securities  141,745   44,739   38,728   -     225,212 

(1)Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and NTN-F).
(2)Includes balances of debentures and promissory notes.

The average rate for debt investment securities is 7.1%.

Investment Portfolio – Yields

The following table shows the balances and weighted-average yields for our debt securities not carried at fair value through earnings, for each range of maturities, as of December 31, 2021. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.

  Maturing within 1 year Yield within 1 year Maturing between 1 and 5 years Yield between 1 and 5 years Maturing between 5 and 10 years Yield between 5 and 10 years Maturing after 10 years Yield after 10 years
  (in R$ millions, except percentages)
Weighted-average yields      %       %       %       % 
Domestic:                                
Brazilian Government   16,969   9.8   61,237   8.4   19,282   6.8   5,297   6.8 
Other fixed-income securities   25,793   8.4   27,239   9.0   207   7.8   369   9.2 
Impaired financial assets   829   8.4   257   9.0   842   7.8   -     -   
Impairment losses   (13)  8.4   (267)  9.0   (784)  7.8   -     -   
Total domestic   43,578   6.4   88,466   7.2   19,547   6.8   5,666   6.7 
International:                                
Foreign government   1,588   5.0   7,756   5.0   1,917   4.7   -     -   
Other fixed-income securities   720   4.3   5,122   2.7   -     2.7   -     -   
Impaired financial assets   105   4.3   -     2.7   -     2.7   -     -   
Impairment losses   (32)  4.3   (31)  2.7   (64)  2.7   -     -   
Total international   2,381   4.1   12,847   3.6   1,853   2.7   -     -   
Total weighted-average yields       8.7       8.0       6.6       6.7 
                                 

Domestic and Foreign Currency

The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.

 134
Table of Contents

  As of December 31,
  2021 2020 2019
  Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
  (in millions of R$)
Assets            
Cash and balances with the Brazilian Central Bank  21,543   10,851   4,531   15,617   4,878   15,250 
Debt instruments  208,133   17,080   226,787   3,315   164,447   8,885 
Loans and amounts due from credit institutions, gross  91,868   3,797   109,339   3,520   107,694   1,553 
Loans and advances to customers, gross  398,335   66,509   396,950   20,822   326,421   20,835 
Equity Instruments  2,078   45   1,675   -     2,358   -   
Total assets   721,957   98,282   739,283   43,275   605,798   46,523 
Liabilities                        
Financial Liabilities at Amortized cost:                        
Deposits from the Brazilian Central Bank and Deposits from credit institutions  62,332   58,674   86,564   45,093   58,283   40,988 
Customer deposits  470,973   -     445,900   -     336,515   -   
Marketable debt securities  66,027   13,009   47,476   9,399   64,987   8,715 
Debt instruments eligible to compose capital  -     12,781   -     13,120   -     10,176 
Other financial liabilities  68,496   413   66,727   153   60,885   -   
Total liabilities   667,828   84,877   646,667   67,766   520,670   59,879 

Loan Portfolio

As of December 31, 2021, our loans and advances to customers totaled R$493 billion (53.0% of our total assets). Net impairment losses, loans and advances to customers totaled R$465 billion as of December 31, 2021 (49.9% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$146.0 billion, R$131.7 billion, R$125.9 billion as of December 31, 2021, 2020, 2019, respectively.

Types of Loans by Type of Customer

The majority of the loans we have outstanding are to borrowers domiciled in Brazil and are denominated in reais. For each loan category, we maintain specific risk management policies that are in line with the standards of the Santander Group, which in turn, are managed and monitored by our board of officers through the credit committee, The credit approval process for each loan category is structured primarily around our business segments. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk” for details on our credit approval policies for retail and wholesale lending.

We have a diversified loan portfolio, with no specific concentration exceeding 10% of our total loans, Currently, 1.2% of our loan portfolio is allocated to our largest debtor and 7.4% to the next 10 largest debtors.

For further information about the breakdown of our Loans and Maturity see sections “a - Breakdown” and “b – Detail” of note “9 – Loans and advances to customers” to our audited consolidated financial statements included in this annual report.

Maturity

The following table sets forth an analysis by maturity of our loans, by type and status, as of December 31, 2021.

  As of December 31, 2021
Debt Sector by Maturity Less than 1 year % of
total		 Between 1 and 5 years % of
total		 Between 5 and 15 years % of
total		 More than 15 years % of
total		 Total % of
total
Commercial and industrial   165,729   61.37%  73,723   45.81%  8,222   20.16%  -     -     247,674   50.20%
Real estate   3,986   1.48%  10,138   6.30%  19,337   47.41%  21,278   98.58%  54,739   11.10%
Installment loans to
individuals 		  99,051   36.68%  75,833   47.12%  13,219   32.41%  306   1.42%  188,409   38.19%
Lease financing   1,285   0.48%  1,238   0.77%  10   0.02%  -     -     2,533   0.51%
Loans and advances to customers, gross   270,051   100.00%  160,932   100.00%  40,787   100.00%  21,585   100.00%  493,355   100.00%

 135
Table of Contents

Fixed and Variable Rate Loans

The following table sets forth a breakdown of our fixed and variable rate loans by type and status as of December 31, 2021.

  Fixed and variable rate loans maturing in
  Less than one year Between one and five years Between five and 15 years Over 15 years Sub-total more than one year Total
  (in millions of R$, except percentages)
Fixed rate                        
Commercial and industrial   111,499   29,745   1,941   -     31,865   143,185 
Real estate   24   73   62   18   153   177 
Installment loans to individuals   105,045   74,689   12,965   306   87,961   193,005 
Lease financing   522   694   -     -     695   1,217 
Total Fixed rate   217,090   105,201   14,968   324   120,493   337,583 
Variable rate                        
Commercial and industrial   37,149   33,524   2,109   -     35,633   72,782 
Real estate   3,962   10,065   19,274   21,260   50,600   54,562 
Installment loans to individuals   11,087   11,598   4,426   -     16,024   27,111 
Lease financing   763   544   9   -     553   1,316 
Total Variable rate   52,961   55,731   25,819   21,261   102,810   155,771 
Total   270,051   160,932   40,787   21,585   223,304   493,355 

Cross-Border Outstandings

The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.

  As of December 31,
  2021 2020 2019
  Balance % of Total Assets Balance % of Total Assets Balance % of Total Assets
  (in millions of R$, except percentages)
OECD countries(1)            
Spain  108   -   437   -   1,984   0.3 
United States  835   0.1   12,674   1.4   3,721   0.5 
Netherlands  -   -   80   -   1,531   0.2 
United Kingdom  20   -   29   -   1,003   0.1 
Luxembourg  13,058   1.4   -   -   -   - 
Other OECD countries(2)  1,958   0.2   3,534   0.4   16,264   2.4 
Total OECD  15,979   1.7   16,754   1.8   24,503   3.6 
Non-OECD countries                        
Latin American countries(2)  560   0.1   1,204   0.1   1,382   0.2 
Cayman Islands  1,679   0.2   2,917   0.3   3,528   0.5 
Other(2)  282   -   1,189   0.1   2,397   0.3 
Total non-OECD  2,521   0.3   5,310   0.6   7,307   1.1 
Total  18,500   2.0   22,064   2.4   31,810   4.6 

(1)The Organization for Economic Cooperation and Development.
(2)Aggregate outstandings in any single country in this category do not exceed 1.5% of our total assets.
 136
Table of Contents

The following table presents the amounts of our cross-border outstandings as of December 31, 2021, 2020 and 2019 by type of borrower where outstandings in the borrower’s country exceeded 1.2% of our total assets.

  Government Banks and Other Financial Institutions Commercial and Industrial Other Loans Total
  (in millions of R$)
2019          
United States  -     8,710   55   316   9,081 
Netherlands  -     -     2,355   -     2,355 
Austria  -     -     127   (2)  125 
United Kingdom  -     -     7   151   158 
Cayman Islands  469   263   488   (752)  468 
Total  469   8,973   3,032   (287)  12,187 
2020                    
United States  -     12,653   9   12   12,674 
Netherlands  -     -     80   -     80 
Austria  -     -     -     444   444 
United Kingdom  -     28   -     1   29 
Cayman Islands  -     1,341   (1)  1,577   2,917 
Total  -     14,022   86   2,034   16,144 
2021                    
United States  -     3,943   1   12   3,956 
Netherlands  -     -     3   -     3 
Austria  -     -     -     595   595 
United Kingdom  -     28   -     -     28 
Cayman Islands  -     2,815   -     1,290   4,105 
Total  -     6,786   4   1,897   8,687 

Non-current assets held for sale

For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.

Liabilities

Deposits

The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.

For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.

The following table shows the maturity of time deposits (excluding inter-bank deposits) in denominations of U.S.$100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.

As of December 31, 2021
DomesticInternational
(in millions of R$)
Under 3 months 255,120-
3 to 6 months 25,742-
6 to 12 months 51,483-
Over 12 months 257,622-
Total 589,967-

 137
Table of Contents

The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2021.

 

As of
December 31, 2021

Maturing

Three Months or Less

Over Three Months Through Six Months

Over Six Months Through
12 Months

Over 12 months

 (in millions of R$)
Total uninsured deposits 285,96796,14620,89668,96099,965

Short-Term Borrowings

The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.

  As of December 31,
  2021 2020 2019
  Amount Average Rate Amount Average Rate Amount Average Rate
  (in millions of R$, except percentages)
Securities sold under agreements to repurchase                        
As of December 31  115,964   1.76%  112,477   1.90%  123,941   5.00%
Average during the period (1)  114,484   2.58%  112,096   2.71%  100,473   4.84%
Maximum month-end balance  155,484       155,174       123,941     
Total short-term borrowings at year end  115,964       112,477       123,941     
(1)The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.

Allowance for Loan Losses

Changes in Allowances for Impairment Losses on the Balances of “Loans and receivables”

The following tables analyze changes in our allowances for impairment losses for the periods indicated. For further information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).”

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$)
Balance at beginning of year  25,640   22,626   22,969   18,262   18,191 
Initial adoption of IFRS 9  -     -     -     2,461   -   
Balance adjusted  25,640   22,626   22,969   20,723   18,191 
Impairment losses charged to income for the year  16,987   18,311   14,361   13,540   13,493 
Write-off of impaired balances against recorded impairment allowance  (12,904)  (15,297)  (14,705)  (11,294)  (13,422)
Balance at end of year  29,723   25,640   22,626   22,969   18,262 
Of which:                    
Loans and advances to customers  28,511   24,053   20,557   20,242   15,409 
Loans and amounts due from credit institutions  22   9   14   14   69 
Debt Instruments  1,191   1,577   2,055   2,714   2,784 
Recoveries of loans previously written off(1)  1,536   861   991   827   1,154 
(1)Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off. 

 138
Table of Contents

Allowance by Type of Borrower

The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.

  For the Year Ended December 31,
  2021 2020 2019 2018 2017
  (in millions of R$)
Recoveries of loans previously charged off(1)  1,536   861   991   827   1,154 
Commercial and industrial  463   422   520   345   413 
Real estate – construction  64   56   47   103   210 
Installment loans to individuals  1,002   370   417   370   521 
Lease finance  7   13   8   9   10 
Impairment losses charged to income for the year(1)  16,987   18,312   14,361   13,540   13,491 
Commercial and industrial  3,340   6,919   2,377   3,620   5,499 
Real estate – construction  116   81   95   193   471 
Installment loans to individuals  13,532   11,309   11,866   9,708   7,461 
Lease finance  (1)  3   23   19   61 
Write-off of impaired balances against recorded impairment allowance  (12,904)  (15,297)  (14,705)  (11,294)  (13,422)
Commercial and industrial  (5,153)  (4,617)  (5,713)  (3,981)  (5,716)
Real estate – construction  (167)  (232)  (108)  (191)  (342)
Installment loans to individuals  (7,576)  (10,433)  (8,834)  (7,100)  (7,312)
Lease finance  (8)  (15)  (49)  (22)  (52)
(1)Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.

The table below shows a breakdown of allowances for credit losses by type of borrowers and the percentage of loans in each category as a share of total loans at the date indicated.

  As of December 31,
  2021 % of Total Loans 2020 % of Total Loans 2019 % of Total Loans
  (in millions of R$, except percentages)
Borrowers            
Commercial and industrial  8,325   28.0   9,757   38.1   7,455   33.0 
Real estate  154   0.5   194   0.8   345   1.5 
Installment loans to individuals  21,240   71.5   15,676   61.1   14,800   65.4 
Lease financing  4   -   14   0.1   26   0.1 
Total  29,723   100   25,640   100.0   22,626   100.0 
                         

Internal Risk Rating

The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:

  As of December 31,
  2021 2020 2019
  (in millions of R$)
Internal Risk Rating            
Low  374,505   347,315   257,133 
Medium-low  79,217   24,277   56,549 
Medium  14,590   26,232   11,755 
Medium-high  9,413   3,896   8,512 
High  15,630   16,101   13,307 
Loans and advances to customers, gross  493,355   417,822   347,257 

 139
Table of Contents

For further information on our internal risk rating levels and their corresponding probability of default, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk—Credit Monitoring.”

Renegotiation Portfolio

The renegotiation portfolio for the year ended on December 31, 2021 amounted to R$21.7 billion, compared to R$20.5 billion for the same period in 2020, an increase of R$1,193 million or 5.8%, This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.

The renegotiation portfolio was covered by allowances for impairment losses of 44.7% as of December 31, 2021 and 44.0% as of December 31, 2020. These levels are considered appropriate for the characteristics of these loans and advances to customers.

The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:

  2021 2020 2019
  (in millions of R$, except percentages)
Renegotiation Portfolio by type of customer      
Commercial and industrial  5,322   5,862   5,141 
Installment loans to individuals  16,356   14,623   10,102 
Financial leasing  5   5   239 
Total  21,683   20,490   15,482 
Allowances for impairment losses  9,698   9,019   7,501 
Coverage ratio  44.7%  44.0%  48.4%

Balances are deemed to be impaired when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts on the dates indicated in January 2018 (takingthe loan agreement, after taking into account the reduction arising fromcollateral guarantees received to secure (fully or partially) collection of the related balances.

As established in our participationinternal renegotiation policy, in order for renegotiated products to be classified as performing, we must, receive an amount equivalent to at least 10% of the total amount outstanding in the program)six months which follow the renegotiation date (note that these transactions will remain classified as renegotiated operations even after receiving such payments). A paymentRenegotiated loans that are more than 60 days overdue are also accounted for as impaired.

We increased our efforts regarding the collection of loans that are less than 60 days past due and also in relation to written off loans. We are also continuing with our strategy of granting loans to persons with low risk profile and higher levels of collaterals and guarantees.

Impaired Assets

The following table shows our impaired assets, excluding country risk.

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$, except percentages)
Impaired assets                    
Past due and other impaired assets(1)  26,923   23,176   23,426   22,426   19,145 
Impaired assets as a percentage of total loans  5.5%  5.5%  6.7%  7.0%  6.7%
Net loan charge-offs as a percentage of total loans  2.6%  3.7%  4.2%  3.5%  4.7%
Net loan charge-offs as a percentage of average total loans  2.8%  3.8%  4.6%  3.8%  4.8%
(1)Includes as of December 31, 2021, R$2,528 million of doubtful loans (R$2,028 million in 2020, R$2,788 million in 2019, R$3,754 million in 2018 and R$5,439 million in 2017) that were not past-due.

 140
Table of Contents

Evolution of Impaired Assets

Our impaired assets increased by 16.2%, or R$3,747 million, to R$26,923 million as of December 31, 2021, compared to R$23,176 million as of December 31, 2020. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 15.9%, or R$4,083 million, to R$ 29,723 million as of December 31, 2021, compared to R$ 25,640 million as of December 31, 2020. Offsetting these effects were recoveries of R$191.91,536 million on loans previously written off as of December 31, 2021 and R$ 861 million as of December 31, 2020.

We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2021.

The following table shows the changes in our impaired assets at the dates indicated:

  As of December 31,
  2021 2020 2019 2018 2017 2016
    (in millions of R$)
Balance at beginning of year  23,176   23,426   22,426   19,145   18,887   18,599 
Initial Adoption of IFRS9 (1)  -     -     -     703   -     -   
Adjusted Balance  23,176   23,426   22,426   19,848   18,887   18,599 
Net additions  18,429   14,758   16,001   13,872   13,679   11,893 
Write-offs  (14,681)  (15,008)  (15,000)  (11,294)  (13,422)  (11,605)
Balance at end of year  26,923   23,176   23,426   22,426   19,145   18,887 
(1)Further information, see notes 1 and 9 to our audited consolidated financial statements included elsewhere in this annual report. 

The amount of “net additions” for any period is assets that became impaired in that period less assets that were impaired but became performing in that period. In 2021, the debt restructuring options were improved to maintain consistent levels of “net additions” and “write-offs.”

Impaired Assets by Type of Customer

The following table shows the amount of our impaired assets by type of customers at the dates indicated:

  As of December 31,
  2021 2020
  (in millions of R$)
Commercial and industrial  11,440   10,558 
Real estate  470   456 
Installment loans to individuals  14,996   12,144 
Lease financing  17   17 
Total  26,923   23,176 
         

Commercial and Industrial

Impaired assets in the commercial and industrial loans portfolio amounted to R$11,440 million as of December 31, 2021, an increase of R$881 million, or 8.3%, compared to R$10,558 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.

Real Estate

Impaired assets in the real estate lending portfolio totaled R$470 million on December 31, 2021, an increase of R$14 million, or 3.1%, compared to R$456 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of the recurrent growth of the credit portfolio.

 141
Table of Contents

Installment Loans to Individuals

Impaired assets in the installment loans to individuals lending portfolio totaled R$14,996 million as of December 31, 2021, with an increase of R$2,852 million, or 23.5%, compared to 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.

Financial Leasing

Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2021, remaining similar to December 31, 2020.

Methodology for Impairment Losses

We evaluate all loans regarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or collectively evaluated by grouping similar risk characteristics. Loans that are individually evaluated for impairment losses are not evaluated collectively.

To measure the impairment loss on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and financial situation, level of indebtedness, ability to generate income, cash flow, management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.

To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.

The expected loss measurement is made through the following factors:

●Exposure at Default (EAD): is the amount of a transaction exposed to credit risk including the ratio of current outstanding balance exposure that could be provided at default. Developed models incorporate hypotheses considering possible modifications to the payment schedule.
●Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered.
●Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.
●Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value.

In order to estimate the above parameters, the Bank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.

Loans Past Due for Less Than 90 Days but Not Classified as Impaired

The following table shows the loans past due for less than 90 days but not classified as impaired at the dates indicated:

 142
Table of Contents

  As of December 31,
  2021 % of total 2020 % of total
  (in millions of R$, except percentages)
Commercial and industrial   4,892   20.7   5,132   25.8 
Mortgage loans   3,606   15.2   3,085   15.5 
Installment loans to individuals   15,150   64.0   11,661   58.6 
Lease financing   11   0.1   13   0.1 
Total (*)   23,659   100.0   19,891   100.0 
(*)Refers only to loans past due between 1 and 90 days.

Impaired Asset Ratios

Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, 2020. Our impaired assets increased by approximately R$3,747 billion in Augustthe same period, from R$23.2 billion to R$26.9 billion. The default rate decreased by 30 basis points in 2021 in comparison to 2020, primarily due to the recurrent growth of the credit portfolio.

The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$ except percentages)
Loans and advances to customers, gross  493,355   417,822   347,257   321,933   287,829 
Impaired assets  26,923   23,176   23,426   22,426   19,145 
Provisions for impairment losses  29,723   25,640   22,626   22,969   18,262 
Credit risk exposure Non-GAAP – customers (1)  540,873   466,104   391,569   364,194   330,474 
Ratios                    
Impaired assets to credit risk exposure  5.0%  5.0%  6.0%  6.2%  5.8%
Coverage ratio (2)  110.4%  110.6%  96.6%  102.4%  95.4%
Impairment losses  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)
Losses on other financial instruments not
  measured at fair value (3)		  -     -     -     -     -   
Impairment losses on financial assets (net) (4)  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)
                     
                     

(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

(2)Provisions for impairment losses as a percentage of impaired assets.
(3)Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).”
(4)As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments.

The following chart shows our impaired assets to credit risk ratio from 2017 through 2021:

 143
Table of Contents

Selected Credit Ratios

The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.

The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

     
 As of December 31,
 2019 2020 2021
 (in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding            
Allowance for credit losses  22,626   25,640   29,723 
Total loans outstanding  347,257   417,822   493,355 
Credit ratio  6.52%  6.14%  6.02%
Nonaccrual loans to total loans outstanding            
Total nonaccrual loans outstanding  23,426   23,176   26,923 
Total loans outstanding  347,257   417,822   493,355 
Credit ratio  6.75%  5.55%  5.46%
Allowance for credit losses to nonaccrual loans            
Allowance for credit losses  22,626   25,640   29,723 
Total nonaccrual loans outstanding  23,426   23,176   26,923 
Credit ratio  96.6%  110.6%  110.4%
Net charge-offs during the period to average loans outstanding            
Net charge-offs during the period  (14,705)  (15,297)  (12,904)
Average amount outstanding  324,190   394,542   471,068 
Credit ratio  4.5%  3.9%  2.7%
Commercial and industrial:            
Net charge-offs during the period  (5,713)  (4,617)  (5,153)
Average amount outstanding  132,372   176,750   214,286 
Credit ratio  4.3%  2.6%  2.4%
Real estate:            
Net charge-offs during the period  (108)  (232)  (167)
Average amount outstanding  38,107   42,368   51,883 
Credit ratio  0.3%  0.5%  0.3%
Installment loans to individuals:            
             
 144
Table of Contents

Net charge-offs during the period  (8,834)  (10,433)  (7,576)
Average amount outstanding  151,735   173,336   202,578 
Credit ratio  5.8%  6.0%  3.7%
Lease financing:            
Net charge-offs during the period  (49)  (15)  (8)
Average amount outstanding  1,975   2,089   2,321 
Credit ratio  2.5%  0.7%  0.3%

Allowance for credit losses to total loans outstanding

In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.

In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.

Nonaccrual loans to total loans outstanding

In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.

In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a further paymentdecrease of 1.1% in the nonaccrual loans outstanding.

Allowance for credit losses to nonaccrual loans

In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.

In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$299.73,200 million for potential loan losses in connection with the COVID-19 pandemic.

 

Net charge-offs during the period to average loans outstanding

In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.

Commercial and Industrial Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.

130 

 145

Table of Contents

Real Estate Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of ContentsDecember 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.

Installment Loans to Individuals

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.

Lease Financing Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.

4C. Organizational Structure

Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2021, Santander Spain held, directly and indirectly, 89.53% of our voting stock.

The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:

ActivityCountry of IncorporationOwnership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1)
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Credit Recovery ServicesBrazil100.00%
Santander Leasing S.A. Arrendamento Mercantil LeasingBrazil100.00%
Aymoré Crédito, Financiamento e Investimento S.A. FinancialBrazil100.00%
Santander Brasil Administradora de Consórcio Ltda. Buying clubBrazil100.00%
Santander Corretora de Câmbio e Valores Mobiliários S.A. BrokerBrazil100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A.HoldingBrazil100.00%
Sancap Investimentos e Participações S.A.HoldingBrazil100.00%
 146
Table of Contents

million was due by January 2018,

Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) HoldingBrazil100.00%
F1RST Tecnologia e Inovação Ltda.TechnologyBrazil100.00%
Rojo Entretenimento S.A.Other ActivitiesBrazil94.60%
Sanb Promotora de Vendas e Cobrança Ltda.Other ActivitiesBrazil100.00%
BEN Benefícios e Serviços S.A.Other ActivitiesBrazil100.00%
Esfera Fidelidade S.A.Other ActivitiesBrazil100.00%
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A.TechnologyBrazil80.00%
Paytec Tecnologia em Pagamentos Ltda.Other ActivitiesBrazil100.00%
SX Negócios Ltda.Other ActivitiesBrazil100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.) 
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)Credit Recovery ServicesBrazil100.00%
Liderança Serviços Especializados em Cobranças Ltda.Credit Recovery ServicesBrazil100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.)Asset ManagementBrazil100.00%
Controlled by Sancap Investimentos e Participações S.A. 
Santander Capitalização S.A.Savings and annuitiesBrazil100.00%
Evidence Previdência S.A. Social SecuritiesBrazil100.00%
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A.BankBrazil50.00%
Banco Hyundai Capital Brasil S.A. (current name of BHJV Assessoria e Consultoria Empresarial Ltda.)BankBrazil50.00%
Solutions 4 Fleet.Other ActivitiesBrazil80.00%
Controlled by Santander Leasing S.A. Arrendamento Mercantil
Banco Bandepe S.A.BankBrazil100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A. LeasingBrazil100.00%
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A. 
Toro Corretora de Títulos de Valores Mobiliários Ltda.BrokerBrazil60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A.BrokerBrazil100.00%
Controlled by Sancap 
 147
Table of Contents

Santander Auto S.A. Other ActivitiesBrazil50.00%
Consolidated Investment Funds
Santander Fundo de Investimento Unix Multimercado Crédito Privado Investment FundBrazil(a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior Investment FundBrazil(a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior Investment FundBrazil(a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado Investment FundBrazil(a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior Investment FundBrazil(a)
Santander Paraty QIF PLC (2) Investment FundBrazil(a)
Santander FI Hedge Strategies Fund (2) Investment FundBrazil(a)
BRL V - Fundo de Investimento Imobiliário-FIIReal Estate Investment FundBrazil(a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não PadronizadoInvestment FundBrazil(a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de InvestimentosInvestment FundBrazil(a)
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior Investment FundBrazil(a)
Verbena FCVS - Fundo de Investimento em Direitos Creditórios Investment FundBrazil(a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não PadronizadoInvestment FundBrazil(a)
(a)Company to which we are exposed or have rights to variable returns and have the ability to affect those returns by making certain decisions in accordance with IFRS 10 - Consolidated Financial Statements. We and/or our subsidiaries hold 100% of the quotas of these investment funds.
(1)This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
(2)Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund.

4D. Property, Plant and Equipment

We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 385 properties for the activities of our banking network and rent 1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

 148
Table of Contents

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5A. Operating Results

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”

Financial Presentation

We have made withinprepared our consolidated financial statements for the prescribed time limits.years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.

The Getnet Spin-Off

We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of our participation, we recorded expenses in anthe Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$364 million (after tax)2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.

Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.

For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

Principal Factors Affecting Our Financial Condition and Results of Operations

Impact of COVID-19

We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”

Brazilian Macroeconomic Environment

Overview

As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:

 149
Table of Contents

  As of and For the Year Ended December 31,
  2021 2020 2019
GDP growth(1)   4.6%  (4.1%)  1.2%
CDI Rate   4.4%  2.1%  6.0%
TJLP   5.3%  4.6%  5.6%
SELIC rate   9.25%  2.0%  4.5%
Selling exchange rate (at period end) R$ per U.S.$1.00   5.58   5.20   4.03 
Decrease (increase) in real rate against the U.S. dollar   7.4%  28.9%  4.0%
Average exchange rate R$ per U.S.$1.00(2)   5.40   5.16   3.94 
Inflation (IGP-M)   17.8%  23.1%  7.3%
Inflation (IPCA)   10.06%  4.5%  4.3%

Sources: BNDES, Brazilian Central Bank, FGV and IBGE.

(1)GDP growth for 2021 is based on Santander Brasil’s internal estimates. For 2020 the source is the IBGE’s revised series.
(2)Average of the selling exchange rate for the business days during the period.

General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the SELIC rate to 10.75% p.a. as of the date of this annual report..

The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial asset prices. Brazil’s economy has been severely affected by the COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.

Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.

Impact of COVID-19 on the Brazilian Economy

The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2017.2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December

 150
Table of Contents

31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.

 

In October 2017, we joinedInterest Rates

An increase in the Incentive Payment ProgramsSELIC rate may adversely affect us by reducing the demand for our credit and Installments (Programas de Parcelamento Incentivado) createdinvestment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.

The following table presents the low, high, average and period-end SELIC rate since 2016, as reported by the cities Rio de JaneiroBrazilian Central Bank:

 

Low

High(1)

Average(2)

Period-End

Year    
2016 13.7514.2514.1513.75
2017 7.0013.759.837.00
2018 6.507.006.756.50
2019 4.506.506.134.50
2020 2.004.502.812.00
2021  2.009.25 4.819.25
2022 (through February 22, 2022)  9.2510.759.86 10.75
(1)Highest month-end rate.
(2)Average of month-end rates during the period.

Our assets are predominantly fixed rate and São Paulo.our liabilities are predominantly floating. The program allows for certain tax debtsresulting exposure to be repaidincreases in installments. market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2021, a 100-basis point increase in the yield curve would have resulted in R$ 553 million decline in the net interest income over a one-year period.

Credit Volume and Quality in Brazil

In connection with our participation in these programs, we are repaying in installments certain amounts due2019, the ratio of nonperforming loans to individuals reached 3.5% and the household debt burden reached 23.9% of household income. In 2020, outstanding credit increased 15.6% as a result of lawsuitscredit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and administrative proceedings relatingthe relaxation in certain mobility restrictions which enabled certain businesses to ISSresume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).

 

2021

2020

2019

 (in billions of R$)
Total Credit Outstanding (*) 4,6843,2613,471
Earmarked credit 1,8811,5001,465
Non-earmarked based credit 2,8031,7612,006
of which:   
Corporate 1,291814905
Individuals (retail) 1,5139481,101

(*) Some figures may be subject to revision by the Brazilian Central Bank.

Source: Brazilian Central Bank.

 151
Table of Contents

Foreign Exchange Rates

Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2021, we recorded foreign exchange exposure of R$117,400 million, foreign exchange exposure of R$ (124,437) million in 2020 and foreign exchange exposure of R$11,208 million in 2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the periods from 2005Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”

The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a total amountsmall depreciation of 1.5% to R$293 million3.31 per U.S.$1.00 as of December 31, 2017. The real depreciated further against the U.S. dollar throughout 2018, with a depreciation of 17%, On December 31, 2018, the exchange rate was R$3.87 per U.S.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As weof December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.

Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.

Inflation

In recent years, inflation had made provisionsbeen oscillating around the target, which is set by the CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for these losses, we registered income2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases were defined for the targets until 2024, when the goal will be 3.00%.

Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was close to the top of R$435 millionthe fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the reversal of certain provisions, net of tax effects, in an amount of R$96 million.

Establishment of Credit Intelligence Bureau

On January 20, 2016, we entered into a non-binding memorandum of understanding with Banco Bradesco S.A., Banco do Brasil S.A., Caixa Econômica Federal and Itaú Unibanco S.A., for the creationindexation of a credit intelligence bureau,significant portion of contracts for services to the CIB. The CIB was structured as a corporation and each of Santander Brasil, Banco Bradesco S.A., Banco do Brasil S.A., Caixa Econômica Federal and Itaú Unibanco S.A. will have a 20% ownership stake in the corporation.

The purposeinflation levels of the CIB is to developprevious years, the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, inflation rate reached a database that, in conformity with applicable laws, will collect, reconcilelevel of 10.7%, the highest on record since May 2005 and handle the credit information of individuals and legal entities that register with the CIB and expressly authorize the inclusion of their credit information on the CIB’s database. We believe this initiative will lead to an increased degree of efficiency and improvement of our credit management activities, and will also facilitate the disbursement of long and medium-term lines of credit to participants inwell above the Brazilian Financial System and to other corporate entities.

On April 14,Central Bank’s inflation target of 4.5%. In 2017, the definitive documents were signed by the shareholders. At the extraordinary shareholders’ meeting held on October 5, 2017, a capital increase in an amount of R$285,205 thousand was approvedinflation fell substantially as a result of which CIB’s capital stock increased from R$65,823 thousand to R$351,028 thousand. The company began its activities in 2019.

Formationthe consistent efforts of Banco Hyundai Capital Brasil S.A.

On April 28, 2016, our wholly-owned subsidiary Aymoré CFI entered into a joint venture with Hyundai Capital, for the incorporation of (i) Banco Hyundai Capital Brasil S.A. and (ii) an insurance brokerage company, in order to provide, respectively, auto finance and insurance brokerage services, as well as products to consumers and Hyundai dealerships in Brazil. Aymoré CFI holds a 50% equity stake in Banco Hyundai Capital Brasil S.A. while Hyundai Capital holds the remaining 50% equity interest. On February 21, 2019, the Brazilian Central Bank granted to Banco Hyundai Capital Brasil S.A.reduce the authorization to operate asinflation rate, ending the year at 2.95%. As a banking entity. Banco Hyundai Capital Brasil S.A. began its operations in the first half of 2019. On April 30, 2019,result, the Brazilian Central Bank granted the authorizationwas required to send a letter to the formationCMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the insurance brokerage company, which was incorporated on July 2, 2019. The company began its operations on November 2019.

Salemonetary policy in Brazil. In 2019, as a result of Santander Securities Services Brasil Distribuidora de Títulos e Valores Mobiliários S.A., or “SSS DTVM”

On June 19, 2014, we executed preliminary documents containingtemporary price shocks affecting edible items, inflation ended the main termsyear slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and conditionsreached 10.06% at the end of the saleyear, as a result of several shocks that ranged from problems in global supply chains – which

 152
Table of Contents

increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.

The majority of our qualified custodyincome, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the saledemand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our subsidiary SSS DTVM, which renders third party fund administration services,customers.

Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to a holding company owned by Santander Spain and a group of private equity funds managed by Warburg Pincus. Following the sale, we will continue to actinflation indexes, such as the administratorIPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.

Reserve and Lending Requirements

The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the funds, as per CVM Instruction No. 306, dated asfinancial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of May 5, 1999, as amended.

operations by limiting or expanding the amounts available for commercial credit transactions.

The closing oftable below shows the transaction occurred on August 31, 2015, when all of our shares in SSS DTVM were formally transferredrequirements for reserves and credit to Santander Securities Brasil and SSS DTVM acquired our qualified custody business. We received R$859 million at the closing of the transaction which generated gains of R$751we are subject for each financing category:

Product As of December 31, 2021 As of December 31, 2020 Form of Required Reserve Yield
Demand deposits            
Rural credit loans(1)   25.00%  27.50% Loans Cap rate: 7.5% p.a.
Microcredit loans(2)   2.00%  2.00% Loans Cap rate: 4.0% p.m.
Reserve requirements(3)   21.00%  21.00% Cash Zero
Additional reserve requirements   0.00%  0.00% Cash n/a
Free funding(4)   52.00%  49.50%    
             
Savings Accounts            
Mortgage loans   65.00%  65.00% Loans Cap rate (SFH): TR + 12.0% p.a.
Reserve requirements(2)   20.00%  20.00% Cash TR + 6.17% or TR + 70.00% of the target SELIC
Additional reserve requirements   0.00%  0.00  Cash n/a
Free funding(4)   15.00%  15.00%    
             
Time deposits            
Reserve requirements(3)   20.00%  17.00% Cash SELIC
In cash or other instruments   0.00%  0.00% Cash or other instruments n/a
In cash   0.00%  0.00% Cash n/a
Additional reserve requirements   0.00%  0.00% Cash n/a
Free funding(4)   80.00%  83.00%    

(1)Rural credits are credits granted to farmers in the amount R$13.6 billion on December 31, 2021 and December 31, 2020, respectively.
(2)Microcredit is a credit granted to very small businesses, with an open position of R$1.3 billion on December 31, 2021 and December 31, 2020, respectively.
(3)Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145.
(4)Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category.

 

131 

 153

Table of Contents

Table of Contents

million before taxes recorded inTaxes

See “Item 4. Information on the “Other non-financial gains/losses” line.Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”

Issuance of Notes

OnIn November 5, 2018,and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our board of directors approved the issuance, through our Cayman Islands branch, of debt instruments to form part of our Tier 1 and Tier 2 regulatory capital, in the aggregatetotal amount of U.S.$2.5 billion, pursuant to an offering made to non-U.S. Persons under Regulation SR$5.5 billion. The Financial Bills have a term of the U.S. Securities Act of 1993, as amended, or the “Notes Offer”.

Our board of directors also approved theten years, and redemption of instruments issued to form part of our Tier 1 and Tier 2 regulatory capital,repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.

Acquisition of Equity Interest in CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A.

On January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A., or “Santander Corretora,” together with other investors (including Banco BTG Pactual S.A. and CBOE III, LLC) entered into an investment agreement with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A., or “CSD BR,” and its shareholders for the acquisition of a minority equity interest in CSD BR. CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Brazilian Central Bank, the CVM and the SUSEP. Subject to closing, Santander Corretora’s interest in CSD BR will be 20%. The closing of the transaction is subject to the conclusion of definitive agreements and the implementation of certain customary conditions precedent, including the receipt of applicable regulatory approvals.

The Getnet Spin-Off

On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which was undertaken by our then-subsidiary Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. As a result of the Spin-Off, each holder of our common shares, preferred shares and Santander Brasil units, including the custodian for the Santander Brasil ADS facility, received Getnet common shares, preferred shares and Getnet units, at the rate of 0.25 common share, preferred share or Getnet Unit, as the case may be, for each one common share, preferred share or Santander Brasil Unit issued by us held at close of trading on the B3 on the relevant record date. Additionally, each holder of Santander Brasil ADSs representing Santander Brasil units received Getnet ADSs, each representing two Getnet units, at a rate of 0.125 Getnet ADS for each Santander Brasil ADS held at the close of trading on the NYSE on the relevant ADS record date. The Getnet common shares, preferred shares and Getnet units are traded on B3, and Getnet ADSs are traded on Nasdaq under the symbol “GET.” The Spin-Off was completed on October 26, 2021.

As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. On April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “ Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.”

The charts below set forth a summary of our simplified corporate structure before and after the Spin-Off and after the reorganization of the PagoNxt group, of which Getnet forms part:

 67
Table of Contents

Corporate Structure Prior to the Spin-Off

Corporate Structure After the Spin-Off

 68
Table of Contents

Corporate Structure After the Reorganization of the PagoNxt Group

Impact of COVID-19

We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. Based on the information available as of the date of this annual report, we present below a summary of the main effects of the COVID-19 pandemic on our business and results of operations:

●As the COVID-19 pandemic escalated in Brazil starting March 2020, we adjusted our operations to be able to continue providing our products and services to our customers while ensuring the health and safety of our employees. We have prioritized the safety and health of our employees and customers by adhering to prevention and care measures recommended by the Brazilian health and labor ministries, while striving to minimize the impact on our business. From the beginning, we implemented remote working arrangements to safeguard employees most at risk from COVID-19. We have also provided telemedicine services in addition to standard medical support to support the care of our employees and their families. Furthermore, we have instituted a protocol for mapping, protecting, and monitoring all contaminated individuals and those in contact with them, as well as a remote working strategy that evolved in lockstep with the pandemic. We supported our employees throughout the COVID-19 pandemic by offering them and their dependent remote medical care through an agreement with a leading Brazilian hospital. We also provided advance payment of thirteenth salary installments in April 2020 (these are normally paid in April and November of each year).
●From March 2020 to October 2021, our branches operated with reduced service hours; from 9:00 a.m. to 2:00 p.m. from March 2020 to July 2020 and then from 9:00 a.m. to 3:00 p.m. until October 2021. From November 2021 through to the date of this annual report, we have been expanding our service hours in our branches from 9:00 a.m. to 4:00 p.m. We adopted a staggered entry system in branches with heavy customer traffic in order to reduce the total number of customers in the branch at any given time. We also reserved the period from 9:00 a.m. to 10:00 a.m. for customers who would are more vulnerable to COVID-19. To provide continuous service and meet the increased demand of our call centers, we temporarily relocated retail employees to our call centers to help deal with the increased demand for remote banking services. In line with our commitment to clear customer communication, we launched the “Overcome Together” and “Santander Supports You” websites, which gathered resources and initiatives related to our business.
 69
Table of Contents
●We have offered individual, microentrepreneur and SME customers the possibility of deferring their loan payments for up to 60 days. In May 2020, we allowed an extension for an additional 30 days, as a result of which our deferred loan portfolio reached a total of R$49.8 billion as of June 30, 2020, R$40.6 million as of December 31, 2020 and R$25.9 million as of December 31, 2021. At the same time, we continuously monitored our loan quality indicators, which remained at acceptable levels throughout the COVID-19 pandemic and through the date of this annual report. We also participated in government programs created in 2020 that granted special credit lines for businesses, particularly in retail, to minimize the negative effects of the pandemic including CMN Resolution No. 4,846, which was published on August 24, 2020 and regulated lending under the Emergency Employment Support Program, initially established by Provisional Measure No. 944/2020. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” As a result, our total portfolio balance of government-sponsored loans reached R$10.3 billion as of December 31, 2021.
●The onset of COVID-19 had a negative impact on our net fee and commission income, especially in the first half of 2020, due to a lower volume of customer transactions, which adversely affected the total amounts we were able to charge in credit and debit card fees. As a result, we experienced reductions in the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2019 to the six months ended June 30, 2020, as compared to the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2018 to the six months ended June 30, 2019. These reductions were due to the abovementioned lower transaction volumes, a higher share of global wholesale banking in the loan portfolio, alongside a shift in the product mix, with a decreased share of higher risk products, such as credit cards and overdrafts. In 2021, in particular in the second half of the year, there was a recovery in economic activity. As a result, in the year ended December 31, 2021, our net interest income increased by 15.5% compared to the year ended December 31, 2020 (although our net fee and commission income decreased by 5.9% in the same period), our sales through physical distribution channels increased (by 46% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and so did our sales through digital channels (which increased by 45% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and we added 784,000 new customers in December 2021 (which is 78% more than in December 2020). For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Interest Income” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Fee and Commission Income.”
●In 2020, we constituted an additional provision in the amount of R$3,200 million. This provision was calculated based on the analysis of the potential macroeconomic effects and took into account not only quantitative and qualitative indicators, but also the adequate and accurate identification of risks and a collective assessment of exposures. In 2021 as a response to the macroeconomic shock of the COVID-19 pandemic, we used a part of the provision overlay on expected credit losses created in 2020, as further explained under “Item 5. Operating and Financial Review and Prospects—A. Operating Results— Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).” However, we also experienced an improvement in our loan portfolio, in particular with respect to individuals as loans to individuals increased by 17% in the year ended December 31, 2021 compared to the year ended December 31, 2020. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019— Results of Operations—Impairment Losses on Financial Assets (Net).”
●In 2020, the National Monetary Council, or “CMN,” and the Brazilian Central Bank introduced measures to minimize the impact of COVID-19 on the financial system. With respect to liquidity, these changes included: (i) a reduction in the time deposit reserve requirement from 31% to 17%; and (ii) an increase in the additional limit on the reserve requirement treated as High Quality Liquidity Assets from 15% to 30%, ensuring greater liquidity in a stress scenario. In addition, a temporary suspension on dividends and other distributions was enacted through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This suspension on the payment of dividends was not renewed in 2021. The CMN also published Resolution No. 4,783, which temporarily reduced the capital conservation buffer (where all rates relate
 70
Table of Contents

to the total amount of risk-weighted assets) required from financial institutions from 2.5% to 1.25% as of the second quarter of 2020, leading our Basel ratio to reach 15.3% as of December 31, 2020. In 2021, the time deposit reserve requirement increased from 17% to 20% as of November 2021, and the capital conservation buffer required from financial institutions rose from 1.25% to 1.625% as of April, 2021, with this percentage increasing gradually until April 2022, when it will reach 2.5%. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” and “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”

●We experienced an increase in digital business. Specifically, we recorded an increase of 45% in the number of new contracts originated through digital channels in the year ended December 31, 2021 compared to the year ended December 31, 2020.

See also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”

Capital Expenditures and Divestitures

Our main capital expenditures include investments in our information technology platform. Our information technology platform focuses on our customers and supports our business model. In 2021, 2020 and 2019, total investments in information technology were R$1,905 million, R$1,432 million, and R$1,858 million, respectively.

In 2021, 2020 and 2019, we continually improved in our technology platforms by means of investment in our digital applications, especially through the implementation of new solutions in the areas of artificial intelligence (machine learning, AIOPs), micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. The application of these new technologies improved our interaction with our customers enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness, investments to better address client needs. We also continued to invest in our physical distribution network (branches, PABs and PAEs), including: biometric identification for corporate customers, digital purchase and payment of exchange, among other initiatives. For more details about our technology and infrastructure, see the item “—B. Business Overview—Technology and Infrastructure.”

Our ongoing capital expenditures consist primarily of investments in information technology. We expect to fund our ongoing capital expenditures principally from our cash flow from operations.

Our major divestitures in the past three fiscal years and until the date of this annual report were the Spin-Off of Getnet and the sale of Super Pagamentos.

For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations.”

4B. Business Overview

Our Strategy

Our strategy is centered on endeavoring to generate profitable, recurring, and sustainable growth. We believe the expansion of our customer base over the years is due to our ability to capture new customers and increase their loyalty. We have achieved this by offering a comprehensive portfolio of products and services, with a particular emphasis on quality and a constant drive to improve customer satisfaction. We serve our customers through multi-channel solutions which we believe enable us to provide a tailored and human service which is responsive to the needs of our customers. We rely on our four integrated service channels to do offer our services to our customers: digital, remote, physical and external channels.

We recorded net income of R$15,559 million, R$13,451 millionand R$16,631 million in the years ended December 31, 2021, 2020 and 2019, an increase of 15.7% in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the years ended December 31, 2021, 2020 and 2019 we achieved capital adequacy ratios of 14.9%, 15.3% and 15.0% respectively. In the years ended December 31, 2021, 2020 and 2019, we have achieved efficiency ratios of 27.1%, 35.5% and 28.8%, and adjusted efficiency ratios of 28.2%, 27.7% and 28.2%, respectively. In addition, we achieved an adjusted return on average stockholders’ equity of 20.2%, 18.4% and 24.6% in 2021, 2020 and 2019, respectively. Adjusted return on average stockholders’ equity is a non-GAAP financial measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” We believe these metrics demonstrate our track record of consistent performance and the results of our constant efforts to improve our productivity.

 71
Table of Contents

In recent years, we have undergone significant transformations, thereby enabling us to identify and capitalize on business opportunities. We have expanded our platform to diversify our offering of products and services:

●In 2016, we initiated our commercial transformation by implementing new work models, streamlining processes and digitalizing our operations. We have sought to introduce a culture of innovation, while remaining cognizant of our surroundings and customer demands. This led us to expand our vehicle financing offering at a time when the market was moving in the opposite direction.
●In 2017, we took steps to improve service quality and we placed customer satisfaction to the core of our strategy. We believe we were industry pioneers in implementing and publicly disclosing our net promoter score, or NPS, as a measure of customer satisfaction.
●In 2018, alongside our culture of service, we advanced our pursuit of efficiency by bringing an industrial cost approach into our banking business, covering three critical fronts: organization, technology, and culture. We believe this strategy has already yielded positive results and that it will enable us to further optimize our productivity while also improving customer experience on our platforms.
●In 2019, we expanded our ecosystem by introducing new, innovative products into the market. We launched Sim, emDia, Santander Auto, Auto Compara and Ben Visa Vale while repositioning ourselves in the card market, as well as refocusing our efforts on customer and account holder loyalty.
●In 2020, we focused our efforts on assisting customers in facing the challenges posed by the COVID-19 pandemic by providing products and services adapted to the new reality brought in by the pandemic. We did so by improving and expanding our digital channels in order to deliver to our customers robust self-service banking at a time when in-person service delivery was not possible. We also reaffirmed our commitment to efficiency and rapid response to emerging market trends by launching SX Santander to offer customers exclusive benefits, differentiating ourselves from the Brazilian Central Bank’s PIX instant payment solution.
●Finally, in 2021 we redoubled our efforts to improve customer experience and satisfaction across all channels. Our strategy is to convert new customers into loyal customers (we define loyal customers as those who purchase six or more products), thus, generating profitability for the bank and satisfaction in using the bank for our customers. We seized on the opportunities we saw in the market and managed to reach 53.4 million customers as of December 31, 2021, including adding more than 784,000 new customers in December 2021. We achieved this while also maintaining high levels of customer loyalty, reaching eight million loyal customers as of December 31, 2021 (an increase of 32% compared to December 31, 2020). The combined effect of the growth in our customer base and our levels of customer loyalty enabled us to increase our customer base by 11% as of December 31, 2021 compared to December 31, 2020. We also further improved our digital operations by expanding our offerings through this channel, which has grown significantly, as evidenced by an increase of 45% in financial products and services purchased through this channel in the year ended December 31, 2021 compared to the year ended December 31, 2020. In addition, we continued to focus on streamlining processes, digitalizing our operations, and reducing paper consumption to enable us to operate faster and more efficiently. As a result, we have achieved: (i) faster service, as the lead time to open a business current account decreased by 78% in the year ended December 31, 2021 compared to the year ended December 31, 2020 and (ii) improved efficiency, with 87.0% of credit card bills issued in digital or email format in the year ended December 31, 2021, an increase of 13 p.p. compared to the year ended December 31, 2020.
●We strive to continuously improve our customer experience through the addition of new services, the expansion of our offering, and the enhancement and deeper integration of our channels.

We have consolidated and improved our four service channels through which customers can select the product or solution that best meets their needs. Our digital channel averaged 442 million total visits per month in 2021, adding 554,000 new accounts in December 2021. Similarly, the physical channel, which consists of our branch network that is expanding into Brazil’s rural areas, recorded a monthly average of more than 15 million visits by customers and potential customers, serving as a crucial pillar for business origination. In the remote channel, with the implementation of SX Negócios, a new service model, we have redefined our model to move away from a call center and toward a business channel. We have built a platform to capture new business, processing over 25 million support requests per month in the year ended December 31, 2021, 4.6 million of which are handled by humans. The external channel is comprised of bank correspondents, which are entities allowed to provide specific services to customers, including customer services, on behalf of another financial institutions, and our business verticals, such as payroll-deductible loans, Prospera and Olé Consignado.

 72
Table of Contents

We believe that our digital platform enables us not only to offer our customers a comprehensive set of services but also to benefit from the business generation potential which arises from the ease with which customers are able to purchase our products and services through our digital sales channels. Sales of our products and services through our digital channels increased by 45% in the year ended December 31, 2021, compared to the year ended December 31, 2020, including an increase in the number of premium bonds (capitalização) contracts of 360% and 23% in premiums written in open insurance contracts (considering life insurance, personal accident insurance, home insurance, and other types of insurance) in each case in the year ended December 31, 2021 compared to the year ended December 31, 2020. GENT&, our artificial intelligence channel, recorded over 18.5 million interactions in December 2021 and is currently capable of answering more than 26,000 questions.

We believe that our business has the potential to grow by means of innovation and technology, in conjunction with user experience enhancements and steady evolution in the quality of our services. Our products, services, and businesses form part of the daily lives of all our customers, whether businesses or individuals, and include, among others, payment solutions (i.e., payment platforms), investment and advisory services, vehicle and consumer goods financing, mortgage loans, payroll-deductible and agribusiness loans, as well as the products and services offered through our wholesale unit. We also endeavor to maintain sound risk management, which entails continuously improving our credit granting models to maintain our credit risk indicators at acceptable levels.

In order to strengthen our platform, we have launched new businesses that continue to evolve and support our customer loyalty strategy, such as (i) Ben, which grew its customer base to 565,000 cards as of December 31, 2021 along with 2,675 human resources customers and 365,432 partner establishments as of the same date; (ii) Sim, which surpassed the five million customer mark and reached a loan portfolio of R$1.6 billion as of December 31, 2021; (iii) emDia, which increased recovered credit volume by 12% in the year ended December 31, 2021 compared to the year ended December 31, 2020, and (iv) Santander Auto, where the percentage of new consumer finance contract purchasers who also acquired insurance reached 20% in 2021, resulting in over R$210 million in written premiums in 2021. In 2020, we also announced the acquisition of securities brokerage firm Toro Corretora to complement our investment platform and broaden our product offering. Finally, in 2021, we launched Auto Compara, a fully online auto insurance comparison and offering platform that is now also available to non-customers. Auto Compara had an average of 350,000 website visits in the year ended December 31, 2021 and we increased by 26% in premiums written during the year. Additionally, we reinforced our position in the automotive and real estate industries by completing acquisitions of businesses and solutions to expand our business and build a more comprehensive platform.

As a result of our efforts to constantly improve our business, we were recognized the Best Bank in Brazil in 2021 by The Banker Magazine.

Our People

Our people are a key pillar of our strategy, supported by a culture that values employees, promotes diversity, encourages efficiency, and fosters innovation, while also preparing us for a new cycle and enabling us to continue anticipating market trends. Our performance is the embodiment of our culture, with our people serving as the catalyst for the transformation. Thus, we have built a diverse and engaged team. We value meritocracy, diversity, and inclusion, as evidenced by the fact that, as of December 31, 2021, 31% of our leadership positions were held by women, 27% of our employees were black employees, and 5% were held by people with disabilities. We also place a premium on proactive knowledge acquisition: in 2021, over 3,200 courses were held on the Santander Academy platform, with 78% of them being taught by employees. Close leadership and open communication are ingrained in our DNA. Our actions are backed by a culture that is increasingly centered on our people – 94% of whom are proud to work for Santander, according to the Great Place to Work, or “GPTW,” survey from 2021. As a result of our efforts, we have been named one of the top 10 best companies to work for in Brazil by GPTW 2021, appearing in the following categories: Ethnic-Racial, Women, LGBTQI+, Early Childhood, 50+, and Healthy Management. Additionally, we were honored with the following awards: (i) Ethnic-Racial by Exame magazine’s Diversity Guide, (ii) Diversity and Inclusion by Euromoney’s Awards for Excellence, and (iii) Bloomberg’s Gender Equality Index. Finally, we were also included on the GPTW B3 index.

 73
Table of Contents

Social and Environmental Initiatives

Similarly, and consistent with our strategy of responsible growth, we recognize our role as a financial institution in Brazil’s development. Hence, for twenty years, we have sought to foster sustainable businesses. We highlight our Amigo de Valor program, one of the main social programs in Brazil today, started in 2002. In 2021, we continued to advance initiatives that reflect how sustainability and social issues are embedded in every layer of our organization:

●In the social realm, we lead initiatives that have impacted more than one million people over the last three years. For the past 19 years, we have worked to protect, promote, and defend the rights of children and adolescents in vulnerable situations through the Amigo de Valor program, benefiting thousands of people and raising R$20 million in 2021 through employee and customer contributions. Since 2002, we have been promoting financial inclusion by means of Prospera Santander Microfinance (Prospera Santander Microfinanças), which had 708,000 active customers and a R$1.9 billion portfolio as of December 31, 2021, with the goal of helping microentrepreneurs thrive and thereby develop the communities in which they operate, while also providing business management guidance. Likewise, for more than two decades, we have consistently invested in education, as we believe that it is the foundation for societal transformation. Finally, we have awarded higher education scholarships since 2005, including 33,000 scholarships in 2021 alone.
●With respect to our environmental initiatives, we offer a comprehensive suite of financing solutions for the development of sustainable businesses, both for individuals and businesses, which we accelerated in 2021, generating R$ 51.6 billion in sustainable businesses in the year ended December 31, 2021. We pioneered green financing, with over R$ 1.3 billion loans linked to environmental, social and governance, or “ESG,” goals and green loans in our portfolio as of December 31,2021, in addition to being among the leaders in CBIOs (decarbonization credit). We are also active solar energy loans, financing photovoltaic panels for individuals, companies, and agribusinesses, disbursing R$ 2.3 billion in the year ended December 31, 2021. In 2021, we also launched a financing facility exclusively for bicycles.

We implement routine socioenvironmental risk assessment, for which we rely on a Socioenvironmental Questionnaire, or “QSA,” by means of which we collect information on customers that have environmental practices, including data on carbon emissions, management of offsets and extreme weather events. The QSA is applied to the Wholesale and Business 3 segments, as well as to Retail customers. This analysis is part of the annual credit review for 14 sectors in which we operate, all of which are potentially affected by climate change according to the Task Force on Climate-related Financial Disclosures, or “TCFD.”

Since 2016, we have taken climate change issues into consideration in the credit rating of Wholesale customers, and, since 2020, we have used a water stress calculator in our socioenvironmental assessments. This tool considers our customers’ economic activity, watershed location and measures taken to save water. It has been developed considering customer vulnerability to climate change in general, even as a result of changes in legislation or consumer preferences.

Regarding decarbonization targets, in 2021 we announced our intention to achieve net zero carbon emissions by 2050 to support the goals of the Paris Agreement on climate change using 100% renewable energy sources by 2025 and eradicating single-use plastic from all our operations. We have been carbon neutral since 2010, fully offsetting our emission sources.

In July 2021, we established a forum with the goal of preventing greenwashing by seeking to ensure that operations which we describe as green, social, or sustainable comply with Santander Group’s taxonomy and market standards. The forum, which is composed of senior executives from the Sustainability, Risk, Social and Environmental Risk, Business, Compliance, and Legal departments, also assesses reputational risks associated with our operations. Out of a total of 40 proposals to label a particular service of product as being “green” which were reviewed by the forum in 2021, 31 have been approved.

In addition, we have developed products that contribute to lowering the impact on climate change, such as:

 74
Table of Contents
●Low Carbon CDB, we launched the Low Carbon CDB, a sustainable, low risk investment aimed at companies that want to have more sustainable investments in their portfolio capable of reducing their greenhouse gas emissions. The resources of the investments in CDB will be used to finance sustainable projects of companies that promote actions to reduce greenhouse gas emissions.
●Carbonômetro (Carbon meter), a tool that calculates the daily greenhouse gas emissions of our operations.
●Carbon Calculator, which encourages employees of Santander Brasil and affiliates to calculate their carbon footprint.
●"The Future of the Carbon Market in Brazil” live video. We produced a live video to discuss the future of the carbon market in Brazil and the challenges and opportunities for the business sector.

In July 2020, we announced a plan to promote sustainable development in the Amazon, in collaboration with two other largest private-sector banks in Brazil. Part of this plan, named “Plano Amazônia,” aims to eliminate deforestation in the supply chain for cattle farms for beef processors in the Amazon, aiming to finance the cultivation of local crops, such as açaí, Brazilian nuts and cocoa, and to identify opportunities for the development of bioeconomy chains. In 2021, we also launched the new commercial network Rede Norte Amazônica, in order to expand our operations in the region, and we have established the North Amazon Network, a business unit comprised of four Brazilian states (Amazonas, Acre, Rondônia, and Roraima), with the objective of fostering business in the region and a particular focus on sustainability. Since its creation, we have made over R$ 270 million in credit lines available to cooperatives and agribusinesses, as well as to producers of Amazonian products who adopt sustainable practices.

In 2021, we inaugurated Brazil’s first sustainable train station in partnership with the State Government of São Paulo, maximizing on-site natural resource efficiency by means of solar energy panels and a water reuse system. Furthermore, in collaboration with the International Finance Corporation, a World Bank Group institution, and the State Government of São Paulo, we supported the Pinheiros River clean-up program.

We also use ESG as one of the criteria for evaluating our executives, evidencing how deeply embedded the subject is in our culture.

In recognition of our efforts, we have received several ESG accolades in 2021, including Exame magazine’s Best ESG Bank, the Eco Brazil Award, Época Negócios 360°’s Most Sustainable Company, in addition to being named to Fortune magazine’s Change the World list.

Our Business

We provide our complete portfolio of products and services to our 30 million active customers as of December 31, 2021 through the following business segments:

●Commercial Banking: provides services and products to individuals and companies (except for global corporate customers who are managed by our Global Wholesale Banking). The revenue from this segment is derived from the banking and financial products and services available to our account and non-account holders.
●Global Wholesale Banking: offers a wide range of national and international tailored financial services and structured solutions for our global corporate customers, comprised mostly of local and multinational corporations.

We outline below the business divisions for each of our operating segments, as well as the breakdown of our net interest income and operating income before tax by segment:

Commercial Banking

Global Wholesale Banking

●Retail Banking●Santander Corporate & Investment Banking (“SCIB”)
●Individuals
●SMEs
●Consumer Finance
●Corporate
 75
Table of Contents
  For the Year Ended December 31,
  Net interest income Operating income before tax
  2021 2020 2019 2021 2020 2019
  (R$ millions)
Commercial Banking(1)   46,236   41,457   42,044   19,491   4,666   18,375 
Global Wholesale Banking   5,082   2,985   2,277   5,260   4,998   3,898 
Total   51,318   44,443   44,321   24,750   9,664   22,273 
(1)Operating income before tax reported under commercial banking includes the effects of the hedge for investments held abroad (offset in the same amount in the “Income Tax” line). The effect of the hedge for investments held abroad in 2021, 2020 and 2019 amounted to loss of R$2,512 million, R$13,583 million and loss of R$1,264 million, respectively. 

The following table shows a managerial breakdown of our loans and advances by customer type at the dates indicated:

  As of December 31, 

Change between

2020 and 2021

 

Change between

2019 and 2020

  2021 2020 2019    
    (R$ millions)      
Individuals   203,678   174,042   156,177   17.0%  11.4%
Consumer Finance   55,441   51,637   48,421   7.4%  6.6%
SMEs   59,602   54,525   53,119   9.3%  2.6%
Corporate(1)   174,634   137,618   89,539   26.9%  53.7%
Total Credit Portfolio   493,355   417,822   347,257   18.1%  20.3%
(1)For purposes of loan portfolio presentation, “corporate” includes companies with annual gross revenues exceeding R$200 million, including our Global Corporate Banking customers.

Commercial Banking

Retail

Individuals

We have structured the individual customer service segment as follows:

●Private Banking – is responsible for customers with at least R$5.0 million in assets available for investment. In this segment, we offer a complete and tailored portfolio of financial products and services, investment advice, loans and asset management through a dedicated manager for investments and banking services.

●Santander Select – is responsible for customers with a monthly income above R$10,000, and R$30,000 in investments, or more than R$100,000 in investments. The offer here consists of a value proposition with differentiated products and services, exclusive service spaces, relationship managers who serve a small number of customers and provide asset management advisory services,

●Santander Van Gogh – is responsible for customers with a monthly income ranging from R$4,000 to R$10,000, or with investments above R$40,000. Our goal is to understand the needs of our customers at each stage of their lives and provide them with financial advice through a multi-channel solution, including financial products and services, as well as financial advice,

●Santander Especial – is responsible for customers who earn up to R$4,000 per month. Our business model offers simple and efficient solutions with an attractive cost benefit to the customer, primarily through electronic channels.

Furthermore, we also support our Select and Van Gogh customers through our Santander Direct channel, Santander Direct is suited to customers who want more flexible service hours, from 8:00 a.m., to 10:00 p.m. and who prefer using a remote method, such as telephone, e-mail or chat, as well as access to digital channels. This service complements our offering and broadens our capillarity by catering to regions where we do not have a physical presence.

 76
Table of Contents

We launched the following products or functionalities for retail customers in 2021:

●Santander Especial – New customers who opened their accounts on our digital channels have access to Santander Direct.

●New account digital process - We endeavor to simplify the account opening process using internal and external information and making the experience quick and simple for new customers.

Small and Medium Enterprises (SMEs)

We serve SMEs under the “Santander Negócios e Empresas” brand, with the following customer service segmentation model:

●Empresas 3 Núcleos (Core Companies) – responsible for companies with annual revenues between R$30 million and R$200 million. Our service model is based on dedicated relationship managers, a team of experts for more complex demands and loan managers specializing in risk management. We also provide specialized services to multinational, technology companies and other major corporations in order to meet their specific needs.
●Empresas 2 Polo (Hub Companies) – responsible for companies with annual revenues between R$3 million and R$30 million. We offer these customers a comprehensive range of products and services through a user-friendly interface, as well as dedicated relationship managers that work in specialized hubs.
●Empresas 1 Agência (Branch Businesses) – responsible for companies with annual revenues of up to R$3 million. We offer these customers a simple banking solution through an integrated account that combines a corporate account with a point of sale, or “POS,” terminal hosted by our former subsidiary Getnet. Through this arrangement, our customers receive benefits for using the Getnet solution to process their credit card sales, with receipts being posted to a Santander Brasil checking account.
●Negócios Direct - for companies with annual revenues of up to R$300 thousand. We offer these customers direct access to a relationship manager who is available during extended service hours and via remote channels, such as telephone, e-mail or chat, as well as access to digital channels that facilitate the client’s day to day needs.
●Empresas MEI (Individual Microentrepreneur) – responsible for companies with annual revenues of up to R$81 thousand. We offer these customers a simplified and cost-effective option through our Santander Conta MEI, a remote service, and digital solutions such as Gent& Santander – the artificial intelligence solution for service and sales.

Consumer Finance

We provide consumer credit to finance motor vehicles, goods and services directly or through intermediate agencies, Santander Financiamentos is our main service channel, but we also operate under multiple brands.

The following table sets forth certain key financial and operating data regarding our consumer finance business for the periods indicated:

 

As of December 31,

Change between 2020 and 2021

Change between 2019 and 2020

 

2021

2020

2019

Individual consumer finance loan portfolio market share (1) (%) 24.4%25.1%25.0%(1.1) p.p.0.1 p.p.
(1)Source: Brazilian Central Bank.

Corporate

Our corporate banking segment aims to be the main distribution channel of the Santander Group to Brazilian and foreign and/or multinational corporate clients. The product offering ranges from simple cash accounts to

 77
Table of Contents

mergers and acquisitions advisory services. We leverage our strength in consumer finance, asset and wealth management, payments and markets to serve our clients and their shareholders, employees, clients and suppliers. We serve companies with annual gross revenues in excess of than R$200 million located across Brazil by physical and digital channels. Our corporate banking segment has been constantly evolving as a segment relying on a disciplined analytical toolkit, consistent communication and workforce upskilling.

Global Wholesale Banking

Santander Corporate & Investment Banking (SCIB)

SCIB is the global business unit that serves customers, who, due to their size and complexity, require tailored services or high-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customer portfolio comprises a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.

Our customers in the SCIB segment benefit from Santander Group’s global structure of services, which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and provision of integrated services.

Our Portfolio of Products and Services

Payments

Credit and Debit Cards

We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.

In order to reach a greater number of customers and remain competitive, we launched the SX card in November 2020, as part of the SX strategy detailed below. This product benefits highly engaged and transactional customers, facilitating the exemption from annual card fees. In addition, we also took the opportunity with the SX card to launch a more modern and ambitious card design for our customers.

To improve customer experience for the high-income segment, where we are aiming to increase market share and brand awareness, we launched the Gold, Platinum and Centurion products with American Express which include NFC technology, the accumulation of Esfera points that do not expire and still allow access to Membership Rewards, an exclusive American Express program.

In line with Santander Brasil’s global purpose of becoming NetZero by 2050, we launched cards made from recycled material in July 2021. The new cards made of recycled material were issued to customers who already had an SX or Elite card, close to expiry. We expect to make the official launch for the first quarter of 2022, with the issuance of 100% of SX and Elite cards with recycled material. Currently, we are the only bank in Brazil that issues cards made from recycled material.

In the SMEs segment, believing in the great potential of microentrepreneurs, or “MEI,” who represent more than half of the companies in Brazil, we developed an exclusive card for this segment. The MEI card grants customers discounts on purchases made with partners, chosen according to the microentrepreneurs field of activity, as a result of which cardholders have access to exclusive offers for the purchase of input for their companies. In addition, there is the possibility of an annual fee waiver by binding the card by using the card on a monthly basis or by registering with the PIX system.

In line with the objective of becoming an open financial services platform, in November 2021 we launched a partnership with Samsung, a solution that offers digital account opening, card sales and SIM loans on the first screen of Samsung pay. The objective is to provide a simple and fluid journey within the app that is already used on a daily basis to pay for on-the-go purchases.

We also improved our digital journey to provide better customer self-service, which we believe is a key component for higher customer engagement. A recent novelty is “Clique e Retire,” a new physical card delivery system that provides a quick, autonomous solution for customers by allowing them to opt to collect their cards from self-service machines.

 78
Table of Contents

The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.

  As of and For the Year Ended
December 31,		 Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
Credit card portfolio market share (1)   12.4%  13.4%  12.9%  (1.0 p.p.)   0.5 p.p. 
Credit card portfolio (R$ billion) (2)    48   37.8   36.1   27.0   (100.0%)
Total card turnover (R$ billion) (2)    306.0   242.0   236.4   26.4   2.4%
Credit card turnover (R$ billion) (2)    203   158.7   161.0   27.9   (1.4%)
Total card transactions (in millions) (2)    3,555.3   2,570.8   2,725.4   38.3   (5.7%)
Credit card transactions (in millions) (2)    1,859.1   1,300.0   1,450.9   43.0   (10.4%)
Participation of credit card in the household consumption (only debit)– Market overview (2)(%)   24.1%  17.4%  13.8%  6.7 p.p.   3.6 p.p. 
Participation of credit card in the household consumption (only credit) – Market overview (2)(%)   42.1%  25.2%  24.0%  16.9 p.p.   1.2 p.p. 
Participation of credit card in the household consumption (total, debit and credit) – Market overview (2)(%)   69.3%  43.5%  38.2%  25.8 p.p.   5.3 p.p. 
(1)Source: Brazilian Central Bank, as of September 31, 2021. Data for the year ended December 31, 2021 was not available as of the date of this annual report.
(2)Source ABECS – “Monitor bandeiras,” The data relating for the year ended December 2021 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS.

Santander Way

Santander Way is an app available to our cardholders that allows them to manage their Santander Brasil cards at any time and place. This complete payment platform also works as a digital wallet, enabling customers to conduct instant contactless payments. The app is frequently updated with new features. Some of the most notable features launched in 2021 included: (i) extra loan and installment offers, (ii) virtual cards that allow purchases before the physical card arrives, (iii) functions for safer online purchases without a physical card, (iv) possibility for the customer to update his or her income to obtain a higher credit limit, and (v) chargeback from unrecognized purchases. In 2021, we have nine million active customers using Santander Way.

Merchant Acquiring Market | Getnet

Getnet is a technology company that offers payment solutions to a range of merchants, from large businesses to the small entrepreneurs, both physically and digitally. Getnet was our subsidiary until the completion of the Spin-Off on October 26, 2021. For more information on the Spin-Off of Getnet, see “—A. History and Development of the Company—The Getnet Spin-Off.”

The following table sets forth certain historical key financial and operating data regarding Getnet’s business for the periods indicated. 

  As of and For the Year Ended December 31, Change between 2020 and 2021 Change between 2019 and 2020
   2021 (1)  2020   2019         
   (R$ millions, except as otherwise indicated)
Market share of total turnover (2)  15.3%  14.9%  11.3%  0.4 p.p.   3.6 p.p. 
Debit turnover (3)  105.8   105.8   80.9   0%  30.8%
Credit turnover (3)  182.7   167.9   126.6   8.8%  32.6%
                     
(1)We completed the Spin-Off of Getnet on October 26, 2021 and, as a result, Getnet is no longer a subsidiary of Santander Brasil. We stopped consolidating Getnet within our results of operations on March 31, 2021. For additional information on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
 79
Table of Contents
(2)  Source: Data for 2021 relates to the nine-month period ended September 30, 2021 and is based on ABECS Monitor Bandeiras - Acquirers. Data for the year ended December 31, 2021 was not available as of the date of this annual report. For comparison purposes, the difference between September 30, 2021 and September 30, 2020 would be an increase of 1.7 percentage points.
(3) Considers data until September, 2021.

We completed the Spin-Off of Getnet in October 2021, and Getnet is no longer our subsidiary. However, on April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.

Following the Spin-Off, Getnet is operating as the Brazilian leg and regional acquirer of the Santander Group’s PagoNxt merchant solutions. PagoNxt is a strategic initiative that seeks to promote sustainable and profitable growth by integrating various payment solutions for businesses and consumers using the latest technology. PagoNxt is an autonomous company within the Santander Group. Through its three lines of business, namely merchant solutions for businesses, trade solutions for international trade and consumer solutions for consumers, it provides solutions not only to banking clients of the Santander Group but also to third-party customers, financial institutions and fintechs.

Esfera

Esfera is our loyalty program, which can be accessed through its own website and mobile app. Our loyalty platforms enable our credit card holders to exchange their reward points for many products, services and travel benefits, including exclusive deals and discounts with a broader selection of partners such as some of Brazil’s largest retailers and a cinema chain, among others. Esfera also operates a marketplace offering cashback to is clients on purchases of products that aggregate more than sixty partners as of the date of this annual report.

Ben

Ben is an employee benefits company that provides greater flexibility, purchasing power and quality of life to its users by creating, supplying and managing types of employee benefit vouchers (e.g. meals, such as Vale Alimentação and Vale Refeição, as well as transportation) in the form of magnetic cards. These benefits are offered through an integrated digital platform.

Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.

Ben is currently working on development of new products, such as fuel cards and other benefit options to expand its portfolio.

Ben added Ben Único to its portfolio. This product allows customers to have two kinds of benefits in a single card, reducing the cost with card emission and logistics, contributing with ESG metrics,

According with new products developing planning, Ben submitted a request to the Brazilian Central Bank to issue a license to operate as a payment institution (instituição de pagamento) and it was granted in December 2021.

The following table sets forth certain key financial and operating data regarding Ben´s business for the periods indicated.

  As of and For the Year Ended December 31,
  2021 2020 2019
  (in R$ millions, except as otherwise indicated)
Card Purchases   1,484   946   560 
Number of Cards (in thousands)   565   217   98 
Number of Transactions (in thousands)   20,477   12,192   9,534 
Merchant accredited (in thousands)   365   338   253 

For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”

 80
Table of Contents

Payroll Loans

Payroll loans support both account and non-account holders in the execution of projects and financial organization. Under these loans, monthly installments are deducted directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, significantly reducing our credit risk. We offer these payroll loans to our customers through our mobile banking platform and our branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts. Furthermore, these loans are also offered to non-account holders through Olé Consignado. For further information on relevant events, relating to Olé Consignado’s corporate events, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”

The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.

  As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
Market share in origination (1)   16.96%  18.90%  13.2%  (1.94)p.p  9.09 p.p 
Payroll loan portfolio (R$ billion)   53.3   48.1   43.0   10.85%  11.9%
(1)Source: Brazilian Central Bank, as of December 31, 2021, 2020 and 2019, as applicable

SIM

SIM is a digital lending platform for individuals through which customers can apply, and be approved, for a loan completely online. After two years of operation, SIM has already achieved a positive net profit, a loan portfolio of R$1.6 billion as of December 31, 2021 and a market share of 0.7%, in the year ended December 31, 2021, as well as a total of 6.5 million registered users as of December 31, 2021. SIM also has a high level of customer satisfaction, with an NPS of 80 points in the year ended December 31, 2021.

emDia

emDia is an online debt renegotiation platform. It provides customers with a simple platform to access debt renegotiation services on a 24/7 basis, As of December 31, 2021, emDia had 6.5 million customers and had contributed to the recovery of R$78 million in credit volume in 2021.

Mortgages

We offer long-term financing to our customers for real estate purchases, secured by deeds of trust. We consider mortgages to be a strategic product due to their lower risk (since the acquired property serves as collateral) and their ability to increase our customer loyalty (especially since we offer customers more attractive rates if they choose to bank with us). In this market, our customers, and those of our competitors, are primarily individuals.

We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 90% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of the borrower’s monthly gross income,

To facilitate the process for our customers, we provide a real estate digital platform where customers can obtain mortgages completely online. We were the first bank in Brazil to offer customers the opportunity to secure a mortgage without being physically present, except for the signing of the agreement and returning it duly registered. We have a partnership with the largest real estate platform in Brazil in order to improve our sales network and strengthen our digital presence.

The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated:

 81
Table of Contents

  As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
  2021 2020 2019    
   (in R$ billions, except percentages)
Mortgage loan portfolio   54.8   45.8   39.7   19.7%  15.4%
Individual sector mortgage loans   53.0   44.0   37.2   20.5%  18.3%
Loan to value(1) – Production (% quarterly average)   65.5%  64.9%  62.9%  0.06 p.p.   2.0 p.p. 
Loan to value – Portfolio (%)   52.5%  52.2%  49.4%  0.30 p.p.   2.75 p.p. 
(1)Ratio between loans and the value of the collateral, excluding home equity.

Home Equity

In our portfolio of loan products, we also offer a “home equity” financing product called “UseCasa” in which clients can receive a loan if they provide real estate as collateral. This product enables clients to access financing to pursue their personal objectives. “UseCasa” has increased its market share to 23.5% in 2021, maintaining our position as the leading private sector bank for these types of loans in Brazil. Our portfolio was R$3.2 billion in 2021, an increase of 27% in the year ended December 31, 2021 compared to the year ended December 31, 2020. Efficiency has also improved as approximately 50% of loans are now approved in less than 10 days. We do not offer home equity loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 60% of the value of the property, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of borrowers’ monthly gross income.

To facilitate the process, customers can obtain home equity loans completely online through our real estate digital platform. When using this option, customers only need to be physically present when signing the contract and when returning it once it is duly registered.

Tailored Products and Services

As mentioned above, we offer a complete set of services and products worldwide. In this way, we have a portfolio that ranges from basic to tailor-made and highly complex solutions in the following areas:

●Global Transaction Banking – Responsible for the sale and management of local transactional banking products, which include local loans, commercial financing such as on-lending of funds from development banks, structuring of local loans and cash management solutions).
●Global Transactional Services – Responsible for the sale of global transactional products, financing for export and import, guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
●Global Debt Financing – Responsible for the provision of financing and financial advice on infrastructure projects, origination, and distribution of fixed income instruments in capital markets both locally and internationally, financing for acquisitions and syndicated loans in local and foreign currency.
●Investment Banking – Advice on mergers and acquisitions and equity transactions in the capital markets.
●Equities – It operates brokerage services for individual, corporate and institutional investors in stocks, listed derivatives and research.
●Treasury Customers – Responsible for structuring and offering foreign exchange products, derivatives and investments to clients in our various segments, including institutional investors, corporate clients and individuals.
●Market Making – Responsible for the pricing of operations (foreign exchange and derivatives) for customers originating from the sales efforts of our corporate, institutional, corporate, private banking and retail. This area is also responsible for managing our proprietary books.
 82
Table of Contents
●Energy Trader – Performs transaction with qualified customers and end consumers, and also acts as a hedge and market making provider in the energy markets.

We are one of the leading banks in capital markets and financial advisory services in the Brazilian and international markets as evidenced by the awards we have received, of which the most significant are listed in the table below.

Company

Acknowledgments

Dealogic

Full Year 2021

#8 Latin America & Caribbean ECM Revenue

#9 Latin America ECM Volume by Bookrunner

#10 Brazil M&A Revenue by Advisor

#6 Brazil M&A Volume by Advisor

#4 Latin America & Caribbean DCM Volume by Bookrunner

#8 Latin America and Caribbean Loans Volume by Bookrunner

#8 Latin America and Caribbean IB Revenue by Bookrunner

#5 Brazil Investment Banking by Bank¹

#1 Latin American & Caribbean Project Finance Loans Volume by MLA²

#1 Americas Project Finance Volume by Finance Adviser to Consortium²

#1 Americas Project Finance Volume by Finance Adviser²

#4 Americas Renewable Energy Project Finance Volume by MLA²

¹ For the third quarter of 2021

² For the first half of 2021

Global FinanceBest New Measures to Support Trade Finance Customers during Pandemic 2021

Best Supply Chain Finance Bank Global 2021

Best Post-Shipment Financing Solution 2021

Best Provider of Short-Term Investments Money 2021

Market Funds in Latin America 2020

Best Trade Finance Bank in LatAm 2020

World’s Best Payment Hub Solution 2020

Best Trade Finance Provider for LatAm 2020

Institutional Investors

#1 The Latin America Strategy Team 

#4 The Latin America Sales Team

# Sales Trading Institutional Team

#5 Research Team

First Quarter of 2020
TMI AwardsBest Trade & Supply Chain Finance Bank in South America 2020
Euromoney

The Best Bank for SMEs Award in LatAm.

October 2020
FX Markets

Best Bank for emerging LatAm currencies 2020

Best Bank for LatAm 2020

Best Bank for USD/BRL 2020

Global Trade Review

Best Trade Finance Bank in LatAm 2020

Best Deal Award Route 2020

Best Supply Chain Bank 2020

First Quarter of 2020
Bond Radar

#1 DCM Distributed in the International Market 

Brasil Bonds & Corporate Bonds

Full Year 2020

Trade Finance an IJ Global

Best Supply Chain Finance Bank 2020

Best Receivables Financier 2020

PFI Awards

Global Adviser of the year

First Quarter of 2020

Anbima

#2 DCM Distributed in the Local Markets 

#4 DCM Originated in Local Markets– Fixed Income Consolidation

Project Finance 

Financing advisory #1 Announced value

First Quarter of 2021

Full Year 2020

Risk Net

Risk Solutions House of the Year 2020

Deals: Cosan (EDQ) / Syngenta (Special Sits)

 83
Table of Contents

Latin Finance

Corporate High-Grade Bond of the Year: Suzano FY2020

Equity Follow-On of The Year: Via Varejo

Infrastructure Bank of the Year – Brazil

Syndicated Loan of the Year: LD Celulose

Domestic M&A Deal of the Year: Grupo Notre Dame Intermédica purchases Clinipam

Corporate High-Yield Bond of the Year: Braskem

Bank of the Year: Southern Cone

Bacen

#1 Total FX 

September 2021
The BankerBest Transaction Bank for Latam 2021

Customer Solutions

Agribusiness

Agribusiness remains one of our key areas of expansion, and we believe that expanding our agribusiness network will help broaden our reach into the Brazilian countryside to strategic areas in which we are not yet present. We provide a full range of products and services focused on the agribusiness sector. Our approach towards rural producers differs from the one taken with our other customers in that we offer a specialized relationship to our rural producers. We believe that a network of physical stores and digital solutions will result in a more agile and efficient communication with these customers.

The following table sets forth certain key financial and operating data regarding our agribusiness for the periods indicated.

  As of and For the Year Ended December 31, 

Change between

2020 and 2021

 Change between 2019 and 2020
  2021 2020 2019    
Number of agribusiness-focused stores   42   40   34   5%  6%
Agribusiness loan portfolio (R$ billion)   13.9   13.7   10.9   1.5%  26.2%

Microfinance

We believe that Prospera Santander Microfinance is a leading microcredit-oriented operation among privately owned banks in Brazil, based on market share and portfolio value. This product aims to support formal and informal microentrepreneurs by generating business and income with a 100% digitalized service process, in addition to products intended to improve business management skills, we have customers who hire us for services previously not available to them, because they do otherwise have access to financial services, such as property finance, consortium and investment services.

  As of and For the Year Ended December 31, Change between 2020 and 2021 

Change between

2019 and 2020

  2021 2020 2019    
Number of Prospera stores   119   99   100   20.02   (1.0%)
Microfinance loan portfolio (R$ billion)   1.9   1.3   1.2   49.2%  8.3%

Webmotors

Webmotors is the first and largest Brazilian technology company focused on providing automotive purchase and sale solutions for dealers, original equipment manufacturers and private sellers, holding the largest online automotive listing in Brazil.

Webmotors received an average of more than 30 million visits per month in 2021. Through Cockpit, a pioneering and disruptive platform for utilities, which brings together solutions for the entire network described above, we offer the following solutions: business management/ performance, buyer profile (CRM), data intelligence, predictive pricing models and market data (AutoGuru).

Webmotors endeavors to be a platform that accompanies private and corporate users throughout the life of their vehicle, from purchase, to use and sale. In order to do so, Webmotors reformulated the business of its subsidiary Loop, which was a traditional auctioning business, into an omnichannel dealer which is able to increase the sale value of demobilized fleets in its digital and physical stores. Webmotors also launched “Agenda Fácil,” a product focused on scheduling services through WhatsApp.

 84
Table of Contents

Santander Auto

In 2019, we launched Santander Auto, a fully digital car insurance solution which relies on the use of big data analytics for pricing.

The Brazilian insurance market is characterized by: (i) low insurance penetration in proportion to its GDP; (ii) low technological evolution, dominated by companies with low innovation rates, still focused on financial results (due to a history of high interest rates); and (iii) retail brokers as the main distribution channel. As a result, the subscription process still requires that the customer complete a question form (approximately 40 questions). As a result, only approximately 20% of Brazilian vehicles are insured.

Actuarial techniques and behavioral models enable Santander Auto to make an insurance proposal, without making additional information requests from the customer, based on information already available to us.

During 2019, its first year of operation, almost 110 thousand policies were sold, which represents a penetration rate of 16% (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos). These results are based on a pricing system based on information bureaus which provides have a more accurate price, which makes it possible to make an offer at the time the vehicle is purchased, and which enables customers to include insurance in their purchase with a single click.

During 2020, we focused on consolidating our insurance offer, by ensuring that all customers have at least one insurance offer, while also covering the most diverse types of risk. We intend to expand the business through the optimization of our ecosystem and penetration in our customer base.

In 2021, Santander Auto expanded its product offering to cover 95% of all vehicles financed by Santander Financiamentos, reaching a penetration rate of 20% in the year ended December 31, 2021 (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos), and registering an increase of 80% in the number of policies sold in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the fourth quarter of 2021, Santander Auto started to offer car insurance to customers who are not financing their vehicle with Santander Financiamentos in order to expand its distribution channel further.

Solution4fleet and Car10

In 2021, we acquired Solution4fleet, a company specialized in leasing vehicles to third parties. Solution4fleet offers services such as assistance, fleet management, inspection, vehicle maintenance and fine management. It is the only company in the Brazilian market that has a complete ecosystem for fleet management and leasing operations.

We also acquired Car10, a company which provides a marketplace to simplify auto repair shops and services with over 7,000 registered garages across Brazil.

+ Negócios and +Vezes | Santander Financiamentos

In 2017, we launched “+Negócios,” which we believe to be an innovative digital trading platform. This simple and intuitive platform enables faster execution of loan simulations, receipt of credit approval and proposal formalization for vehicles, in addition to providing portfolio management reports. In the same year, we also introduced “+Vezes,” a digital trading platform allowing retailers to offer installment payment options for the sale of goods and services.

In 2021, approximately 15 million separate Brazilian individual taxpayer identification numbers were used to simulate vehicle leasing through the “+Negocios” platform, which makes it one of the most widely used platform in Brazil’s vehicle leasing market.

+Vezes has a strong focus on digital channels. With the use of +Vezes website, two editions of “Decora +” and “Energia +” have been launched, both focused on the development of digital showcases to bring main resellers closer to the end customers, mostly on the furniture and photovoltaic segments. Additionally, Crédito Pessoal +Vezes has also been launched, which is a complementary offer of credit for end customers in their checking account, without a specifically required purpose. We have also advanced multiplying +Vezes presence and service throughout the national territory for the implementation of the CONSULTANT + Model, strengthening the relationship with intermediary customers.

 85
Table of Contents

Moreover, “+Fidelidade” is a loyalty program with the objective of offering incentives to agents based on their relationship with Santander Brasil and Webmotors. Accordingly, we have sought to improve the customer’s post-sales experience by implementing several features on +Fidelidade’s online portal.

Cash Management

We offer cash management solutions to corporate customers and SMEs online through our Internet banking and mobile banking services.

Our revenues from cash management include fees charged for offering the following products: (i) collections, in which we assist customers in carrying out commercial transactions using printed or online payment slips; (ii) payments, consisting of simple and automatic management of our customers’ accounts payable activities through individual transactions or via electronic file transfer; (iii) instant Payments, in which our customer pays and receives funds online with an immediate credit or debit to the account (this can be added to our collection, payments or acquiring products); (iv) payroll, which is intended to facilitate the management of salary and benefits payments to our customers’ employees via an online tool;(v) collection of values, which consists of the payment of cash values and checks at the customer’s points of sale; and (vi) custody, by which we perform the custody, control and deposit of predated checks up to the date of clearing.

In addition, we also provide other revenue-generating products which are structured and tailored to the customer’s operation.

Customer Funding

Our main sources of liquidity are customer funding through deposits and other bank funding instruments. These deposits, combined with equity and other instruments, enable us to meet most of our liquidity and legal reserve requirements.

For further information, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”

Investments

Our investment process for retail customers seeks to provide qualified guidance and help them achieve their financial objectives based on five major pillars:

●Client investment profile – We assess our customer’s situation to understand their level of financial knowledge, investment horizons, liquidity needs and the levels of risk they are willing to assume, among other factors. This analysis is reviewed periodically, according to the customer’s needs and local regulations;
●Investment strategy – Our investment philosophy aims to provide long-term returns through a structured asset allocation process and mitigate market risks by diversifying among different asset classes;
●Model Portfolio – We define strategic portfolios for each customer profile and build our “Model Portfolio” on a monthly basis according to market conditions and trends. This tactical view arises from the Asset Allocation Committee, which consists of our advisory team and economists from our economics department, our Santander Asset Management division, our Private Banking unit and our brokerage house (Santander Corretora);
●Execution and implementation – To assure a successful execution of investment strategy, we provide a complete array of financial products, ranging from banking instruments, bonds, stocks, structured notes, investment funds with an open architecture and selected investment providers, real estate funds and exchange traded funds, among other capital markets instruments. Our partnership with Zurich Santander completes this offering with a wide range of private pension plans. Furthermore, our recent acquisition of Toro Corretora has further enhanced our PI DTVM investment platform by expanding our product offering. For more information regarding this acquisition, see “—A. History and Development of the Company—Important Events—Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.;” and
 86
Table of Contents
●Follow-up – Our advisory team performs a thorough and frequent review of our clients’ profile, objectives and results alongside each client in order to maintain the client’s investment within the parameters established and the guidance provided by the model portfolio.

In order to identify possible deviations from the investment profile’s recommended positions, we also rely on automated monitoring systems. These controls alert customers of any transactions that compromise the suitability of their portfolio and are in line with our commitment to protect our customers’ interests.

Furthermore, each customer has direct access to their positions through a private access on the internet and mobile app, where they can view the evolution of their investment strategies.

Programa Avançar

We also have a non-financial solution, known as “Programa Avançar,” which is aimed at entrepreneurial customers. By means of this solution, SMEs can access content and solutions related to management and innovation, internationalization, team building, and other topics relevant to businesses via a web platform. We see this program as a key component of our offering to Brazilian entrepreneurs.

In addition, we offer a digital account solution where individual entrepreneurs can purchase banking products and services in a 100% digital experience.

Similarly, we offer “Santander Copiloto,” an enterprise resource planning tool designed for our SME customers. This tool is integrated with the Santander Digital channels, and provides solutions such as e-commerce, sales point software and tax compliance.

Service Channels

We offer our financial services and products to our customers through our multichannel distribution network composed of: (i) physical channels, such as branches, mini-branches and ATMs; (ii) call centers; and (iii) digital channels, such as Internet banking and mobile banking.

Physical Distribution Network

Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network as of the dates indicated.

  As of December 31,
  2021 2020 2019
Branches   1,987   2,153   2,328 
Mini-branches   1,384   1,411   1,512 
Own ATMs   12,561   12,949   13,296 
Shared ATMs   24,255   23,798   23,780 

Branch Network

Our branch network offers our entire portfolio of products and services to our customers through a personal and customized approach. The table below shows the geographic distribution of our branch network as of the dates indicated.

  As of December 31,
  2021 2020 2019
Northeast   9.74%  9%  9%
North and Midwest   8.42%  7%  7%
Southeast   67.31%  70%  70%
South   14.53%  14%  14%

PABs (Mini-branches)

We offer daily banking services to our SMEs, as well as corporate customers and their employees through our PABs (“Postos de Atendimento Bancário”), which are exclusive sales points located at our customers’ buildings, as well as in hospitals and universities. The presence of PABs in our customers’ offices strengthens our relationship and builds loyalty with those customers, who benefit from the convenience of conducting their banking transactions at their workplace.

 87
Table of Contents

ATMs

We operate an extensive network of 12,561 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 24,255 ATM units. Through this network, our customers can access their accounts and conduct banking transactions, as well as purchase most of the products and services available in our portfolio.

Remote Channel

Our remote channel consists of call centers, online messaging services and contact emails available to all our customers. These allow customers to solve issues, engage new products and services and generally interact with us to fulfil their banking requirements. We received over 25 million contacts per month through our remote channel in the year ended December 31, 2021.

In, we began a process to reshape the way in which we interact with customers through our remote channel. In 2021, this transformation allowed us to achieve more than 740,000 sales in December 31, 2021.

Digital Channels

Our digital channels include Internet banking, mobile banking and other digital solutions aimed at facilitating our customers’ access to the products and services that we offer.

The last few years have been marked by a significant digital transformation for us. We believe that in 2021 we have strengthened our focus on customers with a digital mindset while also leveraging digital tools to enhance our efficiency and scalability. In this context, we highlight the following:

●We have created an online store to receive and serve our customers on an ongoing basis. In the year ended December 31, 2021 we recorded an average of approximately 442 million total visits per month and we increased the number of digital buyers in comparison with the year ended December 31, 2020.
●We added 557,000 new accounts in December 2021, an increase of 190% when compared to December 2020. We believe this growth is due to our streamlined account opening process, which improved our customers’ experience, and to an increase in our approval rates as a result of improvements in our fraud detection and offline processes.
●We have performed an average of approximately 3.2 million sales per month in the year ended December 31, 2021, an increase of 45% when compared to the year ended December 31, 2020. This increase has been primarily driven by an increase in credit cards sales, representing an average of 297,000 sales per month in the year ended December 31, 2021, an increase of 99% when compared to the year ended December 31, 2020. We have consolidated our position as a leading credit and digital recovery platform in Brazil, with more than 2.4 million contracts per quarter in the year ended December 31, 2021 (considering only individuals) an increase of 69% when compared to the year ended December 31, 2020, and with a share of sales amounting to 64% in loans in the year ended December 31, 2021.
●We have also taken steps to improve our digital customer service, in the form of Gent&, our virtual assistant. Gent& is an artificial intelligence launched in 2020. This solution offers a more personalized digital service that provides greater autonomy for our customers.

The following table provides certain key operating information with regards to our digital channels as of the dates indicated.

  For the Year Ended December 31,
  2021 2020 2019
  (in millions)
Number of digital customers (1)   18.8   15.6   13.4 
Number of digital channel transactions (2)   7,482   5,262   4,311 

(1)We define digital customers as those who used at least one of Santander Brasil’s digital channels (e.g., mobile banking and internet banking) in the 30 days preceding the end of the applicable year.
(2)Refers to transactions carried out through internet banking, mobile banking and other digital platforms. The data refers to the year ended December 31.

 88
Table of Contents

The following table provides an overview of the weight of each key distribution channel in our overall distribution system.

  

For the Year Ended

December 31,

  2021 2020 2019
   (%)
Internet banking  27.7   37.8   39.7 
ATMs  3.6   5.9   8.9 
Mobile (1)  62.3   46.9   39.0 
Branch  1.1   2.2   4.1 
IVR (2)  4.6   6.4   7.4 
Call Center  0.7   0.9   0.9 

(1)Refers to total transactions (account holder and unique product-holder).
(2)Interactive voice response is an automated telephone system in which a computer interacts with callers (who can use their voice or the telephone keypad to communicate with the computer), gathers information and transfers caller to the appropriate representative.

Technology and Infrastructure

In 2021, we have performed significant investments in our technology systems. We put customers at the center of our strategy. We are continuously seeking improvements in customer experience and satisfaction by launching new services, as well as combining self-service features with human and personalized services and channels.

Therefore, we have strengthened our technological culture and our business systems capacity, which supports an intense flow of more than 53 million customers as of December 31, 2021 and an average of 442 million total visits per month to our digital channels in the year ended December 31, 2021, along with an efficient and secure processing of an average of more than 367 million transactions per day in the year ended December 31, 2021. We believe that this continuous improvement of our customer services, combined with the offer of new solutions and the expansion of the range of our channels contributed to the growth of our customer base by 11% in the year ended December 31, 2021 compared to the year ended December 31, 2020.

We have increased our operational efficiency and scalability, expanding the use of computing to over 75% of operations, and improving the time-to-market of products and services, by using Agile and DevOps methodologies in the execution of 85% of our projects. Furthermore, we have reduced the number of relevant incidents (which we define as high priority incidents, i.e., those that could result in the unavailability of a wide range of critical services) in the last three years by more than 90% on average, ensuring greater availability of our products and services to our customers. We have listed below other initiatives carried on throughout 2021:

●Investments: We have launched the Algo+ service (stands for “algorithm”), which simplifies the investment process to our customers, allowing them to invest in stocks from the bank’s recommended portfolios without having to sign-in to the home broker. This initiative ensures diversification and time saving in investments, also protecting investors from cognitive biases and human failures.
●Open Banking: We have started to provide the “Open Finance” service to our customers, which allows them to authorize the sharing of their financial data to other financial institutions. This enables us to understand customers’ profiles better, so we can offer personalized products, services, and other benefits, such as increases in credit card limits and competitive banking fees. Customers can also concentrate the management of their finances in a single place, and they will soon be able to manage all their accounts from other banking institutions (e.g., balance and statement checking, making payments and investments) by means of our digital channels. We have also implemented resources and mechanisms to ensure data privacy and security to conform to government regulations.
 89
Table of Contents
●Security: Aiming to provide our customers with a streamlined digital experience, we have offered authentication via facial recognition, eliminating the need to authorize mobile devices at an ATM in order to use all the features of our digital channels. The new security system recognizes the customer with the use of artificial intelligence, including legitimacy checks through advanced Machine and Deep Learning models developed internally, ensuring proof of life and facial verification. Customers only need to register face biometrics when opening an account and afterwards in their mobile application, which grants our customers with a more digital and secure experience.
●Individual Bank Account (Mobile): We have added new resources and features in order to provide a better experience for our customers. Regarding customer service, we provide the DialMyApp service. When the customers access our call center, they are guided to online services (App, Website and Virtual Assistant) through a graphic menu displayed on his cell phone concurrently with the phone call they have placed, which improves engagement and reduces customer service costs. With respect to foreign exchange, we have included a new feature for uploading documents through the OnePay service, optimizing the time of carrying out exchange transactions, in addition to improvements in exchange rates checking for the main currencies. With respect to investments, we have offered our customers a new feature to monitor and analyze the evolution of their investment portfolio for a given period of time by means of the Investment Profitability Chart (GRENT).
●Corporate Bank Account (Mobile): In order to ensure greater support to our corporate customers, we offer new assistance service channels, such as our AI virtual assistant, as well as direct contact with one of our managers in our corporate mobile App. This service also includes a feature that enables our customers to contract our business management system (Santander CoPilot), by means of which they can control their business sales and inventory. Moreover, the Open Banking feature gives customers an opportunity to share their company data, which ensures a better understanding of their business profiles.
●Credit Cards: In the context of the COVID-19 pandemic, we have expanded the digitalization of our card transactional services, enabling customers to self-serve through digital channels for acquisition and post-sales purposes, such as invoice checking via WhatsApp. Another disruptive initiative is the generation of the online card before the physical card, allowing customers to make their purchases in e-commerce and also by cell phone approximation before they receive their physical card by mail.
●Customer Service: Combining entrepreneurship, technology and focus on customer experience, we developed a Voice Analytics solution to scale our capabilities of listening to our customers by means of the use of machine learning, Graphics Processing Units (GPU) and cloud computing, which accelerates our deliveries and adds value to our shareholders. Currently, we have already studied and addressed the needs of our customers going through credit recovery processes and with reduced investments.
●Software Development Agility: We have transformed our software deployment process through the adoption of a new solution focused on the integration of software development lifecycle tools, providing greater autonomy to the development teams, in addition to ensuring production environment stability through automatic deploy and rollback processes without manual interventions (Zero Touch). As a result, our development teams are able to better meet customer needs, delivering new features with more assertiveness, speed and quality. In just nine months after the process was implemented, twice as many software deploys were made compared to the entire year of 2020.
●Cloud: In order to improve the availability and resilience of our main applications, we expanded the use of our computing capacity with two public cloud services providers, extended our on-premises datacenter network using these cloud providers, and created a full mesh connectivity model. Using this model, we have updated software applications to use cloud capabilities adopting an abstraction strategy for the providers’ Cloud products (for example: accessing products through open and common protocols), ensuring code standardization and reduction of lock-in (dependency on a single cloud provider technology implementation), in addition to the implementation of normal/peak/special day auto-scaling strategies and the creation of automated capacity to balance applications in multi-cloud service.

Communications and Marketing

We use and monitor several tools in order to communicate effectively with our customers. These include not only traditional media, such as television and printed media, but also the internet, mobile advertising and social networks.

 90
Table of Contents

We regularly provided information through all available media, seeking to make a real and positive difference in the lives of our clients. Such information includes guidance on what open finance is, i.e., an ecosystem that allows financial institution customers to share their information to other banks which enables banks to develop more tailored products. We publicized updated solutions, like Gent& and Algo+, an algorithm that helps investors to follow our monthly portfolio recommendations. Internally, we released more than 200 videos aimed at instructing our teams on how to best-serve our customers, and guidelines to prevent COVID-19 in the workplace. Externally, we ran 297 video advertisements on TV and social networks. Our communications campaign generated significant feedback, with 100,000 articles published in newspapers and magazines, and 120 stories featured in Brazilian national media outlets as well. On social media, we averaged 10 posts per day, with 2.6 million impressions. We have also joined new media formats on networks such as Telegram, WhatsApp and games. Additionally, we conducted more than 120 live broadcasts and events where our senior management, as well as experts and government officials were invited to address several topics, including the current economic scenario, social investment, sustainability, diversity, women’s leadership, entrepreneurship, and culture and entertainment, The Fourth Edition of Global Citizen, organized in collaboration with newspaper Valor Econômico and featuring Al Gore, the 2007 Nobel Peace Prize winner, received more than 935,338 views. Also, the 22nd Annual Santander Conference showed discussions on politics, sustainable businesses, health and technology, with the participation of major chief executive officers, public authorities and our leadership. The conference was broadcasted on YouTube, garnering a total of 7.1 million views.

Sustainability

In Brazil, sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through the Board of Directors, the Executive Committee and the Sustainability Executive Superintendents. The Sustainability Committee is responsible for providing clarification and recommendations to the Board of Directors regarding the development of sustainability-related guidelines.

Our sustainability strategy is based on three pillars: (i) strategic and efficient use of environmental resources, (ii) developing potential and (iii) resilient and inclusive economy. Our vision, based on these three pillars, is to contribute to a better society, while maintaining management excellence and responsibility, in accordance with our ethical values and using our technology to serve people and businesses.

Resilient and Inclusive Economy

Our broad commercial activity allows us to advise and support of our customers and projects. We believe we can play a role as facilitator and contribute to the generation of jobs and income, and the improvement of logistics and infrastructure for Brazil’s development.

Through this pillar, for example, we offer access to banking services, products and non-financial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the “Prospera Santander Microfinanças,” “Programa Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include the topic of financial management in the client's relationship with the Bank, using tools such as Santander On.

In 2021, we helped 341,000 people through financial inclusion products and financial education guidance.

Development of Potentials

Our commitment to the development of potential begins with our employees. We have ranked as one of the best companies to work for in the GPTW survey since 2016, ranking top ten in 2021. Guided by our corporate culture and internal policies, we offer opportunities that promote development and professional growth, in order to build a culture of delivering results, respect, innovation, inclusion and diversity.

We work to create a culture of respect, inclusion and equity, where everyone can develop their talents with their unique attributes. Diversity is one of the five principles of our Code of Ethical Conduct. Our priorities are gender and racial equity, inclusion of LGBTI+ and people with disabilities, as well as diversity of experience and generational diversity. Since 2018, we have set inclusion targets for black employees in the bank and female employees in leadership, which in 2021, were 27.3% and 31.4%, respectively. Additionally, in 2021, we received two diversity awards from GPTW: one for our ethnic-racial practices and another, for the fourth time, as one of the best companies for women to work.

Through the Santander Universities Program, we offer initiatives focused on granting national and international scholarships, programs for entrepreneurial development, as well as internship and employment programs.

 91
Table of Contents

As of December 31, 2021, about 33,000 scholarships and entrepreneurships were granted with a total investment of approximately R$33 million.

We maintained our actions to support society and continued with our private social investment strategy with our programs to support children, teenagers, the elderly and entrepreneurs.

●In the 19th edition of the Amigo de Valor Program, we raised R$19.8 million to support 100 initiatives throughout Brazil, benefiting over 12,400 people.
●Campanha Brasil sem Fome: we are responsible for the donation of 200,351 baskets of staple food.

Our initiatives, including Amigo de Valor, Parceiro do Idoso, Blood Donation Campaign and Volunteer Program, had an impact on 542,545 people in 2021.

Efficient and Strategic Use of Natural Resources

We are implementing changes to our business that contribute to a responsible and more efficient use of our national environmental resources, including with respect to a reduction in carbon emissions. In this sense, in addition to the responsible environmental management of our operations, we finance and advise companies in the fields of infrastructure and renewable energy, while also providing support for sustainable agribusiness.

In the year ended December 31, 2021, we have destined R$ 51.6 billion to foster sustainable businesses, 96% more than in the year ended December 31, 2020. We believe these operations are in line with market benchmarks and include the issuance of green bonds, advisory services to sanitation businesses and financing for renewable energy (such as CDC Solar). For instance, we have transformed the Vila Olímpia station, at the city ​​of São Paulo, into the first sustainable station in Brazil, increasing its efficiency in the use of natural resources on site. As a consequence of our investments, 70% of the energy now used by the station derives from solar panels and it has implemented a system to recycle its water usage.

One year after the launch of Plano Amazônia, a commitment signed by Santander Brasil, Bradesco and Itaú in connection with measures to enhance and scale up solutions that promote the sustainable regional development, we highlight the following initiatives from Santander Brasil:

●We made available over R$ 270 million in credit lines directed to cooperatives and agribusinesses in the Amazon region.
●We held the Bioeconomy in the Spotlight conference that has promoted a debate related to bioeconomy, preservation and sustainable development of the Amazon region, with market specialists and the CEOs of Santander, Bradesco and Itaú.
●We have been in contact with regional meatpacking companies to inform them about credit restrictions starting in 2025.
●In early 2021, we have announced our commitment to achieve zero net carbon emissions by 2050. The commitment applies to the Santander Group’s and also to Santander Brasil’s activities, as well as to all emissions from customers from any financial, advisory or investment service the bank offers.

Since 2002, we have adopted social and environmental parameters in the credit risk analysis for projects and companies. Our analyses seek to identify issues such as contaminated land, deforestation, labor practices in conditions analogous to slavery and child labor, among other matters that would prevent us from doing business with such projects and companies.

We have been carbon neutral since 2010, by completely offsetting our Scope 1 and 2 emissions. Since 2013, we follow a methodology for selecting projects from which to purchase Verified Emission Reductions, or “VERs,” in order to ensure the social and environmental benefits for the Amazon region. In recent years, we bought VERs from reforestation and renewable energy ventures.

In addition, we have made a commitment to supply 100% of our operations with renewable energy by 2025, establishing specific metrics for electricity, water, paper and internal renewable energy consumption. In the year ended December 31, 2021, 53% of our energy consumption came from renewable sources.

 92
Table of Contents

In 2021, we will renew our ISO 14,001 certification in our administrative buildings, including our headquarters, Campinas radar and data center, and we will also implement the Zero Landfill Program, with the objective of giving a more sustainable destination for our waste.

Socio-Environmental Responsibility Policy

Our Socio-Environmental Responsibility Policy, or “PRSA,” meets the requirements of CMN Resolution No. 4,327/14 and SARB Regulation 14 of FEBRABAN. These regulations define guidelines and consolidate specific policies for socio-environmental practices in business and relationships with certain parties. These practices include socio-environmental opportunities and impacts, and risk management such as suitability in granting and using credits, management of suppliers and socio-environmental risk analysis. We also have a PRSA Senior Group, which consists of our vice-presidents of Risks, Legal Issues, Corporate, Human Resources, Finance and Communication, Marketing, Institutional Relationships and Sustainability, and officers of Agribusiness and Compliance. This Group is involved in decision-making related to the PRSA and operates in connection with our Executive Committee.

On September 2021, the Brazilian Central Bank published the new CMN Resolution No. 4.945, which provides for the Social, Environmental and Climate Responsibility Policy (PRSAC) and the actions aimed at its effectiveness. As of July 1, 2022, the PRSA will be revoked and the PRSAC will come into effect.

Competition and Industry Transformation

Currently, there are five commercial financial institutions at the forefront of the Brazilian financial industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal, Together, these financial institutions accounted for 71.7% of the credit and 73.9% of the deposits available in Brazil as of September 30, 2021, according to the Brazilian Central Bank and the financial statements of the aforementioned banks,

The following table shows the total loans and deposits of the five leading financial institutions in Brazil at the dates indicated:

  Santander Brasil Bradesco Itaú
Unibanco		 Banco
do Brasil		 Caixa Econômica Federal Financial System
  September 2021 (R$ billion)
Total loans (1)  450.3   581.3   567.4   745.3   842.0   4,442.0 
Total deposits (1)  389.8   559.8   792.6   475.2   472.5   3,641.7 
                         
(1)According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 2021).

Insurance Coverage

We maintain insurance policies that are renewed annually in order to protect our assets. All of our branches, affiliates and administrative buildings are insured against losses caused by fire, lightning, explosions and other risks. Such coverage establishes reimbursement for the asset replacement value.

●In addition, we also maintain the following insurance policies:
●policies against material and/or bodily damage caused to third parties for which we are held responsible;
●policies against financial losses due to fraud or employee misconduct, among others;
●directors’ and officers’ insurance policy for our management against third-party complaints regarding management acts. There are insurance policies against crimes, employee dishonesty and damages arising out of public offerings; and
●policies against hacker attacks and cyber-crimes.
 93
Table of Contents

Dependence on Patents, Licenses, Contracts and Processes

The major trademarks we use, including, among others, the “Santander” trademark, are owned by Santander Investment Bank. Santander Brasil has a license to use this trademark. All trademarks of our business are registered or applied through the Brazilian Patent and Trademark Office (Instituto Nacional de Propriedade Industrial, or “INPI”), the agency responsible for registering trademarks, patents and designs in Brazil. After registration, the owner has exclusive rights to use of the trademark in Brazil for a 10-year period that can be successively renewed for equal periods.

As of the date of this annual report, we own a total of 568 trademarks in Brazil, with Santander Brasil owning over 117 of these trademarks, while the remaining are owned by other companies of the Santander Group.

REGULATION AND SUPERVISION

The basic institutional framework of the Brazilian financial system was established by Law 4,595/64, as amended from time to time, or the “Banking Reform Law.” The Banking Reform Law created the CMN, responsible for establishing the general guidelines of monetary, foreign currency and credit policies, as well as regulating the institutions of the financial system.

Principal Regulatory Agencies

CMN

The CMN oversees the Brazilian monetary, credit, budgetary, fiscal and public debt policies. The board resolution of January 14, 2014. the CMN is composed of the president of the Brazilian Central Bank, the Minister of Planning and the Minister of Finance, who also chairs the Board, Pursuant to the Banking Reform Law, the CMN is the highest regulatory entity within the Brazilian financial system, and is authorized to regulate the credit operations of Brazilian financial institutions, to regulate the Brazilian currency, to supervise Brazil’s gold reserves and foreign exchange, to determine Brazilian savings and investment policies and to regulate the Brazilian capital markets with the purpose of promoting the economic and social development of Brazil. In this regard, the CMN also oversees the activities of the Brazilian Central Bank and the CVM.

Brazilian Central Bank

The redemption wereBrazilian Central Bank is an autonomous authority responsible for the implementation of CMN policies related to foreign currency and credit, the regulation of Brazilian financial institutions, particularly in regards to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out with funds raisedby financial institutions and their financial information. The Brazilian Central Bank addresses specific issues through the Notes Offer.Monetary Policy Committee (COPOM), a committee responsible for adopting measures to meet inflation targets defined by the CMN and establishing monetary policy guidelines. In order to meet inflation targets, the COPOM must set the target for the SELIC rate (the average rate for daily financing, backed by federal instruments, as assessed under the SELIC) and publish reports on the Brazilian economic and financial environment and projections for the inflation rate.

CVM

The CVM is responsible for the implementation of CMN policies related to securities, with the purpose of regulating, developing, controlling and inspecting the securities market and its participants (companies with securities traded in the market, investment funds, investors, financial agents, such as custodians of instruments and securities, asset managers, independent auditors, consultants, as well as instruments and securities analysts).

Self-Regulating Entities

The Brazilian financial and capital markets are also subject to the regulation of self-regulating entities that are divided by field of activity. These self-regulating entities include, among others, the ANBIMA, the ABECS, the FEBRABAN, the Brazilian Association of Publicly-Held Companies – ABRASCA and the B3.

Principal Limitations and Obligations of Financial Institutions

In line with leading international standards of regulation, Brazilian financial institutions are subject to a series of limitations and obligations. In general, such limitations and obligations concern the offering of credit, the concentration of risk, investments, operating procedures, loans and other transactions in foreign currency, and the

 94
Table of Contents

administration of third-party funds and microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:

●No financial institution may operate in Brazil without the prior approval of the Brazilian Central Bank, In December 2017, the CMN enacted a new rule establishing that all such requests submitted to the Brazilian Central Bank must be approved within 12 months (subject to suspension of the term in some instances);
●A Brazilian financial institution may not hold direct or indirect equity interests in any company located in Brazil or abroad registered as permanent assets without prior approval of the Brazilian Central Bank. The corporate purpose of such company shall be complementary or subsidiary to the activities carried out by the financial institution;
●Brazilian financial institutions must submit for prior approval by the Brazilian Central Bank the corporate documents that govern their organization and operation, such as capital increases, transfer of headquarters, opening, transfer or closing of branches (whether in Brazil or abroad), election of the members of the statutory bodies and any corporate restructuring or alteration in the composition of their equity control. The requests for changes in control submitted to the Brazilian Central Bank must be approved within 12 months and requests for changes to organizational documents must be approved within three months (in both cases subject to suspension of the term in some instances);
●Brazilian financial institutions must fulfill minimum capital and compulsory deposit requirements and must comply with certain operational limits;
●A Brazilian financial institution may not own real estate, except for properties it occupies and subject to certain limitations imposed by the CMN. If a financial institution receives real estate, for example, in satisfaction of a debt, such property must be sold within one year, unless otherwise authorized by the Brazilian Central Bank;
●Brazilian financial institutions must comply with the principles of selectivity, guarantee, liquidity and risk diversification;
●A Brazilian financial institution belonging to the S1 segment, as is the case of Santander Brasil, cannot lend more than 25% of its Tier 1 Regulatory Capital (patrimônio de referência) to a single person or a group and the maximum exposure to concentrated individual customers or group of connected customers of such Segment 1 financial institution is 600% of its Tier 1 Regulatory Capital (a concentrated individual client would mean, for the purpose of the proposed rule, as any one client to which exposure is equal to or higher than 10% of its Tier 1 Regulatory Capital);
●According to the Banking Reform Law, a Brazilian financial institution cannot carry out credit transactions with (i) its controlling shareholders, directors and members of other statutory bodies (fiscal, advisory and other) and their respective spouses and relatives up to second degree, (ii) the individuals or legal entities that hold a qualified interest (15% of the capital stock) in their capital, (iii) the legal entities in which they have qualified interest (direct or indirect), (iv) the legal entities in which they have effective operational control or preponderance in the deliberations, regardless of the equity interest, and (v) the legal entities with common directors or members of the board of directors. Such prohibition does not apply, subject to limits and conditions established by the CMN through the enactment of Resolution No. 4,693 in October 2018, to: (i) transactions with a counterparty that has an officer or director in common with the financial institution providing credit, provided that the officer or director is considered an independent member in both entities; (ii) transactions carried out under market-compatible conditions, without additional benefits or different benefits when compared to the operations deferred to the institution to other customers with the same profile, (iii) credit operations that have as counterparty a financial institution that is part of the institution prudential conglomerate, provided that they contain contractual clauses of subordination, except in the case of overnight and loan transactions with other financial institutions specified by the law, (iv) the interbank deposits, according to the law, (v) the obligations assumed by related parties under the compensation and settlement services authorized by the Brazilian Central Bank or by the CVM and their respective counterparties, and (vi) other cases authorized by the CMN; the management of third-party assets must be segregated from other activities and must follow the regulations issued by the CVM;
 95
Table of Contents
●The total amount of funds applied in permanent assets of the financial institutions cannot exceed 50% of their adjusted stockholders’ equity;
●Brazilian financial institutions must comply with anti-money laundering, combating the financing of terrorism and anti-corruption regulations;
●Brazilian financial institutions must implement policies and internal procedures to control their systems of financial, operating and management of information, as well as their conformity to all applicable regulations;
●Brazilian financial institutions must implement a policy for remuneration of board members and executive officers that is compatible with their risk management policies; and
●The Banking Reform Law and specific regulations enacted by the CMN impose penalties on financial institutions in certain situations where applicable requirements, controls and requisites have not been observed. In addition, the Brazilian Central Bank may cancel the financial institution’s authorization to operate in certain situations. The cancellation of an authorization for operation of a financial institution may only occur upon the establishment and processing of the appropriate administrative proceeding by the Brazilian Central Bank.

Additionally, as part of the Santander Group and due to the global nature of our organization we are subject to related international rules.

Capital Adequacy and Leverage – Basel

Current Requirements

The Brazilian Central Bank supervises the Brazilian banking system in accordance with the Basel Committee on Banking Supervision, or “Basel Committee,” guidelines and other applicable regulations. For this purpose, banks provide the Brazilian Central Bank with any information which it deems useful in performing its supervisory functions, which includes supervising changes in solvency and capital adequacy of banks.

The main principle that guides the directives set forth in the Basel Committee is that a bank’s own resources must cover its principal risks, including credit risk, market risk and operational risk.

Brazilian financial institutions are subject to capital measurement and standards based on a risk weighted asset ratio. The parameters of this methodology resemble the international framework for minimum capital measurements adopted by Basel III.

Basel III

On December 16, 2010, the Basel Committee issued its Basel III framework, which was revised and republished on June 1, 2011. The Basel III framework increases minimum capital requirements, creates new conservation and countercyclical buffers, changes risk-based capital measures, and introduces a new leverage limit and new liquidity standards in comparison to the former framework. The rules were phased in gradually and were fully implemented by January 1, 2019. Regulatory Capital is composed by Core Capital and two additional tiers:

Tier I capital will have to reach a minimum ratio of 6.0% (according to the schedule established by the Brazilian Central Bank), divided into two portions: (i) Core Capital consisting mainly of corporate capital and profit reserves (shares, units of ownership, reserves and earned income) of at least 4.5%, and (ii) Additional Tier I consisting mainly of perpetual hybrid securities and capital instruments authorized by the Brazilian Central Bank (but excluding amounts relating to funding instruments issued by other local or foreign financial institutions) and any of our own shares purchased by us and the integration of which into the Additional Tier I Capital is permitted. To improve the quality of the capital of financial institutions, Basel III restricts the acceptance of financial instruments that fail to demonstrate effective capability of absorbing losses and requires the reduction of assets that in certain situations could jeopardize the financial institution’s capital value due to the instruments’ low liquidity, dependence on future profits for realization or difficulty of value measurement.

There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debt approved by the Brazilian Central Bank as additional capital requirements, or Tier II, are expected to be maintained if they also comply with requirements introduced by Basel III, including the mandatory conversion clauses into equity or write-off upon the occurrence of triggering events provided for in the regulations.

 96
Table of Contents

In accordance with the Basel III standards, the Brazilian Central Bank created the Additional Core Capital buffer (Adicional de Capital Principal), which is composed by the sum of three buffers:

●Core Capital Conservation buffer (Adicional de Capital Principal de Conservação), which was introduced to ensure that banks have an additional layer of usable capital that can be drawn down when losses are incurred. Whenever the buffer falls below 2.5%, automatic constraints on capital distribution (for example, dividends, share buybacks and discretionary bonus payments) will be imposed so that the buffer can be replenished. Countercyclical capital buffer (Adicional Contracíclico de Capital Principal), which aims to protect the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risks. The countercyclical capital buffer is fixed by the Financial Stability Committee (Comitê de Estabilidade Financeira) based on discussions about the pace of credit expansion, and currently is set zero (Brazilian Central Bank Communication No. 36,830/21). Should the requirement increase, the new percentage takes effect twelve months after the announcement,
●Core Capital Systemic buffer (Adicional de Importância Sistêmica de Capital Principal), which is applicable to the S1 bank segment (banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity).

On March 16, 2020, due to the challenging macroeconomic environment resulting from the COVID-19 pandemic, the Brazilian Central Bank issued Resolution No. 4,783 which establishes the percentage to be applied to the risk-weighted assets value for the purpose of calculating the capital conservation buffer. This percentage increases gradually until April 2022, when it reaches 2.5%.

This level will phase-in towards the 2019 level by 2022, as shown in the image below. This buffer change decreased the minimum Core Capital requirements, reaching 6.75% to 10.5%, as of December 31, 2021.

The Basel III rules also provide for the implementation of a leverage ratio calculated by dividing the Tier I capital by the bank’s total exposure. In early 2015, the Brazilian Central Bank issued a new regulation governing the calculation and reporting of the leverage ratio of Brazilian financial institutions in line with the Basel III rules, which became effective in October 2015. Financial institutions classified as segment 1 (S1), as is the case for Santander Brasil, or segment 2 (S2), for purposes of the application of prudential rules, are required to maintain a minimum RA of 3% as from January 1, 2018.

Additionally, in order to enable the implementation of the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No. 12,838, enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.

 97
Table of Contents

In 2015, the CMN and the Brazilian Central Bank also issued a set of rules for the implementation of the liquidity coverage ratio or “LCR,” a short-term liquidity index. The purpose of the LCR is to demonstrate that financial institutions have sufficient liquid assets to make it through a stress scenario lasting one month. According to these rules, the largest Brazilian banks were required to maintain an LCR of at least 60% since October 2015. This ratio increased 10% annually until it reached 100% in 2019. The Brazilian Central Bank also released, in 2015, the local methodology for calculating the LCR so as to align the existing rules with the guidelines of the document “Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools” issued by the Bank for International Settlements in January 2013. In January 2017, the Brazilian Central Bank enacted a new rule amending the calculation method and procedures for disclosure of LCR information. The new regulation establishes a new possible stress scenario and, for purposes of LCR retail, includes spot and forward deposits.

As mentioned above, the LCR is a short-term liquidity ratio for a 30-day stress scenario. It represents the ratio of high-quality liquidity assets to net outflows. High Quality Liquidity Assets are composed mainly of Brazilian federal government bonds and reserve requirement returns. Net Outflows are mainly composed of losses on deposits, offset in part by Inflows, which are mainly credits.

In November 2017, the CMN established a minimum limit for the Net Stable Funding Ratio (Índice de Liquidez de Longo Prazo, or “NSFR”) and the Leverage Ratio (Razão de Alavancagem, or “RA”) with which Brazilian financial institutions are required to comply. The NSFR corresponds to the ratio between the Available Stable Funds (Recursos Estáveis Disponíveis, or “ASF”) and the Required Stable Funds (Recursos Estáveis Requeridos, or “RSF”) of the financial institution. The financial institutions classified as “segment 1” for purposes of the application of prudential rules, as we are, must maintain, as from October 1, 2018, a minimum NSFR of 1.00. Regarding the leverage ratio, the financial institutions classified as “segment 1,” as we are, or “segment 2” for purposes of the application of prudential rules are required to maintain a minimum RA of 3% as from January 1, 2018.

Other Applicable Laws and Regulations

Consolidated Enterprise Level (conglomerado prudencial)

Financial institutions must submit to the Brazilian Central Bank, monthly and semiannually, consolidated financial statements based on the “consolidated enterprise level” (conglomerado prudencial) of which the financial institution is a member. Such information serves as the basis for calculation of the required Regulatory Capital of the Brazilian institutions. The “consolidated enterprise level” includes data relative to the financial institutions and other institutions authorized to operate by the Brazilian Central Bank, consortium administrators, payment institutions and credit factoring companies, including real estate credit, or of credit rights, such as mercantile foment companies, securitization companies and specific purpose companies, located in Brazil or abroad, as well as other legal entities headquartered in Brazil that have equity participation in the mentioned entities as their exclusive business purpose.

On January 29, 2020, the CMN published Resolution No. 4,818, which requires financial institutions categorized as S1, S2 and S3 to publish IFRS financial statements. The requirement is already in force for publicly held financial institutions and financial institutions which are leaders of a prudential conglomerate and came into effect for all remaining financial institutions on January 1, 2022.

New accounting criteria applicable to financial instruments, hedging and leasing agreements

On November 25, 2021 and December 16, 2021, the CMN issued Resolution No. 4,966/2021 and Resolution No. 4,975/2021. These rules establish, respectively, new accounting principles and criteria applicable to financial instruments, as well as to hedging and financial leasing transactions contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank.

The rules intend to align the accounting criteria applicable to financial instruments and leasing agreements contracted by financial institutions and other entities supervised by the Brazilian Central Bank with best international practices, including the “IFRS 9 – Financial Instruments” and “IFRS 16 – Leases” standards issued by the IASB.

 98
Table of Contents

CMN Resolution No. 4,966/2021 and Resolution No. 4,975/2021 will enter into effect on January 1, 2025, ensuring a transition period for the institutions subject to the changes.

Segmentation for the Proportional Application of Prudential Regulation

In January 2017, the CMN enacted a resolution establishing segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for the purposes of proportional application of the prudential regulation. The segmentation is based on the size, international activity and risk profile of members of each segment. Pursuant to the resolution, the segments are as follows:

●Segment 1 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base equivalent or superior to 10% of Brazil’s GDP; or (b) which perform relevant international activities, irrespective of the size of the institution;
●Segment 2 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base lower than 10% of Brazil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brazil’s GDP;
●Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brazil’s GDP;
●Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and
●Segment 5 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP, that apply a simplified optional method for verifying the regulatory capital’s minimum requirements, except for multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks.

We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.

Regulation of Risk and Capital Management Structure

The rules enacted by the CMN and the Brazilian Central Bank provide that risk management must be conducted through an integrated effort by the relevant entity (i.e., not only must risks be analyzed on an individual basis, but must also control and mitigate the adverse effects caused by the interaction between different risks). The rules set out different structures for risk and capital management, which are applicable for different risk profiles. This means that a financial institution of limited systemic importance can have a simplified structure of management, while institutions of larger complexity have to follow stricter protocols.

Compulsory Reserve Requirements

Currently, the Brazilian Central Bank imposes a series of compulsory reserves requirements. Financial institutions must deposit these reserves with the Brazilian Central Bank. The Brazilian Central Bank uses these reserve requirements as a mechanism to control the liquidity of the Brazilian financial system for both monetary policy and risk mitigation purposes. Reserves imposed on time deposits, demand deposits and saving accounts represent almost the entirety of the amount that must be deposited at the Brazilian Central Bank.

●Time Deposits (CDBs), The Brazilian Central Bank imposes a reserve requirement of 20% in relation to time deposits. Financial institutions must deposit an amount equivalent to the surplus of (i) R$3.6 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2.4 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1.2 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with a Regulatory Capital greater than R$15 billion.

Additionally, as from the issuing of Brazilian Central Bank Resolution No. 145 on September 24, 2021, collateral deposit for the new funding mechanism for financial institutions (called Linhas Financeiras de Liquidez) can be used to deduct up to three percentage points of this type of reserve requirements.

●Demand Deposits. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits.
 99
Table of Contents
●Savings Deposits. The Brazilian Central Bank imposes a reserve requirement of 20% in relation to general savings deposits and to rural savings deposits.

Asset Composition Requirements

Permanent assets (defined as property and equipment other than commercial leasing operations, unconsolidated investments and deferred charges) of Brazilian financial institutions may not exceed 50% of their adjusted net equity, calculated in accordance with the criteria established by the Brazilian Central Bank.

Brazilian financial institutions, as a general rule, may not have more than 25% of their Tier 1 Regulatory Capital allocated to credit and leasing transactions and guarantees extended to the same customer or group of customers acting jointly or representing the same economic interest. In addition, Brazilian financial institutions must comply with an exposure limit of 25% of their Regulatory Capital in connection with underwriting for or investments in securities of the same entity, its affiliates, or controlled or controlling companies. Repurchase transactions executed in Brazil are subject to operational capital limits based on the financial institution’s Regulatory Capital, as adjusted in accordance with Brazilian Central Bank regulations. A financial institution may carry out repurchase transactions in an amount of up to 30 times its Regulatory Capital. Within that limit, repurchase transactions involving private securities may not exceed five times the Regulatory Capital. Limits on repurchase transactions involving securities backed by Brazilian governmental authorities vary in accordance with the type of security involved in the transaction and the perceived risk of the issuer as determined by the Brazilian Central Bank.

The regulation issued by the Brazilian Central Bank with respect to the classification and valuation of securities and derivative financial instruments - including government securities - owned by financial institutions, based on the investment strategy of the financial institution, determined that securities and derivatives are to be classified into three categories: (i) trading; (ii) available for sale; and (iii) held to maturity.

“Trading” and “available for sale” securities are to be marked-to-market with effects in income and stockholders’ equity, respectively. Securities classified as “held to maturity” are recorded at amortized cost, Derivatives are marked-to-market and recorded as assets and liabilities in the balance sheet. Changes in the market value of derivatives are generally recognized in income with certain modifications, if these are designated as hedges and qualify for hedge accounting under the regulations issued by the Brazilian Central Bank. Securities and derivatives in the “held to maturity” portfolio may be hedged for accounting purposes but their increase or decrease in value as derived from the marked-to-market accounting method should not be taken into account.

On June 31, 2018, the CMN enacted a rule providing that financial institutions categorized as “Segment 1” as per the Brazilian Central Bank’s classification system established in 2017 (which is our case) (1) may not have more than 25.0% of their Regulatory Capital allocated to a single legal or natural person, and (2) that the total exposure of such financial institutions to one individual customer may not exceed 600% of their Regulatory Capital allocated to focused exposure, that is 10% of their Regulatory Capital – Tier 1. The rule also subjects financial institutions categorized as segment 2, segment 3 or segment 4 to less restrictive rules.

Centralized Registration and Deposit of Financial Assets and Securities

Law No. 13,476/17 consolidates the provisions on creation of liens over financial assets and securities, CMN Resolution No. 4,593/2017, as amended, regulates the registration and deposit of financial instruments and securities by financial institutions as well as the provision of custody services by such institutions.

Resolution 4,734/19 sets out the guidelines applicable to the establishment of liens and encumbrances on credit and debit payment instruments due to credit operations with financial institutions and regulates credit operations guaranteed by receivables from payment arrangements. The amount of receivables perfected into guarantees for a certain credit transaction will be reduced, whenever applicable, so that they are limited to the outstanding balance of the transaction or to the maximum limit extended, in the case of an extension of a non-dischargeable credit facility by a financial institution on an absolute and unilateral basis.

Circular 3,952/19, deals in particular with the procedures for the registration of receivables, and requires a convention between market infrastructures to guarantee the uniqueness of the receivables as financial assets that can be registered, interoperability, exchange of information between registration systems and participants in the structure. Circular 3,952/19 came into effect on June 7, 2021.

 100
Table of Contents

Brazilian Payment and Settlement System

The rules for the settlement of payments in Brazil are based on the guidelines adopted by the Bank of International Settlements, or “BIS,” and the current Brazilian Payment and Settlement System (Sistema de Pagamentos Brasileiro or the “SPB”). The Brazilian Central Bank and CVM (in relation to transactions with securities) have the power to regulate and supervise this system, SPB is composed of systems for the clearing of checks, clearing and settlement of debit and credit electronic orders, transfer of funds and other financial assets, clearing and settlement of transactions involving securities, clearing and settlement of transactions carried out in commodities and futures, and others, collectively designated as Financial Market Infrastructures, as well as the payment arrangements and payment institutions.

Within the scope of SPB, the Brazilian Central Bank operates the Reserves Transfer System, or “STR,” and the SELIC. STR is a system of transfer of funds with real-time gross settlement, which means that transfers are made at the processing time, one by one, and are subject to the existence of outstanding balance in the account. STR is composed of financial institutions, clearing and settlement houses and the National Treasury Office. SELIC is the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.

Instant Payment System

The Brazilian Central Bank also implemented an instant payment ecosystem in November 2020. The settlement of the system is centralized at the Brazilian Central Bank. In addition to increasing the speed at which payments or transfers are made and received, available 24 hours a day, seven days a week in all days of the year, the ecosystem has the potential to increase market competitiveness and efficiency; lower costs; and enhance customer experience.

On June 12, 2020, the Brazilian Central Bank issued Circular 4,027/20, which established the Brazilian Instant Payment System (Sistema de Pagamentos Instantâneos, or “SPI”). Circular 4,027/20 also approved the regulation with which the direct and indirect participants in the SPI must comply, and provided that the SPI started operating on November 3, 2020 with certain features and becoming available gradually until it was fully operational on November 16, 2020. Brazilian Central Bank Normative Ruling No. 47/20 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 129/21, in turn, establishes the procedures for the adherence to the instant payment arrangement (PIX).

According to the by-laws of the SPI, the participation in the SPI is mandatory for the participants of the PIX arrangement, and optional for (i) the clearing houses and other providers of clearing services, and (ii) the National Treasury Department.

There are two types of participation in the SPI: (i) direct, in which the participant holds an instant payment account and is directly connected to the SPI; and (ii) indirect, in which the participant institution does not hold an instant payment account and its participation occurs via a direct participant to the SPI, responsible for registering the indirect participant in the SPI and to act as its clearing agent in the SPI for instant payments, Circular 4,027/20 came into effect on July 1, 2020.

On August 12, 2020, the Brazilian Central Bank issued Central Bank Resolution No. 1, or “Central Bank Resolution 1/2020,” establishing the PIX System payment arrangement and approving the regulation governing it, or (the “PIX Regulation”).

Pursuant to Central Bank Resolution 1/2020, participation in the PIX System is mandatory for financial institutions and payment institutions authorized to operate by the Brazilian Central Bank that have more than 500,000 active customer accounts, considering cash deposit accounts, savings deposit accounts and prepaid payment accounts. Participation in the PIX System is optional for financial institutions and payment institutions that do not meet this threshold, as well as for the National Treasury Secretariat.

The PIX Regulation applies to all PIX System participants. According to the PIX Regulation, there are three types of participation: (i) transactional account provider, which is a financial institution or a payment institution that offers deposit accounts or payment accounts to end users; (ii) government entity, which is the National Treasury Secretariat, with the exclusive purpose of making collections and payments related to its activities; and (iii) special clearing houses, that are the financial institutions and payment institutions that (a) within the scope of the PIX System, have the exclusive purpose of providing settlement services to other participants, (b) meet the requirements to act as settlement participant in the Brazilian Central Bank’s SPI, and (c) do not meet the criteria of mandatory participation in the PIX System.

 101
Table of Contents

Brazilian Central Bank Resolution 1/2020 came into effect on September 1, 2020. PIX System transactions started operating on a restricted basis through to November 3, 2020 and was fully as of November 16, 2020.

Furthermore, on September 2, 2021, the Brazilian Central Bank issued Resolutions No. 135 and 136, which regulate the offering of the PIX Withdrawal and PIX Change services by regulated institutions that participate in the Brazilian Instant Payments System. Both rules came into effect on November 1, 2021. The new services were established by the Brazilian Central Bank on August 24, 2021, in a meeting of its Collegiate Board, which approved changes to the PIX Regulations.

PIX Withdrawal will allow all the clients of any participating institution to make a withdrawal in kind at one of the points that offer the service. Merchants, shared ATM networks and PIX participants, through their own ATMs, may offer the service. In order to withdraw funds in kind through PIX, the client simply executes a PIX transaction to the withdrawal agent, in a similar dynamic to a normal PIX transaction, by reading a QR Code or through the service provider's API.

With the PIX Change, the dynamic is almost identical. The difference is that the withdrawal of cash can be carried out during a purchase transaction with a merchant that offers PIX as a mean of payment. In this case, the PIX transaction is executed for the total amount (purchase + cash withdrawal). The customer's invoice will show the amount corresponding to the cash withdrawal and the purchase amount.

The offer of the two new products on PIX’s evolving agenda to users is optional, and the final decision to implement PIX Withdrawal and PIX Change is up to the merchants that accept PIX, the companies that own ATM networks, and the financial institutions that have their own ATMs.

Further, on September 23, 2021, the Brazilian Central Bank issued Resolution No. 142, introducing security measures to be adopted by institutions under its regulation and supervision to prevent frauds in the provision of payment services.

Resolution No. 142 establishes that financial and payment institutions must limit the provision of payment services for the period from 8 p.m. to 6 a.m. to a maximum of R$1,000 per deposit or prepaid payment account, as applicable. This limit may be increased at the client's request, which must be submitted formally through the relevant electronic service channels, but the institution must establish a minimum period of 24 hours for the change to take effect. Resolution No. 142 required payment service providers to implement the new transaction limit by October 4, 2021.

Pursuant to Resolution No. 142, financial and payment institutions must also implement, by November 16, 2021: (i) procedures aimed at evaluating the customer prior to offering the anticipation of the settlement of payment receivables on the same date of the execution of a payment transaction within the scope of payment schemes in which the institutions participate; and (ii) daily registration of the occurrence of fraud or attempted fraud in the rendering of payment services, including the corrective measures adopted by the institution. Based on these records, the institutions must prepare a monthly report consolidating the occurrences and the preventive and corrective measures adopted. This report must be forwarded to the institution audit and risk committees (if instituted), internal audit unit, Executive Board and Board of Directors (if instituted).

Furthermore, on September 28, 2021, the Brazilian Central Bank issued Resolution No. 147, which established security mechanisms specific to PIX transactions. The rule also details, within the scope of PIX, the measures established by Resolution No. 142, which applies to all electronic payment methods (including other types of electronic transfers available in Brazil, such as Transferência Eletrônica Disponível – TED or Documento de Ordem de Crédito – DOC). The security measures came into effect on November 16, 2021, with the exception of the new transaction limits, which came into effect on October 4, 2021.

Open Banking Regulation in Brazil

On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open banking. Open banking consists of the sharing of data and payment initiation services and forwarding credit transaction proposals, by financial institutions and other authorized entities (with customers permission) and the integration of information systems.

 102
Table of Contents

Among other topics, the resolution sets forth the mandatory and voluntary participating institutions, the data and services covered, the requirements for sharing, the responsibilities for sharing, the implementation schedule and the form of agreement to be entered into by the participating institutions.

According to the resolution, financial institutions and prudential conglomerates belonging to the S1 and S2 segments, as is our case, are required to participate in open banking.

Open banking has a four-stage implementation plan, as follows:

●Stage 1 (completed on February 1, 2021): public access to participating institutions’ data on their access channels and product/service channels related to checking, savings, prepaid payment accounts and to lending transactions.
●Stage 2 (completed on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
●Stage 3 (completed October 29, 2021): start of PIX transactions by payment transaction initiators, as well as the gradual entry of other payment arrangements.
●Stage 4 (starting on December 15, 2021): sharing of customer transactional data related to additional products, pursuant to the following deadlines: (i) insurance, open-end private pension and capitalization products: until March 4, 2022; (ii) merchant acquiring services: until March 11, 2022; (iii) foreign exchange transactions: until March 18, 2022; and (iv) time deposit accounts and other investment products: until March 25, 2022.

On October 29, 2020, the Brazilian Central Bank issued Central Bank Resolution 32/2020, which sets forth the technical and operational requirements to be observed by institutions which participate in the Brazilian Open Banking System.

The new rule lays out, among others, rules relating to (i) the scope of the data and services to be shared by participating institutions within Open Banking, detailed in a specific manual; (ii) the standards for the development of application programming interfaces (APIs) by participating institutions, detailed in a specific manual, which deals with their design, data transmission protocols, data exchange formats, control accesses, version control systems and specification parameters; among other things; (iii) criteria for registration and cancellation of registration in Open Banking; (iv) services to be rendered by the Open Banking Governance Structure, which also is detailed in a specific manual, including the maintenance of a repository of participating institutions and a website containing updated information about Open Banking and its implementation; and (v) minimal security standards and certifications.

Additionally, on September 9, 2021, the Brazilian Central Bank published Resolution No. 138, which disclosed the minimum scope of data to be available for sharing on Stage 4 of Open Banking, to be further detailed by the Open Banking Governance Body. The fourth stage of the ecosystem, which covers data on foreign exchange, investment, insurance, and open-end private pension transactions, as well as merchant acquiring services, began on December 15, 2021, when the participating institutions must make the information about the mentioned products and services available to other financial institutions.

Regarding investment transactions, the main financial and capital market products offered in Brazil were included in the scope of Stage 4, such as: (i) Banking Time Deposit Certificates (Certificados de Depósito Bancário or CDBs); (ii) Banking Time Deposit Receipts (Recibos de Depósito Bancário or RDBs); (iii) Real Estate Credit Bills (Letras de Crédito Imobiliário or LCIs); (iv) Agribusiness Credit Bills (Letras de Crédito do Agronegócio or LCAs); (v) investment fund quotas; (vi) direct treasury government bonds (títulos do tesouro direto); (vii) stock; (viii) quotas of exchange-traded investment funds (ETFs); (ix) debentures; (x) Certificates of Real Estate Receivables (Certificados de Recebíveis Imobiliários or CRIs); and (xi) Certificates of Agribusiness Receivables (Certificados de Recebíveis do Agronegócio or CRAs).

With regard to foreign exchange transactions, effective total value of transactions (VET) and commercial exchange rates will need to be made available. The data referring to merchant acquiring services will cover applied service fees and rates.

 103
Table of Contents

Finally, the data referring to insurance products and pension plans will follow the scope defined by the CNSP and the SUSEP in CNSP Resolution No. 415/2021 and SUSEP Circular No. 635/2021, respectively, which establish a specific timeline for the implementation of Open Insurance, an exclusive governance body responsible for Open Insurance, as well as specific implementation manuals.

Stage 4 of Open Banking introduced information sharing beyond traditional banking products and services, marking the beginning of the migration from Open Banking to Open Finance in Brazil.

Regulatory Sandbox

On November 28, 2019, the Brazilian Central Bank published Public Consultation No. 72/2019, which ended on January 31, 2020, regarding the Controlled Testing Environment for Financial Innovations or “Sandbox” which is intended to enable institutions test innovative financial and payment projects for a specified period.

After receiving comments on such Public Consultation, the CMN and the Brazilian Central Bank issued, on November 26, 2020, CMN Resolution 4,865/20 and BCB Resolution 29/20, to regulate the Sandbox. These rules set forth the applicable conditions for the implementation of the Sandbox, among which are the specific rules for the first cycle of tests, such as duration and number of participants, required documentation, criteria for the classification of institutions and the schedule for registration, selection and authorization processes of such entities. In November 2021, the Brazilian Central Bank selected developers’ projects for the first cycle, which will last for one year and may be extended for another year.

Treatment of Overdue Debts

The Brazilian Central Bank requires financial institutions to classify credit transactions in accordance with their level of credit risk and to make provisions according to the level attributed to each transaction. Such credit classifications shall be determined in accordance with criteria set forth from time to time by the Brazilian Central Bank, relating to the conditions of the debtor and the guarantor and the transaction terms. Where there are several credit transactions involving the same customer, economic group or group of companies, the credit risk must be determined by analyzing the particular credit transaction of such customer or group that represents the greatest credit risk to the financial institution.

Credit transactions of up to R$50,000 may be classified either by the financial institution’s own evaluation method or according to the number of days such transaction is past due, whichever is the more stringent. Credit classifications are required to be reviewed (i) monthly, in the event of a delay in the payment of any installment of principal or interest, in accordance with the maximum risk classifications; (ii) every six months, in the case of transactions involving the same customer, economic group or group of companies, the amount of which exceeds 5% of the adjusted net worth of the financial institution in question; and (iii) once every 12 months, in all circumstances, except in the case of credit transactions with a customer whose total liability is lower than R$50,000, the classification of which may be reviewed as provided above. Such R$50,000 limit may be amended by the Brazilian Central Bank from time to time.

The provisions set forth above are not applicable to our IFRS consolidated financial statements, which are based on the criteria described under “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment Losses on Financial Assets.”

Regulation of the Transfer of Customer Data by Financial Institutions to Database Managers

Brazilian law regulates the formation and consultation of databases with information regarding performance, individuals or legal entities, for the formation of credit history, Resolution No. 4,737 determines that the history of the following operations should be provided: (i) credit operations; (ii) leasing operations; (iii) self-financing operations executed upon consortium groups; and (iv) other operations with characteristics of credit granting; and defines the criteria for the registration of database managers, such as the identification of the natural and legal persons that are part of the control group of the database manager.

Collection of Bank Fees

Bank services to individuals are divided into the following four groups: (i) essential services; (ii) priority services; (iii) special services; and (iv) specific or differentiated services.

Banks are not able to collect fees in exchange for supplying essential services to individuals with regard to checking accounts, such as (i) supplying a debit card; (ii) supplying 10 checks per month to account holders who meet the requirements to use checks, as per the applicable rules; (iii) supplying a second debit card (except in cases of loss, theft, damage and other reasons not caused by the bank); (iv) up to four withdrawals per month, which can be made at a branch of the bank, using checks or in ATM terminals; (v) supplying up to two statements describing the transactions during the month, to be obtained through ATM terminals; (vi) inquiries over the internet; (vii) up to two transfers of funds between accounts held by the same bank, per month, at a branch, through ATM terminals or over the internet; (viii) clearing checks; and (ix) supplying a consolidated statement describing, on a month-by-month basis, the fees charged over the preceding year with regard to checking accounts and savings accounts.

 104
Table of Contents

Certain services rendered to individuals with regard to savings accounts also fall under the category of essential services and therefore are exempt from the payment of fees. CMN prohibits banks from charging fees for supplying essential services in connection with deposit and savings accounts where customers agree to access and use their accounts by electronic means only (being authorized to charge fees for supplying essential services only when the customer voluntarily elects to obtain personal service at the banks’ branches or customer service locations),

Priority services are those rendered to individuals with regard to checking accounts, transfers of funds, credit transactions, leasing, standard credit cards, over-the-counter exchange transactions for the purchase or sale of foreign currency in respect of international travel, and records, and are subject to the collection of fees by the financial institutions only if the service and its nomenclature are listed in its regulations. Commercial banks must also offer to their individual customers a “standardized package” of priority services, whose content is defined, as well as the customers’ option to acquire individual services instead of adhering to the package.

The collection of fees in exchange for the supply of special services (including, among others, services relating to rural credit, currency exchange market and on lending of funds from the real estate financial system) is governed by the specific provisions found in the laws and regulations relating to such services. The regulation authorizes financial institutions to charge fees for the performance of specific services, provided either that the account holder or user is informed of the conditions for use and payment or that the fee and charging method are defined in the contract.

It is worth pointing out: (i) the prohibition against charging fees in cases of adhesion contract amendments, except in the cases of asset replacement in leasing transactions, early liquidation or amortization, cancellation or termination; (ii) the prohibition against including services related to credit cards and other services not subject to fees in service packages that include priority, special and/or differentiated services; (iii) the requirement that subscription to service packages must be through a separate contract; (iv) the requirement that information given to the customer with respect to a service package must include the value of each service included in the package, the number of times that each service may be utilized per month, and the total price of the package; (v) the requirement that a customer’s annual banking statement must separately identify default interest, penalties and other costs charged on loans and leasing transactions; (vi) the requirement that registration fees cannot be cumulatively charged; and (vii) the requirement that overdraft fees can be charged, at most, once over the course of 30 days.

In addition, CMN regulations establish that all debits related to the collection of fees must be charged to a bank account only if there are sufficient funds to cover such debits in such account and thus forbid overdrafts caused by the collection of banking fees. Furthermore, a minimum of 30 days’ notice must precede any increase or creation of fees (except if related to credit card services, when a minimum of 45 days’ notice is required), while fees related to priority services and the “standardized package” can be increased only after 180 days from the date of the last increase (except if related to credit card services, when a minimum of 365 days’ notice is required) whereas reductions can take place at any time.

Late Payment Fees

The default payment fees charged by financial institutions, consumer credit companies (financeiras), and leasing companies are expressly limited to compensatory interest per day on the amount that is overdue, interest on arrears and fines on arrears.

Credit Cards

The banking regulations also have specific rules relative to the charging of credit card fees, the publication of information in the card invoices and the obligation to provide a package of basic services upon offering credit cards to customers.

 105
Table of Contents

Revolving credit for financings of credit card bills may only be extended to customers until the due date of the following credit card bill. After this term, financial institutions offer customers another product with conditions more favorable than the ones typically found in the credit card market. Banks are prohibited from offering this type of credit to customers who have already contracted one revolving credit for financing of credit card bills which were not repaid in a timely manner.

Payment Agents and Payment Arrangements

The regulation issued by the Brazilian Central Bank, determines, among other aspects: (i) consumer protection, anti-money laundering compliance and risk prevention systems that should be observed by payment agents and payment arrangers; (ii) the procedures for incorporation, organization, authorization and operation of payment agents, as well as transfer of shareholding control, subject to the Brazilian Central Bank’s prior approval; (iii) capital requirements; (iv) definition of arrangements excluded from the SPB; and (v) rules related to payment accounts, which are divided into prepaid and postpaid accounts and require the allocation of the totality of their balance to a special account at the Brazilian Central Bank or investment in government bonds.

Portability of Credit Transactions

Financial institutions’ customers can transfer their credit transactions from one institution to another. Such transfers must comply with the specific rules established by the Brazilian Central Bank, including, among others, the requirement that the amount and term of the transaction in the receiving financial institution must not be higher than the amount due and term of the original transaction.

Digitalization of Documents and Record Keeping

Financial institutions and other institutions authorized to operate by the Brazilian Central Bank may keep in their records digital documents instead of physical documents, provided that certain requirements to ensure the documents’ authenticity and validity are met.

Anti-Money Laundering Regulations

Under the Brazilian Anti-Money Laundering Law, it is a crime to conceal or dissimulate the nature, origin, location, availability, transaction or ownership of assets, rights or amounts resulting, directly or indirectly, from any criminal offense, as well as their use in economic or financial activity and to participate in a group, association or office while being aware that its principal or secondary activities are directed toward the practice of such acts.

The Brazilian Anti-Money Laundering Law also created the Financial Activities Control Council (Conselho de Controle de Atividades Financeiras or “COAF”), which operates under the jurisdiction of the Ministry of Finance. The purpose of the COAF is to investigate, examine, identify and impose administrative sanctions in respect of any suspicious occurrences of illicit activities related to money laundering in Brazil.

The COAF is composed of individuals with recognized competence in this area, appointed by the Minister of Finance, all of whom are nominated by each of the following entities: (i) the Brazilian Central Bank; (ii) the CVM; (iii) the SUSEP; (iv) the Brazilian Treasury Attorney-General’s Office; (v) the Brazilian Federal Revenue; (vi) the Federal Intelligence Agency; (vii) the Ministry of Foreign Affairs; (viii) the Ministry of Justice; (ix) the Federal Police Department; (x) the Ministry of Social Security; and (xi) the General Comptroller’s Office, one of whom will be the president, which shall be appointed by the President of Brazil on the basis of recommendations by the Minister of Finance.

Financial institutions must maintain specific records of (i) the transactions in cash (deposit, withdrawal, withdrawal by means of a prepaid card or request of provision for withdrawal) so as to enable the identification of a deposit in cash, withdrawal in cash, withdrawal in cash by means of a prepaid card, or request of provision for withdrawal, of (a) an amount equal to or greater than R$100,000.00 or (b) that presents evidence of concealment or dissimulation of the nature, of the origin, of the location, of the disposal, of the movement or of the ownership of assets, rights and valuables; and (ii) the issuances of cashier’s checks, funds electronic transfers (TED) or of any other instrument of transfer of funds upon payment in cash, for an amount equal to or greater than R$100,000.00.

Financial institutions must maintain records of all operations, products and services contracted, including withdrawals, deposits, contributions, payments, receipts and transfers of funds. Additionally, the institutions must also keep specific records of (i) transactions in cash with an individual value greater than R$2,000.00; (ii) deposit or cash transactions of an individual value equal to or greater than R$50,000.00; and (iii) withdrawal transactions, including those carried out by check or money order, with an individual value equal to or greater than R$50,000.00.

 106
Table of Contents

The regulations also impose an obligation on financial institutions to request that both customers and non-customers are providing a withdrawal request at least three working days in advance for withdrawals (including those carried out by check or money order) in an amount equal to or greater than R$50,000.00.

On January 23, 2020, the Brazilian Central Bank published Circular No. 3,978, which improves the regulation applicable to financial institutions, by expanding the adoption of a risk-based approach and came into effect on July 1, 2020. Regulated institutions must carry out specific internal risk assessments in order to identify and measure the risk of using their products and services in the practice of money laundering and terrorist funding.

In connection with the aforementioned change, the Know-Your-Client procedures were also improved and include the identification, qualification and classification of the customer, compatible with the risk profile, the nature of the relationship with the AML policy and the institution’s internal risk assessment, which must be permanently reassessed, according to the evolution of the business relationship and the risk profile of the client. The procedures must also include the verification of the client’s (including their representatives’, family members’ or close collaborators) condition as a Politically Exposed Individual, as well as consider them in the monitoring, selection and analysis of operations and situations with indications of suspected money laundering or terrorist funding.

On July 27, 2021, the Brazilian Central Bank published Resolution No. 119, which came into effect on September 1, 2021 and introduced certain changes to Circular No. 3,978/2020, which establishes the regulations and procedures related to anti-money laundering and combating the financing of terrorism applicable to entities subject to the Brazilian Central Bank´s regulation and supervision.

Among other changes brought by the new rule, financial institutions (and other entities regulated by the Brazilian Central Bank) are now required to obtain information about their customers’ place of residence, in the case of a natural person, or the location of the head office or branch, in the case of a legal entity, as part of their mandatory Know-Your-Client (KYC) procedure. The CVM also issued CVM Resolution No. 50 in August 31, 2021, which establishes the framework for the prevention of money laundering and the financing of terrorism in the Brazilian securities market. CVM Resolution No. 50 is in line with the practices currently implemented in the principal global securities markets, including with regard to the recommendations of the Financial Action Group against Money Laundering and the Financing of Terrorism (GAFI/FATF), as well as with the duties arising from Brazilian anti-money laundering laws.

Brazilian Anti-Corruption Law

Law No. 12,846/13 of August 1, 2013, or the “Brazilian Anti-Corruption Law” establishes that legal entities will have strict liability regardless of fault or willful misconduct for acts against the public administration carried out in their interest or for their benefit. The Law encompasses not only performance of acts of corruption but also performance of other injurious acts contrary to the Brazilian or foreign public administration.

Corporations that violate the Brazilian Anti-Corruption Law’s provisions will be subject to heavy penalties, some of which may be imposed through administrative proceedings and others solely through judicial channels. The Brazilian Anti-Corruption Law also creates a leniency program under which self-disclosure of violations and cooperation by corporations might result in the reduction of fines and other sanctions.

Politically Exposed Individuals

Financial institutions and other institutions authorized by the Brazilian Central Bank to operate must take certain actions and have certain controls in order to establish business relationships with and to follow up on the financial transactions of customers who are deemed to be politically exposed individuals (public agents and their immediate family members, spouses, life partners and stepchildren who occupy or have occupied a relevant public office or position over the past five years in Brazil or other countries, territories and foreign jurisdictions). The internal procedures developed and implemented for this purpose by financial institutions must be structured in such a way as to enable the identification of politically exposed individuals, as well as the origin of the funds involved in the transactions of such customers. One option is to verify the compatibility between the customer’s transactions and the net worth stated in such customer’s file.

 107
Table of Contents

Bank Secrecy

Brazilian financial and payment institutions shall also maintain the secrecy of their banking operations and services provided to their customers. The only circumstances in which information about customers, services or transactions of Brazilian financial and payment institutions may be disclosed to third parties are the following:

●the disclosure of information with the express consent of the interested parties;
●the exchange of information between financial institutions for record purposes;
●the supplying to credit reference agencies of information based on data from the records of issuers of bank checks drawn on accounts without sufficient funds and defaulting debtors; and
●the occurrence or suspicion that criminal or administrative illegal acts have been performed, in which case the financial institutions and the credit card companies may provide the pertinent authorities with information relating to such criminal acts when necessary for the investigation of such acts.

Complementary Law 105/01 also allows the Brazilian Central Bank or the CVM to exchange information with foreign governmental authorities, provided that a specific treaty has previously been executed.

The governments of Brazil and the United States executed an agreement on March 20, 2007, by means of which these governments established rules for the exchange of information relating to tax, or the “2007 Agreement.” Under the 2007 Agreement, the Brazilian tax authority would be able to send information it receives by virtue of Section 5 of the Bank Secrecy Law to the U.S. tax authority.

Data Protection Requirements

The LGPD (Lei Geral de Proteção de Dados) was published in the Federal Official Gazette on August 15, 2018 and was amended by Law 13,853/19. The LGPD came into effect in September 2020, except for administrative sanctions, which came into effect on August 1, 2021, pursuant to Law No. 14,010/20, which delayed the applicability of certain provisions of the LGPD.

Before the LGPD, Brazil lacked regulations specific to data privacy and a data protection authority. Despite this, privacy has been generally protected through the Brazilian Federal Constitution, the Civil Code (Law No. 10,406/2002), the Consumer Protection Code (Law No. 8,078/1990) and the Civil Rights Framework for the Internet (Law No. 12,965/2014 and the Decree 8,771/2016).

The LGPD brings about profound changes in the rules and regulations applicable to the processing of personal data, with a set of rules to be complied with in activities such as the collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons.

The LGPD has a wide range of applications and extends to individuals as well as private and public entities, regardless of the country where they are headquartered or where data are hosted, as long as (i) the data processing takes place in Brazil; (ii) the data processing activity is intended to offer or supply goods or services to, or to process data of individuals located in Brazil; or (iii) the subjects of the data are located in Brazil at the time their personal data are collected. The LGPD will apply irrespective of the industry or business when dealing with personal data and is not restricted to data processing activities performed through digital media and/or on the internet.

The LGPD sets out several rules related to data processing such as principles, requirements and duties imposed to data controllers and data processors; rights of data subjects; requirements in connection with cross-border transfers of data; the obligation to appoint a data protection officer; data security and data breach notification; corporate governance practices; and the regime for civil liabilities and penalties in case of a breach of the provisions of the LGPD. Penalties include warnings, blocking and erasure of data, public disclosure of the offense and fines of up to 2% of the economic group’s turnover in Brazil in the preceding year, capped at R$50 million per offense.

Moreover, Law 13,853/2019 created the Brazilian National Data Protection Authority, or “ANPD,” which will have powers and responsibilities analogous to the European data protection authorities, exercising a triple role of (i) investigation, comprising the power to issue norms and procedures, deliberate on the interpretation of the LGPD and request information of controllers and processors; (ii) enforcement, in cases of noncompliance with the law, through an administrative process; and (iii) education, with the responsibility to disseminate information about and foster knowledge of the LGPD and security measures, fostering standards for services and products that facilitate control of data, and elaborating studies on national and international practices for the protection of personal data and privacy, among others.

 108
Table of Contents

The ANPD has been assured technical independence, although it is subordinated to the Presidency of the Republic. It will be composed of five commissioners, to be appointed by the President of Brazil, and advised by a National Council for the Protection of Personal Data and Privacy, composed of 23 unpaid members.

Regulations on Cybersecurity

Financial institutions must follow certain cyber risk management and cloud outsourcing requirements which apply to the design and adaptation of internal controls, namely CMN Resolution No. 4,893/2021, which requires financial institutions to institute a Cybersecurity Policy, as well as regulates the outsourcing of relevant data processing and storage and cloud computing services and CVM Ruling No. 35/2021, which sets forth the standards and procedures to be observed in security transactions carried out in regulated securities markets requiring the implementation of cybersecurity controls and data protection. Policies and action plans to prevent and respond to cybersecurity incidents were fully compliant and in place by December 2021. Data location and processing may occur inside or outside Brazil, but access to data stored abroad must be granted at all times to the Brazilian Central Bank for inspection purposes. The contracting of relevant processing services must be communicated to the Brazilian Central Bank within 10 days from the execution of the agreement. See “Item 3. Key Information—D. Risk Factors— Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”

Auditing Requirements

The legislation and regulations issued by the CMN, CVM and B3 determine that the periodic financial statements of financial institutions must be audited by independent auditors (individuals or legal entities) that are registered with the CVM and who meet the minimum requirements set forth by the Brazilian Central Bank, and that the financial statements must be presented together with an independent auditor’s report. Our financial statements are audited in accordance with International Standards on Auditing with regard to Brazilian GAAP and also with the standards of the Public Company Accounting Oversight Board with regard to IFRS as issued by the IASB, as required by the SEC. For purposes of the financial statements prepared according to Brazilian GAAP, as from January 2017 all financial institutions and other institutions authorized to operate by the Brazilian Central Bank are required to create provisions for all losses related to financial guarantees issued by them. As a result of the auditing work, the independent auditor must prepare the following reports: (i) an audit report, issuing an opinion regarding the accounting statements and the respective explanatory notes, including regarding the compliance with financial regulations issued by the CMN and the Brazilian Central Bank; (ii) an internal control system quality and adequacy evaluation report, including regarding electronic data processing and risk management systems, evidencing any identified deficiencies; (iii) a legal and regulatory provisions noncompliance report, regarding those which have, or may have, material impacts on the financial statements or on the audited financial institution’s operations; (iv) a limited assurance report, analyzing our Annual and Sustainability Report pursuant to the guidelines and requirements of the Global Reporting Initiative, or “GRI”; and (v) any other reports required by the Brazilian Central Bank, CVM and B3. The reports issued by independent auditors must be available for consultation upon request by the overseeing authorities.

Independent auditors and the audit committee, individually or jointly, must formally notify the Brazilian Central Bank of the existence or evidence of error or fraud, within three business days of the identification of the respective occurrence, including:

●noncompliance with legal rules and regulations that place the continuity of the audited entity at risk;
●frauds of any amount perpetrated by the management of the institution;
●material frauds perpetrated by the institution’s employees or third parties; and
●errors that result in major incorrectness in the financial statements of the audited entity.

The executive office of the financial institution must inform the independent auditor and the audit committee, if any of the above situations occur.

 109
Table of Contents

CMN regulation also requires financial institutions and certain other entities holding Regulatory Capital equal to or greater than R$1 billion to create a corporate body designated as the “audit committee.” To obtain more information concerning the audit committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”

Internal Auditing of Financial Institutions

Financial institutions are required to establish and maintain internal audit activities compatible with their operational specifications, so that such internal bodies are able to perform an independent, autonomous and impartial audit of the quality and effectiveness of the institution’s internal systems. Such unit shall be directly controlled by the institution’s board of directors. Internal and external independent auditors are also liable for failures of the financial institution’s internal control mechanisms.

Environmental, Social and Governance (ESG) requirements applicable to financial institutions

Financial institutions are currently required by CMN Resolution No. 4,327/14 to have a responsibility policy, which must guide the social and environmental actions in conducting their businesses, their relationship with their customers and other users of their products and services. The responsibility policy must also guide the financial institution’s relationship with its personnel and with any others affected by the financial institution’s activities. In addition, the responsibility policy must provide for the management of social and environmental risks (which, according to the Brazilian Central Bank, represent one of the several categories of risk to which financial institutions are exposed).

Following Public Consultations Nos. 82, 85 and 86, initiated by the Brazilian Central Bank in 2021 under the “Sustainability” pillar of the “Agenda BC#” (which consists of a list of goals to improve the Brazilian National Financial System), a new set of rules was published on September 15, 2021. These new rules aim to improve the disclosure of information, management and governance of social, environmental and climate risks by financial institutions, as well as to bring changes to the rural credit regulations in effect.

Resolution No. 140 establishes new conditions for the access to rural credit considering social, environmental and climatic aspects. Among them, it stands out the credit restriction for a producer who is not registered, or whose registration is canceled, in the Rural Environmental Registry (Cadastro Ambiental Rural – CAR). The new resolution also sets forth that rural credit shall not be granted to (i) an enterprise fully or partially inserted in a conservation unit, indigenous land already approved, an area of embargo in force resulting from the economic use of illegally deforested areas in the Amazon; nor (ii) an individual or legal entity registered in the official register of employers who have kept workers in conditions analogous to slavery.

CMN issued Resolution No. 4,943, which amended CMN Resolution No. 4,557/17 with the purpose of highlighting and distinguishing social, environmental and climate risks, as necessary for the identification, measurement, evaluation, monitoring, reporting, control and mitigation in connection with the risk management structure of financial institutions. The new rule provides for specific definitions to such risks, using new and modern concepts, such as the inclusion of the two main components of climate risks – physical and of transition – already recognized by international ESG standards. The amended rule also deals with the identification and monitoring of social, environmental and climate risks incurred by financial institutions, resulting not only from their products, services and activities, but also from the activities performed by their counterparties, controlled entities, suppliers and outsourced service providers.

Similar provisions were also included in the simplified structure of continuous risk management pertaining to the Simplified Reference Capital (Patrimônio de Referência Simplificado – PRS5) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.

The CMN issued Resolution No. 4,945, replacing CMN Resolution No. 4,327 of April 25, 2014 on the Social and Environmental Responsibility Policy (Política de Responsabilidade Socioambiental or PRSA). The new rule provides for the inclusion of a climate aspect to the PRSA, which will be henceforth named Social, Environmental and Climatic Responsibility Policy (Política de Responsabilidade Social, Ambiental e Climática – PRSAC). Such new policy to be implemented by financial institutions shall take into account the impacts, strategic goals and business opportunities for the financial institutions in connection with social, environmental and climate aspects. There was also a reduction in the period for reviewing the PRSA, from five to three years.

The Brazilian Central Bank issued Resolution No. 139, regulating the preparation of a Report on Social, Environmental and Climate Risks and Opportunities (Relatório de Riscos e Oportunidades Sociais, Ambientais e

 110
Table of Contents

Climáticas, or the “GRSAC Report”) by financial institutions classified in segments S1 (such as Banco Santander), S2, S3 and S4. Following the propositions of the Public Consultation, this new rule seeks to contemplate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) at the national regulatory level. The GRSAC Report must be published annually with the base date of December 31, within a maximum period of 90 days from December 31, and must be made available on the financial institutions' websites for a period of five years.

Finally, on October 6, 2021, the Brazilian Central Bank published Resolution No. 151, which regulates the remittance information regarding social, environmental, and climate risks addressed in CMN Resolution No. 4,557 and CMN Resolution No. 4,945 to the Brazilian Central Bank by authorized institutions. The rule applies to institutions classified in segments S1 (such as Santander Brasil), S2, S3, or S4; and the information that must be sent to the Brazilian Central Bank is related to the assessment of social, environmental and climate risks related to their exposures in credit and securities transactions, as well as those of the respective debtors under these transactions. The information to be remitted includes identification, economic sector, risk aggravating and mitigating factors, appraisal of social, environmental and climactic risks, among others.

In order to allow financial institutions to adapt their practices and policies to this new set of rules, CMN Resolution No. 4,943/21 and article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) will enter into effect on July 1, 2022, while CMN Resolution No. 4,944/21, the other provisions of CMN Resolution No. 4,945/21 and Central Bank Resolution No. 139/21 will enter into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 will enter into effect on July 1, 2022 and Central Bank Resolution No. 140, which specifically provides for rural credit, came into effect on October 1, 2021.

Policy for Succession of Financial Institutions Managers

Brazilian financial institutions and other institutions authorized to operate by the Brazilian Central Bank shall implement and maintain internal policies for succession of managers, applicable to higher levels of the institution’s management. The internal policy shall encompass the procedures related to recruitment, promotion, appointment and retention of managers in accordance with the institution’s rules for identification, evaluation, training and selection of the candidates to management offices.

Corporate Governance of Financial Institutions

Financial institutions must (i) remit to the Brazilian Central Bank information on the financial institution’s management, controlling group and relevant shareholders, including the obligation to communicate to the regulator any information that may affect the reputation of any such persons; (ii) make available a communication channel allowing employees, contributors, customers, users, associates, or services providers to report anonymously situations indicating illegalities of any nature related to the institution; and (iii) have an internal body responsible for receiving the information and complying with the reporting obligations.

Compliance Policy

Financial institutions must implement and maintain a compliance policy compatible with the nature, size, complexity, structure, risk profile and business model of the institution, which is intended to ensure an effective compliance risk management by the institution and may be established at the consolidated enterprise level (conglomerado prudencial). The compliance policy must establish the scope and purpose of the compliance function in the institution, set forth the organizational structure of the compliance function, specify which personnel is allocated to the compliance function, and establish a segregation of roles among personnel in order to avoid conflicts of interest.

The compliance policy must be approved by the board of directors and the regulation also assigns to the board the responsibility to ensure the following: adequate management of the compliance policy throughout the institution, its effectiveness and continued application, its communication to all employees and services providers, as well as the dissemination of the integrity and ethical standards as part of the institution’s culture. The board of directors is also responsible for ensuring the application of measures in case of noncompliance, and for providing the necessary means for the activities related to the compliance functions to be adequately conducted.

Consumer Protection

Relationships between consumers and financial institutions are governed by Law 8,078, dated September 11, 1990, or the “Brazilian Consumer Protection Code,” which grants consumers certain rights and sets forth measures to be observed by suppliers, which must be complied with by financial institutions. The Brazilian Consumer Protection Code sets forth as consumer rights, among others, the assistance/facilitation in the defense of consumers’ rights, including through reverse burden of proof in their favor, and possibility of judicial review of contractual provisions deemed abusive.

 111
Table of Contents
●to timely provide the necessary information including rights, duties, responsibilities, costs or advantages, penalties and possible risks when carrying out a transaction or rendering a service to allow customers and users free choice and decision-making;
●to timely provide, to the customer or user, agreements, receipts, statements, advice and other documents related to the transactions and services, as well as the possibility of timely cancellation of the agreements;
●formalization of an adequate instrument setting forth the rights and obligations for opening, using and maintaining a postpaid payment account;
●to forward a payment instrument to the customers’ or users’ residence or to enable the respective instrument only upon express request or authorization; and
●identification of end users’ beneficiaries for payments or transfer in statements and bills of the payer, including in situations in which the payment service involves institutions participating in different payment arrangements.

Financial institutions operating exclusively via digital means are excluded from the scope of certain aspects of the regulation.

Law No. 14,181, which amends the Brazilian Consumer Protection Code and Senior Citizens' Statute (Law No. 10,741 of October 1, 2003) to improve provisions related to the offering of consumer credit and provide for the prevention and treatment of over-indebtedness, came into effect on July 2, 2021.

Regarding the prevention of over-indebtedness, such rule created a chapter in the Brazilian Consumer Protection Code dedicated to responsible credit and financial education. The amendments determine the presentation of specific information to the consumer in the granting of credit or installment sales, such as the effective monthly interest rate, late payment interest and the total charges foreseen in the event of late payment.

The new law also regulates informational conduct to be observed by the credit supplier regarding the nature and modality of the credit offered, considering the age of the consumer.

The law also included a new chapter in the Brazilian Consumer Protection Code dedicated to the conciliation between debtor and creditor with respect to over-indebtedness. According to the new law, the over-indebted consumer may request the initiation of a debt renegotiation process, with the consumer being responsible for submitting a payment plan proposal, preserving the existential minimum. The unjustified non-attendance of the creditor or his attorney at the conciliation hearing may suspend the payment of the credit, with the interruption of the late payment charges. In the case of a successful conciliation, the court decision that ratifies the agreement will describe the debt payment plan and will be enforceable. A new debt renegotiation request may only be submitted after two years, counting from the settlement of the obligations provided for in the payment plan. In the case of unsuccessful conciliation, the judge, at the consumer's request, will institute proceedings for over-indebtedness to review and integrate the contracts and renegotiate the remaining debts, through a compulsory judicial plan.

Further, on September 30, 2021, the CMN published Resolution No. 4,949. The rule provides the principles and procedures to be adopted in the relationship with clients and users of products and services of financial institutions and other institutions authorized to operate by the Brazilian Central Bank. On October 13, 2021, the Brazilian Central Bank published Resolution No. 155, which establishes almost identical principles and procedures to be adopted by payment institutions and consortium administrators, which are regulated and supervised solely by the Brazilian Central Bank.

 112
Table of Contents

CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 set forth new rules mainly with the goal of ensuring fair and equitable treatment at all stages of the relationship with institutions providing financial and payments services, as well as a convergence of the interests of such institutions with those of their consumers.

Under CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021, institutions authorized to operate by the Brazilian Central Bank shall prepare and implement an institutional policy for the relation with consumers and users. Such new policy should consolidate guidelines, strategic objectives and organizational values, so that the conduct of the institution’s activities is guided by the principles of ethics, responsibility, transparency and diligence.

CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 also provide that institutions authorized to operate by the Brazilian Central Bank and must indicate to such regulatory agency the officer responsible for complying with the obligations provided under the new rules.

The rules also impose other obligations to the regulated entities within their scope, such as the compliance with transparency and suitability rules. CMN Resolution No. 4,949 will enter into effect on March 1, 2022, and Central Bank Resolution No. 155 will enter into effect on October 10, 2022.

Policy for Relationship with Customers and Users of Financial Products and Services

Financial institutions and other institutions authorized to operate by the Brazilian Central Bank must have a policy governing the relationship with customers and users of financial products and services. In addition, such entities shall comply with the principles of ethics, liability, transparency and diligence promoting the convergence of interests and the consolidation of the institutional image of credibility, security and expertise.

Ombudsman

Financial institutions and other entities that are authorized to operate by the Brazilian Central Bank must have an ombudsman office. An ombudsman office has the following attributes according to the current regulation:

●to provide last resort assistance in connection with customer claims that have not been resolved through the conventional customer service channels (including the banking correspondents and the customer service assistance channel (Serviço de Atendimento ao Consumidor), or SAC); and
●to act as a communication channel between the financial institutions and their customers, including for dispute resolution.

Institutions that are part of a financial group are allowed to establish one ombudsman department to service the whole group. The officer in charge of the ombudsman office must prepare a report every six months, which must be provided to the management and auditing bodies. The reports and recordings of interactions of the ombudsman unit with consumers must be available to the Brazilian Central Bank for a period of at least five years.

Investment Funds Industry Regulation

Investment funds are subject to the regulation and supervision of the CMN and the CVM and, in certain specific matters, the Brazilian Central Bank. Investment funds may be managed by full-service banks, commercial banks, savings banks, investment banks, credit, financing and investment companies and brokerage and dealer companies within certain operational limits.

Investment funds may invest in any type of financial instrument available in the financial and capital markets, including, for example, fixed income instruments, stocks, debentures and derivative products, provided that, in addition to the denomination of the fund, a reference to the relevant type of fund is included.

Broker-Dealer Regulation

Broker and dealer firms are part of the national financial system and are subject to CMN, Brazilian Central Bank and CVM regulation and supervision. Brokerage firms must be chartered by the Brazilian Central Bank and are the only institutions in Brazil authorized to trade on stock exchanges. Both brokers and dealers may act as underwriters in the public placement of securities and engage in the brokerage of foreign currency in any exchange market.

 113
Table of Contents

Since August 29, 2019, securities brokers and dealers may loan their own securities to their customers as long as they use the funds as collateral for operations in which the institution itself intermediates. The loan transaction consists of the transfer of assets from the institution: (i) to the customer, in conjunction with the transfer of that asset to the clearinghouse or clearing and settlement service provider; or (ii) to the clearinghouse or clearing and settlement service provider on behalf of the customer through powers established in a formal written power of attorney. In either case, the assets or set of assets in question shall return to the positions originally held at the end of the period stipulated in the contract. To offer this new service, securities brokers and dealers must appoint a director responsible for the loan operations under consideration.

Since November 27, 2020, securities brokers and dealers may issue electronic currency and maintain payment accounts.

Foreign Exchange Market

Transactions involving the sale and purchase of foreign currency in Brazil may be conducted only by institutions duly authorized by the Brazilian Central Bank to operate in the foreign exchange market. There is no current limit to long or short positions in foreign currency for banks authorized to carry out transactions on the foreign exchange market. Other institutions within the national financial system are not allowed to have short positions in foreign currency, although there are no limits with respect to foreign exchange long positions.

The Brazilian Central Bank imposes a limit on the total exposure in foreign currency transactions and transactions subject to foreign exchange fluctuation undertaken by Brazilian financial institutions, including branches abroad, and their direct and indirect affiliates. The limit is currently equivalent to 30.0% of the financial institution’s Regulatory Capital (Patrimônio de Referência), on a consolidated basis. The CMN, the Brazilian Central Bank and the Brazilian government may change the regulation applicable to foreign currency and foreign exchange transactions undertaken by Brazilian financial institutions in accordance with Brazil’s economic policy (including its foreign exchange policy).

 

On December 18,20, 2021, the President of Brazil sanctioned Law No. 14,286, approved by the Brazilian Senate on December 8, 2021, or the “New Foreign Exchange Law.” The New Foreign Exchange Law, an initiative of the Brazilian Central Bank, overhauls the rules applicable to the Brazilian foreign exchange market and contains provisions regarding Brazilian capital abroad and foreign capital within Brazil. The initiative aims to modernize, simplify and reduce legal doubts associated with current Brazilian foreign exchange legislation.

The main aspects of the New Foreign Exchange Law are: (i) ratification, at the legal level, that foreign exchange transactions may be carried out freely (provided such transactions are carried out by entities authorized to operate in this market and subject to applicable rules); (ii) granting of broad powers to the CMN and the Brazilian Central Bank to regulate the foreign exchange market and foreign exchange operations; (iii) expansion of international correspondence activities by Brazilian banks; (iv) possibility of Brazilian financial institutions investing and lending abroad funds that have been raised in Brazil or abroad; (v) the exclusion from its scope of foreign currency purchase and sale operations of up to U.S.$500 carried out between individuals on an occasional and non-professional basis; and (vi) the granting of powers to the monetary authorities to establish situations in which the prohibition of the private offset of credits between residents and nonresidents, as well as payments in foreign currency in Brazil, would not apply.

Law No. 14,286 will enter into effect in one year from the date of its publication (which occurred on December 30, 2021).

Foreign Investment in Brazilian Financial Institutions

According to the Brazilian federal constitution, the acquisition of equity interests by foreign individuals or legal entities in the capital stock of Brazilian financial institutions is forbidden, unless permitted by bilateral international treaties or by the Brazilian government by means of a presidential decree. A presidential decree issued on November 13, 1997, issued in respect of Banco Meridional do Brasil S.A. (our legal predecessor) allows 100% foreign participation in our capital stock. Foreign investors may acquire the shares issued by Santander Brasil as a result of this decree. In addition, foreign investors may acquire publicly traded nonvoting shares of Brazilian financial institutions traded on a stock exchange or securities depositary receipts offered abroad representing shares without specific authorization.

Following the enactment of Decree No. 10,029, the Brazilian Central Bank published, on January 22, 2020, Circular No. 3,977 recognizing as an interest of the Brazilian government the foreign holding of equity or increase in equity interest of financial institutions headquartered in Brazil (which is still subject to the same requirements and procedures applicable to the acquisition of equity in any Brazilian financial institution), as well as the opening of local branches of foreign financial institutions. However, since Santander Brasil had already been granted a specific presidential decree authorizing the foreign interest in its share capital, prior to Decree 10,029/19 being issued it does not affect its operations in Brazil.

 114
Table of Contents

A foreign financial institution duly authorized to operate in Brazil through a branch or a subsidiary is subject to the same rules, regulations and requirements that are applicable to any Brazilian financial institution.

Bank Correspondents

Financial institutions are allowed to provide specific services to customers, including customer services, through other entities. These entities are called “bank correspondents” and the relationship between the financial institution and the bank correspondent is ruled by a specific regulation published by CMN and is subject to the supervision of the Brazilian Central Bank.

On July 29, 2021, the CMN published Resolution No. 4,935, which will revoke CMN Resolution No. 3,954, of February 24, 2011, changing the regulation of banking correspondents in Brazil. Banking correspondents are companies contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank to provide services to their contracting institutions.

The new rule determines that these institutions set forth a policy for the operation and hiring of their correspondents, and it should formalized by a specific document and approved by the institution’s board of officers or board of directors. This operation and contracting policy should provide for the criteria required for contracting correspondents, internal controls related to the correspondent and remuneration rules for the provision of services.

The contracting institutions will continue to be required to maintain adequate internal control systems in order to monitor the public service activities carried out by the contracted correspondents and the contracting institution’s internal audit must annually assess the effectiveness of these quality control mechanisms.

In addition, with the inclusion of the express possibility of the correspondents acting in a digital setting, some provisions were improved, highlighting the need for the correspondent’s digital platform itself to have a minimum technical qualification that allows the offering of products and services suited to the needs, interests and goals of the contracting institution’s clients.

CMN Resolution 4,935 came into effect on February 1, 2022.

Regulation of Branches

Authorization by the Brazilian Central Bank is required for operations of branches or subsidiaries of Brazilian financial institutions, upon the compliance with certain term, capital and equity requirements, as well as the submission of an economic and financial feasibility analysis.

The Brazilian Central Bank’s prior authorization is also required in order to: (i) allocate new funds to branches or subsidiaries abroad; (ii) subscribe capital increases, directly or indirectly, in subsidiaries abroad; (iii) increase equity participation, directly or indirectly, in subsidiaries abroad; and/or (iv) merge or spin off, directly or indirectly, subsidiaries abroad.

The Brazilian Central Bank determines that financial institutions can install the following establishments in Brazil: (i) branches, (ii) teller booths, (iii) automatic teller machines, and (iv) segregated administrative units, provided that, for items (i) to (iii), conformity with requirements of minimum capital and operating limits are necessary.

Cayman Islands Banking Regulation

We have a branch in the Cayman Islands with its own staff and representative officers, Banco Santander (Brasil) S.A. – Grand Cayman Branch is licensed under The Banks and Trust Companies Law (2013 Revision) of the Cayman Islands, or the “Banks and Trust Companies Law,” as a Category “B” Bank and it is duly registered as a Foreign Company with the Registrar of Companies in the Cayman Islands. The branch, therefore, is duly authorized to carry on banking business in the Cayman Islands. The branch was authorized by the local authorities to act as its own registered office and it is located at the Waterfront Centre Building, 28, North Church Street – 2nd floor, George Town, Grand Cayman, Cayman Islands, P.O. Box 10444 – KYI-1004, Phone: 1-345-769-4401 and Fax: 1-345-769-4601.

 115
Table of Contents

Our Grand Cayman Branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions with Brazil. The results of the operations of the Grand Cayman Branch are consolidated in our consolidated financial statements.

Banks and trust companies wishing to conduct business from within the Cayman Islands must be licensed by the Cayman Islands Monetary Authority under the Banks and Trust Companies Law, irrespective of whether the business is to be actually conducted in the Cayman Islands.

Under the Banks and Trust Companies Law, there are two main categories of banking license: a category “A” license, which permits unrestricted domestic and offshore banking business, and a category “B” license, which permits principally offshore banking business. The holder of a category “B” license may have an office in the Cayman Islands and conduct business with other licensees and offshore companies but, except in limited circumstances, may not do banking business locally with the public or residents of the Cayman Islands. We have an unrestricted category “B” license.

There are no specific ratio or liquidity requirements under the Banks and Trust Companies Law, but the Cayman Islands Monetary Authority will expect observance of prudent banking practices, and the Banks and Trust Companies Law imposes a minimum net worth requirement of an amount equal to CI$400,000 (or, in the case of licensees holding a restricted category “B” or a restricted trust license, CI$20,000). As of December 31, 2020, CI$1 was equivalent to R$6.68, according to the Brazilian Central Bank.

Luxembourg Banking Regulation

Branches of credit institutions from outside the European Union (“non-EU credit institutions”) must be licensed by the Luxembourg Minister of Finance under the law of 5 April 1993 on the financial sector, as amended, in order to operate in Luxembourg.

We have a branch in Luxembourg with its own staff and representative officers. Our Luxembourg branch is licensed as a Luxembourg branch of a non-EU credit institution and is duly registered with the Luxembourg Trade and Companies’ Registry. The branch, therefore, is duly authorized to carry on banking business in Luxembourg. Its registered offices are at 35F, avenue J. F. Kennedy, 2nd floor, L-1855 Luxembourg, Grand Duchy of Luxembourg.

Our Luxembourg branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions involving Brazil. The results of the operations of the Luxembourg branch are consolidated in our consolidated financial statements.

Luxembourg law requires the Luxembourg branch to have a minimum endowment capital of €8,700,000 and the solvency, and liquidity requirements deriving, among others, from EU Regulation No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms apply to it.

Foreign Subsidiary

We had established an independent subsidiary in Spain, Santander EFC, in order to complement our foreign trade strategy for corporate customers, which are composed of large Brazilian companies and their operations abroad. This has allowed us to provide financial products and services by means of an offshore entity, which is not established in a “tax haven,” such as our Cayman Islands branch, in accordance with Law No. 12,249, of June 11, 2010, and Brazilian Federal Revenue Normative Ruling No. 1,037, of June 4, 2010.

The establishment of our foreign subsidiary was approved by the Brazilian Central Bank on September 26, 2011, by the Spanish Ministerio de Economia y Hacienda on February 6, 2012 and by the Bank of Spain on March 28, 2012. The remittance of resources to pay up the share capital of the subsidiary was carried out on March 5, 2012, totaling €748 million, Santander EFC was operational from 2012 to November 12, 2020, when we approved its liquidation. As a consequence of the liquidation, we, as sole shareholder of Santander EFC, have participated in the net assets of the corporation, in the net amount of €741 million.

 116
Table of Contents

U.S. Banking Regulation

Financial Regulatory Reform

Banking statutes and regulations are continually under review by the United States Congress. In addition to laws and regulations, the U.S. bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance. Many changes have occurred as a result of the 2010 Dodd-Frank Act and its implementing regulations, most of which are now in place. The Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” retains the right to apply enhanced prudential standards to foreign banking organizations, or “FBOs,” with greater than $100 billion in global total consolidated assets, such as Santander Spain.

In October 2019, the federal banking agencies issued final rules, or the “Tailoring Rules,” that adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements apply to certain banking organizations, including large FBOs such as Santander Spain. As a result, Santander Spain is now generally subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under previously applicable regulations.

Under the current administration, however, banking organizations, including large FBOs, may become subject to increased scrutiny and more extensive legal and regulatory requirements than under the prior presidential and congressional regime. In addition, changes in key personnel at the agencies that regulate such banking organizations, including the federal banking regulators, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously.

Volcker Rule

Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and its implementing rules (collectively, the “Volcker Rule”) prohibits “banking entities” from engaging in certain forms of proprietary trading or from sponsoring or investing in “covered funds,” in each case subject to certain exceptions. The Volcker Rule also limits the ability of banking entities and their affiliates to enter into certain transactions with covered funds with which they or their affiliates have certain relationships, Banking entities such as Santander Brasil and Santander Spain were required to bring their activities and investments into compliance with the requirements of the Volcker Rule by the end of the conformance period applicable to each requirement. Santander Spain has assessed how the Volcker Rule affects its businesses and subsidiaries, including Santander Brasil, and has brought its activities into compliance. Santander Brasil has adopted processes to establish, maintain, enforce, review and test the compliance program designed to achieve and maintain compliance with the Volcker Rule. The Volcker Rule contains exclusions and certain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations, as well as certain foreign government obligations, and trading solely outside the United States, and also permits certain ownership interests in certain types of funds to be retained. Santander Spain’s non-U.S. banking organization subsidiaries, including Santander Brasil, are largely able to continue their activities outside the United States in reliance on the “solely outside the U.S.” exemptions from the Volcker Rule. Those exemptions generally exempt proprietary trading, and sponsoring or investing in covered funds if, among other restrictions, the essential actions take place outside the United States and any transactions are not with U.S. persons.

On July 21, 2017, the five regulatory agencies charged with implementing the Volcker Rule announced the coordination of reviews of the treatment of certain foreign funds that are investment funds organized and offered outside the United States and that are excluded from the definition of covered fund under the agencies’ implementing regulations. Also in July 2017, the Federal Reserve issued guidelines for banking entities seeking an extension to conform certain “seeding” investments in covered funds to the requirements of the Volcker Rule.

In June 2019, the five regulatory agencies charged with implementing the Volcker Rule finalized amendments to the Volcker Rule. These amendments tailor the Volcker Rule’s compliance requirements to the amount of a firm’s trading activity, revise the definition of trading account, clarify certain key provisions in the Volcker Rule, and modify the information companies are required to provide the federal agencies. Santander Brasil will still largely rely on the “solely outside the U.S. exemption” to conduct its trading activities.

In June 2020, the five federal agencies finalized additional amendments to the Volcker Rule related to the restrictions on ownership interests, in sponsorship of and relationships with covered funds. These amendments became effective on October 1, 2020. Santander Spain will continue to monitor these Volcker Rule-related developments and assess their impact on its operations, including those of Santander Brasil, as necessary.

 117
Table of Contents

U.S. Anti-Money Laundering, Anti-Terrorist Financing, and Foreign Corrupt Practices Act Regulations

Santander Brasil, as a foreign private issuer whose securities are registered under the Exchange Act, is subject to the U.S. Foreign Corrupt Practices Act, or the “FCPA.” The FCPA generally prohibits such issuers and their directors, officers, employees and agents from using any means or instrumentality of U.S. interstate commerce in furtherance of any offer or payment of money to any foreign official or political party for the purpose of influencing a decision of such person in order to obtain or retain business. It also requires that the issuer maintain books and records and a system of internal accounting controls sufficient to provide reasonable assurance that accountability of assets is maintained and accurate financial statements can be prepared. Penalties, fines and imprisonment of Santander Brasil’s officers and/or directors can be imposed for violations of the FCPA.

Furthermore, Santander Brasil is subject to a variety of U.S. anti-money laundering and anti-terrorist financing laws and regulations, such as the Bank Secrecy Act of 1970, as amended, and the USA Patriot Act of 2001, as amended, and a violation of such laws and regulations may result in substantial penalties, fines and imprisonment of Santander Brasil’s officers and/or directors.

The Anti-Money Laundering Act of 2020, or “AML Act,” enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and Patriot Act impose on banks. The AML Act also contains provisions that promote increased information-sharing and use of technology and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.

U.S. Sanctions

“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, OFAC), the United Nations Security Council, the European Union or Her Majesty’s Treasury. The Office of Foreign Assets Control, or “OFAC,” is responsible for administering economic sanctions imposed against designated foreign countries, governments, individuals and entities pursuant to various Executive Orders, statutes and regulations.

OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on U.S. persons’ trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) blocking of assets of targeted governments or “specially designated nationals,” by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. Blocked assets, such as property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. In addition, non-U.S. persons can be liable for “causing” a sanctions violation by a U.S. person or can violate U.S. sanctions by exporting services from the United States to a sanctions target, for example by engaging in transactions with targets of U.S. sanctions denominated in U.S. dollars that clear through U.S. financial institutions (including through U.S. branches or subsidiaries of non-U.S. banks).

Failure to comply with applicable U.S. sanctions could have serious legal and reputational consequences, including significant civil monetary penalties and, in the most severe cases, criminal penalties.

In addition, the U.S. government has implemented various sanctions that target non-U.S. persons, including non-U.S. financial institutions that engage in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”) that involve Iran, North Korea, Russia, or Hezbollah or other persons designated by the United States under the Specially Designated Global Terrorist, or “SDGT,” sanctions program. If a non-U.S. financial institution were determined to have engaged in activities targeted by certain secondary U.S. sanctions or used proceeds produced by such activities targeted, it could lose its ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential consequences.

 118
Table of Contents

Antitrust Regulation

According to the Brazilian antitrust law, actions that concentrate market share must be previously submitted to CADE for approval if the following criteria are met: (i) at least one of the groups involved in the deal has posted annual gross revenues or volume of business equal to or over R$750 million, in Brazil, in the year prior to the transaction; and (ii) at least another group has posted annual gross revenues or volume of business equal to or over R$75 million, in Brazil, in the year prior to the transaction. Closing of a transaction without CADE’s approval will subject the parties to fines ranging from R$60,000 to R$60 million.

The Brazilian Central Bank will also examine certain corporate reorganizations and other acts involving two or more financial institutions not only considering their potential effects on the financial system and its stability but also any potential impacts regarding market concentration and competition. Upon approval of the transaction, the Brazilian Central Bank may establish certain restrictions and require that the financial institutions execute an agreement of market concentration control, pursuant to which the terms and conditions of the sharing of the efficiency gain resulting from the act shall be set forth.

In December 2018, the Brazilian Central Bank and CADE approved a joint normative act establishing procedures with the purpose of increasing efficiency for their respective actions regarding antitrust matters. Pursuant to the joint normative act, the authorities are authorized to share information for the purposes of their respective activities and carry out meetings with each other to discuss matters requiring the regulatory cooperation between both authorities.

Insolvency Laws Concerning Financial Institutions

Financial institutions are subject to the proceedings established by Law 6,024 of March 13, 1974, or “Law 6024,” which establishes the applicable provisions in the event of intervention or extrajudicial liquidation by the Brazilian Central Bank, as well as to bankruptcy proceedings.

Intervention and extrajudicial liquidation occur when the Brazilian Central Bank has determined that the financial institution is in bad financial condition or upon the occurrence of events that may impact the creditors’ situation. Such measures are imposed by the Brazilian Central Bank in order to avoid the bankruptcy of the entity.

Intervention

An intervention can be carried out at the discretion of the Brazilian Central Bank in the following cases:

●risk to the creditors due to mismanagement;
●consistent violation of Brazilian banking laws or regulations; or
●if the intervention is a feasible alternative to the liquidation of the financial institution.

As of the date on which it is ordered, the intervention will automatically suspend the enforceability of the payable obligations; prevent early termination or maturity of any previously contracted obligations; and freeze deposits existing on the date on which the intervention is decreed.

The intervention will cease if interested parties undertake to continue the economic activities of the financial institution, by presenting the necessary guarantees, as determined by the Brazilian Central Bank, when the situation of the entity is regularized as determined by the Brazilian Central Bank; or when extrajudicial liquidation or bankruptcy of the entity is ordered.

Intervention may also be ordered upon the request of a financial institution’s management.

Extrajudicial Liquidation

Extrajudicial liquidation is an administrative proceeding decreed by the Brazilian Central Bank (except that it is not applicable to financial institutions controlled by the Brazilian federal government) and conducted by a liquidator appointed by the Brazilian Central Bank. This extraordinary measure aims at terminating the activities of the affected financial institution, liquidating its assets and paying its liabilities, as in a judicially decreed bankruptcy. The Brazilian Central Bank will place a financial institution in extrajudicial liquidation if:

 119
Table of Contents
●the institution’s economic or financial situation is at risk, particularly when the institution ceases to meet its obligations as they become due, or upon the occurrence of an event that could indicate a state of insolvency under the rules of the Bankruptcy Law;
●management seriously violates Brazilian banking laws, regulations or rulings;
●the institution suffers a loss which subjects its unprivileged and unsecured creditors to severe risk; and/or
●upon revocation of the authorization to operate, the institution does not initiate ordinary liquidation proceedings within 90 days or, if initiated, the Brazilian Central Bank determines that the pace of the liquidation may harm the institution’s creditors.

A request for liquidation procedures can also be filed on reasonable grounds by the officers of the respective financial institution or by the receiver appointed by the Brazilian Central Bank in the receivership procedure.

The decree of extrajudicial liquidation will: (i) suspend the actions or foreclose on rights and interests relating to the estate of the entity being liquidated, while no other actions or executions may be brought during the liquidation; (ii) accelerate the obligations of the entity; and (iii) interrupt the statute of limitations with regard to the obligations assumed by the institution.

Extrajudicial liquidation procedures may be terminated:

●by discretionary decision of the Brazilian Central Bank if the parties involved undertake the administration of the financial institution after having provided the necessary guarantees; or
●when the final accounts of the receiver are delivered and approved and subsequently registered in the relevant public records;
●when converted into ordinary liquidation; or
●when a financial institution is declared bankrupt.

Temporary Special Administration Regime (Regime de Administração Especial Temporária or “RAET”)

In addition to the intervention procedures described above, the Brazilian Central Bank may also establish a RAET, under Law 9447, dated March 14, 1997 combined with Law 6,024/74, which is a less severe form of the Brazilian Central Bank intervention in private and nonfederal public financial institutions that allows institutions to continue to operate normally. The RAET may be ordered in the case of an institution that:

●continually enters into recurrent operations that are against economic or financial policies set forth in federal law;
●faces a shortage of assets;
●fails to comply with the compulsory reserves rules;
●reveals the existence of hidden liabilities;
●experiences the occurrence of situations that cause receivership pursuant to current legislation;
●has reckless or fraudulent management; or
●carries out activities which call for an intervention.

The main objective of a RAET is to assist the recovery of the financial condition of the institution under special administration and thereby avoid intervention and/or liquidation. Therefore, a RAET does not affect the day-to-day business, operations, liabilities or rights of the financial institution, which continues to operate in the ordinary course of business. Measures which may be adopted by the institution include the transfer of assets, rights and obligations to other entities, and corporate restructuring of these entities, with a view to the continuity of the institution’s business or activities.

 120
Table of Contents

There is no minimum term for a RAET, which ceases upon the occurrence of any of the following events: (i) acquisition by the Brazilian federal government of control of the financial institution, (ii) corporate restructuring, merger, spinoff, amalgamation or transfer of the controlling interest of the financial institution, (iii) decision by the Brazilian Central Bank, or (iv) declaration of extrajudicial liquidation of the financial institution.

Bankruptcy Law

Law No. 11,101, of February 9, 2005, as amended, or the “Bankruptcy Law,” regulates judicial reorganizations, out-of-court reorganizations and the bankruptcy of individuals and corporations that have occurred since 2005 and applies to financial institutions only with respect to the matters not specifically regulated by the intervention and extrajudicial liquidation regimes described above.

On December 24, 2020, Law 14,112, or “Law 14,112/20,” was passed. Law 14,112/20 overhauls the current Bankruptcy Law in several material aspects. Law 14,112/20 came into effect on January 23, 2021. Certain changes arising from this new legislation may affect enforcement and priority matters, such as: (i) the possibility of creditors putting forward an alternative judicial reorganization plan; (ii) new rules on the approval of post-petition loans in judicial reorganization and on priority claims in case of conversion to bankruptcy liquidation; (iii) more flexible quorum and mechanics in the extrajudicial reorganization process; (iv) new rules to expedite the bankruptcy liquidation process; (v) new methods for restructuring of the debtor’s tax liabilities and installment payments, as well as new taxation schemes; and (vi) incorporation of rules on cross-border insolvency proceedings into the Brazilian framework.

Law 14,112/20 replicates, with some adjustments, the provisions of the UNCITRAL Model Law on Cross-Border Insolvency. As a result, Law 14,112/20 sets out some rules on access of foreign representatives to courts in Brazil, the method and requirements for recognition of foreign main and ancillary proceedings, authorization for the debtor and his representatives to act in other countries, methods of communication and cooperation between foreign authorities and representatives and the Brazilian jurisdiction, and the processing of concurrent proceedings.

Law 14,112/20 also sets forth, among other measures, (i) a protection for creditors that agree on the conversion of debt into equity against potential transfer of liability with regard to the debtor’s obligations; (ii) the stay period and constraints on the assets of the debtor under judicial reorganization; (iii) conciliation and mediation measures before and during judicial reorganization proceedings; and (iv) the rules on procedural and substantive consolidation. Law 14,112/20 also sets out that a bankruptcy decree does not reach beyond the bankrupt itself, save when the disregard doctrine is to apply.

Repayment of Creditors in a Liquidation or Bankruptcy

In the event of extrajudicial liquidation or bankruptcy of a financial institution, creditors are paid pursuant to their priorities and privileges. Prepetition claims are paid on a ratable basis in the following order: labor credits; secured credits; tax credits; credits with special privileges; credits with general privileges; unsecured credits; contractual fines and pecuniary penalties for breach of administrative or criminal laws, including those of a tax nature; and subordinated credits.

The current law confers immunity from attachment of compulsory deposits maintained by financial institutions with the Brazilian Central Bank. Such deposits may not be attached in actions by a bank’s general creditors for the repayment of debts and require that the assets of any insolvent bank funded by loans made by foreign banks under trade finance lines be used to repay amounts owing under such lines in preference to those amounts owing to the general creditors of such insolvent bank.

Recovery Plans for Systematically Important Financial Institutions

Systemically important Brazilian financial institutions must implement a recovery plan (plano de recuperação), with the aim of reestablishing adequate levels of capital and liquidity and to preserve the viability of such institutions. The recovery plans must identify their critical functions for the National Financial System, adopt stress-testing scenarios, define clear and transparent governance procedures, assess possible barriers to the entity’s recovery, as well as implement effective communication plans with key stakeholders.

Deposit Insurance – FGC

The purpose of the FGC is to guarantee the payment of funds deposited with financial institutions in case of intervention, liquidation, bankruptcy or insolvency. The FGC is funded by ordinary contributions made by the financial institutions in the amount of up to 0.0125% of the total amount of outstanding balances of the accounts corresponding to guaranteed obligations, and certain special contributions as determined. Delay in performing such contributions is subject to a penalty of 2% over the amount of the contribution.

 121
Table of Contents

The total amount of credit in the form of demand deposits, savings deposits, time deposits, deposits maintained in accounts blocked for transactions with checks (for the registration and control of funds relating to the rendering of services of payment of salaries, earnings, pensions), bills of exchange, real estate bills, mortgage bills, real estate credit bills and repurchase and resale agreements whose objects are instruments issued after March 8, 2012 by a company of the same group due to each customer by a financial institution (or by financial institutions of the same financial group) will be guaranteed by the FGC for up to a maximum of R$250,000 per customer. When the assets of the FGC reach 2% of the total amounts they guarantee, the CMN may temporarily suspend or reduce the contribution of financial institutions to the FGC. As from February 2016, credits of financial institutions and other institutions authorized to operate by the Brazilian Central Bank, complementary welfare entities, insurance companies, capitalization companies, investment clubs and investment funds, as well as those representing any interest in or financial instrument held by such entities, are not protected by the ordinary guarantee of FGC. In December 2017, the CMN enacted a new rule amending certain provisions of the FGC regulation among which includes the establishment of a limit of R$1 million per four-year period for the coverage of the credits of a certain creditor against the group of associated financial institutions.

Administrative Proceedings in the Brazilian National Financial System, the Brazilian Payment System and Capital Markets

Law 13,506 of November 13, 2017 or “Law 13,506/17” applies to entities authorized or supervised by the Brazilian Central Bank or by the CVM, as well as to market participants. Some of the key aspects of Law 13,506 are that: (i) it increases the maximum fine applicable by the Brazilian Central Bank from R$250,000 to R$2 billion or 0.5% of the revenues of the company arising from services and financial products in the year prior to the violation; (ii) it increases the maximum fine applicable by the CVM from R$500,000 to R$50 million; (iii) it makes additional types of violations subject to penalties; (iv) it provides that the penalty of “public admonition” may be cumulative to other penalties applicable by the Brazilian Central Bank; (v) it provides that Brazilian Central Bank may enter into cease-and-desist commitments; and (vi) it provides that the Brazilian Central Bank and the CVM may enter into administrative agreements similar to leniency agreements.

Opening, Maintenance and Closing of Deposit Accounts

CMN Resolution No. 4,753/19 provides criteria for the opening, maintenance and closing of deposit accounts. The regulation determines that financial institutions must adopt procedures and controls that allow the verification and validation of the identity and qualification of the account holders and, if applicable, their representatives, as well as the authenticity of the information provided by the client. This information must be kept updated by the financial institution.

The rule also requires financial institutions to ensure, through the procedures and technology used for the opening, maintaining and closing of deposit accounts, the integrity authenticity and confidentiality, as well as the protection against unauthorized access, use, alteration, reproduction and destruction, of the information and the electronic documents used by them during the process.

Issuance of Credit Instruments Electronically

Provisional Measure No. 897, or “MP 897/2019,” among other provisions, (i) created a new credit instrument, the Rural Real Estate Note (Cédula Imobiliária Rural or “CIR”), with the purpose of advancing rural real estate financing by the creation of an instrument specifically designed to that end; (ii) changed the rules governing Bank Deposit Certificates (Certificado de Depósito Bancário or “CDB”), especially regarding their issuance and the transfer of their ownership, by providing among other changes that CDB issued in book-entry form should be transferred by electronic endorsement, exclusively by means of a specific notation in the issuing institution’s own electronic system or, when deposited in central depositary, by means of specific notation in the corresponding electronic system; and (iii) authorized that customary credit instruments such as the Agricultural Certificate of Deposit (Certificado de Depósito do Agronegócio - CDA), the Agricultural Warrant (Warrant Agropecuário - WA), the Real Estate Credit Certificate (Certificado de Crédito Imobiliário - CCI), the Bank Credit Note (Cédula de Crédito Bancário - CCB), the Rural Credit Note (Cédula de Crédito Rural - CCR), the Rural Promissory Note (Nota Promissória Rural - NPR), the Rural Trade Bill (Duplicata Rural - DR), may be issued in book-entry form through the electronic bookkeeping system held at a financial institution or other entity authorized by the Brazilian Central Bank to perform electronic bookkeeping activity.

 122
Table of Contents

On July 15, 2020, the Brazilian Central Bank regulated, through Circular No. 4,036/20, the electronic issuance of book-entry CCBs and CCRs by financial institutions. A financial institution must render the following services in respect of the bookkeeping of CCBs and CCRs: (i) issue the instrument in book-entry form at the request of the borrower; (ii) include of all obligatory information related to CCBs and CCRs, as well as ancillary documents and/or information for the purposes of verifying the outstanding balance of the underlying credit transaction; (iii) verify the effective title or fiduciary title of the instruments; (iv) make the payment CCBs and CCRs for the settlement of obligations available to the debtor; (v) control the financial flow related to the CCBs and CCRs, including prepayments; (vi) record security interests in an entity authorized to perform centralized registration or deposit of financial assets; (vii) make information about the CCBs and CCRs available to debtors, holders, collateral beneficiaries or any other legally qualified interested party; and (viii) carry out the issuance of certificates regarding the instruments whenever required.

Limitation to the fees and interest rates on overdraft-secured checks

On November 27, 2019, the CMN issued Resolution No. 4,765 or “Resolution No. 4,765/2019,” providing for new rules on the overdraft granted by financial institutions in checking accounts held by individuals and individual microentrepreneurs. The new rule limits the charging of fees on overdraft-secured checks to: (i) 0% for the opening credit facilities of up to R$500.00; and (ii) 0.25% for the opening of credit facilities larger than R$500.00, calculated with the amount of the facility that exceeds R$500.00. It also limits interest rates over the overdraft-secured check to up to 8% per month, to which must be added a discount of the overdraft fees already charged monthly by the financial institution. If the interest is less than or equal to the overdraft fees, such interest rates must be equal to zero. In addition, Resolution No. 4,765/2019 establishes that the overdraft-secured check must be compatible with the customer’s risk profile.

Resolution No. 4,765/2019 came into force on January 6, 2020, for agreements executed after the referred date, came into force on June 1, 2020, for agreements executed prior to such date. Regarding the 8% limitation above, the rule applies to all contracts from January 6, 2020, regardless of the date the applicable contract was entered into.

On February 6, 2020, the Brazilian Central Bank issued Circular No. 3,981, which deals with the new information regarding overdraft facilities that must be highlighted in the statement of the checking accounts held by natural persons or MEIs. Circular No. 3,981 came into effect on June 1, 2020.

Automatic debit of banking accounts

On March 26, 2020, CMN issued Resolution No. 4,790, which sets forth new rules for the automatic debit payments from checking account and accounts designated for the payment of an individual’s wages. The new rule sets forth that financial institutions should only process automatic debit payments upon prior and express authorization of the client, and provides for the procedures for the authorization and cancellation of automatic debit payments. The new rule came into force on March 1, 2021, CMN Resolution No. 4,790 repealed CMN Resolution 4,771.

Taxation

Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)

The IRPJ is calculated at a rate of 15.0%, plus a surtax of 10.0% which is levied on profits exceeding the amount of R$240,000 per year and the CSLL is calculated at a rate of 20.0% (25.0% exceptionally in 2021, as per Law No. 14,183/2021) for financial institutions and 9.0% for companies, after adjustments determined by the tax legislation.

Deferred tax assets and liabilities are measured based on temporary differences between the book basis and tax basis of assets and liabilities, tax losses, and adjustments to fair value of securities and derivatives.

According to the requirements in the current regulations, the expected realization of deferred tax assets is based on projections of future results and a technical study approved by the Directors of Santander Brasil.

Income tax (IRPJ) and Social Contribution Tax (CSLL) on Foreign Exchange Variation of Hedges for Investments Held Abroad (Law No. 14,031/2020)

Pursuant to Law No. 14,031/2020, which came in force in July 2020, exchange rate variations arising from hedges on investments held abroad are taxable starting in 2021. Accordingly, in 2021, 50% of the exchange rate variation shall be taxable under the IRPJ and CSLL, while, in 2022, 100% of the exchange rate variation will be considered as taxable.

 123
Table of Contents

Tax on Services (ISS)

Each of the Municipalities of Brazil and the Federal District are responsible for establishing the applicable ISS rate, which is charged on the value of services provided by the company, to the municipality where the service renderer is located. The rates vary from 2% to 5% and depend on the nature of the service.

On December 30, 2016, Complementary Law No. 157/2016 was enacted. This legislation establishes a minimum rate of 2% for these types of taxes, no reductions or deductions being permitted. This legislation provides that the following services are subject to ISS in the municipality in which the service taker is located: (i) card management, including POS services, that may be paid to the municipality where the corresponding POS device has been registered; (ii) leasing; (iii) fund management; and (iv) consortium.

Before the aforementioned Law was enacted, the ISS was due in the municipality in which the service provider was located (irrespective of where the service taker was located). With this new legislation, ISS rates may vary depending on where the service taker is located.

There are several complications that may arise from this new legislation, including (i) as service takers are generally located in several municipalities, it is logistically difficult to comply and collect the taxes; and (ii) there are situations where the municipality of the service taker is not easily identifiable by the credit card company (as is the case for online transactions, for example).

Since the ISS is a municipal tax, the rule must be regulated by each municipality in order to be enforceable. This new rule is only applicable to triggering events occurring from 2018 onwards, when the municipal regulations applicable to Supplementary Law No. 157 come into force.

On March 23, 2018, the Brazilian Supreme Court suspended the application of the Complementary Law No. 157. It is still suspended as of the date of this annual report. This suspension may be circumvented by the enactment of Complementary Law No. 175/20.

Complementary Law No. 175, published on September 24, 2020, was enacted to create a unified ISS collection system, in which taxpayers would be able to collect ISS in every municipality in Brazil. It’s an effort to facilitate tax collection considering the complexity regarding the multiple rulings on ISS, since each municipality can pass its own laws on ISS.

The system is currently under development, and it is expected that it would enable Complementary Law No. 157 to be brought back into effect.

PIS and COFINS Tax Rates

PIS and COFINS (respectively, the profit participation contribution and the social security financing contribution, both of which are social contributions due on certain revenues net of certain expenses) payable by financial institutions and similar entities, as defined by law, are due at the rate of 0.65% and 4%, respectively. They are levied cumulatively on gross revenue billed, which is defined as the total revenues earned by the legal entity, net of certain expenses, such as funding costs.

Non-financial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to non-cumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.

Tax on Financial Transactions (IOF)

IOF is a tax levied on credit, currency exchange, insurance and securities transactions and it is imposed on the following transactions and at the following rates.

Decree No. 10,797/2021 temporarily increased IOF on credit transactions as follows:

 124
Table of Contents

Transaction (1)

Maximum Legal Rate

Current Rate

Credit extended by financial institutions and non-financial entities 1.5% or 3% (between 2.04% and 4.08% in 2021)0.0041% per day for loans contracted by legal entities and 0.0082% per day for individuals capped at 365 days. An additional 0.38% rate is applicable in both cases. (Exceptionally, in 2021, 0.00559% per day for legal entities and 0.01118% per day for individuals).
Transactions relating to securities (2) 1.5% per day0.5% per day for certain investment funds.
0% on transactions with equity securities and certain debt securities, such as debentures and real estate receivables and agribusiness receivables (CRI/CRA).
1% per day on transactions with fixed income derived from federal, state, or municipal public and private bonds, and fixed income investment funds limited to certain percentages of the income raised from investment. This rate is reduced to zero from the 30th day following the acquisition date of the investment and on repurchase agreements carried out by financial institutions and other institutions authorized by the Brazilian Central Bank with debentures issued by institutions belonging to the same group (Decree 8,731/2016).
0% on the assignment of securities to permit the issuance of Depositary Receipts abroad.
Transactions relating to derivatives 25%Although the maximum rate is 25%, it has been reduced to zero at this moment.
Insurance transactions entered into by insurance companies 25%2.38% for health insurance.
0.38% for life insurance.
7.38% for other types of insurance.
Foreign exchange transactions(2) 25%0.38% (general rule).
6.38% on credit card transactions as from April 27, 2011.
6.38% on withdrawals abroad using credit or debit cards as from December 28, 2013.
6.38% on purchase of travelers checks or loading of international prepaid card as from December 28, 2013.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
6% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is equal or less than 180 days.
0% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is higher than 180 days.
0% for interbank transactions.

0% for exchange transactions in connection with the outflow of proceeds from Brazil for the remittance of interest on net equity and dividends to be received by foreign investors.
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors in the Brazilian financial and capital markets.
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors for purposes of initial or additional margin requirements in connection with transactions in stock exchanges.
0% for exchange transactions for the outflow of funds invested by foreign investors in the Brazilian financial and capital markets.
0% for exchange transactions for the inflow and outflow of funds invested by foreign investors, including by means of simultaneous foreign exchange transactions, in certificates of deposit of securities, known as Brazilian Depositary Receipts (“BDRs”).
0% for simultaneous exchange transactions, for the inflow of funds by foreign investors derived from the conversion of direct investments in Brazil made pursuant to Law 4,131/62 into investments in stock tradable in stock exchanges, as from May 2, 2016.
0% for revenues related to the export of goods and services transactions.

The applicable rate is 1.10% for acquisitions of foreign currency (Decree 8,731/2016).

The applicable rate for credit on a foreign bank account belonging to a resident in Brazil is 1.10%, as from March 3, 2018.

(1)The transactions mentioned in the table are for illustration purposes and do not reflect an exhaustive list of transactions subject to the IOF.
(2)There are some exemptions or specific cases in which the applicable rate is zero.

FATCA

The Foreign Account Tax Compliance Act, or “FATCA,” became law in the United States on March 18, 2010. The legislation requires foreign financial institutions, or “FFIs,” (such as Santander Brasil) to enter into an FFI agreement under which they agree to identify and provide the U.S. Internal Revenue Service, or “IRS,” with information on accounts held by U.S. persons and certain U.S.-owned foreign entities, or otherwise face a 30% withholding tax on certain U.S. source withholdable payments. In addition, FFIs that have entered into an FFI agreement will be required to withhold on such payments made to FFIs that have not entered into an FFI agreement, account holders who fail to provide sufficient information to classify an account as a U.S. or non-U.S. account, and U.S. account holders who do not agree to the FFI reporting their accounts to the IRS.

 125
Table of Contents

On September 23, 2014, Brazil and the United States announced that they entered into an intergovernmental agreement, or “IGA,” which became effective in Brazil by virtue of Decree No. 8506 as of August 24, 2015. The aim of the IGA is to improve international tax compliance and implement FATCA. The IGA establishes an automatic annual bilateral exchange of information with the U.S. tax authorities. Under this agreement, Brazilian financial institutions will generally be required to provide certain information about their U.S. account holders to the Brazilian tax authorities (Receita Federal do Brasil), which will share that information with the IRS.

Complying with the required identification, withholding, and reporting obligations requires significant investment in an FFI’s compliance and reporting framework. We are continuing to follow developments regarding FATCA closely and are coordinating with all relevant authorities.

Common Reporting Standard

On December 28, 2016, Normative Ruling No. 1680 was enacted, introducing the Common Reporting Standard in Brazil. The Common Reporting Standard provides for certain account reporting obligations similar to those existing under FATCA. It was created in the context of the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project, which is aimed at reducing tax avoidance. Normative Ruling No. 1,680 applies to legal entities required to present the e-Financeira pursuant to Normative Ruling No. 1571, dated July 2, 2016.

On the same date, the Normative Ruling No. 1681 was enacted providing for the obligation to annually deliver the “Country to Country Statement,” an ancillary obligation also arising from the discussions under the BEPS Project, before the Brazilian Federal Revenue Service, or “RFB,” as a measure to expand information exchange and improve the level of international tax transparency. This new regulation should not have any impact on Santander Brasil, since, as it is controlled by a legal entity resident in Spain, it is not required by the Brazilian regulation to present such statement.

Income Tax Levied on Capital Gains

Law No. 13,259, of March 16, 2016 or “Law 13,259/16” introduced the application of progressive tax rates for income taxation over capital gains recognized by Brazilian individuals and by holders that are not domiciled in Brazil for purposes of Brazilian taxation (“Non-Resident Holders”) on the disposition of assets in general, Under Law 13,259/16, the income tax rates applicable to capital gains realized by these investors would be: (i) 15% for the portion of the gains up to R$5 million, (ii) 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million.

The provisions of Law 13,259/16 may apply to Non-Resident Holders pursuant to CMN Resolution 4,373, provided such Non Resident Holders are not located in a Tax Haven. However, Non Resident Holders (whether they are considered to be Non-Resident Holders as a result of CMN Resolution 4,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and will continue to be taxed at a rate of 25%.

Most transactions carried out by Non-Resident Holders pursuant to CMN Resolution 4,373 and that result in capital gains are subject to taxation at a fixed 15% rate, provided they are not located in a Tax Haven.

The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.

Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.

 126
Table of Contents

As we are part of the Santander Group, we must also disclose the exposure of other entities of the Santander Group to Iran. The following activities are disclosed in response to Section 13(r) with respect to the Santander Group and its affiliates. During the period covered by this report:

(a)Santander UK holds seven blocked accounts for five customers that are currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(b)Santander Consumer Finance, S.A. holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by Santander Consumer Bank, S.A. on these accounts in the year ended December 31, 2021.
(c)Santander Brasil holds a blocked account for a customer with domicile in Brazil designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship with the customer preceded its designation under the sanctions program. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(d)The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.

In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the year ended December 31, 2021 which were negligible relative to the overall revenues and profits of Banco Santander, S.A. The Santander Group has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, deposit taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. The Santander Group is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, the Santander Group intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.

Regulatory Developments Related to COVID-19

The following section summarizes the measures implemented by the CMN and the Brazilian Central Bank to mitigate the consequences of the COVID-19 pandemic on the Brazilian financial system.

Temporary Suspension of Dividend Distributions and Other Payments

On May 29, 2020 the CMN enacted Resolution No. 4,820 in response to the COVID-19 pandemic. Resolution No. 4,820 prohibits financial institutions, such as us, to: (i) offset their capital, including by means of early payment, in excess of amounts equivalent to the minimum mandatory dividend required by the Brazilian Corporate Law, including as interest on capital (ii) repurchase their own shares, subject to certain exceptions as authorized by the Brazilian Central Bank; (iii) reduce their capital stock, except if such reduction is required by law or approved by the Brazilian Central Bank; and (iv) increase the compensation of their officers, directors and members of the board of directors and audit committee, including fixed and variable compensation, CMN Resolution No. 4,280 repealed CMN Resolution No. 4,797.

On December 23, 2020, the CMN enacted Resolution No. 4,885, which made the payment of dividends or interest on capital more flexible. As a result, financial institutions were not allowed to pay in excess of the greater of (x) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (y) the amount equivalent to the mandatory dividends as set forth in article 202 of the Brazilian Corporate Law. This is the only restriction still in force as a result of Resolution No. 4,820.

As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This measure was not applied by the Brazilian Central Bank in 2021.

 127
Table of Contents

Reduction of Capital Conservation Buffer

On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduces the Capital Conservation Buffer (where all rates relate to the total amount of risk weighted assets) required from financial institutions, from 2.5% to 1.25%. The rate of 1.25% will remain in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the Capital Conservation Buffer requirement will gradually be restored to 2.5%. The measure aims to increase the ability of banks to renegotiate credit transactions and maintain engagement in new transactions, considering the current scenario of increased demand for financial services. CMN Resolution No. 4,783 was replaced by CMN Resolution No. 4,958/2021, which maintains the same rates for the periods set forth in the previous rule.

Repos on Sovereign Bonds Denominated in U.S. Dollars

On March 18, 2020, the Brazilian Central Bank issued Circular No. 3,990, which allowed the repurchase transactions of U.S. Dollar denominated federal bonds between the Brazilian Central Bank and Brazilian financial institutions. The Brazilian Central Bank can purchase such bonds with a discount of 10% in comparison to market prices and the financial institution assumes the obligation to purchase the bonds in a future date. The rules also set out a margin transfer during the term of the transaction whenever the exposure is equal or greater than U.S.$500,000. The purpose of this measure is to provide liquidity to the Brazilian sovereign bonds market, by offering liquidity in U.S. Dollars to Brazilian banks and reducing trading volatility of such bonds. Circular No. 3,990 was revoked by Brazilian Central Bank Resolution No. 76, of February 23, 2021, which essentially maintains the same wording established in the previous rule.

Changes to Provision Requirements

On March 16, 2020 CMN enacted Resolution No. 4,782/20, which was amended by Resolution No. 4,856/20, exempting financial institutions from considering certain restructuring of contracts as an indicative that a counterparty may default. Therefore, the measure allows loans to be granted to solvent companies without requiring additional provisions through December 31, 2020. These measures were not applied in 2021.

New Time Deposits with Special Collateral

CMN Resolution No. 4,799/20 has regulated funding through new Time Deposits with Special Collateral (Novo Depósito a Prazo com Garantias Especiais or “DPGEs”), which are deposits taken by financial institutions and guaranteed by the Credit Guarantee Fund (Fundo Garantidor de Crédito or “FGC”). The resolution increased the cap from R$20 million to R$40 million and is intended to strengthen the liquidity strength of smaller financial institutions. The current limit, set forth 4,964/2021, is set at R$90 million.

Central Bank Loans Backed by Debentures and Financial Bills Held by Financial Institutions

On March 23, 2020, the CMN enacted Resolution No. 4,786, which authorized the transactions contemplatedBrazilian Central Bank to grant loans to multiservice banks, commercial banks, investment banks and saving banks, backed by debentures (corporate debt instruments) held by such institutions and acquired in the Notes Offersecondary market, provided that certain provisions set forth in the ruling are complied with. It is worth mentioning the ruling sets forth that said loans will also be secured by mandatory deposits in Bank Reserve Accounts, in amount equivalent to, at least, the total amount of the transactions, as well as by the debenture collateral.

This is considered a Temporary Special Liquidity Credit Facility, and was another measure to offer financial institutions more liquidity in their transactions. The loans established in Resolution No. 4,786/20 will be available to financial institutions until April 30, 2020 and could be engaged for a 125 business day term, which could be extended, at the Brazilian Central Bank’s discretion, for more 125 business days, provided the maximum term of 359 calendar days.

On April 2, 2020, the CMN enacted Resolution No. 4,795, which authorized the Brazilian Central Bank to grant loans to financial institutions under specific conditions, by means of a Temporary Special Liquidity Credit Facility, upon direct acquisition, in the primary market, of Financial Bills secured by financial assets or securities. The loan was available in tranches, and could reach 100% of the Reference Assets of such financial institutions. The facility became available to financial institutions through December 31, 2020 and the redemption,Financial Bills issued thereunder had a term between 30 and 359 calendar days. The first tranche was approved on May 12, 2020, in a total amount of R$17.5 billion. Both rules were revoked on November 1, 2021.

 128
Table of Contents

Flexibilization of Funding Requirements Through Agribusiness Credit Notes (Letras de Crédito do Agronegócio or “LCAs”)

On March 23, 2020, the CMN issued Resolution No. 4,787, which adjusted the assessment base of the mandatory reserve requirements of funds raised through LCAs, which are credit notes issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain, with the purpose of increasing their liquidity. As a result, the rules for applying funds originated from agribusiness activities were completedrelaxed. The Brazilian Central Bank expects an increase in credit extension directed to agribusiness of R$6.3 billion as a result of the measure. The measure was revoked on JanuaryApril 29, 2019.2021.

Employment Support Program providing emergency payroll financing for small and medium-sized businesses

The CMN enacted Resolution No. 4,846 on August 24, 2020, which regulates the granting of loans under the Emergency Employment Support Program (Programa Emergencial de Suporte a Empregos or “PESE”), established through Provisional Measure No. 944/2020. PESE sets forth the offering of an emergency credit line of R$40 billion to finance, for two months, the payroll of small and medium-sized companies that adhere to the program, with the purpose of preserving jobs. Regarding the funding of said credit line, 85% will derive from the National Treasury and the remaining 15% from participating financial institutions, including Santander Brasil. The adhering small and medium-sized businesses will not be able to dismiss workers during the period that the loan is taken out and up to the 60th day after the business receives its last installment. The maximum amount financed per worker will be up to two minimum wages. The funding will go directly to the worker’s account, as is done today through payrolls operated by financial institutions. PESE came into effect on April 6, 2020. CMN Resolution No. 4,846 repealed CMN Resolution No. 4,800.

FX overhedge of equity interests abroad

On March 18, 2020, the CMN enacted Resolution No. 4,784, which amended CMN Resolution No. 4,192, of March 1, 2013. The rule sets forth that the tax credits arising from losses on excess FX position aimed at hedging of investments held abroad by financial institutions will not be deducted from their regulatory capital (patrimônio de referência). The measure aims at providing further capital relief and hence additional comfort for financial institutions to maintain and extend credit.

The changes were incorporated into CMN Resolution No. 4,955, of 2021, which repealed and replaced Resolution No. 4,192.

 

Higher ceiling for repurchase of financial bills (letras financeiras) by financial institutions

Pursuant to CMN Resolution No. 4,788, issued on March 23, 2020, financial institutions classified as Segment 1 for the proportional application of the prudential regulation, as is our case, may, from March 23 to April 30, 2020, repurchase up to 20% of financial bills of their own issuance, a substantial increase from the previous ceiling of 5%.

Brazilian Central Bank authorized to buy and sell government bonds and private financial assets and securities in the secondary market

Constitutional Amendment No. 106, enacted on May 7, 2020, sets forth emergency economic and budget measures for the Brazilian government during the COVID-19 pandemic. Among them, the Amendment authorizes the Brazilian Central Bank, for the duration of the pandemic, to buy and sell (i) government bonds in local and foreign secondary markets; and (ii) other assets, in domestic secondary financial, capital and payments markets, provided that, at the time of purchase, they have a credit risk rating in the local market equivalent to BB- or higher, conferred by at least one of the three largest international rating agencies, as well as a reference price published by a financial market entity accredited by the Brazilian Central Bank.

 129
Table of Contents

SELECTED STATISTICAL INFORMATION

The following information for Santander Brasil is included for analytical purposes and is derived from, and should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 5. Operating and Financial Review and Prospects.”

Average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31, of the prior year and each of the month-end balances of the 12 subsequent months. Average income statement and balance sheet data and other related statistical information have been prepared on a consolidated annual basis.

The selected statistical information set forth below includes information as of and for the years ended December 31, 2021, 2020, and 2019 extracted from the audited financial statements prepared in conformity with IFRS as issued by the IASB. See “Presentation of Financial and Other Information” and “Item 3. Key Information— A. Selected Financial Data.”

Average Balance Sheet and Interest Rates

The following tables show our average balances and interest rates for each of the periods presented. With respect to the tables below and the tables under “—Changes in Net Interest Income – Volume and Rate Analysis” and “—Assets—Earning Assets – Yield Spread,” (i) we have stated average balances on a gross basis, before netting impairment losses, except for the total average asset figures, which include such netting, and (ii) all average data have been calculated using month-end balances, which is not significantly different from having used daily averages. We stop accruing interest on loans once they are more than 60 days past due. All our non-accrual loans are included in the table below under “Other assets.”

  For the Year Ended December 31,
  2021 2020 2019
  Average Balance(1) Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
  (in millions of R$, except percentages)
Assets and Interest            
Income                
Cash and balances with the Brazilian Central Bank  58,494   2,581   4.4%  54,531   1,552   2.8%  48,670   3,828   7.9%
Loans and amounts due from credit institutions  95,513   5,191   5.4%  104,759   1,519   1.4%  101,981   3,844   3.8%
Of which:                                    
  Reverse repurchase
agreements		  45,458   2,154   4.7%  -     -     -     -     -     -   
Loans and advances to customers  461,141   49,538   10.7%  384,389   44,104   11.5%  323,180   50,406   15.6%
Debt instruments  224,890   19,042   8.5%  203,578   13,556   6.7%  178,811   13,528   7.6%
Other interest – earning assets  -     1,636   -     -     2,044   -     -     1,235   -   
Total interest – earning assets  840,038   77,988   9.3%  747,257   62,775   8.4%  652,642   72,841   11.2%
Equity instruments  2,279   90   3.9%  1,730   34   2.0%  1,464   19   1.3%
Investments in associates  952   -     -     1,098   -     -     1,060   -     -   
Total earning assets  843,269   78,077   9.3%  750,085   62,809   8.4%  655,166   72,860   11.1%
Cash and balances with the Brazilian Central Bank  4,633   -     -     4,800   -     -     4,538   -     -   
Loans and amounts due from credit institutions  441   -     -     6,668   -     -     2,258   -     -   
Impairment losses  (26,908)  -     -     (23,936)  -     -     (22,528)  -     -   
Other assets  81,669   -     -     76,642   -     -     56,912   -     -   
                                     
 130
Table of Contents

Property, plant and equipment  8,823   -     -     9,587   -     -     9,091   -     -   
Intangible assets  30,250   -     -     30,769   -     -     30,070   -     -   
Total average assets  942,177   78,077   8.3%  854,615   62,809   7.3%  735,507   72,860   9.9%
Liabilities and Interest Expense                                    
Deposits from the Brazilian Central Bank and Deposits from credit institutions  149,111   4,712   3.2%  111,684   4,327   3.9%  100,473   4,866   4.8%
Of which:                                    
   Repurchase agreements  103,809   4,567   4.4%  -     -     -     -     -     -   
Customer deposits  420,185   13,188   3.1%  380,058   7,504   2.0%  303,741   14,966   4.9%
Of which:                                    
   Repurchase agreements  58,264   -     -    -     -     -     -     -     -   
Marketable debt securities  63,906   4,537   7.1%  68,585   2,786   3.7%  76,194   5,138   6.7%
Subordinated debts  14,550   955   6.6%  13,102   909   6.6%  10,779   660   6.1%
Other interest-bearing liabilities  -     3,277   -     -     2,806   -     -     2,890   -   
Total interest-bearing liabilities  647,752   26,669   4.2%  573,429   18,332   3.2%  491,187   28,520   5.8%
Noninterest bearing demand deposits  33,893   -     -     28,581   -     -     14,612   -     -   
Other liabilities  155,133   -     -     150,759   -     -     133,255   -     -   
Non-controlling interests  329   -     -     315   -     -     617   -     -   
Stockholders’ Equity  105,070   -     -     101,531   -     -     95,836   -     -   
Total average liabilities and equity  942,177   26,669   2.8%  854,615   18,332   2.1%  735,507   28,520   3.9%

(1)     In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.

Changes in Net Interest Income – Volume and Rate Analysis

The following tables present the changes in our net interest income allocated between changes in average volume and changes in average rate for the year ended December 31, 2021, compared to the year ended December 31, 2020, and for the year ended December 31, 2020 compared to the year ended December 31, 2019. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

  For the Years Ended 2021/2020 For the Years Ended 2020/2019
  Increase (decrease) due to changes in
  Volume Rate Net change Volume Rate Net change
  (in millions of R$)
Interest and Similar Income                        
Interest-earning assets                        
Cash and balances with the Brazilian Central Bank   113   854   1,029   414   (2,690)  (2,276)
Loans and amounts due from credit institutions   (134)  4,175   3,672   102   (2,427)  (2,325)
Loans and advances to customers   8,806   (2,809)  5,436   8,493   (14,797)  (6,304)
Debt instruments   1,419   3,681   5,486   1,753   (1,725)  28 
Other interest-earning assets   (408)  —     (408)  809   —     809 
Total interest-earning assets   9,796   5,901   15,215   11,571   (21,639)  (10,068)
Equity Instruments   11   34   56   4   11   15 
Total earning assets   9,807   5,935   15,271   11,575   (21,628)  (10,053)
Interest Expense and Similar Charges                        
Interest-bearing liabilities                        
Deposits from the Brazilian Central Bank and Deposits from credit institutions   1,450   (798)  385   504   (1,043)  (539)
Customer deposits   792   4,431   5,690   3,095   (10,563)  (7,468)
Marketable debt securities   (172)  2,355   2,023   (471)  (2,153)  (2,624)
Subordinated liabilities   95   (51)  39   150   53   203 
Other interest-bearing liabilities   2,421   —     2,421   235   —     235 
Total interest-bearing liabilities   4,587   5,937   10,558   3,513   (13,706)  (10,193)

 131
Table of Contents

Assets

Earning Assets – Yield Spread

The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

  For the Year Ended December 31,
  2021 2020 2019
  (in millions of R$, except percentages)
Average earning assets  840,038   747,257   652,642 
Interest and dividends on equity securities(1)  78,078   62,807   72,860 
Net interest income  49,193   44,480   44,340 
Gross yield(2)(*)  9.3%  8.4%  11.2%
Net yield(3)(*)  5.9%  6.0%  6.8%
Yield spread(4)(*)  4.8%  5.2%  5.3%
(*)Yield information does not give effect to changes in fair value that are reflected as a component of stockholder’s equity.
(1)Total earning assets plus dividends from companies accounted for by the equity method (equity instruments).
(2)Gross yield is the amount of “Interest and dividends on equity securities” divided by “Average earning assets.”
(3)Net yield is the amount of “Net interest income” divided by “Average earning assets.”
(4)Yield spread is the difference between the average rate of “Total earning asset” and the average rate of “Total interest-bearing liabilities.”

Return on Equity and Assets

The following table presents our selected financial ratios for the periods indicated.

 132
Table of Contents

  For the Year Ended December 31,
  2021 2020 2019
ROA: Return on average total assets   1.7%  1.6%  2.3%
ROE: Return on average stockholders’ equity   14.8%  13.3%  17.4%
ROE (adjusted) (1)   20.2%  18.5%  24.6%
Average stockholders’ equity as a percentage of average total assets   11.2%  11.9%  13.0%
Payout(2)   62.0%  24.7%  64.9%
             
(1)“Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” is a non-GAAP financial measure which adjusts “Return on average stockholders’ equity” to exclude the goodwill arising from the acquisition of Banco Real in 2008, Getnet and Super, both in 2014, and Banco Olé Bonsucesso Consignado S.A. in 2015, 60%, and the remaining 40% in 2020. See “Item 3. Key Information—A. Selected Financial Data—Selected Consolidated Ratios” for a reconciliation of “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” to “Return on average stockholders’ equity.”
(2)Dividend payout ratio (dividends declared per preferred share divided by net income per preferred share).

Interest-Earning Assets (other than Loans)

The following table shows the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in “—Average Balance Sheet and Interest Rates.”

  For the Year Ended December 31,
  2021 2020 2019
Cash and balances with the Brazilian Central Bank   7.0%  7.3%  7.5%
Loans and amounts due from credit institutions   11.4%  14.1%  15.6%
Loans and advances to customers   54.9%  51.4%  49.5%
Debt instruments   26.8%  27.2%  27.4%
Total interest-earning assets   100%  100%  100%
             

Loans and Amounts Due from Credit Institutions

For further information about Loans and Amounts Due from Credit Institutions, see note 5 to our audited consolidated financial statements included elsewhere in this annual report.

Investment Securities

As of December 31, 2021 and 2020, the book value of investment securities was R$228 billion and R$232 billion, respectively (representing 24.5% and 24.9%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$171 billion, or 75.3% and R$192 billion, or 82.8% of our investment securities as of December 31, 2021 and 2020, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.

The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:

  As of December 31,
  2021 2020 2019
  (in millions of R$)
Debt securities            
Government securities—Brazil  171,437   191,896   135,848 
Debentures and promissory notes  19,882   17,072   13,875 
Other debt securities  33,894   21,134   23,609 
Total domestic/debt securities   225,212   230,102   173,332 
             
Equity securities            
Shares of Brazilian companies  1,870   1,953   665 
Shares of foreign companies  49   14   —   
Investment fund units and shares  609   363   1,693 
Total equity securities  2,528   2,329   2,358 
Total investment securities   227,740   232,432   175,690 

 133
Table of Contents

As of December 31, 2021 and 2020, we held no securities of single issuers or related groups of companies whose aggregate book or market value exceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented 151.5% and 180.5%, respectively of our stockholders’ equity. As of December 31, 2021 and 2020, the total value of our debt securities was approximately 212.5% and 217.4%, respectively, of stockholders’ equity.

The following table analyzes the maturities and weighted average yields of our debt investment securities not carried at fair value (before impairment allowance) as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.

  Maturing within 1 year Maturing between 1 and 5 years Maturing between 5 and 10 years Maturing after 10 years Total
  (in R$ millions)
Debt securities                    
Government securities—Brazil (1)  107,450   41,694   22,293   -     171,437 
Other debt securities (2)  34,295   3,045   16,435   -     53,776 
Total debt investment securities  141,745   44,739   38,728   -     225,212 

(1)Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and NTN-F).
(2)Includes balances of debentures and promissory notes.

The average rate for debt investment securities is 7.1%.

Investment Portfolio – Yields

The following table shows the balances and weighted-average yields for our debt securities not carried at fair value through earnings, for each range of maturities, as of December 31, 2021. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.

  Maturing within 1 year Yield within 1 year Maturing between 1 and 5 years Yield between 1 and 5 years Maturing between 5 and 10 years Yield between 5 and 10 years Maturing after 10 years Yield after 10 years
  (in R$ millions, except percentages)
Weighted-average yields      %       %       %       % 
Domestic:                                
Brazilian Government   16,969   9.8   61,237   8.4   19,282   6.8   5,297   6.8 
Other fixed-income securities   25,793   8.4   27,239   9.0   207   7.8   369   9.2 
Impaired financial assets   829   8.4   257   9.0   842   7.8   -     -   
Impairment losses   (13)  8.4   (267)  9.0   (784)  7.8   -     -   
Total domestic   43,578   6.4   88,466   7.2   19,547   6.8   5,666   6.7 
International:                                
Foreign government   1,588   5.0   7,756   5.0   1,917   4.7   -     -   
Other fixed-income securities   720   4.3   5,122   2.7   -     2.7   -     -   
Impaired financial assets   105   4.3   -     2.7   -     2.7   -     -   
Impairment losses   (32)  4.3   (31)  2.7   (64)  2.7   -     -   
Total international   2,381   4.1   12,847   3.6   1,853   2.7   -     -   
Total weighted-average yields       8.7       8.0       6.6       6.7 
                                 

Domestic and Foreign Currency

The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.

 134
Table of Contents

  As of December 31,
  2021 2020 2019
  Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
  (in millions of R$)
Assets            
Cash and balances with the Brazilian Central Bank  21,543   10,851   4,531   15,617   4,878   15,250 
Debt instruments  208,133   17,080   226,787   3,315   164,447   8,885 
Loans and amounts due from credit institutions, gross  91,868   3,797   109,339   3,520   107,694   1,553 
Loans and advances to customers, gross  398,335   66,509   396,950   20,822   326,421   20,835 
Equity Instruments  2,078   45   1,675   -     2,358   -   
Total assets   721,957   98,282   739,283   43,275   605,798   46,523 
Liabilities                        
Financial Liabilities at Amortized cost:                        
Deposits from the Brazilian Central Bank and Deposits from credit institutions  62,332   58,674   86,564   45,093   58,283   40,988 
Customer deposits  470,973   -     445,900   -     336,515   -   
Marketable debt securities  66,027   13,009   47,476   9,399   64,987   8,715 
Debt instruments eligible to compose capital  -     12,781   -     13,120   -     10,176 
Other financial liabilities  68,496   413   66,727   153   60,885   -   
Total liabilities   667,828   84,877   646,667   67,766   520,670   59,879 

Loan Portfolio

As of December 31, 2021, our loans and advances to customers totaled R$493 billion (53.0% of our total assets). Net impairment losses, loans and advances to customers totaled R$465 billion as of December 31, 2021 (49.9% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$146.0 billion, R$131.7 billion, R$125.9 billion as of December 31, 2021, 2020, 2019, respectively.

Types of Loans by Type of Customer

The majority of the loans we have outstanding are to borrowers domiciled in Brazil and are denominated in reais. For each loan category, we maintain specific risk management policies that are in line with the standards of the Santander Group, which in turn, are managed and monitored by our board of officers through the credit committee, The credit approval process for each loan category is structured primarily around our business segments. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk” for details on our credit approval policies for retail and wholesale lending.

We have a diversified loan portfolio, with no specific concentration exceeding 10% of our total loans, Currently, 1.2% of our loan portfolio is allocated to our largest debtor and 7.4% to the next 10 largest debtors.

For further information about the breakdown of our Loans and Maturity see sections “a - Breakdown” and “b – Detail” of note “9 – Loans and advances to customers” to our audited consolidated financial statements included in this annual report.

Maturity

The following table sets forth an analysis by maturity of our loans, by type and status, as of December 31, 2021.

  As of December 31, 2021
Debt Sector by Maturity Less than 1 year % of
total		 Between 1 and 5 years % of
total		 Between 5 and 15 years % of
total		 More than 15 years % of
total		 Total % of
total
Commercial and industrial   165,729   61.37%  73,723   45.81%  8,222   20.16%  -     -     247,674   50.20%
Real estate   3,986   1.48%  10,138   6.30%  19,337   47.41%  21,278   98.58%  54,739   11.10%
Installment loans to
individuals 		  99,051   36.68%  75,833   47.12%  13,219   32.41%  306   1.42%  188,409   38.19%
Lease financing   1,285   0.48%  1,238   0.77%  10   0.02%  -     -     2,533   0.51%
Loans and advances to customers, gross   270,051   100.00%  160,932   100.00%  40,787   100.00%  21,585   100.00%  493,355   100.00%

 135
Table of Contents

Fixed and Variable Rate Loans

The following table sets forth a breakdown of our fixed and variable rate loans by type and status as of December 31, 2021.

  Fixed and variable rate loans maturing in
  Less than one year Between one and five years Between five and 15 years Over 15 years Sub-total more than one year Total
  (in millions of R$, except percentages)
Fixed rate                        
Commercial and industrial   111,499   29,745   1,941   -     31,865   143,185 
Real estate   24   73   62   18   153   177 
Installment loans to individuals   105,045   74,689   12,965   306   87,961   193,005 
Lease financing   522   694   -     -     695   1,217 
Total Fixed rate   217,090   105,201   14,968   324   120,493   337,583 
Variable rate                        
Commercial and industrial   37,149   33,524   2,109   -     35,633   72,782 
Real estate   3,962   10,065   19,274   21,260   50,600   54,562 
Installment loans to individuals   11,087   11,598   4,426   -     16,024   27,111 
Lease financing   763   544   9   -     553   1,316 
Total Variable rate   52,961   55,731   25,819   21,261   102,810   155,771 
Total   270,051   160,932   40,787   21,585   223,304   493,355 

Cross-Border Outstandings

The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.

  As of December 31,
  2021 2020 2019
  Balance % of Total Assets Balance % of Total Assets Balance % of Total Assets
  (in millions of R$, except percentages)
OECD countries(1)            
Spain  108   -   437   -   1,984   0.3 
United States  835   0.1   12,674   1.4   3,721   0.5 
Netherlands  -   -   80   -   1,531   0.2 
United Kingdom  20   -   29   -   1,003   0.1 
Luxembourg  13,058   1.4   -   -   -   - 
Other OECD countries(2)  1,958   0.2   3,534   0.4   16,264   2.4 
Total OECD  15,979   1.7   16,754   1.8   24,503   3.6 
Non-OECD countries                        
Latin American countries(2)  560   0.1   1,204   0.1   1,382   0.2 
Cayman Islands  1,679   0.2   2,917   0.3   3,528   0.5 
Other(2)  282   -   1,189   0.1   2,397   0.3 
Total non-OECD  2,521   0.3   5,310   0.6   7,307   1.1 
Total  18,500   2.0   22,064   2.4   31,810   4.6 

(1)The Organization for Economic Cooperation and Development.
(2)Aggregate outstandings in any single country in this category do not exceed 1.5% of our total assets.
 136
Table of Contents

The following table presents the amounts of our cross-border outstandings as of December 31, 2021, 2020 and 2019 by type of borrower where outstandings in the borrower’s country exceeded 1.2% of our total assets.

  Government Banks and Other Financial Institutions Commercial and Industrial Other Loans Total
  (in millions of R$)
2019          
United States  -     8,710   55   316   9,081 
Netherlands  -     -     2,355   -     2,355 
Austria  -     -     127   (2)  125 
United Kingdom  -     -     7   151   158 
Cayman Islands  469   263   488   (752)  468 
Total  469   8,973   3,032   (287)  12,187 
2020                    
United States  -     12,653   9   12   12,674 
Netherlands  -     -     80   -     80 
Austria  -     -     -     444   444 
United Kingdom  -     28   -     1   29 
Cayman Islands  -     1,341   (1)  1,577   2,917 
Total  -     14,022   86   2,034   16,144 
2021                    
United States  -     3,943   1   12   3,956 
Netherlands  -     -     3   -     3 
Austria  -     -     -     595   595 
United Kingdom  -     28   -     -     28 
Cayman Islands  -     2,815   -     1,290   4,105 
Total  -     6,786   4   1,897   8,687 

Non-current assets held for sale

For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.

Liabilities

Deposits

The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.

For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.

The following table shows the maturity of time deposits (excluding inter-bank deposits) in denominations of U.S.$100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.

As of December 31, 2021
DomesticInternational
(in millions of R$)
Under 3 months 255,120-
3 to 6 months 25,742-
6 to 12 months 51,483-
Over 12 months 257,622-
Total 589,967-

 137
Table of Contents

The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2021.

 

As of
December 31, 2021

Maturing

Three Months or Less

Over Three Months Through Six Months

Over Six Months Through
12 Months

Over 12 months

 (in millions of R$)
Total uninsured deposits 285,96796,14620,89668,96099,965

Short-Term Borrowings

The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.

  As of December 31,
  2021 2020 2019
  Amount Average Rate Amount Average Rate Amount Average Rate
  (in millions of R$, except percentages)
Securities sold under agreements to repurchase                        
As of December 31  115,964   1.76%  112,477   1.90%  123,941   5.00%
Average during the period (1)  114,484   2.58%  112,096   2.71%  100,473   4.84%
Maximum month-end balance  155,484       155,174       123,941     
Total short-term borrowings at year end  115,964       112,477       123,941     
(1)The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.

Allowance for Loan Losses

Changes in Allowances for Impairment Losses on the Balances of “Loans and receivables”

The following tables analyze changes in our allowances for impairment losses for the periods indicated. For further information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).”

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$)
Balance at beginning of year  25,640   22,626   22,969   18,262   18,191 
Initial adoption of IFRS 9  -     -     -     2,461   -   
Balance adjusted  25,640   22,626   22,969   20,723   18,191 
Impairment losses charged to income for the year  16,987   18,311   14,361   13,540   13,493 
Write-off of impaired balances against recorded impairment allowance  (12,904)  (15,297)  (14,705)  (11,294)  (13,422)
Balance at end of year  29,723   25,640   22,626   22,969   18,262 
Of which:                    
Loans and advances to customers  28,511   24,053   20,557   20,242   15,409 
Loans and amounts due from credit institutions  22   9   14   14   69 
Debt Instruments  1,191   1,577   2,055   2,714   2,784 
Recoveries of loans previously written off(1)  1,536   861   991   827   1,154 
(1)Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off. 

 138
Table of Contents

Allowance by Type of Borrower

The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.

  For the Year Ended December 31,
  2021 2020 2019 2018 2017
  (in millions of R$)
Recoveries of loans previously charged off(1)  1,536   861   991   827   1,154 
Commercial and industrial  463   422   520   345   413 
Real estate – construction  64   56   47   103   210 
Installment loans to individuals  1,002   370   417   370   521 
Lease finance  7   13   8   9   10 
Impairment losses charged to income for the year(1)  16,987   18,312   14,361   13,540   13,491 
Commercial and industrial  3,340   6,919   2,377   3,620   5,499 
Real estate – construction  116   81   95   193   471 
Installment loans to individuals  13,532   11,309   11,866   9,708   7,461 
Lease finance  (1)  3   23   19   61 
Write-off of impaired balances against recorded impairment allowance  (12,904)  (15,297)  (14,705)  (11,294)  (13,422)
Commercial and industrial  (5,153)  (4,617)  (5,713)  (3,981)  (5,716)
Real estate – construction  (167)  (232)  (108)  (191)  (342)
Installment loans to individuals  (7,576)  (10,433)  (8,834)  (7,100)  (7,312)
Lease finance  (8)  (15)  (49)  (22)  (52)
(1)Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.

The table below shows a breakdown of allowances for credit losses by type of borrowers and the percentage of loans in each category as a share of total loans at the date indicated.

  As of December 31,
  2021 % of Total Loans 2020 % of Total Loans 2019 % of Total Loans
  (in millions of R$, except percentages)
Borrowers            
Commercial and industrial  8,325   28.0   9,757   38.1   7,455   33.0 
Real estate  154   0.5   194   0.8   345   1.5 
Installment loans to individuals  21,240   71.5   15,676   61.1   14,800   65.4 
Lease financing  4   -   14   0.1   26   0.1 
Total  29,723   100   25,640   100.0   22,626   100.0 
                         

Internal Risk Rating

The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:

  As of December 31,
  2021 2020 2019
  (in millions of R$)
Internal Risk Rating            
Low  374,505   347,315   257,133 
Medium-low  79,217   24,277   56,549 
Medium  14,590   26,232   11,755 
Medium-high  9,413   3,896   8,512 
High  15,630   16,101   13,307 
Loans and advances to customers, gross  493,355   417,822   347,257 

 139
Table of Contents

For further information on our internal risk rating levels and their corresponding probability of default, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk—Credit Monitoring.”

Renegotiation Portfolio

The renegotiation portfolio for the year ended on December 31, 2021 amounted to R$21.7 billion, compared to R$20.5 billion for the same period in 2020, an increase of R$1,193 million or 5.8%, This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.

The renegotiation portfolio was covered by allowances for impairment losses of 44.7% as of December 31, 2021 and 44.0% as of December 31, 2020. These levels are considered appropriate for the characteristics of these loans and advances to customers.

The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:

  2021 2020 2019
  (in millions of R$, except percentages)
Renegotiation Portfolio by type of customer      
Commercial and industrial  5,322   5,862   5,141 
Installment loans to individuals  16,356   14,623   10,102 
Financial leasing  5   5   239 
Total  21,683   20,490   15,482 
Allowances for impairment losses  9,698   9,019   7,501 
Coverage ratio  44.7%  44.0%  48.4%

Balances are deemed to be impaired when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts on the dates indicated in the loan agreement, after taking into account the collateral guarantees received to secure (fully or partially) collection of the related balances.

As established in our internal renegotiation policy, in order for renegotiated products to be classified as performing, we must, receive an amount equivalent to at least 10% of the total amount outstanding in the six months which follow the renegotiation date (note that these transactions will remain classified as renegotiated operations even after receiving such payments). Renegotiated loans that are more than 60 days overdue are also accounted for as impaired.

We increased our efforts regarding the collection of loans that are less than 60 days past due and also in relation to written off loans. We are also continuing with our strategy of granting loans to persons with low risk profile and higher levels of collaterals and guarantees.

Impaired Assets

The following table shows our impaired assets, excluding country risk.

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$, except percentages)
Impaired assets                    
Past due and other impaired assets(1)  26,923   23,176   23,426   22,426   19,145 
Impaired assets as a percentage of total loans  5.5%  5.5%  6.7%  7.0%  6.7%
Net loan charge-offs as a percentage of total loans  2.6%  3.7%  4.2%  3.5%  4.7%
Net loan charge-offs as a percentage of average total loans  2.8%  3.8%  4.6%  3.8%  4.8%
(1)Includes as of December 31, 2021, R$2,528 million of doubtful loans (R$2,028 million in 2020, R$2,788 million in 2019, R$3,754 million in 2018 and R$5,439 million in 2017) that were not past-due.

 140
Table of Contents

Evolution of Impaired Assets

Our impaired assets increased by 16.2%, or R$3,747 million, to R$26,923 million as of December 31, 2021, compared to R$23,176 million as of December 31, 2020. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 15.9%, or R$4,083 million, to R$ 29,723 million as of December 31, 2021, compared to R$ 25,640 million as of December 31, 2020. Offsetting these effects were recoveries of R$1,536 million on loans previously written off as of December 31, 2021 and R$ 861 million as of December 31, 2020.

We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2021.

The following table shows the changes in our impaired assets at the dates indicated:

  As of December 31,
  2021 2020 2019 2018 2017 2016
    (in millions of R$)
Balance at beginning of year  23,176   23,426   22,426   19,145   18,887   18,599 
Initial Adoption of IFRS9 (1)  -     -     -     703   -     -   
Adjusted Balance  23,176   23,426   22,426   19,848   18,887   18,599 
Net additions  18,429   14,758   16,001   13,872   13,679   11,893 
Write-offs  (14,681)  (15,008)  (15,000)  (11,294)  (13,422)  (11,605)
Balance at end of year  26,923   23,176   23,426   22,426   19,145   18,887 
(1)Further information, see notes 1 and 9 to our audited consolidated financial statements included elsewhere in this annual report. 

The amount of “net additions” for any period is assets that became impaired in that period less assets that were impaired but became performing in that period. In 2021, the debt restructuring options were improved to maintain consistent levels of “net additions” and “write-offs.”

Impaired Assets by Type of Customer

The following table shows the amount of our impaired assets by type of customers at the dates indicated:

  As of December 31,
  2021 2020
  (in millions of R$)
Commercial and industrial  11,440   10,558 
Real estate  470   456 
Installment loans to individuals  14,996   12,144 
Lease financing  17   17 
Total  26,923   23,176 
         

Commercial and Industrial

Impaired assets in the commercial and industrial loans portfolio amounted to R$11,440 million as of December 31, 2021, an increase of R$881 million, or 8.3%, compared to R$10,558 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.

Real Estate

Impaired assets in the real estate lending portfolio totaled R$470 million on December 31, 2021, an increase of R$14 million, or 3.1%, compared to R$456 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of the recurrent growth of the credit portfolio.

 141
Table of Contents

Installment Loans to Individuals

Impaired assets in the installment loans to individuals lending portfolio totaled R$14,996 million as of December 31, 2021, with an increase of R$2,852 million, or 23.5%, compared to 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.

Financial Leasing

Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2021, remaining similar to December 31, 2020.

Methodology for Impairment Losses

We evaluate all loans regarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or collectively evaluated by grouping similar risk characteristics. Loans that are individually evaluated for impairment losses are not evaluated collectively.

To measure the impairment loss on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and financial situation, level of indebtedness, ability to generate income, cash flow, management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.

To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.

The expected loss measurement is made through the following factors:

●Exposure at Default (EAD): is the amount of a transaction exposed to credit risk including the ratio of current outstanding balance exposure that could be provided at default. Developed models incorporate hypotheses considering possible modifications to the payment schedule.
●Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered.
●Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.
●Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value.

In order to estimate the above parameters, the Bank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.

Loans Past Due for Less Than 90 Days but Not Classified as Impaired

The following table shows the loans past due for less than 90 days but not classified as impaired at the dates indicated:

 142
Table of Contents

  As of December 31,
  2021 % of total 2020 % of total
  (in millions of R$, except percentages)
Commercial and industrial   4,892   20.7   5,132   25.8 
Mortgage loans   3,606   15.2   3,085   15.5 
Installment loans to individuals   15,150   64.0   11,661   58.6 
Lease financing   11   0.1   13   0.1 
Total (*)   23,659   100.0   19,891   100.0 
(*)Refers only to loans past due between 1 and 90 days.

Impaired Asset Ratios

Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, 2020. Our impaired assets increased by approximately R$3,747 billion in the same period, from R$23.2 billion to R$26.9 billion. The default rate decreased by 30 basis points in 2021 in comparison to 2020, primarily due to the recurrent growth of the credit portfolio.

The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.

  As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$ except percentages)
Loans and advances to customers, gross  493,355   417,822   347,257   321,933   287,829 
Impaired assets  26,923   23,176   23,426   22,426   19,145 
Provisions for impairment losses  29,723   25,640   22,626   22,969   18,262 
Credit risk exposure Non-GAAP – customers (1)  540,873   466,104   391,569   364,194   330,474 
Ratios                    
Impaired assets to credit risk exposure  5.0%  5.0%  6.0%  6.2%  5.8%
Coverage ratio (2)  110.4%  110.6%  96.6%  102.4%  95.4%
Impairment losses  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)
Losses on other financial instruments not
  measured at fair value (3)		  -     -     -     -     -   
Impairment losses on financial assets (net) (4)  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)
                     
                     

(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

(2)Provisions for impairment losses as a percentage of impaired assets.
(3)Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).”
(4)As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments.

The following chart shows our impaired assets to credit risk ratio from 2017 through 2021:

 143
Table of Contents

Selected Credit Ratios

The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.

The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

     
 As of December 31,
 2019 2020 2021
 (in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding            
Allowance for credit losses  22,626   25,640   29,723 
Total loans outstanding  347,257   417,822   493,355 
Credit ratio  6.52%  6.14%  6.02%
Nonaccrual loans to total loans outstanding            
Total nonaccrual loans outstanding  23,426   23,176   26,923 
Total loans outstanding  347,257   417,822   493,355 
Credit ratio  6.75%  5.55%  5.46%
Allowance for credit losses to nonaccrual loans            
Allowance for credit losses  22,626   25,640   29,723 
Total nonaccrual loans outstanding  23,426   23,176   26,923 
Credit ratio  96.6%  110.6%  110.4%
Net charge-offs during the period to average loans outstanding            
Net charge-offs during the period  (14,705)  (15,297)  (12,904)
Average amount outstanding  324,190   394,542   471,068 
Credit ratio  4.5%  3.9%  2.7%
Commercial and industrial:            
Net charge-offs during the period  (5,713)  (4,617)  (5,153)
Average amount outstanding  132,372   176,750   214,286 
Credit ratio  4.3%  2.6%  2.4%
Real estate:            
Net charge-offs during the period  (108)  (232)  (167)
Average amount outstanding  38,107   42,368   51,883 
Credit ratio  0.3%  0.5%  0.3%
Installment loans to individuals:            
             
 144
Table of Contents

Net charge-offs during the period  (8,834)  (10,433)  (7,576)
Average amount outstanding  151,735   173,336   202,578 
Credit ratio  5.8%  6.0%  3.7%
Lease financing:            
Net charge-offs during the period  (49)  (15)  (8)
Average amount outstanding  1,975   2,089   2,321 
Credit ratio  2.5%  0.7%  0.3%

Allowance for credit losses to total loans outstanding

In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.

In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.

Nonaccrual loans to total loans outstanding

In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.

In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.

Allowance for credit losses to nonaccrual loans

In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.

In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.

Net charge-offs during the period to average loans outstanding

In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.

Commercial and Industrial Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.

 145
Table of Contents

Real Estate Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.

Installment Loans to Individuals

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.

Lease Financing Loans

In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.

In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.

4C. Organizational Structure

Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2021, Santander Spain held, directly and indirectly, 89.53% of our voting stock.

The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:

ActivityCountry of IncorporationOwnership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1)
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Credit Recovery ServicesBrazil100.00%
Santander Leasing S.A. Arrendamento Mercantil LeasingBrazil100.00%
Aymoré Crédito, Financiamento e Investimento S.A. FinancialBrazil100.00%
Santander Brasil Administradora de Consórcio Ltda. Buying clubBrazil100.00%
Santander Corretora de Câmbio e Valores Mobiliários S.A. BrokerBrazil100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A.HoldingBrazil100.00%
Sancap Investimentos e Participações S.A.HoldingBrazil100.00%
 146
Table of Contents

Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) HoldingBrazil100.00%
F1RST Tecnologia e Inovação Ltda.TechnologyBrazil100.00%
Rojo Entretenimento S.A.Other ActivitiesBrazil94.60%
Sanb Promotora de Vendas e Cobrança Ltda.Other ActivitiesBrazil100.00%
BEN Benefícios e Serviços S.A.Other ActivitiesBrazil100.00%
Esfera Fidelidade S.A.Other ActivitiesBrazil100.00%
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A.TechnologyBrazil80.00%
Paytec Tecnologia em Pagamentos Ltda.Other ActivitiesBrazil100.00%
SX Negócios Ltda.Other ActivitiesBrazil100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.) 
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)Credit Recovery ServicesBrazil100.00%
Liderança Serviços Especializados em Cobranças Ltda.Credit Recovery ServicesBrazil100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.)Asset ManagementBrazil100.00%
Controlled by Sancap Investimentos e Participações S.A. 
Santander Capitalização S.A.Savings and annuitiesBrazil100.00%
Evidence Previdência S.A. Social SecuritiesBrazil100.00%
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A.BankBrazil50.00%
Banco Hyundai Capital Brasil S.A. (current name of BHJV Assessoria e Consultoria Empresarial Ltda.)BankBrazil50.00%
Solutions 4 Fleet.Other ActivitiesBrazil80.00%
Controlled by Santander Leasing S.A. Arrendamento Mercantil
Banco Bandepe S.A.BankBrazil100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A. LeasingBrazil100.00%
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A. 
Toro Corretora de Títulos de Valores Mobiliários Ltda.BrokerBrazil60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A.BrokerBrazil100.00%
Controlled by Sancap 
 147
Table of Contents

Santander Auto S.A. Other ActivitiesBrazil50.00%
Consolidated Investment Funds
Santander Fundo de Investimento Unix Multimercado Crédito Privado Investment FundBrazil(a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior Investment FundBrazil(a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior Investment FundBrazil(a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado Investment FundBrazil(a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior Investment FundBrazil(a)
Santander Paraty QIF PLC (2) Investment FundBrazil(a)
Santander FI Hedge Strategies Fund (2) Investment FundBrazil(a)
BRL V - Fundo de Investimento Imobiliário-FIIReal Estate Investment FundBrazil(a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não PadronizadoInvestment FundBrazil(a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de InvestimentosInvestment FundBrazil(a)
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior Investment FundBrazil(a)
Verbena FCVS - Fundo de Investimento em Direitos Creditórios Investment FundBrazil(a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não PadronizadoInvestment FundBrazil(a)
(a)Company to which we are exposed or have rights to variable returns and have the ability to affect those returns by making certain decisions in accordance with IFRS 10 - Consolidated Financial Statements. We and/or our subsidiaries hold 100% of the quotas of these investment funds.
(1)This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
(2)Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund.

4D. Property, Plant and Equipment

We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 385 properties for the activities of our banking network and rent 1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

 148
Table of Contents

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5A. Operating Results

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”

Financial Presentation

We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.

The Getnet Spin-Off

We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.

Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.

For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

Principal Factors Affecting Our Financial Condition and Results of Operations

Impact of COVID-19

We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”

Brazilian Macroeconomic Environment

Overview

As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:

 149
Table of Contents

  As of and For the Year Ended December 31,
  2021 2020 2019
GDP growth(1)   4.6%  (4.1%)  1.2%
CDI Rate   4.4%  2.1%  6.0%
TJLP   5.3%  4.6%  5.6%
SELIC rate   9.25%  2.0%  4.5%
Selling exchange rate (at period end) R$ per U.S.$1.00   5.58   5.20   4.03 
Decrease (increase) in real rate against the U.S. dollar   7.4%  28.9%  4.0%
Average exchange rate R$ per U.S.$1.00(2)   5.40   5.16   3.94 
Inflation (IGP-M)   17.8%  23.1%  7.3%
Inflation (IPCA)   10.06%  4.5%  4.3%

Sources: BNDES, Brazilian Central Bank, FGV and IBGE.

(1)GDP growth for 2021 is based on Santander Brasil’s internal estimates. For 2020 the source is the IBGE’s revised series.
(2)Average of the selling exchange rate for the business days during the period.

General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the SELIC rate to 10.75% p.a. as of the date of this annual report..

The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial asset prices. Brazil’s economy has been severely affected by the COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.

Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.

Impact of COVID-19 on the Brazilian Economy

The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December

 150
Table of Contents

31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.

Interest Rates

An increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.

The following table presents the low, high, average and period-end SELIC rate since 2016, as reported by the Brazilian Central Bank:

 

Low

High(1)

Average(2)

Period-End

Year    
2016 13.7514.2514.1513.75
2017 7.0013.759.837.00
2018 6.507.006.756.50
2019 4.506.506.134.50
2020 2.004.502.812.00
2021  2.009.25 4.819.25
2022 (through February 22, 2022)  9.2510.759.86 10.75
(1)Highest month-end rate.
(2)Average of month-end rates during the period.

Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2021, a 100-basis point increase in the yield curve would have resulted in R$ 553 million decline in the net interest income over a one-year period.

Credit Volume and Quality in Brazil

In 2019, the ratio of nonperforming loans to individuals reached 3.5% and the household debt burden reached 23.9% of household income. In 2020, outstanding credit increased 15.6% as a result of credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).

 

2021

2020

2019

 (in billions of R$)
Total Credit Outstanding (*) 4,6843,2613,471
Earmarked credit 1,8811,5001,465
Non-earmarked based credit 2,8031,7612,006
of which:   
Corporate 1,291814905
Individuals (retail) 1,5139481,101

(*) Some figures may be subject to revision by the Brazilian Central Bank.

Source: Brazilian Central Bank.

 151
Table of Contents

Foreign Exchange Rates

Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2021, we recorded foreign exchange exposure of R$117,400 million, foreign exchange exposure of R$ (124,437) million in 2020 and foreign exchange exposure of R$11,208 million in 2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”

The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a small depreciation of 1.5% to R$3.31 per U.S.$1.00 as of December 31, 2017. The real depreciated further against the U.S. dollar throughout 2018, with a depreciation of 17%, On December 31, 2018, the exchange rate was R$3.87 per U.S.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.

Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.

Inflation

In recent years, inflation had been oscillating around the target, which is set by the CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases were defined for the targets until 2024, when the goal will be 3.00%.

Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was close to the top of the fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the indexation of a significant portion of contracts for services to the inflation levels of the previous years, the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, inflation rate reached a level of 10.7%, the highest on record since May 2005 and well above the Brazilian Central Bank’s inflation target of 4.5%. In 2017, inflation fell substantially as a result of the consistent efforts of the Brazilian Central Bank to reduce the inflation rate, ending the year at 2.95%. As a result, the Brazilian Central Bank was required to send a letter to the CMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the monetary policy in Brazil. In 2019, as a result of temporary price shocks affecting edible items, inflation ended the year slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and reached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which

 152
Table of Contents

increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.

The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.

Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.

Reserve and Lending Requirements

The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of operations by limiting or expanding the amounts available for commercial credit transactions.

The table below shows the requirements for reserves and credit to which we are subject for each financing category:

Product As of December 31, 2021 As of December 31, 2020 Form of Required Reserve Yield
Demand deposits            
Rural credit loans(1)   25.00%  27.50% Loans Cap rate: 7.5% p.a.
Microcredit loans(2)   2.00%  2.00% Loans Cap rate: 4.0% p.m.
Reserve requirements(3)   21.00%  21.00% Cash Zero
Additional reserve requirements   0.00%  0.00% Cash n/a
Free funding(4)   52.00%  49.50%    
             
Savings Accounts            
Mortgage loans   65.00%  65.00% Loans Cap rate (SFH): TR + 12.0% p.a.
Reserve requirements(2)   20.00%  20.00% Cash TR + 6.17% or TR + 70.00% of the target SELIC
Additional reserve requirements   0.00%  0.00  Cash n/a
Free funding(4)   15.00%  15.00%    
             
Time deposits            
Reserve requirements(3)   20.00%  17.00% Cash SELIC
In cash or other instruments   0.00%  0.00% Cash or other instruments n/a
In cash   0.00%  0.00% Cash n/a
Additional reserve requirements   0.00%  0.00% Cash n/a
Free funding(4)   80.00%  83.00%    

(1)Rural credits are credits granted to farmers in the amount R$13.6 billion on December 31, 2021 and December 31, 2020, respectively.
(2)Microcredit is a credit granted to very small businesses, with an open position of R$1.3 billion on December 31, 2021 and December 31, 2020, respectively.
(3)Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145.
(4)Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category.

 153
Table of Contents

Taxes

See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”

Hedging in Foreign Investments

We operate two foreign branches, one in the Cayman Islands, and another one in Luxembourg. We previously operated an independent wholly-owned subsidiary in Spain, named Santander Brasil Estabelecimiento Financiero de Credito, EFC, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. Under Brazilian income tax rules, Law No. 14,031, dated July 28, 2020, set that, from January 2021 until December 2021 50% of the foreign exchange variation of the portion of investments abroad that are subject to hedge must be computed in the determination of real profits and in the calculation of the taxable base of the social contribution over net income (Contribuição Social Sobre o Lucro Líquido), or “CSLL,” of an investing legal entity domiciled in Brazil. From January 2022, the foreign exchange variation of investments abroad is fully computed in the basis of the IRPJ and the CSLL. The reconciliation of our effective tax rate to the statutory tax rate is set forth in note 23b to our audited consolidated financial statements included elsewhere in this annual report. Santander EFC was operational from 2012 until 2020, when we approved its liquidation. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Foreign Subsidiary.”

Goodwill of Banco Real

We generated goodwill of R$27 billion as a result of our acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill for impairment at least annually or whenever there are indications of impairment. In 2021, 2020 and 2019, the recoverable goodwill amounts are determined from “value in use” calculations. For this purpose, we estimate cash flow for a period of five years. We prepare cash flow estimates considering several factors, including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate of, and long-term adjustments to, cash flows. These estimates rely on assumptions regarding the likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by an independent research company, which is reviewed and approved by the board of directors. Therefore, amortization of goodwill for tax purposes generates a permanent difference and, as a result, no record of the deferred tax liability.

The following table shows the main assumptions for the basis of valuation as of the dates indicated.

  2021 2020 2019
   (Value in use: cash flows)
Main Assumptions(*)            
Basis of valuation             
Period of the projections of cash flows(1)   5 years   5 years   5 years 
Growth rate(2)   4.0%  4.3%  4.8%
Discount rate(3)   12.3%  12.4%  12.5%
(1)The projections of cash flow are prepared using internal budget and growth plans of management, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.
(2)The growth rate is calculated based on a real growth rate of 1% p.a. plus annual long-term inflation in 2021.
(3)The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 18.77% in 2021, 19.56% in 2020 and 17.88% in 2019.
(*)The recoverability test was performed during the second half of 2021. Goodwill is tested for impairment on an annual basis or whenever there is any indication of a potential impairment. At the end of each year, a qualitative assessment is carried out in order to check the existence of signs of impairment. For the years 2021, 2020 and 2019, no indication of impairment was identified.

We performed a sensitivity test in the goodwill impairment analysis considering the main assumptions that could reasonably be expected to possibly change, as required by the IFRS. Accordingly, we applied such a test considering the discount rate and perpetuity growth rate as the main assumption subject to reasonably possible change and we did not identify any impairment to goodwill.

 154
Table of Contents

Other Factors Affecting the Comparability of Our Results of Operations

In addition, our results of operations have been influenced and will continue to be influenced by:

●The Spin-Off of Getnet, as described under “Item 5. Operating And Financial Review And Prospects—A. Operating Results—Financial Presentation—The Getnet Spin-Off”; and
●the other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events” and note 3, to our audited consolidated financial statements included elsewhere in this annual report.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB and the principalIASB.

General

Our main accounting policies are described in Notenote 2 - Accounting policies and method of measurement to our audited consolidated financial statements. The following discussion describes those areas that require use of certain critical accounting estimates and the most judgmentexercise of judgement regarding matters that are inherently uncertain and that impact our financial condition and results of operations. In this regard, if management decides to change these estimates, or involveapply such estimates for different durations a higher degreematerial impact on our financial condition and results of complexityoperations could result.

Management bases its estimates and judgments on historical experience and on various other factors and circumstances, which are believed to be reasonable. Actual results may differ from these estimates if assumptions and conditions change. Any judgments or changes in assumptions are submitted to the audit committee and to our regulatory authorities and are disclosed in the application of the accounting policies.

related notes to our audited consolidated financial statements, included elsewhere in this annual report.

Fair Value of Financial Instruments

We record a financial asset as measured at (i) fair value through profit or loss, (ii) fair value through other comprehensive income or (iii) amortized cost. In general, financial liabilities are measured at amortized cost. Exceptions include financial liabilities measured at: (i) fair value through profit or loss, (ii) other financial liabilities at fair value through profit or loss and (iii) financial liabilities designated as hedge items (or hedging instruments) measured at fair value. See “Item 3. Key Information—A. Selected Financial Data—Balance Sheet Data.”

The fair value of a financial instrument is the price that would be received to sell an asset, or the amount paid to transfer a liability in an orderly transaction between market participants, atin a transaction on the measurement date of which fair value is measured, regardless of whether that price is directly observable or estimated using another valuation technique.

In estimating the fair value of an asset or a liability, we take into account relevant characteristics if market participants would also consider the same when pricing the asset and liability at the time fair value is measured. An assumed transaction like this establishes an asset sale price or transfer cost for the liability. In the absence thereof, price is established using valuation techniques commonly used by financial markets.

For further information, see notes “5 - Loans and amounts due from credit institutions”; “6 - Debt instruments”; “7 - Equity instruments”; “8 - DerivativeWe use derivative financial instruments for both trading and Short positions”; “9 - Loansnon-trading activities. The main types of derivatives used are interest rate swaps, options and advances to clients”; “26 - Other Comprehensive Income”;future rate agreements; foreign exchange forwards, futures, options, and “30 - Fairswaps; cross-currency swaps; equity index futures; and equity options and swaps. The fair value of exchange-traded derivatives is calculated based on published price quotations. The fair value of over-the-counter derivatives is calculated as the sum of expected future cash flows arising from the instrument, discounted to the (“present value” or “theoretical close”) at the date fair value is measured using techniques commonly applied by financial assetsmarkets as follows:

●The present value method is used for financial instruments permitting static hedging (principally, forwards and swaps), loans and advances. This method uses expected future cash flows that are discounted through interest rate curves of the applicable currencies. These interest rate curves are generally observable market data.
 155
Table of Contents
●The Black-Scholes model is used to value financial instruments requiring dynamic hedging (principally structured options and other structured instruments). Certain observable market inputs are used in the model to generate variables such as the bid-offer spread, exchange rates, volatility, correlation between indexes and market liquidity, as appropriate.
●The present value method and the Black-Scholes model are used for valuing financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors. Main inputs used in these models are principally observable market data, including appropriate interest rate curves, volatilities, correlations and exchange rates.
●Dynamic models similar to those used in measuring of interest rate risk for measuring credit risk of linear instruments (such as bonds and fixed-income derivatives). In the case of non-linear instruments, if the portfolio is exposed to credit risk (such as credit derivatives), the joint probability of default is determined using the Standard Gaussian Copula model. The main inputs used to determine the underlying cost of credit for credit derivatives are quoted credit risk spreads, and the correlation between quoted credit derivatives of various issuers.
●The determination of fair value requires us to make certain estimates and assumptions. If quoted market prices are unavailable, fair value is then calculated using widely accepted pricing models that consider contractual terms and prices of the underlying financial instruments, yield curves, observable market data and other relevant factors. The use of different estimates or assumptions in these pricing models could lead to a different valuation being recorded in our consolidated financial statements.

See note 2e (i) to our audited consolidated financial statements included elsewhere in this annual report for additional information on valuation techniques, details on our modeled main assumptions and liabilities”estimates and a sensitivity analysis for the valuation of financial instruments to those changes in “Item 18. Financial Statements,”.

main assumptions and estimates and note 46.c.8 of our consolidated financial statements for a sensitivity analysis relating to the valuation of financial instruments to those changes in main assumptions.

Impairment Losses on Financial Assets

Definition

A financial asset is considered impaired when there is objective evidence that shows events have occurred which:

·●give rise to an adverse impact on future cash flows estimated at the transaction date, in the case of debt instruments (loans and debt securities), give rise to an adverse impact on the future cash flows that were estimated at the transaction date;;

·●in the case offor equity instruments, mean that their carrying amount may not be fully recovered;

·●arise from the violation of terms of loans; and
●during the bankruptcy process.

As a general rule, the value adjustment of impaired financial instruments is recognized in the consolidated income statement for the period in which the impairment becomes evident. The reversal, if any, is recognized in the same manner for previous statements for which the impairment is reversed or reduced. Financial assets are deemed to be impaired, and the accrued interest suspended, when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts and on the dates indicated in the loan agreement after taking into account collateral guarantees received to secure (fully or partially) the collection of related balances.

For all non-performing past due assets, any collections relating to impaired loans and advances are used to recognize the accrued interest. The remainder, if any, is applied to reduce the principal amount outstanding Debt Instruments Carried at Amortized Cost.

Debt Instruments Carried at Amortized Cost

The impairment loss amount incurred for determining a recoverable amount on a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its estimated future cash flows (excluding future credit losses not incurred). This cash flow is discounted to the financial asset’s

 156
Table of Contents

original effective interest rate (or the effective interest rate at initial recognition), which is presented as a reduction of the asset balance and recorded on income statements.

In estimating the future cash flows of debt instruments, the following factors are taken into account:

·●arise duringall amounts that are expected to be obtained over the Bankruptcy process.remaining life of the instrument, (such as provided guarantees);
●impairment loss considers the likelihood of collecting accrued interest receivable;
●various types of risk to which each instrument is subject;
●circumstances in which collections will foreseeably be made; and
●that cash flows are subsequently discounted using the instrument’s effective interest rate.

A debt instrument is impaired due to insolvency when there is evidence of deterioration in the obligor’s ability to pay, either because such obligor is in arrears or for other reasons. An example is recoverable losses resulting from a materialization of the insolvency risk of obligors (credit risk).

For further information, see notes “5 - LoansWe have certain policies, methods and procedures for minimizing our exposure to counterparty insolvency. These policies, methods and procedures are applied in the granting, examination and documentation of debt instruments, contingent liabilities and commitments; identification of recoverable amounts dueand calculation of amounts necessary to cover the related credit risk.

The procedures employed in the identification, measurement, control and reduction of exposure to credit risk, are applied on an individual basis or through grouping similar credit risk characteristics.

Customers with individual management include wholesale segment customers, financial institutions and certain companies. Risk management is performed through an analysis complemented by tools to support a decision-making model based on credit risk assessment using internal procedure.

Customers with standardized management include individuals and companies not classified as individual customers. Risk management models are based on automated decision-making and risk assessment procedure, which are complemented by teams of analysts specializing in credit risk. The credits related to standardized customers are usually considered to be not recoverable when they have experience of historical loss and a delay greater than 90 days.

Methodology for Impairment Losses

We evaluate all loans in respect of the provision for impairment losses from credit institutions”; “6 - Debt instruments”; “7 - Equity instruments”; “8 - Derivativerisk. Loans are either individually evaluated for impairment or collectively evaluated by grouping similar risk characteristics for loans accounted as amortized cost. Loans that are individually evaluated for impairment losses are not evaluated collectively.

To measure the impairment loss on loans individually evaluated for impairment, we consider borrower conditions, such as their economic and financial instrumentssituation; level of indebtedness; ability to generate income; cash flow; management; corporate governance and Short positions”;quality of internal controls; payment history; industry expertise; and “9 - Loanscontingencies and advancescredit limits. The characteristics of assets are also considered, which include: the nature and purpose; type; sufficiency and liquidity level guarantees; total amount of credit; historical experience of impairment; and other circumstances known at the time of evaluation.

To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity to clients”credit risk, or in “Item 18. Financial Statements,”.

other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.

Impairment loss is calculated using statistical models that consider the following factors:

●Exposure at Default or “EAD” is the amount of risk exposure at the date of default by the counterparty. In accordance with IFRS, the exposure at default used for this calculation is also the current exposure, as reported in the balance sheets.
 157
Table of Contents
●Probability of Default or (“PD”) is the probability of the borrower failing to meet its principal and/or interest payment obligations, PD is measured using an annual time horizon to quantify the probability of the borrower defaulting in the coming year. A loan is in default if either the principal or interest is past due by ninety days or more or the loan is current but there are doubts as to the solvency of the counterparty (subjective doubtful assets).
●Loss Given Default, or (“LGD,”) is the loss arising in the event of default, LGD calculation is based on the net charge offs on defaulted loans, taking into account the guarantees/collateral associated with the loans, the income and expenses associated with the recovery process and the timing of default.
●Loss Identification Period, or (“LIP,”) is the time period between the occurrence of a loss event and the identification of an objective evidence of this loss. In other words, it represents the time horizon from the credit loss occurrence until the effective confirmation of such loss.

Moreover, prior to loans be written-off (which is only done after the Bank has completed all recovery efforts and after about 360 days late), a fully registered provision (allowance for loan losses) of the loan’s remaining balance applies. As a result, this provision fully covers the losses. Thus, the Bank understands that its loan loss allowance methodology has been developed to meet its risk metrics and capture loans that could potentially become impaired.

Impairment

Certain assets, such as intangible assets, including goodwill, equity method investments, financial assets not carried at fair value through profit or loss and other assets are subject to impairment review.

132 

Table of Contents

We record impairment charges when we believe there is objective evidence of impairment, or that the cost of the assets may not be recoverable.

The assessment of what constitutes an impairment is based on the following models:

We test goodwill for impairment on an annual basis, or more frequently if events or changes in economic circumstances, such as an adverse change in Santander Brasil’s business condition or observable market data, indicate that these assets may be impaired. The recoverable amount determination used in the impairment assessment requires prices of comparable businesses, present value or other valuation techniques, or a combination thereof, requiring management to make subjective judgments and assumptions. Events and factors that may significantly affect estimates include, among other things, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and technology, and changes in discount rates and specific industry or market sector conditions. If an impairment loss is recognized for goodwill, it may not be reversed in a subsequent period. The recognition of impairment is applicable when significant changes occur in the main estimates used to evaluate the recoverable amounts of the cash-generating unit recoverable amount below the carrying amount. Based on the assumptions described above, no impairment of goodwill in 2021, 2020 and 2019 was identified.

Given the level of uncertainty related to these assumptions, our officers carry out a sensitivity analysis using reasonably possible changes in the key assumptions on which the recoverable amount of the cash-generating units are based in order to confirm that the recoverable amounts still exceed the carrying amounts.

All debt and equity securities (other than those carried at fair value through profit or loss) are subject to impairment testing every reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred.

Evaluation for impairment includes both quantitative and qualitative information. For furtherdebt securities, such information seeincludes actual and estimated incurred credit losses indicated by payment default, market data on (estimated) incurred losses and other current evidence that the issuer may not pay amounts when due. Equity securities are impaired when management believes that, based on a significant or prolonged decline of fair value below the acquisition price, there is sufficient reason to believe that the acquisition cost may not be recovered, “Significant” and “prolonged” are interpreted on a case-by-case basis for specific equity securities.

Upon the impairment of either debt or equity instruments, the amount considered as effective loss is recognized in profit or loss. In addition, we did not identify any impairment of property, plant and equipment in 2021, 2020 and 2019 (see notes “13 - Intangible assets - Goodwill”14, 13 and “24 - Tax assets and liabilities”12, respectively, to our audited consolidated financial statements included elsewhere in “Item 18. Financial Statements”this annual report).

 158
Table of Contents

Post-employment Benefit Plan

The post-employment benefits plans includebenefit plan includes the following obligations undertaken by us: (i) to supplement the public social security system benefits, and (ii) medical assistance in the event of retirement, permanent disability or death for eligible employees and their direct beneficiaries.

Defined Contribution Plan

A defined contribution plan is the post-employment benefit plan for which we and our controlled entities as employers make pre-determined contributions to a separate entity and, in turn, have no legal or constructive obligation to pay further contributions if the separate entity does not hold sufficient assets to honor all benefits relating to the services rendered in the current and prior periods.

These contributions are recognized as personnel expenses in the consolidated income statement.

Defined Benefit Plan

A defined benefit plan is the post-employment benefit plan as is shown in note 21 to our audited consolidated financial statements. For further information, see notes “22 - Provisionsthis type of plan, the sponsoring entity’s obligation is to provide the agreed benefits to employees, assuming the potential actuarial risk that benefits will cost more than expected.

The amendment of IAS 19 established fundamental changes in the accounting for pensionsand disclosure of employee post-employment benefits such as removing the mechanism of the corridor approach for recording of the obligation of the plans. Fundamental changes also include changes in the criteria for recognition of conventional interest of plan assets (valuation based on the discount rate actuarial liability).

The adoption of this accounting policy involved, fundamentally, full recognition of liabilities on account of actuarial losses (actuarial deficit) not recognized previously, against the stockholders’ equity (Statements of Comprehensive Income).

Main Definitions:

●The present value of the defined benefit obligation is the present value of expected future payments required to settle the obligation resulting from employee service in the current and past periods, without deducting any plan assets.
●Deficit or surplus is: (a) the present value of the defined benefit obligation, less (b) the fair value of plan assets.
●The sponsoring entity may recognize the plan’s assets in the balance sheet when they meet the following characteristics: (i) the assets of the fund are sufficient to meet all employee benefit plan or sponsor obligations; or (ii) the assets are returned to the sponsoring entity in order to reimburse it for employee benefits already paid.
●Actuarial gains and losses are changes in present value of defined benefit obligation resulting from: (a) adjustments due to experience (the effects of differences between the actuarial assumptions adopted and what has actually occurred); and (b) effects of changes in actuarial assumptions.
●Current service cost is the increase in the present value of the defined benefit obligation resulting from employee service in the current period.
●The past service cost is the change in present value of defined benefit obligation for employee service in prior periods resulting from a change in the plan or reductions in the number of employees covered.

Post-employment benefits are recognized in the income statement within “Interest expense and similar obligations”charges” and “Provisions (net).”

The defined benefit plans are recorded based on an actuarial study, and conducted by an external consultant, at the end of each year to therein be effective for the subsequent period.

 159
Table of Contents

Revised Accounting Treatment of Certain Energy Contracts

In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in “Item 18. Financial Statements”.these transactions are recorded in equity accounts.

To improve comparability, the amounts of principal of energy trading transactions recorded in equity accounts were deducted from “Derivatives—Forward and Other Contracts” in amounts of R$2,623.1 million and R$1,624.8 million as of December 31, 2020 and 2019, respectively. These deductions had a corresponding impact on our total assets and liabilities as of December 31, 2020 and 2019 as well as on "Financial assets measured at fair value in profit or loss held for trading" and "Financial liabilities measured at fair value in Income Held for Trading" in the statement of cash flows for the years ended December 31, 2020 and 2019. There was no change in the balance of stockholders' equity or income. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.

New Accounting Pronouncements

Standards

The new accountingIFRS standards which will come into forceeffective after December 31, 2019January 1, 2022 are mentioned in our audited consolidated financial statements included in this annual report. For further information, see note “1 - Introduction, basis of presentation of the consolidated financial statements and other information”1 to our audited consolidated financial statements.

statements included elsewhere in this annual report.

All accounting policies and measurement bases with a material effect on the consolidated financial statements for 20192021 were applied in the preparation of such financial statements.

 160
Table of Contents

 

133 

Table of Contents

Results of Operations for the Years Ended December 31, 2019, 20182021, 2020 and 2017

2019

Executive Summary – Santander Brasil Results at a glance

Total Incomeamounted to R$58,76963,926 million in 2019,2021, an increase of 18.7%32.5% in comparison with the year ended December 31, 2018, reflecting2020, primarily due to the good performanceeffects of our business lines.the hedge for investment abroad, which had a significant impact in 2020 due to the exchange rate variation and the growth of the net interest income due to the increase in the volume of the credit portfolio, as a result of greater commercial activity supported by the growth of loyal customers and new acquisitions. Excluding the effects of the hedge for investment abroad, our growth in total income would have amounted tobe R$60,0332,102 million in the year, an increase of 8.4% compared to3.4% over the same periodyear ended December 31, 2020. Total income excluding the effects of the previous year.hedge for investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non- GAAPNon-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures”.Measures.”

Consolidated ProfitNet Income for 20192021 totaled R$16.615,559 million, in the year ended December 31, 2019, 29.9%2021, an increase of 15.7% over the year ended December 31, 2018, as a result of an2020, mainly due to the increase in net interest income, due to higher transactionality, and net fees and commissions as well as lower losses inthe performance of gains/losses on financial assets and liabilities (net) and exchange differences (net).

net interest income.

 Loan Portfolio to customers amounted R$347493 billion as of December 2019,2021, an increase of 7.9%18.1% compared to December 31, 2018,2020, mainly due to anthe increase in loans to individualscommercial and consumer finance portfolio.industrial, and individual portfolios.

Credit Qualityremains at reasonable levels and supportsupports our growth.growth, Impaired assets to credit risk ratio was 6.0%5.0% for the year ended December 31, 2019,2021, a 0.10.3 p.p. decrease as compared the previous year.Coverage ratio was 96.6%110.4% in the year ended December 31, 2019,2021, a 5.80.2 p.p. decrease to 102.4%increase from 110.6% the year ended December 31, 2018.2020. Our Basel Capital adequacy ratio was 15.04%14.9% in the year ended December 31, 2019,2021, a decrease of 0.02%0.3% compared to the year ended December 31, 2018. 2020.

 

Deposits from Brazilian Central Bank and deposits from credit institutions plus customer deposits increased by 8.1% to2.2% reaching R$436 590 billion in 2019.

2021.

 

Results of Operations

 

The following table presents our consolidated results of operations for the years ended December 31, 2019, 20182021, 2020 and 2017:2019:

  For the Year Ended December 31,
        % Change % Change
  2019 2018 2017  
        2019/2018 2018/2017
  (in millions of R$, except percentages)
Net interest income  44,321   41,921   34,946   5.7   20.0 
Income from equity instruments  19   33   83   (42.0)  (60.8)
Income from companies accounted for by the equity method  149   66   72   126.6   (8.4)
Net fee and commission income  15,713   14,132   12,722   11.2   11.1 
Gains/losses on financial assets and liabilities (net) and exchange differences (net)  (326)  (5,589)  1,574   (94.2)  (455.1)
Other operating income (expenses)  (1,108)  (1,056)  (672)  4.9   57.1 
Total income  58,769   49,507   48,725   18.7   1.6 
Administrative expenses  (16,942)  (16,792)  (16,121)  0.9   4.2 
Depreciation and amortization  (2,392)  (1,740)  (1,662)  37.5   4.7 
Provisions (net)  (3,682)  (2,000)  (3,309)  84.1   (39.6)
Impairment losses on financial assets (net)  (13,370)  (12,713)  (12,338)  5.2   3.0 
Impairment losses on other assets (net)  (131)  (508)  (457)  (74.1)  11.3 
Other nonfinancial gain (losses)  20   156   (324)  (86.9)  (148.2)
Operating profit before tax  22,273   15,910   14,514   40.0   9.6 
Income tax  (5,642)  (3,110)  (5,376)  81.4   (42.2)
Consolidated profit for the year  16,631   12,800   9,138   29.9   40.1 

  For the Year Ended December 31,
  

 

2021

 

 

2020

 

 

2019

 

% Change

2021/2020

 

% Change

2020/2019

  (in millions of R$, except percentages)
Net interest income  51,318   44,443   44,321   15.5   0.3 
Income from equity instruments  90   34   19   166.8   78.9 
Income from companies accounted for by the equity method  144   112   149   28.4   (24.8)
Net fee and commission income  (expense)  15,273   16,228   15,713   (5.9)  3.3 
Gains (losses) on financial assets and liabilities (net) and exchange differences (net)  (1,781)  (11,703)  (326)  (84.8)  3,489.9 
Other operating income (expenses) (net)  (1,119)  (873)  (1,108)  28.2   (21.2)
Total income   63,926   48,242   58,769   32.5   (17.9)
Administrative expenses  (17,316)  (17,115)  (16,942)  1.2   1.0 
Depreciation and amortization  (2,434)  (2,579)  (2,392)  (5.6)  7.8 
Provisions (net)  (2,179)  (1,657)  (3,682)  31.6   (55.0)
Impairment losses on financial assets (net)  (17,113)  (17,450)  (13,370)  (1.9)  30.5 
Impairment losses on other assets (net)  (166)  (85)  (131)  95.3   (35.4)
Other non-financial gains (losses)  33   308   20   (89.5)  1,404.1 
Operating income before tax    24,750   9,664   22,273   156.1   (56.6)
Income taxes  (9,191)  3,787   (5,642)  (342.7)  (167.1)
Consolidated net income for the year  15,559   13,451   16,631   15.7   (19.1)

 

134 

 161
Table of Contents

Table of Contents

Consolidated Net Income for the Year

Our consolidated profitnet income for the year ended December 31, 2021, was R$15,559 million, an increase of R$2,108 million, or 15.7%, as compared to our consolidated net income of R$13,451 million for the year ended December 31, 2020, as a result of an increase in net interest income of R$6,875 million, or 15.5%, to R$51,318 million in the year ended December 31, 2021 from R$44,443 million in the year December 31, 2020 to driven by our credit portfolio.

Our consolidated net income for the year ended December 31, 2020 was R$13,451 million, a decrease of R$3,180 million, or 19.1%, as compared to our consolidated net income of R$16,631 million for the year ended December 31, 2019 was R$16,631 million,as a result of an increase of R$3,832 million, or 29.9%, as compared to our consolidated profit of R$12,800 million for the year ended December 31, 2018 as a result of:

(i)an increase of R$2,400 million in net interest income mainly due to the growth in our loan portfolio driven by our commercial banking segment;

(ii)an increase of R$1,581 million in net fees and commission, primarily as a result of an increase of R$722 million in revenues from credit and debit cards, an increase of R$417 million in revenues from sale of insurance and premium bonds, an increase of R$295 million in revenues from capital markets and an increase of R$138 million in revenues from current account services. These increases were explained for the expansion of our customer base, greater loyalty and higher transactionality.

Our consolidated profit for the year ended December 31, 2018 was R$12,800 million, an increase of R$3,662 million, or 40.1%, as compared to our consolidated profit of R$9,138 million for the year ended December 31, 2017 as a result of:

(i)       an increase of R$6,975 million4,080 in net interest income mostly driven by growth in our loan portfolio driven by our commercial banking segment;

(ii)       an increase of R$1,410 million in net fees and commissions, primarily as a result of: (a) an increase of R$571 million in revenues from credit and debit cards; (b) an increase of R$370 million in revenues from current account services; and (c) an increase of R$354 million in revenues from insurance and premium bonds. These increases were in turn due to an 11.6% increase in our total active customer base and a 24.8% increase in the number of loyal customers; and

(iii) a decrease of R$7,163 million in gains/impairment losses on financial assets and liabilities (net) and exchange differences (net), both of which includemainly due to the effectsglobal COVID-19 pandemic that resulted in a R$3,200 million additional allowance for potential loan losses. This was partially offset by the growth of the hedge for investment held abroad.credit portfolio.

Net Interest Income

Net interest income for the year ended December 31, 20192021, was R$44,32151,318 million, a 5.7%15.5% or R$2,4006,875 million increase from R$41,92144,443 million for the year ended December 31, 2018.2020. This increase was mainly explained bydue to a 7.9%15.7% increase in the volume of our credit portfolio driven by individuals and consumer finance.

our Commercial Banking unit.

Average total earning assets in 20192021 were R$655.2843.2 billion, a 7.8%12.4% or R$47.193.2 billion increase from R$608.0750.1 billion in 2018.2020. The principal drivers were an increase of R$45.976.8 billion, or 81.8%20.0%, in the average of loans and amounts due from credit institutions, a R$18.5 billion increase in average of loans and advance to customers and aan R$14.721.3 billion increase in average of debit instruments, which were partially offset by a R$32.3 billion decrease in average of cash on balances with the Brazilian Central Bank.debt instruments. Net yield (the net(net interest income divided by average earning assets) was 6.8%5.86% in 20192021 compared to 6.9%5.93% in 2018, an2020, a decrease of 0.10.07 p.p.

Average total interest-bearing liabilities in 20192021 were R$491.2647.7 billion, a 6.0%13.0% or R$27.874.3 billion increase from R$463.4573.4 billion in 2018.2020. The main driversdriver of this growth werewas an increase of R$18.040.1 billion in customerCustomers deposits an increase ofand R$5.337.4 billion in deposits from the Brazilian Central Bank and deposits from credit institutions, and an increaseas a result of R$4.7 billiona shift in marketable debt securities.

investor preferences toward more stable instruments.

Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was 5.3%4.8% in 2019 as compared to 5.4% in 2018,2021, mainly due to a decreasethe increase in the costSELIC rate during the year ended December 31, 2021, from 2.0% as of funding, associated with the overall reduction in Brazil’s interest rate from 6.50% in 2018 to 4.5% in 2019.

December 31, 2020 and 9.25% as of December 31, 2021.

Net interest income for the year ended December 31, 20182020, was R$41,92144,443 million, a 20.0%0.3% or

135 

Table of Contents

R$6,975122 million increase from R$34,94644,321 million for the year ended December 31, 2017.2019. This increase was mainly due to an 11.6%a 20.3% increase in the volume of our credit portfolio which was primarily concentrated indriven by our commercialglobal wholesale banking segment, and which was partially offset a decrease in our revenues from deposits as a result of the interest rate being lower in the fiscal year ended December 31, 2018 than the fiscal year ended December 31, 2017.

segment.

Average total earning assets in 20182020 were R$608.0750.1 billion, a 9.3%14.5% or R$51.894.9 billion increase from R$556.2655.2 billion in 2017.2019, The principal drivers were an increase of R$32.6 billion increase in the average of loans and amounts due to credit institutions, a R$26.861.2 billion, or 9.7%18.9%, in the average of loans and advancesadvance to customers aand an R$17.324.8 billion increase in average of debt instruments , which were partially offset by a R$ 24.3 billion decrease in average of cash on balances with the Brazilian Central Bank.instruments. Net yield (the net interest income divided by average earning assets) was 6.9%5.9% in 20182020 compared to 6.4%6.8% in 2017, an increase2019, a decrease of 0.50.8 p.p.

Net yield (net interest income divided by average earning assets) was 5.9% in 2020 compared to 6.8% in 2019, a decrease of 0.8 p.p.

Average total interest-bearing liabilities in 20182020 were R$463.4573.4 billion, an 11.2%a 16.7% or R$46.682.2 billion, increase from R$416.8491.2 billion in 2017.2019. The main driversdriver of this growth werewas an increase of R$41.376.3 billion in customer deposits, an increase of R$13.4 billiongiven the shift in deposits from the Brazilian Central Bank and deposits from credit institutions and an increase of R$2.4 billion in subordinated debts, which were offset by a decrease of R$10.5 billion in marketable debt securities.

investor assets toward more stable instruments.

Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was 5.4%5.2% in 2018, as compared2020, mainly due to 4.1% in 2017, mainly duelower share of our Commercial Banking segment accounting for a greater share of in our total results and a decreasethe effect of the reduction in the costSELIC interest rate in the year ended December 31, 2020 from 4.5% as of funding, associated with the overall reduction in Brazil’s interest rate.December 31, 2019 to 2.0% as of December 31, 2020.

Income from Equity Instruments

Income from equity instruments for the year ended December 31, 20192021, totaled R$1990 million, a R$1456 million decreaseincrease from R$3334 million for the year ended December 31, 2018,2020, mainly due to lower dividends receivedhigher dividend gains from an investment fund, Santander Fundo de Investimento GuarujáAmazonas Multimercado Crédito Privado de Investimento no Exterior.Exterior, as a result of gains in the equities positions towards derivatives hedge, R$84.8 million.

 

 162
Table of Contents

Income from equity instruments in 2018,for the year ended December 31, 2020, totaled R$3334 million, a R$5015 million decreaseincrease from R$8319 million for the year ended December 31, 2017. This decrease was primarily2019, mainly due to higher dividend gains from the Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior as a receiptresult of dividends of Rio Alto Gestão de Creditos e Participações S.A. that did not occurgains in 2018.the equities positions towards derivatives hedge.

 

Income from Companies Accounted for by the Equity Method

Income from companies accounted for by the equity method for the year ended December 31, 20192021 was R$149144 million, ana R$8432 million increase from R$66112 million for the year ended 2018,December 31, 2020, mainly due to an increase of R$59 million in the result of operations of Banco RCI Brasil S., a jointly-controlled company, an increase of R$1923.5 million in the results of operations of Tecban (Tecnologia Bancária S.A.), a jointly-controlled company and an increase of R$127.0 million in the results of operations of Webmotors S.A., aboth jointly-controlled company. These improved results were partially offset by a decrease of R$5 million in the results of operations of Gestora de Inteligência de Crédito, a jointly-controlled company and a R$2 million reduction in the results of operations of Santander Auto S.A. a jointly-controlled company.

companies.

Income from companies accounted for by the equity method for the year ended December 31, 20182020 was R$66112 million, a R$637 million decrease from R$72149 million for the year ended December 31, 2017. This increase was2019, mainly due to a decrease of R$33 million in the positive results of operations of Banco RCI Brasil S.A., and a decrease of R$8 million in the results of operations of Gestora de Inteligência de Crédito, both jointly-controlled company, whichcompany. These results were partially offset by negativean increase of R$10 million in the results of operations of WebmotorsTecban (Tecnologia Bancária S.A.), a jointly-controlled company.

136 

Table of Contents

Net Fee and Commission Income

Net fee and commission income for the year ended December 31, 20192021, reached R$15,71315,273 million, an increase of 11.2%a 5.9% or R$1,581956 million decrease compared to R$14,13216,229 million for the year ended December 31, 2018. This increase was2020, impacted mainly due to an increasedecrease of R$722 million in revenues from credit and debit cards, R$417 million in revenues from saledue to the higher card issuance costs as a result of the growth of the business and the impact of the Spin-Off of Getnet. This was partially offset by the growth of insurance, capitalization, asset management and premium bonds, R$295 million in revenues from capital markets and R$138 million from revenues from current account services.

pension funds.

Net feesfee and commissionscommission income for the year ended December 31, 20182020 reached R$14,13216,229 million, a 11.1%,3.3% or R$1,410515 million increase fromcompared to R$12,72215,713 million for the year ended December 31, 2017.2019, impacted mainly due to the increase in (i) trade finance, (ii) insurance and capitalization and (iii) credit and debit cards.

Net fees and commissions from trade finance totaled R$1,758 million for the year ended December 31, 2021, an increase of 1.0% compared to the year ended December 31, 2020.

Net fees and commissions from trade finance totaled R$1,740 million for the year ended December 31, 2020, an increase of 32.1% compared to the year ended December 31, 2019, This increase was mainly due toa result of higher demand for this service during the COVID-19 pandemic and the effects of variations in exchange rates.

Net fees and commissions from insurance and capitalization totaled R$4,311 million for the year ended December 31, 2021, an increase of R$571 million12.5% compared to the year ended December 31, 2020. This increase was mainly a result of an increase in revenues fromour credit life insurance portfolio.

Net fees and debit cards, R$370 million in revenues from current account services, R$354 million in revenuescommissions from insurance and premium bonds.

capitalization totaled R$3,831 million for the year ended December 31, 2020, a 6.8% increase compared to the year ended December 31, 2019, For the year ended December 31, 2019, the net fees and commissions from insurance and capitalization totaled R$3,586 million, a 13.2% increase compared to the year ended December 31, 2018. The performance in both periods was primarily driven by increases in our portfolio of credit life insurance.

Net fees and commissions from credit and debit cards totaled R$4,9863,666 million for the year ended December 31, 2019, an increase2021, a decrease of 16.9%28.8% compared to the year ended December 31, 2018.2020. This increasedecrease was asmainly a result of a higher turnover (R$236.4 billion in the fiscal year ended December 31, 2019 as compared to R$201.6 billion the fiscal year ended December 31, 2018.

Spin-Off of Getnet.

Net fees and commissions from credit and debit cards totaled R$4,2645,151 million for the year ended December 31, 2018,2020, an increase of 15.5%3.3% compared to the year ended December 31, 2017.2019, This increase was primarilymainly due to a higherrecovery of transaction volume (2,338.2 millionvolumes in the year ended December 31, 2018 as compared to 1,987.6 millionsecond half of 2020, despite the year ended December 31, 2017).

Net fees and commissions from insurance and premium bonds totaled R$3,586 million forreduction in volume during the year ended December 31, 2019, a 13.1% increase compared to the year ended December 31, 2018, mainly due to credit life insurance associated to the good evolutionfirst half of the portfolio.

Net fees and commissions from insurance and premium bonds totaled R$3,169 million for the year ended December 31, 2018, an increase of 12.6% compared to the year ended December 31, 2017, mainly due to credit life insurance associated with portfolio dynamics.

Revenues from fees and commissions charged in connection with capital markets totaled R$1,211 million for the year ended December 31, 2019, an increase of 32.2% compared to the year ended 2018, mainly due to an increase of R$263 million in revenues from securities underwriting and placement and an increase of R$32 million in revenues from administration and custody.

Revenues from fees and commissions charged in connection with capital markets totaled R$916 million for the year ended December 31, 2018, an increase of 4.9% compared to the year ended 2017, mainly due to an increase in revenues from securities placements.

Net fees and commissions from current account services totaled R$4,051 million for the year ended December 31, 2019, an increase of 3.5% compared to the year ended 2018 driven by the expansion of our active current account holders due to greater customer loyalty.

Net fees and commissions from current account totaled R$3,913 million for the year ended December 31, 2018, an increase of 10.4% compared to the year ended December 31, 2017 explained by the growth of digital transactions and the increase of active current account holders.

2020.

The following table reflects the breakdown of net fee and commission income for the yearyears ended December 31, 2019, 20182021, 2020 and 2017:2019:

 

  For the Year Ended December 31
  2019 2018 2017 % Change 2019/2018 Change% 2018/2017
    (in millions of R$, except percentages)
Current account services  4,051   3,913   3,544   3.5   10.4 
Collection and payment services  1,313   1,291   1,152   1.7   12.1 
Insurance and capitalization  3,586   3,169   2,815   13.2   12.6 
Asset Management and pension funds  1,434   1,289   824   11.2   56.4 
Credit and debit cards  4,986   4,264   3,692   16.9   15.5 
 163
Table of Contents

 

137 

Table of Contents

  For the Year Ended December 31
  2021 2020 2019 

% Change

2021/2020

 

% Change

2020/2019

    (in millions of R$, except percentages)  
Current account services  3,549   3,716   4,051   (4.5)  (8.3)
Collection and payment services  1,626   1,459   1,313   11.4   11.1 
Insurance and capitalization  4,311   3,831   3,586   12.5   6.8 
Asset Management and pension funds  1,418   1,114   1,434   27.3   (22.3)
Credit and debit cards  3,666   5,151   4,986   (28.8)  3.3 
Capital markets  1,053   858   1,211   22.8   (29.2)
Trade finance  1,758   1,740   1,317   1.0   32.1 
Tax on services  (712)  (678)  (622)  5.1   8.9 
Others  (1,396)  (964)  (1,562)  44.8   38.2 
Total  15,273   16,229   15,713   (5.9)  3.3 

 

Capital markets  1,211   916   873   32.2   4.9 
Trade finance  1,317   1,228   956   7.2   28.5 
Tax on services  (622)  (671)  (526)  (7.3)  27.6 
Others  (1,562)  (1,266)  (608)  23.4   108.2 
Total  15,713   14,133   12,722   11.2   11.1 

 

Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net)

Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 20192021, were losses of R$3261,781 million, a reductiongain of R$5,2639,922 million inover the losses fromof R$5,58911,703 million for the year ended December 31, 2018.2020. This variation is mainly due to greater exposure to operations in Cayman and Luxembourg and unfavorable exchange rate variation in 2020. In 2021, there was a combination of lower exchange rate variation and the end of overhedge operations due to the change in taxation. Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$731 million for the year ended December 31, 2021, a R$1,149 million, increase from gains of R$1,880 million compared to the year ended December 31, 2020, mainly due to the positive results in our derivative position.

Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2020 were losses of R$11,703 million, a R$11,377 million increase from losses of R$326 million for the year ended December 31, 2019. This variation is mainly due to gains of R$5,1569,732 million related to financial assets measure at fair value through profit or loss held for trading and gainslosses of R$ 17.921,912 million related to exchange differences (net). Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$9381,880 million for the year ended December 31, 2019,2020, a R$660942 million increase from gains of R$278938 million compared to the year ended December 31, 20182019 mainly due to the positive results in our derivative positions.position. Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”.

Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2018 were losses of R$5,589 million, a decrease of R$7,163 million from gains of R$1,574 million for the year ended December 31, 2017. This variation is mainly due to a decrease of R$5,057 million in derivatives transactions as a consequence of our results on investment abroad, which was offset by the same amount in income taxes. Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were R$278 million for the year ended December 31, 2018, a 88.3% decrease from R$2,384 million compared to the year ended December 31, 2017, primarily due to positive results in our derivative positions as a result of market volatility which occurred in the fiscal year ended December 31, 2017 did not occur in the fiscal year ended December 31, 2018. Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”.

The following table presents our gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net) for the periods indicated.indicated,

  For the Year Ended December 31
  2019 2018 2017 % Change 2019/2018 Change% 2018/2017
  (in millions of R$, except percentages)
Gains/losses on financial assets and liabilities (net) and exchange differences (net)  (326)  (5,589)  1,574   (94.2)  (455.1)
Effects of the hedge for investment held abroad  1,264   5,867   810   (78.5)  624.3 
Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding Hedge Impact(1)  938   278   2,384   237.7   (88.4)

  For the Year Ended December 31
  2021 2020 2019 

% Change

2021/2020

 

% Change

2020/2019

  (in millions of R$, except percentages)  
Gains/losses on financial assets and liabilities (net) and exchange differences (net)  (1,781)  (11,703)  (326)  (84.8)  3,489.9 
Effects of the hedge for investment held abroad  2,512   13,583   1,264   (81.5)  974.4 
Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding Hedge Impact (1)   731   1,880   938   (61.1)  100.4 
(1)Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

 

138 

 164

Table of Contents

Table of Contents

Other Operating Income/Expenses

Other operating income/expenses for the year ended December 31, 20192021 were expenses of R$1,1081,119 million, an increase of R$52246 million compared to expenses of R$1,056873 million for the year ended December 31, 2018. Other operating income/2020, mainly due to the lower result of our expenses forwith Benefit Guarantor Fund – FGB (Fundo Garantidor de Crédito) pension plan and higher FGC (Fundo Garantidor de Crédito) expenses given the increase in the balance of deposits from R$436 million to R$478 million, which was primarily due to the increase in consumption of products covered by the FGC. For the year ended December 31, 2018,2020, other operating income/expenses were expenses of R$1,056 million, an increase of R$384873 million, compared to expenses of R$6721,108 million for the year ended December 31, 2017, mainly due to assets we received as guarantees from our customers.2019.

 

Administrative Expenses

Administrative expenses for the year ended December 31, 20192021, were R$16,94217,316 million, a R$149 202 million increaseincreases compared to expenses of R$16,79217,115 million for the year ended December 31, 2018.2020, mainly due wages and salaries, and technology and system due to the growth of the business. For the year ended December 31, 2018,2020, our administrative expenses of R$16,79217,115 million reflected a R$672173 million increase compared to administrative expenses of R$16,121 million for the year ended December 31, 2017. The performance in both periods is primarily attributed to the increase in: (i) personnel expenses, which are in line, with our meritocratic culture and the performance of our business; and (ii) data processing expenses line in order to support the increase in the volume of our customer transactions.

Personnel expenses increased R$12216,942 million for the year ended December 31, 2019, mainly as a consequenceresult of higher expenses with technology and systems.

Personnel expenses increased R$154 million for the increase in the benefits line andyear ended December 31, 2021, primarily resulting from higher employee wages and salaries, with a result ofderiving from the renegotiation of our collective bargaining agreement.agreement applied to the Company's salary base since September 2021. In the year ended December 31, 2018,2020, our personnel expenses increaseddecreased R$269456 million compared(compared to the same period in 2017.year ended December 31, 2019). This performance can be attributed to the increase inprimarily resulting from lower employee wages and salaries, benefits, and social security costs and benefits, which are in line with our meritocratic culture and the performance of our business.

share-based compensation.

The following table sets forth our personnel expenses for each of the periods indicated:

 

 For the Year Ended December 31, For the Year Ended December 31,
 2019 2018 2017 % Change 2019/2018 Change% 2018/2017 2021 2020 2019 

% Change

2021/2020

 

% Change

2020/2019

 (in millions of R$, except percentages) (in millions of R$, except percentages)  
Wages and salaries  5,876   5,813   5,714   1.1   1.7   5,905   5,731   5,876   3.0   (2.5)
Social security costs  1,277   1,405   1,381   (9.1)  1.7   1,153   1,222   1,277   (5.7)  (4.3)
Benefits  1,492   1,387   1,309   7.5   6.0   1,435   1,390   1,491   3.2   (6.8)
Training  66   63   58   4.8   8.6   55   49   66   11.9   (25.9)
Other personnel expenses  617   538   475   14.7   13.3   477   479   617   (0.4)  (22.3)
Total  9,328   9,206   8,937   1.3   3.0   9,026   8,871   9,328   1.7   (4.9)

 

Other administrative expenses increased R$2847 million to R$8,291 million for the year ended December 31, 2021, from R$8,243 million for the year ended December 31, 2020, mainly as a result of higher expenses with property, fixtures and supplies and technology and systems, resulting from the expansion of our business, which was partially offset by the decrease in expenses for communications.

Other administrative expenses increased R$630 million to R$8,243 million for the year ended December 31, 2020 from R$7,614 million for the year ended December 31, 2019 from R$7,586 million for the year ended December 31, 2018, mainly due to a R$272297 million increase in technology and systems, and a R$91176 million increase in advertising, R$83 million increase in specialized and technical service, both expenses derived from more intense commercial actions in our business, partially offset by a decrease of R$582 million with general maintenance expenses which as a result of the adoption of IFRS 16.

In the year ended December 31, 2018 other administrative expenses increased R$403 million to R$7,586 million for the year ended December 31, 2018 from R$7,183 million for the year ended December 31, 2017, mainly due to: (i) a R$422 million increase in technology and systems associated with greater transactionality and expansion of our customer base, (ii) an R$189 million increase in specialized and technical services especially technology services. This growth in expenses was partially offset by R$136 million decrease in communications-related expenses.communications.

 

The following table sets forth our other administrative expenses for each of the periods indicated:

  For the Year Ended December 31,
  2021 2020 2019 % Change 2021/2020 

% Change

2020/2019

  (in millions of R$, except percentages)
Specialized and technical services  2,184   2,171   2,173   0.6   (0.1)
Property, fixtures and supplies  889   744   748   19.6   (0.6)
Technology and systems  2,474   2,355   2,059   5.1   14.4 
Advertising  621   654   713   (5.0)  (8.2)
Communications  353   649   473   (45.6)  37.2 
Per diems and travel expenses  72   69   140   4.,2   (50.8)
Taxes other than income tax  202   280   112   (27.7)  150.1 
Surveillance and cash courier services  598   595   631   0.5   (5.7)
Insurance premiums  22   17   35   34.6   (52.2)
Other administrative expenses  874   710   531   23.2   33.5 
Total   8,291   8,243   7,614   0.6   8.3 

 

139 

Table of Contents

   For the Year Ended December 31,
   2019 2018 2017 % Change 2019/2018 Change% 2018/2017
                      

  (in millions of R$, except percentages)
Specialized and technical services  2,173   2,090   1,901   4.0   9.9 
General maintenance expenses  748   1,331   1,284   (43.8)  3.7 
Technology maintenance expenses  2,059   1,786   1,365   15.3   30.8 
Advertising  713   622   618   14.6   0.6 
Communications  473   457   593   3.5   (22.9)
Per diems and travel expenses  140   127   107   10.2   18.7 
Taxes other than income tax  112   89   123   25.9   (27.4)
Surveillance and cash courier services  631   617   630   2.3   (2.1)
Insurance premiums  35   29   27   20.7   7.4 
Other administrative expenses  (1)  531   535   595   21.5   (18.3)
Total  7,614   7,586   7,183   0.4   5.6 

(1) In December 31, 2019, includes mainly Data Processing Expenses in the balance of R$2.4 million (2018 – R$67.7 million and 2017 - R$73.7 million), Service Expenses in the balance of R$2.2 million (2018 - revenue of R$26.8 million and 2017 - R$87.2 million), Expenses with Benefit Guarantor Fund - FGB R$53.5 milion (2018 – R$35.0 million and 2017 - R$5.3 million), Interest on Own Capital R$0 (2018 – R$38.0 million and 2017 - R$20.8 million), and Recovery of Charges and Expenses R$97.4 million (2018 – R$92.4 million and 2017 – R$89.4 million).

The efficiency ratio, which we calculate as total administrative expenses divided by total income, decreased to 28.8%27.1% in the year ended December 31, 2019,2021, as compared to 33.9%35.5% for the year ended December 31, 2018 For2020. This decrease of 8.4 p.p. in the year ended December 31, 2017 it was 33.1%. Our adjusted efficiency ratio which excludesis primarily due to the effecteffects of the hedge for investment held abroad (see “—Hedgingand the growth in Foreign Investments” and “Selected Financial Data—Selected Consolidated Ratios, Including Non-GAAP Ratios”), was 28.2%, 30.3% and 32.5%net interest income driven by the increase in the volume of the credit portfolio.

The efficiency ratio, which we calculate as total administrative expenses divided by total income, increased to 35.5% in the year ended December 31, 2020, as compared to 28.8% for the year ended December 31, 2019, 2018 and 2017, respectively.This increase of 6.7 p.p. in the ratio is primarily due to the effects of the hedge for investment held abroad.

Depreciation and Amortization

Depreciation and amortization for the year ended December 31, 20192021, depreciation and amortization was R$2,3922,434 million, a 5.6%, or R$652145 million, increasedecrease from R$1,7402,579 million for the year ended December 31, 2018,2020, primarily due to a 24.0% decrease in expenses with amortization of hardware and software, which was primarily due to the change in accounting practices resulting fromvolume of assets not deployed or under development and the adoptioneffect of IFRS 16 following the principles of IAS 17. For further information, please see “Item 1 Introduction, basis of presentation of the consolidated financial statements and other information, c.1) Adoption of new standards and interpretations of our consolidated financial statements included in “item 18.Financial Statements of this annual report. write-offs.

For the year ended December 31, 2018, depreciation and amortization amounted to2020 was R$1,7402,579 million, a R$78187 million increase from R$1,6622,392 million for the year ended December 31, 2017, mainly2019, primarily due to higher depreciation expenses related to technologywith amortization of hardware and software items, and higher amortization expensesresulting from investments made in relation to third party real estate and facilities.

this period.

Provisions (Net)

Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$2,179 million for the year ended December 31, 2021, a 31.5%, or R$523 million, increase compared to R$1,657 million for the year ended December 31, 2020, driven by the fact that the amounts provisioned are indexed to the SELIC rate (for tax proceedings), the National Consumer Price Index (Índice Nacional de Preços ao Consumidor) (for civil proceedings) and the Broad National Consumer Price Index — Special (Índice Nacional de Preços ao Consumidor Amplo — Especial) and SELIC rate for labor proceedings, each of which increased significantly in the year ended December 31, 2021.

In the year ended December 31, 2020, provisions (net) totaled R$1,657 million for the year ended December 31, 2020, a decrease of R$2,025 million compared to R$3,682 million for the year ended December 31, 2019, primarily due to a higher than usual level of provisions in 2019, as explained below.

In the year ended December 31, 2019, provisions (net) totaled R$3,682 million, an increase of R$1,682 million compared to R$2,000 million for the year ended December 31, 2018, mainly due to an increase of R$700 million related to the creation of an efficiency and productivity fund, an increase in civil and labor proceedings due to revision of the operational model and a constitution of provisions related to the legal proceeding brought by the association of retired employees of Banespa (Associação dos Funcionários Aposentados do Banco do Estado de São Paulo), or AFABESP, an association of former employees of Banespa in which the classification of the chance of loss was revised to probable in December 2019 (for2019. For further information see note 2322 to our audited consolidated financial statements included in the ”Item 18. Financial Statements” of this annual report).

In the year ended December 31, 2018, provisions (net) totaled R$2,000 million, a increase of R$1,310 million compared to R$3,309 million for the year ended December 31, 2017, mainly due to a decrease of R$816 million related to the past service cost in the contribution established for a post-employment benefit plan named Cabesp due to changes in the plan in the first half of 2018 (for further information, see note 22. to our audited consolidated financial statements included in “Item 18. Financial Statements” ofelsewhere in this annual report) and lower gains related to foreclosed assets.

140 

Table of Contents

report.

Impairment Losses on Financial Assets (Net)

Impairment losses on financial assets (net) for the year ended December 31, 20192021 were R$13,37017,113 million, an R$657338 million increasedecrease compared to R$12,71317,450 million for the year ended December 31, 2018. This increase was principally2020, primarily due to Installment Loansthe resumption of economic activity in Brazil following the easing of the COVID-19 pandemic in the second half of 2021 and the use of the overlay provision constituted in the year ended December 31, 2020 in response to Individuals,the potential effects of the COVID-19 pandemic.

For the year ended December 31, 2020, impairment losses on financial assets (net) were R$17,450 million, a R$4,080 million increase compared to R$13,370 million for the year ended December 31, 2019, principally due

 165
Table of Contents

to the adverse effects of the COVID-19 pandemic which resulted in the creation of additional (overlay) R$3,200 million allowance for potential loan losses and to the recurrent growth of the credit portfolio in this segment.

For the year ended December 31, 2018, impairment losses on financial assets (net) were R$12,713 million, an R$375 million increase compared to R$12,338 million for the year ended December 31, 2017 principally due to:

An increase of 3%, or R$375 million, in impairment loss for loans and receivables to R$12,713 million as of December 31, 2018, from R$12,338 million on December 31, 2017. This increase was primarily a result of the adoption of IFRS 9 criteria.

portfolio.

Our credit risk exposure portfolio increased by R$25.374.8 billion to R$347.3540.9 billion as of December 31, 20192021 compared to R$321.9466.1 billion as of December 31, 2018.2020, Furthermore, our impaired assets increased R$13.7 billion from R$23.423.2 billion as of December 31, 20182020 to R$22.426.9 billion for the year ended December 31, 2019. The default rate decreased by 20 base points in 2019 in comparison with 2018.

2021.

The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio as of December 31, 20192021 and December 31, 20182020 and 2017.2019.

  As of December 31,
  2019 2018 2017 % Change 2019/2018 % Change 2018/2017
  (in millions of R$ except percentages)
Loans and advances to customers, gross  347,257   321,933   287,829   7.9   11.8 
Impaired assets  23,426   22,426   19,145   4.5   17.1 
Provisions for impairment losses  22,625   22,969   18,262   (1.5)  25.8 
Credit risk exposure Non-GAAP – customers(1)  391,569   364,194   330,474   7.5   10.2 
Ratios                    
Impaired assets to credit risk exposure  6.0%  6.2%  5.8%  (0.2)  0.4
Coverage ratio(2)  96.6%  102.4%  95.4%  (5.7)  7.3
Impairment losses  (13,370)  (12,713)  (12,338)  5.2  3.0
Gains (losses) due to derecognition of financial assets
measured at amortized cost(3)		  -     -     -    -   (100)
Impairment losses on financial assets (net) (4)  (13,370)  (12,713)  (12,338)  5.2  3.0

   As of December 31,
  2021 2020 2019 2018 2017
  (in millions of R$ except percentages)
Loans and advances to customers, gross  493,355   417,822   347,257   321,933   287,829 
Impaired assets  26,923   23,176   23,426   22,426   19,145 
Provisions for impairment losses  29,723   25,640   22,626   22,969   18,262 
Credit risk exposure Non-GAAP – customers (1)  540,873   466,104   391,569   364,194   330,474 
Ratios                    
Impaired assets to credit risk exposure  5.0%  5.0%  6.0%  6.2%  5.8%
Coverage ratio (2)  110.4%  110.6%  96.6%  102.4%  95.4%
Impairment losses  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)
Losses on other financial instruments not
  measured at fair value (3)		  -     -     -     -     -   
Impairment losses on financial assets (net) (4)  (17,113)  (17,450)  (13,370)  (12,713)  (12,338)

 

(1)Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$391.6540,873 million and guarantees and documentary credits amounting to R$44 billion.47,518 million. We present theinclude off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

(2)Provisions for impairment losses as a percentage of impaired assets.

(3)Corresponds to registration of losses of a permanent character in the realization value of bonds and securities classified as “Securities available for sale” currently accounted for “Earnings on financials assets (net).”

(4)As of December 31, 2019, 20182021, 2020 and 2017,2019, our total of impairment losses on financial instruments included R$2,0551,191 million, R$2,7141,577 million and R$2,7842,055 million, respectively, relating to debt instruments.

The following chart shows our impaired assets to credit risk ratio from 20142017 through 2019:2021:

 

141 

 166

Table of Contents

Table of Contents

Impaired Assets by Type of Loan

The following table shows our impaired assets by type of loan as of December 31, 2019, 20182021, 2020 and 2017.2019.

 For the Year Ended December 31, For the Year Ended December 31,
 2019 2018 2017 % Change 2019/2018 Change% 2018/2017 2021 2020 2019 % Change 2021/2020 

% Change

2020/2019

 (in millions of R$, except percentages) (in millions of R$, except percentages)
Commercial and industrial  10,073   11,832   11,994   (14.9)  (1.3)  11,440   10,558   10,073   8.3   4.8 
Real estate – construction  827   1,035   782   (20.1)  32.4 
Real estate  470   456   827   3.1   (44.8)
Installment loans to individuals  12,497   9,499   6,304   31.6   50.7   14,996   12,144   12,497   23.5   (2.8)
Lease financing  29   59   65   (50.8)  (9.3)  17   17   29   (0.6)  (40.6)
Total  23,426   22,426   19,145   4.5   17.1   26,923   23,176   23,426   16.2   (1.1)

 

For a discussion of the evolution in impairment in our lending portfolios and our methodology for loan loss allowances with respect to the following lending portfolios, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.” See also “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—Ongoing investigations relating to corruption and diversion of public funds that are being conducted by the Brazilian federal police as well as other Brazilian and non-Brazilian regulators and law enforcement officials may adversely affect the growth of the Brazilian economy and could have a material adverse effect on us” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—The financial problems faced by our customers could adversely affect us.”

Commercial and Industrial

Impaired assets in the commercial and industrial loans portfolio amounted to R$11,440 million as of December 31, 2021, an increase of R$881 million, or 8.3%, compared to R$10,558 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the adverse macroeconomic situation caused by the COVID-19 pandemic.

Impaired assets in the portfolio of commercial and industrial loans amounted to R$10,558 million as of December 31, 2020, an increase of R$486 million, or 4.8%, compared to R$10,073 million as of December 31, 2019, a decrease19, The increase in impaired assets in this portfolio was mainly due to the collective assessment performed by Santander Brasil which was based on macroeconomic forecasts sensitiveness that indicated stage transfers upon the deterioration of the portfolio,

For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information— Short-Term Borrowings —Impaired Assets—Methodology for Impairment Losses,”

Real Estate

Impaired assets in the real estate lending portfolio totaled R$1,759470 million on December 31, 2021, an increase of R$14 million, or 14.9%3.1%, compared to R$11,832456 million as of December 31, 2018.2020, The increase in impaired assets in this portfolio was the result of the recurrent growth of the credit portfolio.

Impaired assets in the real estate lending portfolio totaled R$456 million on December 31, 2020, a decrease of R$371 million, or 44.8%, compared to R$827 million as of December 31, 2019. The decrease was primarily the result of the measures that Santander Brasil put in place to manage it, including collection practices with respect to our borrowers.

For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”

Installment Loans to Individuals

Impaired assets in the installment loans to individuals lending portfolio totaled R$14,996 million as of December 31, 2021, with an increase of R$2,852 million, or 23.5%, compared to 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.

 167
Table of Contents

Impaired assets in the installment loans to individuals lending portfolio totaled R$12,144 million as of December 31, 2020, with a decrease of R$353 million, or 2.8%, compared to 2019. The decrease in impaired assets in this portfolio was the result of the measures that Santander Brasil put in place to manage it, including collection practices with respect to our borrowers whereby we offered certain customers the chance to negotiate a restructuring of their debts, especially during the COVID-19 pandemic, or asset disposal. For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”

Financial Leasing

Impaired assets in the lease financing lending portfolio of commercial and industrial loans amounted tototaled R$11,83217 million as ofon December 31, 2018,2021, a remaining similar to December 31, 2020.

Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2020, a decrease of R$16212 million or 1.3%, compared to R$11,994 million as of December 31, 2017.2019. This decrease in impaired assets in this portfolio was mainly caused by the slowdowndue to asset write-offs in an amount of R$15.3 million which took place in the Brazilian economy between 2014 and 2017, affecting our commercial and industrial

142 

Table of Contents

portfolio.

year ended December 31, 2020.

For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”

Real Estate

Impaired assets in the real estate lending portfolio totaled R$827 million on December 31, 2019, a decrease of R$209 million, or 20.2%, compared to R$1,036 million as of December 31, 2018. The decrease was primarily due to changes on monetary policy that lead to reduction on the interest rates on real estate portfolio in Brazil.

Impaired assets in the real estate lending portfolio totaled R$1,036 million on December 31, 2018, an increase of R$254 million compared to R$782 million as of December 31, 2017.

For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology for Impairment Losses.”

Installment Loans to Individuals

Impaired assets in the installment loans to individuals lending portfolio totaled R$12,497 million as of December 31, 2019, with an increase of R$ 2,998 million, or 31.6%, compared to 2018. This increase was a consequence of the recurrent growth of the portfolio and the weak macroeconomic conditions related to the portfolio in Brazil, such as unemployment rate and degree of income commitment.

Impaired assets in the installment loans to individuals lending portfolio totaled R$9,499 million as of December 31, 2018, with an increase of R$3,195 million, or 50.7%, compared to 2017. This increase was a result of adoption of IFRS 9 criteria this year and the weak macroeconomic conditions in Brazil.

For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology for Impairment Losses.”

Financial Leasing

Impaired assets in the lease financing lending portfolio totaled R$29 million on December 31, 2019, a decrease of R$30 million compared to December 31, 2018.

Impaired assets in the financial leasing lending portfolio amounted to R$59 million as of December 31, 2018, a decrease of R$6 million compared to December 31, 2017. This decrease in impaired assets was mainly due to defaults by certain borrowers as a result of weak macroeconomic conditions in Brazil.

For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology for Impairment Losses”.

Impairment Losses on Other Assets (Net)

Impairment losses on other assets (net) for the year ended December 31, 20192021, amounted to losses of R$131166 million, a decreasean increase of R$37781 million as compared to R$ 85 million the year ended December 31, 2018,2020, mainly due to more intangible asset impairment loss of assets in the acquisition and development of software thatlosses, which was recordedprimarily due to the obsolescence function and disruption of these systems in 2018 that did not occur in 2019.some of our information technology equipment. For the year ended December 31, 2018,2020, impairment losses on other assets (net) amounted to losses of R$50885 million, an increasea decrease of R$5247 million as compared to 2017,the year ended December 31, 2019, mainly due to higher loss provision of non onlending payroll loans.less intangible asset impairment losses during the year.

143 

Table of Contents

Other Nonfinancial Gains/Losses

Other nonfinancial gains/losses were gains of R$33 million during the year ended December 31, 2021, a negative variation of R$275 million from gains of R$308 million during the year ended December 31, 2020, mainly due to positive extraordinary effects of 2020, highlighted below.

During the year ended December 31, 2020, other nonfinancial gains/losses were gains of R$308 million during the year ended December 31, 2020, a positive variation of R$288 million from gains of R$20 million during the year ended December 31, 2019, a negative variation of R$136 million from losses of R$156 million during the year ended December 31, 2018, primarily due to (i) an increase ofthe R$104169 million relating to income from the reversal of the provision for impairment of properties and R$78 million which is related togain on the sale of assets receivedSuperdigital in the recoveryfirst quarter of credits with customers that occurred in 2018 that did not occur in 2019.2020.

During the year ended December 31, 2018, other nonfinancial gains/losses were losses of R$156 million, a negative variation of R$168 million from gains of R$324 million during the year ended December 31, 2017, primarily due to (i) an increase of R$272 million related to provisions for devaluations on real estate that occurred in the fiscal year ended December 31, 2017 that did not occur in the fiscal year ended December 31, 2018 and (ii) an increase of R$182 million of which R$104 million relating to income from the reversal of the provision for impairment of properties and R$78 million which is related to the sale of assets received in the recovery of credits with customers. For further information, see note 42 and 43 from our audited consolidated financial statements included in this annual report.

Operating ProfitIncome Before Tax

Operating profitincome before tax for the year ended December 31, 20192021, was R$22,27324,750 million, an increase of R$6,36315,086 million, or 40.0%156.1%, as compared to R$15,9109,664 million for the year ended December 31, 2018.2020. In the year ended December 31, 2017,2019 our operating profitincome before tax for the year was R$14,51422,273 million.

Excluding the effects of the hedge for investment held abroad operating profitincome before tax amounted to R$23,53727,262 million for the year ended December 31, 2019, an 8.1%2021, a 17.3% increase from R$21,77723,247 million compared to the year ended December 31, 2018.2020. In the year ended December 31, 20172019, operating profitincome before tax was R$14,51423,537 million. Operating profitincome before tax excluding the effects of the hedge for investment held abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

The table below presents our operating profitincome before tax and our operating profitincome before tax excluding the effects of the hedge for investment held abroad for the periods presented.

  For the Year Ended December 31,
  2019 2018 2017 % Change 2019/2018 Change% 2018/2017
  (in millions of R$, except percentages)
Operating Profit Before Tax  22,273   15,910   14,514   40.0   9.6 
Effects of the hedge for investment held abroad  1,264  5,867  810   (78.5)  624.3 
Adjusted operating profit before tax (1)  23,537   21,777   15,324   8.1   42.1 

  For the Year Ended December 31,
  2021 2020 2019 % Change 2021/2020 

% Change 2020/2019

  (in millions of R$, except percentages)
Operating Income Before Tax  24,750   9,664   22,273   156.1   (56.6)
Effects of the hedge for investment held abroad  2,512   13,583   1,264   (81.5)  974.4 
Adjusted operating income before tax (1)  27,262   23,247   23,537   17.3   (1.2)
 

(1)Adjusted operating profitincome before tax is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

 

 168
Table of Contents

Income Taxes

Income taxes expense includesexpenses include income tax, social contribution, PIS and COFINS. IncomeCOFINS (which are social contributions due on certain income net of certain expenses). Total income taxes amounted to expenses ofwere R$5,6429,191 million forin the year ended December 31, 2019, a2021, an increase of 342.7%, or R$2,53212,978 million, increase from expensesin relation to the income tax income balance of R$3,1103,787 million forin the year ended December 31, 2018.2020. This expense increase was mainly attributableattributed to the following events: (i) foreign exchange rate losses of R$1,5122,512 million as a result of the effects of exchange rate variations on investmentsinvestment abroad in our subsidiary and losses on

144 

Table of Contents

hedgefor hedging instruments, affecting the line “Gains (losses) on financial assets and liabilities (net),” line; (ii) thea 156.1% or R$15,086 million, increase in Operating Incomeincome before taxationtax arising from the resultentities' results of operations to R$24,750 million in the entities' operations,year ended December 31, 2021, from R$9,664 million in the year ended December 31, 2020, which was primarily due an increase in net interest income of R$6,875 million, or 15.5%, to R$51,318 million in the year ended December 31, 2021 from R$44,443 million in the year December 31, 2020 driven by our credit portfolio, and (iii) a R$1,237 million, increase in the recognitionrate of certain deferred tax credits inCSLL for banks and other financial institutions for the period from July 1, 2021, to December 201931, 2021, as a result of the adjustment of CSLL tax credits derived from the tax rate increase to 20% for banks (Constitutional amendment nº103/2019).Law 14,183/2021. For furthermore information, see note 24 fromto our audited consolidated financial statements included in this annual report.

For the year ended December 31, 2018,2020, income taxestax expenses amounted to expenses ofpositive R$3,1103,787 million for the year of 2018,2020, a R$2,2669,429 million decreaseincrease from expenses of R$5,3765,642 million for the year ended December 31, 2017.2019. This decreaseincrease was mainly attributable to the foreign exchange gainsfollowing events: (i) losses of R$5,05713,583 million as a consequenceresult of the effects of foreign exchange rate variations on foreign investment in investments abroad for our foreign branchessubsidiary and subsidiary abroad and the associated hedgingfor hedge instruments, affecting the “Gains (losses) on financial assets and liabilities (net)” line.

line; (ii) the reduction in Operating Income before taxation resulting from the result of the entities’ operations, and (iii) the recognition of certain deferred tax credits during the year ended December 31, 2020. For more information, see note 23 to our financial statements audited consolidated figures included in this annual report.

The following table shows our income taxes and income taxes excluding the effects of the hedge for investment held abroad for the periods indicated.

 

  For the Year Ended December 31,
  2019 2018 2017 %Change 2019/2018 Change% 2018/2017
  (in millions of R$, except percentages)
Income taxes  (5,642)  (3,110)  (5,376)  81.4   (42.1)
Effects of the hedge for investment held abroad  (1,264)  (5,867)  (810)  (78.5)  624.3 
Income taxes excluding effects of the hedge for investment held abroad  (6,906)  (8,977)  (6,186)  (23.1)  45.1 

  For the Year Ended December 31,
  2021 2020 2019 

%Change

2021/2020

 

% Change

2020/2019

  (in millions of R$, except percentages)  
Income taxes  (9,191)  3,787   (5,642)  (342.7)  (167.1)
Effects of the hedge for investment held abroad  (2,512)  (13,583)  (1,264)  (81.5)  974.4 
Income taxes excluding effects of the hedge for investment held abroad (*)  (11,703)  (9,796)  (6,906)  19.5   41.9 
 

*Income taxes excluding effects of the hedge for investment held abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

Results of Operations by Segment for the Years Ended December 31, 2019, 20182021, 2020 and 2017

2019

The following tables show our results of operations for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, for each of our operating segments.

 

 169
Table of Contents

Commercial Banking

  For the Year Ended December 31,
  2019 2018 2017 % Change 2019/2018 

%

Change 2018/2017

  (in millions of R$, except percentages)
Net interest income  42,044   39,391   32,392   6.7   21.6 
Income from equity instruments  5   10   83   (51.0)  (88.0)
Income from companies accounted for by the equity method  150   66   72   126.5   (8.3)
Net fee and commission income  13,923   12,537   11,262   11.1   11.3 
Gains/losses on financial assets and liabilities (net) and exchange differences (net)  (1,541)  (6,752)  (26)  (77.2)  26,275.0 
Other operating income (expenses)  (1,069)  (966)  (641)  10.7   50.7 
  For the Year Ended December 31,
  2021 2020 2019 % Change 2021/2020 

% Change 2020/2019

  (in millions of R$, except percentages)
Net interest income  46,236   41,457   42,044   11.5   (1.4)
Income from equity instruments  10   4   5   182.4   (25.6)
Income from companies accounted for by the equity method  105   84   149   25.6   (43.8)
Net fee and commission income  13,285   14,405   13,923   (7.8)  3.5 
Gains/losses on financial assets and liabilities (net) and exchange differences (net)  (1,433)  (13,515)  (1,541)  (89.4)  777.0 
Other operating income (expenses)  (974)  (767)  (1,069)  27.0   (28.3)
Total income   57,229   41,668   53,511   37.4   (22.1)
Personnel expenses  (8,221)  (8,140)  (8,554)  1.0   (4.8)
Other administrative expenses  (7,697)  (7,635)  (7,140)  0.8   6.9 
Administrative expenses  (15,918)  (15,775)  (15,694)  0.9   0.5 
Depreciation and amortization  (2,343)  (2,489)  (2,297)  (5.9)  8.4 
Provisions (net)  (2,177)  (1,639)  (3,669)  32.8   (55.3)
Impairment losses on financial assets (net)  (17,170)  (17,380)  (13,423)  (1.2)  29.5 
Impairment losses on other assets (net)  (164)  (28)  (73)  477.2   61.2 
Other nonfinancial gain (losses)  33   308   20   (89.5)  1,404.1 
Operating income before tax   19,491   4,666   18,375   317.8   (74.6)
    For the Year Ended December 31, 
    2021 2020 2019 %Change 2021/2020 %Change 2020/2019
    (in millions of R$, except percentages)
Operating Income Before Tax      19,491   4,666   18,375   317.8  (74.6)
Effects of the hedge for investment held abroad      2,512   13,583   1,264   (81.5) 974.4
Adjusted Operating Income Before tax (1)      22,003   18,249   19,639   20.6  (7.1)
(1)Adjusted operating income before tax is a non-GAAP measure. For further information, see "Item 3. Key Information–A. Selected Financial Data–Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures."

 

145 

Table of Contents

Total income  53,511   44,286   43,143   20.8   2.7 
Personnel expenses  (8,554)  (8,404)  (8,167)  1.8   2.9 
Other administrative expenses  (7,140)  (7,186)  (7,012)  (0.6)  2.5 
Depreciation and amortization  (2,297)  (1,637)  (1,560)  40.3   4.9 
Provisions (net)  (3,669)  (1,948)  (3,190)  88.3   (38.9)
Impairment losses on financial assets (net)  (13,423)  (12,420)  (11,233)  8.1   10.6 
Impairment losses on non-financial assets (net)  (73)  (450)  (436)  (83.7)  3.2 
Other nonfinancial gain (losses)  20   156   (324)  (86.9)  (148.1)
Operating profit before tax  18,375   12,397   11,220   48.2   10.5 

  For the Year Ended December 31,
  2019  2018 2017 

%

Change 2019/2018

 

%

Change 2018/2017

  (in millions of R$, except percentages)
Operating Profit Before Tax  18,375   12,397   11,220   48.2   10.5 
Effects of the hedge for investment held abroad  1,264   5,867  810  (78.5)  624.3 
Adjusted Operating Profit Before tax  19,639   18,264   12,030   7.5   51.8 

20192021 and 2018

2020

Operating profitincome before tax attributed to the Commercial Banking segment for the year ended December 31, 20192021, was R$18.419.5 billion, a 48.2% or R$6.014.8 billion increase from R$12.44.7 billion for the year ended December 31, 2018. 2020.

This variation was mainly due to:

•
●an increase of R$4.8 billion in net interest income, representing a 11.5% change compared to the year ended December 31, 2020, mainly due to an increase in the credit portfolio resulting from a resumption in economic activity in the year ended December 31, 2021 compared to the year ended December 31, 2020, as a result of relative easing of restrictions relating to the COVID-19 pandemic.
●losses on financial assets and liabilities and exchange differences of R$1.4 billion in the year ended December 31, 2021, compared to losses of R$13.5 billion in the year ended December 31, 2020 (a decrease of 89.4%, or R$12.0 billion) was due to the positive gains from increased market operations in derivatives and especially gains in the IPCA-indexed bonds portfolio. We believe that the variation between the years ended December 31, 2021 and 2020 is non-recurring.

This variation was partially offset by a decrease of R$2,653 million in net interest income for the year ended December 31, 2019, compared to the year ended December 31, 2018 mainly due to an 15.0% increase in the volume of our credit.

• an increase of R$1,386 million1.1 billion in net fee and commission income for the year ended December 31, 2019,2021, compared to the year ended December 31, 2018,2020, mainly due to (i) an increase in revenues from credit and debit cards, (ii) an increase in revenues from salethe Spin-Off of insurance and premium bonds, and (iii) an increase in revenues from current account service; and.

• a decrease of R$377 million in impairment losses on other assets (net) mainly due to impairment loss of assets in the acquisition and development of software that was recorded due to obsolescence function and disruption of these systems in 2018 that did not occur in 2019.

2018 and 2017

Operating profit before tax attributed to the Commercial Banking segment for the year ended December 31, 2018 was R$12.4 billion, a 10.5%, or R$1.2 billion increase from R$11.2 billion for the year ended December 31, 2017. This variation was mainly due to:

• an increase of R$6,998 million in net interest income for the year ended December 31, 2018, compared to the year ended December 31, 2017, as a result of an increase in volume of loans extended to customers, partially offset by revenues from deposits decreased as a result of interest rates beinglower in the fiscal year ended December 31, 2018 than in the fiscal year ended December 31, 2017; and

Getnet.

146 

 170

Table of Contents

Table of Contents

an increase of R$1,275 million in net fee and commission income for the year ended December 31, 2018, compared to the year ended December 31, 2017, mainly due to (i) an increase in revenues from credit and debit cards, (ii) an increase in revenues from current accounts, and (iii) an increase in revenues from insurance and premium bonds. These results were partially offset by:

• a decrease of R$6,726 million in gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2018, compared to the year ended December 31, 2017. This variation is mainly due to a decrease of R$5,057 million in derivatives transactions as a consequence of our results of hedging on investment abroad. For further information, see “— Other Factors Affecting Our Financial Condition and Results of Operations—Hedging in Foreign Investments.”

Excluding the effects of the hedge for investments held abroad on our revenues, our operating profitincome before taxes would have been R$19.622.0 billion, 7.5%20.6% higher than in the fiscal year ended December 31, 2018. For the year ended December 31, 2017 our adjusted operation profit before tax was R$12.0 billion.2020. Operating profit before taxesincome excluding the effects of the hedge of investments heldfor investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

 

2020 and 2019

Operating income before tax attributed to the Commercial Banking segment for the year ended December 31, 2020 was R$4.7 billion, a R$13.7 billion decrease from R$18.4 billion for the year ended December 31, 2019. This variation was mainly due to:

●an increase of R$3,957 million in impairment losses on financial assets mainly due to the global COVID 19 pandemic that resulted in a R$3,200 million additional allowance for potential loan losses and the recurrent growth of the credit portfolio; and
●a decrease of R$587 million in net interest income for the year ended December 31, 2020, compared to the year ended December 31, 2019 mainly attributed to the impact from spread pressure, due to the impact of the reduction of the SELIC rate, and the fact that corporate customers looked to enhance their liquidity during the COVID-19 pandemic.

This variation was partially offset by an increase of R$481 million in net fee and commission income for the year ended December 31, 2020, compared to the year ended December 31, 2019, mainly due to (i) an increase in revenues from the sale of insurance and capitalization, and (ii) an increase in revenues from trade finance, and (iii) an increase in revenues from credit and debit cards.

Excluding the effects of the hedge for investments held abroad on our revenues, our operating income before taxes would have been R$18.2 billion, 7.1% lower than in the fiscal year ended December 31, 2019. Operating income excluding the effects of the hedge for investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

Global Wholesale Banking

  For the Year Ended December 31,
  2019 2018 2017 % Change 2019/2018 

%

Change 2018/2017

  (in millions of R$, except percentages)
Net interest income  2,277   2,531   2,554   (10.0)  (0.9)
Income from equity instruments  14   23   -     (38.7)  -   
Net fee and commission income  1,790   1,595   1,460   12.2   9.2 
Gains/losses on financial assets and liabilities (net) and exchange differences (net)  1,215   1,163   1,600   4.5   (27.3)
Other operating income (expenses)  (39)  (90)  (31)  (57.0)  190.3 
Total income  5,258   5,222   5,582   0.7   (6.5)
Administrative expenses  (1,248)  (1,202)  (943)  3.8   27.5 
Personnel expenses  (774)  (802)  (771)  (3.6)  4.0 
Other administrative expenses  (474)  (400)  (172)  18.5   132.6 
Depreciation and amortization  (95)  (103)  (102)  (8.0)  1.0 
Provisions (net)  (13)  (53)  (119)  (75.7)  (55.5)
Impairment losses on financial assets (net)  54   (294)  (1,105)  (118.2)  (73.4)
Impairment losses on non-financial assets (net)  (58)  (58)  (21)  0.3   176.2 
Operating profit before tax  3,898   3,512   3,293   11.0   6.7 

147 

Table of Contents

2019 and 2018

  For the Year Ended December 31,
  2021 2020 2019 % Change 2021/2020 

%Change

2020/2019

  (in millions of R$, except percentages)
Net interest income  5,082   2,985   2,277   70.2   31.1 
Income from equity instruments  80   30   14   165.2   114.2 
Income from companies accounted for by the equity method  39   28   -     37.5   -   
Net fee and commission income  1,988   1,823   1,790   9.1   1.8 
Gains/losses on financial assets and liabilities (net) and exchange differences (net)  (347)  1,812   1,215   (119.1)  49.2 
Other operating income (expenses)  (145)  (105)  (39)  37.6   172.4 
Total income  6,697   6,574   5,258   1.9   25.0 
Administrative expenses  (1,399)  (1,340)  (1,247)  4.3   7.4 
Personnel expenses  (805)  (732)  (773)  10.1   5.4 
Other administrative expenses  (593)  (609)  (474)  (2.5)  28.4 
Depreciation and amortization  (91)  (91)  (95)  0.8   (4.6)
Provisions (net)  (3)  (18)  (13)  (85.3)  37.9 
Impairment losses on financial assets (net)  (57)   (71)  53   (180.6)  (232.1)
Impairment losses on other assets (net)  (2)  (57)  (58)  (96.7)  (2.9)
Operating income before tax  5,260   4,998   3,898   5.2   28.2 

 

Profit

 171
Table of Contents

 2021 and 2020

Operating income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 20192021, was R$3.95.3 billion, a 11.0%,5.2% or R$385262 million increase compared tofrom R$5.0 billion for the year ended December 31, 2018.

This variation2020, which was primarily due to an increase in Total Income driven in particular by an increase of R$165 million in net fee and commission income, and a reduction in expenses and losses mainly due to:to R$128 million in impairment losses on financial assets relating to an increase in the coverage for potential loan losses.

·a decrease of R$347 million in impairment losses on financial assets (net) principally owing to our preventive management.

·an increase of R$195 million in net fee and commission income manly due to an increase in revenues from securities underwriting and placement and an increase in revenues from administration and custody.

2020 and 2019

These results were partially offset by:

·a decrease of R$253 million in net interestOperating income mainly lower volume in the corporate portfolio.

2018 and 2017

Profit before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 20182020 was R$3.55.0 billion, a 6.7%28.2%, or R$2201,100 million a decreaseincrease from R$3.33.9 billion for the year ended December 31, 2017.

2019.

This variation was mainly due to:

·●an increase of R$812708 million, or 31% in impairment losses on financial assets (net) principally as a resultnet interest income, compared to the year ended December 31, 2019, mainly due to the increase in the credit portfolio resulting from the economic effects of our risk management strategythe COVID-19 pandemic; and recovery campaigns for our customers.

These results were partially offset by:

·●a decrease of R$437 million in gains/lossesgains on financial assets and liabilities (net) and exchange differences (net), mainly explained by a decreaseof R$597 million due to the positive effects of an increase in gains frommarket operations in derivatives and market positions and a decreaseespecially gains in gains from proprietary trading.the IPCA-indexed bonds portfolio.

This variation was partially offset by an increase of R$123 million in impairment losses on financial assets due to an increase in the coverage for potential loan losses.

5B.Liquidity and Capital Resources

 

5B. Liquidity and Capital Resources

Our asset and liability management strategy is set by the asset and liability committee, which operates under strict guidelines and procedures established by the Santander Group. The asset and liability committee establishes, among other policies, our funding strategy, and the target positioning with respect to structural balance sheet risk.

Pursuant to the Santander Group’s model, all subsidiaries have tomust be self-funded in terms of liquidity and capital. In addition, our general asset and liability management policy is to maintain a close match of maturity, interest rate and currency exposures. Subject to our internal risk management policies we aim to maintain adequate liquidity to meet our present and future financial obligations and to capitalize on business and market opportunities as they arise.

Most of our liquidity is raised in the local market and we maintain a portfolio of high quality public bonds for liquidity management. Legal reserve requirements consume a significant amount of funding in Brazil, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”

Due to our diversified sources of funding, which include a large client deposit base in the local market and a large number of correspondent banks with long-standing relationships, historically we have not experienced liquidity problems. In our opinion, our current levels of liquidity and working capital are sufficient for our present requirements.

148 

Table of Contents

See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information” and Note 47. Risk Management from Item 18. Financial Statements of this form.Information.”

Liquidity and Funding

In addition to a minimum liquidity level that meets our stress scenarios, we monitor concentration of funding ratios and the short term (LCR) and long term (Net Stable Funding Ratio) liquidity metrics, which aims to guarantee a stable funding profile. We control, manage and review our liquidity analyzing current and expected levels of liquidity, structuring the sources of financing to achieve an optimal diversification in terms of maturities, instruments, currencies, markets, as well as setting forth contingency plans. The objective is to ensure that we have sufficient liquidity to honor our commitments in light of market conditions, our institutional needs and market opportunities.

 172
Table of Contents

Due to our stable and diversified funding sources, which include a large base of customer deposits as detailed below, we have historically had no liquidity deficiencies.

As part of our liquidity management, we have a formal plan with measures to be taken in the event of a systemic liquidity crisis and/or for liquidity concerns arising from possible reputational risk. Our liquidity contingency plan contains defined thresholds, preventive measures and actions to be taken when a liquidity deficiency occurs and our reserves fall below certain levels.

The following resources and strategies may be used as sources of funding: (i) increase of customer deposits; (ii) securities issuances; (iii) repurchase agreements; (iv) a review of transfer pricing practices; and (v) establishment of more restrictive credit policies.

For further information, see Notes 16. Deposits from the Brazilian Central Banknotes 16, 17, 18, 19 and Deposits from credit institutions, 17. Client deposits, 18. Marketable debt securities, 19. Subordinated liabilities and 20. Debt Instruments Eligible20 to Compose Capital from Item 18. Financial Statements ofour audited consolidated financial statements included elsewhere in this form.

annual report.

The following tables present the composition of our consolidated funding at the dates indicated.

  As of December 31,
  2019 2018 2017
  (in millions of R$)
Customer deposits  336,515   304,198   276,042 
Current accounts  29,524   18,854   17,560 
Savings accounts  49,040   46,068   40,572 
Time deposits  175,994   190,983   146,818 
Repurchase agreements  81,957   48,293   71,092 
Backed operations with Private Securities(1)  8,743   6,978   33,903 
Backed operations with Government Securities(1)  73,214   41,316   37,189 
Deposits from the Brazilian Central Bank and credit institutions  99,271   99,023   79,375 
Demand deposits  685   710   306 
Time deposits(2)  56,602   47,227   52,739 
Repurchase agreements  41,984   51,086   26,329 
Backed operations with Private Securities(1)  9,506   6,978   -   
Backed operations with Government Securities(1)  32,478   44,108   26,329 
Total deposits  435,786   403,221   355,417 
Marketable debt securities  73,702   74,626   70,247 
Agribusiness Credit Notes  14,777   11,925   8,854 
Treasury Bills  27,587   30,721   31,686 
Real Estate Credit Notes  21,266   27,160   27,714 
Bonds and other securities  10,072   4,820   1,993 
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital  10,176   9,780   8,437 
Subordinated liabilities  -     9,886   519 
Total Funding  519,664   497,513   434,620 

  As of December 31,
  2021 2020 2019
  (in millions of R$)
Customer deposits   468,961   445,814   336,515 
Current accounts  41,742   35,550   28,231 
Savings accounts  65,249   62,210   49,040 
Time deposits  280,955   269,929   200,740 
Repurchase agreements  81,014   78,124   58,504 
Backed operations with Private Securities(1)  20,103   14,944   9,506 
Backed operations with Public Securities(1)  60,911   63,180   48,997 
Deposits from the Brazilian Central Bank and credit institutions  121,006   131,657   99,271 
Demand deposits  126   296   685 
Time deposits(2)  75,755   76,489   56,602 
Repurchase agreements  45,125   54,872   41,984 
Backed operations with Private Securities(1)  13,478   13,844   9,506 
Backed operations with Public Securities(1)  31,647   41,028   32,478 
Total deposits   589,967   577,470   435,786 
Marketable debt securities   79,037   56,876   73,702 
Agribusiness Credit Notes  16,989   14,747   14,777 
Treasury Bills  25,074   12,750   27,587 
Real Estate Credit Notes  24,020   19,979   21,266 
Bonds and other securities  12,952   9,399   10,072 
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital  19,641   13,120   10,176 
Total Funding  688,645   647,466   519,664 
 

(1)Refers primarily to repurchase agreements backed by debentures of own issue.issued by the Bank as collateral security.

149 

Table of Contents

(2)This includes transactions with credit institutions in connection with export and import financing lines, BNDES and FINAME onlendingon-lending and abroad on other credit lines abroad.

 

Deposits

Customer Deposits

Our balance of customer deposits was R$468.9 billion on December 31, 2021, R$445.8 billion on December 31, 2020 and R$336.5 billion on December 31, 2019, R$304.2 billion on December 31, 2018,representing 68.1%, 68.9% and R$276.0 billion on December 31, 2017, representing 64.8%, 61.1% and 63.5% of our total funding, respectively.

 173
Table of Contents

Current Accounts

Our balance of current accounts was R$29.541.7 billion on December 31, 2021, R$35.6 billion on December 31, 2020 and R$ 28.2 billion on December 31, 2019, R$18.9 billion on December 31, 2018representing 7.1%, 6.2% and R$17.6 billion on December 31, 2017, representing 6.8%, 4.7%, and 4.9%6.5% of total deposits, respectively.

Customer Savings Deposits

Our balance of customer savings deposits was R$65.2 billion on December 31, 2021, R$62.2 billion on December 31, 2020 and R$49.0 billion on December 31, 2019, R$46.1 billion on December 31, 2018representing 11.1%, 10.8% and R$40.6 billion on December 31, 2017, representing 11.3%, 11.4% and 11.4% of total deposits, respectively.

Customer Time Deposits

Our balance of customer time deposits was R$176.0281,0 billion on December 31, 2021, R$269.9 billion on December 31, 2020 and R$200,7 billion on December 31, 2019, R$191.0 billion on December 31, 2018representing 47.6%, 46.7% and R$146.8 billion on December 31, 2017, representing 40.4%, 47.4% and 41.3%46.1% of total deposits, respectively.

Customer Deposits – Repurchase Agreements

We maintain a portfolio of Brazilian public and private sector debt instruments used to obtain overnight funds from other financial institutions or investment funds by selling such securities and simultaneously agreeing to repurchase them. Due to the short-term (overnight) nature of this funding source, such transactions are volatile and composed, generally, of Brazilian public securities and of repurchase agreements linked to debentures. Securities sold under repurchase agreements increased to R$82.081.0 billion on December 31, 2021 from R$78.1 billion on December 31, 2020 and R$58.5 billion on December 31, 2019, from R$48.3 billion on December 31, 2018representing 13.7%, 13.5% and R$71.1 billion on December 31, 2017, representing 18.8%, 12.0% and 20.0%13.4% of total deposits, respectively.

respectively

Deposits from the Brazilian Central Bank and Credit Institutions

Our balance of deposits from the Brazilian Central Bank and credit institutions was R$121.0 billion on December 31, 2021, R$131.7 billion on December 31, 2020 and R$99.3 billion on December 31, 2019, R$99.0 billion on December 31, 2018representing 20.5%, 22.8% and R$79.4 billion on December 31, 2017, representing 22.8%, 24.6% and 22.3%22.9% of total deposits, respectively.

Our balance of deposits includes mainly borrowings and domestic onlendings:

·●Borrowings. We have relationships with banks all over the world, providing credit lines as foreign currency-linked (either to the U.S. dollar or to a basket of foreign currencies). We apply the proceeds from these transactions mainly to U.S. dollar-linked lending operations and in particular to trade finance operations.

·●Domestic Onlendings. We onlendlend from public institutions, mainly BNDES and FINAME, for which we act as a financial agent. Funding from these sources in Brazil represents a method of providing long-term loans with attractive average interest rates to certain sectors of the economy. Loans from these funds are allocated by BNDES through banks to specific sectors targeted for economic development. This type of lending is known as “repassing” or “onlending.” Because the repassed funds are generally matched and/or funded by loans from a federal government agency, we take no interest rate or maturity mismatch risk nor charge interest at a fixed margin over the cost of funds. We, however, retain the commercial credit risk of the borrower and therefore have discretion in the lending decision and application of the credit criteria. This type of funding is not affected by compulsory deposit requirements. The onlending is generally secured or guaranteed, although this is not required by the terms of the onlending.

150 

Table of Contents

of the borrower and therefore have discretion in the lending decision and application of the credit criteria. This type of funding is not affected by compulsory deposit requirements. The onlending is generally secured or guaranteed, although this is not required by the terms of the onlending.

Other Funding

Marketable Debt Securities

Our balance of marketable debt securities was R$79.0 billion on December 31, 2021, R$56.9 billion on December 31, 2020 and R$73.7 billion on December 31, 2019, R$74.6 billion on December 31, 2018representing 11.6%, 8.8% and R$70.2 billion on December 31, 2017, representing 14.2%, 15.0% and 16.2% of our total funding, respectively.

Agribusiness credit notes (Letra de Crédito do Agronegócio), which are credit notes that are freely negotiable and represent an unconditional promise of payment in cash, are issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain and the exchange acceptances. The balance for these instrumentsacceptances, reached R$17.0 billion on December 31, 2021, R$14.7 billion on December 31, 2020 and R$14.8 billion on December 31, 2019, R$11.9 billion on December 31, 2018, and R$8.9 billion on December 31, 2017.2019.

 174
Table of Contents

Treasury bill instrumentsbills (Letras financeirasFinanceiras) are a funding alternative available to banks that can be characterized as senior or eligible to compose the Regulatory Capital.Capital, Pursuant to CMN Resolution 4,1234,733 of August 23, 2012,June 2019, its minimum term must be 24 months and it must be issued for a minimum amount of R$300,000 for subordinated transactions and R$150,00050,000 for senior transactions. Our balance of treasury bills instruments totaled R$27.625.1 billion as ofon December 31, 2019,2021, a 10.2% decrease97% increase from December 2018.31, 2020.

Real estate credit notes (Letras de Crédito Imobiliário) decreased 21.7%increased 20%, from R$27.220.0 billion on December 31, 20182020 to R$21.324.0 billion on December 31, 2019.

2021.

We undertake issuances of securities, including under our U.S.$10,000,000,000 Global Medium Term Notes Program. Our balance of bonds and other securities was R$10.113.0 billion on December 31, 20192021 and R$4.89.4 billion on December 31, 2018.2020. This change was principally due to the non Replacementfact that in 2021 we issued a greater aggregate amount of certain debt instruments reaching maturity.securities than those which matured in that year.

Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital

We haveOn November 2018, we issued U.S. dollar-denominated Notes that constitute Tier 1 and Tier 2 regulatory capital as part of our plan to optimize our capital structure. structure, as follows:

  • U.S.$1.25 billion indexed 7.25% per year with no maturity (perpetual) and interest paid semiannually; and
  • U.S.$1.25 billion indexed 6.125% per year maturing in November 2028 and interest paid semiannually.

These issuances were made through our branch in the and as a result they do not generate liability for income tax at source.

In November and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our Tier 2 regulatory capital, in the total amount of R$ 5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.

As of December 31, 20192021, the balance for both Tier 1 and Tier 2 debt instruments was R$10.219.6 billion compared to R$9.813.1 billion as of December 31, 2018.2020. This variationincrease of 49.3% was caused by:

a)new issuances on November 2018 as of:

i.  R$1.25 billion bearing interest at 7.25% per year with no maturity (perpetual) and interest paid semiannually, asdue to the issuance of May 8, 2019; and

ii.  R$1.25 billion bearing interest at 6.125% per year maturing in November 2028 and interest paid semiannually, as of May 8, 2019.

b)The reclassification of the balances of December 31, 2017 to Subordinated Liabilities as approved by the Brazilian Central Bank on December 17, 2018, as of the date of their issuance, Levels I and II of Regulatory Capital must be excluded.

The issuances generated from November 2018 were made through the Cayman Agency and, consequently, there is no incidence of Income Tax at Source.abovementioned Financial Bills.

 

Subordinated Liabilities

Our subordinated liabilities as ofOn December 31, 2018 the subordinated liabilities we had were repurchased, on January 2019, withaccording to the approval issued by the Brazilian Central Bank on December 18, 2018. For further information, see note

151 

Table of Contents

“19 - Subordinated liabilities”to our audited consolidated financial statements included elsewhere in “Item 18. Financial Statements”.

this annual report.

Capital Management

Our capital management is based on conservative principles and continuous monitoring of the items that affect our solvency level. We are required to comply with Brazilian capital adequacy regulations under Brazilian Central Bank rules. In October 2013, the new regulations implementing the capital and the regulatory capital requirements of the Basel Committee on Banking Supervision (Basel III) came into effect in Brazil. TheFor additional information regarding minimum regulatory capital requirement is currently at 11%. The Tier I requirement is 6.0%, divided into core capital of at least 4.5%, consisting mainly of corporate capitallevel and profit reserves, including shares, units of ownership, reserves and earned income, and additional capital consisting mainly of certain reserves, revenue earned and hybrid securities and instruments as capital authorized by the Brazilian Central Bank.

According to the new rules on regulatory capital in Brazil, the value of goodwill for the calculation of capital base was deducted in accordance with the “phase-in” for implementation of Basel III in Brazil, which will be completed by January 1, 2019. The following table sets forth the percentage of required goodwill deduction for each year up to 2019:

Basel III Phase in
201520162017201820192020
40%60%80%100%100%100%

Source: Brazilian Central Bank; Resolution No. 4,192 of the Brazilian Central Bank of March 2013.

Ifother Basel III requirements, were fully implementedsee “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision— Capital Adequacy and Leverage - Basel—Basel III” and note 30, Operational Ratios, to our audited consolidated financial statements included elsewhere in this annual report.

CMN regulations establish conservative capital and countercyclical buffers for Brazilian financial institutions, and determine the minimum percentages applicable as well as which sanctions and limitations will apply in case of non-compliance with such additional requirements. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Principal Limitations and Obligations of Financial Institutions.”

 175
Table of Contents

Capital Expenditures

See “Item 4. Information on the Company—A. History and Development of the date hereof, we would continue to maintain an adequate regulatory capital ratio under Basel IIICompany—Capital Expenditures and Brazilian Central Bank rules.Divestitures.”

Off-Balance Sheet Arrangements

We have entered, in the normal course of business, into several types of off-balance sheet arrangements, including lines and letters of credit and financial guarantees. For more information, see note “31 - Operational Ratios” in “Item 18. Financial Statements,” which contains43 to our audited consolidated financial statements preparedincluded elsewhere in accordance with IFRS as issuedthis annual report.

Lending-Related Financial Instruments and Guarantees

We use lines and letters of credit and financial guarantee instruments to meet the financing needs of our customers. The contractual amount of these financial instruments represents represent the maximum possible credit risk should the counterparty draw down the commitment or we fulfill our obligation under the guarantee, and the counterparty subsequently fails to perform according to the terms of the contract. Most commitments and guarantees expire without the counterparty drawing on the credit line or a default occurring. As a result, the total contractual amount of these instruments does not represent our future credit exposure or funding requirements. Further, certain commitments, primarily related to consumer financing are cancelable, upon notice, at our option.

The “maximum potential amount of future payments” represents a notional amount potentially lost if a total default by the IASB.guaranteed parties occurred, without considering possible recoveries from collateral held or pledged, or those under recourse provisions. There is no relationship between these amounts and probable losses on these guarantees, In fact, the maximum potential amount of future payments significantly exceeds inherent losses.

For further information, see note 43 to our audited consolidated financial statements included elsewhere in this annual report.

Contractual Obligations

Our contractual obligations as of December 31, 2021 are summarized as follows:

  As of December 31, 2021
  Total Less than 1 year 1-3 years 3-5 years More than 5 years
  (in millions of R$)  
Contractual Obligations                    
Deposits from the Brazilian Central Bank and credit institutions   121,006   110,429   6,676   1,671   2,230 
Customer deposits   468,961   221,917   163,642   83,327   75 
Marketable debt securities   79,037   33,091   35,850   9,341   755 
Debt Instruments Eligible to Compose Capital(1)   19,641   5,552   14,089   -   - 
Total   688,646   370,990   220,257   94,339   3,060 
5C.(1)The table above excludes the notional and any interest payments relating to our perpetual Tier I bonds which interests are discretionary as described in “Item 5. Operating And Financial Review And Prospects—A. Operating Results.”
(2)Calculated for all Deposits from credit institutions, Customer Deposits, Marketable debt securities, Subordinated liabilities and Debt Instruments Eligible to Compose Capital (Tier II) assuming a constant interest rate based on data as of December 31, 2021 over time for all maturities, and those obligations with maturities of more than five years have an average life of ten years.

The above table does not reflect amounts payable on derivative contracts as they are dependent on changes in financial markets. The net fair value position of our derivative contracts as of December 31, 2021 reflected liabilities of R$3,479 million, compared to liabilities of R$3,109 million as of December 31, 2020.

In addition, we lease several properties under standard lease contracts, which can be cancelled or renewed at our option and include escalation clauses. The total future minimum payments of non-cancelable operating leases as of December 31, 2021 was R$2,318 million. From this total, R$715 million matures in up to one year, R$1,421 million matures from one year to up to five years and R$181 million matures after five years. Additionally, we have contracts with indeterminate maturities totaling R$0.8 million for the year ended December 31, 2021.

 176
Table of Contents

5C. Research and Development, Patents and Licenses, etc.

We do not have any significant policiespolicy or projects relating tosignificate project involving research and development, and we do not own no relevant patents or licenses.patents licenses, bearing in mind that we only have licenses involving trademarks.

5D. Trend Information

5D.Trend Information

The following discussion is based largely upon our current expectations about future events, and trends affecting our business. Actual results for our industry and performance could differ substantially. For further information related to our forward-looking statements, see “Forward-Looking Statements” and for a description of certain factors that could affect our industry in the future and our own future performance, see “Item 3. Key Information—3D. Risk Factors.”

Impact of COVID-19 on our Business

We expect that our business will continue to be affected by the COVID-19, and its variants, pandemic, and governmental responses to it, including by their respective impacts on our customers, suppliers and other third parties with whom interact as well as on Brazilian and global economic conditions. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”

Other Trends Affecting our Business

The following list sets forth, in our view, the most important trends, uncertainties and events that are reasonably likely to continue to have a material effect on our revenues, income from continuing operations, profitability, liquidity and capital resources, or that may cause reported financial information to be not necessarily indicative of future operating results or financial condition:

The economic and political crisiscondition, in Brazil may adversely affect the performanceaddition to those set forth under “—Impact of the Brazilian economy. As a result,COVID-19 on our credit portfolio, which is focused on Brazil, may not grow or could decrease and our provisions for loan losses increase;

Financial problems in certain countries in Europe, including in the United Kingdom or in other countries as a result of the exit of the United Kingdom from the European Union, could lead to another international financial crisis. If this occurs, Brazilian GDP growth in future periods may be depressed and, as a result, our credit portfolio may not grow or could decrease and our provisions for loan losses would increase;

Business”:

·●Potential inflation increases thatsince December 2019, a novel strain of coronavirus has spread in China and other countries, culminating in the COVID-19 pandemic. These events have caused disruption of regional or global economic activity and are expected to continue to have a negative impact on global economic activity. A continued downturn in local, regional or global economic conditions may adversely affect our business, results of operations and financial condition. The extent to which the COVID-19 pandemic and its variants impact our results will depend on future developments, which are highly uncertain, as new variants of the virus have emerged, and existing vaccines and acquired immunity may not be effective, as well as the actions to contain the COVID-19 pandemic. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally— The COVID-19 pandemic has had, and is expected to continue to have, a negative impact on global, regional and Brazilian economies, and we would be materially adversely affected by a protracted economic downturn, “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could cause an increase in interest ratesmaterially and lower growth in lending activities;adversely impact our business, financial condition, liquidity and results of operations” and “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19”;

152 

Table of Contents

·●Continuedeconomic and political crisis in Brazil, including the impact of the current international economic environment and the macroeconomic conditions in Brazil, and the policies of the Brazilian administration that took office on January 1, 2019, may adversely affect the performance of the Brazilian economy. As a result, our credit portfolio, which is focused on Brazil, may not grow or could decrease and our provisions for loan losses increase;
●a global economic downturn as a result of pandemics, epidemics or outbreaks of infectious diseases, or instability or conflicts, can have an adverse effect on the global market and economy, including Brazil.
 177
Table of Contents

It may decrease the interest of investors in Brazilian assets, in addition to making it difficult for us to access the capital markets and finance our operations, including on acceptable terms;

●uncertainties regarding the political scenario for 2022, increased volatility in economic indicators and deceleration in growth rates may negatively affect our strategic plan, with impacts on our profitability, asset quality, portfolio expansion and financing conditions.
●exposure to various types of inflation and interest rate risks, and the Brazilian government’s efforts to control inflation and interest rates;
●continued market volatility and instability that could affect our revenues;

·●Restrictive regulations orextensive regulation by the Brazilian government intervention inand the banking business,Brazilian Central Bank, among others, which could affect our margins and/or growth in lending activities;

·●Regulatoryregulatory capital changes toward more restrictive rules as a response to any potential financial crisis or general macroeconomic conditions;

·●Decreaseddecreased liquidity in domestic capital markets;

·●Tax policieschanges in taxes or other fiscal assessments that could decrease our profitability;

·●Currency fluctuationexchange rate volatility and exchange rate controls that could have an adverse impact on international investors;

·●Failureour ability to adequately protect ourselves against risks relating to cyber-security;cybersecurity risks; and

·●Ourour dependence on the proper functioning of information technology systems; andsystems.

·In contrast to all the points mentioned above, a recovery in the Brazilian economy, with new reforms underway (such asConversely, a recovery in the Brazilian economy by means of economic reforms (including the pension and the foreign trade reform, and the foreign trade reform), and ongoing control of inflation control) could have a positive effect on the Brazilian economy and, therefore, on the economic environment and, therefore, impact our business.

For more information, see “Item 3. Key Information—D. Risk Factors” where we present the risks we face in our business that may affect our commercial activities, operating results or liquidity.

5E.Off-Balance Sheet Arrangements

5E. Critical Accounting Estimates

WeOur financial statements are presented in IFRS as issued by the IASB. For summary information about critical judgments, assumptions and estimation uncertainties in applying accounting policies that have entered,the most significant effect on the amounts recognized in the normal coursefinancial statements, see “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of business, into several types of off-balance sheet arrangements, including linesOperations—Critical Accounting Policies” and letters of credit and financial guarantees. For more information, see note “44 – Other disclosures” in “Financial Statements”.

Lending-Related Financial Instruments and Guarantees

We use lines and letters of credit and financial guarantee instruments2 to meet the financing needs of our customers. The contractual amount of these financial instruments represents the maximum possible credit risk should the counterparty draw down the commitment or we fulfill our obligation under the guarantee, and the counterparty subsequently fails to perform according to the terms of the contract. Most of these commitments and guarantees expire without the counterparty drawing on the credit line or a default occurring. As a result, the total contractual amount of these instruments does not represent our future credit exposure or funding requirements. Further, certain commitments, primarily related to consumer financing are cancelable, upon notice, at our option.

The “maximum potential amount of future payments” represents the notional amount that could be lost if there were a total default by the guaranteed parties, without consideration of possible recoveries from collateral held or pledged, or recoveries under recourse provisions. There is no relationship between these amounts and probable losses on these guarantees. In fact, the maximum potential amount of future payments significantly exceeds inherent losses.

For further information, see note “44 – Other Information” in “Item 18. Financial Statements,” which contains our audited consolidated financial statements prepared in accordance with IFRS as issued byfor the IASB.

5F.Contractual Obligations

Our contractual obligations as offiscal years ended December 31, 2021, 2020 and 2019, are summarized as follows:included elsewhere in this annual report.

153 

Table of Contents

  As of December 31, 2019
  Total Less than 1 year 1-3 years 3-5 years More than 5 years
  (in millions of R$)
Contractual Obligations          
Deposits from the Brazilian Central Bank and credit institutions  99,271   66,073   25,656   4,877   2,666 
Customer deposits  336,515   275,480   44,112   16,923   -   
Marketable debt securities  73,702   11,370   37,269   3,900   21,163 
Debt Instruments Eligible to Compose Capital(1)  10,176   171   -     -     10,005 
Total  519,664   523,923   107,037   25,7   33,834 

(1)The table above excludes the notional and any interest payments relating to our perpetual Tier I bonds which interests are discretionary as described in “Item 5A—Operating And Financial Review And Prospects—Operating Results.”

The above table does not reflect amounts that we may have to pay on derivative contracts. The amounts ultimately payable will depend upon movements in the financial markets. The net fair value position of our derivative contracts as of December 31, 2019 reflected liabilities of R$1,983 million, compared to liabilities of R$103 million as of December 31, 2018.

In addition, we lease many properties under standard real estate lease contracts, which can be cancelled at our option and include renewal options and escalation clauses. Total future minimum payments of non-cancelable operating leases as of December 31, 2019 was R$2,291 million, of which R$651 million matures in up to one year, R$1,492 million from one year to up to five years and R$147 million after five years. Additionally, we have contracts with indeterminate maturities totaling R$0.9 million per month.

5G.Safe Harbor

See “Forward-Looking Statements.”

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6A.6A. Board of Directors and Board of Executive Officers

Pursuant to our By-Laws, we are managed by a board of directors (conselho de administração) and a board of executive officers (diretoria executiva). The board of directors is our supervisory board as set out in our By-Laws and in applicable legislation. Our board of executive officers is responsible for our day-to-day management. Our board of directors comprises a minimum of five members and a maximum of twelve members, of which at least 20.0% must be independent members. The board of directors has a chairman and a vice-chairman, each elected at the general shareholders’ meeting by majority vote.

Our board of executive officers comprises a minimum of two members and a maximum of 75 members, one of them being appointed as the Chief Executive Officer, and the others may be appointed as senior vice president executive officers, vice president executive officers, investor relations officers, executive officers and officers without specific designations. Some of our executive officers are also members of the boards of executive officers and/or boards of directors of our subsidiaries.

 178
Table of Contents

Pursuant to Brazilian law, the election of each member of the board of directors and board of executive officers must be approved by the Brazilian Central Bank.

The following table presents the names, positions and dates of birth of the current members of our board of directors and board of executive officers:

154 

Table of Contents

Members of the Board of Directors:

Name

Position

Date of Birth

Álvaro Antonio Cardoso de SouzaChairmanSeptember 5, 1948
SergioSérgio Agapito Lires RialVice-ChairmanChairmanJuly 28, 1960
Mario Roberto Opice Leão MemberJuly 21, 1975
José Antonio Álvarez ÁlvarezMemberJanuary 6, 1960
José de Paiva FerreiraMemberMarch 1, 1959
José Maria Nus BadíGarcía Cantera Member December 9, 1950May 26, 1966
Celso Clemente GiacomettiAlberto Monteiro de Queiroz Netto MemberNovember 30, 1967
Angel Santodomingo Martell MemberNovember 16, 1965
Pedro Augusto de Melo Independent MemberOctober 13, 1943November 4, 1961
Deborah Patricia WrightIndependent MemberSeptember 4, 1957
Deborah Stern VieitasIndependent MemberAugust 21, 1957
Marília Artimonte RoccaIndependent MemberJanuary 31, 1973

 

Members of the Board of Executive Officers:

Name

Position

Date of Birth

Sergio Agapito Lires RialMario Roberto Opice Leão Chief Executive OfficerJuly 28, 196021, 1975
Alberto Monteiro de Queiroz NettoVice President Executive OfficerNovember 30, 1967

Angel Santodomingo Martell

Vice President Executive Officer and Investor Relations Officer

November 16, 1965

Alessandro TomaoVice President Executive OfficerMarch 8, 1977
Antonio Pardo de Santayana MontesVice President Executive OfficerNovember 5, 1971
Carlos ReyAndrea Marques de VicenteAlmeida Vice President Executive OfficerFebruary 20, 1974January 13, 1971
Ede Ilson Viani ………………….Vice President Executive OfficerSeptember 5, 1967
Elita Vechin Pastorelo Ariaz Vice President Executive OfficerMarch 28, 1970
Jean Pierre DupuiVice President Executive OfficerSeptember 23, 1968
Juan Sebastián Moreno BlancoJoão Marcos Pequeno De Biase Vice President Executive OfficerDecember 17, 1964
Mário Roberto Opice LeãoVice President Executive OfficerJuly 21, 1975October 12, 1967
Patricia Souto AudiVice President Executive OfficerMay 15, 1968
Vanessa de Souza Lobato BarbosaVice President Executive OfficerDecember 24, 1968
José Roberto Machado FilhoAdriana Marques Lourenço de Almeida Executive OfficerOctober 4, 1972
Alexandre Guimarães Soares(*) OfficerAugust 25, 196827, 1969
Amancio Acúrcio GouveiaOfficerMarch 31, 1963
Ana Paula Vitali Janes Vescovi….Vescovi OfficerApril 08,8, 1969
André de Carvalho NovaesOfficerApril 14, 1969
André Juaçaba de Almeida(*) OfficerSeptember 27, 1974
André Rosenblit(*) OfficerMay 1, 1969
Carlos Aguiar NetoOfficerMarch 5, 1971
Cassio SchmittOfficerApril 23, 1971
Celso Mateus de Queiroz(*) OfficerSeptember 19, 1974
Claudenice Lopes DuarteOfficerJuly 25, 1972
Daniel Fantossi Assa……………………………Fantoni Assa OfficerDecember 12, 1975
Elita Vechin Pastorelo Ariaz……………………Francisco Soares da Silva Junior OfficerMarch 28,January 23, 1970
Franco Luigi FasoliOfficerSeptember 18, 1975
Geraldo José Rodrigues Alckmin Neto(*)...........Neto OfficerSeptember 8, 1981
Germanuela de Almeida de AbreuOfficerDecember 6, 1975
Gilberto Duarte de Abreu Filho OfficerAugust 7, 1973
Gustavo Alejo VivianiOfficerAugust 26, 1975
Gustavo de Souza Fosse OfficerMay 14, 1972
Igor Mario PugaOfficerNovember 10, 1981
Jean Paulo Kambourakis...............Kambourakis OfficerMay 09,9, 1980
Leandro Alves(*) OfficerJanuary 5, 1984
Luciana de Aguiar Barros(*) OfficerJanuary 3, 1980
José Teixeira de Vasconcelos NetoOfficerMarch 8, 1975
Luis Guilherme Mattos de Oliem BittencourtOfficerDecember 4, 1973
Luiz Masagão Ribeiro FilhoOfficerSeptember 1, 1976
Marino Alexandre Calheiros AguiarMarcelo Augusto Dutra Labuto OfficerSeptember 3, 1971
Maria Teresa Mauricio da Rocha Pereira Leite OfficerJune 21, 1967
Marilize Ferrazza Santinoni OfficerNovember 20, 1965
 179
Table of Contents

Murilo Setti Riedel(*) OfficerMay 14, 197117, 1963
Rafael Bello NoyaPaulo César Ferreira de Lima Alves(*) OfficerOctober 19, 197718, 1968
Paulo Sérgio Duailibi(*) OfficerSeptember 28, 1966
Ramón Sanchez DíezOfficerOctober 29, 1968
Ramon Sanchez Santiago………………………Santiago OfficerMay 25, 1969
Reginaldo Antonio RibeiroOfficerMay 19, 1969
Ricardo Olivare de Magalhães OfficerJanuary 26, 1979
Roberto Alexandre Borges Fischetti………...Fischetti OfficerAugust 28, 1975
Robson de Souza RezendeOfficerJanuary 24, 1967
Rogério Magno Panca OfficerDecember 30, 1970
Sandro Kohler Marcondes(*)...............................Marcondes OfficerApril 16, 1964
Sandro Mazerino Sobral OfficerFebruary 24, 1975
Sandro Rogério da Silva Gamba(*)Gamba OfficerAugust 31,197531, 1975
Thomaz Antonio Licarião Rocha(*) OfficerMarch 02, 1977
Thomas Gregor IlgOfficerSeptember 12, 1968
Vitor Ohtsuki(*Tiago Celso Abate(*)...................................................OfficerJune 05,12, 1980
Vítor Ohtsuki OfficerJune 5, 1977

(*) Pending approval by the Brazilian Central BankBank.

 

Below are the biographies of the members of our board(i) Board of directorsDirectors, which were elected at the Shareholders’ Meetings held on April 30, 2021 (election of all members but Mario Roberto Opice Leão, Angel Santodomingo Martell and boardAlberto Monteiro de Queiroz Netto); and December 17, 2021 (election of officers.

Mario Roberto Opice Leão, Angel Santodomingo Martell, and Alberto Monteiro de Queiroz Netto); and (ii) our Board of Executive Officers, as elected at the Board Meetings held on May 3, 2021 (election of all members but Sandro Mazerino Sobral, Rogério Magno Panca, Maria Teresa Mauricio da Rocha Pereira Leite, Gilberto Duarte de Abreu Filho and Andrea Marques de Almeida); July 1, 2021 (election of Sandro Mazerino Sobral and Rogério Magno Panca); November 1, 2021 (election of Andrea Marques de Almeida, Maria Teresa Mauricio da Rocha Pereira Leite and Gilberto Duarte de Abreu Filho); December 1, 2021 (election of Gustavo de Souza Fosse); December 17, 2021 (change of position of Mario Roberto Opice Leão from the position of Vice President Executive Officer to the position of Chief Executive Officer and the change of position of Andrea Marques de Almeida, Elita Vechin Pastorelo Ariaz and João Marcos Pequeno De Biase from the position of Officers to the position of Vice President Executive Officers); January 3, 2022 (elections of Alexandre Guimarães Soares, André Juaçaba de Almeida, André Rosenblit, Celso Mateus de Queiroz, Leandro Alves, Luciana de Aguiar Barros, Paulo César Ferreira de Lima Alves, Paulo Sérgio Duailibi, Thomaz Antonio Licarião Rocha and Tiago Celso Abate); and January 20, 2022 (election of Murilo Setti Riedel).

Members of the Board of Directors:

Álvaro Antonio Cardoso de Souza. Mr. Souza is Portuguese and was born on September 5, 1948.

155 

Table of Contents

He holds degrees in Economics and Business Administration from the Pontifícia Universidade Católica de São Paulo, and attended several specialization courses from a number of American universities, such as the University of Pittsburgh and The Wharton Business School of the University of Pennsylvania. He is the Managing Director of AdS - Management, Consulting and Investments, a firm which provides advice on investments and general management. He is the Chairman of the Board of Santander Brasil and a member of Santander Global Board in Spain. He developed his career in the banking business and has worked at Citigroup for thirty-two years, in Brazil and abroad. Outside Citigroup, Álvaro was the President of Banco ABC-Roma, a subsidiary of the media and entertainment Globo Group, Chairman of the Deliberative Council of Fundo Brasileiro para Biodiversidade (FUNBIO), and President of the American Chamber of Commerce in São Paulo (AmCham). He was also a board member of WWF International, WWF Brazil and of several Brazilian companies such as AmBev S.A., Celbrás, Ultraquímica, SPCI Computers, Signature Lazard Brazil, Triângulo Bank, CSU Cardsystems, Duratex S/A. and Gol Airlines. He served as a board member of MasterCard International. He is also a member of our risk and compliance committee, and chairman of the Group Board Risk Committee

Sérgio Agapito Lires Rial. Mr. Rial is Brazilian and was born on July 28, 1960. He hasjoined Santander Brasil, in the very early part of 2015, as Executive Chairman. From 2016, he acted as the Chief Executive Officer of Santander Brasil (during six years until December 31, 2021), and as head of South America from 2019 to 2021. South America, of which Brazil is a degreesignificant component, is a key part of the Santander Group. In January 2022, Mr. Rial assumed the position of Chairman of Santander Brasil, remaining a board member of Santander Spain as well. Before joining the Santander Group, he held leadership positions in Law fromseveral large financial and agribusiness companies. Mr. Rial worked at ABN AMRO for 18 years, serving as a member of ABN AMRO’s Global Executive Board (the first non-Dutch) and prior to that, as Chief Executive Officer of Asia Pacific, SVP Client Coverage in Europe, President in China and Hong Kong, and Head of the Universidade Federal do Rio de JaneiroFixed Income Emerging Markets Desks in Amsterdam. After ABN AMRO, he led Bear Stearn’s Capital Markets businesses internationally out of New York. Right after Bear Stearns, Mr. Rial joined Cargill’s team of senior executives, focusing initially on Cargill´s poultry and in Economics from Universidade Gama Filho,food ingredient business throughout Latin America and also holds an MBA from IBMEC in São Paulo, as well as specialization degrees from Harvard Business School,later on assuming Cargill’s Global Chief Financial Officer role out of Minneapolis, and being part of Cargill’s senior leadership team and board of directors. Returning to Brazil, he became the Wharton School of Business at the University of Pennsylvania and INSEAD, in France. His professional career includes serving as Chief Executive Officer of Marfrig Global Foods, S.A, Vice-President Executive Officerthe world’s second-largest meat company, leading one of the most challenging restructuring stories in the country. He served on the boards of Mosaic Fertilizer and World ChiefCarval in the U.S. and Cyrela Realty in Brazil. Currently, he serves as a board member for Delta Airlines in Atlanta and is a co-chair of The Nature Conservancy Board for Latin America, named LACC, and Chairman of Ebury, a cross-border payment fintech focused on SME´s. He is also currently the Chairman of CNF (Brazil´s Financial Officer of Cargill. He was alsoNational Confederation) and is a member of the board of directors of Cargill for nine years.FIESP (São Paulo’s Industrial Federation) Strategic Advisory Board. He wasstudied Law and Economics in Rio de Janeiro (UFRJ and UGF), holds a Managing Director of Bear Stearns & Co.,MBA from IBMEC and has participated in New York, Officer of ABN AMRO Bankseveral courses at Insead, Harvard and a member of the board of directors of ABN AMRO Bank in the Netherlands, as well as a member of the board of directors of Mosaic Fertilizers. Currently he is Vice-Chairman of the Board of Directors and the Chief Executive Officer of Santander Brasil, and Chairman of the Board of Directors of Universia Brasil S.A.Wharton.

 180
Table of Contents

José Antonio Álvarez Álvarez. Mr. Álvarez is Spanish and was born on January 6, 1960. He holds a bachelor’sBachelor’s degree (Hons) in Administration and Business Economics from Universidad Santiago de Compostela in Spain and an MBA from the University of Chicago’s Graduate School of Business. Mr. Álvarez became CEO of Santander Group on January 1, 2015, and Executive Vice PresidentChairman on January 15, 2019. Earlier, from 2004Prior to 2015,this, he wasserved as Executive Vice President of Finance of Santander Spain from 2004 to 2015 and Head of the Finance Division from 2002 to 2004. Before working atjoining Santander Group, he served as Head of the Finance Division of Banco Bilbao Vizcaya Argentaria, S.A. in Spain from 1999 to 2002 and as Financial Officer of Corporación Bancaria de España, S.A. (Argentaria) from 1995 to 1999. He was alsoPreviously, he served as Chief Financial Officer of Banco Hipotecario, S.A. in Spain, Vice President of Finanpostal Gestión Fondos de Inversión y Pensiones, and held positions at Banco de Crédito Industrial and Instituto Nacional de Industria. He wasserved as a member of the Board of Directors of Santander Consumer Finance S.A,S.A., Santander Consumer Bank AG and Banco de Crédito Local S.AS.A., among others, and served on the supervisory boards of Santander Group'sGroup’s independent subsidiaries, such as Poland, Germany and the United States. He was Chairman of the European Banking Federation Board and chaired the Banking Supervision Committee from 2009 to 2012. Mr. Álvarez is currently a member of the Board of Directors of SAM Investments Holdings Limited andhas been a member of our Board of Directors since 2009.

José de Paiva Ferreira. Mr. Paiva is Portuguese and was born on March 1, 1959. He has a specialization degree in Business Administration from the Fundação Getúlio Vargas, and an MBA from the Wharton School of Business at the University of Pennsylvania. He has worked in the financial markets for more than 40 years. He started at Banco Bradesco in 1973 and occupied several different positions. Afterwards, he joined Banco Geral do Comércio, Noroeste and Santander Brasil, where he was Vice President Executive Officer, responsible for the Business, Human Resources, Operations, Technology, Property, Products, Marketing, Credit Cards, Insurance, Leasing and Branch Network. From 2000 to 2001, he occupied the position of e-Business Officer for Latin America, forin the American Division of Santander Central Hispano. At the end of 2001, he came backreturned to Brazil in order to work at Banco Banespa as Vice President Executive Officer of Banco Banespa, where he was responsible for the OperationalHuman Resources, Department.Technology, Operations and Patrimony. In 2003, he became Vice President Executive Officer responsible for Marketing, Products and Retail Business for Santander Brasil. In 2008, he became the Chief Executive Officer of Santander

156 

Table of Contents

Brasil, a position that he occupied until the merger with Banco Real, when he became Senior Vice President Executive Officer, responsible for the Retail Business. In March 2011, he became Directora member of Santander Brasil’s Board of Directors, and joined the board business groupMitsubishi Corp Group based in Los Angeles, California, USA, where his main activities involved technological innovations. From July 2013 to December 2019, he returned to Santander Brasil and acted as Senior Vice President Executive Officer, responsible for Human Resources, Organization, Property, Proceedings, Operations, Technology and Costs. Additionally, he performed the following functions: Executive Director of Febraban (2014 to 2019), Chairman of the Febraban Self-Regulation Board (2016 to 2019), Chairman of the Board of Directors of CIP- Interbank Payment Chamber (2015 to 2018), President of Tecban Council - Banking Technology (2014 to 2015), Advisor of the Cancer Institute - SP (2009 to 2010) and Mentor of the Inova Unicamp Program (2011 to 2013). Currently, he is a member of our Board of Directors and a member of our risk and compliance committee.

José Maria Nus BadíGarcía Cantera. Mr. BadíJosé García Cantera is Spanish and was born on December 9, 1950.May 26, 1966. He holds a degree in industrial engineering and also holds an MBA from IE Business Administration, Economics and Political Science from the Business School of the University of Zaragoza. He started at Santander as Chief Executive and Chief Risk Officer at Banco Español de Credito, S.A. (Banesto). In 2010,School. Mr. BadíGarcía served as Chief Risk Officer of Santander UK and was Chief Risk Officer of Santander Group. He also has been its Chief Risk Officer since June 2018. Previously, Mr. Badía was also the Executive Vice President for Risk at Banco Bilbao Vizcaya Argentaria and Bankinter. Currently, heCantera is Senior Executive Vice President and Risk Advisor of the Santander Group in Spain. He became Chief Financial Officer and Head of the Financial Management Division in January 2015. Prior to his current role, Mr. García Cantera was Head of Global Wholesale Banking, reporting directly to the Santander Group’s CEO. Mr. García Cantera became CEO of Banesto in 2006, having joined in September 2003 as Senior Executive Vice President of Wholesale Banking, comprising Corporate Banking, Treasury, Capital Markets, Banesto Bolsa and the Santander Group’s international operations. Before working at Banesto, Mr. García Cantera held senior executive positions at Salomon Brothers-Citigroup. He was a member of the Management Committee of Citigroup EMEA and of the Board of Directors of Citigroup Capital Markets UK and Citigroup EMEA. During his time as a Latin American stock analyst, he was rated as best analyst by a number of specialized publications including Institutional Investor, Reuters, Extel and Global Investor between 1995 and 2002.

Pedro Augusto de Melo. Mr. de Melo is Brazilian and was born on November 4, 1961. He has a degree in accounting sciences and a postgraduate degree in accounting and financial administration from the São Judas Tadeu University of Accounting Sciences (São Paulo). Since March 2, 2020 he has occupied the position of CEO of the Brazilian Institute of Corporate Governance (IBGC). In July 2021, he was appointed to coordinate the Audit Committee of Hospital Sírio Libanês. He developed his career in the Deloitte and KPMG audit areas. From 2008 to 2017, he was CEO of KPMG Brazil, in addition to being the CEO for KPMG South America from 2015 to 2017. On October 1, 2017, he assumed the roles of COO for South America and Leader of Customers and Markets for South America until he retired from the firm in early 2020. He also actively participated in other levels of Governance at KPMG International, KPMG Americas and KPMG South America. He was Chairman of the Board of Directors of Santander GroupIBRACON - Brazilian Institute of Independent Auditors between 2009 and 2010. He was also a member of the BoardGovernance Committee of Directors of Santander Brasil.

Celso Clemente Giacometti. Mr. Giacometti is BrazilianAmcham Brasil and was born on October 13, 1943. He holds a degree in Business Administration from the Faculdade de Economia São Luís and graduated with an Accounting Sciences degree from the Faculdade de Ciências Econômicas de Ribeirão Preto. He started his career in 1960 as trainee and reviewer at Citibank. From 1963 to 2001 he worked at Arthur Andersen, becoming a partner in 1974 and acting as CEO of Brazilian operations from 1985 to 2000. He served on the Board of Directors and audit committees of Lojas Marisa S.A., Tarpon Investments, TIM Participações, Sabó Autopeças and Votorantim Indústrias. He was a memberexecutive of the Fiscal CouncilUnion of CTEEP/ISAAccounting Companies - Transmissão Paulista. He was also the CEO of Souto Vidigal, a holding company and family office, from 2004 to 2006. On February 3, 2010, he was elected as an independent member of our Board of Directors, a body over which he presided between October 2011 and June 2013 and between August 2013 and March 2015. He is President of the Fiscal Council and member of the Audit Committee of Ambev S.A. He is the Manager Partner of Giacometti Serviços Profissionais Ltda. Mr. Giacometti is also one of the co-founders and former board member of IBGC (Brazilian Institute of Corporate Governance) and a current member of its Governance and Nomination Commission.SESCON. Currently, he is an independent member of ourthe Board of Directors as well as a memberand the coordinator of our Compensationthe Risk and Compliance Committee and Chairman of our Nomination and Governance Committee.the Banco Santander (Brasil) S.A.

 181
Table of Contents

Deborah Patricia Wright. Mrs. Deborah Wright is Brazilian and was born on September 4, 1957. She holds a Business Administration degree from the São Paulo School of Business Administration (EAESP-FGV). Mrs. Wright started her career in 1980 at Kibon’s Marketing Department, where she remained until 1989. In 1989, she joined Unilever as Marketing Manager and worked in the food division. In 1991, she returned to Kibon as Marketing Director, becomingand became Commercial Vice President in 1994. In 1995 she became the General Manager of Kraft Suchard Foods. In 1997, she reached the position of General Manager of Kibon. At ICI/Paints, she was the General Manager for Tintas Coral Brasil from 1997 to 1999, and subsequently the Regional Manager for ICI. She was also General Officer at Parmalat Brasil in 1999, and Chief Executive Officer of Pão de Açúcar’s Group Internet Division from 2000 to 2001. From 2002 to 2007, she was Corporate Vice President/Commercial Vice President in the area of Sales and Corporate Marketing of the Abril Group. From 2009 to 2010, she was Chief Executive Officer/Country Manager of Ipsos Brasil, a market research firm. She has been acting as a board memberBoard Member since 2001. From 2001 to 2005 she was a memberserved on the board of the Escola Americana deGraded - The American School of São Paulo’s board (Graded School).Paulo. From 2005 to 2006 she was a board Member of CONAR (Brazilian National Self-Regulatory Board of Advertising). From 2008 to 2009 she was a member of the superior board of CONAR (National Board of Advertising Self-Regulation).Directors of the Samaritano Hospital in São Paulo. From 2008 to 2014 she was a board member offor Lojas Renner’s board,Renner, a Brazilian publicly-traded company, specializing in apparel retail, as well as Chairwoman of thetheir Sustainability Committee from 2012 to 2014. SheFrom 2013 to 2016, she was a member of the consultative council ofAdvisory Board for Eurofarma, from 2013 to 2016.the fourth largest Brazilian pharmaceutical company, still privately owned and not listed on the stock exchange. Currently she is associated with:with the following entities: Brazilian subsidiary of WCD Brazilian Group (Women Corporate Directors); Strategy and Innovation Committee, which she co-founded in 2010; she is the coordinator of the IBGC (Brazilian Institute of Corporate Governance) Strategy Commission at IBGC, where she leads a work and study group of DEI (Diversity, Equity and Inclusion); AmCham’s (American Chamber of Commerce); Amcham’s Strategic Corporate Governance Forum; and she is an ambassador of the Group Gender Diversity – Women30% Club and WOB (Women on Boards) and has been involved in Boards. Sheadvocacy for gender diversity for over a decade. Besides that, she is also an independent member of our boardthe Board of directors,Directors, a member of our nominationthe nominations andgovernance committee and a chairwoman of our compensation committee.the Compensation Committee of Banco Santander (Brasil) S.A.

157 

Table of Contents

Deborah Stern Vieitas. Mrs. Vieitas is Brazilian and was born on August 21, 1957. She holds a degree in Public Administration from FGV-SP and a degree in Journalism from the School of Communications and Arts (Escola de Comunicações e Artes) of the University of São Paulo. She also holds a master’s degree in Business from FGV-SP and in Public Administration from École Nationale d’Administration. She is currently the Chief Executive Officer of American Chamber of Commerce Brazil (Amcham Brazil). From 2015 to 2017, she was an independent member of the Board of AXA Seguros SA.S.A. From 2008 to 2014, she was CEO and Board Member of the Banco Caixa Geral – Brasil. From 2000 to 2008, she was anas Executive Vice President of Banco BNP Paribas Brasil, Mrs. Vieitas was responsible for Corporate Coverage and Loan and Financing portfolios. From 1998 to 2000, she was an Executive Vice President of Banco CCF Brasil and in charge of Large Corporate & Corporate Coverage, Capital Markets, Trade Finance and Foreign Exchange. Currently she is an independent member of our Board of Directors and Audit Committee coordinator.chairwoman of the audit committee, in addition to having already been a member of the Risks and Compliance Committee.

Marília Artimonte Rocca.Ms.Mrs. Rocca has been CEO of Hinode Group, the largest Marketing Multilevel consumer goods company in Brazil, since November 2018. It also has operations in Latin America. Previously, she was Ticket’s Managing Director in Brazil, a food voucher Edenred Group company. Formerly, she served as vice president at TOTVS, the sixth largest software company worldwide, based in São Paulo. From 2008 till 2012, Mrs. Rocca was a managing partner at Mãe Terra, a natural and organic foods B-Corp sold to Unilever in 2017. Prior to that she co-founded and managed Endeavor Brazil, the most successful NGO supporting innovative entrepreneurship in the country. In 2000, she also co-founded Fundação Brava, a family foundation focused on transferring management tools to the public sector and Brazilian NGOs to boost their effectiveness. From 1995-98, Mrs. Rocca worked for Walmart as one of the organization’s first female directors in Brazil. For 20 years Mrs. Rocca has served as a board member at privately and publicly held companies in the Education, IT, Services and Consumer Goods industries. Mrs. Rocca earned a BA in Business Administration from EAESP/Fundação Getúlio Vargas and an MBA in Management from Columbia University, attending on the Fundação Estudar Scholarship. She is a 2006 Henry Crown Fellow of The Aspen Institute and a member of the Aspen Global Leadership Network. Also, Marilia is an independent Board member and coordinator of the Sustainability Committee of Banco Santander (Brasil) S.A.

Mario Roberto Opice Leão. Mr. Leão is Brazilian and was born on January 31, 1973. SheJuly 21, 1975. He holds a degree in Business AdministrationProduction Engineering from the Fundação Getúlio VargasEscola Politecnica of the Universidade de São PauloPaulo. He joined Santander Brasil in October 2015 as an Executive Director in Corporate and Investment Banking. In July 2017 he became Executive Vice President of Corporate and SMEs and a member of the executive committee. Since January 2022 he has acted as Chief Executive Officer of Santander Brasil. Before joining Santander Brasil, he was a Managing Director in Capital Markets at Morgan Stanley from 2008 to 2015, worked for Goldman Sachs from 2006 to 2008 and for Citibank from 1996 to 2006.

 182
Table of Contents

Angel Santodomingo Martell. Mr. Santodomingo is Spanish and was born on November 16, 1965. He holds a degree in Economics and Business with a specialization in Finance from ICADE University in Madrid and a CFA (Chartered Financial Analyst) from the CFA Society of the United States. As one of our Vice President Executive Officers, he holds the position of Chief Financial Officer and Investor Relations Officer since 2014. He started at the Santander Group in 2005 as Head of International Development in the Asset Management unit after which he became global responsible for the Santander Group Investor Relations area. Prior to this he was the head of Grupo Fortis in Spain and an MBA in Business Administration from Columbia Business School, New York. She attended the Executive – Family in Business Programofficer and board member at Harvard Business School in Boston. Ms. Rocca began her career in the Operations Department of Walmart Brazil, andBanesto Bolsa. He also worked at the company until 1998. She had managed nonprofit organizations for six yearsUsera y Morenés S.V.B. - Sociedade de Valores y Bolsa and co-founded and was General Director of Endeavor Brazil, NGO leader in high-impact entrepreneurship, and Brava Foundation, an organization dedicatedArthur Andersen (Deloitte). From 1996 to promoting public management. She inaugurated and still develops part2008, he acted as founding member of the Family Office of the Lemann, Sicupiranonprofit organization CFA Society in Spain, also occupying different positions including President; and Telles families. She alsofrom 2009 to 2014 he was Vice President of TOTVS and partnerAERI’s (Asociación Española de Relaciones con Inversores) Board of MãDirectors. He was Chairman of the Board of Directors of Webmotors S.A. from 2018 to 2021. Currently, he is Chief Executive Officer of Santander Leasing S.A. Arrendamento Mercantil, Santander Corretora de Seguros, Investimentos e Terra. Ms. Rocca wasServiços S.A., a member of the BoardsAdvisory Board of DirectorsFundo Garantidor de Créditos (FGC) and a member of TOTVS from 2001 to 2012the boards of directors of Banco Hyundai Capital Brasil S.A., Banco PSA Finance Brasil S.A., Banco RCI Brasil S.A. and of Endeavor Brasil from 2005 to 2012. SheHDI Seguros Brasil. On December 17, 2021, he was alsoelected a member of the Board of Directors of the IBMEC Group from 2004 to 2008 and was appointed to the position of member of the External Evaluation Committee of Insper. From 2012 to 2016, Ms. Rocca served as an independent member of the Board of Directors of Santander Brasil and from August 2016 to June 2018, she served as Executive Director of Ticket. Currently she is CEO of the Hinode Group and is an independent member of our Board of Directors and coordinator of the Sustainability Committee.Brasil.

Members of the Board of Executive Officers:

Sérgio Agapito Lires Rial. See “—Members of the Board of Directors.”

Alberto Monteiro de Queiroz Netto. Mr. Monteiro is Brazilian and was born on November 30, 1967. He holds a bachelor’s degree in Business Administration from Faculdade de Ciências Políticas e Econômicas do Rio de Janeiro. He also completed a post graduatepost-graduate degree in Banking at Universidade de São Paulobanking by FEA/USP and an MBA in corporate finance at Fundação Getúlio Vargas do Rio de Janeiro.Corporate Finance by FGV/RJ. From 2009 to 2011, he served as Chief Financial Officerchief financial officer and Investor Relations Officerinvestor relations officer at CSN – Companhia Siderúrgica Nacional. Between 2011 and 2014, he was also Chief Financial Officerchief financial officer and Investor Relations Officerinvestor relations officer of Suzano Papel e Celulose SA. Between 2014 and 2016, he held the position of Executive Vice Presidentexecutive vice president at GraninvestimentosGranInvestimentos S.A. where he was responsible for finance. In 2017, Mr. Monteiro served as Executive Vice Presidentexecutive vice president at Banco do Brasil S.A., where he was in charge of the Finance, Investor Relationsfinance, investor relations and M&A Departments.departments. Currently Mr. Monteiro is the Vice President Executive Officer and Headhead of the Private Banking SegmentWealth Management segment of Santander Brasil. He is also aBrasil, and on December 17, 2021, he was elected member of the Advisory Board of Directors of Santander Brasil GestãBrasil.

Members of the Board of Executive Officers:

Mario Roberto Opice Leão. See “—Members of the Board of Directors.”

Alberto Monteiro de Recursos Ltda.Queiroz Netto. See “—Members of the Board of Directors.”

Angel Santodomingo MartellMartell.. Mr. Santodomingo is Spanish and was born on November 16, 1965. He holds a degree in Economics and Business with specialization in Finance from the ICADE University in Madrid and a CFA (Chartered Financial Analyst) from the CFA SocietySee “—Members of the United States. As one of our Vice President Executive Officers, he holds the position of Chief Financial Officer and Investor Relations Officer. He started at the Santander Group in 2005 as Head of International Developments and Asset Management and then became globally responsible for the investor relations area. He was the head of Grupo Fortis in Brazil and an officer and board member at Banesto Bolsa. He

158 

Table of Contents

also worked at Usera y Morenés S.V.B. - Sociedade de Valores y Bolsa and Arthur Andersen (Deloitte). From 1996 to 2008, he occupied the position of Chief Executive Officer of the CFA Society in Spain, where he acted as founding member of such nonprofit organization focused on serving the holders of financial analyst accreditation (CFA) and from 2009 to 2014 was Vice President of AERI’s (Asociación Española de Relaciones con Inversores) Board of Directors. He is also Chief Executive Officer of Aymoré CFI, Santander Leasing S.A. Arrendamento Mercantil, Santander Corretora de Seguros, Investimentos e Serviços S.A. and Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., Executive Officer of Santander Cultural and Santander Holding Imobiliária S.A., Chairman of the board of directors of Webmotors S.A. and a member of the boards of directors of Banco Hyundai Capital Brasil S.A., Banco PSA Finance Brasil S.A., Banco RCI Brasil S.A., Santander Leasing S.A. Arrendamento Mercantil and Super Pagamentos e Administração de Meios Eletrônicos S.A.”

Alessandro Tomao. Mr. Tomao is Brazilian and was born on March 8, 1977. He holds a bachelor’s degree in Lawlaw from the FMU University and a master’s degree in Business Administration - HR degree from the University of São Paulo. As one of our Executive Vice Presidents, he has been responsible for the Company’s Legal and Corporate Affairs department since February 2018. From June 2010 to February 2018, he washas been the Headhead of the Legal Litigation, Legal Consultinglegal litigation, legal consulting in Laborlabor and Pension Funds Departmentspension funds departments at Santander Brasil. From January 2000 to May 2010, he served as the head of the labor and pension funds legal department at Banco Itaú S.A. Previously, from 1998 to 2000, he acted as a trainee at Whirlpool Brazil, where he started his career. Since 2015,January 2020, he has been a permanentExecutive Director of FEBRABAN. He is also member of the legal counselBoard of FEBRABAN, where he acted from 2011 to 2015Directors at CACEIS as the coordinator of the labor committee. Since January 2017, he is a member of the Legal Counsel of ABRAPP (Brazilian Association of Pension Funds). He is also a member of the board of directors of Santander Cultural and Santander Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A.2019.

Antonio Pardo de Santayana MontesMontes. Mr. Pardo de Santayana is Spanish and was born on November 5, 1971. He holds a degree in Economics and Law from the ICADE Schoolschool of the Universidade Pontifícia Comillas. As one of our Vice President Executive Officers, he is responsible for the risk management department in Santander Brasil, having previously held the post of Officer responsible for the Risk Credit Recovery area and Officer of Wholesale Risks and Aymoré CFI. He is also the South America Risk Lead for Santander Group, a member of the Global Executive Risk Committee and the Global Control Risk Committee and an Executive Officer in Banco Bandepe S.A., Aymoré CFI, Santander Leasing S.A. Arrendamento Mercantil and Sancap Investimentos e Participações S.A. He was a consultant at PricewaterhouseCoopers from 1995 to 1998, Senior Risk Analystsenior risk analyst for Santander Central Hispano/Santander Investment from 1998 to 2000 and senior manager of Monitor Company from 2000 to 2005. He2005, and returned to the Santander Group in 2005 as Associate Officer in the Wholesale Risks area, where he remained until 2009, when he came to work in Brazil. He

 183
Table of Contents

Andrea Marques de Almeida. Ms. de Almeida is also Executive Officer of Banco Bandepe S.A., Aymoré CFI, Santander Leasing S.A. Arrendamento Mercantil, and Sancap Investimentos e Participações S.A.

Carlos Rey de Vicente. Mr. Rey is SpanishBrazilian and was born on February 20, 1974. He graduatedJanuary 13, 1971. She has a degree in Lawproduction engineering from the Universidad ComplutenseFederal University of Rio de Madrid,Janeiro, an MBA in Finance from IBMEC - Rio de Janeiro and he became a memberan MBA in management from the State University of São Paulo. Before joining Santander Brasil, Ms. de Almeida held management positions at Vale S.A in the Colégio de Abogados de Madrid in 1997. In 2010 he startedareas of risk management and finance. She also held the position of Executive Director of Finance and Investor Relations at Santander Spain, where he was responsible for the strategy and planning of the banks of Santander México, Chile, Argentina, Puerto Rico, Uruguay, Peru and Colombia. From 2001 to May 2010, Mr. Rey was a partner of McKinsey & Co., where he was responsible for heading several projects on strategic consulting. His activities were always concentrated on banking and insurance matters, besides acting on team management. Before, he worked as a lawyer in two different law firms, at one of which he was a Partner and Founder, dealing mainly with insurance and civil responsibility.Petrobrás S.A. Currently, Mr. Reyshe is our Vice President Executive Officer responsible for the Finance and Strategy and Quality department. He is also a member of the Boards of Directors of Santander Leasing S.A. Arrendamento Mercantil, Super Pagamentos e Administração de Meios Eletrônicos S.A., Santander Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A., Zurich Santander Brasil Seguros e Previdência S.A., Zurich Santander Brasil Seguros S.A. and Santander Brasil Establecimiento Financeiro de Crédito S.A., Administrative Officer of Norchem Participações e Consultoria S.A. and Vice President Officer of Santander Cultural. He is also a member of our Sustainability Committee.departments.

Ede Ilson Viani. Mr. Viani is Brazilian and was born on September 5, 1967. He holds a degree in Accounting from Faculdade Tibiriçá and an MBA in Finance from IBMEC Instituto Brasileiro de Ensino e Pesquisa - Insper.Mercado de Capitais. He was an auditor at Banco Itaú S.A. from 1986 to 1990 and worked at BankBoston S.A for 16 years as a Senior Auditor, the Credit Risk Management Superintendent, the localHead of Local Currency Loans and Head Officer

159 

Table of Contents

and the small and medium companies head officer.Small Business Segment. He joined Santander Brasil in 2007 as officer (or Head Officer) for small and medium business bankingSmall & Medium Companies Director and from July 2010 to 2014 aswas Retail Banking Risk Management Director (or Head Officer). As one of our officers,Director. From 2014 he wasacted as the Director responsible for our retail banking branches untilSmall & Middle, Government & Institution and Agribusiness and after that as Retail Banking Network Director up to December, 2019 when he was promoted toand became Technology & Operations Vice President.

Elita Vechin Pastorelo Ariaz. Ms. Ariaz is Brazilian and was born on March 28, 1970. She holds a law degree from the positionUniversity of Vice President Executive Officer, responsible forSão Paulo, a master’s degree in law (LL.M.) from Temple University – Pennsylvania and an extension from the Organization, Property, Proceedings, Operations, Technology and Costs area. HeCorporate Finance Special Program at New York University. She is also a member of the BoardBrazilian Bar Association and the New York State Bar Association. Between 1992 and 1996, she worked as an in-house lawyer at Tenenge – Técnica Nacional de Engenharia S.A.; between 1997 and 1998, she worked as a foreign associate at the law firm of DirectorsCameron & Hornbostel LLP in Washington, DC; between 1998 and 2001, she worked as an associate at the law firm of Super Pagamentos e Administração de Meios Eletrônicos S.A.LeBoeuf, Lamb, Greene and MacRae, LLP, in New York, NY. Between 2002 and 2018, she worked as an in-house lawyer at Grupo Safra, having started as the head of legal support for Grupo Safra’s offshore operations. In her last six years at Grupo Safra she was also responsible for providing legal support for the operations of the investment banking division of Grupo Safra as well as for its asset management division. In 2018, she joined Santander Brasil where she served as Director responsible for the Business Legal Department – wholesale and retail until 2021. As one of our Executive Vice Presidents, she is currently responsible for Human Resources area.

Jean Pierre Dupui. Mr. Dupui is Brazilian and was born on September 23, 1968. He holds a bachelor’s degree in Economics and a specialization degree both from Boston University. Currently he is responsible for Global Corporate & Investment Banking at Santander Brasil. From 1992 to 1998 he worked at the structured finance and trade finance department of Lloyds TSB Group in São Paulo and London. From 1998 to 2001 he worked at the structured finance department of Citigroup Brasil. From 2001 to 2004 he worked for BBVA Brasil in the Debt Capital Markets Department.debt capital markets department. From 2004 to 2006 he was a Corporate Finance Officer at Citigroup New York and São Paulo. He started his career in Santander Group in 2006, where he took charge of the Credit Markets Departmentdepartment of Santander Brasil. From 2009 to 2012 he was responsible for Global Transaction Banking of Santander in Madrid. Mr. Dupui is also an Executive Officer of Banco Bandepe and Santander Cultural, and Banco Bandepe S.A. anda member of the Board of Directors ofCurator Counsel at Fundação Santander Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A.

Juan Sebastián Moreno Blanco. Mr. Moreno was born on December 17, 1964, in Spain. He graduated in Business Administration from the University of Houston, TX. From 1987 to 1994, he worked at Bankinter as Commercial Officer, responsible for the Commercial Department as well as for the Enterprises segment in Santander. From 1994 to 1997, he worked as Project Officer in the financial system of Mexico and Brazil, for Booz, Allen & Hamilton, in Mexico. He joined the Santander Group in 1997, where he served as Executive Officer of Companies and Institutions, after which he became Executive Officer of Business Development at Banco Santander Mexico, with responsibility for activities in the area of products of the bank. In 2006, he became responsible for the segments of Large Enterprises, Corporate, Institutional and High Income in Latin America, in addition to leading the product areas for the countries of Latin America (Comex, Cash Management, Payroll etc.). From 2008 to 2010, he performed the role of Chief Executive Officer of Banco Santander – Puerto Rico. As of 2010, he occupied the position of Vice President Officer of the Commercial area of Banco Santander Mexico, with responsibility for the business areas. At that time, he was also a member of the Boardboards of Directors, Steering Committee, Asset and Liability Committee, Finance Committee and Risk Committee. As a Vice President Executive Officer, he is responsible for our Retail and Commercial Branches. He is also an Executive Officerdirectors of Banco BandepeS3 Caceis Brasil DTVM S.A.

Mário Roberto Opice LeãJoão Marcos Pequeno De Biase. Mr. LeãoDe Biase is Brazilian and was born on July 21, 1975.October 12, 1967. He holds a degreegraduated in Production EngineeringEconomics from the Escola PolitecnicaFederal University of the UniversidadeRio de São Paulo. He began his career in 1996 as an associateJaneiro - UFRJ. Before joining Banco Santander Brasil, Mr. De Biase worked at Citigroup, in the financial control area, being the Financial Analyst of all wholesale products from Citigroup Brazil, including global markets, financing,Banco Itaú BBA between 2008 and corporate banking accounts. In 2006,2020, where he served as Global Markets Manager,Head of Corporate and had an active role inInvestment Banking - CIB, Executive Director responsible for the developmentcommercial area and innovationhead of derivatives in Brazil.the bank’s origination team. From 20062005 to 2008, he workedserved as Director and Head of Sales and Global Market Coverage for Deutsche Bank. From 1998 to 2005, Mr. De Biase was Director of Investment Banking and Sales of fixed income products at Goldman Sachs as Fixed Income, CurrenciesCredit Suisse in São Paulo. From 1991 to 1998, he held various positions at Banco de Investimentos Garantia, including Head of the office located in Rio de Janeiro and Commodities Manager, and, between 2008 to 2015, as GlobalHead of the Capital Markets area where he was responsible for the liquidation and back office of all Client Company Transactions. Mr. De Biase started his career in 1989 as a Trainee in the Economic Planning team at Petrobrás Comercial Internacional. Currently, Mr. De Biase holds the position of Executive Superintendent of Morgan Stanley. Since October 2015, he has been partVice President of the executive teamCorporate segment of Banco Santander Brasil, being responsible for wholesale banking, leading a team of 70 people servicing more than 700 largeserving larger and medium-sized companies, both national and international companies in Brazil. This positionmultinational. At Santander since 2020, João was also covers foreign exchange loans and treasury products. As oneExecutive Director of our Vice President Executive Officers, he is also a memberthe Corporate & Investment Banking area of our Sustainability Committee.the Global Corporate Banking segment.

 184
Table of Contents

Patricia Souto Audi.Ms.Mrs. Souto Audi is Brazilian and was born on May 15, 1968. She holds a bachelor’s degree in Business Administration from the University of Brasilia and she is an experta Specialization in public policiesPublic and government management. Between 2015 and 2018, she served asGovernment Management, National School of Public Administration from the secretaryPublic Management National School (ENAP) in Brasilia. She was Secretary of Transparency and Corruption Prevention of Corruption at the Brazilian Ministry of Transparency; director ofINSS Benefits at INSS (National Institute of Social Security); coordinator atDirector; ILO Coordinator (International Labor Organization) in Brazil; secretarySecretary of Management at the Ministry of Planning, Budget and Management of the Federal governmentGovernment and secretarySecretary of the

160 

Table of Contents

Economic and Social Development Council, at Civil House, a governmentalcivil society body directly connectedthat gives advice to the Presidency of the Republic of Brazil. She joined Santander Brasil in August 2018 as the head of Institutional Relations. Nowadays, she holds the position of Executive Superintendent Head of the Institutional Relations Department. Since January 2019,Vice President, where she is one of our Vice President Executive Officers, responsible for the Communication, Marketing, Institutional Relationsinstitutional relations and Sustainability Departments of Santander Brasil. She is also chief executive officer of Rojo Entretenimento S.A., Executive Officer of Universia Brasil S.A. and a member of the Board of Directors of Santander Cultural.sustainability.

Vanessa de Souza Lobato Barbosa. Ms. Lobato is Brazilian and was born on December 24, 1968. She holds a bachelor’s degree in Business Administration from Pontifícia Universidade Católica de Minas Gerais, and a specialization degree in Marketing from Universidade Federal de Minas Gerais. From 19921990 to 1995 she served as Marketing Local Manager at Banco Nacional, with responsibility for the sponsorship budget and micromarketingmicro marketing activities focused on the retail network. She also worked at Unibanco, in Recife, from 1995 to 1999, where she was responsible for different branches in the city of Recife. In 1999 she started at Santander Brasil, where she worked as General Manager of the Recife branch office. From 2001 to 2006 she served as Local Superintendent, where she was responsible for one of the Retail’s Locals,retail’s locals, with itstheir head office in Belo Horizonte, covering the states of Minas Gerais, Goiás, as well as Brasília, and the states of the Northeast Region. From 2006 to 2013, Ms. Lobato wasbecame an Executive Superintendent of our branch network, with responsibility for one of our branch networks, with responsibility forretail branches in Brazil, specifically the “SPI Centro Sul” branch based in Campinas, State of São Paulo, covering important cities such as:as Campinas, Jundiaí, Sorocaba, Piracicaba, Limeira and Americana. AsAmericana, totaling 258 branches in 94 cities. From 2013 to 2020, she led, as one of our Executive Vice Presidents, the Vice President Executive Officers, sheof Human Resources and is currently the Vice President responsible for Retail.

Adriana Marques Lourenço de Almeida. Ms. Almeida is Brazilian and was born on October 4, 1972. She holds a degree in Business Administration from Fundação Armando Álvares Penteado - FAAP and an MBA from Columbia Business School, in the Human Resources department.United States. She is also a memberhas more than 25 years of experience in national and multinational banks. From 2017, she served as an executive at Banco Santander (Brasil) S.A., where she was responsible for managing business with multinational companies as well as with the Board of Directors ofautomotive sector. Since 2019, she led the Global Transaction Banking division (cash management, supply chain finance and local currency loans) for the wholesale bank at Banco Santander Cultural.(Brasil) S.A.

José Roberto Machado FilhoAlexandre Guimarães Soares.. Mr. MachadoSoares is Brazilian and was born on August 25, 1968.27, 1969. He holdshas a degree in Electrical Engineeringengineering from the Escola Mauá de Engenharia and has an extension in economics from the Faculdade de Engenharia Industrial in SãEconomia e Administração Paulo/ USP and has a master’spost-graduate degree in Business, Economics and Financemarketing from the UniversidadeEscola Superior de São Paulo. He was an engineer for Keumkang Limited from 1990Propaganda e Marketing. Prior to 1991, a foreign Exchange Manager from 1992 to 1995joining Santander Brasil, Mr. Soares held management positions at Banco Safra, BankBoston Banco Múltiplo S.A. and a Manager of the emerging markets trading desk from 1992 to 1996 of Banco CCF BrasilReal S.A. He was alsois an Executive Officer of Banco Rabobank Internacional Brasil S.A. from 1998 to 2003 and was an Executive Officer of Banco Real from 2003 to 2009. Currently, he is responsible for the Individual Businesses area. He is also Executive Officer of Banco Bandepe S.A., administrator of Santander Brasil Administradora de Consórcio Ltda. and aalternate member of the boardsdeliberative councils of directorsthe Câmara Interbancária de Pagamentos and TECBAN – Tecnologia Bancária. As one of Zurich Santander Brasil Seguros e Previdência S.A., Zurich Santander Brasil Seguros S.A., Santander Cultural,our officers, Alexandre is Vice President responsible for Manufacturing and B3- Brasil, Bolsa, Balcão.Technology & Operations.

Amancio Acúrcio GouveiaGouveia.. Mr. Gouveia is Brazilian and was born on March 31, 1963. He holds a degree in Accounting from the Universidade Santa Úrsula. As one of our officers, he has been acting as a controller working in the Accounting and Fiscal management areas of our companies since 2001. He was an Audit Manager for KPMG until 1991 and an accounting manager of Unibanco – União de Bancos Brasileiros S.A. from 1991 to 1999, and assistant superintendent of BankBoston Banco Múltiplo S.A. from 1999 to 2001. He is Chief Executive Officer of Banco Bandepe S.A. and Executive Officer of Santander Leasing S.A. Arrendamento Mercantil, Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., Santander Capitalização S.A., Aymoré CFI, Evidence Previdência S.A. and Sancap Investimentos e Participações S.A. He is also Administrator of Santander Brasil Administradora de Consórcio Ltda. He also serves as a member of the Fiscal Council of the Brazilian Federation of Banks, of the National Federation of Banks, of the Brazilian Institute of Banking Science and of the Banks Union in the Statesstates of São Paulo, Paraná, Mato Grosso, Mato Grosso do Sul, Acre, Amazonas, Pará, Amapá, Rondônia and Roraima. He has professional experience as a teacher:teacher at ABEU—Faculdades Integradasm, as Professor III, between March 1991 and February 1999, as a teacher for General Accounting under the accounting degree curriculum; at the Faculdade de Direito Cândido Mendes, as a substitute professor between March of 1997 and December of 1998, where he taught Elements of Accounting under the law degree curriculum; and at the Sponsor of Seminars promoted by IOB and IBRACON, in the year 1990, where he taught as part of the Training Programs of Accounting for Non-Accountants.

161 

Table of Contents

Ana Paula Vitali Janes Vescovi.Mrs. Vescovi is Brazilian and was born on April 8, 1969. She graduatedhas a degree in Economics from Universidade Federal do Espírito Santo, a Master in Public Administration from Brazilian School of Public Administration at Fundação Getúlio Vargas/Vargas in Rio de Janeiro/RJ, a Master in Public Economics from Universidade de Brasilia/DF and a postgraduate degree in Public Policies and Government Management from the National School of Public Administration/DF. Since 1999, she has worked in public service, with an emphasis on fiscal and financial management and public policies, with executive experience in the three spheres of government. Since 2015, sheShe served as Chairman of the boardBoard of directorsDirectors of Banco do Estado do Espírito Santo – BANESTES, Instituto de Resseguros do Brasil and Caixa Econômica Federal, and is a member of the Board of Directors of Eletrobras. Nowadays, she serves as a member of the Board of Directors of Ultrapar. She held the positions of Secretary of the National Treasury and Executive Secretary at the Ministry of Economy, between 2016 and 2018. As one of our officers, she is responsible for the macroeconomic research area.

 185
Table of Contents

André de Carvalho Novaes. Mr. Novaes is Brazilian and was born on April 14, 1969. He holds a degree in Economics from the Universidade Federal Fluminense and an executive MBA from BPS Business School (São Paulo and Toronto). From 1993 to 1997, he served as Products Coordinator in Santander Brasil, where he was responsible for credit proposals analysis, and in several areas at Aymoré CFI and in posts as commercial operator and credit and collection chief. In 1996, he served as coordinator of products in São Paulo. From 1997 to 2001, he served as commercial manager. From 2002 to 2008, he served as Regional Manager. From 2008 to 2012, he served within Santander Brasil as the person responsible for the Other Assets segment in Aymoré CFI. Since 2012, he has served as Executive Superintendent in Santander Brasil, with responsibility for Aymoré CFI’s Vehicle Partnerships. In December 2012, he became the Commercial Coordinator of Aymoré CFI, with responsibility for the Commercial and Partnerships team. Currently, Mr. Novaes is head of Santander Financiamentos and reports to the CFO. He is also Executive Officer of Aymoré CFI, Vice Chairman of the Board of Directors and Vice President Officer of Webmotors S.A., and a member of the Board of Directors of Banco Hyundai Capital Brasil S.A. and, Santander Auto S.A. and Loop Gestão de Pátios S.A. He is also a member of the Board of Directors and Institutional Relations Officer of Banco RCI Brasil S.A.

André Juaçaba de Almeida. Mr. Juaçaba de Almeida is Brazilian and was born on September 27, 1974. He holds a degree in economic sciences from Universidade Candido Mendes. Prior to joining Santander Brasil, Mr. Juaçaba de Almeida held positions in structured transaction at Citibank and at Banco Goldman Sachs in the commercial area of Foreign Exchange Derivatives, Interest and Commodities. As one of our officers, Mr. Juaçaba de Almeida is responsible for the relationship with large corporations: Banking, as well as our Investment Banking.

André Rosenblit. Mr. Rosenblit was born May 1, 1969. He holds a degree in business administration from the Fundação Álvaro Penteado. Prior to joining Santander Brasil, Mr. Rosenblit held management positions at Banco Safra S.A. and Banco Deutsche. Currently he is also an officer of Santander Corretora de Câmbio e Valores Mobiliários S.A. As one of our officers, Mr. Rosenblit is responsible for the Equities Area.

Carlos Aguiar Neto. Mr. Aguiar is Brazilian and was born on March 5, 1971. He holds a degree in Electrical Engineering from Fundação Armando Alvares Penteado with a specialization in Business Administration from Fundação Getúlio Vargas. From 1996 to 2007, he worked as Treasurer of Cargill Agrícola S.A., officer of Cargill Previdência and Executive Officer of Banco Cargill S/A. From 2007 to 2010, he was CFO and Investor Relations at BrasilAgro – Cia Brasileira de Propriedades Agrícolas S.A. From 2010 to 2015, he was CEO at Macquarie Crop Partners LP at Macquarie Bank, responsible for funds that invest in farms and grain production in Brazil and Australia. Mr. Aguiar is also Executive Officer of ABAG (Associação Brasileira do Agronegócio), a member of COSAG (Conselho Superior do Agronegócio da Fiesp) and Executive Officer of FEBRABAN (Federação Brasileira de Bancos) on the Rural Credit Sector Commission. Since 2015, he has been responsible for the agribusiness area of Santander Brasil. He is also a member of our Sustainability Committee.Committee and Executive Officer of Banco Bandepe S.A.

Cassio Schmitt. Mr. Schmitt is Brazilian and was born on April 23, 1971. He holds a degree in Economics from the Universidade Federal do Rio Grande do Sul, a master’s degree in Corporate Economics from Fundação Getúlio Vargas and an MBA from the Sloan School of Business, Massachusetts Institute of Technology. He was thean Economist of Banco de Crédito Nacional S.A. from 1995 to 1996, and Senior Economist atof UNIBANCO – União de Bancos Brasileiros S.A. from 19961995 to 1999. He was an associate of the Leveraged Finance team of UBS Warburg in 2000 in New York, Project Finance Superintendent of UNIBANCO from 2001 to 2003 and Corporate Banking SuperintendentBanker of UNIBANCOUNIBANCO’s Representative Office in New York from 2003 to 2004. He became responsible for the project finance team of Santander Brasil infrom 2004 and forto 2010, adding the areas of acquisition finance and syndicated lending in 2010.lending. From 2011 to 2012, he was the Director responsible for the GCB ClientsWholesale Risk Department, and from 2013 to 2014 he was responsible for Global Transaction Banking, including Cash and fromTrade. From 2015 to 2018onwards, he wasled several businesses in the officer responsible forRetail Banking, such the Credit Recovery Business and the Personal and Real Estate Loans.SMEs Credit Products, including Payroll Loans, Agro and Mortgage Loans, and the Innovation team. Currently, Mr. Schmitt serves as our officer in charge of the CompaniesRetail Corporate Business, Government and Institutional Retail sector.clients. He was member of the Board of Directors of Banco Olé Consignado S.A. and Super Pagamentos e Administração de Meios Eletrônicos S.A. (“Superdigital”).

 186
Table of Contents

Celso Mateus de Queiroz. Mr. de Queiroz is Brazilian and was born on September 19, 1974. He holds a degree in Business Administration from UNIB – Universidade Ibirapuera and a postgraduate degree in marketing administration from Fundação Armando Alvares Penteado, an MBA in business management from Fundação Getúlio Vargas and an MBA in Business Management from INSPER. Prior to joining Santander Brasil, de Queiroz held management positions at Banco Real S.A. As one of our officers, Mr. de Queiroz is responsible for Rede SP Capital.

Claudenice Lopes Duarte. Mrs. Duarte is Brazilian and was born on July 25, 1972. She holds a degree in Journalism from Faculdades Integradas Alcântara Machado with a specialization in Business Communication from Fundação Getúlio Vargas. From 1996 to 2009, she worked at GWA Comunicação

162 

Table of Contents

Integrada as Senior Director. From 2009 to 2010, she was Executive Manager of Press Relations at Santander Brasil. From 2011 to 2012, she was Superintendent of Relations with the Press and Institutional Relations at Santander Brasil and, as one of our officers, she is currently responsible for Internal and External Communications at Santander Brasil.

Daniel Fantoni Assa.Mr. Assa is Brazilian and was born on December 12, 1975. He holds a degree in Business Administration from Fundação Alberto Alvares Penteado and an MBA from Instituto Brasileiro de Mercado de Capitais. He started his career at Banco Real working at Corporate and Investment BankBanking and was responsible for structuring the areas of the commercial bank and investment bank. At Santander Brasil, between 2008 and 2011, he was Executive Superintendent of Corporate & Investment Banking; between 2011 and 2014, he was Executive Superintendent of Credit Recovery; between 2015 and 2016, he was Executive Superintendent of Corporate; and between 2016 and 2019, he was Executive Superintendent of Wholesale Risk. As one of our officers, he is responsible for the Corporate Risks area.

Elita Vechin Pastorelo Ariaz.Francisco Soares da Silva Júnior. Ms. VechinMr. Soares is Brazilian and was born on March 28,January 23, 1970. SheHe holds a degree in Lawaccounting from Universidade de Sãthe Centro Universitário do Maranhão Paulo, Masterand in Administration from Faculdade Natalense. He completed specialization courses in Human Resources from Fundação Getúlio Vargas. He worked at Banco Santander (Brasil) S.A. from 2001 to 2017, holding several management and superintendent-level positions at the Company. In 2017 he assumed the position of Laws (LL.M.) from Temple University – Pennsylvania, and is a graduate of the Special Program in Corporate Finance from New York University. She is a member of the Bar Association in both Brazil and New York. Between 1992 and 1996, she was a lawyerChief Executive Officer at Tenege – Técnica Nacional de Engenharia S.A; between 1997 and 1998, she was foreign attorney at Cameron & Hornbostell LLP, Washington, DC; between 1998 and 2001, she was associate at Lebouf, Lamb, Greene and Macre, LLP in New York, NY. In 2002, she was Senior Counsel at Grupo Ultra. Between 2002 and 2018, she was head of the Legal Department of the Investment Bank at Grupo Safra. In 2018, she joined Santander Brasil as Executive Superintendent of the Legal Affairs Department,Banco Olé Consignado, where she now serveshe served until 2020. Currently, as one of our officers.Executive Officers, he is responsible for the external distribution and sales channels.

Franco Luigi Fasoli.Mr. Fasoli is Brazilian and was born on September 18, 1975. He holds a degree in Business Administration from Fundação AlbertoArmando Alvares Penteado and a postgraduate degree in Financial Economics from Universidade de São Paulo. Working since 1997 with financial institutions, he started his career at Santander Brasil as Senior Manager of Products and Marketing. In 2001, he started at Banco Real as Senior Manager of ProductsHe worked for 13 years in Argentina, Italy and Marketing. After returning to Santander Brasil in 2001,Spain, where he was Head ofresponsible for multinational companies and later for Trade Finance & Correspondent Banking & Cash Management at foreign branches such as Argentina, Italia and Spain.for Latin America. Since 2014, back in Brazil, he has served as Head of Commercial Network for Middlebeen working in the Companies Market and Retail.in the Retail Network. As one of our officers, he is currently responsible for the SP Capital branches network.Small & Medium Companies.

Geraldo José Rodrigues Alckmin Neto.Mr. Rodrigues is Brazilian and was born on September 8, 1981. He graduated in Business Administration from Pontifícia Universidade Católica de São Paulo. At Santander Brasil he served as Executive Superintendent since 2013. Between 2008 and 2013 he was Executive Superintendent of InsurancesInsurance at Banco Santander México, attending the “Programa de Futuros Diretivos”.Diretivos.” From 2004 to 2008, he served as Relationship Manager and Foreign Trade. As one of our directors, he is currently responsible for the development of our investment business, as well as high-income clients and Santander Capitalização S.A.

Germanuela de Almeida de Abreu. Mrs. de Abreu is Venezuelan and was born on December 6, 1975. She holds a degree in Economics from Universidad Católica Andrés Bello – Caracas/Venezuela with an MBA in Human Resources from USP (Universidade de São Paulo – São Paulo). She completed the Development Program for Board Members by Fundação Dom Cabral. She served at Banco da Venezuela (Grupo Santander Caracas) as Senior Risk Analyst from 1999 to 2001. At Santander Brasil, she was Senior Sales Support Manager between 2001 and 2002, Human Resources Training Consultant between 2002 and 2003, HR Risk Consultant between 2003 and 2006, Executive Manager of HR between 2006 and 2008 and Superintendent of Human Resources between 2008 and 2013. SinceAt Banco Santander (Brasil) S.A., she served as Executive Superintendent between 2013 to 2018, where she has been our officerwas responsible for the strategy related to performance management, career development, compensation, benefitsof Performance Management, Career, Compensation, Benefits and budgetBudget and spending management.Expenditure Management for the Bank, and in 2018 she was elected an Officer in our Human Resources area.

 187
Table of Contents

Gilberto Duarte de Abreu Filho. Mr. Abreu is Brazilian and was born on August 7, 1973. He holds a degree in Industrial Engineering from the University of São Paulo and a MBA from the Massachusetts Institute of Technology in Cambridge, MA. Before joining Santander Brasil, Mr. Abreu was a senior manager at McKinsey & Company, managing projects in the financial and retail areas. He is also the Chief Executive Officer of Sancap Investimentos e Participações S.A., and Executive Officer of Banco Bandepe S.A.

163 

Table of Contents

Gustavo Alejo Viviani.Mr. Alejo is Argentinian and was born on August 26, 1975. He holds a degree in Economics from Pontifícia Universidade Católica of São Paulo and a CFA (Chartered Financial Analyst) from the CFA Society of the United States. He completed academic extension courses in Business Administration at the University of California-BerkeleyCalifornia, Berkeley, and Advanced Corporate Finance at the London Business School. From July 1997 to March 1999, he was a Junior Research Analyst of Shares and Fixed Income at Citibank (Brasil). He has served at Santander Brasil since 2000, where he has been a Credit Consultant, a Trader, a Senior Relationship Manager, the Superintendent of Corporate and Investment Banking, and the Managing Director of our Corporate and Investment Banking Division. He currently serves as our officerDivision and the Director responsible for the Credit and Recovery Division in the Wholesale Bank. He currently serves as our Retail Chief Financial Officer and is responsible for the Retail Collections Division.

Gustavo de Souza Fosse. Mr. Fosse is Brazilian and was born on May 14, 1972. He holds a degree in Information Systems Management from União Educacional de Brasília and an MBA in IT Governance and Financial Consulting and Capital Markets. He was an employee of Banco do Brasil for 34 years, holding the positions of Chief Technology Officer and Vice President of Business Development and Technology. In 2021 he was a member of the Board of Directors of Cielo S.A. As one of our officers, Mr. Fosse is responsible for Retail and Financial.

Igor Mario Puga. Mr. Puga is Brazilian and was born on November 10, 1981. He holds a degree in Social Communication from the Casper Líbero School of Social Communication and a degree in Statistics and Applied Research from the Institute of Mathematics and Statistics of the University of São Paulo. After joining IG - Internet Group of Brazil (2000 to 2001) and Terra Networks (2002), he was JWT’s Digital Intelligence Manager from 2003 to 2004 and Africa Propaganda’s Digital Media Manager (from 2005 to 2006). From 2007 to 2014, as Founding Partner and General Officer, he served in the ID\TBWA group. Between 2014 and 2016, he served as Chief Interactive Officer and then Vice President of Integration and Innovation of the DM9DDB. Mr. Puga joined Santander Brasil in 2016, as the officer responsible for the Marketing Department. He is also a memberwas the youngest ever winner of the BoardCaboré Award, and nowadays, in addition of Directorsbeing CMO of Santander, Cultural.he is Vice President of CENP.

Jean Paulo Kambourakis.Mr. Kambourakis is Brazilian and was born on May 9, 1980. He holds a degree in Electrical Engineering from Universidade de São Paulo and a degree in Business Administration from Fundação Getúlio Vargas. He started his career at Banco Real, where between 2004 and 2006, he was trainee, Senior Project Analyst and Project Consultant. He has been at Santander Brasil since 2006, where he has been Superintendent of Projects; Executive Superintendent of Organization and Efficiency; Executive Superintendent of Planning; and Executive Superintendent of Planning, Expenses and Efficiency. As one of our officers, he is currently responsible for the Securitization area. He is also Executive Officer of Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.

José Teixeira de Vasconcelos Neto. Mr. Neto is Brazilian and was born on March 8, 1975. He holds a degreereceived degrees in Business Administrationbusiness administration from the Universidade deUniversity of Pernambuco - FCAP and in Economic Scienceseconomics from the Universidade Católica deCatholic University of Pernambuco. He completed specialization courses in Finance from FCAP-Universityfinance at the University of Pernambuco, received an MBA in Marketingmarketing from Fundação Getúlio Vargas, and an MBA in Retail (GVPEC)retail from Fundação Getúlio Vargas. HePreviously, he was General Managerthe general manager of the Banco Citibank S.A. from 2000 to 2003. He served as Commercial Superintendent2003, and Executive Superintendenta commercial superintendent and executive superintendent at Banco Citibank S.A. - Consumer Finance Unit (Citi Financial) from 2003 to 2007. He was Regional Superintendent atalso regional superintendent of Santander BrasilBrazil from August 2007 to July 2010. From2010, and, from August 2010 to September 2015, Mr. Neto served as the Executive Superintendentwas an executive superintendent of the Network in Banco HSBC Brasil.Brasil network. He served as one of the officers responsible for our Branch network since 2015, and since January 2019, he has been responsible for our network of branches since 2015, and, in January 2019, was made responsible for the Rede Direct network.area.

 

Leandro Alves. Mr. Alves is Brazilian and was born on January 5, 1984. He holds a degree in computer engineering from the Centro Universitário FIEO and a postgraduate degree in administration and Risk Management from Insper. Prior to joining Santander Brasil, Mr. Leandro held data management positions at Banco Real ABN AMRO. As one of our officers, Mr. Alves is responsible for Natural Person and Financial Risk.

Luciana de Aguiar Barros. Ms. de Aguiar Barros is Brazilian, and was born on January 3, 1980. She holds a degree in statistics from the Universidade de Campinas, a postgraduate degree in business administration from Fundação Getúlio Vargas and an MBA in credit risk management from INSPER. She has been a member of the Santander Group since 2010, having several roles in our credit area. As one of our officers, Ms. de Aguiar Barros is currently responsible for Consigned Credit area.

 188
Table of Contents

Luis Guilherme Mattos de Oliem Bittencourt. Mr. Bittencourt is Brazilian and was born on December 4, 1973. He holds a degree in Computer Engineering from the University of Campinas. He started his professional career in Banco Itaú-Unibanco serving in the areas of Business Intelligence, Electronic Channels and CRM, where he acquired 14 years of experience. From 2010 to 2012, in Banco HSBC Brasil, Mr. Bittencourt served in the areas of Distribution, Digital Channels and Customer Relationship Management, or “CRM.” Since 2013, Mr. Bittencourt has served in Santander Brasil, initially as Executive Superintendent of CRM, Digital Channels and Management Information System, Customers Intelligence and CRM, and currently serves as the officer responsible for Customers’ Service.

Luiz Masagão Ribeiro Filho. Mr. Masagão is Brazilian and was born on September 1, 1976. He holds a degree in Business Administration from Fundação Getulio Vargas. He started his career in 1997, serving as Operator of Interest Rates Options in Brazil at Banco Citibank S.A. until 2005. He was the Senior Operator of Foreign Exchange Options from February 2005 to September 2005 in ING Bank

164 

Table of Contents

N.V. Back toat Banco Citibank S.A., he was Executive Manager from 2005 to 2008 and Superintendent from 2008 to 2009. Mr. Masagão served as Executive Superintendent of Fixed Income Sales from 2009 to 2010 at Morgan Stanley and then joined Santander Brasil’s team, initially serving as Chief of the GCB/Corporate Sales team, from 2010 to 2014, and last as Brazil’s Sales Executive Superintendent. On November 2018, he became the Treasurer of Santander Brasil, responsible for treasury operations, including Proprietary Trading, Market Making, Sales and Products. He is also Executive Officer of Banco Bandepe S.A. and Santander Corretora de Seguros, Investimentos e Serviços S.A.

Marcelo Augusto Dutra Labuto. Mr. Labuto is Brazilian and was born in Belo Horizonte, in the State of Minas Gerais on September 3, 1971. He holds a Bachelor’s Degree in Business Administration from UNB (Universidade de Brasília) with an MBA in Marketing from COPPEAD UFRJ (Instituto de Pós-Graduação em Administração e Pesquisa da Universidade Federal do Rio de Janeiro). He served as Vice President of Retail Business at Banco do Brasil between 2017 and 2018 and CEO between 2018 and 2019. Previously, Mr. Labuto was CEO of BB Seguridade Participações S.A; Officer of Insurance, Open Pension Plans and Capitalization; Loans and Financing Officer; General Manager at the Affiliated Entities Governance Unit and General Manager at the Strategic Partnerships Unit at Banco do Brasil. Mr. Labuto was a member of the Board of Directors of BB Seguridade Participações S.A.; Banco Votorantim; Brasilcap Capitalização S.A.; IRB Brasil Resseguros; Elo Participações S.A.; Companhia Brasileira de Soluções e Serviços; BB Mapfre SH1 Participações S.A.; Mapfre BB SH2 Participações S.A.; Brasilprev Seguros e Previdência S.A.; CIELO S.A.; Vale S.A.; Brasildental Planos Odontológicos; Alelo S.A; Movera S.A; Livelo S.A; and Banco CBSS. He served as a member of the Advisory Committee of Brasilprev Seguros e Previdência; a member of the Executive Committee of Grupo Segurador BB and Mapfre; a member of the Innovation Committee of CIELO S.A.; and a member of the Compliance and Risk Committee of Vale S.A. As one of our officers, he was responsible for the Natural Persons Area, in Retail during 2020 and 2021 and currently leads our distribution channels.

Marino Alexandre Calheiros AguiarMaria Teresa Mauricio da Rocha Pereira Leite. . Mr. AguiarMs. Pereira Leite is PortugueseBrazilian and was born on May 14, 1971. He graduatedJune 21, 1967. She holds a degree in finance from Fundação Armando Alvares Penteado. Prior to joining Santander Brasil, Ms. Pereira Leite held management positions at ABN AMRO Bank N.V., Royal Bank of Scotland Business and Deutsche Bank. She was also CEO & Head of Corporate Banking at Deutsche Bank responsible for corporate banking products and relationships with multinational subsidiaries. Ms. Pereira Leite joined Santander Brasil in 2021 as a Statutory Director of the Corporate Banking division.

Marilize Ferrazza Santinoni. Mrs. Santinoni is Brazilian and was born on November 20, 1965. She holds a degree in Business Administration from the Technical University of LisbonUniversidade de Ijui-RS and an MBA of Business Management from Fundação Getúlio Vargas, Passo Fundo-RS. She has been an employee of Banco Santander (Brasil) S.A. since 1984, where she worked at several roles both in Information TechnologyManagement and Internet. Mr. Aguiar started his career in 1994Regional Superintendence. Since 2016, she has been acting as a Systems Analyst at Accenture in Portugal, responsible for Functional DesignExecutive Network Superintendent, and Technical Computer Systems. From 1996 to 1999, he had the task of Coordinator and, in 1999, became Manager responsible for providing consulting and technology services to banking institutions in Portugal and Brazil. He held the position of Senior Manager from 2002 to 2006, and was an officer from 2006 to 2008, responsible for developing the commercial and relationship strategy of the Insurance segment. Between 2008 and 2010, he worked for CPM Braxiscurrently, as an officer, with responsibility for the technology program of a major financial institution in Brazil. In 2010, Mr. Aguiar became a statutory officer at Accenture Brazil, responsible for technology services to the financial industry in Latin America. He is currently one of our officers, andshe is responsible for our Technology area in the Vice Presidencybanking network of Proceedings, TechnologyParaná and Operations unit. He is also Superintendent Executive Officerthe northern region of Santa Catarina for Banco Santander Brasil Tecnologia(Brasil) S.A.

 189
Table of Contents

Rafael Bello NoyaMurilo Setti Riedel. Mr. NoyaRiedel is Brazilian and was born on October 19, 1977.May 17, 1963. He holds a degree in Business Administrationbusiness administration from the University of São Paulo – FEA, and an MBA from the University of São Paulo – FEA. Before joining Santander, Mr. Riedel held management positions at HDI Seguros S.A, acting as Technical Director and Chief Executive Officer. From 2019 to 2022 he was chairman of the Board of Directors of Santander Auto S.A.

Paulo César Ferreira de Lima Alves. Mr. de Lima Alves is Brazilian, born on October 18, 1968. He holds a degree in economics from the Universidade de São PauloFortaleza – UNIFOR and completed several courses, including Building and Sustaining Competitive Advantage at Harvard Business School, and Leadershipa postgraduate degree in TalentFinancial Management and Development at IMD International. He also completedControllership from the LEAD Program at the IE Business School and Corporate Leadership Program at IESE Business School. He began his career at Citibank, where he worked from 1996Fundação Getúlio Vargas. Prior to 2007 across several divisions. He also served as a member of the Citibank Credit Committee. He joinedjoining Santander Brasil, in 2007, whereMr. Paulo held management positions at Banco ABN AMRO Real S.A. As one of our officers, he becameis currently responsible for clients coverageNorthern Network Banking.

Paulo Sérgio Duailibi. Mr. Duailibi is Brazilian, born on September 28, 1966. He holds a degree in business administration from the Corporate Investment Banking Department. From June 2015Universidade Federal de Minas Gerais and a master’s degree in business administration from the Fundação Getúlio Vargas. Prior to August 2017, Mr. Noya was the Head of the Credit Markets Unit atjoining Santander Brasil, where heMr. Duailibi held management positions at Banco Safra S.A. and BankBoston Banco Múltiplo S.A. He was responsible for a team of 70 specialists on the origination and execution of operations in the areas of Capital Markets (both domestic and international), Syndicated Loans, Project Financing, Acquisitions and Asset and Capital Structuring. During this period, he was also the ChairmanVice-Chairman of the Board of Directors and a memberEffective Member of the Human Resources Executive Committee at BW Guirapa I S.A. Since August 2017, Mr. NoyaDeliberative Council of the Associação Brasileira das Empresas de Crédito Imobiliário e Poupança. As one of our officers, he is responsible for the NI & Financial Technology Platform and has been the Head of Banking, where he has been responsible for leading a team of approximately 60 people that covers the largest Brazilian corporate companies, financial institutions and private equity institutions. He is also an officerdirector of Santander Leasing S.A. Arrendamento Mercantil and of Atual Serviços de Recuperação de Crédito e Meios Digitais S.A.Holding Imobiliária since 2020.

Ramón Sanchez Díez. Mr. Sanchez is Spanish and was born on October 29, 1968. He holds a bachelor’s degree in Economics from the Universidad Autónoma de Madrid and has completed an Advanced Management Program at the Wharton School of Business at the University of Pennsylvania. He is a Certified Regulatory and Compliance Professional (CRCP) and a Certified Anti-Money Laundering Specialist (CAMS). He served as a Financial Analyst and Portfolio Manager for Santander Brasil’s New York branch from 1992 to 1997, and as an officer for Strategy and Analysis for Latin American banks at Santander Spain in Madrid from 1997 to 2003. He was an officer for Strategy and Investor Relations for Santander Brasil from 2004 to 2006, Head of Customer Acquisition from 2007 to 2009,2009. He was in charge of our retail banking channels (call center, internet, mobile and ATM) from 2009 until 2011 and, before his current position, he was the Head of Retail Commercial Planning and Communication. Mr. Díez was president of the Spanish Chamber of Commerce in Brazil between 2006 and 2009. As one of our officers, he is responsible for our Compliance Department. He also serves as Executive Officer of Banco Bandepe S.A. and Santander Corretora de Seguros, Investimentos e Serviços S.A.

165 

Table of Contents

Ramon Sanchez Santiago. Mr. Ramon Sanchez Santiago is Spanish and was born on May 25, 1969. He graduated in Law from the University of Salamanca, Spain. From 2000 to 2010, he was Head for Internal Audit at different Banks of Santander Group (Puerto Rico, Chile, SCF). Between 2010 and 2011, he was Project Leader of the Santander Group, responsible for the project to reduce the Risk Weighted Assets (RWA) throughout the Group. He was also Head of Internal Audit at Santander UK from 2011 to 2014. From 2015 to 2018, he served as Internal Audit Officer of the Santander Group for Capital and Solvency. As one of our Executive Officers, Mr. Santiago has been responsible for our Internal Audit area since September 2018.

Reginaldo Antonio Ribeiro. Mr. Ribeiro is Brazilian and was born on May 19, 1969. He holds a degree in Economics from the Universidade Estadual de Campinas, an Accounting degree from the Universidade Paulista and an MBA from the Fundação Instituto de Pesquisas Contábeis, Atuariais e Financeiras – FIPECAFI of the Universidade de São Paulo. He served for Arthur Andersen Consultoria Fiscal Financeira S/C Ltda. from 1990 to 2001 rendering tax advisory services to Brazilian and multinational entities. He was also a member of the Fiscal Council of Companhia Energética de São Paulo and AES Tietê from 2002 to 2006. As one of our officers,Officers, he is responsible for tax issues, accounting and tax procedures, planning strategiesrules and corporate reorganization processes. He also serves as Administrator of Aquanima Brasil Ltda. and Summer Empreendimentos Ltda., as Executive Officer of Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., Banco Bandepe S.A., Fundação Santander and Santander Holding ImobiliáriaGlobal Cards & Digital Solutions Brasil S.A., and as Vice President Officer of Santander Corretora de Seguros, Investimentos e Serviços S.A.

 190
Table of Contents

Ricardo Olivare de Magalhães. Mr. Olivare is Brazilian and was born on January 26, 1979. He holds a degree in Statistical Mathematics from the Institute of Mathematics and Statistics of the University of São Paulo and holds a Master’s degree in Applied Statistics also from the Institute of Mathematics and Statistics of the University of São Paulo. An employee of Banco Santander (Brasil) S.A. since 2001, he has held several positions in the Company’s credit area. In 2008 he held the position of CRM Deputy Director at Banco Santander México and as Administrative OfficerDirector of Norchem ParticipaçõesAnalytical Marketing from 2010. In 2012 he returned to Banco Santander (Brasil) S.A. to assume the position of Executive Superintendent responsible for the credit recovery strategy. In 2017 he became Executive Superintendent of products and channels of Aymore Crédito, Financiamento e ConsultoriaInvestimento S.A. He currently holds a position as Statutory Director of Aymore Crédito, Financiamento e Investimento S.A. and Webmotors S.A.

Roberto Alexandre Borges Fischetti. Mr. Fischetti is Brazilian and was born inon August 28, 1975. He holds a degree in Economics from the business school of the University of São Paulo (Faculdade de Economia, Administração e Contabilidade (FEA), Universidade de São Paulo). Mr. Fischetti has acted in the Brazilian financial market and banking industry since 1998. From 1998 to 2003, he worked at DeustcheDeutsche Bank as Fixed Income Trader, responsible for management of proprietary interest rate and foreign exchange positions. From 2004 to 2007, he was Superintendent of Treasury Products at Banco Real, responsible for the structuring of operations and treasury products and coordination of the product team. Since 2007, Mr. Fischetti was Financial Executive Superintendent of Santander Brasil, responsible for the management of structural interest and exchange rate exposures, local and external liquidity management, and the pricing of commercial operations. As one of our officers, he is responsible for the ALM financial management. He is also a member of the Board of Directors of Banco RCI Brasil S.A.

Robson de Souza Rezende. Mr. Rezende is Brazilian, born January 24, 1967. He holds a degree in Statistics from Associação - Salgado de Oliveira de Educação e Cultura in Niteroi in the state of Rio de Janeiro and an MBA in Marketing from ESPM-SP. He began his career at Unibanco, where he worked between 1985 and 1999 in the Management of Agencies and later in the Human Resources Area working in Training and Development with a focus on the Agencies of Unibanco. Mr. Rezende joined Santander Brasil in 1999. From 1999 to 2003, he served as a Superintendent of Human Resources. From 2003 to 2008, he served as Regional Superintendent. From 2008 to 2010, he worked as Superintendent of Commercial Models, during which time he participated in the integration of the commercial model of Santander Brasil and Banco Real. He also led the Santander branch expansion project in Brazil for three years from 2010 to 2013. He was responsible for the Branch network in the state of Rio de Janeiro, managing approximately 290 branches and 3,700 employees in the region. As one of our officers, he is currently responsible for the Commercial Retail Network.

Rogério Magno Panca. Mr. Panca is Brazilian and was born on December 30, 1970. He holds a degree in Economics from the Universidade Católica de Santos, holds a postgraduate degree in Business Administration from Fundação Getúlio Vargas and an MBA in International Business from FEA-USP. He served as executive manager of structured operations by Banco do Brasil between 2008 and 2011. In the period from 2011 to 2013, he was Head of Large Corporate for Banco do Brasil and in 2014, became Head of the Governance Unit of Entities Linked to Banco do Brasil. Between 2015 and 2019, he was a member of the Board of Directors of Banco Digio S.A., Cateno S.A., Elo Serviços S.A., Livelo S.A., Alelo S.A. and Cielo S.A. During this period he was also officer of Banco do Brasil responsible for division of Means of Payment. Since 2019, he is a superintendent and an officer and member of the Board of Directors of Elopar. He joined Santander Brasil in 2019 and currently is one of our directors responsible for the area of Cards and Digital Payments.

Sandro Kohler Marcondes.Mr. Marcondes is Brazilian and was born on April 16, 1964. He graduated in Business Administration from Unicentro Paraná. He completed his Master Degree in Business Administration by Fundação Getúlio Vargas. At Santander Brasil since 2018, he served as Executive Superintendent Global Debt Financing. In 2018, he served as Executive Officer of Financing and Investor Relations at Neoenergia S.A. From 2005 to 2018 he served as Executive Officer at Banco do Brasil S.A. and also at Banco do Brasil S.A. from 1999 to 2004 he served as General Manager in Paris and Assistant General Manager. Currently he is the Officer responsible for Global Debt Financing structure, managing the activities of Debt Capital Markets.

Sandro Mazerino Sobral. Mr. Sobral is Brazilian and was born on February 24, 1975. He holds a degree in Economics from the Universidade Presbiteriana Mackenzie with a specialization in Economic Sciences from the FEA USP and in Banking from the IBMEC-SP. An employee of Banco Santander (Brasil) S.A. since 2003, he has held various positions in the Company’s capital markets and trading area, being responsible for managing the portfolios of fixed income, inflation, accrual, FX and equities. Since 2017 he has been in charge of our trading desks.

 191
Table of Contents

Sandro Rogério da Silva Gamba. –Mr. Gamba is Brazilian and was born on August 31, 1975. He graduatedholds a degree in Civil Engineering from Universidade Mackenzie, post graduatedan a post-graduate degree in Production Engineering from Universidade de São Paulo –USP and Real StateEstate Business from Fundação Armando Alvares Penteado – FAAP and MBA from Insper. At Gafisa S.A., from 1998 to 2004 he held positions like: engineer, coordinator and manager; from 2004 to 2007 he served as new business manager; from 2007 to 2011 he served as Director; from 2011 to 2014 served as Executive Officer and, at last, he served as CEO from 2014 to 2018. In addition, he served as member of the Board of Directors of Construtora Tenda from 2012 to 2014 and of Alphaville Urbanismo from 2017 to 2019. Currently he is the Officer responsible for Real Estate Business and Real Estate Credit platforms.

Thomaz Antonio Licarião Rocha. Mr. Licarião Rocha is Brazilian, born on March 2, 1977. He has a degree in advertising and marketing from the Escola Superior de Propaganda e Marketing. He has been part of the Santander Group since 2000, having several roles within the commercial area. As one of our officers, he is currently responsible for Assets and Risks Platform.

166 

Table of Contents

Thomas Gregor Ilg. Mr. Ilg is Brazilian and was born on September 12, 1968. He holds a degree in Agricultural Engineering from the Universidade Estadual de Campinas, and a postgraduate diploma in Business Administration from the Fundação Getúlio Vargas. He has been engaged in the financial markets for almost 30 years, including almost 20 years with Santander Brasil and 10 years with The First National Bank of Boston, where he first joined as a trainee in the Risks and Business areas. At Santander Brasil, he was responsible for the Corporate Banking Business until the beginning of 2007 when he joined our Treasury Division to develop an area designed to distribute derivatives to the Middle Market, Private Banking and Retail Business in general. At the end of 2008, he moved to the Credit Division to manage the Corporate Banking Risk area, and currently he is responsible for our SMEs Retail Risks area.

Tiago Celso Abate. Mr. Abate is Brazilian and was born on June 12, 1980. He is alsoholds a memberdegree in economics from the Pontifical Catholic University and a postgraduate degree in finance from INSPER and an MBA in Retail Management and Digital Business from FIA and FIAP, respectively. He has worked for Grupo Santander since 2005, having several roles related to the retail area of the BoardBank. As one of Directorsour officers, he is currently responsible for the structure of Banco RCI Brasil S.A.Consumers and High Income in Retail.

Vitor Ohtsuki. Mr. Ohtsuki is Brazilian and was born on June 5, 1977. He graduatedholds a degree in Production Engineering from Universidade de São Paulo. He completed thePaulo, an MBA degree in Marketing byfrom Universidade de São Paulo and a Master’s Degree in Global Management byfrom Stanford University. At Santander Brasil since 2004, he served as Private Banking Head, Executive Superintendent of Wealth Management, Private Banking Superintendent, Executive Manager and General Manager. Also, heMr. Ohtsuki served as Marketing Manager at Banco Citibank S.A. from 2000 to 2004.

Certain Arrangements and Relationships

We have no knowledge of any arrangement or understanding with major shareholders, customers, suppliers or any other person, pursuant to which any person was selected as a director or executive officer. None of the members of our board of directors, or of our board of executive officers, have any family relationships with each other, or with any other members of our senior management.

6B.6B. Compensation

Compensation of Directors, Executive Officers and Members of the Audit Committee and Members of Our Fiscal Council

We endeavor to have a compensation policy that is consistent with the interests of our shareholders, creates long-term value and is compatible with adequate, rigorous risk management and long-term strategy, values and interests, while also enabling us to maintain a solid capital base.

Our shareholders establish the maximum total annual aggregate compensation of our Directors and Officers at the annual shareholders’ meeting. The compensation of the members of our Audit Committee is established by our Board of Directors.Directors and the compensation of the members of our Fiscal Council is established at the annual shareholders’ meeting. The compensation of our directors, officers, and members of our audit committee and members of our fiscal council is as follows:

 192
Table of Contents

Board of Directors

FixedAll members of our Board of Directors are entitled to fixed compensation composed of monthly payments and benefits within the overall limit approved at our annual general shareholders’ meeting.meeting, In exceptional and fully justified cases, the Chairman of our Board of Directors may also receive an annual variable compensation for his or her duties, as determined by the Compensation Committee and the Board of Directors, within the annual limit set forth at the annual shareholders meeting.shareholders’ meeting, If granted, such variable compensation should consider the form of payment and the different deferral percentages, according to the level of variable compensation received in the year, and observe the Malusmalus and/or Clawback clauseclawback clauses with the possibility of reducing and/or returning up to 100% of the value of the variable compensation.

In the event that a member of the Board of Directors is also a member of our audit committee, pursuant to the applicable regulations and the internal rules of the audit committee, such member must choose to receive the compensation package of either the board of directors or the audit committee.

Board of Executive Officers

FixedOur executive officers are entitled to fixed compensation composed of monthly payments, benefits, pensions and variable compensation, always within the overall limit of annual compensation, approved at the annual general shareholders’ meeting.

The variable compensation shall be paid considering the different deferral percentages, depending on the level of the variable compensation received in the year (includes amount of Long-Term Incentive - ILP in the year of grant, valued at the granting price), and observeobserving the Malusmalus and/or Clawback clauseclawback clauses with the possibility of reducing and/or returning up to 100% of the value of the variable compensation in the assumptions.

167 

Table of Contents

Audit Committee

FixedThe members of our audit committee are entitled to fixed compensation consisting of monthly fees, as established by the Board of Directors. In cases whereHowever, according to the applicable regulations and internal rules of the committee itself, if a member of the Board of Directors is also a member of our Audit Committee, in accordance with the applicable regulations and internal rules of theaudit committee, itself, such member should elect to receive compensation in relation to their functions for either the Board of Directors or the Audit Committee.audit committee.

Fiscal Council

Supervisory Board

FixedOur Fiscal Council is a non-permanent body. Members of our fiscal council are entitled to fixed compensation composed of monthly fees in the amount approved at our General Shareholders' Meeting.Shareholders’ Meeting, the last of which was held on April 30, 2021.

In relation to the other Advisory Committees such

The members of advisory committees are also entitled to a fixed compensation composed of monthly fees. Only those members who do not occupy a position on the Board of Executive Officers are entitled to this compensation.

Compensation Plan Overview

At the general shareholders meeting held on April 26, 2019,30, 2021, the compensation limit was set up to R$400433.94 million for our Directors and Executive Officers and R$4.04,832 million for our Audit Committee for the 12-month period starting on January 1, 2019,2021, as proposed by the Board of Directors at the meeting held on March 27, 2019.26, 2021. As for the Fiscal Council, the general shareholders’ meeting approved a monthly compensation of R$11,985 thousand for each of the members, provided that the alternate members shall only receive such compensation in the event they replace the effective members. For the abovementioned twelve-month period, members of our Board of Directors and Executive Officers received a total of approximately R$277352.6 million, and members of our Audit Committeeaudit committee received a total of approximately R$3.2 million.million and members of our Fiscal Council received a total of approximately R$449.7 thousand. The total amount of contributions for pension plans of our Board of Directors and Executive Officers in 20192021 was R$3857 million.

Under Brazilian law, companies are required to disclose the highest, lowest and average compensation of our Directors,their directors, members of the Fiscal Council, if installed, and officers without indicating any individual name. Please findstating their names. The table below presents the information for the years of 2017, 2018ended 2021, 2020 and 2019:

 193
Table of Contents

 

Board of Executive OfficersBoard of Directors Fiscal Council 

Board of Executive Officers

Board of Directors

Fiscal Council

12/31/201912/31/201812/31/201712/31/201912/31/201812/31/201712/31/201912/31/201812/31/2017

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Nº of members41.7042.2044.009.9010.002.50--50.0045.0041.7012.009.009.906.002.50
Nº of paid members40.9040.8040.504.805.004.171.30-45.1639.0040.905.584.754.803.001.30
Value of highest compensation (Reais)45,325,345.0043,068,683.2629,985,549.151,752,022.721,563,056.441,444,916.6055,370.00-
Value of lowest compensation (Reais)1,843,405.072,026,240.061,795,457.14769,131.80700,542.46544,316.60-
Average value of compensation (Reais)6,647,842.606,884,079.475,675,740.271,012,232.27772,680.82752,412.19132,888.00-
Value of highest compensation (Reais) 59,029,586.2546,953,181.9245,325,345.002,129,585.071,802,918.401,752,022.72142,710.00139,600.0055,370.00
Value of lowest compensation (Reais)(1) 2,098,466.401,791,418.041,843,405.07762,000.00769,131.80142,710.00139,600.00—
Average value of compensation (Reais) 7,674,778.206,495,886.87664,784,2601,064,162.321,037,445.251,012,232.27149,901.00139,600.00132,888.00
(1)The value of the lowest individual remuneration considers only members who have exercised their functions in the 12-month period of the fiscal year in question. The amounts do not include social charges.

 

As approved by our Board of Directors at the meeting held on December 23, 2009, we indemnify our Directors and Executive Officers, and members of the Audit Committee fromare indemnified in relation to claims arising during thetheir time they occupy their respective offices. This relates,in office. The indemnity exclusively tocovers court or administrative costs and attorneys’legal fees, except in cases of bad faith, gross negligence, willful misconduct or mismanagement by our Directors or Executive Officers. This indemnity was also granteddisclosed to the members of the Auditaudit committee, the Compensation Committee and the Compensation Committee.Fiscal Council.

Variable Compensation

The criteria for granting and paying variable compensation vary according to the activities performed by the different areas and, therefore, payment of the variable compensation may differ depending on the department and activities performed by each member.

168 

Table of Contents

Long Term Incentive Programs

We have four programs forOur long-term compensation: (i)incentive plans are established in line with our business strategy. Each plan has a specific set of indicators and operating rules, and grants within our plans may be either global (i.e., based on shares in Santander Spain) or local (i.e., based on shares in Santander Brasil). The grants and payments under each of our long-term incentive plans must be approved by our governance, structures in place at the Deferral Program; (ii) Long Term Incentive Plan - Private Ultra High; (iii)time of approval, including the Second Long-Term Incentive Global Plan CRDIV – Grant 2015human resources and (iv) LTIP Technology.

finance departments, and must comply with applicable laws and regulations governing such plans.

Executive Officersofficers and Executivesexecutives in key positions are eligible to participate in these plans, which last three years, and promotefoster our Executive Officersexecutive officers and Executives’executives’ commitment to our long-term results.results, Members of the Board of Directors can only participate if they are Executive Officers.

Deferral Program

Our deferral program is available to our Statutory Officers, Officers in positions of management and certain other eligible employees. As part of the deferral program, we defer between 40% and 60% of the variable compensation of an employee over a period of three to five years, depending on the employee’s level of responsibility.

The program aims to (i) align the program with the principles of the Financial Stability Board, or “FSB,” agreed upon at the G20; (ii) align our interests with those of the plan’s participants (to achieve sustainable and recurring growth and profitability of our businesses and to recognize the participants’ contributions); (iii) allow the retention of participants; and (iv) improve our performance and protect the interests of shareholders via a long-term commitment.

Pursuant to Brazilian law, variable compensation is required to be compatible with the financial institution’s own risk management policies. At least 50% of variable compensation must be paid in stock or stock-based instruments and at least 40% of variable compensation must be deferred for future payment by at least 3 years. These rules arebecame effective as from January 1, 2012.

The following table summarizes the rules of payment to variable compensation taking as an example the exercise ended ofon December 31, 2019.2021.

2020

2021

2022

2023

2022

2023

2024

2025

At the time of the award

Deferred

Deferred

30% in cashRemaining 20% in cashRemaining 20% in cash
Payment calculated on ⅓ cash awardedPayment calculated on ⅓ cash awarded
Payment calculated on ⅓ cash awarded
30% in units
(with one year lockup)		Remaining 20% in unitsRemaining 20% in units (with one year lockup)
Payment calculated on ⅓ units awardedPayment calculated on ⅓ units awarded
Payment calculated on ⅓ units awarded

 

If

 194
Table of Contents

The deferral percentage will also depend on the amountlevel of the variable compensation is between R$5.5 million and R$8 million,received in the deferral is 50%, which shall be paid in up to five tranches, 25% of which is paid in cash andyear, with the other 25% is paid in units, each with a one-year lock-up. If the variable compensation amount is equal to or greater than R$8 million, the deferral is 60%, which shall be paid in up to five tranches, 30% of which is paid in cash, and the other 30% paid in units with a one-year lock-up. In the case of the Chief Executive Officer, the deferral in this program is at least 50%, with at least 25% paid in accordance with above.

above-mentioned criteria applied as minimum.

Still pursuant to Brazilian law, payments made under theall deferral programplans are subject to total or partial cancellation, or claw back, in cases of: (i) our unsatisfactory financial performance (financial results audited lower than as defined in our business plan or lossthe application of malus/clawback, that is, the Board of Directors of the Company, on the recommendation of the Compensation Committee and after the evaluation of the Malus/Clawback Committee, may approve to reduce up to 100% of the amount of each participant in the period); (ii) failure to comply with internal policies, especially policies for risk management (with the need for reclassification of operations or revision of provisions); (iii) substantial change in our financial condition, unless arising from changes in accounting standards (damages, financial loss); or (iv) significant changes in our share capital or risk profile. If the board of directors deems it necessary, it may also take into account any change in the capital base of the Santander Group.cases previously approved by Internal Governance.

We renew and update our deferral program every year. As of December 31, 2019,2021, we had fivesix plans outstanding: one for each fiscal year: 2015, 2016, 2017, 2018, 2019 and 2019.2020. As of December 31, 2019,2021, werecorded total expenses of R$203186 million in connection with our Deferral Program compared to total expenses of R$126202 million in 2018.

169 

Table of Contents

2020.

Deferral Program –2015,– 2016, 2017 2018 and 2019

2018

Our 20152016 to 20192018 deferral programs are divided ininto two programs:

·●Collective Identified. – Statutory officers and executives who take significant risks in Santander Brasil and are in charge of the control areas. Deferred compensation will be paid 50% in cash, indexed to 100% of the CDI, and 50% in Units.units.

·●Collective Unidentified – Employees., Individuals eligible for this program include manager employees and certain of our other employees. Deferred compensation will be paid 100% in cash, indexed to 100% of the CDI.

From the financial yearDeferral Program – 2019, the rule for the Collective Unidentified was changed to:

• Superintendents:Employees. Superintendent-level employees are eligible for this program. Deferred compensation is paid 50% in cash,2020 and 50% in units.2021

• Other: Employees.Employees with variable remuneration above a minimum stipulated amount are eligible. Deferred compensation is paid 50% in cash, and 50% in units.

●Since the financial year 2019, the rule for the Collective Unidentified was changed to “Other Employees,” which includes superintendents and other employees with variable compensation above a minimum established value, and they are also eligible to receive a specific deferral model, applicable according to the function and the level of the variable compensation. Deferred compensation will be paid 50% in cash, and 50% in units.

Long-Term Incentive Plan - Private Ultra HighPlans

Our long-term programs are divided into Local and Global plans. Each plan has specific performance indicators and conditions to best maintain the participant’s employment relationship until the payment date in order to be entitled to the receipt.

Released in 2017, its objectiveThe payment of the plans is to align the interests of Banco Santander and the participant aiming,calculated based on the one hand, to the growth and profitabilitypercentage of achievement of the Private business and,indicators applied on the other, to the recognition of the participant's contribution. The Plan’s objective is the payment of variable compensation by the Bank to the participants.reference value (target).

Local Long-Term Incentive Program

On December 31, 2019 the performance period ended and as the indicators had no minimum achievement, there will be no payment to the participants in this plan.

LTIP Technology

It is aWe have eleven retention planplans for key positions launched in Julybetween 2019 where the participant must remain in employment until the payment date to be entitled to receive it.

Each executive had a reference value defined in Reais, which was converted into shares of Santander Brasil (SANB11) at a price of R$44.66, whichand 2021. These plans will be deliveredpaid in July 2022, with a 1-year restriction.

Payment isSANB11 units and are subject to the application of the Malus / Clawbackmalus/clawback clauses, which may result in a reduction or full cancellation in the number of shares to be delivered in cases of failure to comply with internal rules and exposure to excessive risks.

Each participant has a reference value defined in cash, converted into SANB11 units, usually at the average price of the last 15 trading sessions immediately prior to the payment of the plan, At the end of the vesting period, the resulting shares are delivered with a one-year restriction, and this payment is still subject to the application of the malus/clawback clauses, which may reduce or cancel the shares to be delivered in cases of non-compliance with internal rules and exposure to excessive risks.

 195
Table of Contents

For the fiscal year 2021, we incurred expenses of R$26 million, with respect to the Local Long-Term Incentive Program, compared to total expenses of R$11 million in the year ended December 31, 2020.

Global Long-Term Incentive ProgramFiscal Council

Second Long-Term Incentive Global Plan CRDIV – Grant 2015

In 2015,Our Fiscal Council is a second global long-term incentive plan was created for executives includednon-permanent body. Members of our fiscal council are entitled to fixed compensation composed of monthly fees in the Identified Collective (CRDIV Global Plan). The indicators that will be used to measureamount approved at our General Shareholders’ Meeting, the attainmentlast of the targets are presented below and will be used at two different stages: (i) to calculate the maximum target of each participant (2015-2016); and (ii) to calculate the amount of shares to be paid (2016, 2017 and 2018).

170 

Table of Contents

1.       TSR vs. Competitor

RTA in 2015“Coefficient RTA 2015”
(% on the RTA 2015 budgeted)
≥ 90%1
> 75% to < 90%0.75 – 1 (*)
≤ 75%0

(*)Linear increase of the RTA 2015 coefficient in function of the concrete percentage that the RTA 2015 represents on the budget of this scale line.

2.       ROTE Bank (Return on Tangible Equity) vs Budgeted

ROTE in 2015“Coefficient ROTE 2015”
(% on the ROTE 2015 budgeted)
≥ 90%1
> 75% to < 90%0.75 – 1 (*)
≤ 75%0

(*)Linear increment of the ROTE 2015 coefficient in function of the concrete percentage that the ROTE 2015 represents on the budget of this scale line.

3.       Employees Satisfaction

Position among the best banks to work in 2017“Coefficient Employees”
1st to 3rd1
4th or subsequent0

4.       Client satisfaction

Position among the best banks according to client satisfaction index in 2017“Coefficient Clients”
1st to 3rd1
4th or subsequent0.5 – 1 (*)

5.       Business bindings vs Budgeted

Clients companies 1 and 2 linked“Coefficient Companies”
(% on budget for the corresponding market)
≥ 100%1
> 90% and < 100%0.5 – 1 (*)
≤ 90%0

(*)Linear increment of the coefficient companies according to the concrete percentage, within these lines of each scale that the number of linked clients of each type represents on December 31, 2017 on the budgeted.

Each executive had a target inreais, which has been converted into Santander Group shares for a price of R$17.473 which was delivered in 2019, withheld on April 30, 2021.

Advisory Committees

The members of advisory committees are also entitled to fixed compensation composed of monthly fees. Only those members who do not occupy a lockupposition on the Board of one year after each delivery.Executive Officers are entitled to this compensation.

171 

Table of Contents

Due to the Group's capital increase (2017), the number of target shares was increased by approximately 1.5%.

Compensation Plan Overview

At the endgeneral shareholders meeting held on April 30, 2021, the compensation limit was set up to R$433.94 million for our Directors and Executive Officers and R$4,832 million for our Audit Committee for the 12-month period starting on January 1, 2021, as proposed by the Board of Directors at the meeting held on March 26, 2021. As for the Fiscal Council, the general shareholders’ meeting approved a monthly compensation of R$11,985 thousand for each of the benchmarking period,members, provided that the achievement of Phase 1 was 91.5% and Phase 2 was 73.09%, resultingalternate members shall only receive such compensation in the plan's final achievement of 66.88%.

Payment forevent they replace the SAN shares resulting fromeffective members. For the final achievement of the plan was made in cash in March / 2019 based on the quotation of R $ 45.49, to the “Extended Group” participants (without restriction of disposal) and to the participants of the Identified Collective, in March 2020, after the 1 year restriction period.

In the year ended December 31, 2019, there were no “pro rata” expenses recorded relating to costs on the respective dates of the cycles of the global program. The expenses related to the plans are recognized as “Other liabilities—Provision for share-based payments.”

Contract Termination

Employment contracts have an undefined period. The termination of the employment relationship for non-fulfillment of obligations or voluntarily does not entitle executives to any financial compensation.

Pension and Retirement Benefits

Members of our board of directors and our executive officers may enroll in our retirement plan, SBPrevi, while they are affiliated with Santander Brasil.

For further information on SBPrev, please see “— D. Employees.”

6C.Board Practices

Our shareholders electabovementioned twelve-month period, members of our Board of Directors at the annual general shareholders’ meetingand Executive Officers received a total of approximately R$352.6 million, members of our audit committee received a total of approximately R$3.2 million and members of our Fiscal Council received a total of approximately R$449.7 thousand. The total amount of contributions for two-year terms (members may be reelected). Thepension plans of our Board of Directors appointsand Executive Officers in 2021 was R$57 million.

Under Brazilian law, companies are required to disclose the highest, lowest and average compensation of their directors, members of the Fiscal Council, if installed, and officers without stating their names. The table below presents the information for the years ended 2021, 2020 and 2019:

 193
Table of Contents

 

Board of Executive Officers

Board of Directors

Fiscal Council

 

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Nº of members 50.0045.0041.7012.009.009.906.006.002.50
Nº of paid members 45.1639.0040.905.584.754.803.003.001.30
Value of highest compensation (Reais) 59,029,586.2546,953,181.9245,325,345.002,129,585.071,802,918.401,752,022.72142,710.00139,600.0055,370.00
Value of lowest compensation (Reais)(1) 2,098,466.401,791,418.041,843,405.07762,000.00762,000.00769,131.80142,710.00139,600.00—
Average value of compensation (Reais) 7,674,778.206,495,886.87664,784,2601,064,162.321,037,445.251,012,232.27149,901.00139,600.00132,888.00
(1)The value of the lowest individual remuneration considers only members who have exercised their functions in the 12-month period of the fiscal year in question. The amounts do not include social charges.

As approved by our Board of Directors at the meeting held on December 23, 2009, our Directors and Executive Officers, are indemnified in relation to claims arising during their time in office. The indemnity exclusively covers court or administrative costs and legal fees, except in cases of bad faith, gross negligence, willful misconduct or mismanagement by our Directors or Executive Officers. This indemnity was disclosed to the members of the audit committee, the Compensation Committee and the Fiscal Council.

Variable Compensation

The criteria for granting and paying variable compensation vary according to the activities performed by the different areas and, therefore, payment of the variable compensation may differ depending on the department and activities performed by each member.

Long Term Incentive Programs

Our long-term incentive plans are established in line with our business strategy. Each plan has a specific set of indicators and operating rules, and grants within our plans may be either global (i.e., based on shares in Santander Spain) or local (i.e., based on shares in Santander Brasil). The grants and payments under each of our long-term incentive plans must be approved by our governance, structures in place at the time of approval, including the human resources and finance departments, and must comply with applicable laws and regulations governing such plans.

Executive officers and executives in key positions are eligible to participate in these plans, which last three years, and foster our executive officers for two-year terms (members may be reelected).

The current membersand executives’ commitment to our long-term results, Members of the Board of Directors were electedcan only participate if they are Executive Officers.

Deferral Program

Our deferral program is available to our Statutory Officers, Officers in positions of management and certain other eligible employees. As part of the deferral program, we defer between 40% and 60% of the variable compensation of an employee over a period of three to five years, depending on the employee’s level of responsibility.

The program aims to (i) align the program with the principles of the Financial Stability Board, or “FSB,” agreed upon at the ordinary shareholders’ meeting held on April 26, 2019,G20; (ii) align our interests with those of the plan’s participants (to achieve sustainable and recurring growth and profitability of our businesses and to serve untilrecognize the ordinary shareholders’ meetingparticipants’ contributions); (iii) allow the retention of participants; and (iv) improve our performance and protect the interests of shareholders via a long-term commitment.

Pursuant to Brazilian law, variable compensation is required to be heldcompatible with the financial institution’s own risk management policies. At least 50% of variable compensation must be paid in 2021. stock or stock-based instruments and at least 40% of variable compensation must be deferred for future payment by at least 3 years. These rules became effective as from January 1, 2012.

The current Executive Officers were elected atfollowing table summarizes the rules of payment to variable compensation taking as an example the exercise ended on December 31, 2021.

2022

2023

2024

2025

At the time of the award

Deferred

30% in cashRemaining 20% in cash
 Payment calculated on ⅓ cash awardedPayment calculated on ⅓ cash awardedPayment calculated on ⅓ cash awarded
30% in units
(with one year lockup)		Remaining 20% in units (with one year lockup)
 Payment calculated on ⅓ units awardedPayment calculated on ⅓ units awardedPayment calculated on ⅓ units awarded

 194
Table of Contents

The deferral percentage will also depend on the level of variable compensation received in the year, with the above-mentioned criteria applied as minimum.

Still pursuant to Brazilian law, all deferral plans are subject to the application of malus/clawback, that is, the Board of Directors meetings heldof the Company, on May 3, 2019, July 2,the recommendation of the Compensation Committee and after the evaluation of the Malus/Clawback Committee, may approve to reduce up to 100% of the amount of each participant in the cases previously approved by Internal Governance.

We renew and update our deferral program every year. As of December 31, 2021, we had six plans outstanding: one for each fiscal year: 2016, 2017, 2018, 2019 and February 3,2020. As of December 31, 2021, we recorded total expenses of R$186 million in connection with our Deferral Program compared to total expenses of R$202 million in 2020.

Deferral Program – 2016, 2017 and 2018

Our 2016 to 2018 deferral programs are divided into two programs:

●Collective Identified – Statutory officers and executives who take significant risks in Santander Brasil and are in charge of the control areas. Deferred compensation will be paid 50% in cash, indexed to 100% of the CDI, and 50% in units.
●Collective Unidentified – Employees, Individuals eligible for this program include manager employees and certain of our other employees. Deferred compensation will be paid 100% in cash, indexed to 100% of the CDI.

Deferral Program – 2019, 2020 for terms of officeand 2021

●Since the financial year 2019, the rule for the Collective Unidentified was changed to “Other Employees,” which includes superintendents and other employees with variable compensation above a minimum established value, and they are also eligible to receive a specific deferral model, applicable according to the function and the level of the variable compensation. Deferred compensation will be paid 50% in cash, and 50% in units.

Long-Term Incentive Plans

Our long-term programs are divided into Local and Global plans. Each plan has specific performance indicators and conditions to best maintain the participant’s employment relationship until the first Board of Directors meeting occurs after the ordinary shareholders’ meeting, which ispayment date in order to be held in 2021. entitled to the receipt.

The Board of Directors usually meets eight times a year, but meetings may be held more frequently as the discretionpayment of the Chairmanplans is calculated based on the percentage of achievement of the Board of Directors. The Executive Officers meet as often as required by the Chief Executive Officer, or a designated person.

On August 31, 2017, our Board of Directors approved its regulations, which can be accessed by shareholdersindicators applied on the website www.santander.com.br/ri,reference value (target).

Local Long-Term Incentive Program

We have eleven retention plans for key positions launched between 2019 and 2021. These plans will be paid in SANB11 units and are subject to the application of the malus/clawback clauses, which may result in a reduction or full cancellation in the section entitled “Corporate Governance—Management Board—Regulationsnumber of shares to be delivered in cases of failure to comply with internal rules and exposure to excessive risks.

Each participant has a reference value defined in cash, converted into SANB11 units, usually at the average price of the Boardlast 15 trading sessions immediately prior to the payment of Directors”. The information contained on our website, any website mentionedthe plan, At the end of the vesting period, the resulting shares are delivered with a one-year restriction, and this payment is still subject to the application of the malus/clawback clauses, which may reduce or cancel the shares to be delivered in this annual report, or any website directly or indirectly linkedcases of non-compliance with internal rules and exposure to these websites, is not partexcessive risks.

 195
Table of Contents

For the fiscal year 2021, we incurred expenses of and is not incorporated by referenceR$26 million, with respect to the Local Long-Term Incentive Program, compared to total expenses of R$11 million in this annual report.the year ended December 31, 2020.

Fiscal Council

Our Fiscal Council is a non-permanent body. Members of our fiscal council are entitled to fixed compensation composed of monthly fees in the amount approved at our General Shareholders’ Meeting, the last of which was held on April 30, 2021.

Advisory Committees

The members of advisory committees are also entitled to fixed compensation composed of monthly fees. Only those members who do not occupy a position on the Board of Executive Officers are entitled to this compensation.

Compensation Plan Overview

At the general shareholders meeting held on April 30, 2021, the compensation limit was set up to R$433.94 million for our Directors and Executive Officers and R$4,832 million for our Audit Committee for the 12-month period starting on January 1, 2021, as proposed by the Board of Directors at the meeting held on March 26, 2021. As for the Fiscal Council, the general shareholders’ meeting approved a monthly compensation of R$11,985 thousand for each of the members, provided that the alternate members shall only receive such compensation in the event they replace the effective members. For the abovementioned twelve-month period, members of our Board of Directors and Executive Officers received a total of approximately R$352.6 million, members of our audit committee received a total of approximately R$3.2 million and members of our Fiscal Council received a total of approximately R$449.7 thousand. The total amount of contributions for pension plans of our Board of Directors and Executive Officers in 2021 was R$57 million.

Under Brazilian law, companies are required to disclose the highest, lowest and average compensation of their directors, members of the Fiscal Council, if installed, and officers without stating their names. The table below presents the information for the years ended 2021, 2020 and 2019:

 193
Table of Contents

 

Board of Executive Officers

Board of Directors

Fiscal Council

 

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Year ended December 31, 2021

Year ended December 31, 2020

Year ended December 31, 2019

Nº of members 50.0045.0041.7012.009.009.906.006.002.50
Nº of paid members 45.1639.0040.905.584.754.803.003.001.30
Value of highest compensation (Reais) 59,029,586.2546,953,181.9245,325,345.002,129,585.071,802,918.401,752,022.72142,710.00139,600.0055,370.00
Value of lowest compensation (Reais)(1) 2,098,466.401,791,418.041,843,405.07762,000.00762,000.00769,131.80142,710.00139,600.00—
Average value of compensation (Reais) 7,674,778.206,495,886.87664,784,2601,064,162.321,037,445.251,012,232.27149,901.00139,600.00132,888.00
(1)The value of the lowest individual remuneration considers only members who have exercised their functions in the 12-month period of the fiscal year in question. The amounts do not include social charges.

As approved by our Board of Directors at the meeting held on December 23, 2009, our Directors and Executive Officers, are indemnified in relation to claims arising during their time in office. The indemnity exclusively covers court or administrative costs and legal fees, except in cases of bad faith, gross negligence, willful misconduct or mismanagement by our Directors or Executive Officers. This indemnity was disclosed to the members of the audit committee, the Compensation Committee and the Fiscal Council.

Variable Compensation

The criteria for granting and paying variable compensation vary according to the activities performed by the different areas and, therefore, payment of the variable compensation may differ depending on the department and activities performed by each member.

Long Term Incentive Programs

Our long-term incentive plans are established in line with our business strategy. Each plan has a specific set of indicators and operating rules, and grants within our plans may be either global (i.e., based on shares in Santander Spain) or local (i.e., based on shares in Santander Brasil). The grants and payments under each of our long-term incentive plans must be approved by our governance, structures in place at the time of approval, including the human resources and finance departments, and must comply with applicable laws and regulations governing such plans.

Executive officers and executives in key positions are eligible to participate in these plans, which last three years, and foster our executive officers and executives’ commitment to our long-term results, Members of the Board of Directors can only participate if they are Executive Officers.

Deferral Program

Our deferral program is available to our Statutory Officers, Officers in positions of management and certain other eligible employees. As part of the deferral program, we defer between 40% and 60% of the variable compensation of an employee over a period of three to five years, depending on the employee’s level of responsibility.

The program aims to (i) align the program with the principles of the Financial Stability Board, or “FSB,” agreed upon at the G20; (ii) align our interests with those of the plan’s participants (to achieve sustainable and recurring growth and profitability of our businesses and to recognize the participants’ contributions); (iii) allow the retention of participants; and (iv) improve our performance and protect the interests of shareholders via a long-term commitment.

Pursuant to Brazilian law, variable compensation is required to be compatible with the financial institution’s own risk management policies. At least 50% of variable compensation must be paid in stock or stock-based instruments and at least 40% of variable compensation must be deferred for future payment by at least 3 years. These rules became effective as from January 1, 2012.

The following table summarizes the rules of payment to variable compensation taking as an example the exercise ended on December 31, 2021.

2022

2023

2024

2025

At the time of the award

Deferred

30% in cashRemaining 20% in cash
 Payment calculated on ⅓ cash awardedPayment calculated on ⅓ cash awardedPayment calculated on ⅓ cash awarded
30% in units
(with one year lockup)		Remaining 20% in units (with one year lockup)
 Payment calculated on ⅓ units awardedPayment calculated on ⅓ units awardedPayment calculated on ⅓ units awarded

 194
Table of Contents

The deferral percentage will also depend on the level of variable compensation received in the year, with the above-mentioned criteria applied as minimum.

Still pursuant to Brazilian law, all deferral plans are subject to the application of malus/clawback, that is, the Board of Directors of the Company, on the recommendation of the Compensation Committee and after the evaluation of the Malus/Clawback Committee, may approve to reduce up to 100% of the amount of each participant in the cases previously approved by Internal Governance.

We renew and update our deferral program every year. As of December 31, 2021, we had six plans outstanding: one for each fiscal year: 2016, 2017, 2018, 2019 and 2020. As of December 31, 2021, we recorded total expenses of R$186 million in connection with our Deferral Program compared to total expenses of R$202 million in 2020.

Deferral Program – 2016, 2017 and 2018

Our 2016 to 2018 deferral programs are divided into two programs:

●Collective Identified – Statutory officers and executives who take significant risks in Santander Brasil and are in charge of the control areas. Deferred compensation will be paid 50% in cash, indexed to 100% of the CDI, and 50% in units.
●Collective Unidentified – Employees, Individuals eligible for this program include manager employees and certain of our other employees. Deferred compensation will be paid 100% in cash, indexed to 100% of the CDI.

Deferral Program – 2019, 2020 and 2021

●Since the financial year 2019, the rule for the Collective Unidentified was changed to “Other Employees,” which includes superintendents and other employees with variable compensation above a minimum established value, and they are also eligible to receive a specific deferral model, applicable according to the function and the level of the variable compensation. Deferred compensation will be paid 50% in cash, and 50% in units.

Long-Term Incentive Plans

Our long-term programs are divided into Local and Global plans. Each plan has specific performance indicators and conditions to best maintain the participant’s employment relationship until the payment date in order to be entitled to the receipt.

The payment of the plans is calculated based on the percentage of achievement of the indicators applied on the reference value (target).

Local Long-Term Incentive Program

We have eleven retention plans for key positions launched between 2019 and 2021. These plans will be paid in SANB11 units and are subject to the application of the malus/clawback clauses, which may result in a reduction or full cancellation in the number of shares to be delivered in cases of failure to comply with internal rules and exposure to excessive risks.

Each participant has a reference value defined in cash, converted into SANB11 units, usually at the average price of the last 15 trading sessions immediately prior to the payment of the plan, At the end of the vesting period, the resulting shares are delivered with a one-year restriction, and this payment is still subject to the application of the malus/clawback clauses, which may reduce or cancel the shares to be delivered in cases of non-compliance with internal rules and exposure to excessive risks.

 195
Table of Contents

For the fiscal year 2021, we incurred expenses of R$26 million, with respect to the Local Long-Term Incentive Program, compared to total expenses of R$11 million in the year ended December 31, 2020.

Global Long-Term Incentive Program

Long-Term Incentive Global Plan CRDIV – Grant 2015

Payment for the Santander Spain shares resulting from the final achievement of the plan was made in cash in March 2019 based at a price of R$45.49 to the “Extended Group” participants (without restriction of disposal) and to the participants of the Identified Collective in March 2020, after the one year restriction period, following which this plan was discontinued.

Long-Term Incentive Plan – Digital Transformation Award

We currently have two global plans launched in 2019 and 2020. Eligible executives had an incentive target set in reais. Payment according to the achievement of performance indicators will be calculated in shares and options of Santander Spain (SAN), after a deferral period of three years, with equivalent settlement in reais.

For the year ended December 31, 2021, we incurred expenses of R$4.3 million in connection with the Global Long-Term Incentive Program, compared to total expenses of R$0.9 million in 2020.

Contract Termination

Employment contracts have an undefined period. The termination of the employment relationship for non-fulfillment of obligations or voluntarily does not entitle executives to any financial compensation.

Pension and Retirement Benefits

Members of our board of directors and our executive officers may enroll in our retirement plan, SBPrevi, while they are affiliated with Santander Brasil. For further information on SBPrev, please see “— D. Employees.”

6C. Board Practices

Our shareholders elect members of our Board of Directors at the annual general shareholders’ meeting for two-year terms (members may be reelected). The Board of Directors appoints our executive officers for two-year terms (members may be reelected).

The current members of the Board of Directors were elected at the ordinary shareholders’ meeting held on April 30, 2021 and on the extraordinary shareholders’ meeting held on December 17, 2021, to serve until the ordinary shareholders’ meeting to be held in 2023. The current Executive Officers were elected at Board of Directors meetings held on May 3, 2021, July 1, 2021 and November 1, 2021 for terms of office until the first Board of Directors meeting occurs after the ordinary shareholders’ meeting, which is to be held in 2023. The Board of Directors usually meets nine times a year, but meetings may be held more frequently as the discretion of the Chairman of the Board of Directors. The Executive Officers meet as often as required by the Chief Executive Officer, or a designated person.

On May 27, 2020, our Board of Directors approved its regulations, which can be accessed by shareholders on the website www.santander.com.br/ri, in the section entitled “Corporate Governance—Management Board—Regulations of the Board of Directors.” The information contained on our website, any website mentioned in this annual report, or any website directly or indirectly linked to these websites, is not part of and is not incorporated by reference in, this annual report.

Fiscal Council

According to Brazilian Corporate Law, the adoption of a permanent fiscal council, as a publicly held company, is voluntary.voluntary, Our By-Laws provide for a nonpermanent fiscal council, which can be installed at the request of shareholders, representing at least one percent of the voting shares or two percent of the nonvoting shares. The fiscal council was installed at our ordinary shareholders’ meeting held on April 26, 2019. All30, 2021. The current members of our fiscal council were elected at the ordinary shareholders’ meeting held on April 26, 201930, 2021 and at the extraordinary shareholders meeting held on December 17, 2021 to serve until the ordinary shareholders’ meeting to be held in 2020.

2022.

172 

 196

Table of Contents

Table of Contents

The fiscal council is an independent body elected by shareholders to supervise the activities of managers and independent auditors. The responsibilities of the fiscal council are established by Brazilian Corporate Law and include oversight of management’s compliance with laws and By-Laws, the issuance of a report on the company’s annual and quarterly reports, certain matters submitted for shareholders’ approval, calling of shareholders’ meetings in some cases and reporting on specific matters arising at those meetings.

The following table sets forth the members of our fiscal council as of the date of this annual report:

Name

Position

Date of Birth

Antonio Melchiades BaldiseraJosé Roberto Machado Filho MemberJanuary 26, 1952August 25, 1968
João Guilherme de Andrade So ConsiglioCassia Maria Matsuno Chibante MemberDecember 7, 1968May 19, 1978
Louise BarsiMemberSeptember 7, 1994
Manoel Marcos Madureira Deputy MemberDecember 30, 1951
Luciano Faleiros Paolucci Deputy MemberDecember 12, 1977
Valmir Pedro Rossi Deputy MemberJune 10, 1961

 

Below are the biographies of the members of our fiscal council.council,

Antonio Melchiades Baldisera.José Roberto Machado Filho. Mr. BaldiseraMachado is Brazilian, born on August 25, 1968. He holds a bachelor’s degree in Electrical Engineering from the Faculty of Industrial Engineering (FEI) of São Paulo and a Master’s degree in Business Administration, Economics and Finance from the University of São Paulo. Mr. Machado was an engineer at Keumkang Limited from 1990 to 1991, foreign exchange manager from 1992 to 1995 and manager of trading desk for emerging markets from 1992 to 1996 at Banco CCF Brasil S.A. He was also an executive director of Banco Rabobank Internacional Brasil SA from 1998 to 2003 and was executive director of Banco Real from 2003 to 2009. He was also a member of the management of Banco Santander (Brasil) S.A. until April 2020. He is currently a member of the board of directors at Heluz, Can TeraMed | OnixCann and Bright Cities.

Cassia Maria Matsuno Chibante. Ms. Matsuno is Brazilian, born on January 26, 1952. He graduated withMay 19, 1978. She holds a degreeBachelor’s Degree in Accounting, a postgraduate degree in Accounting ManagementLaw from the FundaçãUniversity of São Getúlio VargasPaulo (USP) and with an MBAa Bachelor’s Degree in Controlling, Audit and Tax ManagementBusiness Administration from Fundação Getúlio Vargas. He served as General Accounting ManagerShe also has an MBA in finance from IBMEC. Ms. Matsuno was a manager in the area of direct taxes at Arthur Andersen / Deloitte Touche Tohmatsu from 1999 to 2004. From 2004 to 2016, she was superintendent of finance at Banco NoroesteSantander (Brasil) S.A. until 1997. At Santander Brasil, he served as General Manager and Deputy Officer of the Accounting Department from 1998 to 2000. He was General Audit Manager of Banco Sudameris do Brasil S.A. from 2000 to 2003. He was also representative at FEBRABAN at the Electronic Fraud and Operational Security Subcommissions (Subcomissão de Fraudes Eletrônicas e Subcomissão de Segurança Operacional), and representative at FEBRABAN at the Internal Audit Committee. He was Executive Superintendent of Santander Brasil between 2003 and 2018, working in the Internal, External and Electronic Fraud Management area. He is currently a Consultant at AMB - Business Consulting in Prevention and Treatment of Financial Fraud, Operational Safety and Audit.

João Guilherme de Andrade So Consiglio. Mr. Consiglio is Brazilian and Italian and was born on December 7, 1968. He is graduated in Economics from the Universidade de São Paulo (USP), with a postgraduate degree from Degli Studi University, Genova, Italy. He has worked infocus on the financial market andarea of tax planning. From 2016 to 2018, she acted as an economist for more than 25 years. He was Executive Vice President of Santander Brasil and membersuperintendent of the Executive Committeecorporate development area of Banco Santander (Brasil) S.A. In 2018, she became the Bank in Brazil for seven years, responsible for business with large corporate clients (Corporate). He was also Product Officersuperintendent of ABN AMRO/strategy and market analysis at Banco Real and worked in the Corporate Development area, leading acquisitions and divestments of the Bank in Brazil, Private Equity and Capital Market operations. Prior to joining the financial market he was an economist at the Bunge Group. He has participated in several boards of directors such as Banco RCI Brasil S.A, CIP (Interbank Chamber of Payments) and Cia. Brasileira de Soluções e Serviços, among others. He is currently a board member of Unipar CarbocloroSantander (Brasil) S.A.

Louise Barsi. Ms. Barsi is Brazilian and was born on September 7, 1994. She holds a degree in Economics from Universidade Presbiteriana Mackenzie and in Accounting from Fundação Escola de Comércio Álvares Penteado (FECAP). Currently sheShe holds a post-graduatepostgraduate degree in Capital Markets at the Fundação Escola de Comércio Álvares Penteado (FECAP) and a master's degree in Accounting with a financial specialization from Fundação Escola de Comércio Álvares Penteado (FECAP). Ms. Barsi is a CNPI analyst, having worked at Elite Investimentos andfrom 2015 to 2019, participated in the Fiscal Council of Unipar Carbocloro from April 2016 to October 2017.2017 and the Fiscal Council of Aes Brasil from April 2019 to July 2020, and was a substitute member of the Fiscal Council of Eletropaulo (Enel). She is currently a member of the board of directors at Eternit since April 2018December 2017, where she also coordinates the Audit and has beenFinance Committee, a substitute memberDeputy Member of the board of directors at Unipar CarbocloroCarboclo since April of 2018 and a Fiscal Council Member at Klabin since April 2019 and at Aes Brasil since April 2021. Ms. Barsi is also an Alternate Membereffective member of Fiscal Council of Banco Santander (Brasil) S.A. for the term of 2021/2022, elected in separate votes by the majority of minority shareholders holding non-voting preferred shares attending the ordinary shareholder’s meeting held in April, 2021.

Manoel Marcos Madureira. Mr. Madureira is Brazilian and was born on December 30, 1951, He holds a Bachelor’s degree in Mechanical Engineering from the Universidade de Taubaté in São Paulo and a degree in Business Administration from the Tokyo International Center in Japan. From 1976 to 2005 he worked in the automotive industry, as an officer of institutional relations and communications for Fiat Automóveis and Mercedes Benz of Brasil. From 1998 to 2005 he was Vice President of the Automobile Manufacturers Association and President of the Automotive Engineering Association. In 2006, he was elected Vice President of the Corporate Affairs department of Santander Brasil, and in 2007 assumed the Vice Presidency of the Brazilian Federation of Banks. In 2008, he was transferred to the Santander Spain Group as the Communication Officer for Latin America, where he remained until September 2012. In October 2012, he returned to Brazil as Executive Officer in charge of the Corporate Communications and Institutional Relations Departments of Santander Brasil, and was Executive Vice President responsible for the Communication, Marketing, Institutional Relations and Sustainability departments of Santander Brasil until 2018. Mr. Madureira was also the Chief Executive Officer of Rojo Entretenimento

 197
Table of Contents

S.A. and Executive Officer of Universia Brasil S.A. (companies part of Santander Group). Mr. Madureira is currently an alternate member of the Fiscal Council of Eletropaulo (a subsidiarySantander Brasil and President of Enel).the Brazilian – Spain Chamber of Commerce.

173 

TableLuciano Faleiros Paolucci. Mr. Paolucci is Brazilian and Italian and was born on December 12, 1977. He has a degree in law from UNIFEB, with a Master’s Degree from the University of ContentsSussex (England) - LLM International Commercial Law. He also holds two specializations in Corporate Law and Financial and Capital Markets by INSPER. He is currently studying for a Master’s Degree in Agribusiness Finance from ESALQ and the law school of University of São Paulo. Mr. Paolucci has four years of experience in England, where he worked as a foreign lawyer. Initially, he worked at the DMH Stallard Solicitors in Brighton, where he worked with contracts, real estate law and damages. Later, he worked at Simmons & Simmons in London, one of the largest law firms in the United Kingdom, working in Finance/Business Law within the department responsible for Project Finance and Oil & Gas. In Brazil, he worked as a lawyer in the corporate department of Demarest e Almeida Advogados, focused on M&A and Corporate Law. He then worked at Mattos Filho Advogados, where he focused his practice on commercial contracts in general. He was a lawyer at Santander Brasil for seven years, working in the Private Equity, Corporate Law and the M&A departments. He is currently one of the partners of De Luca & Oliveira Advogados, responsible for corporate related matters. Mr. Paolucci was an effective member of the Fiscal Board of Banco Olé Consignado between June 2019 and January 2020, and since April 2019, is an alternate member of the Fiscal Council of Santander Brasil.

Valmir Pedro Rossi. Mr. Rossi is Brazilian and was born on June 10, 1961. He holds a degree in Accounting from the Universidade de Passo Fundo, a postgraduate degree in Finance from the Universidade de Caxias do Sul, a Marketing degree from PUC Rio de Janeiro and MBAs from Universidade de São Paulo (USP) and from UNB-Brasília. He is a Board member and Fiscal Council member certified from the IBGC. He also acted as Accountant at Casfor Ogr. Contábeis and Bertol S.A., as consultant at Sebrae RS, and for 30 years occupied several positions at Banco do Brasil S.A, the State Superintendent of Pará, State Superintendent of Rio Grande do Sul, Superintendent of retail at São Paulo, and also Corporate and Regional Superintendent for Latin America. He also served as CEO of Banco da Amazônia, a publicly traded federal bank, headquartered in Belém (PA). He worked as a Board member or Fiscal Council member at the following companies: Metalúrgica Gerdau S.A., Brasilprev S.A., BB Seguridade S.A, Fucapi S.A., Banco da Amazônia S.A., besides several other entities and associations. He is currently an effective member of the Fiscal Council of KaMin Cadam S.A and CSN S.A and a member of the audit committee of BRF S.A. and SIMPAR S.A. (holding company of JSI, Movida, etc.). He is a member of the Ethics Committee in Corporate Governance of the IBGC - Instituto Brasileiro de Governança Corporativa and a member of the Fiscal Council of the Instituto Mulheres em Operações, and also an alternative member of the Fiscal Council of Banco Santander (Brasil) S.A. for the terms of 2020, 2021 and 2022, and was elected in a separate vote by the majority of shareholders along with minority shareholders holding preferred shares without voting rights attending the Annual General Meeting held in April 2021.

Board Advisory Committees

Audit Committee

According toUnder Brazilian law, including Brazilian Central Bank regulations, an audit committee is a statutory board, separate from the board of directors and created by a shareholders’ resolution. The members of the audit committee may be members of the board of directors, provided that they meet certain independence requirements. All members of our audit committee meet such independence requirements. In addition, under Brazilian law, the function of hiring independent auditors is reserved for the board of directors. As a result, as specified in Section 3(a)(58) of the Exchange Act, our board of directors functions as our audit committee for the purpose of approving any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or to us.

Pursuant to Exchange Act Rule 10A-3(c)(3), which provides for an exemption under the rules of the SEC regarding the audit committees of listed companies, a foreign private issuer, such as us, is not required to have an audit committee equivalent to or comparable with a U.S. audit committee, if the foreign private issuer has a body established and selected pursuant to home country legal or listing provisions expressly requiring or permitting such a body, and if the body meets certain requirements. As a foreign private issuer, we rely on the exemption under Rule 10A-3(c)(3) of the Exchange Act with respect to our audit committee, and we believe that our audit committee complies with the aforementioned exemption requirements. Except in these respects, our audit committee performs the functions of the audit committees of U.S. companies. For more information, see “Item 16D. Exemptions from the Listing Standards for Audit Committees.”

 198
Table of Contents

Our audit committee is composed of three to six members, elected by our board of directors, among persons, members of the board of directors and others, who meet all statutory and regulatory requirements for the exercise of their office, including any requirements to ensure their independent judgment, and who shall serve for a one-year term and may be reelected pursuant to applicable legislation for up to four consecutive times to a maximum five-year term of office. One of the members shall be designated as the audit committee’s coordinator, and at least one member must have proven knowledge in the areas of accounting and auditing (financial expert).

Our audit committee has as its main functions:

·●to advise the board of directors on the engagement or replacement of the independent auditor;

·●to review, prior to publication, the interim financial statements, including the notes, the management report and the opinion of the independent auditor;

·●to evaluate the effectiveness of the independent and internal audits, including in regard to compliance with normative provisions applicable to us, in addition to internal regulation and codes;

·●to evaluate the fulfillment by our management of the recommendations made by the independent or internal auditors; and

·●to prepare, at the end of the six-month period ended on June 30 and December 31 of each year, the report of the audit committee, meeting the applicable legal and regulatory provisions.provisions; and

●to receive and review the reports required by the regulatory bodies concerning the activities of the ombudsman, on each June 30 and December 31 or when a material event is identified.

The current members of the audit committee are Luiz Carlos Nannini,Deborah Stern Vieitas, who acts as coordinator, Maria Elena Cardoso Figueira, who acts as financial expert, Vania Maria da Costa Borgerth, and Maria Elena Cardoso Figueira, Julio Sergio de Souza Cardozo and Deborah Stern Vieitas, who act as coordinator.René Luiz Grande. Our audit committee meets ordinarily once a month. The current members of the audit committee were appointed on May 3, 20192021 and June 1, 2021 to serve for a one-year term.

Set forth below are the biographies of the members of our audit committee:

Maria Elena Cardoso Figueira. Ms. Figueira is Brazilian, was born on November 29, 1965 and graduated in Economics from the Pontifical Catholic University of Rio de Janeiro (PontifíPontifícia Universidade Católica do Rio de Janeiro).Janeiro. Ms. Figueira is a board of directors, Supervisory Board and Audit Committee member certified member ofby the Board of Directors and supervisory Board of IBGC (the Brazilian Institute of Corporate Governance) and a partner of Figueira Consultoria, Financeira, her individual financial advisory firm. Ms. Figueira has attended training programs in Brazil (through ISE, FAAP, KPMG, Gonew and IBGC) and abroad (through IESE, IE and IE)IBGC) and has extensive professional experience in finance and tax, including at Arthur Andersen, Banco Bilbao Vizcaya, KPMG, Santander (in Brazil, as Deputy Director in charge of Tax Planning, and in Spain, from April 2012 to May 2014, where she worked in the Department of Financial Regulation and Accounting Standards focusing on capital allocation). Since 2004, Ms. Figueira has also served as a member of the Audit Committeesaudit committees and advisory Boards of: (i) Santander Brasil, acting as an independent member of the Audit Committeeaudit committee since May 2018; (ii) HSBC Brasil S.A .S.A. - Banco de Investimentos

174 

Table of Contents

(from (from June 2017 to April 2018), as a member and Chairman of the Advisory and Audit and Risk Committee; (iii) HSBC Brasil S.A. - Banco Múltiplo,Multiplo, from October 2014 to June 2016, as chairman and member of the Advisory Board and the Audit and Risk Committee; and (iv) Santander Brasil, from August 2004 to April 2012, as an independent member of the Audit Committee,audit committee, Coordinator and financial expert. Since 2015, Ms. Figueira has been an associate member and participant of the IBGC Financial Institutions Governance Committee, of the Independent Appellate Board and a membercoordinator of the Women Corporate Directors - WCD, - Brazil chapter and, sincechapter. Since 2017, she ishas been an associate member and participant of the Strategic Governance Committee of American Chamber of Commerce in Brazil (Amcham Brasil).

Luiz Carlos Nannini. Mr. NanniniAmcham Brasil. Since 2020, she is Brazilian and was born on January 2, 1960. He holdsalso a degree in Accounting Sciences, with several specialization courses in Brazil and abroad, including a leadership course at Harvard. He has more than 30 years of experience in the conduct of independent audit services, including: the preparation of financial statements in accordance with IFRS and U.S. GAAP; due diligence; implementation of internal controls (including IT); corporate restructuring; tax planning and affairs; and participation in advisory councils in Brazil, the U.S. and globally. Furthermore, Mr. Nannini has significant experience in audit committees and fiscal councils of publicly held Brazilian companies. Currently he is a member and financial expert of our Audit Committee.

Julio Sergio de Souza Cardozo. Mr. Cardozo is Brazilian, born on August 18, 1944. He holds a degree in Accounting and Business Administration from Universidade Presbiteriana Mackenzie of Rio de Janeiro and a PhD in Finance and Internal Controls from the Universidade do Estado do Rio de Janeiro, where he acted as Auditor and Accounting Professor at the undergraduate and graduate levels until August 2016. From 1985 to 2001, he served as Audit Partner at Ernst & Young Brazil. From 2001 to 2007, he held the positions of CEO and Chairman of the Board of Ernst & Young Brazil, as well as Board member of Ernst & Young Americas (New York). In the same period, he served as CEO and Chairman of the Board of EY South America and a member of the Fiscal Council of USIMINAS, Santa Catarina Power Plants and BRADESPAR. He has also served as a member of the Board of Directors and coordinator member of the Audit Committee of the credit card manager AVISTALojas Americanas S.A. Currently, Cardozo is the Managing Partner of Júlio Sergio Cardozo & Associados Consultoria em Negócios Ltda.;and a member of the Supervisory Board of DirectorsCamil Alimentos S.A. Since 2021 she has been a member of Saraiva S.A. Livreiros e Editores;the Audit Committee of Hospital Sírio Libanês and an alternate member of the Fiscal Council of Centrais Elétricas do Ceará and professorB3 S.A. Since 2022 she has been a member of the Audit Committee of Br Properties S.A.

Vania Maria Borgerth. Mrs. Borgerth holds a degree in Accounting from Universidade Santa Úrsula, an MBA Program in Finance offrom IBMEC, an MBA in IFRS from FIPECAFI and a specialization in accounting from Fundação Getúlio Vargas. She holds a master's degree in Business Administration from IBMEC and is a PhD student in Accounting and Business Administration from FUCAPE Business School. Ms. Borgerth has over 25 years of solid experience in the financial market. At BNDES, she held several executive positions such as Financial Policy

 199
Table of Contents

and Investor Relations Manager, Chief Accountant, Advisor to the CEO and Controllership Superintendent, Council Member (Fiscal) at FAPES Pension Fund and Member of the Risk Committee. A member of the UN Council for Corporate Reporting (UNCTAD/ISAR), she headed the Brazilian delegation from 2013-2020. Representative of Brazil in several international standards bodies such as IFRS Foundation, IAASB (auditing standards), IESBA (accounting ethics standards), Shift Project (human rights) and IIRC (Integrated Reporting). At the IBGC, she coordinated the "Transparency" pillar of the Positive Governance Agenda, represents the Institute as an IIRC Council Member and participates in the Sustainability Regulation WG. She is the Operational Coordinator of the Federal Accounting Council Working Group that prepared OCPC no. 09 (CVM Resolution No. 14) which deals with Integrated Reporting. She is the author of a book focused on the ethical aspects of The Sarbanes Oxley Act and a lecturer. She holds an International Certificate in IFRS from the Association of Certified Chartered Accountants (ACCA) and a Board of Directors Certificate from the IBGC.

René Luiz Grande. Mr. Grande is Brazilian and was born on April 19, 1953. He holds a degree in Economics from Pontificia Universidade Católica de São Paulo, and a specialization degree in National Financial System from Fundação Instituto de Administração. He was an employee of the Brazilian Central Bank, qualified by the public examination since June, 1975, and worked in the Supervision and Inspection Department of the National Financial System. During his career in the Brazilian Central Bank he served as an Analyst from 1975 to 1978; Technical Assistant from 1978 to 1989; Inspection Supervisor from 1989 to 1999; Head of the Banking Supervisory and Technical Department from 1999 to 2003; and Deputy Head of the Banking Supervisory and Financial Conglomerates Department from 2003 to 2011. Before working with the Brazilian Central Bank, he occupied the position of Head of Human Resources with the Companhia Brasileira de Embalagens Metálicas BRASILATA from 1973 to 1975. At Banco Santander (Brasil) S.A., Mr. Grande was Coordinator of the audit committee between the years 2012 and 2017, a member of the Risks and Compliance Committee between January 2018 and June 2020, and is currently an independent member of the Audit Committee.

Deborah Stern Vieitas., See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

Compensation Committee

In compliance with regulations issued by the Brazilian Central Bank (specifically, CMN Resolution No. 3,921/2010 of November 25, 2010), on February 7, 2012, our shareholders established the compensation committee in our By-laws, which also acts as the compensation committee for certain of our affiliates and subsidiaries.

Our compensation committee is composed of three to five members, appointed by the board of directors from among persons who meet all statutory and regulatory requirements for the exercise of their office. At least one of the members cannot be an executive officer and the others may or may not be members of our board of directors, and at least two members shall be independent, pursuant to paragraph 3 of article 14 of our By-Laws. The compensation committee shall have in its composition qualified members with the experience required for competent and independent judgment regarding our internal compensation policy and the repercussions of this internal compensation policy on risk management. Such persons shall serve for a term of two years and may be reelected for up to four consecutive times, pursuant to applicable legislation.

Our compensation committee has as its main functions:

·●to develop internal compensation policies applicable to our management and make proposals to our board of directors regarding policies for variable and fixed compensation, benefits, and special programs for recruiting and terminations;

175 

Table of Contents

·●to supervise the implementation and coming into operation of the compensation policy for our management;

·●to propose to the board of directors the aggregate compensation of our management to be submitted to the general meeting, pursuant to Article 152 of Brazilian Corporate Law;

·●to analyze our internal officer and board compensation policies and procedures in comparison with market practice, and recommend changes to align our policies with market practice if significant differences from market practice are identified;

·●to prepare annually, within 90 days as from December 31 of each year, the compensation committee report, in accordance with applicable statutory and regulatory provisions; and

 200
Table of Contents
·●to ensure that the management compensation policy is compatible with our risk management policy, the goals and current and expected financial condition, as well as with the provisions set forth in applicable regulatory provisions and regulations published by the Brazilian Central Bank.

The current members of the compensation committee are Deborah Patricia Wright, (whowho acts as coordinator), Álvaro Antonio Cardoso de Souza, Celso Clemente Giacometticoordinator, Sérgio Agapito Lires Rial and Luiz Fernando Sanzogo Giorgi. The current members of the compensation committee were appointed on May 3, 20192021 and December 17, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2021.

2023.

Set forth below are the biographies of the members of our compensation committee:

Deborah Patricia Wright. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

Álvaro Antonio Cardoso de SouzaSérgio Agapito Lires Rial. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

Celso Clemente Giacometti. See “—Members of the Board of Directors.”

Luiz Fernando Sanzogo Giorgi. Mr. Giorgi is Brazilian and was born on September 3, 1964. He has a bachelor’s degree in Business Administration from Fundação Armando Alvares Penteado (FAAP) and over 26 years of experience in management. He started his career in 1982 at Price Waterhouse, where he worked until 1986, and, then at Embraer, where he worked between 1986 and 1989. From 1989 to 2003, he worked as a consultant and director at Hay Group, and from 2003 to 2005, he worked for the Suzano Group as a Vice Chairman of Suzano Holding. He was a member of the Management Committee of the Boardboard of Directorsdirectors of Suzano Papel e Celulose, Chief Executive Officer of Suzano Petroquímica and a full member of the Board of Petroflex. In September of 2005, he founded LFG – Assessoria em Gestão Empresarial e Liderança. From 2007 to 2015, he served as a member of the board of directors of Santher S.A.; from From 2007 to 2011, he served as a full member of the board of directors of J. Macedo Alimentos S.A.; in In 2008, he served as a full member of the board of directors of Vix Logística S.A.; from From 2007 to 2008, he served as a member of the HR Committee of the board of directors of Grupo Libra S.A.; and in In 2013, he served as a member of the board of directors of Itautec S.A. Currently, heMr. Giorgi serves as a member of the boards of directors of Vonpar S.A. and Empresas Concremat. He is also a member of the Advisory Board of Heads Agência de Propaganda and chairman of the Boardboard of Directorsdirectors of Teadit S.A. He holds the position of member of the HR Committees of Sul América Seguros S.A., Lojas Marisa S.A. and Martins Atacadista S.A. He is also a member of our Nomination and Governance Committee.

Risk and Compliance Committee

The Risk and Compliance Committee is a consultative body, which has the responsibility ofis responsible for advising our Board of Directors on subjects related to the policies, operational directions and methodologies of capital allocation, risk management and exposure edges, according to applicable law,regulations, as well as advising on compliance practices that enhance our management regarding transparency and monitoring of compliance functions of the institution. For more details about risk management, see the information under note 47:46, Risk Management of the financial statements.

176 

Table of Contents

The riskRisk and compliance committeeCompliance Committee is composed of three to six members, provided that the majority of them: (i) may not be, nor may they have been, employees of Santander Brasil in the last six months prior to their appointment; (ii) may not be the spouse or relative of a person referred to in item (i) herein; (iii) cannot receive from us any compensation that does not relate to their role as a member of the risk and compliance committee or the board of directors; (iv) must have experience in risk management; and (v) may not be a controlling shareholder of Santander Brasil, nor participate in decisions at the executive level. The term of office of each of the committee’s members is of two years, reelection permitted, and the members may be removed at any time. The risk and compliance committee meetings are held at least four times a year or when extraordinarily convened by its coordinator.

The current members of the risk and compliance committee are Bernardo ParnesPedro Augusto de Melo (who acts as coordinator), Álvaro Antônio Cardoso de Souza,Sérgio Agapito Lires Rial, José de Paiva Ferreira and René Luiz Grande.Virginie Genès-Petrolinho. The current members of the risk and compliance committee were appointed on May 3, 2019,2021 and December 17, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2021.2023.

Bernardo ParnesPedro Augusto de Melo. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

 201
Table of Contents

Sérgio Agapito Lires Rial. Mr. ParnesSee “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

José de Paiva Ferreira. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

Virginie Genès-Petronilho. Ms. Virginie Genès-Petronilho is a naturalized Brazilian and was born in France on March 4, 1960. HeAugust 17, 1962. She holds a degree in Business Administration with a focus on financebusiness administration from Fundação Armando Álvares Penteado, SP,ESCP EUROPE in Paris, France. With 34 years of experience in the banking and Law from Faculdade de Direito da Universidade dereinsurance sectors, she served as Executive Superintendent at BNP Paribas in São Paulo, focusedbeing responsible for the business management of the customer relationship areas and for the credit portfolio management in Business Law. HeLatin America. She also haswas responsible for the Management of the Credit Risk at Banco Caixa Brasil, also in São Paulo, from May 2009 to October 2011. She worked for 18 years in the ABN AMRO Group: she served as a postgraduatesenior corporate credit analyst at ABN AMRO in Economics and FinanceAmsterdam from Fundação Getúlio Vargas. Mr. Bernardo was CEO1997 until 2000, when she became Vice President of Deutsche Bankthe Corporate Credit area within the Risk Department for Latin America at ABN AMRO Banco Real in São Paulo, performing this role until 2005. She was Risk Director at ABN AMRO Bank in Mexico between 2005 and Chief Country Officer of Deutsche Bank Brazil. At Deutsche Bank, he2008. She was alsoRelationship Manager Banque de Neluflize, Schlumberger, Mallet, a member of the Americas’ Executive Committee, the Regional Management Executive Committeefilial from ABN AMRO Group in Paris from 1989 until 1997 and the Latin American Advisory Board. Prior to Deutsche Bank, he was CEO of Banco Bradesco BBI S.A., and before that, he was CEO of JSI Investimentos Ltda., part of the Safra Group. Mr. Parnes also worked for 14 years at Merrill Lynch, where he was Country Head of Brazil, and worked for seven years at Citigroup in Brazil. He is currentlyCredit Commercial de France from 1985 until 1989. Currently, Ms. Genès-Petronilho has been a member of the board of directors of Albert Einstein Hospital, MASP (São Paulo Art Museum)Camara França Brasil since March 2020 and Coordinatorsince February 2017 she has been Vice President of our Risk and Compliance Committee.

Álvaro Antônio Cardoso de Souza. See “—MembersManagement for Latin America of the BoardReinsurance Business Unit of Directors.”

José de Paiva Ferreira. See “—Members of the Board of Directors.”

René Luiz Grande. Mr. Grande is Brazilian and was born on April 19, 1953. He holds a degree in Economics from Pontificia Universidade Católica de São Paulo, and a specialization degree in National Financial System from Fundação Instituto de Administração. He was an employee of the Brazilian Central Bank, qualified by the public examination since June, 1975, and worked in the Supervision and Inspection Department of the National Financial System. During his career in the Brazilian Central Bank he served as an Analyst from 1975 to 1978; Technical Assistant from 1978 to 1989; Inspection Supervisor from 1989 to 1999; Head of the Banking Supervisory and Technical Department from 1999 to 2003; and Deputy Head of the Banking Supervisory and Financial Conglomerates Department from 2003 to 2011. Before working with the Brazilian Central Bank, he occupied the position of Head of Human Resources with the Companhia Brasileira de Embalagens Metálicas BRASILATA from 1973 to 1975. Currently, Mr. Grande is aSwissRe Brasil Group. She has also been member of our Risk and Compliance Committee having heldof the position of Coordinator of our Audit Committee from 2012 to 2017.Banco Santander (Brasil) S.A. since June 2020.

Nomination and Governance Committee

The nomination and governance committee is a consultative body which is responsible for advising the board of directors on subjects related to the nomination and governance of Santander Brasil.

The committee is composed of three to seven members, and the majority of those memberswhich must be independent and, preferably also members of the board of directors. The term of office is two years, reelection permitted, and the members may be removed at any time. The committee meetings are held at least four times a year or when extraordinarily convened by its coordinator.

177 

Table of Contents

The current members of the nomination and governance committee are Celso Clemente GiacomettiSérgio Agapito Lires Rial (who acts as coordinator), Álvaro Antonio Cardoso de Souza, Deborah Patricia Wright and Luiz Fernando Sanzogo Giorgi. The current members of the nomination and governance committee were appointed on May 3, 20192021 and December 17, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2021.2023.

Celso Clemente GiacomettiSérgio Agapito Lires Rial.. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

Álvaro Antonio Cardoso de Souza. See “—Members of the Board of Directors.”

Deborah Patricia Wright. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

Luiz Fernando Sanzogo Giorgi.. See “—Compensation Committee.”

Sustainability Committee

The sustainability committee is a consultative body which is responsible for advising the board of directors on subjects relating to social and sustainable development issues, including the promotion of sustainable development and other social initiatives.

The committee comprises three to five members, and at least one of these members must be independent. The term of office is of two years, reelection permitted, and the members may be removed at any time. The committee meetings are held at least four times a year or when extraordinarily convened by its coordinator.

The current members of the sustainability committee are Marília Artimonte Rocca (who also acts as coordinator), Carlos ReyÁlvaro Antônio Cardoso de Vicente,Souza, Andrea Marques de Almeida, Carlos Aguiar Neto, Mário Roberto Opice LeãLuiz Masagão Ribeiro Filho and Tarcila Reis Corrêa Ursini.Tasso Rezende de Azevedo. The current members of the sustainability committee were appointed on May 3, 2019, August 6, 2019 and December 31, 20192021 to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in 2021.2023.

 202
Table of Contents

Marília Artimonte Rocca.See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”

Álvaro Antônio Cardoso de Souza. Mr. Álvaro de Souza is Portuguese and was born on September 5, 1948. He holds degrees in Economics and Business Administration from the Pontifícia Universidade Católica de São Paulo, and attended several specialization courses from a number of American universities, such as the University of Pittsburgh and the Wharton Business School of the University of Pennsylvania. He is the Managing Director of AdS - Management, Consulting and Investments, a firm which provides advice on investments and general management. He is Chairman of the Board of Santander Brasil and a member of Santander Global Board in Spain. He has worked in several banks, including Citibank, where he worked for 32 years in Brasil and abroad. In addition to the period he worked at Citigroup, he was founder and President of Banco ABC, then a subsidiary of Globo Group, Chairman of the Deliberative Council of Fundo Brasileiro para Biodiversidade (FUNBIO), and president of the American Chamber of Commerce in São Paulo (AmCham Brasil). He was also a board member of WWF International, Mastercard International and several Brazilian companies, such as AmBev S.A., Celbrás, Ultraquímica, SPCI Computers, Lazard Brazil Bank, Triângulo Bank, CSU Cardsystems, Duratex S/A. and Gol Airlines, and was President of the board of directors of WWF Brasil. Mr. Souza was chairman of our board of directors from December 2016 to December 2021. He is currently a member of the Sustainability Committee of Santander Brasil and a member of the board of directors of Santander Group in Spain.

Carlos ReyAndrea Marques de VicenteAlmeida. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers.”

Carlos Aguiar Neto. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers.”

Mario Roberto Opice LeãLuiz Masagão Ribeiro Filho. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers.”

Tarcila Reis Corrêa UrsiniTasso Rezende de Azevedo. Ms. Corrêa UrsiniMr. Azevedo is Brazilian, born on May 9, 1974. She holdsin 1972. He has a degree in Economicsforestry engineering from the Luiz de Queiroz School of Agriculture at the University of São Paulo (Universidade de São Paulo),Paulo. He is a Law degree fromsocio-environmental entrepreneur and consultant on forestry, climate change and sustainability. Mr. Azevedo is coordinator of the Pontifical Catholic University of São Paulo (Pontifícia Universidade Católica de São Paulo)Greenhouse Gas Emissions and Removal Estimation System (SEEG) as well as the MAPBIOMAS Project, a master's degreeplatform that maps and monitors changes in Developmentland cover and Law from Kings College, London. Ms. Corrêa Ursini began her careeruse in Brazil, the Amazon Basin and other regions by through multi-institutional collaboration. He also serves as a lawyer, with work experiences in Brazil, Spainvisiting scholar at Princeton University and England. She was an associated lawyer at Machado, Meyer, Sendanczas a board member for several organizations including Rainforest Alliance, NEPCon, Imaflora and Opice from 1997 to 2000 in the CorporateInstitute of Energy and Mergers and Acquisitions area. Since 2001 she has been working on sustainability strategy, management and research, advising organizations from the most diverse sectors, sizes and cultures. She was manager of the Ethos Institute from 2003 to 2007. She was international representative of Brazil in the development of ISO 26000. Ms. Corrêa Ursini was a member of the International Council of Stakeholders of the Global Reporting Initiative (GRI), Netherlands. SheEnvironment. Currently, Mr. Azevedo is an independent member of the Duratex S.A. Board of Sustainability Committee since June 2012, beginning to preside it in 2016; is an independentalso a member of the Sustainability Committee of the Baumgart Group Council since February 2017; is an independent member of the Sustainability Committee of Precon Engenharia since 2016. She is a member of the Brazilian Institute of Corporate Governance - IBGC, of the Sustainability Studies Committee since its foundation, was part of the 40th group of Formation Counselors. She is a member of WCD - Women Corporate Directors (IFC / IBGC / KPMG), Women's Leadership Group for Sustainability, Ministry of the Environment and voluntary supporter of various civil society organizations. She is a postgraduate professor in Socio-Environmental Management at FIA. She is co-author of The World Guide to CSR, chapter Brazil, Greenleaf 2009, a collaborator of Communication in Progress of the United Nations Global Compact, co-author of the Term of Reference that defined the Sustainability of the Sebrae System.

178 

Table of Contents

Banco Santander (Brasil) S.A.

Executive Committee

The Chief Executive Officer, Senior Vice President Executive Officers and Vice President Executive Officers make upconstitute the Executive Committee, which examines policies for business management, operational support, human resources and capital allocation. ItThe committee also deliberates on the main technological, infrastructure and services projects.

Contract termination

Employment contracts have an undefined term.period. The voluntary termination of the employment relationship or termination for non-fulfillment of obligations or voluntary does not entitle executives to any financial compensation.

6D.6D. Employees

On December 31, 2019,2021, we had 47,81948,834 full-time, permanent employees. The following table presents the breakdown of our full-time, permanent employees (in accordance with local criteria) at the datedates indicated.

  As of December 31,
  2021 2020 2019
Administrative employees   17,630   12,722   12,188 
Commercial areas employees   31,204   31,877   35,631 
Total   48,834   44,599   47,819 

 

  As of December 31,
  2019 2018 2017
Administrative employees  12,188   12,480   10,936 
Commercial areas employees  35,631   35,532   36,468 
Total  47,819   48,012   47,404 
 203
Table of Contents

The following table presents a breakdown of our full-time, permanent employees (in accordance with local criteria) by geographic location within Brazil at the dates indicated.

  As of December 31,
  2020 2019 2018
Region      
 Midwest    1,047   1,430   1,021 
 Northeast    4,547   4,066   4,283 
 North    774   674   760 
 Southeast    30,545   30,595   34,732 
 South    10,839   3,596   5,957 
 Other    1,082   4,238   1,066 
 Total    48,834   44,599   47,819 

 

We provide a competitive benefits package, which contributes to the engagement, attraction and retention of our employees. To ensure competitiveness, we compare our annual benefit package to market practices and trends. Policies are developed and offered based on the needs of our employees. We also have a policy of providing continuous training to our employees, allowing them to hone their skills and create a more effective team, committed to the values of the group.

We have a profit sharing plan with our employees based on predetermined goals for our annual operating and financial results. As a result, if we meet or exceed certain goals, our employees can share in our financial performance. See “—B. Compensation.”

We also offer a defined contribution pension plan where employees can choose to contribute part of their wages and to which we can also make contributions on behalf of such employees. This plan provides retirement benefits, and disability and death benefits. Currently the mainlargest plan is SantanderPrevi, a plan that since July 2018 is closed for new participants.participants since July 2018. As of January 2018, the SBPrev pension plan, administered by Icatu Seguros, was implemented for new employees and new members. As of December 31, 2019, 38,3792021, 31,436 participants were enrolled in SantanderPrevi plan, and the total assets under management under the plan was approximately R$4,0824.11 billion. As of December 31, 2019,2021, we had 4,954 registered participants in the SBPrev plan, we had 3,770 registered participants, with total amount under management of R$195,188431,922 million. For additional information on our pension plans, see note 2321 to our audited consolidated financial statements.

statements included elsewhere in this annual report.

The Brazilian Banking Employees’ Union represents most of our employees. Inemployees in the event of a potential conflict with our banking employees and/or the banking union, and negotiations are conducted by the FENABAN. Every two years, generallyusually in September, all Brazilian banks have a collective negotiation period in which they revise salary structures. During this period, the Brazilian Banking Employees’ Union negotiates the percentages of readjustment for fixed salary and benefits of bank employees’ salaries within the scope of the Brazilian Banking Collective Agreement with the FENABAN. Negotiations pertainingrelated to wages and salaries for the period 2018-20202020-2022 have already been concluded and the levels of compensation agreed are consistent with market practice. Since the acquisition of our predecessor banks by our indirect shareholder Santander Spain, we have not suffered significant losses through strikes and our management believes it has good relations with our employees.

 204
Table of Contents

 

179 

Table of Contents

6E.6E. Share Ownership

The following table provides the names of our directors and executive officers as well as members of our fiscal councilFiscal Council who owned shares of Santander Brasil as of March 6, 2020.February 22, 2022.

ShareholdersCommon SharesPercentage of Outstanding Common SharesPreferred SharesPercentage of Outstanding Preferred SharesPercentage of Total Share Capital
Alberto Monteiro de Queiroz Netto       38,753                  (1)       38,753                (1)               (1)
Alessandro Tomao       97,861                  (1)       97,861                (1)               (1)
Amancio Acúrcio Gouveia     170,226                  (1)     170,226                (1)               (1)
André de Carvalho Novaes       34,165                  (1)       34,165                (1)               (1)
Angel Santodomingo Martell     146,632                  (1)     146,632                (1)               (1)
Antonio Melchiades Baldisera       10,096                  (1)       10,096                (1)               (1)
Antonio Pardo de Santayana Montes     144,860                  (1)     144,860                (1)               (1)
Carlos Aguiar Neto       45,155                  (1)       45,155                (1)               (1)
Carlos Rey de Vicente     172,260                  (1)     172,260                (1)               (1)
Cassio Schmitt     137,906                  (1)     137,906                (1)               (1)
Celso Clemente Giacometti                1                  (1)               -                   (1)               (1)
Claudenice Lopes Duarte       16,816                  (1)       16,816                (1)               (1)
Conrado Engel     653,191                  (1)     653,191                (1)               (1)
Daniel Fantoni Assa     101,892                  (1)     101,892                (1)               (1)
Ede Ilson Viani     115,288                  (1)     115,288                (1)               (1)
Elita Vechin Pastorelo Ariaz       17,534                  (1)       17,534                (1)               (1)
Germanuela de Almeida de Abreu       36,781                  (1)       36,781                (1)               (1)
Gilberto Duarte de Abreu Filho     192,060                  (1)     192,060                (1)               (1)
Gustavo Alejo Viviani     195,593                  (1)     195,593                (1)               (1)
Igor Mario Puga       15,924                  (1)       15,924                (1)               (1)
Jean Paulo Kambourakis       60,253                  (1)       60,253                (1)               (1)
Jean Pierre Dupui     338,095                  (1)     338,095                (1)               (1)
João Guilherme A S Consiglio     160,645                  (1)     160,645                (1)               (1)
José Antônio Alvarez Alvarez                1                  (1)               -                   (1)               (1)
José de Paiva Ferreira     429,607                  (1)     429,607                (1)               (1)
José Roberto Machado Filho     106,614                  (1)     106,614                (1)               (1)
José Teixeira de Vasconcelos Neto       28,011                  (1)       28,011                (1)               (1)
Juan Sebastian Moreno Blanco     595,436                  (1)     595,436                (1)               (1)
Luis Guilherme Mattos de Oliem Bittencourt       48,160                  (1)       48,160                (1)               (1)
Luiz Masagão Ribeiro Filho     176,413                  (1)     176,413                (1)               (1)
Manoel Marcos Madureira     151,164                  (1)     151,164                (1)               (1)
Marino Alexandre Calheiros Aguiar       24,319                  (1)       24,319                (1)               (1)
Mário Roberto Opice Leão     155,466                  (1)     155,466                (1)               (1)
Patrícia Souto Audi       10,132                  (1)       10,132                (1)               (1)
Rafael Bello Noya       71,793                  (1)       71,793                (1)               (1)
Ramón Sanches Santiago         8,588                  (1)         8,588                (1)               (1)
Ramón Sanchez Díez       79,548                  (1)       79,548                (1)               (1)
Reginaldo Antonio Ribeiro       59,915                  (1)       59,915                (1)               (1)
Roberto Alexandre Borges Fischetti     162,860                  (1)     162,860                (1)               (1)
Robson de Souza Rezende       34,329                  (1)       34,329                (1)               (1)

180 

Table of Contents

Sergio Agapito Lires Rial     496,197                  (1)     496,197                (1)               (1)
Thomas Gregor Ilg       90,551                  (1)       90,551                (1)               (1)
Ulisses Gomes Guimarães       29,256                  (1)       29,256                (1)               (1)
Vanessa de Souza Lobato Barbosa     105,012                  (1)     105,012                (1)               (1)
Employees  3,907,014

0.11

 

  3,914,470

0.12

 

            0.12
Total  9,672,373   9,679,827  

Principal Shareholders

Common Shares

Percentage of Outstanding Common Shares

Preferred Shares

Percentage of Outstanding Preferred Shares

Percentage of Total Share Capital

Adriana Marques Lourenço de Almeida 33,903(1)33,903(1)(1)
Alberto Monteiro de Queiroz Netto 28,725(1)28,725(1)(1)
Alessandro Tomao 117,040(1)117,040(1)(1)
Alexandre Guimarães Soares 32,899(1)32,899(1)(1)
Amancio Acurcio Gouveia 178,936(1)178,936(1)(1)
Ana Paula Vitali Janes Vescovi 13,485(1)13,485(1)(1)
Andre de Carvalho Novaes 45,885(1)45,885(1)(1)
André Juaçaba de Almeida 16,974(1)16,974(1)(1)
Andre Rosenblit50,016(1)50,016(1)(1)
Angel Santodomingo Martell 186,152(1)186,152(1)(1)
Antonio Pardo de Santayana Montes 103,205(1)103,205(1)(1)
Carlos Aguiar Neto 22,249(1)22,249(1)(1)
Cassio Schmitt 130,810(1)130,810(1)(1)
Celso Mateus de Queiroz 12,030(1)12,030(1)(1)
Claudenice Lopes Duarte 9,286(1)9,286(1)(1)
Daniel Fantoni Assa 87.854(1)87.854(1)(1)
Ede Ilson Viani 106,138(1)106,138(1)(1)
Elita Vechin Pastorelo Ariaz 29,415(1)29,415(1)(1)
Francisco Soares da Silva 48,657(1)48,657(1)(1)
Franco Luigi Fasoli 26,437(1)26,437(1)(1)
Geraldo Jose Rodrigues Alckmin Neto 35,145(1)35,145(1)(1)
Germanuela de Almeida de Abreu 10,707(1)10,707(1)(1)
Gilberto Duarte de Abreu Filho 45,048(1)45,048(1)(1)
Gustavo Alejo Viviani 177,714(1)177,714(1)(1)
Gustavo de Souza Fosse 28,161(1)28,161(1)(1)
Igor Mario Puga 9,800(1)9,800(1)(1)
Jean Paulo Kambourakis 38,298(1)38,298(1)(1)
Jean Pierre Dupui 213,704(1)213,704(1)(1)
Joao Marcos Pequeno de Biase 70,121(1)70,121(1)(1)
José Antonio Álvarez Álvarez 1(1)—(1)(1)
Jose de Paiva Ferreira 473,067(1)473,066(1)(1)
José Roberto Machado Filho32,707(1)32,707(1)(1)
Leando Alves 9,782(1)9,782(1)(1)
Luciana de Aguiar Barros 36,121(1)36,122(1)(1)
Louise Barsi —(1)90,000(1)(1)
Luis Guilherme Mattoso de Oliem Bittencourt 37,898(1)37,898(1)(1)
Luiz Masagao Ribeiro Filho 208,343(1)208,343(1)(1)
Manoel Marcos Madureira 158,208(1)158,208(1)(1)
Marcelo Augusto Dutra Labuto 58,779(1)58,779(1)(1)
Maria Tereza Mauricio da Rocha Pereira Leite 26,215(1)26,215(1)(1)
Marilize Ferrazza Santinoni 33,197(1)33,197(1)(1)
Marino Alexandre Calheiros Aguiar (*) 27,082(1)27,082(1)(1)
Mario Roberto Opice Leao 196,072(1)196,072(1)(1)
Paulo César Ferreira de Lima Alves 15,415(1)15,415(1)(1)
Paulo Sérgio Duailibi 29,960(1)29,960(1)(1)
Patricia Souto Audi 7,327(1)7,327(1)(1)
Ramon Sanches Santiago 15,098(1)15,098(1)(1)
Ramon Sanchez Díez 60,325(1)60,325(1)(1)
Reginaldo Antonio Ribeiro 72,051(1)72,051(1)(1)
Ricardo Olivare de Magalhaes 32,855(1)32,855(1)(1)
Roberto Alexandre Borges Fischetti 187,726(1)187,726(1)(1)
Robson de Souza Rezende 50,718(1)50,718(1)(1)
Rogério Magno Panca 7,601(1)7,601(1)(1)
Sandro Kohler Marcondes 17,205(1)17,205(1)(1)
Sandro Rogerio da Silva Gamba 40,044(1)40,044(1)(1)
Sandro Mazerino Sobral 34,234(1)34,234(1)(1)
Sérgio Agapito Lires Rial 284,564(1)284,564(1)(1)
Thomas Gregor Ilg 60,611(1)60,611(1)(1)
Thomaz Antino Licarião Rocha63,359(1)63,359(1)(1)
Tiago Celso Abate33,162(1)33,162(1)(1)
Valmir Pedro Rossi 2,000(1)2,000(1)(1)
Vanessa de Souza Lobato Barbosa 98,771(1)98,771(1)(1)
Vitor Ohtsuki 31,801(1)31,801(1)(1)
Total 4,351,328 4,441,327  
 

(1)Owns less than 0.01%.
(*)Mr. Marino Alexandre Calheiros Aguiar resigned as an officer on February 25, 2022.

 

(2)No longer an officer. 205
Table of Contents

 

Shares held by members of our boardBoard of directors,Directors, our officers and members of our fiscal councilFiscal Council do not have special voting rights in relation to shares held by our other shareholders.

For a description of our equity compensation plans, see “Item 6. Directors, Senior Management and Employees ––“––B. Compensation.”

181 

Table of Contents

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7A.7A. Major Shareholders

As of March 6, 2020,February 22, 2022, Santander Spain directly and indirectly through its subsidiaries, Grupo Empresarial Santander, S.L. and Sterrebeeck B.V., owned approximately 89.5%89.53% of our total capital stock (not including the shares held by Banco Madesant - Sociedade Unipessoal).

stock.

The following table presents the beneficial ownership of our common and preferred shares as of February 28, 2020.22, 2022.

Principal Shareholders Common Shares Percentage of Outstanding Common Shares Preferred Shares Percentage of Outstanding Preferred Shares Total Shares (thousands) Percentage of Total Share Capital
  (in thousands, except percentages)
Sterrebeeck BV(1)  1,809,583   47.39%  1,733,643   47.11%  3,543,226   47.25%
Grupo Empresarial Santander SL  1,107,672   29.01%  1,019,645 �� 27.71%  2,127,317   28.37%
Banco Santander, S.A.  521,964   13.67%  519,268   14.11%  1,041,232   13.89%
Treasury Shares(2)  16,820   0.44%  16,701   0.45%  33,521   0.45%
Employees(3)  9,672   0.25%  9,679   0.26%  19,351   0.26%
Other minority shareholders  352,981   9.24%  380,897   10.35%  733,878   9.79%
Total  3,818,692   100%  3,679,833   100%  7,498,525   100%

Principal Shareholders Common Shares Percentage of Outstanding Common Shares Preferred Shares Percentage of Outstanding Preferred Shares Total Share (thousands) Percentage of Total Share Capital
             
Sterrebeeck BV (1)   1,809,583,330   47.39%  1,733,643,596   47.11%  3,543,226,926   47.25%
Grupo Empresarial Santander SL (1)   1,627,891,019   42.63%  1,539,863,493   41.85%  3,167,754,512   42.25%
Banco Santander, S.A.   2,696,163   0.07%  -     -    2,696,163   0.04%
Treasury Shares   15,704,544   0.41%  15,704,544   0.43%  31,409,088   0.42%
Administrators/Executives (2)   4,887,646   0.13%  4,977,644   0.14%  9,865,290   0.13%
Other minority shareholders   357,932,329   9.37%  385,646,743   10.48%  743,579,072   9.92%
Total   3,818,695,031   100.00%  3,679,836,020   100.00%  7,498,531,051   100.00%
 

(1)An affiliate within the Santander Group.

(2)On September 18, 2017, our shareholders approved the cancellation of 64,551,366 shares held in treasury (32,275,683 common shares and 32,275,683 preferred shares).

(3)Includes members of senior management. See “6E.“Item 6. Directors, Senior Management and Employees—E. Share Ownership.”

 

For further information of our ownership structure, see Item“Item 18. Financial StatementsStatements” of this formannual report on Form 20-F, in notes 2827 - Shareholders’ equity (letter a) and 4645 - Related party transactions (letter c).

Regarding theThe total number of ADRs held by U.S. investors as of December 31, 2019, is 161,153,083.February 22, 2022 was 149,747,122. The total number of Units held by U.S. investors as of December 31, 2019,February 22, 2022, is 58,273,91751,185,526 (excluding Units held by The Bank of New York Mellon as depositary).

Significant Changes in Percentage Ownership of Principal Shareholders

On April 11, 2017, Qatar Holding LLC, or the “Selling Shareholder,” participated in a secondary offering of 80,000,000 units, each of which is composed of one common share, no par value, and one preferred share, no par value, of Santander Brasil. Furthermore, the Selling Shareholder granted the international underwriters the option to purchase up to 12,000,000 additional ADSs of Santander Brasil within 30 days from, but not including, April 5, 2017, solely to cover over-allotments of ADSs, if any. The international underwriters exercised the option for 5,065,000 ADSs, and the settlement took place on May 9, 2017.

On September 18, 2017, our shareholders approved the cancellation of 64,551,366 shares held in treasury, representing 32,275,683 common shares and 32,275,683 preferred shares. Such treasury shares corresponded, as of that date, to the totality of the shares then held in treasury.

On December 31, 2018, we held 26,633,004 shares in treasury, of which 13,316,502 were common shares and 13,316,502 were preferred shares.

On December 31, 2019, we held 34,466,574 shares in treasury, of which 17,233,287 were common shares and 17,233,287 were preferred shares.

On December 22, 2020, (i) Santander Spain transferred to 519,268,168,572 ADRs issued by Santander Brasil to Grupo Empresarial Santander S.L. and (ii) Banco Madesant Sociedade Unipessoal S.A. transferred 950,000 ADRs issued by Santander Brasil to Grupo Empresarial Santander S.L. As these transfers were both within the Santander Group there was no change in our ultimate indirect control.

182 

Table of Contents

On February 20,December 31, 2020, we held 35,356,57437,657,924 shares in treasury, of which 17,678,28718,828,962 were common shares and 17,678,28718,828,962 were preferred shares.

 206
Table of Contents

On December 31, 2021, we held 31,510,410 shares in treasury, of which 15,755,205 were common shares and 15,755,205 were preferred shares.

On February 22, 2022, we held 31,409,088 shares in treasury, of which 15,704,544 were common shares and 15,704,544 were preferred shares.

Voting Rights of Principal Shareholders

Our principal shareholders do not have voting rights distinct from those of our other shareholders.shareholders, See “Item 10. Additional Information—B. By-Laws—Rights of Common Shares and Preferred Shares.

7B.7B. Related Party Transactions

We have a related party transactions policy, with respect to related party transactions, which requires that any related transactions be approved by the board of directors. This is intended to ensure that all transactions covered by the policy are conducted in our interest and that any related party transactions are conducted on an arm’s length basis on terms substantially similar to those of comparable transactions in the market. The policy defines the power to approve certain transactions as resting with the board of directors. The policy defines related transactions as those occurring between us and our shareholders, our subsidiaries, our employees, directors and officers, as well as our subsidiaries’ employees, directors and officers. The policy defines the power to approve certain transactions as resting with the board of directors. Additionally, related party transactions are included in the regular auditing program developed by our internal audit.

We currently engage in, and expect from time to time in the future to engage in, financial and commercial transactions with our subsidiaries and affiliates and those of the Santander Group. We have credit lines outstanding with certain of our affiliates within the Santander Group and its affiliated financial institutions around the world.Group. As of December 31, 2019,2021, borrowings and deposits from the Santander Group represented approximately 1%6.3% of our total funding. In addition, from time to time, we enter into certain transactions with the Santander Group and other related parties for the provision of advisory and advertising services. Such transactions are conducted on an arm’s-length basis, based on terms that would have been applied for transactions with third parties.

The transactions and remuneration of services with related parties are made in the ordinary course of business on an arms’ length basis under similar conditions, including interest rates, terms and guarantees, and involve no greater risk than transactions with unrelated parties carried out in the ordinary course and have no other disadvantages. The following discussion describes all of our material related party transactions.

Information Technology Platform

We have entered into agreements with some affiliates of the Santander Group (Santander Global Technology, S.L., Santander Brasil Tecnologia S.A (Brazil) andS.A. Santander Global Technology Brasil Ltda. and Santander Tecnologia e Inovação Ltda) for the outsourcing of certain products and services relating to our information technology platform, including software development and maintenance, infrastructure and cybersecurity.

We believe the provisions of these services are provided on an arm’s-length basis with terms substantially similar to those available from other providers in the market. In 20192020 and 2018,2021, Santander Group affiliates received approximately R$859 million1.0 billion and R$586 million,1.3 billion, respectively, for the products and outsourcing provided above. See “Item 4. Information on the Company—B. Business Overview—Technology and Commercial Transformation—Technological Infrastructure.”

Procurement Services

We have entered into agreements with Aquanima Brasil Ltda., an affiliate of the Santander Group, which provides procurement services with Santander Brasil and its affiliates. We contracthire solutions in Tradetrade negotiations, Tacticaltactical and Strategic Purchasing, Online Procurement, Supplier Management, Outsourcingstrategic purchasing, online procurement, supplier management, outsourcing, consulting, and Consulting.vendor risk assessment. Among the strategies used, we highlight possible joint purchases of

183 

Table of Contents

materials and services between different customers and other economic groups, which allow greater efficiency in price negotiations and rationalization of services. Weservices, as well as the engagement of management real state in 2021, we paid Aquanima Brasil Ltda., approximately R$2947 million in 20192021 and R$2740 million in 2018.2020 for the services rendered in those years.

Spin-Off of Getnet and Related Arrangements

On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which was undertaken by our then-subsidiary, Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. Prior to the conclusion of the Spin-Off, Santander Brasil owned 100% of Getnet’s total capital stock. The Spin-Off was completed on October 26, 2021. As a result of the Spin-Off: (i) Santander Spain, our controlling shareholder, became Getnet’s controlling shareholder directly and indirectly through certain of its subsidiaries, (ii) Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and (iii) we stopped consolidating Getnet within our results of operations on March 31, 2021. For more information about the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off.”

 207
Table of Contents

Partnership Agreement

On April 15, 2021, we entered into the Getnet Partnership Agreement with Getnet, which provides a framework for our relationship with Getnet following the Spin-Off. The Partnership Agreement described below is filed as an exhibit to this annual report. This summary below is qualified in its entirety by reference to the full text of the Partnership Agreement. 

Prepayment of Receivables

Pursuant to the Partnership Agreement, we provide prepayment of receivables to merchants accredited by Getnet, except where Getnet opts to provide these services itself or where the merchant opts to obtain such services from another financial institution. For these purposes, we are required to accept those receivables which are duly registered in systems authorized by the Brazilian Central Bank. The prepayment of receivables is formalized through specific agreements to be entered into between the parties from time to time.

If we prepay the merchant’s receivables, the ownership of the receivables is transferred to Santander Brasil and Getnet is required to pay the amounts due thereunder to us upon receipt.

Income or loss arising from prepayment of receivables is attributed to Getnet’s business and recorded within Getnet’s results of operations. Under the Partnership Agreement, we calculate the results of the prepayments receivables transactions as the total revenue generated by these transactions, less the expenses incurred by us to provide prepayment of receivables to merchants, which include (i) acquiring expenses, which consist of the costs incurred by us in transferring funds to other banks as a result of the prepayment of receivables and the provision of payment services by Getnet, and (ii) prepayment expenses, which consist of (a) the costs incurred by us to fund prepayment of receivables transactions, (b) the expenses incurred by us with technology systems to support the prepayment of receivables to Getnet merchants; (c) taxes incurred in connection with the prepayment of receivables to Getnet merchants; (d) costs incurred by us to transfer funds to other banks in connection with the prepayment of receivables to Getnet merchants; and (e) our operating losses in the provision of prepayment of receivables services to Getnet merchants. Santander Brasil receives a monthly fee for participating in these arrangements.

If the prepayment of receivables results in a profit, we are required to pay Getnet the amount of profit made. If the prepayment of receivables results in a loss, Getnet is required to pay us an amount equivalent to the amount of the loss.

Santander Brasil Distribution Channel

We may, pursuant to the Partnership Agreement, market certain of Getnet products and services to our customer base. Any such distribution by Santander Brasil is based on marketing materials, guidelines and instructions provided by Getnet for this purpose. Getnet has also agreed, pursuant to the Partnership Agreement, to make such materials, guidelines and instructions available to us. Additionally, we have agreed to give Getnet access to its facilities so that we may distribute equipment to customers, as provided by the Services Agreement executed on January 24, 2019 between Getnet, Itrade Marketing Smollan Brasil Ltda. (third party provider) and Santander Brasil. Getnet pays certain amounts provided for in the Partnership Agreement to Santander as consideration for these distribution services.

Santander Brasil Integrated Account

Pursuant to the Partnership Agreement, Getnet has agreed to offer preferential terms and conditions to customers who hold current accounts with Santander Brasil as part of the “Santander Brasil Integrated Account” offer (Santander Conta Integrada), including discounts on equipment rental fees, discounts in the fees charged for prepayment of receivables, and discounts on monthly service fees. In view of the special abovementioned conditions granted to Santander Brasil’s clients, Santander Brasil has agreed to reimburse Getnet for the full amount of the discounts granted to such clients.

 208
Table of Contents

Funding

Pursuant to the Partnership Agreement, Santander Brasil intends to provide funding for Getnet and/or its subsidiaries to extend credit to their customers. Any funding is subject to a separate funding agreement to be entered into by the parties at the time of the relevant transaction.

In addition, in order to facilitate the concession of credit by Getnet SCD, we and Getnet have agreed to either, at our discretion (i) enter into a transaction consisting of a securitization of certain Getnet SCD receivables, in which Santander Brasil will act as the investor and provide the necessary funding for Getnet SCD to operate, or (ii) constitute an investment fund focused on receivables (Fundo de Investimento em Direitos Creditórios), or “FIDC,” in which Santander Brasil will invest by subscribing for the equity interests which constitute the FIDC, which will acquire Getnet SCD receivables.

Credit Origination and Customer Referrals to Santander Brasil

The Partnership Agreement provides that Getnet will originate credit transactions as well as commercial leads for other products and services from its customer base to be referred to Santander Brasil, who will provide Getnet with the related marketing material and instructions. We will pay Getnet consideration for these referrals.

Getnet Discount

The Partnership Agreement provides that we will reimburse Getnet the amount of discounts that we provide to attract and/or retain customers which are deemed to be of strategic importance to Getnet and Santander Brasil. The total amount reimbursed is subject to cap of 0.2% of the total amount of transactions involved.

Use of Brands

We and Getnet may use each other’s brands in connection with the transactions covered by the Partnership Agreement subject to the terms and conditions of the Partnership Agreement.

Indemnification

We and Getnet have agreed to indemnify each other and each of the other’s directors, officers, managers, members, representatives, agents, and employees against certain liabilities incurred due to an act of the other party, or the other party’s employees or contractors under the scope of the Partnership Agreement.

Term/Termination

The Partnership Agreement is effective as from January 1, 2021 for an indefinite term. Both parties have the right to terminate the Partnership Agreement at will, upon one-year prior written notice to the other party. In case of fault by the other party, as described by the Partnership Agreement, such as due to insolvency, bankruptcy, loss of material license, among others, the non-defaulting party is free to terminate the Partnership Agreement by means of a simple notification sent to the other party.

Governing Law

The Partnership Agreement is governed by the laws of Brazil.

Other Related Party Transactions

On February 28, 2020, we sold our entire equity interest in Superdigital to Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain. For further information regarding this sale, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”

For further information, see note “46 - Related party transactions (letter d)” in “Item 18. Financial Statements,” which contains45 to our audited consolidated financial statements preparedincluded elsewhere in accordance with IFRS as issued by the IASB.this annual report.

7C.7C. Interests of Experts and Counsel

Not applicable.

 209
Table of Contents

ITEM 8. FINANCIAL INFORMATION

8A.8A. Consolidated Statements and Other Financial Information

See “Item 18. Financial Statements,” which contains our audited consolidated financial statements prepared in accordance with IFRS as issued by the IASB.

Legal Proceedings

We are a party to lawsuits and administrative proceedings incidental to the normal course of our business. The main categories of lawsuits and administrative proceedings to which we are subject include:

·●administrative and judicial actions relating to taxes;

·●administrative and indemnification suits for damages related to consumer rights, especially in particular with respectrelation to credit cards, checking accounts and loan disputes;

·●lawsuits involving disputes related to contracts and instruments to which we are a party, including claims related to breach of contracts;

·●civil lawsuits mainly from depositors and civil associations, including individual lawsuits and class actions, challenging monetary adjustments determined by government economic plans instituted to combat inflation during the 1980s and 1990s;

·●lawsuits relating to the privatization of Banespa;

·●class actions involving agreements and settlement of debts with the public sector; and

·●suits brought by employees, former employees, associations and unions relating to alleged labor rights violations.

In accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, we record provisions for judicial proceedings in which we assess the risk of loss to be probable and we do not record provisions when the risk of loss is possible or remote. In cases where there is ongoing litigation, we record a provision for our estimate of the probable loss based on historical data for similar claims. In addition, we record provisions (i) on a case-by-case basis based on the analysis and legal opinion of internal and external counsel or (ii) by considering the historical average amount of loss of such category of lawsuits.lawsuits, Due to the established provisions and the legal opinions provided by our counsel, we believe that any liabilities related to lawsuits or proceedings to which we are a party, both individually and in the aggregate, will not have a material adverse effect on our financial condition or results of operations.

184 

Table of Contents

As of December 31, 2019,2021, our judicial and administrative proceedings classified as probable loss risk (tax, labor and civil) and legal obligation amounted to approximately R$9.2 billion11,179 million and have been provisioned.provisioned, We believe that we have made adequate provisions related to the costs anticipated to be incurred in connection with our judicial and administrative proceedings.proceedings, Our judicial and administrative proceedings classified as possible loss risk (tax, labor and civil) amounted to approximately R$27.6 billion.32,145 million.

Tax Litigation

We are a party to several tax-related lawsuits and judicial and administrative proceedings.

proceedings,

The main lawsuits related to tax legal obligations fully recognized tax liabilities are as obligations are:

follows:

·●PIS/COFINSCOFINS:. We filed lawsuits seeking to invalidate the provisions of Law 9,718/98, pursuant to which PIS and COFINS taxes must be levied on all revenues of legal entities. Prior to the enactment of such provisions, which have been overruled by recent Supremedecisions of the Federal Court decisionsof Justice (Supremo Tribunal Federal) , or “STF,” for non-financial institutions, PIS and COFINS were levied only on revenues from services and sale of goods. On April 23, 2015, the Supreme CourtSTF issued a decision, applicable solely to Santander Brasil, accepting jurisdiction over the appeal regarding PIS and rejecting jurisdiction over the appeal related to COFINS. The tax authorities appealed the decision of the Supreme CourtSTF related to COFINS and their appeal was denied on August 19, 2015. In respect of COFINS, the case is finished with a favorable decision applicable to Santander Brasil. The appeal related to PIS, as well as the appeals submitted by other companies in the group, are pending. As of December 31, 2019,2021, such claims amounted to R$3,7564,075 million and are fully provisioned.provisioned

 210
Table of Contents

As of December 31, 2019,2021, our tax proceedings with a probable loss risk for tax litigationof loss amounted to approximately R$6,2776,249 million, which was fully provisioned, and our tax proceedings with a possible loss risk for tax litigationof loss amounted to approximately R$24,708 million.

29,498 million.

The main judicial and administrative proceedings to whichclassified with a probable loss risk assessment relates are:

are as follows:

·●Tax on services for financial institutionsinstitutions:. Certain municipalities levy Service Tax(Imposto Sobre Serviços – ISS) on certain revenues derived from transactions not usually classified as the rendering of services. In such cases, weWe have argued in administrative and judicial proceedingsfiled suit against the payment of ISS.such taxes. As of December 31, 2019, amounts related to2021, the total amount involved in these proceedings totaled R$225284 million, which arewas fully provisioned.

·●Social security contribution.: We are involved in administrative and judicial proceedings regardingrelating to the collection of income tax on social security and education allowance contributions, as we believe that these benefits do not constitute salary.taxable wages. As of December 31, 2019,2021, amounts related to these proceedings totaled R$28254 million, which are were fully provisioned.

·●Taxes on banking transactionstransactions:. In May 2003, the Brazilian Federal Revenue Service issued a tax assessment against Santander Distribuidora de Títulos e Valores Mobiliários Ltda. (Santander DTVM), or “Santander DTVM” and another tax assessment against Santander Brasil. The tax assessments refer to the collection of CPMF (Contribuição Provisória sobre Movimentação Financeira) tax on transactions conducted by Santander DTVM in the cash management of its customers’ funds and clearance services provided by Santander Brasil to Santander DTVM in 2000, 2001 and 2002. Based on our tax advisors’ opinion, the procedures adopted by Santander DTVM were correct. Santander Brasil DTVM succeeded in the first instance in its proceeding before the tax appeals board, but this decision was overturned in the Superior Chamber of Tax Appeals, and we were found liableThe administrative discussion ended unfavorably for the tax assessment. Both decisions were appealed before the Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais), or the “CARF.” In June 2015, the CARF upheld the decision of the Superior Chamber of Tax Appeals.both companies. On July 3, 2015, Santander Brasil and Produban Serviços de InformáticaSantander Brasil Tecnologia S.A. (current(the current name of Santander DTVM) filed a lawsuit requesting the cancellation of both tax assessments. The lawsuit was rejected. We appealed this decision. On December 8, 2020, our appeals were rejected. We filed an appeal for clarification against this decision, which was rejected. As a result, new appeals to the superior courts (High Court of Justice (Superior Tribunal de Justiça), or “STJ,” and the STF) have been filed. The amount under discussion in these proceedings as of December 31, 2021 totaled R$1,709 million. Based on the assessment of legal counsel, a provision of R$946 million was made to cover the probable risk of loss in these proceedings.

185 

Table of Contents

lawsuit requesting the cancellation of both tax assessments. The lawsuit was judged unfavorably and a decision on an appeal is currently pending judgment in court. The amount as of December 31, 2019 totaled R$1,489 billion. Based on the assessment of legal counsel, a provision of R$743 million was made to cover the probable risk of loss in these proceedings.

Contingent liabilities classified as having a possible risk of loss refer to judicial and administrative proceedings involving tax matters assessedwhich were deemed by theour management, taking in accountbased on the advice of our legal counsels,counsel, as having a possible losses, whichrisk of loss, and were not recognized as liabilities. The such main lawsuits include:

·●Losses on loans.: We have challenged the tax assessments issued by the Brazilian Federal Revenue Service claiming that our deduction of losses on loans from our corporate income tax (Imposto de Renda das Pessoas Jurídicas – IRPJ) and CSLL (Contribuição Social sobre o Lucro Líquido) bases havedid not metmeet the relevant requirements under applicable law. As of December 31, 20192021, the amount related to this challenge was approximately R$1,5171,176 million.

·●Social Security Contribution – Profit Sharing Payments (Participação nos Lucros e Resultados, or “PLR”). We are involved in administrative and judicial proceedings arising from tax assessment with respect to the collection of social security contributions on profit sharing payments. The tax authorities claim that payments by us were not made in accordance with the law. We have appealed against these infraction notices, sinceassessments, as we consider theour tax treatment to be appropriate based on the applicable law and the nature of the payments. As of December 31, 20192021, amounts related to these infraction noticesproceedings totaled approximately R$6,5877,341 million.

·●IRPJ and CSLL – Capital Gain.: The Brazilian Federal Revenue Service issued a tax assessment against Santander Seguros S.A. (legal(the legal successor of ABN AMRO Brasil Dois Participações S.A. (AAB, or “AAB Dois Par)Par”) charging income tax and social contribution related to the 2005 fiscal year. The Brazilian Federal Revenue Service claims that the capital gain on the sale of Real Seguros S.A. and Real Vida e Previdência S.A. by AAB Dois Par should be paid at a 34.0% tax rate instead of 15.0%. The assessment was appealed at the administrative level based on our understanding that the tax treatment adopted in the transaction was in compliance with the currentapplicable tax lawlaws and the capital gain was properly taxed. The administrative discussion ended unfavorably. We are awaitingfiled a decision bylawsuit requesting the CARF.cancellation of tax assessments<B>.</B> We are responsible for any adverse outcome in this processproceedings as athe former controlling shareholder of Zurich Santander Brasil Seguros e PrevidêPrevid&ecirc;ncia S.A. As of December 31, 20192021, the amount related to this proceeding was approximately R$400496 million.

 211
Table of Contents
·●Goodwill amortization of the acquisition of Banco RealReal:. In October 2014, the Brazilian Federal Revenue Service issued a tax assessment against Santander Brasil in the amount of R$1,063 billion,million, claiming income tax and social contribution relating to the 2009 tax year. The argument of the Brazilian Federal Revenue Service is that the amortization of goodwill arising beforefrom our merger with Banco Real cannot be deducted. We are awaiting a decision by the CARF. As of December 31, 20192021, the amounts related to this proceeding totaled approximately R$1,4161,466 million. This case is classified as having a possible risk of loss concerning the amortization of goodwill and asa remote risk of loss in relation to the fine charged in the case.

·●Goodwill amortization of the acquisition of Banco SudamerisSudameris:. In November 2014, we received a tax assessment of R$196 million related to the deduction of goodwill amortization relatingin relation to the acquisition of Banco Sudameris. In December 2012, we received a similar tax assessment in the amount of R$239 million relating to the fiscal years encompassing August 2007 to April 2009. We have appealed in both cases to the CARF. We consider our risk of loss in this case as possible. As of December 31, 20192021, the amount related to this proceeding was approximately R$634659 million.

186 

Table of Contents

·●Unrecognized Compensation.Compensation: We are currently engaged in legal and administrative proceedings with the Brazilian federal revenue serviceFederal Revenue Service relating to the failure to ratify certain tax offsets with credits we were owed by the Brazilian government due to overpayment or undue payment. As of December 31, 20192021, the amount related to these proceedings was approximately R$4,1825,351 million. The risk of loss is classified as possible.

·●Tax on Services (ISS) - Financial Institutions -: We are currently party to proceedings relating to the payment of ISS to various municipalities with respect to various revenues arising from operations that are usually not classified as services. On December 31, 20192021, the amounts related to these proceedings totaled approximately R$3,032 million.4,146 million.

Joined Certain Tax Repayment Programs

·●In August 2017 we joined the PERT. The program allows for certain tax debtsUse of CSLL Tax and Negative Tax Loss: We are currently party to be repaid in installments. In connection with our participation in this program, we are repaying in installments certain amounts due as a result of lawsuits and administrative proceedings relating to corporate income tax and social security contributions for the periods from 1999 to 2005 in a total amount of R$492 million in January 2018 (taking into account the reduction arising from our participation in the program). A payment of R$191.9 million was due in August 2017 and a further payment of R$299.7 million was due by January 2018, both of which we have made within the prescribed time limits. As a result, we recorded expenses in an amount of R$364 million (after tax) in the third quarter of 2017.

·In October 2017 we joined the Incentive Payment Programs and Installments (Programas de Parcelamento Incentivado) createdassessments issued by the citiesBrazilian Federal Revenue Service in 2009. These proceedings relate to the alleged undue compensation of Rio de Janeirotax loss carryforwards and São Paulo. The programs allow for certainnegative basis of CSLL, because of tax debts to be repaidassessments drawn up in installments. In connection with our participation in these programs, we are repaying in installments certain amounts due as a result of lawsuits andprevious periods. A judgment is pending at the administrative proceedings relating to ISS for the periods from 2005 to 2016 in a total amount of R$293 million aslevel. As of December 31, 2017. As we had made provisions for2021, the amount related to these losses, we registered income ofassessments was R$435 million as a result of the reversal of certain provisions, net of tax effects, in an amount of R$961,093 million.

Labor Litigation

Similar to many other Brazilian banks, we are party to lawsuits brought by labor unions, associations and individual employees seeking, in general, compensation for overtime work, lost wages and retiree complaints about pension benefits and other labor rights. We believe we have either paid for or adequately provisioned for all such potential liabilities. In addition, we are the defendants in labor lawsuits filed by third-party employees that rendered or render services to us through service providers. The Brazilian courts understandSuperior Labor Court has issued a binding judicial precedent determining that if a third-party service provider fails to pay its employee, the employee has the right to demand payment directly from the company to which it rendered its services.their services (secondary liability). If this happens, the service taker’s liability will be limited to the services that were rendered by each individual. As of December 31, 2019,2021, our labor proceedings with a probable loss risk of labor-related litigationloss amounted to R$3.3 billion,2,025 million, which amount has been provisioned. Our labor proceedings with a possible loss risk of labor-related litigationloss amounted to R$220.2267.3 million.

Former employeesEmployees of Banco do Estado de São Paulo S.A.:S. A. Litigation

·A claim was filed in 1998 by the association of retired Banespa employees (AFABESP)A claim was filed in 1998 by the association of retired Banespa employees, or “AFABESP,” requesting the payment of a half-yearly bonus contemplated in the bylaws of Banespa in the event that Banespa obtained a profit and that the distribution of this profit were approved by the Board of Directors. The bonus was not paid in 1994 and 1995 since Banespa had not made a profit during those years. Partial payments were made from 1996 to 2000, as approved by the board of directors. The relevant clause in the by-laws was eliminated in 2001. The bonus was not paid in 1994 and 1995 since Banespa had not made a profit during those years. Partial payments were made from 1996 to 2000, as approved by the board of directors. The relevant clause in the bylaws was repealed in 2001. A Brazilian Regional Labor Court and the Brazilian Superior Labor Court and the High Employment Court ordered Santander Brasil, as successor to Banespa, to pay this half-yearly bonus for the period from 1996 to the present. On March 20, 2019, a decision from the Federal Court of Justice (Supremo Tribunal Federal or “STF”) rejected the extraordinary appeal filed by Santander Brasil. We have brought a rescission action to revert the decision in the main proceedings and suspend procedural enforcement. While there is an injunction in force authorizing

187 

Table of Contents

certain steps of the execution any actsSTF rejected the extraordinary appeal filed by Santander Brasil. We have brought a rescission action to revert the decision in the main proceedings and suspend procedural enforcement. The rescission action was dismissed in 2020 and, as of seizurethe date of assets or freezing of funds are prohibited untilthis annual report, the judgment present is delivered in ongoing rescission action.deadline to file an extraordinary appeal to the STF has not yet lapsed. Our legal advisors have classified the risk of loss as probable. The current court decision does not define a specific amount to be paid by the defendants (this would only be determined once a final decision is issued and the enforcement process has begun)begun, which is not the case yet).

IGPDI

 212
·A claim was filed in 2002 in Federal Court by AFABESP on behalfTable of its members requesting that certain pension supplements to which persons admitted to the relevant retirement plan prior to May 22, 1975 be adjusted pursuant to the IGP-DI index (Índice Geral de Preços - Disponibilidade Interna). The first instance judgment was favorable to the plaintiffs, requiring that the correction be made but only in the periods in which no other form of adjustment was applied. We and Banesprev have appealed this decision. In Provisional Execution calculations were presented by Santander Brasil and Banesprev with "zero" result due to the exclusion of participants who, among other reasons, are listed as authors in other actions or have already had some type of adjustment. The contingent liabilities are classified as possible risk of loss. The amount related to this action is not disclosed due to the current stage of the process and the possible impact that such disclosure may generate on the progress of the claim.Contents

IGP-DI Litigation

A lawsuit was filed in 2002 in the Brazilian federal court by AFABESP on behalf of its members requesting that certain pension supplements to which persons admitted to the relevant retirement plan before May 22, 1975 were entitled be adjusted in accordance with the General Index of Brazilian Domestic Availability Prices (Índice Geral de Preços - Disponibilidade Interna), or the IGP-DI, inflation index. The lower court ruling was favorable to the plaintiffs and ordered that the readjustment be made, but only for periods of time when no other form of readjustment was applied. Santander Brasil and Banesprev appealed this decision, but both appeals were denied. After the judgment of the appeals, we filed motions for clarification, which are pending judgment. At the same time, AFABESP filed for provisional compliance with the judgment in the lower court and, in response, we filed a motion to have certain members of AFABESP excluded from the list of beneficiaries of this decision, as these members were already plaintiffs in other legal proceedings related to these issues. The court has not definitively ruled on our claim, such that there is still no definitive list of beneficiaries of its decision. Based on the assessment of our legal advisors, the risk of loss is possible, which is why no provision has been recorded.

Abusive Targets Class Action -

In 2017,

The labor Federal Public the Brazilian Labor Prosecutor’s Office (Ministério Público Federal do Trabalho), or the “MPT,” filed a class action against Santander Brasil alleging that our management of our employeesthe method used to define and assess employees’ corporate targets is in appropriate.abusive and inappropriate. Specifically, the class action alleges that we apply constant pressure to meet those targets, which would allegedly be abusive, apply excessive and continuously increased goals, make excessive and inappropriate demands, impose an excessive workloadsworkload resulting in physical and psychological strain, make constant threats of dismissal for failure to meet targets, have a staff too small to deal with the existing workload, run an organizational model based on stress and humiliation, andhumiliation. The complaint further alleges that, as a result, we have allegedly caused irreparable damage to our employees’ physical and mental health as a result of which the public social security system has suffered losses of more than R$90 million due to the 7,677 accident-related and social security benefits granted to employees from 2010 to 2015.

The Federal Public Prosecutor’s Office’s claimMPT’s complaint demands that we refrain from imposing certain corporate targets, refrain from subjecting employees to abusive targets, to reduce the target levels, refrain from increasing targets by more than 10% per year, institute a quarterly targeting system, and refrain from adopting targets for operational areas. There is also a claim for the payment of indemnity for collective moral damages in an amount of not belowless than R$460 million, and that we be prohibited from contracting with the government for 10 years. The Federal Public Prosecutor’s OfficeMPT is also demanding that a fine of R$500 thousand500,000 be set for any breach by us of the obligations imposed on us following the judgment.

The lower court ruling prohibited submitting employees to abusive targets. It also determined that the targets should only be reviewed only annually and that their annual variation should be subjectsubjected to collective bargaining between Santander Brasil and the unions. The ruling also prohibited us from setting targets for employees in the back office and control departments, and required payment of indemnity for collective moral damages in the amount of R$274.4 million, in addition to the imposition of certain daily fines. Finally, the ruling determined that we are required to implement a new experimental target program under the terms provided for in the decision fromdated January 1, 2020. We appealed this decision and obtained a temporary stay. We estimate the risk of loss as remote.

Civil Litigation

We are a party to civil lawsuits claiming damages and other civil remedies. These disputes normally fall within one of the following categories: (i) actions requesting the review of contractual terms and conditions or seeking monetary adjustments, including the alleged effects of implementation of certain

188 

Table of Contents

economic government plans (as described below); (ii) actions arising from loan agreements; (iii) execution actions; and (iv) actions seeking damages. As of December 31, 2019,2021, our probable loss risk in connection with civil litigation liabilitiesproceedings amounted to R$2.5 billion,2,905 million, which has been fully provisioned, in full and our possible loss risk in connection with civil litigation liabilitiesproceedings amounted to R$1,5 billion.2,380 million. For civil lawsuits considered to be common and similar in nature, the provisions are recorded based on statistically averaged previous payments and on the legal counsel’s evaluation of success. Provisions for other lawsuits are determined individually on a case-by-case basis.

 213
Table of Contents

Economic Plans

Like the rest of the banking system, we have been the subject of claims from customers and depositors and of class actions brought for a common reason, arising from a series of legislative changes relating to the calculation of inflation in the 1980s and 1990s (“planos econômicos”). The claimants considered that their vested rights had been impaired due to the immediate application of these adjustments. The claims relate to the adjustments to the calculation of inflation applied on the amounts held in (i) savings deposit accounts (depósitos em conta poupança); (ii) time deposits (CDBs); and (iii) court deposits (depósito judicial).

In April 2010, the High CourtSTJ set the statute of Justice, or “STJ,” set a limitation period for these class actions at five years, as claimed by the banks, rather than twenty20 years, as sought by the claimants. There are no new claims in connection with this matter due to the statute of limitations. The decisions issued to date have been adverse for the banks, although some proceedings have been brought to the STJ and the STF, which are expected to be definitively settled. In August 2010, the STJ handed down a decision finding for the plaintiffs in terms of substance,as to the merits, but excluding one of the “planos”plans from the claim, thereby reducing the amount thereof,of the award and once again confirming the five-year statute of limitations period.limitations. Shortly thereafter, the STF issued an injunctive relief order whereby the proceedings in progress are stayed until the court issues a final decision. Although the STF initiated judgment in November 2013, a formal ruling has not been handed down as of the date hereof and we cannot predict when a formal ruling will be handed down by either the STJ or the STF.

In December 2017, the Brazilian Attorney-General’s Office (Advocacia-Geral da União), the Brazilian Central Bank, the Brazilian Consumer Protection Institute (Instituto Brasileiro de Defesa do Consumidor), the Brazilian Savers’ Association (Frente Brasileira pelos Poupadores) and the Brazilian Federation of Banks (Federação Brasileira dos Bancos) haveFEBRABAN signed an agreement to resolve existing disputes over the impact of the economic plans on the amounts held by claimants in savings deposit accounts. The settlement discussions did not address the full value of the payments and focused on setting the amount that would be paid to each person according to the relevant balance at the plan date. The total valueamount of the payments will depend on the number of persons adhering, as well as on the number of saverspersons who have proved in court the existence of the account and the balance on the date of the anniversary of the change in indices. The terms of agreement were negotiated between the parties and submitted to the STF, which approved the terms of the agreement on March 1, 2018 (for further details about the agreement, please see the specific section “Cartilhaon “Cartilha Planos Econômicos”micos” on the FEBRABAN’s website, of Brazilian Banks Federation, which is not incorporated herein by reference). All existing claims were suspended for two years, induring which period claimants must decide whether or not they will adhere to the agreement. On March 3, 2020, the agreement was extended by means of an amendment, with the inclusion of actions that involve only the discussion of the Collor I Plan. This extension has a term of five years. The approval of the terms of the amendment occurred on June 3, 2020.

In November 2018, the STF handed down a decision recognizing the leading courtcase status (repercussão geral) of an appeal discussing the matter of understated inflation in the monetary restatement of court deposits and determined that procedures related to this matter will be stayed until a final decision is reached by the court. Following ratification of the amendment to the settlement agreement in 2020, the STF determined an additional stay of the proceedings related to the matter for five years.

Insilene Indústria de Silenciosos do Nordeste Ltda.

Litigation

This is a judicial claim filed against our wholly-owned subsidiary Banco Bandepe S.A., or “Bandepe,” in connection with a loan agreement entered into between Bandepe and Insilene Indústria de Silenciosos do Nordeste Ltda., or “Insilene”.“Insilene.” According to the complaint, Bandepe never provided the loan foreseen in the agreement, as a result of which Insilene went into bankruptcy. In this judicial process,these proceedings, the judgefirst instance court ruled in favor of Insilene, and suchwhich decision may no longer be appealable. The

189 

Table of Contents

proceeding is in its liquidation phase, and there is disagreement between Bandepe and Insilene regarding the value to be paid. The Court of JusticeAn appellate court of the State of Pernambuco approved the amount indicated in the expert’s report and deniedrejected the calculation criteria sustained by Bandepe. Bandepe filed an appeal to the STJ to change the form of liquidation to a form more favorable to Bandepe, on the basis that Insilene could have foreseen the damages. This appeal was successful and the liquidation phase will be restarted. After such decision and considering the changes in the form of liquidation, the risk of effective financial loss was reclassified as remote.

Fundo de Investimento em Direitos Creditórios Trendbank Banco de Fomento – Multisetorial.

Multisetorial

A legal proceeding was filed against us in connection with the provision of custody services to Fundo de Investimento em Direitos Creditórios Trendbank Banco de Fomento – Multisetorial, or the “Fund,” related to the acquisition of fake or defective bonds. In a decision by the first instance court, the case was dismissed in relation to us on the grounds that the custodian could not be held responsible for the acquisition of bonds. The Court of JusticeOn appeal, the court reversed the decision of the lower court as a result of which the case will be retried following the expert phase. We estimate the risk of loss as possible.

 214
Table of Contents

Similar proceedings have been brought by the Federal General Accounting Office (Tribunal de Contas de União- TCU)o), or the “TCU,” and the CVM to determine the liability for losses caused to pension funds as a result of their investments in the Fund. InThe pension funds involved in the CVM proceeding pension funds are PETROS - Fundação Petrobras de Seguridade Social and Postalis – Instituto de Previdência Complementar andComplementar. Only damages to Postalis are under discussion in the TCU proceeding only the liability for losses caused to POSTALIS pension fund is under discussion.. In both proceedings, weproceeding. We have presented our defense.defenses to both proceedings.

IBAMA Litigation

Camargo Corrêa S.A. and Camargo Corrêa Administração e Participações Ltda.

We filed a judicial proceeding, along with certain affiliates of ours, against Camargo Corrêa S.A. and Camargo Corrêa Administração e Participações Ltda., or “Camargo Corrêa,” in connection with the association agreement entered into for the implementation of the control and administration of Banco Geral do Comércio S.A., or “BGC,” and its affiliates, or the “Association Agreement.” Under this proceeding, the plaintiffs seek compensation for damages arising from obligations originated from events which took place before the signature of the Association Agreement and which were only disclosed to the parties after the implementation of the agreement and we (along with our affiliates) assumed BGC’s management. In response, Camargo Corrêa filed a counterclaim arguing to be our creditor. The judge ruled partially against our affiliates and us. In an appeal decision, the Court of Justice of the State of São Paulo (TJSP) reversed the decision in full, following grounds and granting the compensation claimed by us and our affiliates. There is still a possibility of appealing from Camargo Correa. We estimate the risk of loss as possible.

IBAMA

On October 10, 2016, after an inspection conducted in rural properties located in the State of Mato Grosso, the Brazilian Environment Authority (Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveisveis)), or “IBAMA,” filed an infraction notice against us alleging that we had financed the production of corn in a protected area. The amount of the fine was set at R$47.5 million (approximately U.S.$158.5 million). According to IBAMA, financing seed production in protected areas is considered an environmental infraction due to the potential environmental damage whichthat it may cause. We filed an administrative defense on November 9, 2016, stating that we had not financed production in a protected area, given that the financing agreement with the property owner had no connection with the production of seeds. As a consequence of the filing of the administrative defense, the enforceability of the fine is suspended. Although we believe we have presented valid arguments, we believe that the chancerisk of loss in the administrative proceedings is possible. If we were to lose the administrative proceedings, we may seek a review of the administrative finding by a court.

190 

Table of Contents

Other Litigation

In addition to the matters described above, we are from time to time subject to certain claims and party to certain legal proceedings incidental to the normal course of our business, including in connection with our lending activities, relationships with our employees and other commercial or tax matters.matters, In view of the inherent difficulty of predicting the outcome of these legal matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories, or those that involve a large number of parties or are in the early stages of discovery, we cannot state with confidence what the eventual outcome of these pending matters will be, what the timing of the ultimate resolution of these matters will be or what the eventual loss, fines or penalties related to each pending matter may be. We believe that we have made adequate provisions related to the costs anticipated to be incurred in connection with these various claims and legal proceedings and believe that liabilities related to such claims and proceedings should not have, in the aggregate, a material adverse effect on our business, financial condition, or results of operations. However, in light of the uncertainties involved in such claims and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the provisions currently accrued by us; as a result, the outcome of a particular matter may be material to our operating results for a particular period, depending upon, among other factors, the size of the loss or liability imposed and our level of income for that period.

Contingent liabilities classified as remote risk of loss refer to judicial and administrative proceedings involving other matters assessed by legal counsels, whichcounsel that have not been provided for.provisioned. The main lawsuits are discussed in the following paragraphs.

In December 2008, the Brazilian Federal Revenue Service issued a tax assessment against us in the total amount of R$3.9 billion with respect to IRPJ and CSLL related to 2002 to 2004. The tax authorities assert that we did not meet the legal requirements for deducting amortization of the goodwill arising from the acquisition of Banespa. On October 21, 2011, a unanimous decision of the CARF was handed down to cancel the tax assessments corresponding to fiscal years 2002 to 2004. The Brazilian Federal Revenue Service appealed to the CARF’s superior appeals panel (Câmara Superior de Recursos Fiscais) with respect to the merits, but not the fine, and the 2002 fiscal year, which was already being subject to the statute of limitation. Because of these two items,As a result, the assessment was reduced to R$1.8 billion. In December 2017, thatthis favorable decision was reformedmodified in favor of the Brazilian Federal Revenue Service. Concurrently with the administrative proceeding, through “Popular Action,”a class action (Ação Popular), the administrative proceeding was returned to the CARF for a new judgment.judgment, which has not yet been handed down. However, the Brazilian Federal Revenue Service continues to charge us; therefore, a new lawsuit was filed to discuss this issue. There has been no decision at first instance. In June 2010, the Brazilian Federal Revenue Service issued two other infraction notices in the total amount of R$1.4 billion, based on the same concepts as the previous notice, with respect to IRPJ and CSLL related to 2005 to 2007. In these cases, Santander Brasil was not granted a favorable decision, and it has been appealed on its merits, though there was a reduction in the fine of R$367 million, and the assessment was reduced to R$984 million, the proceedings were partially unfavorable. We have filed claims for cancellation of these tax assessments. As of December 2013, the Brazilian Federal Revenue Service issued another infraction notice, in the total amount of R$344 million with respect to income tax and social contribution related to 2008.2008, Santander Brasil challenged this tax assessment and was granted a favorable decision inby the first instance.trial court. The tax authority has appealed the decision and this was accepted. We are currently awaiting a final decision. In accordance with the advice of our external legal counsel, we believe that the Brazilian Federal Revenue Service’s position is incorrect, and that the risk of loss is remote. We did not record any provision since this issue should not have an impact on our consolidated financial statements.

 215
Table of Contents

In addition to the aforementioned proceedings, in June 2013, the Brazilian tax authorities issued an infraction notice against us as the responsible party liable for the tax on the capital gain allegedly obtained in Brazil by an entity which is not resident in Brazil, Sterrebeeck B.V., as a result of the “a shares merger (incorporação de ações” (a shares merger)) transaction carried out in August 2008. Through this transaction, we acquired all the shares of Banco Real and AAB Dois Par by providing the shareholders of these entities’ newly issued shares through a capital increase carried out for that purpose. The Brazilian tax authorities take the view that in the aforementioned transaction, Sterrebeeck B.V.B.V, obtained income subject to tax in Brazil consisting of the difference between the issuance value of our shares that were received and the

191 

Table of Contents

acquisition cost of the shares delivered in the exchange. WeA new appeal was filed an appeal against the infraction notice beforewith the CARF, which is awaiting judgment. This appeal was dismissed in March 2019. This decision will be subject to clarification actionpartially allowed and further appeal atwe filed an injunction against the CARF.unfavorable portion of the appeal. The case is currently awaiting judgment. Based on the advice of our external legal counsel, the position taken by the Brazilian tax authorities is not correct, and there are arguments for appeal against the infraction notice. As a result, the risk of loss is considered to be remote. Consequently, we have not recognizedmade any provisions in connection with these proceedings.

On December 8, 2016, the General Superintendentgeneral superintendent of the CADE began an investigation into alleged anticompetitive conduct in the real onshore foreign exchange market. The investigation concerns 11 financial institutions, including Santander Brasil, and 19 individuals active in the Brazilian foreign exchange market between 2009 and 2012. On January 8, 2018, we filed an administrative defense stating our understandings that there is no evidence that we were involved in the alleged conduct. We expect that these investigations will not have a significant financial impact on us.

The MPF has charged one of our officers in connection with the alleged bribery of a Brazilian tax auditor to secure favorable decisions in tax cases, resulting in a claimed benefit of R$83 million (approximately U.S.$2515 million) benefit tofor us. On October 23, 2018, the officer was formally indicted and asked to present his defense. On November 5, 2018 the officer in question presented his defense. The proceedings isare currently in course.ongoing. We are not a party to these proceedings. We have voluntarily provided information to the Brazilian authorities and have relinquished the benefit of certain tax credits to which the allegations relate in order to show good faith.

Dividend Policy

General Rules

We are required by Brazilian Corporate Law and our By-Laws to hold an annual general shareholders’ meeting by no later than the fourth month after each fiscal year, at which time, the allocation of the net profits inof the preceding year and the distribution of an annual dividend are approved by our shareholders. The payment of annual dividends is based on our consolidated audited financial statements prepared for the immediately preceding fiscal year.

Our By-Laws provide that an amount equal to at least 25.0% of our adjusted net income, after deducting allocations to the legal and contingency reserves, should be available for distribution as a dividend or interest attributable to shareholders’ equity in any given year. This amount represents the mandatory dividend.

Our board of directors may declare interim dividends or interest attributable to shareholders’ equity based on income verified in semiannual consolidated financial statements. The board of directors may also declare dividends or interest attributable to shareholders’ equity based on consolidated financial statements prepared for shorter periods, provided that the total dividends paid in each six-month period do not exceed the capital reserves amount required by Brazilian Corporate Law. The board of directors may also declare interim dividends or interest attributable to shareholders’ equity out of retained earnings or income reserves recorded in the last annual or semiannual balance sheet. Any payment of interim dividends or interest on shareholders’ equity may be set off against the mandatory dividends relating to the net income earned in the year in which the interim dividends were paid.

 216
Table of Contents

The amount distributed to shareholders as interest attributable to shareholders’ equity, net of any withholding tax, may be included as part of the minimum mandatory dividend. In accordance with applicable law, we are required to pay to shareholders an amount sufficient to ensure that the net amount they receive in respect of interest attributable to shareholders’ equity, after payment of the applicable withholding tax, plus the amount of declared dividends, is at least equivalent to the amount of the minimum mandatory dividend.

However, Brazilian Corporate Law allows our shareholders to suspend dividends distribution if our board of directors reports at our annual shareholders’ meeting that the distribution would not be advisable given our financial condition. Our fiscal council, if installed, should review any suspension of the

192 

Table of Contents

mandatory dividend. In addition, our management should submit a report to the CVM setting out the reasons for the suspension. Net income not distributed by virtue of a suspension is allocated to a separate reserve and, if not absorbed by subsequent losses, is required to be distributed as a dividend as soon as our financial condition permits such payment.

Current and Future Dividend Policy

WeOur board of directors currently recommendrecommends to our shareholders a 50% distribution of our yearly adjusted net income as dividends and/or interest attributable to shareholders’ equity. Our future dividend policy and the amount of future dividends and/or interest attributable to shareholders’ equity we decide to recommend to our shareholders for approval will depend on a number of factors, including, but not limited to, our cash flow, financial condition (including capital position), investment plans, prospects, legal requirements, economic climate, andregulatory provisions .and such other factors as we may deem relevant at the time.

Payment of Dividends

Any holdershareholder as of the record of shares at the timedate set once a dividend is declared is entitled to receive dividends. Under Brazilian Corporate Law, dividends are generally required to be paid within 60 days following the date on which the dividend is declared, unless the shareholders’ resolution establishes another payment date, which must occur prior to the end of the fiscal year in which such dividend was declared. Based on Brazilian Corporate Law, unclaimed dividends do not bear interest, are not monetarily adjusted and may revert to us three years after being declared.

The depositary is the registered owner of the units underlying the ADRs on the records of the registrar. Such units are held since December 13, 2016 by SantanderS3 Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A. (currently the(the current corporate name of Santander Securities Services Brasil Distribuidora de Títulos e Valores Mobiliários S.A.) in Brazil, acting as the custodian and agent for the depositary for our ADRs.

Payments of cash dividends and distributions, if any, are made inreais to the custodian on behalf of the depositary, which then converts such proceeds into U.S. dollars and causes such U.S. dollars to be delivered to the depositary for distribution to holders of ADRs. In the event that the custodian is unable to convert the Brazilian currency received as dividends into U.S. dollars immediately, the amount of U.S. dollars payable to holders of ADRs may be adversely affected by changes in the exchange rate of the real with thefor reais into U.S. dollar.

dollars.

The following table sets forth the amounts available for distribution as dividends based on the Brazilian GAAP calculation of net income.income, The reconciliation of net income under Brazilian GAAP to net income under IFRS is presented in Appendix I of our audited consolidated financial statements for the years ended December 31, 2019, 20182021, 2020 and 2017.2019:

  For the year ended December 31,
  2021 2020 2019
  (in millions of R$)
Net Income under Brazilian GAAP  14,996   14,056   14,088 
(-) Legal Reserve  750   703   704 
(=) Amounts Available for distribution  14,246   13,353   13,384 
Mandatory Dividends – 25.0%  3,561   3,338   3,346 
Interest on Shareholder’s Equity  3,649   3,325   4,010 
Dividends  6,000   512   6,790 
Total (Interest on Shareholder’s Equity and Dividends)  9,649   3,837   10,800 
Dividends distributed in excess of the Mandatory Dividend  7,388   499   7,454 

 

  For the year ended December 31,
  2019 2018 2017
  (in millions of R$)
Net Income under Brazilian GAAP  14,088   12,166   7,996 
(-) Legal Reserve  704   608   391 
(=) Amounts Available for distribution  13,384   11,558   7,605 
Mandatory Dividends – 25.0%  3,346   2,890   1,901 
Interest on Shareholder’s Equity  4,010   4,080   3,800 
Dividends  6,790   2,520   2,500 
Total (Interest on Shareholder’s Equity and Dividends)  10,800   6,600   6,300 
Dividends distributed in excess of the Mandatory Dividend  7,454   3,710   4,399 

 217
Table of Contents

 

History of Payment of Dividends and Interest Attributable to Shareholders’ Equity

In 2019,2021, we declared dividends and interest on shareholders’ equity in the gross amount of R$10,8009,649 million, of which R$1,0003,000 million was paid on April 29, 2019,June 2, 2021, R$1,0003,400 million on July 31, 2019,September 3, 2021, R$1,0003,000 million on October 30, 2019December 3, 2021 and R$7,800249 million on February 21, 2020.

193 

Table of Contents

3, 2022. The table below shows the amounts paid to our shareholders in the periods indicated.

  For the year ended December 31,
  2019 2018 2017 2016 2015
  (in millions of R$, except per share figures)
Dividends  6,790   2,520   2,500   1,400   4,800 
Interest attributable to shareholders’ equity  4,010   4,080   3,800   3,850   1,400 
Total  10,800   6,600   6,300   5,250   6,200 
Dividends and interest on capital per 1,000 shares                    
Common shares  1,378.87   841.68   776.17   666.21   784.90 
Preferred shares  1,516.76   925.85   853.79   732.83   863.39 

8B.Significant Changes
  For the year ended December 31,
  2021 2020 2019 2018 2017
  (in millions of R$, except per share figures)  
Dividends  6,000   512   6,790   2,500   1,400 
Interest attributable to shareholders’ equity  3,649   3,325   4,010   3,800   3,850 
Total  9,649   3,837   10,800   6,300   5,250 
Dividends and interest on capital per 1,000 shares                    
Common shares  1,397.75   489.83   1,379   776.17   666.21 
Preferred shares  1,537.54   538.82   1,517   853.79   732.83 

 

8B. Significant Changes

There has been no significant change since the date of our last audited financial statements, except for the subsequent events related to the sale of Superdigital, described in “Item 4. Information on the Company—History and Development of the Company—Important Events—Sale of equity stake in Super Pagamentos e Administração de Meios Eletrônicos S.A.” and to the acquisition of the remaining 40% of non-controlling interest held by Bosan Participações in Banco Olé Consignado, in each case as referred to in note 48 to our audited consolidated financial statements in "Item 18. Financial Statements." statements.

ITEM 9. THE OFFER AND LISTING

9A.9A. Offering and Listing Details

Market Price and Volume Information

On September 18, 2009, our Board of Directors approved the implementation of the Global Public Offering, which included the issue of 525,000,000 Units (each representing, at that date, 55 common shares and 50 preferred shares), which were all registered, without par value, free and clear of any liens or encumbrances. This offering consisted of the simultaneous initial public offering of (i) Units in Brazil on the over-the-counter market, in accordance with CVM Instruction 400 of December 29, 2003, as amended, and (ii) Units abroad, including in the form of ADRs representing ADSs registered with the SEC under the Securities Act.

 

On October 6, 2009, the Global Public Offering priced shares at R$23.50 per unit and U.S. $13.40$13.40 per ADR. The Units have been traded on the B3 and since October 7, 2009, and our ADRs have been traded on the NYSE since October 7, 2009.

On April 29, 2014, Santander Spain, our indirect controlling shareholder, announced its intention to launch voluntary exchange offers in Brazil and in the United States to acquire up to all of our shares that were not held by the Santander Group, representing approximately 25% of our share capital, with payment in Brazilian depositary receipts or ADRs representative of Santander Spain’s common shares.

On October 30, 2014, the Brazilian Exchange Offer and the U.S. Exchange Offer were concluded. As a result of these offers, the Santander Group’s shareholding increased to 88.3% of our total share capital (not including the shares held by Banco Madesant - Sociedade Unipessoal).capital. Further, as a result of the offer in Brazil, our Units were delisted from the Level 2 Segment and are now traded at the basic listing segment of B3.

The uncertainties caused by the outbreak of the COVID-19 pandemic had an adverse impact on the global economy and global capital markets and in Brazil, including markets volatility, which resulted in the B3’s circuit breaker mechanism being triggered eight times during March 2020.

The price of our units and ADSs may experience volatility, which could negatively impact holders of our Units and ADSs.

 218
Table of Contents

The following table shows our outstanding publicly traded common shares and preferred shares as of February 28, 2020:22, 2022:

Free Float B3 NYSE
Common shares   208,185,207   149,747,122 
Preferred shares   235,899,621   149,747,122 
Total   444,084,828   299,494,244 

 

Free Float B3 NYSE
Common shares  204,840,333   152,473,083 
Preferred shares  232,644,747   152,473,083 
Total  437,485,080   304,946,166 

194 

Table of Contents

Units, Common and Preferred Shares Traded on B3

The table below sets forth the high, low and last daily sales prices inreais for our common shares on the B3 for the periods indicated.

  Reais per share – SANB3 (Common Shares)
  High  Low  Last 
2014 Annual(1)  8.50   0.10   6.70 
2015 Annual  10.80   6.10   8.83 
2016 Annual  19.46   6.60   19.36 
1st Quarter  10.13   6.60   9.31 
2nd Quarter  11.42   8.75   9.90 
3rd Quarter  14.20   9.61   13.51 
4th Quarter  19.46   12.90   19.36 
2017 Annual  22.92   13.01   18.49 
1st Quarter  22.92   16.00   16.13 
2nd Quarter  17.60   13.01   14.75 
3rd Quarter  17.40   14.30   15.10 
4th Quarter  20.03   14.90   18.49 
2018 Annual  24.60   14.06   22.22 
1st Quarter  23.00   16.91   23.00 
2nd Quarter  24.60   14.16   15.05 
3rd Quarter  21.05   14.06   19.40 
4th Quarter  23.72   19.01   22.22 
2019 Annual  28.99   20.30   25.45 
1st Quarter  26.65   20.49   21.94 
2nd Quarter  23.71   20.50   23.00 
3rd Quarter  24.60   20.30   23.77 
4th Quarter  28.99   22.27   25.45 
Last 6 Months  24.40   20.70   23.77 
September 2019  28.99   22.27   26.05 
October 2019  27.24   23.99   23.99 
November 2019  28.00   23.80   25.45 
December 2019  26.90   21.41   21.41 
January 2020  22.33   20.36   21.15 
February 2020  24.40   20.70   23.77 

  Reais per share – SANB3 (Common Shares)
  High Low Last
 2017 Annual    22.92   13.01   18.49 
 1st Quarter    22.92   16.00   16.13 
 2nd Quarter    17.60   13.01   14.75 
 3rd Quarter    17.40   14.30   15.10 
 4th Quarter    20.03   14.90   18.49 
 2018 Annual    24.60   14.06   22.22 
 1st Quarter    23.00   16.91   23.00 
 2nd Quarter    24.60   14.16   15.05 
 3rd Quarter    21.05   14.06   19.40 
 4th Quarter    23.72   19.01   22.22 
 2019 Annual    28.99   20.30   25.45 
 1st Quarter    26.65   20.49   21.94 
 2nd Quarter    23.71   20.50   23.00 
 3rd Quarter    24.60   20.30   23.77 
 4th Quarter    28.99   22.27   25.45 
 2020 Annual    25.90   10.50   21.66 
 1st Quarter    25.90   11.29   12.99 
 2nd Quarter    16.57   10.50   13.97 
 3rd Quarter    15.62   12.51   13.05 
 4th Quarter    22.35   12.71   21.66 
 2021 Annual    22.45   15.67   15.76 
 1st Quarter    22.25   17.13   18.75 
 2nd Quarter    22.45   17.84   19.61 
 3rd Quarter    21.09   15.77   16.64 
 4th Quarter    17.90   15.67   15.76 
 Last 6 Months    21.09   14.00   14.92 
 June 2021    21.09   18.60   20.42 
 July 2021    21.07   15.77   16.64 
 August 2021    17.90   15.75   16.16 
 September 2021    21.07   15.77   16.64 
 October 2021    17.90   15.75   16.16 
 November 2021    17.43   15.19   15.50 
 December 2021    16.09   14.00   14.21 
 January 2022    16.24   14.22   15.60 
 February 2022*    15.65   14.82   15.05 
 

* Through February 22, 2022.

 

 219
(1)With the purposeTable of eliminating the trading in cents of SANB3 (common) and SANB4 (preferred) shares, increasing liquidity and reducing the transaction costs thereof, our shareholders approved on March 18, 2014 (i) a bonus share issue of 19,002,100,957 preferred shares to our shareholders, at the ratio of 0.047619048 preferred shares for each common share (SANB3) or preferred share (SANB4). This resulted in a bonus share issue of five preferred shares for each Unit (SANB11), through the capitalization of reserves in the amount of approximately R$172 million; and (ii) a reverse share split (inplit) of the totality of our common shares and preferred shares at a ratio of 1:55, so that each fifty-five common shares and fifty-five preferred shares would thereafter correspond to one common share and one preferred share, respectively. As a result, each Unit (ticker SANB11) came to be comprised of one common share and one preferred share. The bonus share issue and reverse share split were implemented on June 2, 2014.Contents

  Reais per share – SANB4 (Preferred Shares)
  High Low Last
2014 Annual(1)  8.18   0.10   6.02 
2015 Annual  7.92   5.52   7.23 
2016 Annual  10.59   5.40   10.05 
1st Quarter  8.00   5.40   7.40 
2nd Quarter  8.27   7.20   8.09 
3rd Quarter  9.64   7.86   8.53 
4th Quarter  10.59   8.57   10.05 
2017 Annual  14.04   9.31   13.22 
1st Quarter  13.79   9.31   11.68 
2nd Quarter  11.60   9.80   10.08 
3rd Quarter  13.58   9.99   12.50 
4th Quarter  14.04   12.16   13.22 
2018 Annual  22.89   13.50   20.53 
1st Quarter  16.95   13.53   16.89 
2nd Quarter  17.57   13.50   13.90 
3rd Quarter  17.30   13.71   16.25 
4th Quarter  22.89   15.97   20.53 
2019 Annual  24.73   19.32   23.53 
1st Quarter  24.73   20.26   21.70 
2nd Quarter  23.44   20.59   22.70 
3rd Quarter  23.85   19.32   21.80 
4th Quarter  23.56   19.59   23.53 

Last 6 Months  23.85   19.32   23.53 
September 2019  22.14   19.98   21.80 
October 2019  22.50   20.10   20.80 
November 2019  21.18   19.59   20.05 
December 2019  23.56   19.89   23.53 
January 2020  25.35   20.30   20.50 
February 2020  21.19   19.60   20.26 

The table below sets forth the high, low and last daily sales prices in reais for our preferred shares on the B3 for the periods indicated.

  Reais per share – SANB4 (Preferred Shares)
  High Low Last
 2017 Annual    22.92   13.01   18.49 
 1st Quarter    22.92   16.00   16.13 
 2nd Quarter    17.60   13.01   14.75 
 3rd Quarter    17.40   14.30   15.10 
 4th Quarter    20.03   14.90   18.49 
 2018 Annual    24.60   14.06   22.22 
 1st Quarter    23.00   16.91   23.00 
 2nd Quarter    24.60   14.16   15.05 
 3rd Quarter    21.05   14.06   19.40 
 4th Quarter    23.72   19.01   22.22 
 2019 Annual    28.99   20.30   25.45 
 1st Quarter    26.65   20.49   21.94 
 2nd Quarter    23.71   20.50   23.00 
 3rd Quarter    24.60   20.30   23.77 
 4th Quarter    28.99   22.27   25.45 
 2020 Annual    24.28   11.42   23.49 
 1st Quarter    24.25   12.00   13.87 
 2nd Quarter    16.46   11.42   14.22 
 3rd Quarter    16.19   13.96   14.90 
 4th Quarter    24.28   14.56   23.49 
 2021 Annual    25.00   17.62   18.11 
 1st Quarter    25.00   18.20   20.82 
 2nd Quarter    24.26   19.25   21.06 
 3rd Quarter    21.85   18.52   18.77 
 4th Quarter    20.53   17.62   18.11 
 Last 6 Months    21.84   15.90   16.87 
 June 2021    21.84   20.29   21.19 
 July 2021    21.44   18.52   18.77 
 August 2021    20.53   17.62   18.16 
 September 2021    21.44   18.52   18.77 
 October 2021    20.53   17.62   18.61 
 November 2021    19.53   17.52   17.82 
 December 2021    18.36   15.95   15.95 
 January 2022    18.49   15.90   17.89 
 February 2022*    17.94   16.61   16.79 
 

(1)On June 2, 2014, as part of our plan to optimize our capital, we carried out a reverse share split of the totality of our issued share capital at rate of 55:1 for each of our common and preferred shares.

* Through February 22, 2022.

195 

 220

Table of Contents

Table of Contents

 

  B3
  Units – SANB11
  High Low Last
  R$ per share
2014 Annual  16.49   10.84   13.46 
2015 Annual  17.99   12.21   16.04 
2016 Annual  29.80   12.33   29.53 
1st Quarter  18.63   12.33   16.95 
2nd Quarter  19.46   16.53   18.18 
3rd Quarter  23.45   17.74   22.00 
4th Quarter  29.80   21.80   29.53 
2017 Annual  36.13   22.75   31.88 
1st Quarter  36.13   27.42   27.65 
2nd Quarter  29.24   22.75   25.00 
3rd Quarter  29.55   24.94   27.64 
4th Quarter  33.21   27.23   31.88 
2018 Annual  45.19   28.02   42.70 
1st Quarter  40.00   31.62   39.91 
2nd Quarter  40.80   28.02   29.30 
3rd Quarter  38.35   28.80   35.71 
4th Quarter  45.19   35.01   42.70 
2019 Annual  50.68   40.35   49.52 
1st Quarter  50.68   41.14   43.97 
2nd Quarter  46.77   41.28   45.46 
3rd Quarter  48.36   40.35   45.33 
4th Quarter  50.17   42.97   49.52 
Last 6 Months  46.40   41.11   45.33 
September 2019  49.87   42.97   47.06 
October 2019  48.59   43.90   44.10 
November 2019  50.17   44.00   49.52 
December 2019  51.58   41.65   42.07 
January 2020  43.42   40.19   41.19 
February 2020  46.40   41.11   45.33 

  B3
Units – SANB11
  High Low Last
  R$ per share
 2017 Annual    22.92   13.01   18.49 
 1st Quarter    22.92   16.00   16.13 
 2nd Quarter    17.60   13.01   14.75 
 3rd Quarter    17.40   14.30   15.10 
 4th Quarter    20.03   14.90   18.49 
 2018 Annual    24.60   14.06   22.22 
 1st Quarter    23.00   16.91   23.00 
 2nd Quarter    24.60   14.16   15.05 
 3rd Quarter    21.05   14.06   19.40 
 4th Quarter    23.72   19.01   22.22 
 2019 Annual    28.99   20.30   25.45 
 1st Quarter    26.65   20.49   21.94 
 2nd Quarter    23.71   20.50   23.00 
 3rd Quarter    24.60   20.30   23.77 
 4th Quarter    28.99   22.27   25.45 
 2020 Annual    48.21   21.54   44.83 
 1st Quarter    48.21   22.75   26.00 
 2nd Quarter    32.47   21.54   27.59 
 3rd Quarter    31.41   26.22   27.72 
 4th Quarter    46.60   27.00   44.83 
 2021 Annual    47.20   33.24   33.76 
 1st Quarter    47.20   35.34   39.60 
 2nd Quarter    46.80   37.36   40.50 
 3rd Quarter    42.59   34.22   35.37 
 4th Quarter    38.15   33.24   33.76 
 Last 6 Months    42.59   29.84   31.43 
 June 2021    42.59   39.23   41.94 
 July 2021    42.40   34.22   35.37 
 August 2021    38.15   33.24   34.40 
 September 2021    42.40   34.22   35.37 
 October 2021    38.15   33.24   34.40 
 November 2021    36.97   32.63   32.96 
 December 2021    34.46   29.84   29.98 
 January 2022    34.82   30.08   32.87 
 February 2022*    33.60   31.32   31.61 
 

* Through February 22, 2022.

 

 221
(1)On June 2, 2014, we carried out a reverse share splitTable of the totality of our issued share capital at rate of 55:1 for each of our common and preferred shares. Bonus Shares and Reverse Share Split (Inplit).Contents

For information on the rights attaching to our common shares and to our preferred shares, please see “Item 10. Additional Information—B. By-Laws—Rights of Common Shares and Preferred Shares.”

ADRs Traded on NYSE

Our ADRs have been listed and traded on the NYSE since October 7, 2009. Our Units abroad, including in the form of ADRs representing ADSs, are registered with the SEC under the Exchange Act.

The deposit agreement pursuant to which ADRs have been issued is between us and The Bank of New York Mellon, as depositary, and all the holders from time to time of ADRs. For further information on our arrangements with The Bank of New York Mellon, please see “Item 12. Description of Securities other than Equity Securities—D. American Depositary Receipts.Receipts,”

Since certain of our shares and our ADRs are held by nominees, the number of record holders may not be representative of the number of beneficial owners.

  NYSE
ADR – BSBR
  High Low Last
  U.S.$ per ADR
 2017 Annual    22.92   13.01   18.49 
 1st Quarter    22.92   16.00   16.13 
 2nd Quarter    17.60   13.01   14.75 
 3rd Quarter    17.40   14.30   15.10 
 4th Quarter    20.03   14.90   18.49 
 2018 Annual    24.60   14.06   22.22 
 1st Quarter    23.00   16.91   23.00 
 2nd Quarter    24.60   14.16   15.05 
 3rd Quarter    21.05   14.06   19.40 
 4th Quarter    23.72   19.01   22.22 
 2019 Annual    28.99   20.30   25.45 
 1st Quarter    26.65   20.49   21.94 
 2nd Quarter    23.71   20.50   23.00 
 3rd Quarter    24.60   20.30   23.77 
 4th Quarter    28.99   22.27   25.45 
 2020 Annual    12.68   3.69   8.64 
 1st Quarter    12.68   4.55   5.17 
 2nd Quarter    6.74   3.69   5.22 
 3rd Quarter    6.11   4.76   4.94 
 4th Quarter    8.95   4.80   8.64 
 2021 Annual    9.27   5.81   5.95 
 1st Quarter    8.84   6.34   7.05 
 2nd Quarter    9.27   6.62   8.20 
 3rd Quarter    8.34   6.39   6.54 
 4th Quarter    6.99   5.81   5.95 
 Last 6 Months    8.30   5.19   5.79 
 June 2021    8.30   7.27   8.05 
 July 2021    8.17   6.39   6.54 
 August 2021    6.99   5.81   6.11 
 September 2021    8.17   6.39   6.54 
 October 2021    6.99   5.81   6.11 
 November 2021    6.57   5.74   5.82 
 December 2021    6.05   5.19   5.37 
 January 2022     6.50   5.33   6.27 
 February 2022*    6.34   5.90   6.25 

* Through February 22, 2022.

196 

 222

Table of Contents

Table of Contents

 

  NYSE
  ADR – BSBR
  High Low Last
  U.S.$ per ADR
2014 Annual  7.18   4.48   5.02 
2015 Annual  5.98   2.96   3.89 
2016 Annual  9.12   3.02   8.89 
1st Quarter  4.93   3.02   4.65 
2nd Quarter  5.74   4.41   5.70 
3rd Quarter  7.19   5.33   6.70 
4th Quarter  9.12   6.66   8.89 
2017 Annual  11.75   6.86   9.67 
1st Quarter  11.75   8.67   8.82 
2nd Quarter  9.40   6.86   7.53 
3rd Quarter  9.48   7.48   8.74 
4th Quarter  10.00   8.36   9.67 
2018 Annual  12.25   7.20   8.72 
1st Quarter  12.05   9.78   9.99 
2nd Quarter  12.11   7.20   11.91 
3rd Quarter  10.20   7.32   7.38 
4th Quarter  12.25   8.65   8.72 
2019 Annual  13.72   9.68   12.13 
1st Quarter  13.72   10.44   11.23 
2nd Quarter  12.17   10.05   11.87 
3rd Quarter  12.85   9.68   10.89 
4th Quarter  12.45   10.27   12.13 
Last 6 Months  12.85   9.68   12.13 
September 2019  11.16   9.85   10.89 
October 2019  12.45   10.43   11.74 
November 2019  11.98   10.27   10.39 
December 2019  12.36   10.44   12.13 
January 2020  12.68   9.67   9.70 
February 2020  10.11   9.20   9.38 

9B.9B. Plan of Distribution

Not applicable.

9C.9C. Markets

Our Units and common and preferred shares are traded on the B3. The regulation of Brazilian securities markets which affects these securities is discussed below. In addition, we also have ADRs which have been listed and traded on the NYSE since October 7, 2009. For further information, see “Item 9. The Offer and Listing—“—A. Offering and Listing Details.”.

Regulation of Brazilian Securities Markets

The Brazilian securities market is regulated by the CVM, as provided for byin the Brazilian Capital Markets Law 6,385 of December 7, 1976, or the “Brazilian Securities Market Law,” and by the Brazilian Corporate Law, as well as the CMN and the Brazilian Central Bank.

Under Brazilian Corporate Law, a corporation is either publicly held (companhia aberta)(companhia aberta) or privately held (companhia fechada)(companhia fechada) and unlisted. All publicly held companies must be registered with the CVM and are subject to reporting and other regulatory requirements. A company registered with the CVM may list its securities either on the Brazilian stock exchange market or on Brazilian over-the-counter markets. The shares of a publicly held company may also be traded privately.

In Brazil, the over-the-counter market is divided into two categories: (i) organized over-the-counter markets, in which the transactions are supervised by self-regulating entities authorized by the CVM; and (ii) non-organized over-the-counter markets, in which the transactions are not supervised. In either

197 

Table of Contents

case, the over-the-counter markets consist of direct trades, outside of the stock exchange market, through a financial institution registered with the CVM, which serves as an intermediary. No special application, other than registration with the CVM (and, in case of organized over-the-counter markets, registration with the applicable one), is necessary for securities of a public company to be traded in these markets.

To be listed on the B3, a company must apply for registration with the CVM and the B3.

Trading on the B3 (current name of BM&FBOVESPA)

The B3 currently facilitates all trading activities of shares and commodities in Brazil, including settlement, clearing and depositary services.

Trading on the Brazilian stock exchange is conducted by authorized members. Trading sessions in the shares market take place every business day, from 10:00 a.m. to 5:00 p.m. between March and October and from 10:00 a.m. to 6:00 p.m. between November and February, on an electronic trading system called PUMA. Trading is also conducted from March to October between 5:30 p.m. and 6:00 p.m. in an after-market system connected to both traditional brokerage firms and brokerage firms operating on the Internet.internet. This after-market trading is subject to regulatory limits on price volatility of securities traded by investors operating on the Internet.

internet.

The trading of securities on the B3 may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of the B3 or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the B3.

 223
Table of Contents

In addition, in order to maintain control over the fluctuation of the B3 index, the B3 has adopted a “circuit breaker” insystem pursuant to which trading sessions may be suspended for a period of 30 minutes, one hour, or a time to be defined by B3, whenever the B3 index falls below 10.0%, 15.0% or 20.0%, respectively, in relation to the value of closing index levels of the previous trading session.

When investors trade shares on the B3, the trade is settled two business days after the trade date, without adjustments to the purchase price. The seller is ordinarily required to deliver the shares to the exchange on the second business day following the trade date. Delivery of and payment for shares are made through the facilities of an independent clearing house, a division of the B3, which handles the multilateral settlement of both financial obligations and transactions involving securities. According to the regulations of the B3, financial settlement is carried out through the system of transfer of funds of the Brazilian Central Bank and the transactions involving the sale and purchase of shares are settled through the B3 custody system. All deliveries against final payment are irrevocable.

In order to keep our securities listed on the B3, we are required to comply with the provisions of the B3’s Issuer Manual (Manual do Emissor), which establishes technical and operational procedures and criteria applicable to companies that have securities for listed on the B3. The most up-to-date version of the B3’s Issuer Manual became effective as of January 1, 2018.

October 22, 2020.

Corporate Governance Practices

In 2000, the B3 introduced three special listing segments, Levels 1 and 2 of Corporate Governance and Novo Mercado, which were aimed at fostering a secondary market for securities issued by Brazilian companies that voluntarily abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law.

Our Units were initially listed on the Level 2 Segment. However, as a result of the Brazilian Exchange Offer and the U.S. Exchange Offer launched by Santander Spain in Brazil for the acquisition of our shares, our Units were delisted from the Level 2 Segment and are now traded at the basic listing segment of the B3.

198 

Table of Contents

Within the B3, we are a part of one sustainability index: the ISE (Índice de Sustentabilidade Empresarial– Entrepreneurial Sustainability Index) which is a reference for socially responsible investments in Brazil. To be part of the portfolio, currently composed of 4046 companies, the company’s performance is evaluated in regardswith respect to sustainability, including economic efficiency, environmental balance, social practices and corporate governance.

In 2016, the Brazilian Code of Corporate Governance for Publicly-held Companies (Código Brasileiro de Governança Corporativa – Companhias Abertas), or the “Governance Code,” was published by the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança Corporativa). It sets forth corporate governance principles, guidelines and actions applicable for publicly held companies and establishes a “comply or explain” enforcement model. On June 8, 2017, following a public consultation on the implications of the Governance Code for Brazilian companies, the CVM issued Normative Ruling No. 586 introducing the necessary changes to the existing securities regulation in order to make these consistent with the provisions of the Governance Code.

The new rules established by this ruling apply to companies (i) which are registered as category “A” issuers, (ii) whose securities have been traded on the B3 since January 1, 2018, and (iii) which, on the publication date of CVM Instruction 586,,had at least one of their securities included in the Brazil Index 100 – IBrX-100 (Í(Índice Brasil 100)100) or within the Bovespa Index – IBOVESPA (Índice Bovespa). We fulfill all three of these criteria and are therefore subject to the new CVM rules.

 

Investment in Our Units by Non-Residents of Brazil

Investors residing outside Brazil, including institutional investors, may either register their investments in securities in Brazil, as a foreign direct investment under Law 4,131/62, or as a portfolio investment under the applicable regulation enacted by CMN and CVM. Foreign investors, regardless of whether their investments are made as direct investments or portfolio investments, must be enrolled with the Brazilian Internal Revenue. This registration process is undertaken by a financial institution or an institution authorized to operate by the Brazilian Central Bank as the investor’s legal representative in Brazil.

Since March 30, 2015, portfolio investments are regulated by CMN Resolution 4,373, enacted on September 29, 2014, or “CMN Resolution 4,373,” which superseded CMN Resolution 2,689, which had been in force for about 15 years.

 224
Table of Contents

The main purpose of CMN Resolution 4,373 is to facilitate the entry of foreign investors in the Brazilian financial and capital markets. CMN Resolution 4,373 introduces the possibility for foreign investors to make investments in local currency with funds held in their foreign bank accounts, or with bills of payment denominated inreais but issued abroad.

With certain limited exceptions, CMN Resolution 4,373 allows investors to carry out any type of transaction in the Brazilian capital markets involving a security traded on a Brazilian stock or futures exchange, or through an organized over-the-counter market, but investors may not transfer the ownership of investments made under such regulation to other non-Brazilian holders through private transactions. Investments and remittances outside Brazil for gains, dividends, profits or other payments under our Units are made through the foreign exchange market.

For further information on the requirements for the registration of foreign portfolio investments, see “Item 10. Additional Information—D. Exchange Controls—Foreign Investment in Brazil—Capital Markets Investment.”

Foreign direct investors under Law 4,131/62 may sell their shares in both private and open market transactions, but these investors are currently subject to a less favorable tax treatment on gains, apart from being subject to taxation on the execution of foreign exchange transactions. For more information on foreign direct investors, see “Item 10. Additional Information—D. Exchange Controls—Foreign Investment in Brazil—Foreign Direct Investment.”

199 

Table of Contents

Since March 30, 2015, CMN Resolution 4,373 also deals with investments of foreign capital in Brazil through Depositary Receipts, or “DRs,” and superseded the former rule (CMN Resolution 1,927 of May 18, 1992).

We filed an application to have the ADRs approved under the former rule by the Brazilian Central Bank and the CVM, and we received final approval on October 1, 2009.

If a holder of ADRs decides to exchange such ADRs for the underlying Units, the holder will be entitled to (i) sell the Units on the B3 and rely on the depositary’s electronic registration for five business days from the date of exchange to obtain and remit U.S. dollars abroad upon the holder’s sale of our Units, (ii) convert its investment into a foreign portfolio investment under CMN Resolution 4,373, or (iii) convert its investment into a foreign direct investment under Law 4,131/62. See “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations” for a description of the tax consequences for an investor residing outside Brazil of investing in our Units in Brazil.

If a holder of ADRs wishes to convert its investment into either a foreign portfolio investment under CMN Resolution 4,373 or a foreign direct investment under Law 4,131/62, it should begin the process of obtaining its own foreign investor registration with the Brazilian Central Bank or with the CVM, as the case may be, in advance of exchanging the ADRs for Units.

The custodian is authorized to update the depositary’s electronic registration to reflect conversions of ADRs into foreign portfolio investments. If a holder of ADRs elects to convert its ADRs into a foreign direct investment under Law 4,131/62, the conversion will be effectedcarried out by the Brazilian Central Bank after receipt of an electronic request from the custodian with details of the transaction. This may also require the Units to be converted into shares.

If a foreign direct investor under Law 4,131/62 wishes to deposit its Units into the ADR program in exchange for ADRs, such holder will be required to present to the custodian evidence of payment of capital gains taxes. The conversion will be effectedcarried out by the Brazilian Central Bank after receipt of an electronic request from the custodian with details of the transaction. This may also involve the need to change the Units into shares.

The Brazilian federal constitution permits foreign individuals or companies to invest in the voting shares of Brazilian financial institutions only if they have specific authorization by the President of Brazil based on national interest or reciprocity. A presidential decree issued on November 13, 1997, in respect of Banco Meridional do Brasil S.A. (a predecessor entity) allows up to 100% foreign participation in our capital stock. Foreign investors may acquire our Units or ADRs as a result of this decree. In addition, foreign investors may acquire publicly traded non-votingnonvoting shares of Brazilian financial institutions traded on a stock exchange or depositary receipts offered abroad representing non-votingnonvoting shares without specific authorization. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations Regulations—Foreign Investment in Brazilian Financial Institutions.”

 225
Table of Contents9D.

9D. Selling Shareholders

Not applicable.

9E.9E. Dilution

Not applicable.

9F.9F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

200 

Table of Contents

10A.10A. Share Capital

Not applicable.

201 

Table of Contents

10B.10B. By-Laws

Below we provide a summary of the important provisions of our By-Laws and of the corporate and Brazilian capital markets legislation and regulations. This description is not intended to be exhaustive. It is based on our By-Laws (an English translation of which is attached as an exhibit to this annual report), as well as on the legislation and regulations applicable to companies and the Brazilian capital market currently in effect.

Registration and Business Purpose

We are a publicly held company, incorporated under Brazilian law. Our documents of incorporation are duly registered with JUCESP, under NIRE 35300332067.

Pursuant to article 4 of our By-Laws, our corporate purpose is to (i) participate in asset, liability and accessory transactions related to our respective authorized portfolios (commercial, investment, credit, financing and investment, real estate credit and leasing), (ii) carry out foreign exchange transactions; (iii) manage investment portfolios; (iv) any other transaction that would be allowed by law and regulations in force; and (v) participate, as shareholder or quotaholder, in other companies.

Managers’Directors’ and Executive Officers’ Role and Conflict of Interests

Brazilian Corporate Law imposes on the members of the Board of Directors and Officers the duty of diligence during the performance of their functions, as well as the duty of loyalty to the company, besides prohibiting members of the Board of Directors and the Officers from: (i) receiving any type of direct or indirect personal advantage from third parties, by virtue of the position occupied, without authorization in the By-Laws or from a shareholders’ meeting; (ii) taking part in any corporate transaction in which he or she has an interest that conflicts with our interest or in the decisions made by other directors on the matter; (iii) use any commercial opportunity which may come to his or her knowledge, by virtue of his or her position, for his or her own benefit or that of a third party, whether or not harmful to the company; (iv) fail to exercise or protect the company’s rights or to take advantage of a commercial opportunity of interest to the company, in seeking to obtain advantages for himself or herself or for a third party; and (v) acquire for resale with profit property or rights which he or she knows the company needs or which the company intends to acquire.

As we are a financial institution, we are subject to certain prohibitions establishedlimitations set forth by the Banking Reform Law, as amended by Law 13,506 of November 13, 2017, or “Law 13,506/17,” as well as related regulations. For more information in relation to such prohibitions,limitations, see “Item 4B.4. Information on the Company—B. Business Overview—Regulation and Supervision—Principal Limitations and Obligations of Financial Institutions.Institutions” and “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Administrative Proceedings in the Brazilian National Financial System, the Brazilian Payment System and Capital Markets.”

In addition to these provisions, Article 10 of our By-Laws provides that members of the Board of Directors and Officers are forbidden to be involved in the analysis, approval or settlement of business deals or loans relating to a company where they (i) they hold more than 5% of the capital stock as partners or shareholders, or where they are members of the management, or (ii) had been members within a period of up to six months before their appointment. Finally, our policy for transactions with related parties also sets forth procedures to be followed by managers involved in such transactions, and when other potential conflicts of interest may arise.

 226
Table of Contents

Rights of Common Shares and Preferred Shares

Each common share gives its holder the right to a vote at general meetings, however, the preferred shares do not grant voting rights in our shareholders’ general meetings, except as related to the following matters:

·●change of corporate status, merger, consolidation or spin-off;

·●approval of agreements entered into between us and our controlling shareholder, directly or indirectly, and agreements with other companies in which our controlling shareholder has an interest, whenever the law or the By-Laws provide that they must be approved at a shareholders’ general meeting; and

202 

Table of Contents

indirectly, and agreements with other companies in which our controlling shareholder has an interest, whenever the law or the By-Laws provide that they must be approved at a shareholders’ general meeting; and

·●the appraisal of assets to be contributed to increase our capital stock.

In regards toRegarding the election of members of the Board of Directors, the Brazilian Corporate Law sets forth that, when members of the Board of Directors are elected, the following parties have the right to elect one member of our Board of Directors:

·●minority holders of shares in public companies holding a minimum of 15% of the total number of voting shares, or

·●holders of preferred shares without voting rights, or with restricted voting rights, representing 10% of the capital stock, or

·●holders of common and preferred shares who jointly represent at least 10% of the capital stock, in a separate vote.

Nevertheless, these rights can only be exercised by the holders of shares who maintained their holding for at least three months before the date of the annual shareholders’ meeting. The Brazilian Corporate Law also permits a multiple vote procedure to be adopted, upon request by shareholders representing at least 10% of our voting capital. Pursuant to CVM Instruction 282 of June 26, 1998, the percentage needed to call for a multiple vote to elect members of the board of directors, in public companies with capital stock exceeding R$100 million, is 5% of the voting capital per request of multiple vote.

The holders of preferred shares are entitled to the following rights according to our By-Laws:

·●dividends and interest on shareholders’ own equity in an amount 10% higher than those attributed to common shares, as well as priority in the distribution;

·●participation on equal terms with the common shares conditions, in capital increases arising from the capitalization of reserves and income, as well as in the distribution of bonus shares created by the capitalization of accrued income, reserves or any other resources;

·●priority in reimbursement of capital, without payment of premium, in the case of liquidation; and

·●tag-along rights in the event of a change in our control, under the same terms and conditions extended to our controlling shareholders.

Common shares not belonging to the controlling shareholders also give their holders tag-along rights in the event that our control is transferred on the same terms and conditions as those granted to our controlling shareholders.

The shareholders’ general meeting may decide on conversion of the preferred shares into common shares.

The Brazilian Corporate Law sets forth that shares without voting rights or shares with restricted rights, including our preferred shares, shall be granted unrestricted voting rights if the company ceases to distribute, during three consecutive fiscal years, any fixed or minimum dividend granted to these shares, until the respective distributions are made.

 227
Table of Contents

According to our By-Laws, the dividends that are not claimed by shareholders within three years, from the beginning of their payment, shall prescribe to our benefit.

Under the Brazilian Corporate Law, any change in the preferences or changes which would have

203 

Table of Contents

an adverse financial effect on the rights of holders of preferred shares, or any change that results in the creation of a more favored class of preferred shares, must be approved by a resolution at a general shareholders’ meeting and will become valid and effective only after approval by a majority of our preferred shareholders.

Brazilian Corporate Law also sets forth that the following shareholders’ rights cannot be repealed or modified by our By-Laws or decisions made at shareholders’ meetings:

·●the right to vote at general meetings, in the case of holders of common shares;

·●the right to share in the distribution of dividends and interest on shareholders’ equity, and to share in the surplus assets in the event of our liquidation;

·●preemptive rights in subscribing for shares or convertible securities in specific circumstances;

·●the right to monitor the management; and

·●the right of withdrawal in the circumstances established by law, including our consolidation, merger and spin-off.

Description of Units

The Units are share deposit certificates, each representing one common share and one preferred share, all of them free and unencumbered. The shares represented by the Units shall be registered in a trust account linked to the Units, and their ownership can only be transferred by means of transfer of the corresponding Units, upon written instructions from the holder. Earnings from the Units and the amount received in the case of redemption or repayment shall only be paid to the holder of the Units registered in the books of the custodian.

None of the shares underlying the Units, the earnings thereon or the corresponding redemption or repayment amounts may be pledged, encumbered or in any other way given in guarantee by the holder of the Units, nor may they be subject to attachment (penhora), seizure (arresto), impounding (sequestro), search and apprehension (busca e apreensão), or to any other lien or encumbrance.

The Units are held by us (except units that underlie the ADSs which are held by our affiliate, Santander Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A.), as the custodian, in book-entry form in an account opened in the holder’s name. The transfer of ownership is effected by debiting the seller’s Unit account and crediting the buyer’s Unit account according to a written transfer order issued by the seller or a court authorization or transfer order delivered to the custodian, all of which are retained by the custodian. Dividends, interest on shareholders’ equity and/or cash bonuses shall be paid to the custodian and the custodian shall then transfer the amount to the custody agents for payment to the Unit holders. The pledge, usufruct, right of succession, fiduciary transfer in guarantee and any other conditions, onus or encumbrances on the Units must be registered in the custodian’s records, as well as noted in the corresponding statement of account of Units.

The custodian shall provide Unit holders with a statement of account at the end of each month in which there is movement and, when there is no movement, at least once a year. The statement shall show the date and place of issue, the name and details of the holder of the Unit account, an indication that it is a statement of Unit account, details of the shares deposited, a statement that the shares deposited, their earnings and any amounts received in the event of redemption or repayment shall only be paid to the holder of the Unit account or to the holder’s order in writing, our charge for the deposit, if any, and the addresses where Unit holders may obtain assistance.

Upon a written order issued by the holder of the Unit account to a broker authorized by the stock exchange where the Units are traded, the custodian shall block the corresponding Units and transfer them to the buyer upon receipt of a confirmation of the sale from the stock exchange.

204 

Table of Contents

The Unit holder shall have the right, at any time, to instruct a broker to cancel Units and transfer the underlying shares. The broker must request to us, as the agent, to transfer the Units to the share deposit accounts held by the custodian in the holder’s name. The Unit holder shall bear any transfer and cancellation costs involved. Similarly, the holder may instruct a broker to assemble Units by transferring the number of shares that jointly represent a Unit, which shall be registered by the custodian in a trust account linked to the Units.

 228
Table of Contents

The right to cancel Units may be suspended in the event of a public offering for distribution of Units, either in the domestic or the international market, in which case the suspension may not last longer than 180 days. Units subject to any lien or encumbrance may not be cancelled.

The following rules apply to the exercise of the rights granted to the shares represented by Units:

·●Dividends and share redemption or repayment amounts delivered to us, as depository of the shares, shall be paid by us to the Unit holder;

·●Only the Unit holder shall have the right to attend our general meetings and to exercise all of the prerogatives conferred on our shareholders by the shares represented by the Units;

·●In the event of a stock split, cancellation or reverse stock split or new issuances of shares by us while the Units are in existence, the following rules will be observed:

(1)       In the event there is a change in the number of shares represented by Units as a result of a reverse stock split or cancellation of shares, we will debit the number of cancelled shares from each Unit holder’s account and proceed with the automatic cancellation of Units, observing the ratio of one common share and one preferred share issued by us to each Unit. We will deliver to the shareholders the shares which are insufficient to constitute a Unit in the form of shares, rather than Units; and

(2)       In the event there is a change in the number of shares represented by the Units as a result of a stock split or new issuances of shares, the custodian will register the deposit of the new shares and issue new Units, registering them in the accounts of their respective holders, so as to reflect the new number of shares held by unit holders. In this way, the accounts will maintain a ratio of one common share and one preferred share issued by us and represented by Units, and the custodian will deliver to holders the shares which are insufficient to constitute a Unit in the form of shares rather than Units;

(1)In the event there is a change in the number of shares represented by Units as a result of a reverse stock split or cancellation of shares, we will debit the number of cancelled shares from each Unit holder’s account and proceed with the automatic cancellation of Units, observing the ratio of one common share and one preferred share issued by us to each Unit. We will deliver to the shareholders the shares which are insufficient to constitute a Unit in the form of shares, rather than Units; and
(2)In the event there is a change in the number of shares represented by the Units as a result of a stock split or new issuances of shares, the custodian will register the deposit of the new shares and issue new Units, registering them in the accounts of their respective holders, so as to reflect the new number of shares held by unit holders. In this way, the accounts will maintain a ratio of one common share and one preferred share issued by us and represented by Units, and the custodian will deliver to holders the shares which are insufficient to constitute a Unit in the form of shares rather than Units;

In the event of a capital increase, by means of the issuance of shares that may be converted into new Units, Unit holders may exercise the preemptionpreemptive rights belonging to the shares represented by their Units. We shall create new Units in the register of book-entry Units and credit them to their holders so as to reflect the new number of common and preferred shares issued by us, subject to the current proportion of ordinary and preferred shares to constitute the Units.Units, Shares that are too few to constitute a Unit shall be delivered to the shareholders as shares, rather than Units. There shall be no automatic credit of Units in the event of the exercise of preemptionpreemptive rights in the issue of securities other than shares.

Unit holders will be entitled to receive any shares issued as a result of our spin-off, consolidation or merger.

General Meetings

At our duly convened general meetings, our shareholders are authorized to make resolutions on matters relating to our activities and to make decisions deemed to be in our best interests.

Our shareholders are exclusively responsible for approving the financial statements at the annual general meeting, and to decide on the destination of net earnings and the distribution of dividends for the year immediately preceding the meeting. The members of the Board of Directors and Fiscal Councilare, as a general rule, elected at annual general meetings unless for an exceptional reason they have to be elected at an extraordinary general meeting.

205 

Table of Contents

An extraordinary general meeting may be held at any time, including together with an annual general meeting.meeting, Our shareholders in a general meeting are exclusively responsible for approving, among other matters: (i) amendments to our By-Laws; (ii) election and dismissal of members of our board of directors; (iii) creation of any reserves of profits, other than the legal reserve; (iv) suspension of the rights of a shareholder that has failed to comply with obligations under the law or our By-Laws; (v) approval of our incorporation, merger or spin-off; and (vi) approval of our dissolution or liquidation, approval of reports prepared by the liquidators and the election of a liquidator and members of the fiscal council to operate during a liquidation.

Quorum of General Meetings

As a general rule, the Brazilian Corporate Law sets forth that a general meeting can be held if shareholders holding at least 25% of the voting capital stock are present, at the first call, and at the second call if any number of holders of voting shares are present. If the shareholders have been convened to resolve on amendments to the By-Laws, the quorum at the first call must be at least 2/3two-thirds of the voting shares and, at the second call, any number of holders of voting shares.

 229
Table of Contents

The CVM may authorize the aforementioned quorum, set forth in the Brazilian Corporate Law, to be reduced in the case of a publicly held company with widely held shares, and where the last three general meetings have been attended by shareholders representing less than half the voting shares.

In general, the approval of any matter must occur through votes of shareholders attending a general meeting in person, or through a proxy, corresponding to at least the majority of the common shares represented at the meeting, and abstentions are not taken into account for this calculation. Nevertheless, the affirmative vote of shareholders representing at least one halfone-half of the voting shares is needed for the approval of the following matters, among others: (i) reduction of the mandatory dividend to be distributed to our shareholders; (ii) changes in our business purpose; (iii) our merger, spin-off or incorporation; (iv) our participation in a corporate group (as defined by the Brazilian Corporate Law); (v) the termination of a state of liquidation; and (vi) our dissolution.

Call Notice of ourOur Shareholders’ General Meetings

The Brazilian Corporate Law requires all general meetings to be called by a minimum of three entries in the Official Gazette of the State of São Paulo and in other mass circulation newspapers in São Paulo, where the B3 is located. Our call notices for meetings are currently published in the Official Gazette of the State of São Paulo, the official journal of São Paulo state, and in the Valor Econômico newspaper. The first call must be published not more than 30 days before the date of the meeting, and the second call not more than eight days in advance. However, in certain circumstances, at the request of any shareholder, the CVM may (i) after consulting us, require the shareholders’ meeting to be postponed and held 30 days after the first call; and/or (ii) suspend for up to 15 days the advance notice required for an extraordinary general meeting, to give the shareholder time to understand and analyze the proposals to be voted on at the meeting. The call notices must give full details of the agenda for the meeting (the term “general matters” being prohibited) and the adequate supporting documents must be available to the public on the CVM’s website from the date of publication of the first call.

Place of Our Shareholders’ General Meetings

Our shareholders’ meetings are held at our headquarters at Avenida Presidente Juscelino Kubitschek, 2041/2235, Bloco2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Olímpia,Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil. The Brazilian Corporate Law allows our shareholders to hold meetings outside our headquarters in an event of force majeure, provided that the meetings are held in the city of São Paulo and the relevant notice contains a clear indication of the place where the meeting will be held.

206 

Table of Contents

Responsibility for Calling General Meetings

It is usually the responsibility of our Board of Directors to call a general meeting, provided that such meetings may also be called by the following persons or bodies: (i) any shareholder, when our directors fail to call a meeting within 60 days of the date required by law or by our By-Laws; (ii) shareholders representing a minimum of 5% of our capital stock, if our managers fail to call a meeting, within eight days, in response to a justified request submitting matters to be discussed; (iii) shareholders representing a minimum of 5% of our capital stock, if our Board of Directors failfails to call a meeting intended to install a Fiscal Council, within eight days of the request being made; and (iv) the Fiscal Council (if already installed), if our Board of Directors fails to call the annual general meeting; and the Fiscal Council can also call an extraordinary general meeting whenever there are serious or urgent reasons.

Conditions for Admission to a General Shareholders’ Meetings

Shareholders attending general meetings must prove that they are the holders of shares with voting rights, as set forth in the Brazilian Corporate Law. Our shareholders may be represented by a proxy (including a public proxy in accordance with CVM Instruction 481, of December 17, 2009, as amended), appointed not more than one year before the date of the meeting, and this representative must be a shareholder, a manager, a lawyer or, in the case of a publicly held company, as ours is, a financial institution.institution, Investment funds may be represented by their respective administrators.

 230
Table of Contents

Remote Voting

The CVM has enacted a regulation which establishes rules for remote participation and voting in general meetings of publicly held companies.

Since January 1, 2017, the rule became applicable to all publicly held companies that had at least one type or class of share listed included in either the IBrX-100 or the IBOVESPA indices, as is our case. Accordingly, since the beginning of 2017, we have put in place the necessary structure to allow our shareholders to participate and vote remotely at general meetings. For this purpose, our shareholders must follow the voting procedures disclosed by us in the call notice for the relevant general meeting to transfer the voting pronouncements including by contacting either us or the custodians (whom(who will be responsible for transferring the voting pronouncements to us), pursuant to the terms of the applicable regulation.

regulations.

Policy on Trading in Our Own Securities

The objective of our Policy on Trading in Our Own Securities, prepared in accordance with CVM Instruction 358Resolution 44 of January 3, 2002, as amended,August 23, 2021, or “CVM Instruction 358,Resolution 44,” is: (i) to control and punish those persons with access to privileged information and who use this information to trade in securities issued by us; and (ii) to establish rules for trading in our securities.

The purpose of this policy is to avoid insider trading (the furnishing of privileged information from which third parties may benefit) and to ensure transparency in the trading of our securities.securities, Our trading policy establishes blackout periods for trading our shares by ourselves, our controlling shareholders (direct or indirect), members of the Board of Directors, Executive Officers and members of our Fiscal Council (when one has been installed) and other technical or consultative bodies or other persons who, by virtue of their job, position or commercial, professional or trust relationship with us, have access to any privileged information. This is intended to avoid improper use of information not disclosed by us.

Among other matters, persons subject to our policy shall refrain from buying or selling, by themselves through direct dependents or by using directly or indirectly controlled companies, any securities issued by us, or backed by them, as well as their respective derivatives, including:

207 

Table of Contents

(1)From the time when such persons become aware of material information that may affect the value of our securities, until such information is disclosed to the public. Those subject to the policy may trade in Company securities received or acquired under our variable compensation plans only during a period of 30 days from the date when such securities are vested, and after the end of the corresponding lock-up period, for the purpose of disposing of them, subject to the undertakings described in the following items;

(2)During the period between our decision to increase capital stock, issue securities, distribute dividends, pay bonuses, or execute a stock split or a reverse stock split, and the publication of the corresponding notices or announcements;

(3)When it is intended to carry out a takeover, a total or partial spin-off, transformation or corporate reorganization; and

(4)During the 30-day period prior to the publication of annual or six-monthly financial statements, or quarterly financial information. However, exceptionally in the case of issues of fixed-rate securities by us by means of a public offer overseas, in order to raise funds for us in the ordinary course of our business, including medium term notes issued by us, this period shall be reduced to 15 days before the publication of such statements.

Our policy also establishes that our controlling shareholders, officers, and members of our Board of Directors, members of our Fiscal Council (when there is an active one) and members of any other bodies with technical or consulting functions created by a provision in the By-Laws, shall not trade securities issued by us or their respective derivatives on the same day that we, our controlled or associated companies or any other company under their common control are selling shares held in treasury or purchasing shares to be held in treasury, or while holding open orders to deal in our shares. However, such prohibition shall not apply if the acquisition or sale of our shares by us has the specific purpose of managing the risk arising out of our activities as market maker of certain funds indexes.

 231
Table of Contents

Right to Withdrawal

The Brazilian Corporate Law gives our shareholders the right to withdraw from Santander Brasil, upon reimbursement of the equity value of their shares, if the shareholder disagrees with or abstains from voting on certain resolutions approved in shareholders’ general meetings.

According to the Brazilian Corporate Law, the right of withdrawal may be exercised in the following circumstances, among others as provided by law: (i) a change in the preferences, privileges or repayment or redemption conditions granted to our preferred shares, or the creation of a new, more favored class of shares (in which case, only a shareholder who is adversely affected by such change or creation shall have the right of withdrawal); (ii) spin-off (subject to the conditions below); (iii) a reduction in our mandatory dividend; (iv) a change in our corporate purpose; (v) a merger or incorporation with another company in specific circumstances (as described below); (vi) our joining to a group of companies, as defined in the Brazilian Corporate Law; (vii) a corporate transformation; (viii) the takeover of all of our shares by another Brazilian company, so as to make us its wholly ownedwholly-owned subsidiary; or (ix) the acquisition of control of another company at a price exceeding the legal limits.

The Brazilian Corporate Law also provides that a spin-off of a company shall entitle its shareholders to withdraw only if it results in: (i) a change in the corporate purpose, unless the assets spun off are transferred to a company whose principal activity coincides with the business purpose of the spun-off company; (ii) a reduction in the mandatory dividend; or (iii) becoming part of a group of companies, as defined in the Brazilian Corporate Law. Besides,Law, In addition, in the event of a consolidation or merger of us into another company, or when we become part of a group of companies (as defined in the Brazilian Corporate Law), our shareholders will not be entitled to withdraw from our company if the shares of such companies (a) are liquid, i.e., are listed on the three general indexes or on any other Stock Exchange index, as defined by the CVM, and (b) are widely held, such that our controlling shareholders or other companies under common control hold less than half the shares of the type or class to which the right of withdrawal corresponds. The right of withdrawal must be exercised within 30 days of publication of the minutes of the general meeting resolving on the matter that gave rise to such right. Furthermore, we have the right to reconsider any resolution that has given rise to a right of withdrawal, during the 10

208 

Table of Contents

days following the end of the period for exercising the right, if we consider that the payment of the price for buying out dissident shareholders would put our financial stability at risk.

Shareholders who exercise the right to withdrawal shall receive the equity value of their shares, based on the latest balance sheet approved at a general meeting. If, however, the resolution giving rise to the right of withdrawal was passed more than 60 days after the date of the latest approved balance sheet, a shareholder may call for a special balance sheet to be prepared as of a date not more than 60 days before the resolution, to assess the value of the shares.shares, In this case, we must immediately pay 80% of the reimbursement value, calculated according to the latest balance sheet approved by our shareholders, and the balance within 120 days of the date of the resolution of the general meeting.

Redemption of Shares

According to the Brazilian Corporate Law, we may redeem our shares by means of a resolution passed at a general meeting by votes representing at least 50% of the shares affected by the redemption. Shares may be redeemed out of retained profits, revenues reserves or capital reserves. If not all of the shares are to be redeemed, a lottery ballot shall be held. If custody shares are selected in the ballot and the custody agreement does not provide for the situation, the financial institution must specify the proportion of shares to be redeemed.

PreemptionPreemptive Rights

Our shareholders have preemptive rights to subscribe for shares in any capital increase, in proportion to their shareholding at the time of the increase. Our shareholders also have preemptive rights in any offer of our shares or subscription warrants. A period of not less than 30 days from the publication of the notice to shareholders of the capital increase is allowed for the exercise of preemptive rights, and these rights are transferable.

However, according to the Brazilian Corporate Law and our By-Laws, our shareholders do not have preemptive rights in cases of granting or exercise of any share call option. In addition, our Board of Directors may exclude the preemptive right of our shareholders or reduce the exercise period, in the issuance of shares and subscription warrants whose placement is made through sale on stock exchange or public subscription, or share exchange, in a public offering of control acquisition.

 232
Table of Contents

Purchase of Our Own Shares

Our By-Laws authorize our Board of Directors to approve the purchase of our own shares. In any of the following circumstances, the decision will only become effective upon prior approval at a shareholders meeting: (i) acquisition on an organized securities market involving more than 5% of our outstanding shares of a certain type or class in less than 18 months; (ii) acquisition on an organized securities market for prices 10% above the market price; (iii) acquisition aiming at changing or preserving our share control composition or our management structure; or (iv) where the counterparty in an acquisition out of the organized securities markets is related to us (according to the applicable accounting rules). The decision to purchase our shares will be disclosed to the markets and the respective trade will be settled within 18 months from the approval.

The decision to acquire our shares is also subject to certain restrictions. It may not, among others:other things: (i) aim for the acquisition of shares belonging to our controlling shareholders; (ii) be carried out in the organized markets for prices above the market prices; (iii) take place simultaneously with a public offering for the purchase of our shares; or (iv) require the use of funds exceeding the available funds (considered all capital or profits reserves plus the realized results of the ongoing fiscal year, excluded,excluding, in both cases, the legal reserve, the reserve for realizable profits, the special reserve for non-distributed compulsory dividends and the tax incentives).

We may not hold in treasury more than 10% of our outstanding shares of a certain type or class, including shares held by our subsidiaries and affiliated companies and the shares corresponding to the economical exposure arising from derivatives or deferred settlement transactions entered into by us, our

209 

Table of Contents

subsidiaries and affiliated companies. This limit does not apply to reimbursed shares, forfeited shares, or acquisitions in the scope of a public offering for acquisition of shares, which will be subject to specific laws and regulation.

We may purchase our shares on the stock exchange, but not for a price above the market value. Acquisitions by means of private transactions must observe the applicable limitations and the approval by the shareholders meeting may be required. We may also buy our own shares in the event that we should cease to be a publicly held company., We may also purchase or issue put or call options on our shares.

On September 18, 2017, our shareholders approved the cancellation of 64,551,366 shares held in treasury, representing 32,275,683 common shares and 32,275,683 preferred shares. Such treasury shares corresponded, as of that date, to the totality of the shares then held in treasury.

On November 1, 2019, our Board of Directors approved the Unit repurchase program to cover the acquisition of up to 37,256,072 Units or ADRs, representing 37,256,072 common shares and 37,256,072 preferred shares by us or our branch in Cayman, corresponding to approximately 1% of the totality of our corporate capital. The repurchase program endsended on November 4, 2020.

On February 2, 2021, our Board of Directors approved the Unit repurchase program to cover the acquisition, by us or our branch in Cayman, of up to 36,956,402 Units or ADRs, representing 36,956,402 common shares and 36,956,402 preferred shares, corresponding to approximately 1% of the totality of our corporate capital. The repurchase program ends on August 2, 2022.

Cancellation of Registration as a Publicly Held Company

We may cancel our registration as a publicly held company and, for this purpose, our controlling shareholders must necessarily make a public offer to acquire all our shares in the market, according to the Brazilian Corporate Law and the regulations issued by the CVM. The minimum offer price must be at least equal to the economic value of our shares, as valued by a specialized company using any generally accepted and recognized valuation method, or any other criteria defined by the CVM.

The valuation report must be prepared by a specialized and experienced appraiser, who is independent of Santander Brasil, our management team and our controlling shareholders and who shall be chosen by the board of directors. The controlling shareholder shall bear the costs of preparing the valuation report.

Disposal of Control

Our By-Laws state that disposal of control of our company, either in a single transaction or in a series of transactions, must be subject to the condition, whether a suspensive or resolutory condition, that the acquirer is obligated to make a public offer to acquire all the shares held by our other shareholders, both common and preferred. This is further pursuant to the conditions and deadlines required by the current legislation, ensuring that they receive equal treatment with respect to the controlling shareholder in the disposal.

 233
Table of Contents

This offer will still be required (i) in cases where there is assignment for consideration of rights to subscribe for shares that may result in the disposal of the company’s control; and (ii) in case of disposal of control of a company that holds the controlling power over us.

Requirement for Disclosure of Information

As a publicly held company, we must comply with the requirements for disclosure of information set forth by the Brazilian Corporate Law and the CVM.

Periodic and Occasional Disclosure of Information

The regulations applicable to publicly held companies issued by the CVM, including CVM Instruction 358,Resolution 44, provide that we must disclose both periodic and occasional information. Among such items of information are, for example, our financial statements accompanied by the management reports and the reports of our independent auditors, our standard financial information form (formulário de informações financeiras padronizadas – DFP), our quarterly report (formulário de informações trimestrais – ITR) and our reference form (formulário de referência).

210 

Table of Contents

According to CVM Instruction 480, of December 7, 2009, as amended, the reference form (formulá(formulário de referência)ncia) must be filed with the CVM annually, within five months of the closing date of the reporting period, in the form established by the regulation. The reference form (formulá(formulário de referência)ncia) shall be updated, prior to a public offer, as well as upon the occurrence of certain events determined by the regulation that alter the information described therein, within seven business days of the respective change. This document contains complete information regarding us and, in general, includes the matters addressed in this annual report.

CVM Instruction 457, of July 13, 2007, as amended, or “CVM Instruction 457,” provides that we are also subject to the disclosure of our consolidated financial statements based on IFRS within four months of the end of each reporting period. The financial statements mentioned by CVM Instruction 457 must be disclosed in their entirety, together with (i) the management report, (ii) explanatory note expressly stating without reservation that the consolidated financial statements are in accordance with IFRS as issued by the IASB and Brazilian GAAP, and (iii) the opinion of the independent auditors. Within 15 days following the term established by Brazilian law for disclosure of our quarterly information, we must: (i) disclose our full quarterly information translated tointo English; or (ii) disclose our financial statements or consolidated financial statements in accordance with IFRS as issued by the IASB, accompanied by the independent auditors’ review report.

Disclosure of Information Aboutabout Trading by Our Managers and Related Persons

Our Officers, members of our Board of Directors, Fiscal Council, if in operation, and any technical or consulting body created by our By-Laws must disclose to us the securities issued by us, our controlling or controlled companies, when publicly held, and the derivatives and other securities referenced by such securities that are held by them, as well as the trades with such securities. This obligation includes the securities held by the spouses, companions and any dependents of the aforementioned persons, as well as the companies directly or indirectly controlled by them.

We are obliged to send such information to CVM and B3 within ten10 days following the end of the month in which there is a change in the holding position or the month in which the relevant person is invested in the position (including name of person acquiring the shares, number and characteristics of the securities, form, price and date of acquisition)., Upon the issuance of CVM Instruction 568 on September 17, 2015, it also became mandatory to provide the CVM and B3 within the same time period the information related to the securities traded by us, our entities and affiliated companies.

Disclosure of Information Aboutabout Our Shareholders with Relevant Interest

CVM Instruction 358, as amended,Resolution 44 sets forth that (i) any direct or indirect controlling shareholders, (ii) any shareholders entitled to elect members of the board of directors and fiscal council, as well as (iii) any person or group of persons acting jointly with the aforementioned persons or representing the same interest, that carries out relevant transactions (that is, transactions whereby the direct or indirect holding of the aforementioned persons surpasses, upwards or downwards the thresholds of 5%, 10%, 15%, and so on successively, of our shares of a certain class and type) must disclose to us information on their trades, which will be sent to the CVM.

The rulingresolution establishes that the following information must be provided: (i) the name and qualification of the person acquiring the shares, including the registration number in the Natural Persons Registry (CPF) or the National Register of Legal Entities (CNPJ); (ii) the reason for the participation and aimed quantity of shares, containing, if it were the case, a declaration by the acquiring party that it does not intend to alter the composition of its control or the structure of the company’s administration; (iii) the number of shares and other securities or other financial instruments referenced in such shares, of physical or financial settlement, specifying the number, class and type of such shares; (iv) indication of any agreements ruling the exercise of voting rights or the purchase and sale of our securities; and (v) if the shareholder is resident or domiciled abroad, the name and the registration number in the Natural Persons Registry (CPF) or the National Register of Legal Entities (CNPJ) of its agent or legal representative in Brazil for the purposes of article 119 of the Brazilian Corporate Law.

211 

 234

Table of Contents

Table of Contents

Such obligations also apply to (i) the acquisition of any right over our shares and other securities subject to disclosure; and (ii) execution of any derivative financial instruments referenced in our shares, even without physical settlement provisions.

Our Investor Relations Officer is responsible for sending this information to the CVM and to the B3 as soon as received.

Disclosure of Material Facts

The Brazilian Securities Market Law and CVM Instruction 358Resolution 44 set forth that we must disclose any decision made by a controlling shareholder, by the general shareholders’ meeting or by any of our management bodies, or by any other act or event in connection with our business that could influence: (i) the trading price of our securities or securities referenced to our securities; (ii) the decision by investors to buy, sell or keep those securities; and (iii) the decision by investors to exercise any rights they have as holders of those securities.

Examples of material facts are: the signing of shareholders’ agreements, the transfer of control of the company, a consolidation, merger or spin-off involving the company or associated companies, the change in rights and advantages of the securities issued by the company, the split or reverse split of shares, among others.

Our Investor Relations Officer is responsible for the disclosure of any material facts to the market.

The applicable regulation authorizes us, on an exceptional basis, to request confidential treatment of certain material developments from the CVM when our management believes that disclosure of the respective fact to the public could result in adverse consequences to us.

10C.10C. Material Contracts

For the two years immediately preceding the publication of this annual report.report, we were not a party to any material contract outside the ordinary course of business.

10D.10D. Exchange Controls

Foreign Investment in Brazil

Foreign Direct Investment

Foreign direct investment in Brazil is regulated by Law No. 4,131, and Law 4,390, enacted on September 3, 1962, and August 29, 1964, respectively, as amended.amended, including by the New Foreign Exchange Law. A foreign direct investor under Law No. 4,131/62 must:

·●register as a foreign direct investor with the Brazilian Central Bank;

·●obtain a taxpayer identification number from the Brazilian tax authorities;

·●appoint a tax representative in Brazil; and

·●appoint a representative in Brazil for service of process in respect of suits based on the Brazilian Corporate Law.

Foreign capital must be registered with the Brazilian Central Bank through the Electronic Registration System – Foreign Direct Investment, or the “Registro Declaratório Eletrônico – Investimento Externo Direto,” within 30 days of the flow of funds into Brazil in accordance with Law No. 4,131. The registration of foreign capital is required for the remittance of profits abroad, the repatriation

212 

Table of Contents

of capital and the registration of reinvestments. Investments will always be registered in the foreign currency in which they are actually made, or in Brazilian currency, if the funds are derived from a non-resident account properly held in Brazil.

 235
Table of Contents

On December 28, 2006, Law No. 11,371 allowed the registration of the foreign capital invested in Brazilian companies but not yet duly registered and not subject to other types of registration. For the purposes of such registration the amount of foreign capital inreais to be registered must be evidenced in the accounting records of the relevant Brazilian company and must be registered prior to the last business day of the subsequent calendar year during which the company becomes obligated to register the capital.

Other than such registration, foreign investment is not subject to government approvals or authorizations and there are no requirements regarding minimum investment or local participation in capital (except in very limited cases such as in regard to financial institutions, insurance companies and other entities subject to specific regulations). Foreign participation, however, is limited (that is, subject to approvals) or forbidden in several sectors.

Foreign investments in currency must be officially channeled through financial institutions duly authorized to deal in foreign exchange. Foreign currency must be converted into Brazilian currency and vice versa through the execution of an exchange contract. Foreign investments may also be made through the contribution of assets and equipment intended for the local production of goods and services.

The Brazilian Congress is currently debating a bill to amend Law 4,131 and other laws that govern the Brazilian foreign exchange market. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Foreign Exchange Market”.

Capital Markets Investment

Investors residing outside Brazil, including institutional investors, are authorized to purchase securities in Brazil on the Brazilian stock exchange, provided that they comply with the registration requirements set forth in the applicable regulation enacted by CMN and the CVM.

Since March 30, 2015, portfolio investments arehave been regulated by CMN Resolution 4,373, which revoked the former rule (CMN Resolution 2,689, of January 26, 2000) which had been in force for about 15 years.

The main purpose of CMN Resolution 4,373 is to facilitate the entry of foreign investors in the Brazilian financial and capital markets. It introduced, among other things, the possibility for foreign investors of making investments in local currency with funds held in foreign bank accounts of the non-resident investor, or with bills of payment denominated inreais but issued abroad.

With certain limited exceptions, under CMN Resolution 4,373 investors are permitted to carry out any type of transaction in the Brazilian capital markets involving a security traded on a stock or futures exchange or an organized over-the-counter market, but may not transfer the ownership of investments made under such regulation to other non-Brazilian holders through private transactions. Investments and remittances outside Brazil of gains, dividends, profits or other payments under Santander Brasil’s shares are made through the commercial rate exchange market.

Under CMN Resolution 4,373, an investor residing outside Brazil must:

·●appoint at least one financial institution or an institution authorized to operate by the Brazilian Central Bank as representative in Brazil that will be responsible for complying with the registration and reporting requirements and reporting procedures of the Brazilian Central Bank and the CVM;

·●register as a foreign investor with the CVM;

213 

Table of Contents

·●appoint one or more custodians authorized by the CVM;

·●register the foreign investment with the Brazilian Central Bank;

·●appoint a tax representative in Brazil; and

·●obtain a taxpayer identification number from the Brazilian federal tax authorities.

Securities and other financial assets held by foreign investors pursuant to said regulation must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Brazilian Central Bank or the CVM. In addition, securities trading by foreign investors is generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by the CVM.

 236
Table of Contents

CVM InstructionResolution No. 560,13, of March 27, 2015, as amended, introduced in Brazilian securities regulationNovember 11, 2020 establishes the obligation of the representatives of investors residing outside Brazil to inform the CVM of the movements and applications of funds of such investors participating in collective accounts and holders of own accounts represented by them.

10E.10E. Taxation

The following summary contains a description of certain Brazilian and U.S. federal income tax consequences of the ownership and disposition of units or ADRs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to the ownership or disposition of units or ADRs. The summary is based on the tax laws of Brazil and regulations thereunder and on the tax laws of the United States and regulations thereunder, as of the date hereof, which are subject to change.

Although there is at present no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in a treaty. No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. Holders (as defined below) of units or ADRs. Prospective holders of units or ADRs should consult their tax advisors as to the tax consequences of the acquisition, ownership, and disposition of units or ADRs in their particular circumstances.

Brazilian Tax Considerations

The following discussion is a summary of the Brazilian tax considerations relating to the acquisition, exchange, ownership, and disposition of units or ADRs by a Non-Resident Holder. The discussion is based on Brazilian law as currently in effect, which is subject to change, possibly with retroactive effect, and to differences of interpretation. Any change in such law may change the consequences described below.

The tax consequences described below do not take into accountconsider the effects of any tax treaties or reciprocity of tax treatment entered into by Brazil and other countries. The discussion also does not address any tax consequences under the tax laws of any state or locality of Brazil.

The description below is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, exchange, ownership, and disposition of our units or ADRs.ADRs, Holders of units or ADRs and prospective purchasers thereof should consult their tax advisors with respect to the tax consequences of owning and disposing of our units or ADRs in light of their particular investment circumstances.

214 

Table of Contents

Income Tax

Dividends

Dividends paid by a Brazilian company, such as ourselves, including stock dividends to a Non-Resident Holder are currently not subject to withholding income tax in Brazil, to the extent that such amounts are related to profits generated since January 1, 1996. Dividends relating to profits generated prior to January 1, 1996 may be subject to Brazilian withholding tax at varying rates, depending on the year the profits were generated.

Interest Attributable to Shareholders’ Equity

Law 9,249, dated December 1995, as amended, allows a Brazilian corporation, such as ourselves, to make distributions to shareholders of interest on net equity and to treat those payments as a deductible expense for purposes of calculating Brazilian corporate income tax and social contribution on net profits, subject to the limits described below. These distributions may be paid in cash. For tax purposes, this interest is limited to the daily pro rata variation of the Long-Term Rate (Taxa de Longo Prazo – TLP), as determined by the Brazilian Central Bank from time to time, and the amount of this deductible expense may not exceed the greater of:

·●50% of the net income (after the deduction of social contribution on net profit but before taking into account allowances for income tax and the interest attributable to shareholders’ equity) for the period in respect of which the payment is made; and

·●50% of our accumulated profits.

Payment of interest on shareholders’ equity to a Non-Resident Holder is subject to withholding income tax at the rate of 15%, or 25% for individuals or entities residing in a “Tax Haven.” According to Brazilian legislation, a “Tax Haven” jurisdiction is one in which there is no income taxation or where the local income tax rate is generally applied at rates under 20%. Ordinance 488 dated December 12, 2014 provided for the possibility of that 20% threshold being reduced to 17% if the corresponding jurisdictions are aligned with international standards of fiscal transparency in accordance with rules to be established by the Brazilian tax authorities, or where local legislation imposes restrictions on disclosure regarding shareholder composition or investment ownership. These payments may be included, at their net value, as part of any mandatory dividend, as discussed above under “—“Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.”

Distributions of interest on shareholders’ equity to Non-Resident Holders may be converted into U.S. dollars and remitted outside Brazil, subject to applicable exchange controls, if the investment is registered with the Brazilian Central Bank.

 237
Table of Contents

Capital Gains

(i)       Taxation of Capital Gain Earned in the Country in a Transaction Not Carried Out on the Brazilian Stock Exchange (Or Similar Exchange)

According to Law 10,833/03, the gains recognized on a disposition of assets located in Brazil, such as our units, by a Non-Resident Holder, could be subject to withholding tax in Brazil. This rule is applicable regardless of whether the disposition occurs in Brazil or abroad and regardless of whether the disposition is made to an individual or entity resident or domiciled in Brazil.

As a general rule, capital gains realized as a result of a disposition of units are the positive difference between the amount realized on the disposition of the units and the acquisition cost of such units.

Historically, the income tax on these gains had to be withheld at source and the tax rate would vary depending on the domicile of the Non-Resident Holder:

·●If the Non-Resident Holder is not located in a Tax Haven, a progressive tax rate will be applied as provided for in Law No. 13,259/16, as follows: (i) at a rate of 15% for the portion of the gain up to R$5 million, (ii) at a rate of 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) at a rate of 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million; and

215 

Table of Contents

·●If the Non-Resident Holder is located in a Tax Haven, the tax rate will be 25%.

The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.

(ii)       Taxation of the Capital Gains Earned in the Country in a Transaction Carried Out on the Brazilian Stock Exchange (Or Similar Exchange)

There could also be the levy of income tax on net gains earned by a Non-Resident Holder on the disposition of units sold on the Brazilian stock exchange, commodities or futures exchange (or similar exchange). The tax rate will vary according to the type of investment registration made by the Non-Resident Holder at the Brazilian Central Bank, as well as the location of the beneficiary:

·●Capital gains earned by a Non-Resident Holder who (i) has its investment registered in Brazil with the Brazilian Central Bank under the rules of CMN Resolution 4,373, or “Registered Holder,” and (ii) is not a Tax Haven resident are exempt from income tax; and

·●Capital gains earned by a Non-Resident Holder who is not a Registered Holder or is a Tax Haven resident (Registered Holder or not) are currently subject to income tax at a rate of 15%. In this case, withholding income tax of 0.005% will be levied by the intermediary institution (that is, a broker) that receives the order directly from the Non-Resident Holder, which can be later offset against the 15% income tax due on the capital gain, which will be paid by the Non-Resident Holder’s tax representative in Brazil.

Any other gains realized on a disposition of units that is not carried out in an exchange environment or that is conducted in the non-organized “OTC market” are subject to the same rules set forth in item “(i) Taxation of Capital Gain Earned in the Country in a Transaction Not Carried Out on the Brazilian Stock Exchange (Or(or Similar Exchange).” Gains realized by a Non-Resident Holder on the disposition of preemptive rights held in stock will be subject to Brazilian income tax, according to the same rules applicable to the sale of units or ADRs.

 238
Table of Contents

(iii)       Capital Reduction

In case of a capital reduction by a Brazilian corporation, such as ourselves, the positive difference between the amount received by the Non-Resident Holder and the acquisition cost of the shares is treated as capital gain derived from a transaction held out of a Brazilian exchange described above in (i) and is therefore currently subject to withholding tax at the following progressive rates: (i) 15% for the portion of the gains up to R$5 million, (ii) 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million for a Non-Resident Holder not located in a Tax Haven or up to 25% for a Non-Resident Holder located in a Tax Haven.

Although subject to interpretation, in the case of Non-Resident Holders carrying out investments pursuant to CMN Resolution 4,373, it is possible to sustain that the income tax should not apply at progressive rates under Law 13,259/16.16, but at a fixed rate of 15%. Moreover, Non-Resident Holders located in a Tax Haven jurisdiction are subject to a specific tax regulation and remain taxed to a tax rate of 25%.

Sale of ADRs

Pursuant to Section 26 of Law 10,833/10833/2003, the sale of an asset located in Brazil by a Non-Resident Holder, whether to a Brazilian resident or to another Non-Resident Holder, is subject to Brazilian income tax. Our understanding is that ADRs do not qualify as assets located in Brazil and thus should not be subject to the Brazilian income tax. Notwithstanding the foregoing, since the tax rule referred to in Section 26 of Law 10,833 provides broad language and has not been definitely analyzed by the administrative or judicial courts, we are unable to assure you of the final outcome of such discussion.

216 

Table of Contents

Gains on the exchangeExchange of ADRs for units

Units

Non-Resident Holders may exchange ADRs for the underlying units, sell the units on the Brazilian stock exchange and the sale proceeds may be remitted abroad. As a general rule, the exchange of ADRs for shares is not subject to income taxation in Brazil.

Upon receipt of the underlying units in exchange for ADRs, Non-Resident Holders may also elect to register with the Brazilian Central Bank the U.S. dollar value of such units with the Brazilian Central Bank as a foreign portfolio investment under CMN Resolution 4373,4,373, which will entitle them to the tax treatment applicable to Registered Holders described above.

Alternatively, the Non-Resident Holder is also entitled to register with the Brazilian Central Bank the U.S. dollar value of such units as a foreign direct investment with the Brazilian Central Bank under Law No. 4,131/62, in which case the respective sale would be subject to the tax treatment applicable to transactions carried out of by a Non-Resident Holder that is not a Registered Holder.

Gains on the exchangeExchange of unitsUnits for ADRs

The deposit of units in exchange for ADRs by a Non-Resident Holder may be subject to Brazilian income tax on capital gains if the acquisition cost of the units is lower than the market price for such units.

The difference between the acquisition cost and the average price of the units is considered a capital gain currently subject to income tax at the following progressive rates: (i) 15% for the portion of the gains up to R$5 million, (ii) 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million), or 25.0% for Tax Haven residents. If a Non-Resident Holder that is a foreign direct investor under Law 4,131/4131/62 wishes to deposit its units into the ADR program in exchange for ADRs, such Non-Resident Holder will be required to present to the custodian evidence, if applicable, of payment of the income tax assessed on capital gains at the aforementioned progressive rates previously noted or, in the case of a Tax Haven resident, 25%.

Pursuant to CMN Resolution 4,373 the progressive rates of Law 13,259/16 to capital gains obtained by Non-Resident Holders not located in a Tax Haven will be applicable and for Non-Resident Holders (whether they are considered to be Non-Resident Holders as a result of CMN Resolution 43734,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and remain taxed to a tax rate of 25%.

 239
Table of Contents

However, in certain circumstances, there may be arguments to sustain the position that such taxation is not applicable to 4,373 Holders that are not resident or domiciled in a Low or Nil Tax Jurisdiction, which should be subject to the assessment of the withholding income tax at a fixed 15% rate.

However,Moreover, there are arguments to support the position that there should be no withholding tax on this transaction, because: (i) the deposit of units would not have represented the disposal of the investment; and (ii) the transaction is registered on the stock exchange. Given the uncertainty of these two positions, we recommend that you consult your tax advisors.

Tax on Foreign Exchange Transactions (IOF/Exchange)

The Tax on Foreign Exchange Transactions, or “IOF/Exchange,” is due on the conversion of Brazilian or foreign currency, or any document that represents it, into an available equivalent amount. Currently, for most foreign exchange transactions, the IOF/Exchange rate is 0.38%.

However, currently different IOF/Exchange rates apply to foreign exchange transactions carried out in connection with investments made by Non-Resident Holders in the Brazilian financial and capital markets under CMN Resolution 4373. These rates are:

i.investment in financial and capital markets (Fixed Income), constitution of guaranteed margin, derivatives operations with predetermined yield, including simultaneous transactions: zero;

217 

Table4,373 are generally subject to the IOF/Exchange at a rate of Contents

ii.investment in variable income securities negotiated on a stock exchange, commodities and futures, acquisition of shares in public offerings or subscription of shares, as long as they belong to publicly-held companies whose shares are subject to trading on the stock exchange: zero;

iii.investment in private equity funds (FIP), investment funds in emerging companies (FIEE) and investment funds in shares from these funds (FIC-FIP and FIC-FIEE): zero;

iv.simultaneous foreign exchange transactions resulting from the cancellation of depositary receipts for the acquisition of shares negotiated on the stock exchange: zero;

v.returns of investments made in the Brazilian capital and financial markets: zero;

vi.distribution of interest on shareholders’ equity and dividends: zero;

vii.investment in Brazilian Depositary Receipts: zero; and

viii.investments in bonds related to infrastructure projects, which comply with the requirements provided for in Article 1 of Law 12,431/2011: zero.

Under the provisions of the Law, the Brazilian government may increase any of these rates at any time, up to 25%. However, any increase in rates may only apply to future transactions.

Tax on Transactions Involving Bonds and Securities and Derivatives

Brazilian law imposes a Tax on Transactions Involving Bonds and Securities, known as “IOF/Bonds Tax.”

Currently, the IOF Bonds Tax is due at a daily rate of 1.0%, limited to 96.0% of the income generated by fixed income bonds, on the redemption amount or the amount received from assignment or renegotiation. The rate is reduced to zero as from the thirtieth day.

The rate of IOF/Bonds Tax applicable to transactions of variable income securities, including those traded in stock, commodities or futures markets that involve shares, or units composed of shares, is reduced to zero.

The IOF Derivatives Tax was established by Decree 7,563 of September 16, 2011, with the original levy of 1% on the notional value of the adjusted purchase sale or maturity of financial derivative contract in the countryBrazil that individually results in an increased foreign exchange exposure on a short position. However, under Decree 8,027 of June 12, 2013 the tax rate was reduced to zero.

Other Brazilian Taxes

The inheritance and gift tax, or “ITCMD,”“ITCMD” is applicable to the transfer of any goods or rights by gift or bequest. The transfer of shares, or units comprised of shares, that are abroad to individuals who are residentsresident in Brazil is subject to taxation. If the shares are in Brazil and are transferred to a non-resident, the ITCMD will apply if the donor is domiciled in Brazil and the recipient is domiciled abroad. The ITCMD is a state tax with a maximum rate of 8%.

Material U.S. Federal Income Tax Considerations for U.S. Holders

The following summary describes the material U.S. federal income tax consequences of the ownership and disposition of ADRs or units, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to acquire such securities. This summary does not address “Medicare contribution tax” consequences and applies only to U.S. Holders (as defined below) that hold ADRs or units as capital assets for U.S. federal income tax purposes and does not address special classes of holders, such as:

i.certain financial institutions;

218 

Table of Contents

ii.insurance companies;

iii.dealers and traders in securities that use a mark-to-market method of tax accounting;

iv.persons holding ADRs or units as part of a hedge, “straddle,” conversion transaction or integrated transaction;

 240
Table of Contents
v.holders whose “functional currency” is not the U.S. dollar;

vi.holders liable for the alternative minimum tax;

vii.tax exempt entities, including “individual retirement accounts” and “Roth IRAs”;

viii.partnerships or other entities classified as partnerships for U.S. federal income tax purposes;

ix.holders that own or are deemed to own 10% or more of our shares by vote or value;

x.persons holding ADRs or units in connection with a trade or business conducted outside the United States; and

xi.persons who acquired ADRs or units pursuant to the exercise of an employee stock option or otherwise as compensation.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds units or ADRs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership.partnership, Partnerships holding units or ADRs and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of holding and disposing of the units or ADRs.

The summary is based upon the Internal Revenue Code of 1986, as amended, or the “Code,”“Code” administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, all as of the date hereof, changes to any of which may affect the tax consequences described herein, possibly with retroactive effect. In addition, the summary is based in part on representations of the depositary and assumes that each obligation provided for in, or otherwise contemplated by, the deposit agreement or any other related document will be performed in accordance with its terms.terms, U.S. Holders are urged to consult their tax advisors as to the U.S. federal income tax consequences of the acquisition, ownership and disposition of ADRs or units in their particular circumstances.

As used herein, a “U.S. Holder” is, for U.S. federal income tax purposes, a beneficial owner of ADRs or units that is:

(1)an individual who is a citizen or resident of the United States;

(2)a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

(3)an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

(4)a trust if (a) a court within the United States is able to exercise primary supervision for the administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has validly elected under applicable Treasury Regulations to be treated as a U.S. person.

In general, for U.S. federal income tax purposes, U.S. Holders of ADRs will be treated as the owners of the underlying units represented by those ADRs.ADRs, Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADRs for the underlying units represented by those ADRs.

219 

Table of Contents

The U.S. Treasury has expressed concerns that parties to whom American depositary shares are released before delivery of shares to the depositary (a practice called “pre-release”) or intermediaries in the chain of ownership between U.S. Holders and the issuer of the security underlying the American depositary shares, may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of American depositary shares. These actions would also be inconsistent with the claiming of the preferential tax rates described below, applicable to dividends received by certain non-corporate holders. Accordingly, the creditability of Brazilian taxes and the availability of the preferential tax rates for dividends received by certain non-corporate holders, each described below, could be affected by actions taken by these parties or intermediaries.

Taxation of Distributions

Distributions paid on our units or ADRs (including distributions to shareholders that are treated as interest on net equity for Brazilian tax purposes and amounts withheld in respect of Brazilian tax), other than certain pro rata distributions of our common shares, will be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders as dividends. These dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s (or in the case of ADRs, the depositary’s) receipt of the dividend, and will not be eligible for the “dividends received deduction” generally allowed to corporations receiving dividends from domestic corporations under the Code. The amount of the distribution will equal the U.S. dollar value of thereaisreceived, calculated by reference to the exchange rate in effect on the date that distribution is received (which, for U.S. Holders of ADRs, will be the date on which the distribution is received by the depositary), whether or not the depositary or U.S. Holder in fact converts anyreais received into U.S. dollars at that time. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. Any gains or losses resulting from the conversion ofreais into U.S. dollars will be treated as ordinary income or loss, as the case may be, of the U.S. Holder and will generally be U.S. source.

 241
Table of Contents

Subject to applicable limitations (including the requirement that the ADRs be readily tradable on an established securities market in the United States), the discussion above regarding concerns expressed by the U.S. Treasury and the discussion of the passive foreign investment company rules below, under current law, dividends paid with respect to our ADRs to certain non-corporate U.S. Holders will be taxable at the preferential rates applicable to long-term capital gain. Non-corporate U.S. Holders should consult their tax advisors regarding the availability of these favorable rates in their particular circumstances.

Sale or Other Disposition of ADRs or Units

Subject to the discussion of the passive foreign investment company rules below, gain or loss realized by a U.S. Holder on the sale or exchange of ADRs or units will be subject to U.S. federal income tax as capital gain or loss in an amount equal to the difference between the U.S. Holder’s adjusted tax basis in the ADRs or units and the amount realized on the disposition, in each case as determined in U.S. dollars. Such gain or loss will be long-term capital gain or loss to the extent that the U.S. Holder’s holding period with respect to the ADRs or units exceeds one year.year, Gain or loss, if any, will generally be U.S. source for foreign tax credit purposes. The deductibility of capital losses is subject to limitations. Long-term capital gain of a non-corporate U.S. Holder is generally taxed at preferential rates. If a Brazilian tax is withheld on the sale or other disposition of ADRs or units, a U.S. Holder’s amount realized will include the gross amount of proceeds of the sale or disposition before the deduction of the Brazilian tax. See “—Brazilian Tax Considerations” for a description of when a disposition may be subject to taxation by Brazil.

220 

Table of Contents

Foreign Tax Credits

Subject to certain generally applicable limitations, which may vary depending upon a U.S. Holder’s circumstances, and subject to the discussion above regarding concerns expressed by the U.S. Treasury, a U.S. Holder will be entitled to a credit against its U.S. federal income tax liability for Brazilian income taxes withheld from dividends on ADRs or units. A U.S. Holder will be entitled to use these foreign tax credits to offset only the portion of its U.S. tax liability that is attributable to foreign-source income. This limitation on foreign taxes eligible for credit is calculated separately with regard to specific classes of income. In addition, a U.S. Holder must satisfy minimum holding period requirements in order to be eligible to claim a foreign tax credit for foreign taxes withheld on dividends.

Because a U.S. Holder’s gains from the sale or exchange of ADRs or units will generally be treated as U.S. source income, the limitation described above may preclude a U.S. Holder from claiming a credit for all or a portion of the foreign taxes imposed on any such gains. U.S. Holders should consult their tax advisors as to whether these Brazilian taxes may be creditable against the U.S. Holder’s U.S. federal income tax liability on foreign-source income from other sources. Instead of claiming a credit, a U.S. Holder may, at its election, deduct such otherwise creditable Brazilian income taxes in computing taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.

The Brazilian IOF/Exchange Tax imposed on the purchase of units and the IOF/Bonds Tax on the deposit of units in exchange for ADRs (as discussed above under “—Brazilian Tax Considerations”) will not be treated as creditable foreign tax for U.S. federal income tax purposes. U.S. Holders should consult their tax advisors as to whether those taxes would be deductible for U.S. federal income tax purposes.

The rules governing foreign tax credits are complex and, therefore, U.S. Holders are urged to consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to make effective use of foreign tax credits.

Passive Foreign Investment Company Rules

Based on proposed Treasury Regulations, including regulations which are proposed to be effective for taxable years beginning after December 31, 1994, we believe we were not a passive foreign investment company (a “PFIC”) for our taxable year ended December 31, 2019.2021. However, because the proposed Treasury Regulations may not be finalized in their current form, because the application of the proposed regulations is not entirely clear and because the composition of our income and assets will vary over time, there can be no assurance that we will not be a PFIC for any taxable year. The determination of whether we are a PFIC is made annually and is based upon the composition of our income and assets (including, among others, entities in which we hold at least a 25.0% interest), and the nature of our activities.

 242
Table of Contents

If we were a PFIC for any taxable year during which a U.S. Holder held our ADRs or units, any gain recognized by a U.S. Holder on a sale or other disposition of ADRs or units would be allocated ratably over the U.S. Holder’s holding period for the ADRs or units. The amounts allocated to the taxable year of the sale or other exchange and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to all other taxable years would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the resulting tax liability for each of those taxable years.years, Further, the portion of any distribution in respect of ADRs or units that is in excess of 125.0%125% of the average of the annual distributions on ADRs or units received by the U.S. Holder during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, would be subject to taxation as described above. Certain elections may be available that would result in alternative treatments (such as mark-to-market treatment) of the ADRs or units.units, U.S. Holders should consult their tax advisors to determine whether any of these elections would be available and, if so, what the consequences of the alternative treatments would be in their particular circumstances.

221 

Table of Contents

If we were to be treated as a PFIC in any taxable year in which a U.S. Holder held units or ADRs, a U.S. Holder would generally be required to file IRS Form 8621 with its annual U.S. federal income tax returns, subject to certain exceptions.

In addition, if we were to be treated as a PFIC in a taxable year in which we pay a dividend or the prior taxable year, the preferential dividend rates discussed above with respect to certain dividends paid to non-corporate holders would not apply.

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding unless (i) the U.S. Holder is an exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.

Certain U.S. Holders who are individuals (and specified entities that are formed or availed of for purposes of holding certain foreign financial assets) may be required to report information relating to their ownership of an interest in certain foreign financial assets, including stock of a non-U.S. entity, subject to certain exceptions (including an exception for publicly traded stock and interests held in custodial accounts maintained by a U.S. financial institution). U.S. Holders are urged to consult their tax advisors regarding the effect, if any, of this requirement on the ownership and disposition of ADRs or units.

FATCA

The United States has enacted legislation, commonly referred to as “FATCA,” that generally imposes a reporting and withholding regime with respect to certain U.S. source payments (including interest and dividends), and to payments of gross proceeds from the disposition of property that can produce U.S. source interest and dividends and certain payments made by entities that are classified as financial institutions under FATCA. However, regulations proposed in 2018 (the preamble to which specifies that taxpayers are permitted to rely on them pending finalization) eliminate the withholding requirement on payments of gross proceeds of a taxable disposition. The United States has entered into an intergovernmental agreement regarding the implementation of FATCA with Brazil, or the “IGA”.“IGA.” For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—FATCA,” above. Under the current terms and conditions of the IGA, we do not expect payments made on or with respect to the ADRs or units to be subject to withholding under FATCA. However, significant aspects of when and how FATCA will apply remain unclear, and no assurance can be given that withholding under FATCA will not become relevant with respect to payments made on or with respect to the ADRs or units in the future. Prospective investors should consult their own tax advisors regarding the potential application of FATCA.

 243
Table of Contents
10F.

10F. Dividends and Paying Agents

Not applicable.

10G.10G. Statement by Experts

Not applicable.

222 

Table of Contents

10H.10H. Documents on Display

We are subject to the information requirements of the Exchange Act, except that as a foreign issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file with or furnish reports and other information to the SEC. Reports and other information filed or furnished by us to the SEC may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 100 F Street, N.E., Washington, D.C. 20549. Copies of such material may also be inspected at the offices of the NYSE, 11 Wall Street, New York, New York 10005, on which our ADRs are listed. In addition, the SEC maintains a website that contains information which we have filed electronically with the SEC, which can be accessed over the Internetinternet at http://www.sec.gov.

We also file consolidated financial statements and other periodic reports with the CVM located at Rua Sete de Setembro, 111, Rio de Janeiro, Rio de Janeiro 20159-900, Brazil. The CVM maintains an Internetinternet website that contains reports and other information about issuers, like us, that file electronically with the CVM.CVM, The address of that website is http://www.cvm.gov.br. We also file consolidated financial statements and other periodic information with the B3. The address of the B3 website is http://www.bmfbovespa.com.br.

10I.10I. Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview

In addition to establishing and applying our local risk management policies and procedures, we have incorporated the Santander Group’s global risk management functions at various levels of our organization, including financial, credit, market, operational and compliance risk, to ensure a consistent worldwide approach

worldwide.

In addition, committees led by senior management are responsible for controlling risks by overseeing credit approval and compliance with the exposure policies defined and approved by the Bank’s board of directors.

The Control department and Risk Consolidation department provided their respective Risk management reports to senior management. Likewise, the reports for senior management of the Santander Group’s financial entities and foreign branches are generated mainly by the risk control departments of each of those entities and branches.

The presentation of such information to senior management is designed to enhance the understanding and management of risks for the Santander Group’s administrative bodies and branches. The type of information and highlights in each report varies depending on the intended audiences within senior management, such as the Santander Group, its financial entities, or its foreign branches. Information can be transmitted to senior management through our intranet risk reporting tool, by e-mail or through live presentations.

Information, analyses and decisions are also disseminated through the channels described below, fostering communication among all areas of the organization:

i.internal department mailboxes, which allow for the exchange of information within groups and areas;

ii.periodic meetings (departmental, monthly, quarterly, off-site, conventions), which allow for regular exchange of information on an in-person basis;

iii.our regulations portal, which is an internal portal within our intranet where we maintain our current risk management policies;

223 

Table of Contents

iv.e-mail;

 244
Table of Contents
v.video and teleconferences with Santander Spain; and

vi.risk committees, including the executive risk committee for Brazil and the Risk control committee.

Information is prepared with the goal of improving risk management and is classified into two groups:

i.Standard information: this information is generated on a regular basis and with fixed content, subject to revision, made available to senior management for select target areas, depending on the type of information included in the report. The reports are used to facilitate knowledge about the risk for which the Risk Management department is responsible, including credit use, instrument valuation and results, as well as the analyses needed to manage these risks and optimize capital.

ii.Non-standard information: this includes presentations and information not included in the reports above prepared for our senior management on an ad hoc basis or upon specific request. When the request for certain information becomes more regular, such reporting is integrated into automated “Standard information”.information.”

iii.Each report varied by the nature of the information and its frequency. The nature of the information provided is either quantitative or qualitative.

Quantitative Information. Quantitative information includes risk metrics that permit our senior management to better analyze situations, trends and developments in each segment, activity or portfolio, relating to planned scenarios or defined limits, with emphasis on any scenarios falling outside such limits. Quantitative information primarily addressed the liquidity and market risk (trading and banking book) which includes, among other items, measurements of positions, mark-to-market valuations, sensitivity analyses, volume analyses, measures of liquidity gaps and country risk models, impacts of risks on results, economic risks, stress test simulations and back-testing.

Qualitative Information. Qualitative information includes internal and external events relating to the economic, financial or competitive environment, and an evaluation and analysis of the causes and known or foreseeable consequences of such events. These also include measures used to prepare such models.

The frequency with which quantitative and qualitative risk management information is prepared depends on the information provided, as follows:

Daily information:

i.liquidity and market risk: includes data on treasury limits (VaR, positions, sensitivity of linear and non-linear econometric models) and the principal changes in the treasury portfolio. Also includes LCRshort-term liquidity and liquidity buffer calculation.

Weekly information:

i.focuses on generating updated high-level information in different segments (focused on solvency risk) or portfolios (focused on market risk), as well as a summary of the relevant facts and expected short-term changes;

ii.is generated for our senior management, including the chief executive officer and vice president executive officers of retail, risks and finance, and an independent member of our board of directors; and

iii.is drawn from our risk management framework and policies globally and is validated by local market risk areas.

224 

Table of Contents

Monthly information:

i.liquidity and market risk: facilitatesfacilitate the analysis of the current activity, including structural and interest rate risks; it also includes a detailed analysis of alternative measures, stress scenarios and short, long and concentration liquidity metrics.

Monthly information is generally more detailed than weekly information.

 245
Table of Contents

Risk Management Committees

The following table describes the main risk committees in Brazil (which are responsible for credit decisions and for ongoing control of credit risk matters), including their responsibilities, members and frequency of meetings.

Committee

Main Responsibilities

Members

Meeting Frequency

Executive Risk Committee·      Apply●Enable the application, at the local level, of the Santander Group’s risk policies locally in a manner compatible withculture, aligning the objectivesSantander Brasil’s strategy, predisposition and risk tolerance level (“Main Guide”) to the mission and objective of theits business areas;areas

·●

CEO

Weekly
 ·●Approves the risk appetite secondary metrics that will be proposed to the board of directors of Santander Brasil;·●Vice President Executive Officer (Chief Risk Officer)., 
 ·●Manage exposures from different clients,customers, economic sectors and types of risks, including, among others, the following functions:

·●

Vice President Executive Officer of Legal and Corporate Affairs

 
 ·●Approve risk proposals for credit and market operations, including, among others, underwriting operations of fixed and variable income, customer limits for Treasury products, ALCO (Assets and Liabilities Committee) limits, debt restructuring proposals and payment arrangements;

·●

Executive Superintendent of Wholesale’s Risks

 
 ·●Handle general issues related to market risk, cross-border limits, country risk, global banking operations, and market risk approvals;·●Vice-President Executive Officer of Corporate and Investment Banking 
 ·●Adopt and, if necessary, validate, portfolio sales or individual asset-credits;·●Vice President Executive Officer of Corporate 
 ·●Approve predefined internal risk regulations as well as changes in risk policies with impact on revenue, margin or provisionand monitor the Strategic Business Plan main indicators;·●Vice President Executive Officer of Private Banking and Wealth

225 

Table of Contents

      expenses on the Strategic Business Plan as well as on any related matters;Management 
 ·●Authorize management tools, improvement initiatives, follow up on projects and any other relevant activities related to risk management;  
 246
Table of Contents
 

·●Approve the policy and standards of methodological models and validate their effectiveness;●
 ·●Be aware of and take the necessary measures regarding risk to comply with the recommendations and directions issued by supervisory authorities in the exercise of its functions and the internal audit of the Bank;● 
 ·●Provide information to the board of directors and to the executive committee and assistance, if needed, in order to execute the tasks assigned to risk management by applicable law, the by-laws, the board of directors´ rules of procedure and the regulation of the Risk Executive Committee; and● 
 ·●Approve the creation, modification and termination of other committees or decision bodies and their regulations and delegate to those committees or people empowerment on decision-making and risk management.management,●

226 

Table of Contents

Committee

Responsibilities

Members

Meeting Frequency

 
Risk Control Committee·●Oversee the Risk Identification and Assessment (RIA) exercise;·●Chief Financial OfficerBiweekly
 ·●Conduct a full segment and regular follow up of all risks, including Conduct Risk, checking if the risk profile is set in accordance with the risk

·     Chief Risk Officer

·     Chief IT Officer

appetite, the commercial and strategic plan and the budget approved by the board of directors;●

Chief Risk Officer

Chief IT Officer·  

Vice President Executive Officer of Communication and Marketing

 
 ·●Conduct an independent and periodic control report on risk management activities, which includes:·●Executive Superintendents ofSuperintendent of- Enterprise Risk Architecture and Risk ControlManagement 
 ·●Full risk profile view of the different businesses, including among others, benchmarking of the main competitors of the Bank and monitoring of key strategic projects;·      Chief Audit Officer●Executive Superintendent of GIR and Relationship with Supervisors 

 247
Table of Contents
 

·●Monitor the observance of appetite and risk policies, advising the board risk committee on these issues;

●Approve the secondary metrics of Risk Appetite,

·●Review and monitor compliance with the General Risk Framework and Risk Appetite, identifying exposures to the most relevant risks through risk reports

●Monitor all relevant aspects of capital management and its impacts.impacts

●Approve, review and guarantee the correct and effective risk governance, including the control and decision forums, structures, policies and reports to ensure that all relevant risks are identified, managed and reported,

●Approve and review the Strategic, Financial, Business Continuity and Recovery Plans

·●Vice President Executive Officer of Finance and Strategy.Strategy,

·●Chief Compliance Officer

●Vice President Executive Officer of Legal and Corporate Affairs

●Chief Data Officer

●Audit Director

●Chief Information Security Officer

 
 ·●Support and assist the board in carrying out stress tests, in particular valuingby evaluating the scenarios and assumptions to be used andin these tests, valuing the results of these tests and analyzing the measures proposed by the risk function as a consequence of the results;  
 ·●Validate the information on risks that must be submitted to the board of directors when so required and without prejudice to the direct access to the person responsible for the risk function (Chief Risk Officer) to the board;  
 

·●Supervise measures taken regarding risks to comply with the recommendations and directions issued by the supervisory authorities in the exercise of its function and Santander Brasil’s audit;

  
 248
Table of Contents

 

·●Provide the board of directors, through the board risk committee, and the executive committee the information and assistance needed regarding risks for the fulfillment of its functions in risk management matters assigned to it by law, the board of directors´ rules of procedure and the regulation of the Risk Control Committee – RCC; and

·●Approve the operation of hierarchically lower-risk control committees and their respective regulations;

●aspects related to capital management, including:

●Present the impact of new regulations and the results of the elaboration of QIS (Quantitative Impact Study);

●Review and evaluate responses to additional requests made by regulators regarding capital management issues;

●Carry out the analysis and supervision of the results of the capital adequacy assessment exercises and their main components (schedule, assumptions, economic scenarios, methodologies, results, capital buffer, contingency plans and other relevant aspects) of the following processes: ICAAP, TEBU (Bottom-up Stress Test), Strategic.

  

227 

Table of Contents

 

The Executive Risk Committee and Risk Control Committee, which are described above in detail above, make decisions with regard to risk management in Brazil with representatives of our senior management, including our Chief Executive Officer (CEO), our Vice President Executive Officer of Risk Management (CRO) and other members of the Executive Committee. The main responsibilities of the Executive Risk Committee and Risk Control Committee include defining our level of risk tolerance, monitoring our loan portfolios and market conditions, as well as following up on any recommendations made by the Brazilian Central Bank. They also raise any matters to our board of directors that exceed the authority of the committee. Each of our risk management committees havehas certain authority and approval levels, in each case subject to Brazilian law and regulations. Decisions at the committee level are intended to be collegial in a manner to ensure that differing opinions are all considered.

Credit Risk

Santander Group’s risk management model is based on a prudent management, driven by the risk appetite defined by the unit and approved by the headquarters. We operate within the limits of the Santander Group's risk management guidelines and Brazilian Central Bank regulations, in order to protect and optimize capital and promote profitability. One of our credit risk management principles is that of independence among our business areas, providing sufficient autonomy for proper risk management. Another important characteristic of our risk management is the direct involvement of senior management in the decision-making process through credit committees. Our credit risk management process, especially new loan approval and risk monitoring, is structured according to our customer and product classifications, and is divided into retail and wholesale lending.

 249
Table of Contents

Retail Lending

In retail banking, credit requests made by individuals are analyzed by a credit approval system, which assigns a credit rating based on our policies and approved scoring model, which takes into account the credit history of the individual, the individual’s relationship with us and the type of credit requested.

 

These requests can come from one of our many service channels, including branches, internet banking, mobile applications and ATMs.

We use two distinct scoring models depending on the phase ofin which the customer is in with respect to their interaction with us (the “application” phase and the “behavior” phase). A credit scoring model is applied in the application phase when the customer begins a relationship with us and a behavioral scoring model is used when the customer has

228 

Table of Contents

already had a relationship with us for a period established by our risk management policies (i.e., during the “ongoing” phase). This policy allows us to evaluate our existing customers with a more complete analysis than if we applied a pure scoring model for all customers.

 

For financing products offered to SMEs (retail businesses), the method used to grantevaluate if approval should be granted is determined based on internally-developed credit risk approval limits, developed internally, as well as the customer´s creditworthiness. These approval methods include system automation, or manual individual analysis, which generates a credit risk rating based on our internal models. Additional information, such as the characteristics of the financing product being offered, including related terms and conditions, as well as collateral granted in connection therewith, is also taken into account in the approval process.

 

Pre-approved limits on lines of credit for a both individuals or anand SMEs are granted based on creditworthiness, as determined by our scoring criteria. Credit limits are managed based on the performance of the customers, taking into accountconsidering each customer’s risk profile.

Credit authorizationsauthorization limits are established through policies which define rules and responsibilities of each member ofthese are automatically applied to all credit requests. When an automatic credit decision results in the committee. We have established procedures and authorized certain organizational bodiescustomer’s needs, the commercial area has the authority to approve credit requests in amounts greater than those delegated to individual branches (bothsubmit a request for individuals and SMEs).manual approval. Such approvals are madesubjected to review by analysts or committees, depending on the relevant authorized organizational body through applyingvalue of the relevant scoring model and individualized analysis.

loan sought.

The following table presents the individuals or organizational bodies authorized to make extensions of credit to retail borrowers for the amounts specified:

 

Authorization RequiredAmount
Branch (1)Up to R$500 thousand
Decision centers(2)centers (1) Up to R$30 million
Retail Risk Higher Committee and Wholesale(3)Wholesale (2) Up to R$680 million

(1) For individuals, the maximum value is R$200,000. For SMEs the maximum is R$500,000.

(2) Members of risk decision-making centers include superintendents and other representatives of the risk area.

(3)(2) Members of the higher Risk Committee include, among others, the Chief Executive Officer of the group, the officers of Wholesale, Retail, Market Risk, Recovery and representatives of the Risk and Compliance Departments.

 

There is also a more robust model called Rating Plus which is addressed to mid-size companies a few other retail clients. This model combines the clients’ internal and external financial behavior, information obtained from their balance sheets and a questionnaire that is adapted in accordance with the companies’ individualities.

The evaluation made by Rating Plus seeks to attribute an internal classification for the costumers defining their risk level in comparison with their creditworthiness. The classification as well as the credit analyses for these clients are usually made manually through specific proposals or limits.

Wholesale Lending

In Wholesalewholesale banking, each customer is analyzed on an individual basis.basis, Commercial and risk areas analyze the client'sclient’s needs and indicators, checkinganalyzing profitability, creditworthiness and adequacy into the risk appetite metrics of Santander Group RAS – Risk Appetite Statement, in order to determine and take the proposed limitsubmit it for approval.

Wholesale lending risk appetite metrics and limits are set annually and tracked monthly through reports sent to the headquarters of the Santander headquarters.Group. These limits are defined considering the risk appetite of Santander Brasil and the wider Santander Group, in line with current regulations (Brazilian Central Bank and European

 250
Table of Contents

Central Bank), and the expectations of the commercial area. Individual and sectoral portfolio concentrations are monitored to mitigate the risk of the portfolio.

All credit requests from our wholesale customers must be approved by a credit committee, which are outlined below:

Authorization Required

Limit

Territorial CommitteeUp to R$50 million
Superior and High Risk CommitteeUp to R$170 million
Wholesale CommitteeUp to R$340350 million
Executive Risk Committee Up to R$1 billion

 

229 

Table of Contents

Credit Monitoring

Credit lines to retail banking SME customers are reviewed weekly, whereas individual clientscustomers are systematically reviewed daily, based on the client’s credit rating. This process allows for improvements in credit exposure forto customers who present good credit quality. FurtherAdditional specific early warnings are automatically generated when deterioration of a customer’s credit quality is identified. When this occurs, a process to reduce credit risk and prevent default is implemented. For SMEs, this includes monthly monitoring of their financial performance, the financial situation of each enterprise is discussed by specific committees in the presence of the commercial area.area, These processes are implemented, with the goal of continuously improving the quality of our loan portfolio.

Credit lines to wholesale customers and related credit quality are reviewed on an annual basis.basis, When any specific concern the credit quality of a certain customer, we use a customer monitoring system known as SCAN (Santander Customer Assessment Note), which allows possible actions to be taken under the following categories: “monitoring,” “intensive monitoring,” “proactive monitoring” or “block and exit.” A customer subject to action under one of these categories will be reviewed on a quarterly or a semi-annual basis, depending on the situation.

We use proprietary internal rating models to measure the credit quality of a given customer or transaction.transaction, Each rating relates to a certain probability of default or non-payment, determined on the basis of the customer’s history, with the exception of certain portfolios classified as “low default portfolios.” These ratings and models are used in our loan approval and risk monitoring processes.

The table below shows the internal risk rating levels and their corresponding probability of default:

Internal Risk Rating

Probability of Default

LowSmallerLower than 2.1%
Medium-lowBiggerGreater than 2.1% and SmallerLower than 4.1%
MediumBiggerGreater than 4.1% and SmallerLower than 6.3%
Medium-highBiggerGreater than 6.3% and SmallerLower than 10.0%
HighBiggerGreater than 10.0%

 

For a breakdown of our portfolio by internal risk rating, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information —Assets —InternalInformation—Short-Term Borrowings—Internal Risk Rating.”

Recovery

Our business recovery area is responsible for all nonperforming portfolios. This area uses statistical tools to study the behavior of clientscustomers and then defines, implements and monitors strategies related to these portfolios, seeking to ensure maximum recovery subject to applicable Brazilian law and regulation.

Customers with greater probability of payment are classified as low-risk customers and those with a low probability are classified as high risk. The aforementioned risk classification determines the intensity of collection efforts expended.

The channels of operation are defined as “Mapa de Responsabilidade,” (Responsibility Map), using the time value of default versus risk value, in addition to other characteristics, to create strategies for recovery.

Our credit recovery tools include daily contact through our call center, inclusion of defaulting clientscustomers within external sources of credit protection, sending collection letters, and direct contact through our branch network. In addition to the aforementioned tools, we use the following strategies:

 251
Table of Contents
·●Internal teams specialized in restructuring and debt recovery work directly with defaulting clientscustomers with loans of higher values and/or are overdue more than 60 days.

230 

Table of Contents

·●We use specialized external firms to collect, report and assess high-risk customers. These firms are remunerated according to pre-established percentages applied to the amounts recovered.

●In addition, we use digital channels as a mean of increasing the availability of renegotiation offers to our customers.

Once we have exhausted all of the credit recovery resources available to us, we conduct sales of any remaining nonperforming loans. These sales are held periodically through an auction process, with the aim of obtaining optimal prices in the markets and thereby reducing the impact on us.

Assets and Liabilities Committee

Our asset and liability management strategy is defined by our assets and liabilities committee (ALCO), which operates under the guidelines and procedures established by the Santander Group. Members of the committee include our Chief Executive Officer, Chief Risk Officer, Vice President Executive Officer - Finance and Strategy, Vice President Executive Officer - CFO, Director - Financial Management and the Chief Economist. The assets and liabilities committee establishes strategies, policies and procedures with the objective of managing our balance sheet and risk structure.

Market Risk

Types of market risk

Interest rate risk

Interest rate risk is the possibility that changes in interest rates could adversely affect the value of a financial instrument, a portfolio or our operations as a whole. We are exposed to interest rate risk whenever there is a mismatch between interest rate sensitive assets and liabilities, subject to any hedging we have engaged in using interest rate swaps or other off-balance sheet derivative instruments. Interest rate risk arises in connection with both our trading and non-trading activities.

Credit spread risk

Credit spread risk arises due to changes in credit spread curves associated with specific issuers and debt types may adversely affect the value of a financial instrument, a portfolio or Santander Group as a whole.

Exchange rate risk

Exchange rate risk arises due to the sensitivity of a foreign currency position in relation to a base currency (in our case,reais) due to a potential change in exchange rates. We are exposed to foreign exchange rate risk as a result of mismatches between assets and liabilities, and off-balance sheet items denominated in different currencies, either as a result of trading or in the normal course of business. We maintain non-trading open currency positions arising from our investments in overseas subsidiaries (such as our Cayman Islands and Luxembourg branches), affiliates and their respective currency funding. Our principal non-trading currency exposure is the U.S. dollar, which, as mandated by our policies, is hedged to thereal within established limits.

Equity price risk

Equity price risk arises due to the sensitivity of an investment position in equity markets to adverse movements in the market prices or in response to expectations of future dividends. Among other instruments, equity price risk affects positions in shares, stock market indices and derivatives using shares as the underlying asset (puts, calls, and equity swaps). We are exposed to equity price risk in both our trading and non-trading investments in equity securities.

Commodities price risk

Commodities price risk relates to the potential negative effect of changes in commodity prices.

231 

Table of Contents

Our exposure to this risk is not significant and ismostly concentrated in derivative operations involving commodities for clients.customers.

 252
Table of Contents

Inflation risk

Inflation risk is the risk that changes in inflation rates may adversely affect the value of a financial instrument, a portfolio or Santander Group as a whole.

Volatility risk

Volatility risk is the sensitivity of a portfolio to volatility in a number of risk factors, including interest rates, exchange rates, share prices and commodity prices. This risk is applicable to financial instruments which have volatility as a variable in their valuation model.

Other, more complex, risks to which we may be exposed include:

Correlation risk

Correlation risk is the sensitivity to changes in the relation between risk factors, whether of the same type (for example, between two exchange rates) or of a different nature (for example, between an interest rate and the price of a commodity).

Market liquidity risk

Market liquidity risk is the possibility of a Bank entity or the Santander Group as a whole finding itself unable to exit or close a position in time without affecting the market price or the cost of the transaction. This risk can be caused by a decrease in the number of market participants or institutional investors, the execution of large volumes of operations, market instability or increases of the concentration existing in certain products and currencies. Market depth is the main liquidity driver in our trading portfolio, even though our policy is to trade the most liquid assets.assets, Our liquidity risk also arises in non-trading activity, due to the maturity gap between assets and liabilities mostly in the retail banking business.

Risk of prepayment or cancellation

In certain transactions, the relevant loan agreement allows, explicitly or implicitly, voluntary prepayment prior to maturity without any penalty, which creates a risk that the cash flows received as a result of the prepayment will be reinvested at a potentially lower interest rate. This mainly affects loans or mortgage securities.

mortgage.

Underwriting risk

Underwriting risk occurs in the underwriting of a placement of securities or another type of debt, assuming the risk of partially owning the issue or the loan due to non-placement of all or any proportion of any issuance among potential buyers.

Derivatives used in Managing Market Risks

We use derivatives both in trading and non-trading activities to manage market risks. Trading derivatives are used to eliminate, reduce or modify risk in trading portfolios (interest rate, foreign exchange, commodities and equity price risk), and to provide financial services to customers. Our principal counterparties (in addition to customers) for this activity are financial institutions and the B3. Our principal derivative instruments include interest rate swaps, interest rate futures, foreign exchange forwards, foreign exchange futures, foreign exchange options, cross currency swaps, commodities derivatives, equity index futures and equity options and interest rate options. With respect to non-trading activity, derivatives are used in order to manage interest rate risks and foreign exchange risks arising from asset and liability management activity. We also use interest rate and foreign exchange linear derivatives in non-trading activity. As no market exists in Brazil, we do not use credit derivatives

232 

Table of Contents

Activities subject to market risk

Our market risk area is responsible for measuring, controlling and monitoring risk, in respect to the above identified areas, as a result of changes in market factors. Market risk arises due to changes and potential volatility in interest rates, exchange rates, share prices and commodities prices, as well as due to liquidity risk of the various products and markets in which we operate.

The following outlines the main source of risk for which we are exposed:

 253
Table of Contents

Trading book

The trading book includes financial services to customers and purchase-sale and positioning mainly in fixed income, equity and currency products. The trading book comprises our proprietary positions in financial instruments held for resale and/or bought to take advantage of current and/or expected differences between purchase and sale prices. This portfolio also includes positions in financial instruments deriving from market-making and sales activities. As a result of trading fixed income, equity, commodities and foreign exchange products, we are exposed to their respective market risks. We are also exposed to volatility when non-linear derivatives are used.

Non-trading book (banking/structural)

The non-trading book consists of market risks inherent in the balance sheet, excluding the trading portfolio. These include:

i.Structural interest rate risks. This arises from mismatches in the maturities and re-pricing of all assets and liabilities.

ii.Structural exchange rate risk/hedging of results.results and offshore investments. Exchange rate risk occurs when the currency in which the investment is made is different from therealin companies or branches that are consolidated and those that are not (structural exchange rate). In addition, exchange rate hedging of future results generated in currencies other than thereal(hedging of results).

iii.Structural equity risk. This involves investments via stakes in financial or non-financial companies that are not consolidated, as well as portfolios available for sale formed by equity positions.

Market Risk Management Framework

Our board of directors is responsible for establishing our policies, procedures and limits with respect to market risk, including which businesses to invest in and maintain. The risk committee monitors our overall performance in relation the risks we assume. Together with the local and global assets and liabilities committees, each market risk unit measures and monitors our market and liquidity risk and provides figures to the assets and liabilities committees to use in managing such risks.

Market risk is regulated and controlled through certain policies, set forth in our market and liquidity risk management policies manual, as well as through specific exposure limits established for the entire Santander Group. In addition, authorized products are listed and reviewed periodically.

These policies, procedures and limits on market risk are applicable to all units, businesses or portfolios susceptible to market risk, and are built on five basic pillars, which we believe are vital for correct management of market risks:

i.Market and structural risk measurement, analysis and control;

ii.Calculation, analysis, explanation and reconciliation of profit and loss (P&L);

iii.Definition, capture, validation and distribution of market data;

iv.Definition of limits, products and underlyings; and

233 

Table of Contents

v.Consolidation of information.information,

In turn, our market risk management is guided by the following basic principles:

i.Independence of the trading and balance sheet activities;

ii.Global overview of the risks taken;

iii.Definition of limits and empowerment;

iv.Control and oversight;

v.Homogeneous aggregated metrics;

vi.Homogeneous and documented methodologies;

vii.Measuring risk;

 254
Table of Contents
viii.Information consolidation; and

ix.Contingency plans and technical capability.capability,

Structure of Limits Regarding Market Risk

The market risk limit structure represents Santander Brasil’s risk appetite and is aligned with our global market risk management policies, which encompass all of our business units and serve to:

i.identify and define the main types of risk incurred in a manner consistent with our business strategy;

ii.quantify and report to our business segments with respect to appropriate risk levels and risk profile in line with senior management’s assessment of risks to help avoid any of our business segments taking undesired risks;

iii.provide flexibility to our business segments to timely and efficiently establish risk positions that are responsive to market changes and our business strategies, and always within risk levels acceptable to Santander Brasil;

iv.allow the individuals and teams originating new business to take prudent risks that will help attain budgeted results;

v.establish investment alternatives by limiting equity requirements; and

vi.define the range of products and underlying assets within which each unit of treasury can operate, taking into consideration our risk modeling and valuation systems and our liquidity tools. This will help to constrain market risk within our defined risk strategy.

Global market risk management policies define our risk limit structure while the risk committee reviews and approves such policies. Business managers administer their activities within these limits. The risk limit structure covers both our trading and non-trading portfolios and includes limits on fixed income instruments, equity securities, foreign exchange and derivative instruments.

Limits considered to be global limits refer to the business unit level. To date, system restrictions prevent intra-day limits. Our business units must comply with approved limits. Potential excesses require a range of actions carried out by the global market risk function unit including (i) providing risk-reducing suggestions and controls, which are the result of breaking “alarm” limits and (ii) taking executive actions that require risk takers to close out positions in order to reduce risk levels.

The market risk limits used by us are established along different metrics intended to cover all activity subject to market risk from many perspectives, applying criteria we believe to be conservative.

234 

Table of Contents

The principal limits include:

Trading limits

i.       VaR limits;

ii.limits of equivalent positions and/or nominal;

iii.sensitivity limits to interest rates;

iv.vega limits; and

v.limits aimed at reducing the volume of effective losses or protecting results already generated during the period:

·●loss trigger; and

·●stop loss.

 255
Table of Contents

Structural limits

i.structural interest rate risk of the balance sheet:

·●sensitivity limit of net interest margin (“NIM”) over a one year horizon; and

·●sensitivity limit of market value of equity (“MVE”);

ii.structural exchange rate risk comprised of the net position in each currency; and

iii.liquidity risk: limits defined for short, long and concentration metrics and considering BAU and Stress scenario.

Market Risk Statistical Tools

Locally, we use a variety of mathematical and statistical models, including VaR models, historical simulations and stress testing to measure, monitor, report and manage market risk. Such numbers, produced locally, also serve as input for global activities such as evaluations of RORAC, and to allocate economic capital to various activities in order to evaluate the RORAC of such activities.

Trading Activity

·●VaR: as calculated by us, our internal VaR model is an estimate of the expected maximum loss in the market value of a given portfolio over a one-day time horizon at a 99% confidence level, subject to certain assumptions and limitations discussed below. Our standard methodology is based on historical simulation of 520 days and is calculated using the VaR methodology “full revaluation.” In order to capture recent market volatility in the model, the reported VaR is the higher between the 1% percentile and the 1% weighted percentile of the simulated PnL distribution. The first VaR figure gives the same weight to all observed values, and the second one applies an exponential declining factor to give a higher weight for the most recent observations. This methodology makes our VaR numbers react very quickly to changes in current volatility, significantly reducing the likelihood of back testing exceptions. We use VaR estimates to alert senior management whenever the statistically estimated losses in our portfolios exceed prudent levels.

1.Assumptions and limitations: our VaR methodology should be interpreted in light of the limitations that (i) a one-day time horizon may not fully capture the market risk of positions that cannot be liquidated or hedged within one day and (ii) at present, we compute VaR at the close of business and trading positions may change substantially during the course of the trading day.

235 

Table of Contents

2.Calibration measures: in order to calibrate our VaR model, we use back testing, which is a comparative analysis between VaR estimates and the daily clean Profit and Loss (theoretical result generated assuming the mark-to-market daily variation of the portfolio considering only the movement of the market variables). The purpose of these tests is to verify and measure the precision of the models used to calculate VaR.

·●Stressed VaR: our stressed VaR model uses the same calculation methodology as VaR with the following two exceptions: (i) the stressed VaR uses a window of 250260 days, instead of 520 days for the VaR; (ii) unlike when calculating the VaR the higher of the percentile uniformly weighted and the one exponentially weighted is not applied. Instead, only the uniformly weighted percentile is used. All the other aspects regarding the methodology and the inputs for calculating the stressed VaR are the same as those for the VaR. To determine the period of observation the market risk area has analyzed the history of the main market risk factors, which were chosen on the basis of expert criteria, and taking into account the most significant positions of our portfolio.

·●Stress Test: this is a simulation technique, which consists of estimating the potential impact on results by applying different stress scenarios to all the trading portfolios and considering the same assumptions according to the relevant risk factor. These scenarios can replicate events that happened in the past (such as crisis events) or hypothetical scenarios. These results are analyzed at least monthly and, along with the VaR provide a fuller spectrum of the risk profile.

·●Sensitivities: our market risk sensitivity measures gauge the change (or sensitivity) of the market value of an instrument or portfolio to changes in each of the risk factors. The sensitivity of the value of an instrument to changes in market factors may be obtained through analytical approximations by partial derivatives or through a full revaluation of the portfolio.

 256
Table of Contents

Non-trading Activities

·●Interest rate gap of assets and liabilities: focuses on lags or mismatches between changes in the value of assets, liabilities and off-balance sheet items. Gap analysis provides a basic representation of the balance sheet structure and allows for the detection of interest rate risk by concentration of maturities. It is also a useful tool for estimating the impact of future interest rate movements on NIM or equity. All on- and off-balance sheet items must be broken down by their flows and analyzed in terms of re-pricing and maturity. In the case of those items that do not have a contractual maturity, an internal model of analysis is used and estimates are made of their duration and sensitivity.

·●NIM sensitivity: measures the change in the short- and medium-term in the accruals expected over a 12-month horizon, in response to a shift in the yield curve. The yield curve is calculated by simulating the NIM, with a shift in the yield curve, as well as for the current scenario. The sensitivity is the difference between the calculation of the two margins.

·●MVE sensitivity: Net worth sensitivity measures the interest risk implicit in net worth (equity) over the entire life of the operation on the basis of the effect that a change in interest rates has on the current values of financial assets and liabilities. This is an additional measure to the sensitivity of the NIM.

·●Value at risk: The VaR for balance sheet activity and investment portfolios.

·●Analysis of results arising from the interest rate scenarios established by Circular No. 3,876 of the BrazilBrazilian Central Bank: there are six shock scenarios for MVE sensitivity and two for NIM sensitivity.

·●Liquidity risk: our ability to finance our commitments at reasonable market prices, as well as to carry out our business plans with stable sources of funding. We permanently monitor maximum gap profiles. The measures used to control liquidity risk are the liquidity gap, stress scenarios and contingency plans.

236 

Table of Contents

·●Liquidity gap: provides information on contractual and expected cash inflows and outflows for a certain period of time, for each of the currencies in which we operate. The gap measures the net need or excess of funds at a particularspecific date and reflects the level of liquidity maintained under normal market conditions.

Analysis of scenarios/contingency plan: includes the local and external activities and consists of a formal set of preventive and corrective actions taken in times of liquidity crises. Using analysis of historical scenarios and simulations of impacts on bank liquidity, we define action plans and contingencies to establish roles and responsibilities and levels to trigger the contingency plan. Each unit should prepare its contingency plan. Additionally, Santander Spain must be periodically informed about the contingency plan of each subsidiary. The frequency with which this plan must be updated depends on market liquidity conditions.

 257
·AnalysisTable of scenarios/contingency plan: includes the local and external activities and consists of a formal set of preventive and corrective actions taken in times of liquidity crises. Using analysis of historical scenarios and simulations of impacts on bank liquidity, we define action plans and contingencies to establish roles and responsibilities and levels to trigger the contingency plan. Each unit should prepare its contingency plan. Additionally, Santander Spain must be periodically informed about the contingency plan of each subsidiary. The frequency with which this plan must be updated depends on market liquidity conditions.Contents

Quantitative Analysis

Trading Activity

Quantitative Analysis of Daily VaR in 2019

2021

Our risk performance with regard to trading activity in financial markets between 20172019 and 2019,2021, measured by daily VaR (measured at a 99% of confidence level, over a one day time frame), is shown in the following graph.

 

During 2019,2021, VaR presented a low volatility, fluctuatingfluctuated between R$20.830 million and R$85.440 million, (on March 21 2019, when it was announced the arrest of Michel Temer), with an average of R$41.934.5 million. The histogram below shows the distribution of average risk in terms of VaR in 20192021 where the accumulation of days with VaR levels between R$3020 million and R$6040 million can be observed in 88.9%79.8% of the distribution.

237 

 258

Table of Contents

Table of Contents

VaR by Risk Factor

The minimum, maximum, average and year-end 20192021 VaR values by risk factor were as follows:

 2018 2019 2020 2021
 Period End Low Average High Period End Period End Low Average High Period End
 (in millions of R$) (in millions of R$)
Trading VaR  46.5   20.8   41.9   85.4   20.9   31.6   16.7   34.5   63.1   34.4 
Diversification Effect  (23.8)  1.7   (11.4)  (32.8)  (10.7)  (33.7)  (5.2)  (27.6)  (54.4)  (12.8)
Interest Rate VaR  33.9   14.7   31.0   66.0   16.7   26.6   12.7   31.8   72.3   34.9 
Equity VaR  11.6   2.0   8.6   29.2   7.4   2.8   2.6   7.5   21.5   6.4 
Foreign Exchange VaR  24.6   1.6   13.8   31.3   7.5   35.6   4.0   19.0   48.9   5.9 
Commodities VaR  0.2   0.0   0.0   0.4   0.0 
Commodity VaR  0.3   0.1   3.8   21.4   0.1 

 

The average VaR for 20192021 was R$41.934.5 million, with most of the risk due to interest rate positions. Santander Brasil was relatively conservative in equity and commodities trading activity.

activity in line with the approach taken over the last few years.

The average VaR of the threefour main risk factors, interest rates, equity prices, and exchange rates and commodities were R$31.031.8 million, R$8.67.5 million, R$19.0 million and R$13.83.8 million respectively, with a negative average diversification effect of R$11.427.6 million. The chart below shows the evolution of the VaR interest rates (IR), VaR exchange rates (FX) and, VaR equity prices (EQ) (atand Commodities (CM), at a 99% confidence level, over a day time frame and a 15 day15-day moving average).average.

 

238 

Table of Contents

Risk Management of Structured Derivatives

Our structured derivatives activity is mainly focused on designing investment products and managing hedging risks for clients.customers. Our risk management is focused on ensuring that the net risk exposure is the lowest possible. These transactions include options on equities, currencies, fixed-income instruments.

 259
Table of Contents

The chart below shows the VaR Vega performance of our structured derivatives business in 2019, 20182021, 2020 and 2017.2019. In the most recent year, this figure fluctuated around an average of R$4.58.23 million. In general, the periods with higher VaR Vega levels are related to episodes of significant increases in market volatility.

 

Scenario analysis

Different stress test scenarios were analyzed during 2019.2021, A correlation break scenario generated the results presented below.

239 

Table of Contents

Worst Case Scenario

The table below shows the maximum daily losses for each risk factor (fixed-income, equities and currencies) as of December 31, 2019,2021, in a scenario that uses historical volatilities and simulates variations of the risk factors for +/-3 and +/-6 standard deviations on a daily basis.basis, From this group of scenarios, we generate a table of stress test results, which identifies the largest loss per risk factor.factor, The sum of the largest losses of each risk factor is the result of the Worst Case Scenario, which considers the break of correlation between risk factors.

Worst Case Stress Test Exchange Rate Fixed Income Equity Total Exchange Rate Fixed Income Equity Total
 (in millions of R$) (in millions of R$)
Total trading  (54.8)  (79.0)  (35.1)  (168.8) (14.5)  (19.7)  (14.8)  (49.0)

 

The stress test shows that the economic loss suffered by the group in the marked-to-market result would be, if this scenario materialized in the market, R$168.8180.2 million.

Non-trading Activity

Quantitative Analysis of Interest Rate Risk in 2019

2021

Convertible Currencies

At the end of 2019,2021, the sensitivity of NIM at one year, to a parallel rise of 100 basis points in the local yield curve was R$334553 million.

In addition, at the end of 2019,2021, the sensitivity of net worthMVE to parallel rises of 100 basis points in the yield curves was R$2,0631,678.0 million in the local currency yield curve.

Structural Gap

 260
Table of Contents

The following table shows the managerial gaps between the re-pricing dates of our assets and liabilities as of December 31, 20192021 in millions ofreais. reais.

  Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive
  (in millions of R$)
Structural Gap                                    
Money Market  309,426   115,341   859   1,347   21,303   18,675   37,938   20,504   93,459 
Loans  470,730   138,528   62,721   50,867   60,773   56,304   54,350   47,394   (208)
Permanent  15,836   -     -     -     -     -     -     -     15,836 
Other  199,895   35,519   -     23   -     2   -     -     164,351 
Total Assets  995,886   289,388   63,580   52,237   82,076   74,981   92,288   67,898   273,437 
Money Market  (126,572)  (73,371)  (1,934)  (2,839)  (4,595)  (18,206)  (7,959)  (13,862)  (3,807)
Deposits  (498,828)  (305,888)  (16,114)  (6,422)  (10,091)  (13,844)  (15,886)  (93,436)  (37,147)
Equity and Other  (370,486)  (63,009)  (23,483)  (16,556)  (23,913)  (1,462)  (5,224)  (3,319)  (233,521)
Total Liabilities  (995,886)  (442,267)  (41,531)  (25,817)  (38,599)  (33,512)  (29,069)  (110,617)  (274,474)
– Balance Gap  0   (152,879)  22,049   26,420   43,478   41,469   63,219   (42,719)  (1,037)
Off-Balance Gap  18,976   22,280   (4,189)  496   (957)  (23,496)  4,750   3,164   16,929 
Total Structural Gap  18,976   (130,599)  17,860   26,916   42,520   17,973   67,969   (39,556)  15,892 
Accumulated Gap  18,976   (111,623)  (93,763)  (66,847)  (24,327)  (6,354)  61,615   22,060   37,951 

 

  Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive
  (in millions of R$)
Structural Gap                  
Money Market  272,311   83,617   696   1,208   11,398   23,946   19,059   37,881   94,506 
Loans  337,639   80,230   43,964   41,351   48,774   59,367   22,408   25,053   16,492 
Permanent  16,782   -     -     -     -     -     -     -     16,782 
Other  231,613   50,960   259   129   36   -     -     -     180,230 
Total Assets  858,346   214,808   44,919   42,687   60,207   83,314   41,467   62,934   308,009 
Money Market  (122,348)  (74,002)  (1,917)  (3,293)  (3,208)  (3,950)  (13,957)  (8,457)  (13,564)
Deposits  (404,842)  (200,816)  (5,377)  (6,174)  (9,587)  (24,901)  (13,092)  (27,995)  (116,899)
Equity and Other  (331,156)  (54,789)  (11,339)  (6,784)  (7,361)  (722)  (599)  (2,490)  (247,074)
Total Liabilities  (858,346)  (329,607)  (18,633)  (16,251)  (20,156)  (29,573)  (27,648)  (38,942)  (377,537)
– Balance Gap  -     (114,799)  26,286   26,437   40,052   53,741   13,819   23,993   (69,528)
Off-Balance Gap  -     58,910   (7,262)  (3,197)  (13,889)  (19,836)  (2,377)  (11,425)  30,838 
Total
Structural Gap		  -     (55,889)  19,024   23,240   26,162   33,905   11,442   12,568   (38,689)
Accumulated Gap
  -     (55,890)  (36,866)  (13,626)  12,536   46,441   57,883   70,451   31,762 

240 

Table of Contents

The interest rate risk of our balance sheet management portfolios, measured by the sensitivity of the net margin to a parallel movement of 100 basis points, increased R$135121 million during 2019,2021, reaching a maximum of R$334607 million in December.June, The sensitivity of the market value decreased R$20293 million during 2019,2021, reaching a maximum of R$2,3421,882 million in October.September, The main factors in 20192021 that influenced the sensitivity were the volatility of the interest curve, updating of methodologies and the effects of strategies in the business areas.

The following chart shows our NIM and MVE sensitivity during each month in 2019.2021.

 

 261
Table of Contents

Interest Rate Risk Profile as of December 31, 20192021

The currency gap tables below show the managerial distribution of risk by maturity and currency in Brazil as of December 31, 20192021 in millions ofreais.

 

 Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive

Gaps in

Local

currency

                  
Gaps in local currency                                    
Money Market
  243,106   82,104   646   1,023   10,980   21,542   12,671   30,916   83,223   268,082   112,019   823   1,060   18,672   15,816   22,730   18,170   78,792 
Loans  285,391   61,762   30,786   32,699   43,599   58,580   20,151   23,682   14,132   382,313   90,863   49,412   41,903   52,908   54,584   53,957   43,028   (4,344)
Permanent  16,782   -     -     -     -     -     -     -     16,782   15,804   -     -     -     -     -     -     -     15,804 
Others  103,613   24,461   -     -     -     -     -     -     79,153   128,760   18,923   -     23   -     2   -     -     109,812 

Total

Assets

  648,892   168,326   31,432   33,722   54,579   80,122   32,823   54,598   193,289   794,960   221,806   50,235   42,986   71,580   70,402   76,687   61,198   200,064 
Money Market  (104,130)  (72,943)  (609)  (1,126)  (2,662)  (3,583)  (2,187)  (7,456)  (13,564)  (99,888)  (71,740)  (1,006)  (1,901)  (3,868)  (3,020)  (6,747)  (7,986)  (3,620)
Deposits  (385,544)  (194,698)  (3,876)  (4,431)  (8,136)  (21,281)  (11,499)  (26,695)  (114,927)  (463,227)  (290,333)  (5,332)  (4,382)  (7,209)  (8,943)  (11,999)  (89,470)  (45,558)
Equity and Other
  (177,481)  (27,448)  -     -     -     -     -     309   (150,342)  (214,666)  (24,490)  (44)  (66)  (132)  (264)  3,149   (3,319)  (189,499)

Total

Liabilities

  (667,155)  (295,089)  (4,486)  (5,557)  (10,799)  (24,864)  (13,686)  (33,842)  (278,832)  (777,780)  (386,563)  (6,383)  (6,349)  (11,209)  (12,227)  (15,597)  (100,775)  (238,677)

Off-Balance Gap

  (56,847)  57,544   8,092   1,330   (4,276)  (14,620)  (485)  (10,361)  (62,310)  36,988   23,679   8,421   (585)  (1,113)  (21,346)  5,925   3,083   18,923 
Gap  (75,111)  (69,218)  35,039   29,496   39,504   40,638   18,652   10,396   (147,854)  54,167   (141,078)  52,274   36,052   59,258   36,829   67,016   (36,494)  (19,690)

  Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive
Gaps in foreign currency                                    
Money Market  41,344   3,322   36   287   2,631   2,859   15,208   2,334   14,667 
Loans  88,417   47,664   13,309   8,964   7,865   1,720   393   4,366   4,135 
Permanent  31   -     -     -     -     -     -     -     31 
Others  71,135   16,595   -     -     -     -     -     -     54,539 
Total Assets  200,927   67,582   13,345   9,251   10,496   4,579   15,600   6,700   73,373 
Money Market  (26,684)  (1,630)  (928)  (938)  (727)  (15,186)  (1,212)  (5,876)  (187)
Deposits  (35,601)  (15,555)  (10,782)  (2,040)  (2,882)  (4,901)  (3,887)  (3,966)  8,411 
Equity and Other  (155,821)  (38,519)  (23,439)  (16,490)  (23,781)  (1,198)  (8,373)  -     (44,022)
Total Liabilities  (218,106)  (55,704)  (35,148)  (19,468)  (27,390)  (21,285)  (13,472)  (9,842)  (35,797)
Off-Balance Gap  (18,012)  (1,399)  (12,610)  1,081   156   (2,150)  (1,175)  81   (1,994)
Gap  (35,192)  10,479   (34,413)  (9,136)  (16,738)  (18,857)  953   (3,061)  35,582 

 

241 

 262

Table of Contents

Table of Contents
  Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive

Gaps in

foreign

currency

                  
Money
Market		  29,206   1,513   50   185   418   2,404   6,388   6,965   11,283 
Loans  52,248   18,469   13,178   8,651   5,175   787   2,256   1,371   2,360 
Permanent  1   -     -     -     -     -     -     -     1 
Others  128,000   26,500   259   129   36   -     -     -     101,077 

Total

Assets

  209,454   46,482   13,487   8,965   5,629   3,191   8,644   8,336   114,720 
Money Market
  (18,218)  (1,060)  (1,308)  (2,167)  (546)  (367)  (11,770)  (1,001)  -   
Deposits  (19,298)  (6,118)  (1,501)  (1,743)  (1,451)  (3,620)  (1,593)  (1,300)  (1,972)
Equity and Other
  (153,675)  (27,340)  (11,339)  (6,784)  (7,361)  (722)  (599)  (2,799)  (96,732)

Total

Liabilities

  (191,191)  (34,518)  (14,148)  (10,694)  (9,357)  (4,709)  (13,961)  (5,100)  (98,705)
Off-Balance Gap  56,847   1,366   (15,354)  (4,527)  (9,613)  (5,216)  (1,893)  (1,064)  93,149 
Gap  75,110   13,329   (16,015)  (6,256)  (13,342)  (6,733)  (7,209)  2,172   109,165 

Market Risk: VaR Consolidated Analysis

Our total daily VaR as of December 31, 20182020 and December 31, 2019,2021, broken down by trading and structural (non-trading) portfolios, is set forth below. Our VaR data for trading and non-trading portfolios were summed and thus do not reflect the diversification effect.

 

  2019 2018
  Low Average High Period End Period End
  (in millions of R$)
Trading  20.8   41.9   85.4   20.9   46.5 
Non-trading  1,336.3   1,915.0   2,203.7   1,755.1   1,743.7 
Diversification effect  -     -     -     -     -   
Total  1,357.1   1,956.9   2,289.1   1,776.0   1,790.2 

  2021 2020
  Low Average High Period End Period End
  (in millions of R$)
Trading  16.7   34.5   63.1   34.4   31.6 
Non-trading  1,663.4   2,451.7   4,274.1   -     1,755.1 
Diversification effect  -     -     -     -     -   
Total  1,680.1   2,486.2   4,337.2   34.4   1,786.7 
 

Note:VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.

 

Our daily VaR estimates of interest rate risk, foreign exchange rate risk and equity price risk were as set forth below:

242 

Table of Contents

Interest Rate Risk

  2019 2018
  Low Average High Period End Period End
  (in millions of R$)
Interest rate risk          
                     

Interest rate risk          
Trading  14.7   31.0   66.0   16.7   33.9 
Non-trading  1,336.3   1,915.0   2,203.7   1,755.1   1,743.7 
Diversification effect  -     -     -     -     -   
Total  1,351.0   1,946.0   2,269.7   1,771.8   1,777.6 

  2021 2020
  Low Average High Period End Period End
  (in millions of R$)
Interest rate risk                    
Trading   12.7   31.8   72.3   34.9   26.6 
Non-trading   1,663.4   2,451.7   4,274.1   -     1,364.7 
Diversification effect   -     -     -     -     -   
Total   1,676.1   2,483.5   4,346.4   34.9   1,391.3 
 

Note:VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.

 

Foreign Exchange Rate Risk

  2019 2018
  Low Average High Period End Period End
  (in millions of R$)
Exchange rate risk          
Trading  1.6   13.8   31.3   7.5   24.6 
Non–trading  N.A.   N.A.   N.A.   N.A.   N.A. 
Diversification effect  -     -     -     -     -   
Total  1.6   13.8   31.3   7.5   24.6 

  2021 2020
  Low Average High Period End Period End
  (in millions of R$)    
Exchange rate risk                    
Trading   4.0   19.0   48.9   5.9   35.6 
Non–trading   -   -   -   -   - 
Diversification effect   -   -   -   -   - 
Total   4.0   19.0   48.9   5.9   35.6 
 

Note:VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.

 

Equity Price Risk

  2019 2018
  Low Average High Period End Period End
  (in millions of R$)
Equity price risk          
Trading  2.0   8.6   29.2   7.4   11.6 
Non–trading  N.A.   N.A.   N.A.   N.A.   N.A. 
Diversification effect  -     -     -     -     -   
Total  2.0   8.6   29.2   7.4   11.6 

  2021 2020
  Low Average High Period End Period End
  (in millions of R$)
Equity price risk          
Trading   2.6   7.5   21.5   6.4   2.8 
Non–trading   -     -     -     -     -   
Diversification effect   -     -     -     -     -   
Total   2.6   7.5   21.5   6.4   2.8 

 

Note:VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.
 263
Table of Contents

 

Commodity Price Risk

  2019 2018
  Low Average High Period End Period End
  (in millions of R$)
Commodities price risk          
Trading  0.0   0.0   0.4   0.0   0.2 
Non–trading  N.A.   N.A.   N.A.   N.A.   N.A. 
Diversification effect  -     -     -     -     -   
Total0.00.00.40.00.2

243 

Table of Contents

  

At December 31,

  2021 2020
  Low Average High Period End Period End
  (in millions of R$)
Commodity price risk          
Trading   0.1   3.8   21.4   0.1   0.3 
Non-trading   N.A.   N.A.   N.A.   N.A.   N.A 
Diversification effect   -     -     -     -     -   
Total   0.1   3.8   21.4   0.1   0.3 

 

Our daily VaR estimates by activity were as set forth below:

  2019 2018
  Low Average High Period End Period End
  (in millions of R$)
Trading          
Interest rate risk  14.7   31.0   66.0   16.7   33.9 
Exchange rate risk  1.6   13.8   31.3   7.5   24.6 
Equity  2.0   8.6   29.2   7.4   11.6 
Commodities price risk  0.0   0.0   0.4   0.0   0.2 
Total Trading  20.8   41.9   85.4   20.9   46.5 
Non-trading                    
Interest rate  1,336.3   1,915.0   2,203.7   1,755.1   1,743.7 
Exchange rate  N.A.   N.A.   N.A.   N.A.   N.A. 
Equity   N.A.    N.A.    N.A.    N.A.    N.A. 
Total Non-Trading  1,336.3   1,915.0   2,203.7   1,755.1   1,743.7 
Total (Trading + Non-Trading)  1,357.1   1,956.9   2,289.1   1,776.0   1,790.2 
Interest rate  1,351.0   1,946.0   2,269.7   1,771.8   1,777.6 
Exchange rate  1.6   13.8   31.3   7.5   24.6 
Equity  2.0   8.6   29.2   7.4   11.6 
Commodities price risk  0.0   0.0   0.4   0.0   0.2 

  2021 2020
  Low Average High Period End Period End
  (in millions of R$)
Trading          
Interest rate risk   26.8   12.7   31.8   72.3   34.9 
Exchange rate risk   2.8   2.6   7.5   21.5   6.4 
Equity price risk   35.6   4.0   19.0   48.9   5.9 
Commodity price risk   0.3   0.1   3.8   21.4   0.1 
Total Trading   31.6   16.7   34.5   63.1   34.4 
Non-trading                    
Interest rate risk   1,663.4   2,451.7   4,274.1   -     1,755.1 
Exchange rate risk   N.A.   N.A.   N.A.   N.A.   N.A. 
Equity price risk   N.A.   N.A.   N.A.   N.A.   N.A. 
Commodity price risk   

N.A.

   

N.A.

   

N.A.

   

N.A.

   

N.A.

 
Total Non-Trading   1,663.4   2,451.7   4,274.1   -     1,755.1 
Total (Trading + Non-Trading)   1,663.4   2,451.7   4,274.1   -     1,755.1 
Interest rate risk   1,663.4   2,451.7   4,274.1   -     1,755.1 
Exchange rate risk   1.4   9.3   42.4   35.6   7.5 
Equity price risk   1.2   5.8   34.0   2.8   7.4 
Commodity price risk   -     0.2   2.5   0.3   -   
 

Note:VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.

 

Operational Risk

We have adopted the definition of the Basel Committee and Brazilian Central Bank for operational risk, which is defineddefines operational risk as the possibility of losses resulting from inadequate processes, people and systems, failures, or even from external events. This definition includes the legal risk associated with the inadequacy or deficiency in executed agreements, as well as penalties for noncompliance with legal provisions and damages for third parties resulting from our activities. This definition does not include strategic risk. Operational risk losses mayevents might result in financial losses, adversely affectingadverse effects on the continuity of our business, and also negatively affect ournegative effects on public image.

image and customer experience.

To accomplish our operational risk objectives, we have established a risk model based on three lines of defense, with the objective ofaimed at continuously improving and developing our management and control of operational risks. The three lines of defense are as follows:

are:

·●First line of defense: all business and support areas within Santander Brasil are responsible for identifying, managing, mitigating and reporting operational riskrisks related to its activities;activities.

244 

Table of Contents

·●Second line of defense: the operational risksrisk and internal control departments areis responsible for monitoring and ensuring control over operational and technological risk management practices throughout the organization.or ganization. It is also responsible for implementing and communicating our operational risk culture, defining methodologies, policies, tools, training, applicable procedures and requirements for the effective management of operational risk and ensuring there is an adequate business contingency plan in place throughout the organization;risk.

 264
Table of Contents
·●Third line of defense: the Internal Audit Departmentdepartment is responsible for undertaking independent reviews of the risk management undertakenactivities carried out by the first and second lines of defense, and for promoting continuous improvements in both lines.

The objectives of ourthe operational risk management model are:

·●to disseminate a culture of operational risk management and control, to foster the prevention of risk events and operational risks losses, and to mitigate their financial, legal and reputationalnon-financial impacts;

·●to provide support to decision-makers within Santander Brasil;

·●to ensure there is sufficient coverage to cover the business continuity in a sustainable manner and to improve internal controls;possible impacts of operational risk on an ongoing basis; and

·●to maintain control of operational risk in a manner which is consistent with business strategy.

The following bodies are involved in the implementation of risk management model in order to ensure we have a structured process of operational risk management and decision maker:

·●Risk Control Committee (Comitê de Controle de Riscos): Aa committee which aims to perform a holistic and periodic monitoring of the risks to which we areSantander Brasil is exposed and to exercise independent control on the risk management activities;

·●IntegratedSenior Forum of Internal Control and Operational Risk Operational Committee (Comitê IntegradoFórum Sênior de Riscos OperacionaisControle Interno e Risco Operacional): A committee which aims to ensurea senior forum aimed at ensuring and fosterfostering the adequate monitoring, control and mitigation of operational risks; and

·●Operational Risk ForumMeeting (FórumReunião de Riscos Operacionais): Anan independent forum, responsible for implementing and disseminating cultural norms, methodologies, standards, policies, tools, training and procedures applicable and required for the effective and efficient management and control of operational risk.

Our risk management model assists managers in achieving their strategic objectives by contributing to the decision-making process and by reducingseeking to reduce operational risk exposure and losses. It is compliant with the applicable regulatory requirements.

Social and Environmental Risk

Since 2002, we have remained at the forefront of social and environmental risk analysis in Brazil. We consider social and environmental risk when deciding whether to extend credit. Our Social and Environmental Responsibility Policy, (PRSA), whichor “PRSA,” complies with National Monetary Council Resolution 4,327/2014 and the SARB 14 self-regulation issued by Febraban,Febraban. Our PRSA establishes guidelines and consolidates specific policies for social-environmental practices used inapplicable to business and stakeholder relations.relations, such as relations with suppliers. These practices includinginclude social and environmental risk management, impacts and opportunities related themes, such as, adequacyassessment in the concessiongranting or use of credit, supplier management and analysis of the social and environmental risk whichusing credit. This is carried out through the analysis of the socio-environmental practices of wholesale and Empresas Nucleo (Core Companies) SMESSME customers, thatwhich have limits or credit risk greater than R$5 million and are included inbelong to one of the 14 sectors of social and environmental attention,focuses.

Furthermore, the Brazilian Central Bank has recently issued new regulations and standards applicable to us relating to the management and governance of social, environmental and climate risks by financial institutions. These rules relate both to risks resulting from our products, services and activities, and to risks arising out of the activities of our counterparties, controlled entities, suppliers and outsourced service providers. One such regulation is National Monetary Council Resolution 4,945/2021, which will revoke Resolution 4,327/2014 and institute new guidelines applicable to the PRSA. The majority of these regulations will enter into effect in orderJuly 2022. See “Item 4. B Information on the Company—B, Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Environmental, Social and Governance (ESG) requirements applicable to financial institutions.”

 265
Table of Contents

We have been signatories of the Equator Principles since 2009. The Equator Principles are a framework used by financial institutions to determine, assess and manage environmental and social risk in projects, and are based on the Performance Standards on Social and Environmental Sustainability of International Finance Corporation (IFC) and the World Bank Group.

In 2016, we started to take into account climate change related matters in the credit rating of wholesale customers. In 2020, we began to use a water stress calculator in our socio-environmental assessments. This tool considers the client’s economic activity, hydrographic basin location and measures adopted to save water. It was developed considering the customer’s vulnerability to climate change in general, including as a result of changes in legislation or consumer preferences.

We believe that assessing the socio-environmental risk in our operations, also enables us to mitigate issues of operational, capital, credit and reputational risk. In 2019,2021, we screened 1,340911 wholesale corporate customers, and 6971,049 Empresas Nucleo (Core Companies) customers, as well as 49and 28 major new projects (including both those that are and that are not subject to the Equator Principles and not subject, for these types of risks.Principles). Furthermore, wholesale segment customers are screened for environmental and social concerns by the new customers´customer acceptance area,department, when

245 

Table of Contents

initiating they begin their commercial relationship with us. Since 2009, we are a signatory ofSee “Item 3. Key Information—D. Risk Factors—Risks Relating to the Equator Principles, whose standards are applied in order to mitigate socialBrazilian Financial Services Industry and Our Business—Social and environmental risks when financing large projects.may have a material adverse effect on us.”

Cyber SecurityCybersecurity Risk

We have extensive security measures in place to mitigate the risk of cyber-securitycybersecurity threats affecting our technology platforms and our business. We have taken into consideration the practices set forth in the ISO-27002 security standard to assist us in formulating such security measures. Our security measures, include, but are not limited to access and privilege management, segregation of test and production environments, network security analysis, cyber incident management, baseline configuration of hardware and software, activity log correlation, malware prevention and remediation, and security analysis of third-party operations. We employ a range of security processes, solutions and dissemination of these measures, including regular compliance checks and continuous monitoring of network activity by our Security Operations Center (SOC). We also perform periodic reviews of cyber-securitycybersecurity threats and related controls, including periodic penetration tests performed by independent third parties. In addition, we are constantly investing in technology and security solutions, as well as conducting user training and awareness efforts. Furthermore, we cooperate and exchange information and experience relating to cyber-securitycybersecurity with local and international security communities, such as local telecommunications companies and other financial institutions, and as a member of the Financial Services - Information Sharing and Analysis Center community. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”

Other Information

Volatile market conditions arising from the COVID-19 pandemic may result in significant changes in macroeconomic conditions, foreign exchange rates, interest rates, and the prices of our securities, which may adversely affect us, see “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12A.12A. Debt Securities

Not applicable.

12B. Warrants and Rights

Not applicable.

12B.Warrants and Rights 266
Table of Contents

12C. Other Securities

Not applicable.

12C.Other Securities

Not applicable.

12D.12D. American Depositary Receipts

Depositary

The Bank of New York Mellon, or BNYM, has acted as depositary in relation to our ADR program since October 20, 2015. The principal executive office of BNYM is located at 240 Greenwich Street, New York, New York 10286, United States.

Fees and Expenses

BNYM, as depositary, may charge the following fees and expenses to the ADR holders, any party depositing or withdrawing Units or any party surrendering ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADRs), as applicable:

·●a fee of U.S.$5.00 or less for each 100 ADRs (or portion thereof) issued, delivered or surrendered, as the case may be;

246 

Table of Contents

·●a fee of U.S.$0.05 or less per ADR (or portion thereof) for any cash distribution made pursuant to the deposit agreement;

·●a fee of U.S.$0.05 or less per ADR (or portion thereof) per annum for depositary services;

·●a fee for the distribution of securities or of rights (where the depositary will not exercise or sell those rights on behalf of the ADR holders), such fee being in an amount equal to the fee for the execution and delivery of ADRs which would have been charged as a result of the deposit of such securities under the deposit agreement entered into with BNYM (for these purposes treating all such securities as if they were Units) but which securities are instead distributed by the depositary to the ADR holders;

·●such registration fees as may from time to time be in effect for the registration of transfers of Units generally on the registrar’s unit register and applicable to transfers of Units to or from the name of the depositary or its nominee or the name of the custodian for the depositary or its nominee on the making of deposits or withdrawals;

·●certain other cable and facsimile transmission fees and expenses;

·●such expenses as are incurred by the depositary in the conversion of foreign currency;

·●stock transfer or other taxes and other governmental charges; and

·●any other charges payable by the depositary or the custodian of the depositary, any of the depositary’s or such custodian’s agents or the agents of the depositary’s or such custodian’s agents, in connection with the servicing of Units or other deposited securities (which charges shall be assessed against the ADR holders as of the date or dates set by the depositary in accordance with the deposit agreement which we have entered into with BNYM and shall be payable at the sole discretion of the depositary by billing those ADR holders for those charges or by deducting those charges from one or more cash dividends or other cash distributions).

The depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to be distributed, to ADR holders that are obligated to pay those fees.

We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The fees described above may be amended from time to time.

 267
Table of Contents

Direct and Indirect Payments

BNYM has agreed to reimburse us for certain expenses related to the establishment and maintenance of the ADR program including, among others, expenses incurred in connection with investor relations activities and any other ADR program expenses. Under certain circumstances, including the removal of BNYM as depositary, we are required to repay to BNYM amounts reimbursed in prior periods. For the year ended December 31, 2019,2021, such reimbursements amounted to U.S.$3,23.2 million.

247 

Table of Contents

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

No matters to report.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

No matters to report.

ITEM 15. CONTROLS AND PROCEDURES

15A.15A. Disclosure Controls and Procedures

As of December 31, 2019,2021, with the supervision and participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). As described below, there are inherent limitations to the effectiveness of any control system, including disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives.

Based on such evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

In addition, to thisas required by the Brazilian Central Bank through CMN Resolution 4,968/21 and in accordance with the applicable legal requirements (Resolutions 2,554/98 andBrazilian Central Bank Circular 3,467/09), we are in process of preparing130/21, the report onrelated to the evaluationquality and adequacy of the Bank's internal control environment. This reportcontrols will be issued within 45 days after the determined period of 45 (forty-five) daysexpected date of publication of the our Brazilian GAAP financial statements, which is scheduled to be March 13, 202018, 2022 (Brazilian Central Bank – GAAP).

15B.15B. Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining an adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.

Our internal control over financial reporting process is designed by, or under the supervision of, our principal executive and financial officers and also incorporates supervision from effected by our Board of Directors, management and other personnel. The purpose is to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with generally accepted accounting principles. For us, generally accepted accounting principles refer to IFRS as issued by the IASB.

Our internal control over financial reporting includes those policies and procedures that:

·●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

·●provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and officers; and

248 

 268
Table of Contents

Table of Contents

·●provide reasonable assurance of prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.statements,

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projected effectiveness of controls in future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures deteriorates.

We have adapted our internal control over financial reporting to the international standards and comply with the guidelines set by the Committee of Sponsoring Organizations of the Treadway Commission, or “COSO,” in its Internal Control – Integrated Framework 2013. These guidelines have been extended and implemented for the Group,Santander Brasil group, applying a common methodology and standardizing the procedures for identifying processes, risks and controls.

Risk Management Integrated Framework

The documentation process in our companies has been constantly directed and monitored by a global coordination team, which sets development guidelines and supervises execution at the unit level.

The general framework is consistent, as it assigns specific responsibilities to management regarding the structure and effectiveness of the processes related directly and indirectly with the production of consolidated financial statements, as well as the controls needed to mitigate the risks inherent in these processes.

With the supervision and participation of management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2019,2021, based on the framework set by the COSO Integrated Framework 2013.

Based on this assessment, which was carried out through March 6, 2020,February 24, 2022, our management concluded that as of December 31, 2019,2021, its internal control over financial reporting was effective based on those criteria.

PricewaterhouseCoopers Auditores Independentes Ltda. which has audited theour consolidated financial statements of Santander Brasil for the year ended December 31, December 2019,2021, has also audited the effectiveness of Santander Brasil’sour internal controlcontrols over financial reporting under auditing standards of the Public Company Accounting Oversight Board (United States) as stated in their report appearing in our consolidated financial statements included in “Item 18.18, Financial Statements.”

15C.Audit15C. Attestation Report of the Registered Public Accounting Firm

For the report, dated March 6, 2020February 24, 2022, from PricewaterhouseCoopers Auditores Independentes Ltda., our registered public accounting firm, on the effectiveness of our internal control over financial reporting as of December 31, 2019,2021, see “Item 18. Financial Statements.”

15D.15D. Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16. [RESERVED]

ITEM16A.AUDIT COMMITTEE FINANCIAL EXPERT

16A. Audit Committee Financial Expert

The Board of Directors has determined that one of the members of our audit committee, Mr. Luiz Carlos NanniniMs. Maria Elena Cardoso Figueira is an “Audit Committee Financial Expert” and meets the requirements set forth by the SEC and NYSE. HeShe is, as are all other current members of the Audit Committee,audit committee, deemed independent under the applicable Brazilian law and the regulations of the SEC and NYSE.

249 

Table of Contents

For more details about the Audit Committee,audit committee, refer to “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee”Committee.”

ITEM 16B.SANTANDER BRASIL’S CODE OF ETHICAL CONDUCT 269
Table of Contents

16B. Santander Brasil’s Code of Ethical Conduct

The Code of Ethical Conduct, the central element the Governance Compliance, is applicable to the members of the Boards of Directors, Executive Officers and to all employees and trainees (“Persons Subject to the Code of Ethical Conduct”) of Santander Brasil and its subsidiaries. It defines the principles that should guide both the personal and professional behavior of the Persons Subject to the Code of Ethical Conduct. They must know the Code of Ethical Conduct and seek to promote it, by championing and striving for its enforcement, and also have the obligation to attend and participate in all assigned training activities in order to become appropriately acquainted with the Code of Ethical Conduct. The Persons Subject to the Code of Ethical Conduct should be guided by ethical principles and rules of conduct that are consistent with our values.

The Code of Ethical Conduct helps us to establish respectful and transparent relationships and aims for the accomplishment of Santander Brasil’s obligations to its customers, employees, shareholders, partners, regulators and society as a whole. The Code of Ethical Conduct should also be a reference for compliance with legal duties and for the maintenance of commercial relationships founded on trust with partners and clients.customers.

The full version of the Santander Code of Ethical Conduct, which does not form part of this annual report on Form 20-F, is available on our website at https://www.santander.com.br/ri.ri/estatuto-codigo-politicas.

ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES

16C. Principal Accountant Fees and Services

The balance of “Other general administrative expenses—Technical reports” includes the fees paid by the consolidated companies (detailed in the accompanying Appendix I of the consolidated financial statements included elsewhere in this annual report) to PricewaterhouseCoopers Auditores Independentes Ltda. for the fiscal years ended December 31, 2019, December 31, 20182021, 2020 and December 31, 2017,2019, as follows:

 For the year ended December 31, For the year ended December 31,
 2019 2018 2017 2021 2020 2019
 (in R$ millions) (in R$ millions)
Audit of the annual financial statements of the companies audited (constant scope of consolidation)  25.2   19.9   17.5   26.3   24.0   25.2 
Audit related  0.1   0.5   3.9   0.2   0.4   0.1 
Tax  -     -     -   
All other  0.3   0.1   1.3   0,4   -     0.3 
Total  25.6   20.5   22.7   26.9   24.4   25.6 

 

The approximate value of withholding taxes in respect of the audit fees for the year ended December 31, 20192021 according to applicable law totaled R$3.61.9 million.

The services commissioned from our auditors meet the independence requirements stipulated by the Brazilian Central Bank and CVM regulation and by the Sarbanes-Oxley Act of 2002, and they did not involve the performance of any work that is incompatible with the audit function.

If we are required to engage an auditing firm for audit and audit-related services, those services and any fees paid to the auditing firms must be pre-approved by the audit committee.

Our Audit Committee pre-approves all audit and non-audit services to be performed by our registered public accounting firm.

250 

Table of Contents

ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

16D. Exemptions from the Listing Standards for Audit Committees

Under NYSE and SEC rules for listed companies, we must comply with Rule 10A-3 under the Securities Exchange Act (Listing Standards Relating to Audit Committees)., Rule 10A-3 provides that we should establish an Audit Committeeaudit committee composed of members of the Board of Directors, meet the requirements specified in the listing standards, or appoint and establish a board of auditors or similar body to perform the role of the Audit Committee,audit committee, in reliance on the general exemption of audit committees of foreign private issuers set forth in Rule 10A-3(c) (3) of the Securities Exchange Act.

In accordance with the rules of the Brazilian Central Bank, we constituted a body similar to the Audit Committeeaudit committee of the Board of Directors of an American company, which we refer to as our “Audit Committee.”

 270
Table of Contents

Our Audit Committee observescomplies with Brazilian legislation, including CMN and Brazilian Central Bank regulations, and performs all the functions of an Audit Committee under Rule 10A-3. As provided inUnder Brazilian law, including Brazilian Central Bank regulations, an audit committee is a statutory board, separate from the board of directors and created by a shareholders’ resolution. The members of the audit committee may be members of the board of directors, provided that they meet certain independence requirements. All members of our Board of Directors and the Audit Committee and distinct statutory entities. Moreover, according toaudit committee meet such independence requirements. In addition, under Brazilian law, the function of hiring independent auditors is reserved for the board of directors. As a power reserved exclusively to the Board of Directorsresult, as specified in Section 3(a)(58) of the company, under the specific and express recommendation issued from the Audit Committee, as the case may be, for the engagement or replacementExchange Act, our board of independent auditors, and our Board of Directors actsdirectors functions as our audit committee for the purposespurpose of nominatingapproving any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or to us.

Pursuant to Exchange Act Rule 10A-3(c)(3), which provides for an exemption under the rules of the SEC regarding the audit committees of listed companies, a foreign private issuer, such independent auditors.

as us, is not required to have an audit committee equivalent to or comparable with a U.S. audit committee, if the foreign private issuer has a body established and selected pursuant to home country legal or listing provisions expressly requiring or permitting such a body, and if the body meets certain requirements. As a foreign private issuer, we rely on the exemption under Rule 10A-3(c)(3) of the Exchange Act with respect to our Audit Committee, and we believe that our audit committee complies with the aforementioned exemption requirements. Except in these respects, our Audit Committee is comparable to an Audit Committeeaudit committee performs the functions of the boardaudit committees of U.S. companies.

16E. Purchases of Equity Securities by the Issuer and performs the same functions of an American company. Our Audit Committee is able to act independently in carrying out the responsibilities of an Audit Committee under the Sarbanes-Oxley Act, meets the exemption requirements of Rule 10A-3(c)(3) and therefore is in compliance with Rule 10A-3 of the Securities Exchange Act.

ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Affiliated Purchasers

The following table reflects purchases of our equity securities, including in the form of ADRs, by us or our affiliates in 2019.

2021.

Santander Brasil – Buyback Program Units

Months Total Number of Units Purchased (3) Average Price Paid per Unit in U.S.$ (4) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1) (5) Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (2)
November 2020    
December 2020    
January 2021    
 February 2021   447   4.9208   447   -   
 March 2021   -     -     -     -   
 April 2021   -     -     -     -   
 May 2021   -     -     -     -   
 June 2021   -     -     -     -   
 July 2021   868,600   8.0397   868,600   -   
 August 2021   -     -     -     -   
 September 2021   -     -     -     -   
 October 2021   -     -     -     -   
 November 2021   -     -     -     -   
 December 2021   -     -     -     -   
 Total   869,047   12.96   869,047   36,956,402 

 

Months Total Number of Units Purchased (3) Average Price Paid per Unit in U.S.$ (4) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1) (5) Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (2)
         
November 2018  1,438,400   10.7684   1,438,400   -   
December 2018  818,500   11.0285   818,500   -   
January 2019  683,500   12.9728   683,500   -   
February 2019  1,579,900   12.9271   1,579,900   -   
March 2019  1,098,900   11.4158   1,098,900   -   
April 2019  -     -     -     -   
May 2019  894,000   10.9507   894,000   -   
June 2019  718,400   11.6827   718,400   -   
July 2019  -     -     -     -   
August 2019  632,800   10.3023   632,800   -   
September 2019  -     -     -     -   
October 2019  659,200   11.9678   659,200   -   

251 

Table of Contents

November 2019  199,000   10.6889   199,000   -   
December 2019              -   
Total  8,722,600   115   8,722,600   37,753,760 

(1)The buyback program, as approved by our board of directors on November 3, 20161, 2019 for the period from November 4, 20165, 2019 to November 3, 2018,4, 2020, and on November 1, 2018February 2, 2021 for the period from November 6, 2018February 3, 2021 to November 5, 2019. A new buyback program was approved by our board of directors on November 1, 2019 for the twelve (12)-month period starting on November 6, 2019.

(2)The number entered in the “Total” row of the column “Maximum Number (or Approximate Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs” refers to the number of Units which may be repurchased in the period from November 2018 to November 2019 as approved by our board of directors. The number of Units that may be repurchased for the period from November 6, 2018 to November 5, 2019 as approved by our board of directors is 37,753,760.

(3)The “Total Number of Units Purchased” was 199,000 in November 2019 and 0.00 in December 2019.

(4)The “Average Price Paid per Unit in U.S.$” was 10,6889 in November 2019 and U.S.$0,00 in December 2019

(5)The “Total Number of Units Purchased as Part of Publicly Announced Plans or Programs” was 199,000 in November 2019 and 0.00 in December 2019.

(6)August 2, 2022. The repurchase plans define an annuala maximum of Units to be repurchased within its term but without a monthly limit.

(2) The number entered in the “Total” row of the column “Maximum Number (or Approximate Dollar Value) of units that May Yet Be Purchased Under the Plans or Programs” refers to the number of Units which may be repurchased in the periods as approved by our board of directors. The total number of Units that may be repurchased for the period from February 3, 2021 to August 2, 2022 as approved by our board of directors is 36,956,402. 

For further information on our buyback program, please see “Item 4. Information on the Company—A. History and Development of the Company—Important Events—Buyback Program.”

ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

16F. Change in Registrant’s Certifying Accountant

Not applicable.

ITEM 16G.CORPORATE GOVERNANCE 271
Table of Contents

16G. Corporate Governance

In December 2012, primarily in response to the requirements of the European Banking Authority, Santander Spain adopted a corporate governance framework (Marco de Gobierno Interno del Grupo Santander). The purpose of the framework is to organize and standardize the corporate governance practices of Santander Spain and its most significant subsidiaries, including us, in order to enhance the ability of Santander Spain to manage the risks arising from Santander group operations around the world.

The three pillars of the framework are (i) an organizational model based on functions subject to internal governance, (ii) terms of reference according to which Santander Spain exercises control and oversight over its subsidiaries and participates in specific decisions as their controlling shareholder, and (iii) corporate models establishing common guidelines for the management and control of Santander Spain’s subsidiaries, subject to local autonomy considerations. In general, the framework purports to implement organizational and procedural changes rather than mandating particular substantive outcomes. However, in some cases, and subject to the limitations there set forth, the framework states that Santander Spain may require that its subsidiaries make substantive changes or take specific actions. The framework enables Santander Spain to participate in the decision-making processes of its subsidiaries by requiring its approval of certain decisions that may have a significant impact on the Santander Group as a whole due to their significance or potential risk, such as decisions relating to mergers and acquisitions, capital structure, dividends and risk tolerance, among other things. The framework also requires that a single person at each subsidiary be in charge of each function subject to internal governance and gives Santander Spain the authority to participate in the appointment, evaluation and compensation of each such person.

By its own terms, the framework as a whole is premised on the legal and financial autonomy of the subsidiaries and does not empower Santander Spain to supplant its subsidiaries’ decision-making processes. Moreover, each of the three pillars of the framework is explicitly made subject to local legal requirements. We approved the adoption of this corporate governance framework in May 2013, and have approved all subsequent amendments since then (the latest one was approved in December 2019), subject to the precedence of applicable Brazilian laws and regulations and the limitations imposed thereby such as banking secrecy laws, and subject also to our corporate governance practices, including our policies for related party transactions and for disclosure of material acts and facts.

252 

Table of Contents

As a result of the precedence given to local legal requirements in the framework itself and in our adopting resolutions, we do not expect that the adoption of the corporate governance framework will affect our ability to comply with applicable corporate governance regulations, including the rules of the Brazilian Central Bank, CVM and B3, and SEC and NYSE rules applicable to foreign private issuers.

Pursuant to Section 303A.11 of the Listed Company Manual of the NYSE, we are required to provide a summary of the significant ways in which our corporate governance practices differ from those required for United States resident companies under the NYSE listing standards. Section 303A of the NYSE Listed Company Manual sets forth certain corporate governance requirements that a company must satisfy to be listed on the NYSE. However, exemptions from many of the requirements are available to foreign private issuers such as us. As a foreign private issuer, we are permitted to and we will, follow home country practice in lieu of the NYSE corporate governance standards, from which we are exempt.

A discussion of the significant differences between Brazilian corporate governance standards that govern our practices and the NYSE standards applicable to U.S. companies follows below. It includes only a brief summary description of our corporate governance practices.

Principal Differences between Brazilian and U.S. Corporate Governance Practices

We are also subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies. Under the NYSE rules, we are required only to: (i) have an Audit Committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our Chief Executive Officer of any material noncompliance with any applicable NYSE corporate governance rules, (iii) submit an executed written affirmation annually to the NYSE and submit an interim written affirmation each time a change occurs to the board or any of the committees subject to Section 303A of the NYSE rules, and (iv) provide a brief description of the significant differences between our corporate governance practices and the NYSE, corporate governance practicepractices required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below, as required for foreign private issuers by NYSE Rule 303A.11.

 272
Table of Contents

Majority of Independent Directors

The NYSE rules require that a majority of the board must consist of independent directors. As a company with a majority of our voting shares being beneficially owned by another entity (Santander Spain), we are not required to comply with this rule. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Currently, our Board of Directors must have at least five members, at least 20.0% of which must be independent, as determined pursuant to Article 14 of our By-Laws.By-Laws, Currently, fivefour members of our Board of Directors are deemed independent (representing 56%36% of the composition of our Board of Directors). Also, Brazilian Corporate Law, the Brazilian Central Bank and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation, duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. While we believe that these rules provide adequate assurances that our directors are independent and meet the requisite qualification requirements under Brazilian law, we believe that such rules would permit us to have directors that would not otherwise pass the test for director independence established by the NYSE.NYSE, Brazilian Corporate Law requires that our directors shall be elected by our shareholders at an annual shareholders’ meeting. Currently, all of our directors are elected by our shareholders after recommendation of the Nomination and Governance Committee, for a term of two years.

Executive Sessions

NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present.present, Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one thirdone-third of the members of the Board of Directors can be elected from management members. Our Chief Executive Officer, Mr. Sergio Agapito Lires Rial,Mario Roberto Opice Leão, is a

253 

Table of Contents

member of our Board of Directors. There is no requirement that our non-management directors meet regularly without management. As a result, the non-management directors on our board do not typically meet in executive session.

Committees

NYSE rules require that listed companies have a Nominating/Corporate Governance Committee and a Remuneration Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. As a company whose majority of voting shares is held by another group, we are not required to comply with this rule. The responsibilities of the Nominating/Corporate Governance Committee include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. The responsibilities of the Remuneration Committee, in turn, include, among other things, reviewing corporate goals relevant to the Chief Executive Officer’s compensation, evaluating the Chief Executive Officer’s performance, approving the Chief Executive Officer’s compensation levels and recommending to the board non-chief executive officer compensation, incentive compensation and equity-based plans.

In February 2017, our Board of Directors approved the terms for the establishment of our Nomination and Governance Committee. The Nomination and Governance Committee also oversees corporate governance at Santander Brasil.

CMN rules require us to have a compensation committeeCompensation Committee composed of at least three members. We have created the compensation committeeCompensation Committee whose function is to advise our Board of Directors on matters in connection with, but not limited to (i) fixed and variable compensation policies and benefits and (ii) the long-term incentive plan.

See “Item 6. Directors, Senior Management and Employees—C. Board Practices” for a complete description of all of our board advisory committees.

Pursuant to Brazilian Corporate Law, the aggregate compensation for our directors and executive officers is established by our shareholders.

Audit Committee and Audit Committee Additional Requirements

NYSE rules require that listed companies have an Audit Committeeaudit committee composed that (i) is composed of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding Audit Committeesaudit committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities.

 273
Table of Contents

CMN rules require us to have an Audit Committeeaudit committee of at least three independent members. The Audit Committeeaudit committee is elected by the Board of Directors.Directors, SEC Rule 10A-3 provides that the listing of securities of foreign private issuers will be exempt from the Audit Committeeaudit committee requirements if the issuer meets certain requirements. Our Audit Committee allows us to meet the requirements set forth by this rule. See “Item 16D. Exemptions from the Listing Standards for Audit Committees.”

Shareholder Approval of Equity Compensation Plans

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions.exceptions, Under Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval.approval, Our shareholders do not have the opportunity to vote on all equity compensation plans.

254 

Table of Contents

Corporate Governance Guidelines

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. Wecomply with the corporate governance guidelines under applicable Brazilian law. The corporate governance guidelines applicable to us under Brazilian law are consistent with the guidelines established by the NYSE.

Pursuant to the practices of corporate governance guidelines, on September 22, 2010, our Board of Directors approved a policy that regulates related party transactions, which was last revised on March 27, 2019. This policy provides rules which aim to ensure that all decisions, in particular those involving related parties and other situations with potential conflict of interests will be aligned with our interests and those of our shareholders. The policy applies to all employees, Directors and Executive Officers of Santander Brasil.

Code of Business Conduct and Ethics

NYSE rules require that listed companies adopt and disclose a code of conduct and ethics for Directors, Officers and employees, and promptly disclose any waivers of the code for Directors or Executive Officers. Applicable Brazilian law does not have a similar requirement. We adopted a Code of Ethical Conduct on February 27, 2009, last revised on September 28, 2016, which regulates the set of ethical principles that shall guide the conduct of our employees, officers and directors of Santander Brasil, as well as of its affiliates. Our Code of Ethical Conduct complies with the requirements of the Sarbanes-Oxley Act and the NYSE rules.

Internal Audit Function

NYSE rules require that listed companies maintain an internal audit function to provide management and the Audit Committeeaudit committee with ongoing assessments of the company’s risk management processes and system of internal controls.

OurCMN rules also require us to have an internal audit function, and our internal audit department works independently to conduct structured examinations, analyses, surveys and fact-finding to evaluate the integrity, adequacy, effectiveness, efficiency and economy of the information systems processes and internal controls related to our risk management. The internal audit department reports on an ongoing basis to the Audit Committee.audit committee. In carrying out its duties, the internal audit department has access to all documents, records, systems, locations and professionals involved with the activities under review.

Other Corporate Frameworks

On the recommendation of our controlling shareholder, our Board of Directors analyzed and approved the adoption of a series of corporate frameworks to matters such as: (i) internal audit; (ii) accounting and disclosure of financial information; (iii) risk control; (iv) communication and branding; (v) human resources; (vi) information technology; and (vii) money-laundering protection. Currently, we have a total of 16 frameworks (Marcos Corporativos)(Marcos Corporativos) in force. We believe that these frameworks once all of them have been adopted, will continue to enhance the formalization of our governance and internal controls structures.

Website

Our corporate governance codes, which do not form part of this annual report, are available to the public on our website in Portuguese and English at www.santander.com.br under the heading “Investor Relations—Corporate Governance.” The information contained on our website, any website mentioned in this annual report, or any websiteanywebsite directly or indirectly linked to these websites is not part, of and is not incorporated by reference in, this annual report.

ITEM 16H.MINE SAFETY DISCLOSURE 274
Table of Contents

16H. Mine Safety Disclosure

Not applicable.

16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

255 

 275

Table of Contents

Table of Contents

PART III

ITEM 17.ITEM 17. FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of this item.

ITEM 18.ITEM 18. FINANCIAL STATEMENTS

Consolidated Financial Statements are filed as part of this annual report, see pages 1 to 159.starting on page F-1.

ITEM 19.ITEM 19. EXHIBITS

(a)       Index to Consolidated Financial Statements

 

Page

Independent auditor’s Report of PricewaterhouseCoopers Auditores IndependentesF-2F-3
Consolidated Balance Sheets as of December 31, 2021, 2020 and 2019F-4
Consolidated Statement of Income for the years ended December 31, 2021, 2020 and 2019 2018 and 2017F-7F-6
Consolidated Income Statements for the years ended December 31, 2019, 2018 and 2017F-9
Consolidated StatementsStatement of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 2018 and 2017F-10F-7
Consolidated StatementsStatement of Changes in Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019 2018 and 2017F-11F-8
Consolidated Statement of Cash Flow StatementsFlows for the years ended December 31, 2021, 2020 and 2019 2018 and 2017F-13F-11
Notes to the Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019 2018 and 2017F-14
F-13

 

(b)       List of Exhibits.

We are filing the following documents as part of this annual report on Form 20-F:

Exhibit Number

Description

1.1English translation of the By-laws of Santander Brasil, amended and restated on April 26, 2019March 31, 2021 (incorporated by reference to our Form 6-K (file no. 001-34476) filed with the SEC on April 29, 2019)01, 2021).
2.1Form of Deposit Agreement among Santander Brasil, The Bank of New York Mellon, as depositary, and the holders from time to time of American depositary shares issued thereunder, including the form of American depositary receipts (incorporated by reference to Exhibit 1 to our Registration Statement on Form F-6 (file no. 333-207353) filed with the SEC on October 9, 2015).
2.2Subordinated Indenture dated as of January 29, 2014, among Santander Brasil and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 2.3 to our Annual Report on Form 20-F (file no. 001-34476) filed with the SEC on April 30, 2014).
2.3First Supplemental Indenture dated as of January 29, 2014, among Santander Brasil and The Bank of New York Mellon, as trustee, paying agent, transfer agent and registrar (incorporated by reference to Exhibit 2.4 to our Annual Report on Form 20-F (file no. 001-34476) filed with the SEC on April 30, 2014).
2.4Second Supplemental Indenture dated as of January 29, 2014, among Santander Brasil and The Bank of New York Mellon, as trustee, paying agent, transfer agent and registrar (incorporated by reference to Exhibit 2.5 to our Annual Report on Form 20-F (file no. 001-34476) filed with the SEC on April 30, 2014).
2.5Description of SecuritiesSecurities.

256 

Table of Contents

4.1Option Plan to Purchase Share depositDeposit Certificate of Santander Brasil (incorporated by reference to Attachment I to our Form 6-K/A filed with the SEC on January 6, 2010).
4.2Long-termLong-Term Incentive Plan – Investment in Deposit Share Certificate (“Units”) of Santander Brasil (incorporated by reference to Exhibit III to our Form 6-K (file no. 001-34476) filed with the SEC on September 27, 2011).
4.3Deferred Bonus Plans related to 2011 (incorporated by reference to Exhibit I to our Form 6-K (file no.no, 001-34476) filed with the SEC on January 9, 2012).
4.4Deferred Bonus Plans related to 2012 (incorporated by reference to Exhibit I to our Form 6-K (file no.no, 001-34476) filed with the SEC on January 15, 2013).
 276
Table of Contents

4.5Long-termLong-Term Incentive Plan – Investment in Deposit Share Certificates (“Units”) of Santander Brasil (incorporated by reference to Exhibit V to our Form 6-K (file no. 001-34476) filed with the SEC on April 4, 2013).
4.6Deferred Bonus Plans related to 2013 (incorporated by reference to Exhibit II to our Form 6-K (file no. 001-34476) filed with the SEC on May 1, 2013).
4.7Deferred Bonus Plans related to 2014 (incorporated by reference to Exhibit V to our Form 6-K (file no. 001-34476) filed with the SEC on April 1, 2015).
4.8Deferred Bonus Plans related to 2015 (incorporated by reference to Exhibit II to our Form 6-K/A (file no. 001-34476) filed with the SEC on December 3, 2015).
8.14.9Partnership Agreement between Santander Brasil and Getnet, executed on April 16, 2021 (English translation).*
8.1List of Subsidiaries (incorporated by reference to Note 3 to our Audited Consolidated Financial Statements filed with this Annual Report on Form 20-F)..
11.1English translation of the Code of Ethical Conduct of Santander Brasil (incorporated by reference to Exhibit 11.1 to our Annual Report on Form 20-F (file no. 001-34476) filed with the SEC on March 28, 2017).
12.1Section 302 Certification by the principal executive officer.
12.2Section 302 Certification by the principal financial officer.
13.1Section 906 Certification by the Chief Executive Officer.
13.2Section 906 Certification by the Chief Financial Officer.
15.1Consent Letter of PricewaterhouseCoopers

 

SIGNATURES*     Certain information has been omitted from this exhibit pursuant to Item 4 of the Instructions As To Exhibits of Form 20-F because it is both not material and is the type that the registrant treats as private or confidential. The registrant hereby agrees to furnish an unredacted copy of the exhibit and its materiality and privacy or confidentiality to the U.S. Securities and Exchange Commission upon request.

 

 277
Table of Contents

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 BANCO SANTANDER (Brasil) S.A.
 
By:/s/ Sergio Agapito Lires RialMario Roberto Opice Leão
  Name: Sergio Agapito Lires RialMario Roberto Opice Leão
  Title: Chief Executive Officer

Date: March 6, 2020February 28, 2022

 278
Table of Contents

Banco Santander (Brasil) S.A.

 

Consolidated Financial Statements

Prepared in accordance with International Financial Reporting

Standards - IFRS

December 31, 2021

257 

Table of Contents

BANCO SANTANDER (BRASIL) S.A.
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
INDEX

Report of independent registered public accounting firm 
INDEXPg.

Report of Independent Registered Public Accounting FirmConsolidated Balance SheetF-2
Consolidated Balance SheetsF-7F-4
Consolidated Statement of Income StatementsF-9F-6
Consolidated StatementsStatement of Comprehensive IncomeF-10F-7
Consolidated StatementsStatement of Changes in Stockholders’ EquityF-11F-8
ConsolidatedStatement of Cash Flow StatementsFlowsF-13F-11
1.   Introduction, basis of presentation of the consolidated financial statements and other informationF-14F-13
2.   Accounting policies and method of measurementF-25F-16
3.   Basis of consolidationF-39F-37
4.   Cash and balances with the Brazilian Central BankF-42F-41
5.   Loans and amounts due from credit institutionsF-43F-41
6.   Debt instrumentsF-44F-42
7.   Equity instrumentsF-45F-43
8.   Derivative financial instruments and Short positionsF-46F-44
9.   Loans and advances to clientsF-54F-52
10.   Non-current assets held for saleF-59F-57
11.   Investments in associates and joint venturesF-60F-57
12.   Tangible assetsF-64F-61
13.   Intangible assets - GoodwillF-65F-62
14.   Intangible assets - Other intangible assetsF-66F-64
15.   Other assetsF-67F-65
16.   Deposits from the Brazilian Central Bank and Deposits from credit institutionsF-67F-65
17.   Client depositsF-68F-65
18.   Marketable debt securitiesF-69F-66
19.   Subordinated liabilitiesF-70
20.   Debt Instruments Eligible to Compose CapitalF-71F-67
21.20.   Other financial liabilitiesF-72F-68
22.21.   Provisions for pensions and similar obligationsF-72F-68
23.22.   Provisions for judicial and administrative proceedings, commitments and other provisionsF-79F-76
24.23.   Tax assets and liabilitiesF-84F-82
25.24.   Other liabilitiesF-87F-85
26.25.   Other Comprehensive IncomeF-87F-85
27.26.   Non-controlling interestsF-88F-86
28.   Stockholders’27.   Shareholders’ equityF-89F-87
29.28.   Earnings per shareF-92F-90
30.29.   Fair value of financial assets and liabilitiesF-93F-91
31.30.   Operational RatiosF-99F-97
32.31.   Interest and similar incomeF-100F-98
33.32.   Interest expense and similar chargesF-100F-98
34.33.   Income from equity instrumentsF-100F-98
34.   Fee and commission incomeF-99
35.   Fee and commission incomeexpenseF-101F-99
36.   Fee and commission expenseF-102
37.   Gains or losses on financial assets and liabilitiesF-102F-100
38.37.   Exchange differences (net)F-102F-100
39.38.   Other operating income and expensesF-103F-100
40.39.   Personnel expensesF-103F-100
41.40.   Other general administrative expensesF-105F-102
42.41.   Gains or losses on non financial assets and investments, netF-106F-103
43.42.   Gains (losses) on disposal and expenses of non-current assets held for sale not classified as discontinued operationsF-106F-103
44.43.   Other disclosuresF-106F-103
45.44.   Business segment reportingF-111F-109
46.45.   Related party transactionsF-115F-112
47.46.   Risk managementF-118F-120
48.47.   Subsequent EventsF-144F-147

Supplemental information 

APPENDIX I - RECONCILIATION OF STOCKHOLDERS' EQUITY AND NET INCOME - BRGAAP vs IFRSTable of Contents

F-146
APPENDIX II - STATEMENTS OF VALUE ADDEDF-149


Table of Contents

 

Banco Santander (Brasil) S.A.

Report of Independent Registered Public Accounting Firmindependent registered public
accounting firm

December 31, 2021

Table of Contents

 

 

Report of independent registered public accounting firm

To the Board of Directors and Stockholders of

Banco Santander (Brasil) S.A.

Opinions on the Financial Statementsfinancial statements and Internal Control
internal control over Financial Reportingfinancial reporting

We have audited the accompanying consolidated balance sheets of Banco Santander (Brasil) S.A. and its subsidiaries (the “Company”"Company") as of December 31, 2019, 20182021, 2020 and 2017,2019, and the related consolidated income statements, statements of income, comprehensive income, statements of changes in stockholders’stockholders' equity and cash flow statementsflows for each of the three years in the period ended December 31, 2019,2021, including the related notes (collectively referred to as the “consolidated"consolidated financial statements”statements"). We also have audited the Company’sCompany's internal control over financial reporting as of December 31, 2019,2021, based on criteria established inInternal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019, 20182021, 2020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20192021 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2021, based on criteria established inInternal Control - Integrated Framework(2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1.c.2.1.iii to the consolidated financial statements, the Company changed the manner in which it accounts for financial instruments in 2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Item 15B –- Management´s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’sCompany's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

PricewaterhouseCoopers, Av. Francisco Matarazzo 1400, Torre Torino, São Paulo, SP, Brasil, 05001-903, Caixa Postal 60054,

T: +55 (11) 3674 2000, www.pwc.com.br

 

Table of Contents

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,

F-1

Table of Contents

evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Supplemental Information

The reconciliation of stockholders' equity and net income –- BRGAAP vs IFRS as of and for the years ended December 31, 2019, 20182021, 2020 and 20172019 and the statements of value added for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, included in APPENDIX I and II respectively, have been subjected to audit procedures performed in conjunction with the audit of the Company’sCompany's consolidated financial statements. This supplemental information is the responsibility of the Company’sCompany's management. Our audit procedures included determining whether the supplemental information reconciles to the consolidated financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with Brazilian Corporate Law. In our opinion, the reconciliation of stockholders' equity and net income –- BRGAAP vs IFRS as of and for the years ended December 31, 2019, 20182021, 2020 and 20172019 and the statements of value added for the years ended December 31, 2019, 20182021, 2020 and 20172019 are fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.

Definition and Limitationslimitations of Internal Controlinternal
control over Financial Reportingfinancial reporting

A company’scompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’scompany's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’scompany's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

 

Table of Contents

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit

F-2

Table of Contents

committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Measurement of expected credit losses

As described in Notes 1.c.2.1.iii, 2.i,1.c.2.1.ii, 2.h, 9, 43.h and 47.b46.b to the consolidated financial statements, management measures the expected credit losses at the probability-weighted estimate of credit losses, that involves management’smanagement's judgment, as set forth in IFRS 9 - Financial Instruments. At December 31, 2019,2021, the impairment losses on loans and receivables was BRL 22,625,75028,510,660 thousand on total loans and receivables at amortized cost of BRL 347,256,660493,354,702 thousand. Management calculates expected credit losses (‘ECL’ECL') using three main components: a probability of default (‘PD’PD'), loss given default (‘LGD’LGD') and exposure at default (‘EAD’EAD') including individual and collective models. The ECL measurement is based on management’smanagement's estimate of present value expected to be received, including the use of a variety of assumptions such as historical loss experience, credit quality, portfolio size, concentration, economic factors and estimated future cash flows. Additionally, management has assessed the Covid-19 pandemic impact in the estimation of credit losses process. In this assessment, management has considered forward-looking information, including changes in macroeconomic scenarios, impacting the calculation model for provisioning expected credit losses.

The principal considerations for our determination that performing procedures relating to the measurement of expected credit losses is a critical audit matter are (i) there was significant judgment used by management in determining the expected credit losses, in particular the assumptions used in determining the PD and LGD, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained relating to these assumptions; and (ii) the audit effort involved use of professionals with specialized skill and knowledge to assist in evaluating those assumptions.assumptions; and (iii) the consideration of the Covid-19 pandemic impacts in measuring then expected credit losses with the current scenario of uncertainty.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included understanding and testing the effectiveness of controls relating to management’smanagement's measurement of expected credit losses, which included controls over the assumptions used. These procedures also included, among others: (i) the involvement of professionals with specialized skill and knowledge to assist in testing management’smanagement's process for determining the expected credit losses, including evaluating the appropriateness of the methodology and models, testing the accuracy and completeness of data used, and evaluating the reasonableness of significant assumptions; (ii) the analysis of management’smanagement's accounting policies in comparison with IFRS 9; and (iii) analysis over management’smanagement's disclosures in the financial statements.statements; and (iv) understanding of the procedures adopted by management in considering the impacts of Covid-19 in the estimation of additional expected credit loss, evaluating the reasonableness of the estimation considering models, assumptions and data used.

Table of Contents

Provisions for judicial and administrative proceedings

As described in Notes 1.c.2.1.v, 2.r1.c.2.1.iv, 2.q and 2322 to the consolidated financial statements, Provisions for judicial and administrative proceedings are recorded when their risk of loss are considered probable and the amounts can be reliably measured, based on the nature, complexity and history of lawsuits and the opinion of legal counsel. At December 31, 2019,2021, the Company has recorded provisions for judicial and administrative proceedings of BRL 9,226,7357,668,914 thousand. The Company also discloses the contingency in circumstances where management concludes no loss is probable or reasonably estimable, but it is reasonably possible that a loss may be incurred.

F-3

Table of Contents

The principal considerations for our determination that performing procedures relating to provisions for judicial and administrative proceedings is a critical audit matter are there was significant judgment by management when assessing the likelihood of a loss being incurred and the potential amount of the judicial and administrative proceedings. This in turn led to a high degree of auditor judgment and effort in evaluating management’smanagement's assessment of the provisions for judicial and administrative proceedings, including the involvement of professionals with specialized skills and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the understanding and testing the design and the effectiveness of controls relating to identifying, assessing, monitoring, measuring, recording, and disclosing the provisions for judicial and administrative proceedings, including the completeness and accuracy of the data used. Our procedures also included testing the recognition and measurement of the Company’sCompany's provisions for judicial and administrative proceedings and performing external confirmation procedures with law firms responsible for a sample of the judicial and administrative proceedings to evaluate the reasonableness of management’smanagement's assessment of the provisions. With the assistance of our professionals with specialized skill and knowledge, we evaluated the reasonableness management’smanagement's assessment of a sample of proceedings taking into account the individual progress of similar proceedings.

Valuation of Level 3 financial instrumentsSão Paulo, February 24, 2022

As described in Notes 1.c.2.1.ii, 2.e and 30 to the consolidated financial statements, if there is low liquidity, the Company uses valuation techniques based on internal models with the use of significant non-observable inputs for which the determination of fair value requires significant management judgment or estimation. At December 31, 2019, the Company has recorded as level 3 fair value measurements certain financial instruments including financial assets of BRL 4,322,668 thousand and financial liabilities of BRL 2,164,757 thousand. The Company determines the fair value of certain Level 3 financial instruments using quantitative models that utilize multiple significant non-observable inputs, including long-dated volatility, estimated future inflation and forward price, as applicable.

The principal considerations for our determination that performing procedures relating to these financial instruments is a critical audit matter due to a high degree of management judgment in the valuation process since the techniques carried out with internal models are based on subjective non-observable inputs. This in turn led to a high degree of auditor judgment and effort in performing procedures, including the involvement of professionals with specialized skill and knowledge to assist in evaluating certain audit evidence.

F-4

Table of Contents

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the understanding and testing the effectiveness of controls relating to valuation models, significant non-observable inputs, and data. Our procedures also included, the involvement of professionals with specialized skill and knowledge to calculate an independent estimate of fair value for a sample of certain financial instruments and compare management’s estimate with the independently developed estimate of fair value. Developing the independent estimate involved testing the completeness and accuracy of data provided by management and evaluating the reasonableness of management’s assumptions used to develop the significant non-observable inputs.

/s/PricewaterhouseCoopers Auditores Independentes Ltda.

São Paulo, Brazil

March 6, 2020

We have served as the Company’sCompany's auditor since 2016.

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

Consolidated Balance Sheet

 

         
Assets Note 2021 2020 2019
         
Cash  4   16,657,201   20,148,725   20,127,364 
                 
Financial assets measured at fair value through profit or loss      18,858,842   60,900,466   32,342,306 
Debt instruments  6   3,122,017   3,545,660   3,735,076 
Balances with the Brazilian Central Bank      15,736,825   57,354,806   28,607,230 
                 
Financial assets measured at fair value through profit or loss  held for trading      70,570,665   95,843,126   55,396,069 
Debt instruments  6   47,752,595   68,520,799   34,885,631 
Equity instruments  7   2,020,610   1,818,276   2,029,470 
Trading derivatives  8.a  20,797,460   25,504,051   18,480,968 
                 
Non-trading financial assets mandatorily measured at fair value through profit or loss      870,162   499,720   171,453 
Equity instruments  7   477,707   438,912   171,453 
Loans and advances to customers  9   392,455   60,808   —   
                 
Financial assets measured at fair value through other comprehensive income      101,241,787   109,740,387   96,120,233 
Debt instruments  6   101,212,600   109,668,214   95,962,927 
Equity instruments  7   29,187   72,173   157,306 
                 
Financial assets measured at amortized cost      633,241,352   554,924,796   474,680,904 
Loans and amounts due from credit institutions  5   95,664,754   112,849,776   109,233,128 
Loans and advances to customers  9   464,451,587   393,707,229   326,699,480 
Debt instruments  6   73,125,011   48,367,791   38,748,296 
                 
Hedging derivatives  8.a  342,463   743,463   339,932 
                 
Assets held for sale  10   816,345   1,092,909   1,325,335 
                 
Investments in associates and joint ventures  11   1,232,646   1,094,985   1,070,762 
                 
Tax assets      41,757,332   41,063,782   33,599,178 
Current      4,117,035   3,082,084   3,304,116 
Deferred  23.d  37,640,297   37,981,698   30,295,062 
                 
Other assets  15   6,049,028   7,222,411   5,061,337 
                 
Property, plant and equipment  12   8,783,785   9,537,111   9,781,957 
                 
Intangible assets      30,786,788   30,766,498   30,595,788 
Goodwill  13   27,915,469   28,360,137   28,375,004 
Other intangible assets  14   2,871,319   2,406,361   2,220,784 
                 
Total assets      931,208,396   933,578,379   760,612,618 
                 
The accompanying notes are an integral part of these consolidated financial statements.

 

F-5

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

CONSOLIDATED BALANCE SHEETS

(Thousand of Brazilian Reais - R$) Consolidated Financial Statements | December 31, 2021 | F-4

Table of Contents

 

* Values expressed in thousands, except when indicated.

Liabilities and stockholders' equity  Note   2021   2020   2019 
         
Financial liabilities measured at fair value through profit or loss  held for trading      36,952,567   75,020,184   44,439,835 
Trading derivatives  8.a  24,172,008   29,212,238   20,604,182 
Short positions  8.b  12,780,559   45,807,946   23,835,653 
                 
Financial Liabilities Measured at Fair Value Through Profit or Loss      7,459,784   7,038,467   5,319,416 
Deposits from Brazilian Central Bank and deposits from credit institutions  20   7,459,784   7,038,467   5,319,416 
                 
                 
Financial Liabilities at Amortized Cost      750,093,694   707,288,791   575,230,401 
Deposits from Brazilian Central Bank and deposits from credit institutions  16   121,005,909   131,656,962   99,271,415 
Customer deposits  17   468,961,069   445,813,972   336,514,597 
Marketable debt securities  18   79,036,792   56,875,514   73,702,474 
Debt instruments eligible to compose capital  19   19,641,408   13,119,660   10,175,961 
Other financial liabilities  20   61,448,516   59,822,683   55,565,954 
                 
Hedging derivatives  8.a  446,973   144,594   200,961 
                 
Provisions      11,604,482   13,814,978   16,331,825 
Provisions for pensions funds and similar obligations  21   2,728,126   3,929,265   4,960,620 
Provisions for judicial and administrative proceedings, commitments and other provisions  22   8,876,356   9,885,713   11,371,205 
                 
Tax liabilities      8,175,023   10,130,248   10,960,075 
Current      5,949,833   5,583,653   5,419,202 
Deferred  23.d  2,225,190   4,546,595   5,540,873 
                 
Other liabilities  24   10,501,378   14,051,245   10,920,944 
                 
Total liabilities      825,233,901   827,488,507   663,403,457 
                 
Stockholders' equity  27   109,046,574   106,205,067   96,736,290 
Share capital      55,000,000   57,000,000   57,000,000 
Reserves      48,880,561   40,414,981   34,877,493 
Treasury shares      (713,039)  (791,358)  (681,135)
Option for acquisition of equity instrument      —     —     (67,000)
Profit for the year attributable to the parent      15,528,052   13,418,529   16,406,932 
Less: dividends and remuneration      (9,649,000)  (3,837,085)  (10,800,000)
                 
Other Comprehensive Income      (3,406,428)  (428,080)  (85,710)
                 
Stockholders' Equity Attributable to the Parent      105,640,146   105,776,987   96,650,580 
                 
Non - controlling interests  26   334,349   312,885   558,581 
                 
Total stockholders' equity      105,974,495   106,089,872   97,209,161 
Total liabilities and stockholders' equity      931,208,396   933,578,379   760,612,618 

The accompanying Notes are an integral part of these consolidated financial statements.

AssetsNote201920182017
     
Cash and Balances With The Brazilian Central Bank420,127,36419,463,58720,642,321
     
Financial Assets Held For Trading --86,271,097
Debt instruments6--34,879,681
Equity instruments7--489,770
Trading derivatives8.a--17,070,125
Balances With The Brazilian Central Bank --33,831,521
Financial Assets Measured At Fair Value Through Profit Or Loss 32,342,30643,711,800-
Debt instruments63,735,0763,171,746-
Balances With The Brazilian Central Bank 28,607,23040,540,054-
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 57,020,90368,852,314-
Debt instruments634,885,63150,066,469-
Equity instruments72,029,470766,333-
Trading derivatives8.a20,105,80218,019,512-
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 171,453917,477-
Equity instruments7171,453298,297-
Loans and advances to customers9-619,180-
Other Financial Assets At Fair Value Through Profit Or Loss --1,692,057
Debt instruments6--1,658,689
Equity instruments7--33,368
Available-For-Sale Financial Assets --85,823,384
Debt instruments6--84,716,747
Equity instruments7--1,106,637
Financial Assets Measured At Fair Value Through Other Comprehensive Income96,120,23385,436,677-
Debt instruments695,962,92785,395,691-
Equity instruments7157,30640,986-
Held to maturity investments6--10,214,454
Loans and Receivables --368,729,006
Loans and amounts due from credit institutions5--78,692,334
Loans and advances to customers9--272,420,157
Debt instruments6--17,616,515
Financial Assets Measured At Amortized Cost 474,680,904429,731,475-
Loans and amounts due from credit institutions5109,233,12891,859,759-
Loans and advances to customers9326,699,480301,072,207-
Debt instruments638,748,29636,799,509-
Hedging Derivatives8.a339,932343,934192,763
Non-Current Assets Held For Sale101,325,3351,380,2311,155,456
Investments in Associates and Joint Ventures111,070,7621,053,315866,564
Tax Assets2433,599,17831,565,76728,825,741
Current 3,304,1163,885,1894,047,663
Deferred 30,295,06227,680,57824,778,078
Other Assets155,061,3374,800,4674,578,270
Tangible Assets129,781,9576,588,9756,509,883
Intangible Assets 30,595,78830,018,98830,202,043
Goodwill1328,375,00428,378,28828,364,256
Other intangible assets142,220,7841,640,7001,837,787
TOTAL ASSETS 762,237,452723,865,007645,703,039
     
The accompanying Notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements | December 31, 2021 | F-5

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

Consolidated Statement of Income

F-6

                 
  Note 2021 2020 2019
         
Interest and similar income  31   77,987,308   62,774,940   72,841,060 
Interest expense and similar charges  32   (26,668,842)  (18,332,228)  (28,519,953)
Net interest income      51,318,466   44,442,712   44,321,107 
Income from equity instruments  33   90,040   33,754   18,933 
Income from companies accounted for by the equity method  11   144,184   112,261   149,488 
Fee and commission income  34   20,388,089   20,606,707   20,392,458 
Fee and commission expense  35   (5,114,788)  (4,378,493)  (4,679,306)
Gains (losses) on financial assets and liabilities (net)  36   221,782   12,998,060   2,462,545 
Financial assets at fair value through profit or loss      1,555,837   711,949   252,253 
Financial assets measured at fair value through profit or loss held for trading      3,519,626   12,122,794   2,391,080 
Non-trading financial assets mandatorily measured at fair value through profit or loss      205,016   172,828   11,501 
Financial instruments not measured at fair value through profit or loss      (665,853)  (239,054)  (57,522)
Other      (4,392,844)  229,543   (134,767)
Exchange differences (net)  37   (2,002,286)  (24,700,962)  (2,788,537)
Other operating expense (net)  38   (1,119,380)  (872,510)  (1,107,719)
Total income      63,926,107   48,241,529   58,768,969 
Administrative expenses      (17,316,419)  (17,114,960)  (16,941,526)
Personnel expenses  39   (9,025,702)  (8,871,482)  (9,327,714)
Other administrative expenses  40   (8,290,717)  (8,243,478)  (7,613,812)
Depreciation and amortization      (2,433,921)  (2,579,127)  (2,391,857)
Tangible assets  12   (1,850,780)  (2,039,805)  (1,870,836)
Intangible assets  14   (583,141)  (539,322)  (521,021)
Provisions (net)      (2,179,417)  (1,656,547)  (3,681,586)
Impairment losses on financial assets (net)      (17,112,734)  (17,450,188)  (13,369,905)
Financial assets measured at amortized cost and contingent commitments      (17,112,734)  (17,450,188)  (13,369,905)
Impairment losses on other assets (net)      (165,799)  (84,908)  (131,435)
Other intangible assets  14   (30,160)  (66,269)  (103,924)
Other assets      (135,639)  (18,639)  (27,511)
Gains (losses) on disposal of assets not classified as assets held for sale  41   (15,113)  230,713   10,646 
Gains (losses) on assets held for sale not classified as discontinued operations  42   47,625   77,463   9,843 
Operating income before tax      24,750,329   9,663,975   22,273,149 
Income taxes  23   (9,191,005)  3,786,778   (5,641,699)
Consolidated net income for the period      15,559,324   13,450,753   16,631,450 
Profit attributable to the parent      15,528,052   13,418,529   16,406,932 
Profit attributable to non-controlling interests  26   31,272   32,224   224,518 

TableThe accompanying Notes are an integral part of Contentsthese consolidated financial statements.

 

BANCO SANTANDER (BRASIL) S.A.

CONSOLIDATED BALANCE SHEETS

(Thousand of Brazilian Reais - R$) 

Liabilities and Stockholders' EquityNote201920182017
     
Financial Liabilities Held For Trading --49,322,546
Trading derivatives8.a--16,514,154
Short positions8.b--32,808,392
     
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading 46,064,66950,938,992-
Trading derivatives8.a22,229,01618,243,315.00-
Short positions8.b23,835,65332,695,677.00-
     
Financial Liabilities Measured At Fair Value Through Profit Or Loss 5,319,4161,946,056-
Deposits from Brazilian Central Bank and deposits from credit institutions215,319,4161,946,056.00-
     
Financial Liabilities at Amortized Cost 575,230,401547,295,169478,880,704
Deposits from Brazilian Central Bank and deposits from credit institutions1699,271,41599,022,80679,374,685
Customer deposits17336,514,597304,197,800276,042,141
Marketable debt securities1873,702,47474,626,23270,247,012
Subordinated debts19-9,885,607519,230
Debt Instruments Eligible to Compose Capital2010,175,9619,779,9448,436,901
Other financial liabilities2155,565,95449,782,78044,260,735
     
Hedging Derivatives8.a200,961223,520163,332
     
Provisions 16,331,82514,695,89813,986,916
Provisions for pensions funds and similar obligations224,960,6203,357,6543,923,457
Provisions for judicial and administrative proceedings, commitments and other provisions2311,371,20511,338,24410,063,459
     
Tax Liabilities2410,960,0758,074,7648,248,019
Current 5,419,2025,043,3755,751,488
Deferred 5,540,8733,031,3892,496,531
     
Other Liabilities2510,920,9449,095,1488,013,921
     
Total Liabilities 665,028,291632,269,547558,615,438
     
Stockholders' Equity2896,736,29091,944,33387,425,075
Share capital 57,000,00057,000,00057,000,000
Reserves 34,877,49330,440,28828,966,451
Treasury shares -       681,135(461,432)(148,440)
Option for Acquisition of Equity Instrument -         67,000(1,017,000)(1,017,000)
Profit for the year attributable to the Parent 16,406,93212,582,4778,924,064
Less: dividends and remuneration -  10,800,000(6,600,000)(6,300,000)
     
Other Comprehensive Income -         85,710(878,863)(774,368)
     
Stockholders' Equity Attributable to the Parent 96,650,58091,065,47086,650,707
     
Non - Controlling Interests27558,581529,990436,894
     
Total Stockholders' Equity 97,209,16191,595,46087,087,601
Total Liabilities and Stockholders' Equity 762,237,452723,865,007645,703,039

 

The accompanying Notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements | December 31, 2021 | F-6

Table of Contents

 

* Values expressed in thousands, except when indicated.

Consolidated Statement of Comprehensive Income

  2021 2020 2019
       
Consolidated Profit for the Year  15,559,324   13,450,753   16,631,450 
             
Other comprehensive income that will be reclassified subsequently to profit or loss when specific conditions are met:  (3,245,041)  (897,996)  1,468,651 
Financial assets measured at fair value through other comprehensive income  (2,389,705)  (1,003,155)  1,352,702 
Financial assets measured at fair value through other comprehensive income  (4,255,996)  (1,976,013)  2,926,285 
Income taxes  1,866,291   972,858   (1,573,583)
Cash flow hedges  (855,335)  105,159   115,949 
Valuation adjustments  (1,628,393)  168,015   270,119 
Amounts transferred to income statement  —     —     6,767 
Income taxes  773,058   (62,856)  (160,937)
             
Other comprehensive income that will not be reclassified to net income:  266,692   555,624   (675,497)
Defined benefits plan  266,692   555,624   (675,497)
Defined benefits plan  592,967   1,110,034   (1,358,578)
Income taxes  (326,275)  (554,410)  683,081 
             
Total comprehensive income  12,580,976   13,108,381   17,424,604 
             
Attributable to the parent  12,549,704   13,076,157   17,200,086 
Attributable to non-controlling interests  31,272   32,224   224,518 
Total comprehensive income  12,580,976   13,108,381   17,424,604 
The accompanying Notes are an integral part of these consolidated financial statements.

 

F-7

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

CONSOLIDATED INCOME STATEMENTS

(Thousand of Brazilian Reais - R$) Consolidated Financial Statements | December 31, 2021 | F-7

Table of Contents

 

* Values expressed in thousands, except when indicated.

Consolidated Statement of Changes in Stockholders’ Equity

                                                            
     Stockholders´ Equity Attributable to the Parent 
          
  Note  Share
Capital		  Reserves  Treasury
shares		  Option for acquisition of equity instrument  Profit
attributed
to the parent		  Dividends and
remuneration		  Total stockholders´
equity		  Financial assets measured at fair value through other comprehensive income  Defined benefits plan  Adjustments investment abroad  Gains and losses - cash flow hedge and investment  Total  Non-controlling
interests		  Total
stockholders'		 
Balance on december 31, 2018      57,000,000   30,440,288   (461,432)  (1,017,000)  12,582,477   (6,600,000)  91,944,333   1,992,581   (3,071,040)  859,370   (659,774)  91,065,470   529,990   91,595,460 
Total comprehensive income      —   —   —   —   16,406,932   —   16,406,932   1,352,702   (675,497)  —   115,949   17,200,086   224,518   17,424,604 
Net profit      —   —   —   —   16,406,932   —   16,406,932   —   —   —   —   16,406,932   224,518   16,631,450 
Other comprehensive income      —   —   —   —   —   —   —   1,352,702   (675,497)  —   115,949   793,154   —   793,154 
Financial assets measured at fair value through other comprehensive income      —   —   —   —   —   —   —   1,352,702   —   —   —   1,352,702   —   1,352,702 
Employee benefit plan      —   —   —   —   —   —   —   —   (675,497)  —   —   (675,497)  —   (675,497)
Gain and loss - cash flow and investment hedge      —   —   —   —   —   —   —   —   —   —   115,949   115,949   —   115,949 
Appropriation of net income from prior years      —   12,582,477   —   —   (12,582,477)  —   —   —   —   —   —   —   —   - 
Option to acquire own instrument          (1,598,336)  —   950,000   —   —   (648,336)  —   —   —   —   (648,336)  —   (648,336)
Dividends and interest on capital  27.b  —   (6,600,000)  —   —   —   (4,200,000)  (10,800,000)  —   —   —   —   (10,800,000)  —   (10,800,000)
Share based compensation  39.b  —   50,886   —   —   —   —   50,886   —   —   —   —   50,886   —   50,886 
Treasury shares  27.d  —   —   (219,703)  —   —   —   (219,703)  —   —   —   —   (219,703)  —   (219,703)
Treasury shares income  27.d  —   5,796   —   —   —   —   5,796   —   —   —   —   5,796   —   5,796 
Other      —   (3,618)  —   —   —   —   (3,618)  —   —   —   —   (3,618)  (195,927)  (199,545)
Balance on december 31, 2019      57,000,000   34,877,493   (681,135)  (67,000)  16,406,932   (10,800,000)  96,736,290   3,345,283   (3,746,537)  859,370   (543,825)  96,650,580   558,581   97,209,161 

 Note201920182017
     
Interest and similar income3272,841,06070,478,39371,418,349
Interest expense and similar charges33(28,519,953)(28,557,051)(36,471,860)
Net interest income 44,321,10741,921,34234,946,489
Income from equity instruments3418,93332,62383,120
Income from companies accounted for by the equity method11149,48865,95871,551
Fee and commission income3520,392,45817,728,45215,815,543
Fee and commission expense36(4,679,306)(3,596,293)(3,093,675)
Gains (losses) on financial assets and liabilities (net)372,462,545(2,782,802)969,090
Financial assets held for trading --1,174,111
Financial Assets At Fair Value Through Profit Or Loss 252,253(138,673)-
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading2,391,080(2,764,859)-
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss11,50161,239-
Other financial instruments at fair value through profit or loss --30,694
Financial instruments not measured at fair value through profit or loss (57,522)(138,104)(122,115)
Other (134,767)197,595(113,600)
Exchange differences (net)38(2,788,537)(2,806,471)605,056
Other operating expense (net)39(1,107,719)(1,055,850)(672,013)
Total Income 58,768,96949,506,95948,725,161
Administrative expenses (16,941,526)(16,792,138)(16,120,595)
Personnel expenses40(9,327,714)(9,206,007)(8,937,278)
Other administrative expenses41(7,613,812)(7,586,131)(7,183,317)
Depreciation and amortization (2,391,857)(1,739,959)(1,662,247)
Tangible assets12(1,870,836)(1,216,704)(1,190,967)
Intangible assets14(521,021)(523,255)(471,280)
Provisions (net) (3,681,586)(1,999,604)(3,309,239)
Impairment losses on financial assets (net) (13,369,905)(12,713,435)(12,338,300)
Loans and receivables9.c--(12,338,141)
Financial Assets Measured At Amortized Cost and contingent commitments(13,369,905)(12,713,532)-
Gains (losses) due to derecognition of financial assets measured at amortized cost-97(159)
Impairment losses on other assets (net) (131,435)(508,310)(456,711)
Other intangible assets14(103,924)(300,865)(306,110)
Other assets14(27,511)(207,445)(150,601)
Gains (losses) on disposal of assets not classified as non-current assets held for sale4210,646(25,476)(64,302)
Gains (losses) on non-current assets held for sale not classified as discontinued operations439,843181,734(260,083)
Operating Income Before Tax 22,273,14915,909,77114,513,684
Income taxes24(5,641,699)(3,109,853)(5,375,636)
Consolidated Net income for the period 16,631,45012,799,9189,138,048
Profit attributable to the Parent 16,406,93212,582,4778,924,064
Profit attributable to non-controlling interests27224,518217,441213,984
Earnings Per Share (Brazilian Reais)29   
Basic earnings per 1,000 shares    
Common shares 2,094.831,604.341,133.43
Preferred shares 2,304.321,764.781,246.77
Diluted earnings per 1,000 shares    
Common shares 2,094.831,604.341,132.44
Preferred shares 2,304.321,764.781,245.69
Net Profit attributable - Basic    
Common shares 7,965,1946,108,3494,332,026
Preferred shares 8,441,7386,474,1284,592,038
Net Profit attributable - Diluted    
Common shares 7,965,1946,108,3494,331,955
Preferred shares 8,441,7386,474,1284,592,109
Weighted average shares outstanding (in thousands) - Basic    
Common shares 3,802,3033,807,3863,822,057
Preferred shares 3,663,4443,668,5273,683,145
Weighted average shares outstanding (in thousands) - Diluted    
Common shares 3,802,3033,807,3863,825,313
Preferred shares 3,663,4443,668,5273,686,401

 

Consolidated Financial Statements | December 31, 2021 | F-8

Table of Contents

 

* Values expressed in thousands, except when indicated.

                                                         
       Stockholders´ Equity Attributable to the Parent       
                                              
  Note  Share
Capital		  Reserves  Treasury
Shares		  Option for Acquisition of Equity Instrument  Profit
Attributed
to the Parent		  Dividends and
Remuneration		  Total Stockholders´
Equity		  Financial Assets Measured at Fair Value Through Other Comprehensive Income  Defined Benefits plan  Adjustments investment abroad  Gains and losses - Cash flow hedge and Investment  Total  Non-controlling
Interests		  Total
Stockholders'
Equity		 
Balance on December 31, 2019      57,000,000   34,877,493   (681,135)  (67,000)  16,406,932   (10,800,000)  96,736,290   3,345,283   (3,746,537)  859,370   (543,825)  96,650,580   558,581   97,209,161 
                                                             
Total comprehensive income      —     —     —     —     13,418,529   —     13,418,529   (1,003,154)  555,624   —     105,159   13,076,158   32,224   13,108,382 
Net profit      —     —     —     —     13,418,529   —     13,418,529   —     —     —     —     13,418,529   32,224   13,450,753 
Other comprehensive income      —     —     —     —     —     —     —     (1,003,154)  555,624   —     105,159   (342,371)  —     (342,371)
Financial Assets Measured at Fair Value Through Other Comprehensive Income      —     —     —     —     —     —     —     (1,003,154)  —     —     —     (1,003,154)  —     (1,003,154)
Employee benefit plan      —     —     —     —     —     —     —     —     555,624   —     —     555,624   —     555,624 
Gain and loss - Cash flow and investment hedge      —     —     —     —     —     —     —     —     —     —     105,159   105,159   —     105,159 
Appropriation of net income from prior years      —     16,406,932   —     —     (16,406,932)  —     —     —     —     —     —     —     —     —   
Option to Acquire Own Instrument      —     (67,000)  —     67,000   —     —     —     —     —     —     —     —     —     —   
Dividends and interest on capital from prior years   27.b   —     (10,800,000)  —     —     —     10,800,000   —     —     —     —     —     —     —     —   
Dividends and interest on capital  27.b  —     —     —     —     —     (3,837,085)  (3,837,085)  —     —     —     —     (3,837,085)  —     (3,837,085)
Treasury shares  27.d  —     —     (110,223)  —     —     —     (110,223)  —     —     —     —     (110,223)  —     (110,223)
Other      —     (2,443)  —     —     —     —     (2,443)  —     —     —     —     (2,443)  (277,920)  (280,363)
Balance on December 31, 2020      57,000,000   40,414,981   (791,358)  —     13,418,529   (3,837,085)  106,205,067   2,342,129   (3,190,913)  859,370   (438,666)  105,776,987   312,885   106,089,872 

Consolidated Financial Statements | December 31, 2021 | F-9

Table of Contents

 

* Values expressed in thousands, except when indicated.

                               
                               
    Stockholders´ Equity Attributable to the Parent  
           
   Note   Share
Capital		   Reserves   Treasury
Shares		   Option for Acquisition of Equity Instrument   Profit
Attributed
to the Parent		   Dividends and
Remuneration		   Total Stockholders´
Equity		   Financial Assets Measured at Fair Value Through Other Comprehensive Income   Defined Benefits plan    Adjustments investment abroad   Gains and losses - Cash flow hedge and Investment   Total   Non-controlling
Interests		   Total
Stockholders'
Equity		 
Balance on December 31, 2020      57,000,000   40,414,981   (791,358)  —     13,418,529   (3,837,085)  106,205,067   2,342,129   (3,190,913)  859,370   (438,666)  105,776,987   312,885   106,089,872 
                                                             
Total comprehensive income      —     —     —     —     15,528,052   —     15,528,052   (2,389,705)  266,692   —     (855,335)  12,549,704   31,272   12,580,976 
Net profit      —     —     —     —     15,528,052   —     15,528,052   —     —     —     —     15,528,052   31,272   15,559,324 
Other comprehensive income      —     —     —     —     —     —     —     (2,389,705)  266,692   —     (855,335)  (2,978,348)  —     (2,978,348)
Financial Assets Measured at Fair Value Through Other Comprehensive Income      —     —     —     —     —     —     —     (2,389,705)  —     —     —     (2,389,705)  —     (2,389,705)
Employee benefit plan      —     —     —     —     —     —     —     —     266,692   —     —     266,692   —     266,692 
Gain and loss - Cash flow and investment hedge      —     —     —     —     —     —     —     —     —     —     (855,335)  (855,335)  —     (855,335)
Appropriation of net income from prior years      —     13,418,529   —     —     (13,418,529)  —     —     —     —     —     —     —     —     —   
Spin-Off   27.a & 27.c   (2,000,000)  (1,167,674)  —     —     —     —     (3,167,674)  —     —     —     —     (3,167,674)  —     (3,167,674)
Dividends and interest on capital from prior years   27.b   —     (3,837,085)  —     —     —     3,837,085   —     —     —     —     —     —     —     —   
Dividends and interest on capital   27.b   —     —     —     —     —     (9,649,000)  (9,649,000)  —     —     —     —     (9,649,000)  —     (9,649,000)
Treasury shares  27.d  —     —     78,319   —     —     —     78,319   —     —     —     —     78,319   —     78,319 
Other      —     51,810   —     —     —     —     51,810   —     —     —     —     51,810   (9,808)  42,001 
Balance on December 31, 2021      55,000,000   48,880,561   (713,039)  —     15,528,052   (9,649,000)  109,046,574   (47,576)  (2,924,221)  859,370   (1,294,001)  105,640,146   334,349   105,974,495 

The accompanying Notes are an integral part of these consolidated financial statements.

 

F-8

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Thousand of Brazilian Reais - R$) Consolidated Financial Statements | December 31, 2021 | F-10

  201920182017
     
Consolidated Profit for the Year 16,631,45012,799,9189,138,048
     
Other Comprehensive Income that will be reclassified subsequently to profit or loss when specific conditions are met: 1,468,651558,9671,194,335
Available-for-sale financial assets --1,147,384
Valuation adjustments - Gains (Losses) --1,789,286
Amounts transferred to income statement --30,694
Income taxes --(672,596)
Financial Assets Measured At Fair Value Through Other Comprehensive Income 1,352,702475,809-
Financial Assets Measured At Fair Value Through Other Comprehensive Income 2,926,285388,481-
Gains (Losses) on financial assets previously classified as available-for-sale and reclassified to the income statement (net) -7,982-
Gains (Losses) on financial assets previously classified as available-for-sale and reclassified to reserves (net) -296,802-
Income taxes (1,573,583)(217,456)-
Cash flow hedges 115,94983,15846,951
Valuation adjustments 270,119140,81173,238
Amounts transferred to income statement 6,767(6,767)-
Income taxes (160,937)(50,886)(26,287)
Other Comprehensive Income that will not be Reclassified to net Income: (675,497)(366,660)(620,903)
Defined benefits plan (675,497)(366,660)(620,903)
Defined benefits plan (1,358,578)(418,768)(992,156)
Income taxes 683,08152,108371,253
     
Total Comprehensive Income 17,424,60412,992,2259,711,480
     
Attributable to the parent 17,200,08612,774,7849,497,496
Attributable to non-controlling interests 224,518217,441213,984
Total Comprehensive Income 17,424,60412,992,2259,711,480

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

The accompanying Notes are an integral partConsolidated Statement of these consolidated financial statements. Cash Flows

  Note 2021 2020 2019
1. Cash Flows From Operating Activities        
Consolidated profit for the year      15,559,324   13,450,753   16,631,450 
Adjustments to profit      (13,898,808)   (31,268,076)  14,654,879 
Depreciation of tangible assets  12.a  1,850,780   2,039,805   1,870,836 
Amortization of intangible assets  14   583,141   539,322   521,021 
Impairment losses on other assets (net)      165,799   84,908   131,435 
Provisions and impairment losses on financial assets (net)      19,292,151   19,106,735   17,051,491 
Net gains (losses) on disposal of tangible assets, investments and non-current assets held for sale  41&42   (32,512)  (308,176)  (20,489)
Income from companies accounted by the equity method  11.a  (144,184)  (112,261)  (149,488)
Changes in deferred tax assets and liabilities  23.d  2,265,227   (8,232,869)  (2,912,279)
Monetary adjustment of escrow deposits      (433,629)  (219,447)  (574,399)
Recoverable taxes      (217,820)  (120,220)  (182,469)
Effects of changes in foreign exchange rates on cash and cash equivalents      —     —     99 
Effects of changes in foreign exchange rates on assets and liabilities      (35,669,654)   (44,250,466)  (2,609,679)
Other      (1,558,107)  204,593   1,528,800 
Net (increase) decrease in operating assets      22,502,791   (139,525,961)  (42,332,510)
Financial assets measured at fair value through profit or loss      42,041,624   (26,198,034)  11,080,730 
Financial assets measured at fair value through profit or loss held for trading      50,833,925   (43,070,163)  11,831,411 
Non-trading financial assets mandatorily measured at fair value through profit or loss      (370,442)  (328,267)  746,024 
Financial assets measured at fair value through other comprehensive income      4,094,548   (14,905,798)  (8,835,552)
Financial assets measured at amortized cost      (86,179,125)  (80,800,357)  (60,461,392)
Other assets      12,082,261   25,776,658   3,306,269 
Net increase (decrease) in operating liabilities      (12,821,626)  200,930,390   41,219,165 
Financial liabilities measured at fair value through profit or loss held for trading      (38,067,617)  33,203,455   (4,874,323)
Financial liabilities measured at fair value through profit or loss      421,317   1,516,522   3,373,359 
Financial liabilities at amortized cost      30,512,246   165,920,919   40,961,046 
Other liabilities      (5,687,572)  289,494   1,759,083 
Tax paid  23.a  (4,534,538)  (1,269,150)  (5,301,184)
Total net cash flows from operating activities (1)      6,807,143   42,317,956   24,871,800 
                 
2. Cash Flows From Investing Activities                
Investments      (2,679,473)  (2,019,278)  (3,500,499)
Acquisition of subsidiary, less net cash in the acquisition      (13,746)  (13,570)  (746)
Tangible assets  12.a  (1,162,774)  (1,235,923)  (1,924,783)
Intangible assets      (1,202,416)  (769,785)  (1,519,725)
Corporate Restructuring      (300,537)  —     (55,245)
Disposal      752,781   856,181   987,164 
Tangible assets  12.a   37,576   47,096   29,911 
Non - current assets held for sale      563,205   663,067   808,980 
Dividends and interest on capital received      152,000   146,018   148,273 
Total net cash flows from investing activities (2)      (1,926,692)  (1,163,097)  (2,513,335)
                 
3. Cash Flows From Financing Activities                
Acquisition of own shares  27.d  78,319   (110,223)  (219,703)

Issuance of Instruments Eligible to Compose Capital

  19   5,500,000   —     —   
Issuance of  other long-term financial liabilities  18   101,784,961   60,047,656   53,017,039 
Dividends and interest on capital paid      (9,907,319)  (10,280,430)  (6,953,718)
Payments of other long-term financial liabilities  18   (97,220,580)  (82,900,914)  (61,914,716)
Payments of subordinated liabilities  19   —     —     (9,885,607)
Payments of interest of Debt Instruments Eligible to Compose Capital  19   (911,306)  (914,645)  (328,892)
Net increase in non-controlling interests      17,415   6,842   (14,266)
Capital Increase in Subsidiaries, by Non-Controlling Interests      —     —     100,000 
Total net cash flows from financing activities (3)      (658,510)  (34,151,714)  (26,199,863)
Exchange variation on Cash and Cash Equivalents (4)      —     —     (99)
Net Increase in Cash (1+2+3+4)      4,221,941   7,003,145   (3,841,497)
Cash and cash equivalents at beginning of year      28,446,808   21,443,663   25,285,160 
Cash and cash equivalents at end of year      32,668,749   28,446,808   21,443,663 
The accompanying Notes are an integral part of these consolidated financial statements.

F-9

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Thousand of Brazilian Reais - R$) Consolidated Financial Statements | December 31, 2021 | F-11

                 
  Stockholders´ Equity Attributable to the ParentNon-controlling
Interests		Total
Stockholders'
Equity
     
 NoteShare
Capital		ReservesTreasury
Shares		Option for Acquisition of Equity InstrumentProfit
Attributed
to the Parent		Dividends and
Remuneration		Total Stockholders´
Equity		Financial Assets available for saleFinancial Assets Measured At Fair Value Through Other Comprehensive IncomeDefined Benefits planTranslation adjustments investment abroadGains and losses - Cash flow hedge and InvestmentTotal
Balance at December 31, 2016 57,000,00027,881,326(514,034)(1,017,000)7,334,563(5,250,000)85,434,855666,190-(2,083,477)859,370(789,883)84,087,055725,50484,812,559
                 
Total comprehensive income----8,924,064-8,924,0641,147,384-(620,903)-46,9519,497,496213,9849,711,480
Net profit ----8,924,064-8,924,064-----8,924,064213,9849,138,048
Other comprehensive income-------1,147,384-(620,903)-46,951573,432-573,432
Financial Assets Measured At Fair Value Through Other Comprehensive Income-------1,147,384----1,147,384-1,147,384
Pension plans ---------(620,903)--(620,903)-(620,903)
Gain and loss - Cash flow and investment hedge-----------46,95146,951-46,951
Appropriation of net income from prior years-7,334,563--(7,334,563)----------
Dividends and interest on capital28.b-(5,250,000)---(1,050,000)(6,300,000)-----(6,300,000)-(6,300,000)
Share based compensation40.b-37,161----37,161-----37,161-37,161
Treasury shares28.d-(744,419)365,643---(378,776)-----(378,776)-(378,776)
Capital restructuring --(49)---(49)-----(49)-(49)
Treasury shares income28.d-(2,498)----(2,498)-----(2,498)-(2,498)
Other0-(289,682)----(289,682)-----(289,682)(502,594)(792,276)
Balance at December 31, 2017 57,000,00028,966,451(148,440)(1,017,000)8,924,064(6,300,000)87,425,0751,813,574-(2,704,380)859,370(742,932)86,650,707436,89487,087,601

Change in the initial adoption of IFRS 9		 -(1,245,023)----(1,245,023)(1,813,574)1,516,772---(1,541,825)-(1,541,825)

Balances on January 1, 2018		 57,000,00027,721,428(148,440)(1,017,000)8,924,064(6,300,000)86,180,052-1,516,772(2,704,380)859,370(742,932)85,108,882436,89485,545,776
Total comprehensive income----12,582,477-12,582,477-475,809(366,660)-83,15812,774,784217,44112,992,225
Net profit ----12,582,477-12,582,477-----12,582,477217,44112,799,918
Other comprehensive income--------475,809(366,660)-83,158192,307-192,307
Financial Assets Measured At Fair Value Through Other Comprehensive Income--------475,809---475,809-475,809
Pension plans ---------(366,660)--(366,660)-(366,660)
Gain and loss - Cash flow and investment hedge-----------83,15883,158-83,158
Appropriation of net income from prior years-8,924,064--(8,924,064)----------

Option to Acquire Own Instrument		-106,440----106,440-----106,440(106,440)-
Dividends and interest on capital28.b-(6,300,000)---(300,000)(6,600,000)-----(6,600,000)-(6,600,000)
Share based compensation40.b-(17,854)----(17,854)-----(17,854)-(17,854)
Treasury shares28.d--(312,305)---(312,305)-----(312,305)-(312,305)
Capital restructuring --(687)---(687)-----(687)-(687)
Treasury shares income28.d-(15,868)----(15,868)-----(15,868)-(15,868)
Other -(40,517)----(40,517)- ---(40,517)44,6904,173
Balance at December 31, 2018 57,000,00030,377,693(461,432)(1,017,000)12,582,477(6,600,000)91,881,738-1,992,581(3,071,040)859,370(659,774)91,002,875592,58591,595,460

F-10

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.Table of Contents 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Thousand of Brazilian Reais - R$)  

* Values expressed in thousands, except when indicated.

 

                 
                 
  Stockholders´ Equity Attributable to the ParentNon-controlling
Interests		Total
Stockholders'
Equity
     
 NoteShare
Capital		ReservesTreasury
Shares		Option for Acquisition of Equity InstrumentProfit
Attributed
to the Parent		Dividends and
Remuneration		Total Stockholders´
Equity		Financial Assets available for saleFinancial Assets Measured At Fair Value Through Other Comprehensive IncomeDefined Benefits planTranslation adjustments investment abroadGains and losses - Cash flow hedge and InvestmentTotal
Balance at December 31, 2018 57,000,00030,377,693(461,432)(1,017,000)12,582,477(6,600,000)91,881,738-1,992,581(3,071,040)859,370(659,774)91,002,875592,58591,595,460
                 
Total comprehensive income----16,406,932-16,406,932-1,352,702(675,497)-115,94917,200,086-17,200,086
Net profit ----16,406,932-16,406,932-----16,406,932-16,406,932
Other comprehensive income--------1,352,702(675,497)-115,949793,154-793,154
Financial Assets Measured At Fair Value Through Other Comprehensive Income--------1,352,702---1,352,702-1,352,702
Pension plans ---------(675,497)--(675,497)-(675,497)
Gain and loss - Cash flow and investment hedge-----------115,949115,949-115,949
Appropriation of net income from prior years-12,582,477--(12,582,477)----------

Own Instrument Acquisition Option		-(1,598,336)-950,000--(648,336)-----(648,336)-(648,336)
Dividends and interest on capital28.b-(6,600,000)---(4,200,000)(10,800,000)-----(10,800,000)-(10,800,000)
Share based compensation -50,886----50,886-----50,886-50,886
Treasury shares28.d--(219,703)---(219,703)-----(219,703)-(219,703)
Treasury shares income28.d-5,796----5,796-----5,796-5,796
Other -58,976----58,976-----58,976(34,004)24,972
Balance at December 31, 2019 57,000,00034,877,492(681,135)(67,000)16,406,932(10,800,000)96,736,289-3,345,283(3,746,537)859,370(543,825)96,650,580558,58197,209,161
Cash and cash equivalents components  Note   2021   2020   2019 
Cash  4   16,657,201   20,148,725   20,127,364 
Loans and other  5   16,011,548   8,298,083   1,316,299 
Total of cash and cash equivalents      32,668,749   28,446,808   21,443,663 
                 
Non-cash transactions                
Foreclosures loans and other assets transferred to non-current assets held for sale  10   235,904   445,173   735,864 
Dividends and interest on capital declared but not paid  27.b  249,000   1,177,085   7,800,000  
Supplemental information                
Interest received      77,987,308   62,774,940   72,841,060 
Interest paid      (26,668,842)  (18,332,228)  (28,519,953)

 

 

The accompanying Notes are an integral part of these consolidated financial statements.

 

F-11

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

CONSOLIDATED CASH FLOW STATEMENTS

(Thousand of Brazilian Reais - R$) Consolidated Financial Statements | December 31, 2021 | F-12

 Note201920182017
1. Cash Flows From Operating Activities    
Consolidated profit for the year 16,631,45012,799,9189,138,048
Adjustments to profit 14,654,87714,765,40417,015,113
Depreciation of tangible assets121,870,8361,216,7041,190,967
Amortization of intangible assets14521,021523,255471,280
Impairment losses on other assets (net) 131,435508,310456,711
Provisions and Impairment losses on financial assets (net) 17,051,49114,713,03915,647,539
Net Gains (losses) on disposal of tangible assets, investments and non-current assets held for sale42&43(20,489)(156,258)324,385
Income from companies accounted by the equity method11(149,488)(65,958)(71,551)
Changes in deferred tax assets and liabilities24.d(2,912,281)(1,594,440)(406,395)
Monetary Adjustment of Escrow Deposits (574,399)(664,003)(637,124)
Recoverable Taxes (182,469)(222,402)(210,834)
Effects of Changes in Foreign Exchange Rates on Cash and Cash Equivalents99--
Effects of Changes in Foreign Exchange Rates on Assets and Liabilities(2,609,679)1,173,75733,691
Other 1,528,800(666,600)216,444
Net (increase) decrease in operating assets (42,332,510)(79,913,313)(16,745,263)
Balance with the Brazilian Central Bank 85516,629,126(7,043,255)
Financial assets held for trading --44,950,707
Financial Assets Measured At Fair Value Through Profit Or Loss 11,080,730(8,791,116)-
  Other Financial Assets Measured At Fair Value Through Profit Or Loss-1,692,15418,988
Financial Assets Measured At Fair Value Through Profit Or Loss Held for Trading11,831,411(16,412,738)-
Non-Trading Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss746,024(419,851)-
Available-for-sale financial assets --(27,214,188)
Financial Assets Measured At Fair Value Through Other Comprehensive Income(8,835,552)(4,323,459)-
Loans and receivables --(30,256,590)
Financial Assets Measured At Amortized Cost (60,462,247)(75,906,801)-
Held to maturity investments --(26,266)
Other assets 3,306,2697,619,3722,825,341
Net increase (decrease) in operating liabilities 41,219,16764,293,93444,163,382
Financial liabilities held for trading --(2,297,323)
Financial Liabilities Measured At Fair Value Through Profit Or Loss held for trading(4,874,323)1,616,446-
Financial Liabilities Measured At Fair Value Through Profit Or Loss 3,373,3591,946,056-
Financial liabilities at amortized cost 40,961,04657,833,93543,702,283
Other liabilities 1,759,0852,897,4972,758,422
Tax paid24.a(5,301,184)(3,668,571)(3,280,230)
Total net cash flows from operating activities (1) 24,871,8008,277,37250,291,050
     
2. Cash Flows From Investing Activities    
Investments (3,500,499)(3,157,794)(2,197,918)
Capital increase in Investments in associates and Joint Ventures11-(36,051)(34,154)
Acquisition of subsidiary, less net cash in the acquisition (746)(111,224)(275,091)
Tangible assets12.a(1,924,783)(1,394,299)(1,106,406)
Intangible assets (1,519,725)(1,616,222)(738,554)
Corporate Restructuring10(55,245)2(43,713)
Disposal 987,164797,716744,913
Capital reduction of investee in joint control11.b---
Tangible assets12&4229,911122,00937,467
Non - current assets held for sale10808,980563,607434,553
Dividends and interest on capital received 148,273112,100272,893
Total net cash flows from investing activities (2) (2,513,335)(2,360,078)(1,453,005)
     
3. Cash Flows From Financing Activities    
Acquisition of own shares28.d(219,703)(312,305)(378,776)
Issuance of Debt Instruments Eligible to Compose Capital20-9,347,750-
Issuance of other long-term financial liabilities1853,017,03973,765,08159,663,420
Dividends and interest on capital paid (6,953,718)(6,076,073)(5,652,081)
Payments of other long-term financial liabilities18(61,914,716)(78,903,009)(97,009,957)
Payments of subordinated liabilities19(9,885,607)(544,566)-
Payments of interest of Debt Instruments Eligible to Compose Capital20(328,892)(683,783)(623,146)
Net increase in non-controlling interests27(14,266)55,869(296,184)
Capital Increase in Subsidiaries, by Non-Controlling Interests27100,00048,000-
Total net cash flows from financing activities (3) (26,199,863)(3,303,036)(44,296,724)
Exchange variation on Cash and Cash Equivalents (4) (99)--
Net Increase in Cash (1+2+3+4) (3,841,497)2,614,2584,541,321
Cash and cash equivalents at beginning of year 25,285,16022,670,90218,129,581
Cash and cash equivalents at end of year 21,443,66325,285,16022,670,902
     
Cash and cash equivalents components    
Cash and Balances With The Brazilian Central Bank420,128,21919,463,58720,642,321
Loans and other51,315,4445,821,5732,028,581
Total of cash and cash equivalents 21,443,66325,285,16022,670,902
     
Non-cash transactions    
Foreclosures loans and other assets transferred to non-current assets held for sale10735,864785,139524,497
Dividends and interest on capital declared but not paid28.b4,800,0004,800,0004,455,000
Supplemental information    
Interest received 71,777,47670,831,20573,094,248
Interest paid (27,654,965)(29,796,455)(37,948,828)

The accompanying Notes are an integral part of these consolidated financial statements.

F-12

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.Table of Contents 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated)  

* Values expressed in thousands, except when indicated.

 

1.Introduction, basis of presentation of the consolidated financial statements and other information

 

a)Introduction

 

Banco Santander (Brasil) S.A. (Banco Santander or Bank), directly and indirectly controlled by Banco Santander, S.A., headquartered in Spain (Banco Santander Spain), is the lead institution of the Financial and Prudential Conglomerates (Conglomerate Santander) before the Central Bank of Brazil (Bacen), established as a joint-stock corporation, with head office at Avenida Presidente Juscelino Kubitschek, 2041 and 2235 – Building A - Vila Olímpia, in the City of São Paulo, State of São Paulo. Banco Santander operates as a multiple service bank, conducting its operations by means of its commercial, investment, loans, mortgage loans, leasing and foreign exchange portfolios. Through its subsidiaries, also operates in the segments of payments, management of shares’ club, securities and insurance brokerage operations, capitalization plans,premium bonds, consumer finance, payroll loans, digital platforms, benefit vouchers, management and recovery of non-performing loans and private pension products. The operations are conducted within the context of a group of institutions that operates in the financial market on an lintegratedintegrated basis. The corresponding benefits and costs of providing services are absorbed between them and are conducted in the normal course of business and under commutative conditions.

 

The Board of Directors authorized the issuance of the Financial Statements for the year ended on December 31, 2019,2021, at the meeting held on March 6, 2020.February 24, 2022.

 

These Financial Statements and the accompanying documents were the subject of an unqualified report of the Independent Auditors and a recommendation for approval issued by the Company's Audit Committee and a favorable opinion of the Company's Fiscal Council.

 

b)Basis of presentation of the condensed consolidated financial statements

 

The consolidated financial statements have been prepared in accordance with the standards of the International Financial Reporting Standards (IFRS) issued by the International Accountant Standards Board (IASB), and interpretations issued by the IFRS Interpretations Committee (current name International Financial Reporting Interpretations Committee - IFRIC). All relevant information specifically related to the financial statements of Banco Santander, and only in relation to these, are being evidenced, and correspond to the information used by Banco Santander in its management.

 

As described in FN 8 a.1), the comparative information for prior periods was adjusted to reflect the remeasurement of the commercialization of electric energy operation.

c) Other information

 

c.1) Adoption of new standards and interpretations

 

• IFRS 16- as ofThe following standard changes were adopted for the first time for the year beginning January 1, 2019, the Bank adopted IFRS 16, which replaces IAS 17.2021:

 

I.●TransitionAmendments to IFRS 9, IAS 39, IFRS 7 “Financial Instruments”, IFRS 4 “Insurance Contracts” and IFRS 16 “Leases”:

As permitted byThe changes provided for in Phase 2 of the specific transition provisions, Banco Santander opted to applyIBOR reform address issues that may affect the regulations inFinancial Statements during the reform of a retrospective modified manner,benchmark interest rate, including the effects of which were appliedchanges in contractual cash flows or hedging relationships arising from the substitution of a rate for a alternative reference rate (replacement issues). The effective date of application of this change was January 1, 2019.2021.

 

The changes in accounting practices resulting fromGroup's contracts linked to LIBOR were reviewed between the adoption of IFRS 16 were appliedparties and updated by the respective alternative rates disclosed, plus a spread. Management has verified that the updated cash flows are economically equivalent to the right of use assets as part of tangible assets and lease liabilities as other liabilities in the balance sheet.

II.Lease Identification

In adopting IFRS 16, the Bank recognized lease liabilities involving leasesoriginal ones, so that had already been classified as "commercial leases" in accordance with the principles of IAS 17 - Leases.there were no material impacts related to this replacement.

 

ForTherefore, the initial application of the standard, the Bank used the following permitted practical expedients:implementations above had no significant impact on these Financial Statements.

 

• The exclusion of the initial direct costs for the measurement of the right to use asset at the date of initial application;

• It was decided not to separate the service provision component embedded in lease agreements; and

• The Bank also decided not to apply IFRS 16 to contracts that were not identified as containing a lease under IAS 17 and IFRIC 4 - Determination as to whether a Contract contains a Lease.

In addition, the following recognition exemptions are also used:

• The accounting of operating leases with a remaining term of less than 12 months as of January 1, 2019 as short-term leases;

• The accounting for operating leases whose underlying asset is of immaterial;

• Until January 1, 2019, leases of fixed assets, in which the Bank as the lessee, held substantially all the risks and benefits of the property, were classified as financial leases. The balances presented are immaterial.

The majority of the lease contracts in which the bank is a lessor relates to real estate and equipment at the branches.

Banco Santander does not have rights-of-use assets that fall within the definition of investment properties

III.Lease term

Lease agreements are formalized, analyzed and negotiated individually and contain a wide range of different terms and conditions. The Bank evaluates the term of the contract, as well as the intention to remain in the real estate. Thus, estimates of terms may vary according to contractual conditions, considering extension options, and also according to legal provisions.

The Bank assumes that the fines for contractual termination charged before the maturity date are not significant.

Lease agreements do not contain restrictive clauses, but leased assets can not be used as collateral for loans.

F-13

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

IV.Initial Measurement

In their initial recognition, leases are recognized as a right of use asset and a corresponding liability on the date the leased asset becomes available for use by the Group.

The right of use to be recorded is measured at cost against the lease liability, which represents the present value of the lease payments that are not made to date. Lease payments are discounted using the incremental interest rate incremental borrowing interest rate. There is no onerous contract that required an adjustment in usage rights to be recorded as assets on the date of the initial adoption.

The use rights are measured at amortized cost in accordance with the following:

• The value of the initial measurement of the lease liability;

• Any lease payments made before or on the start date of any incentive received;

• any directly attributed initial cost; and

• Restoration costs, if the requirements of IAS 37 are met for the recording of Provisions, Contingent Liabilities and Contingent Assets.

The recognized rights of use assets related to each type of asset are as follows:

 
 12/31/2018

Adoptions Effects -

IFRS 16

01/01/2019
Real Estate and Properties-2,373,9592,373,959
Data processing systems-91,79191,791
Total-2,465,7502,465,750

The Santander Group uses as an incremental rate the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment, by term, guarantee and similar economic scenario, represented in Santander Brasil by the funding cost curve of a risk-free asset, applied individually to each contract according to the estimates projected as the lease term.

Lease liabilities include the net present value of the following lease payments:

• Reduced fixed payments of any incentive;

• Variable payments that are based on a rate or indexer;

• Expected amounts to be paid by the lessee based on the residual value of collateral;

• The exercise price of a call option, if the lessee is reasonably certain about the exercise of the option; and

• Payment of penalties for the termination of the lease if the term of the operation reflects the exercise of the option by the lessee.

In the analysis of the Santander Group's contracts, only contracts with fixed and non-incentive payments or residual guarantee values were identified or the purchase option was embedded, thus, the effects on the accounting of liabilities arising from the initial adoption:

Lease Contracts as of December 31, 2018 -
Operating lease contracts discounted by the incremental interest rate2,203,382
(-) Short-term leases as expenses(19,252)
(+)/(-) Adjustments as a result of a different treatment of the termination dates of the contract281,620
Balance as of January 1, 20192,465,750
Liabilities recognized as of January 1, 2019 - Other financial liabilities2,465,750

Effects on accounting for the year ended on December 31, 2019 due to the initial adoption (there were no impacts on the results of the comparative periods generated by the initial adoption):

01/01 to
12/31/2019
Effects on results arising from the adoption of IFRS 16:
Rental Expense - Other administrative expenses693,660
Asset amortization expenses - Tangible Assets(564,132)
Interest expense on liabilities - Interest and similar income(201,601)
Incremental interest tax effect - Income taxes28,836
Total(43,237)

F-14

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Effects on the accounting of the financial liability on the period ended December 31, 2019:

Adoption of IFRS 16 in 01/01/20192,465,750
   New contracts origination267,268
Accrued interests198,433
Renew of the existing contracts422,755
Payments(693,704)
Other movements(61,465)
Financial liability measured at amortized cost – Leasing Contracts as of 12/31/20192,599,037

Below is presented the projected inflation (IGP-M) on December 31, 2019:

Projected IGP-M (annualized)
   Up to 3 months3.29%
From 3 to 12 months3.26%
From to 1 to 3 years2.62%
From 3 to 5 years2.94%
More than 5 years3.21%

V.Subsequent measurement

After the initial measurement, the values of the assets recorded as right of use are being updated using the cost method, so any accumulated depreciation is deducted monthly, according to the criteria of CPC 27 - Property, Plant and Equipment depreciation of the right-of-use asset and any remeasurement of the lease liability, when applicable.

The initially recorded lease liability is updated monthly by increasing the liability amount of the interest portion of each lease and reducing the amount of monthly lease payments and corrected for any remeasurement lease, when applicable. The majority of the lease contracts in which the bank is a lessor relates to real estate and equipment at the branches.

The lease liability is remeasured, in case of changes in the lease term or in the contract value, the amount resulting from the new determination of the lease liability is recorded as a contra entry to the corresponding right of use asset.

The effects of adopting IFRS 16 impacts exclusively the operating segment Commercial Bank.

•IFRIC 23- Published in June 2017 by the IASB, IFRIC 23 - Uncertainty over Income Tax Treatments on Profit has mandatory application as of January 1, 2019 and aims to clarify procedures for the application of recognition and measurement requirements established in the IAS 12 of Taxes on Profit when there is uncertainty about the treatments to be adopted for the Taxes on Profit.

The Bank carried out analyzes on the procedures already adopted for accounting and presentation of Income Taxes in relation to the content of IFRIC 23 and it was possible to conclude that there are no impacts on the disclosures made up to December 31, 2018, as well as from the adoption of the new standard on January 1, 2019.

StandardsRules and interpretations that will come into effect after December 31, 20192021

 

AtOn the date of preparation of these consolidated financial statements, the following standards and interpretations that have effective adoption date after December 31, 2019January 1, 2022 and have not yet been adopted by the Bank are:

 

●Amendment to IAS 37 “Provision, Contingent Liabilities and Contingent Assets”: in May 2020, the IASB issued this amendment to clarify that, for the purpose of assessing whether a contract is onerous, the cost of contract performance includes the incremental costs of performance contract and an allocation of other costs that are directly related to its performance. The effective date of application of this change is the 1st. January 2022.

• IFRS 17- In May 2017, the IASB issued the IFRS for insurance contracts to replace IFRS 4. IFRS 17 is scheduled to be implemented January 1, 2021. The purpose of this standard is to demonstrate greater transparency and useful information in condensed financial statements, one of the main changes being the recognition of profits as the delivery of insurance services, in order to evaluate

●IFRS 17 - In May 2017, the IASB issued the IFRS for insurance contracts that aims to replace IFRS 4. The implementation date of IFRS 17 is January 1, 2023. This standard is intended to demonstrate greater transparency and information useful in financial statements, one of the main changes being the recognition of earnings as the measure of delivery of insurance services, in order to assess the performance of insurers over time. Banco Santander is evaluating the possible impacts when adopting the standard.

Consolidated Financial Statements | December 31, 2021 | F-13

Table of Contents

 

* Values expressed in thousands, except when indicated.

●Amendment to IFRS 3 “Business Combinations”: issued in May 2020, with the aim of replacing the references from the older version of the conceptual framework to the newer one. The amendment to IFRS 3 is effective from January 1, 2022.

●Annual improvements – 2018-2020 cycle: in May 2020, the IASB issued the following amendments as part of the annual improvement process, applicable from January 1, 2022:

(i)IFRS 9 - "Financial Instruments" - clarifies which fees should be included in the 10% test for writing off financial liabilities.

(ii)IFRS 16 - "Leases" - amendment to example 13 in order to exclude the example of lessor payments related to improvements in the leased property.

(iii)IFRS 1 "Initial Adoption of International Financial Reporting Standards" - simplifies the application of said standard by a subsidiary that adopts IFRS for the first time after its parent, in relation to measuring the accumulated amount of exchange rate variations.

●Classification of Liabilities, amendments to IAS 1 “Presentation of Financial Statements”, considering non-current liabilities those in which the entity has the possibility of deferring payment for more than 12 months from the closing date of the reporting period. The amendments to IAS 1 are effective as of January 1, 2023.

●Modification of IAS 8 – Presentation of Financial Statements and IAS 8 Accounting Policies: changes in accounting estimates and errors, which use a consistent definition of materiality for the purpose of making material judgements and deciding on the information to be included in the financial statements. The amendments to IAS 1 are effective as of January 1, 2023.

●Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 1 January 2023: The amendments to IAS 12 Income Taxes require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities. The amendments to IAS 12 are effective as of January 1, 2023.

There are no other IFRS standards or IFRIC interpretations that have not yet come into effect that could have a material impact on the Bank's financial statements.

 

•Amendments to IFRS 9, IFRS 7 and IAS 39 - In September 2019, the IASB changed its IFRS 9 and IAS 39 standards as well as the related disclosure standard, IFRS 7, on some requirements for hedge accounting. The changes were implemented on January 1, 2020. The amendments modify some specific requirements on hedge accounting in order to clarify potential effects of the uncertainty caused by the IBOR reform project. In addition, such changes require entities to provide additional information about their hedge relationships that are directly affected by these uncertainties. Banco Santander concluded that there are no significant impacts as from the adoption of the new standards on January 1, 2020.

c.2) Estimates used

 

The consolidated results and the calculation of consolidated equity are impacted by the accounting policies, assumptions, estimates and measurement methods used by the Bank's directors in the preparation of interim consolidated financial statements. The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities of future periods. All estimates and assumptions required, in accordance with IFRS, are the best estimates in accordance with the applicable standard.

 

In interim consolidated

Consolidated financial statements,management, as estimates are made by managementthe note of the Bank and the consolidated entities in order to quantify certain assets, liabilities, revenuesincome and expenses and disclosures of explanatory notes.

F-15

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

c.2.1) Critical estimates

The main estimates were discussed in detail for the preparation of the consolidated financial statements as of December 31, 2019. In the exercise ended December 31, 2019, there were no significant changes in the estimates made at the end of the year 2018, in addition to those indicated in these statements financial statements, especially arising from the application of IFRS 16.

 

The critical estimates and assumptions that have the most significant impact on the accounting balances of certain assets, liabilities, revenues and expenses and in the disclosure of explanatory notes, are described below:

 

i. Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL), Social Integration Program (PIS) and Contribution for the Financing of Social Security

The income tax expense is obtained by adding the Income Tax, Social Contribution, PIS and Cofins. Current Income Tax and Social Contribution arise from the application of the respective tax rates on the real income, and the rates of PIS and Cofins applied on the respective calculation basis provided for in the specific legislation, together with the changes in deferred tax assets and liabilities recognized in the consolidated statement of income. The CSLL rate, for banks of any kind, was increased from 15% to 20% effective as of March 1, 2020, pursuant to article 32 of Constitutional Amendment 103, published on November 13, 2019.

Deferred tax assets and liabilities include temporary differences, identified as the amounts expected to be paid or recovered on the differences between the carrying amounts of the assets and liabilities and their respective bases of calculation, and accumulated tax credits and tax losses. These amounts are measured at the rates that are expected to be applied in the period in which the asset is realized or the liability is settled. Deferred tax assets are only recognized for temporary differences to the extent that it is considered probable that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets may be used and the deferred tax assets do not result from the initial recognition (except in one combination of business) of other assets and liabilities in an operation that does not affect either the taxable income or the taxable income. Other deferred tax assets (tax credits and accumulated tax losses) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable income for them to be used.

The deferred tax assets and liabilities recognized are revalued at the balance sheet date, and the appropriate adjustments are made based on the findings of the analyzes carried out. The expected realization of the Bank's deferred tax assets is based on projections of future results and based on a technical study.

Additional details are in notes 2.aa.

ii. Valuation of the fairFair value assessment of certain financial instruments

Financial instruments are initially recognized at fair value and those that are not measured at fair value through profit or loss are adjusted for transaction costs.

 

Financial assets and liabilities are subsequently measured, at the end of each period, using valuation techniques. This calculation is based on assumptions, which take into account theconsider Management's judgment based on information and market conditions existing at the balance sheet date.

 

Banco Santander classifies the measurements at fair value measurements using the hierarchy of fair value hierarchy that reflects the model used in the measurement process, segregating the financial instruments betweeninto Levels I, II or III.

 

Additional details are in notesNotes 2.e and 47.c8& 46.c8 of the Consolidated Financial Statements as of December 31, 2019, which2021 present the accounting practice and sensitivity analysis for the Financial Instruments.Instruments, respectively.

 

iii. IFRS 9 - Financial Instruments:issued in its final format in July 2014, the International Accounting Standards Board (IASB) approved IFRS 9, which replaced IAS 39 Financial Instruments, in accordance with the guidelines defined by the G20 by finance ministers of the world's 20 largest economies) in April 2009, establishing requirementsii. Allowance for the recognition and measurement of financial instruments. This standard was adopted from January 1, 2018.

Provisions forloan losses on receivablesdue to impairment

 

The book valuecarrying amount of non-recoverable financial assets is adjusted by recording a provision for loss of debit from "Lossesimpairment chargeable to “Losses on financial assets (net) -– Financial assets measured at amortized cost"cost” in the consolidated statement of income. The reversal of previously recorded losses is recognized in the consolidated income statement of income in the period in which the impairment loss decreases and can be objectively related to a recovery event.

Consolidated Financial Statements | December 31, 2021 | F-14

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

To determine the balance of "Provision for impairment", Banco Santander first assesses whether there is objective evidence of impairment individually for financial assets that are significant, and individual or collective for non-recoverable financial assets.

In order to individually measure the impairment loss onof loans assessed for impairment, the Bank considers the counterparty's conditions, of the counterparty, such as its economic and financial situation, level of indebtedness, capacity to generate income, generation capacity, cash flow, management,administration, corporate governance and quality of internal controls, payment history, industry experience, contingencies and credit limits, as well as asset characteristics, of assets, such as their nature and purpose, type, sufficiency and guarantees of liquidity level and total credit value , and also based on historical impairment experience of impairment and other circumstances known at the time of the valuation.

 

In order toTo measure the impairment loss onof loans collectively assessed collectively for impairment, the Bank separates financial assets into groups taking into accountconsidering the characteristics and similarities of credit risk, ie,that is, according to the segment, type of assets, guarantees and other factors associated with the historical impairment experience of impairment and other circumstances known at the time of the valuation.

 

Further details are in note 2.i ofNotes 2.h & 46.b2 to the Consolidated Financial Statements as of December 31, 2019, which2021, present the sensitivity analysisaccounting practice and measures for Financial Instruments.

F-16

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Transitionmeasuring credit risk, respectively.

 

As permitted by the transitional provisions of IFRS 9, the Group chose not to restate comparative figures, upon initial adoption in January 1, 2018. Any adjustments in the carrying amounts of financial assets and liabilities at the transition date were recognized in the initial net income and other reserves of the current period. The Group also opted to continue applying the hedge accounting requirements of IAS 39 in adopting IFRS 9.

Financial assets and liabilities

Initial Recognition and Measurement

The Bank initially recognizes loans and advances, deposits, debt securities issued and subordinated liabilities at the date of origin.

All other financial instruments (including regular purchases and sales of financial assets) are recognized on the trade date, which corresponds to the date on which the Bank becomes part of the contractual provisions of the instrument.

A financial asset or liability is initially measured at fair value, plus, in the case of an item not designated at fair value through profit or loss, transaction costs directly attributable to its acquisition or issue.

Ranking

Financial assets

On initial recognition, a financial asset is classified as measured at amortized cost, at fair value through Other Comprehensive Income or at fair value through profit or loss.

A financial asset is measured at amortized cost if it meets the following conditions and is not designated at fair value through profit or loss:

• The asset is maintained within a business model whose objective is to maintain assets to receive contractual cash flows;

• The contractual terms of the financial asset generate, at specific dates, cash flows that refer exclusively to payments of principal and interest on the principal amount outstanding.

A debt instrument is measured at fair value through Other Comprehensive Income if it meets the following conditions and is not designated at fair value through profit or loss:

• The asset is maintained within a business model whose objective is achieved through the receipt of contractual cash flows and the sale of financial assets; and

• The contractual terms of the financial asset generate, at specific dates, cash flows that refer exclusively to payments of principal and interest on the outstanding principal amount.

In the initial recognition of an equity instrument not held for trading, the Bank may irrevocably elect to present subsequent changes in fair value through Other Comprehensive Income. This option is made considering each investment individually and was not used by the Bank.

All other financial assets are classified as measured at fair value through profit or loss.

In addition, at initial recognition, the Bank may irrevocably designate at fair value through profit or loss a financial asset that would otherwise meet the measurement requirements at amortized cost or at fair value through Other Comprehensive Income, if such designation eliminate or substantially reduce an accounting mismatch that may exist. This option was not used by the Bank.

Business model evaluation

The Bank evaluates the objective of a business model in which an asset is maintained at the portfolio level, for better reflecting how the business is managed and what information is provided to Management. The information considered includes:

- Defined policies and objectives for the portfolio and the application of these policies in practice. Including, if Management's strategy is focused on earning contractual interest income, maintaining a specific interest rate profile, aligning the duration of the assets;

- How the performance of the portfolio is evaluated and reported to the Bank's Management;

- The risks that affect the performance of the business model (and financial assets held within that business model) and how those risks are managed;

- How the managers of the business are remunerated - for example, if the remuneration is based on the fair value of the managed assets or the contractual cash flows received;

- The frequency, volume and timing of sales in prior periods, the reasons for such sales and their expectations about future sales. However, sales activity information is not considered in isolation, but as part of an overall assessment of the Bank's stated purpose of managing financial assets.

Financial assets held for trading or managed, whose performance is valued at fair value, are measured at fair value through profit or loss, since (i) they are not held to receive contractual cash flows (ii) nor maintained to receive cash flows and sell financial assets.

F-17

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Assessment to determine whether contractual cash flows refer exclusively to payments of principal and interest

For the purposes of this valuation, "principal" is defined as the fair value of the financial asset at initial recognition. "Interest" is defined as the consideration for the value of the currency over time and for the credit risk associated with the principal amount outstanding for a specific period and for other underlying risks and costs of the borrowings (eg liquidity risk and costs) as well as the profit margin.

In assessing whether contractual cash flows refer exclusively to payments of principal and interest, the Bank considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the term or value of the contractual cash flows so that it would not meet this condition. In carrying out the evaluation, the Bank considers:

- contingent events that would alter the value and term of the cash flows;

- leverage;

- terms of advance payment and extension;

- terms limiting the Bank's right to cash flows of assets; and

- resources that modify the consideration of the value of the currency in time, for example, periodic readjustment of interest rates.

Reclassification of categories of financial assets

Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Bank changes its business model to manage financial assets.

Derecognition of Financial Assets

The Bank derecognizes a financial asset when the contractual rights to the cash flows of the asset expire or when it transfers the rights to the receipt of the contractual cash flows in a transaction in which essentially all the risks and benefits of ownership of the financial asset are transferred or in which the Bank does not transfer or retain substantially all the risks and rewards of ownership of the financial asset and does not control the financial asset.

The difference between the carrying amount of the asset (or book value allocated to the portion of the asset disposed) and the sum (i) of the consideration received (including any new assets obtained, less any new liabilities assumed) and (ii) any accumulated gains or losses recognized in "Other Comprehensive Income" is recorded in the income statement.

As from the date of the adoption of IFRS, mentioned above, any accumulated gains / losses recognized in "Other Comprehensive Income" in relation to equity instruments designated at fair value through Other Comprehensive Income are not recorded in the statement of income through the write-off of these securities.

The Bank carries out transactions in which it transfers the assets recognized in its balance sheet, but maintains all or substantially all the risks and benefits of the assets transferred or part thereof. In these cases, the transferred assets are not downloaded. Examples of such operations include assignments of co-sponsored loan portfolios.

In operations in which the Bank does not retain or transfer substantially all the risks and rewards of ownership of a financial asset and hold control of the asset, the Bank continues to recognize the asset in the extent of its continued involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

Derecognition of Financial Liabilities

The Bank derecognizes a financial liability when its contractual obligations are terminated, canceled or when they expire.

Effective interest rate

The effective interest rate is one that exclusively discounts future cash payments or receipts estimated during the expected life of the financial asset or financial liability at the gross carrying amount of a financial asset (i.e. its amortized cost before any provision for reduction recoverable amount) or the amortized cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees paid or received that are an integral part of the effective interest rate, such as origin taxes.

Changes in financial assets and liabilities

Financial assets

If the terms of a financial asset are modified, the Bank assesses whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, the contractual rights to the cash flows of the original financial asset will be considered as due. In this case, the original financial asset is written off and a new financial asset is recognized at fair value.

If the cash flows of the modified asset measured at amortized cost are not substantially changed, the change does not result in a derecognition of the financial asset. In this case, the Bank recalculates the gross carrying amount of the financial asset and recognizes the amount resulting from the adjustments to the gross carrying amount as gain or loss of change in profit or loss. If such a change is made due to the financial difficulties of the debtor, gains or losses are presented together with the impairment losses. In other cases, they are presented as interest income.

F-18

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Interest Revenue

Interest income is calculated by applying the effective interest rate to the gross carrying amount of the financial assets, except:

(a) Financial assets acquired or originated with credit impairment, for which the original effective interest rate adjusted to the credit is applied to the amortized cost of the financial asset.

(b) Financial assets that are not acquired or originated with credit impairment, but subsequently presented a default event (or "stage 3"), for which interest income is calculated by applying the effective interest rate to its net amortized cost of the provision.

Equity Instruments

Equity instruments are those that meet the definition of stockholders 'equity from the issuer's point of view, that is, instruments that do not contain a contractual obligation to pay and show a residual interest in the issuer's stockholders' equity. Examples are equity instruments that include common shares.

Generally, all equity instruments are measured at fair value through profit or loss, except where the Bank's management has elected, at the time of initial recognition, the irrevocable designation of an equity investment at fair value through Other Comprehensive Income. The Bank's policy is to designate capital investments as measured at fair value against Other Comprehensive Income when these investments are held for other purposes that do not generate investment returns, in which case the fair value gains and losses are recognized in Other Comprehensive Income and are not subsequently reclassified to profit or loss, including the sale of the asset. Impairment losses (and the reversal of impairment losses) are not accounted for separately from other changes in fair value. With respect to dividends, when they represent a return on such investments, they continue to be recognized in income as other income when the Bank has the right to receive payments.

Gains and losses on investments measured at fair value through profit or loss are included under "Financial Assets measured at fair value through profit or loss" in the Statement of Income.

Financial Liabilities

The Bank derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, a new financial liability is recognized at fair value based on the modified terms. The difference between the carrying amount of the extinguished financial liability and the new financial liability with modified terms is recognized in the income statement.

Offsetting

Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Bank currently has a legally enforceable right to offset the amounts and the intention to liquidate them on a net basis, or realize the asset and settle the liability simultaneously.

Revenues and expenses are presented on a net basis only when permitted by IFRSs or for gains or losses resulting from a group of similar operations, such as in the Bank's trading activity.

Measurement at fair value

"Fair value" corresponds to the price that would be received on the sale of an asset or paid in the transfer of a liability in an organized transaction between market participants at the measurement date in the main market or, in the absence thereof, the most advantageous market to which the Bank has access on that date.

When one is available, the Bank measures the fair value of an instrument based on the price quoted in that market for that instrument. A market is considered active if the transactions for the asset or liability occur with sufficient regularity and volume to provide price information on an ongoing basis.

If there is no quoted price in an active market, the Bank uses valuation techniques to maximize the use of relevant observable information and minimize the use of unobservable information. The chosen valuation technique incorporates all the factors that would be considered by the participants of the active market in the price of an operation.

The best evidence of the fair value of a financial instrument, at initial recognition, usually corresponds to the price of the transaction, that is, the fair value of the consideration paid or received. If the Bank determines that the fair value at initial recognition differs from the price of the transaction and the fair value is not evidenced by a price quoted in an active market for an identical asset or liability or based on an assessment technique for which any non-observable information is considered to be irrelevant to the measurement, the financial instrument will initially be measured at fair value, adjusted to defer the difference between the fair value at the initial recognition and the transaction price. This difference is subsequently recognized in profit or loss appropriately based on the life of the instrument, but until the valuation is fully supported by observable market data or the transaction is terminated.

If an asset or liability measured at fair value has a purchase price and a sale price, the Bank measures the assets and the positions purchased at a purchase price and the liabilities and the positions sold at a sale price.

The fair value of a financial liability with a cash demand (for example, a cash deposit) is not less than the amount payable on demand, discounted from the first date on which payment of the amount could be required.

Impairment

The Bank recognizes adjustments for expected credit losses in respect of the following financial instruments that are not measured at fair value through profit or loss:

- financial assets that are debt instruments;

- lease receivables;

- financial guarantee contracts issued; and

F-19

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

- loan commitments issued.

No impairment loss is recognized in equity instruments.

The Bank measures the impairment adjustments equal to the expected credit losses during the maturity, except for the instruments below, for which they are recorded as expected credit losses in 12 months:

- debt instruments with a low credit risk at the closing date; and

- other financial instruments (other than lease receivables) in which credit risk has not increased substantially since its initial recognition.

Adjustments for losses on lease receivables are always measured at an amount equal to the expected credit losses during the maturity.

Measurement of expected credit losses

Expected credit losses are a probability-weighted estimate of credit losses. They are measured as follows:

- financial assets not subject to impairment at the closing date: as the present value of all cash shortages, ie the difference between the cash flows due to the entity under the contract and the cash flows the Bank expects to receive;

- financial assets subject to impairment at the closing date: as the difference between the gross carrying amount and the present value of the estimated future cash flows;

- loan commitments to be released: as the present value of the difference between the contractual cash flows due to the Bank if the commitment is used in full and the cash flows that the Bank expects to receive; and

- financial guarantee contracts: expected payments to reimburse the holder, less any amounts that the Bank expects to recover.

Modified Assets

If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced by a new asset due to financial difficulties of the debtor, it is necessary to assess whether the financial asset should be written off and the expected credit losses are measured as follows:

- If the expected restructuring does not result in derecognition of the existing asset, the cash flows expected and arising from the modified financial asset are included in the calculation of the cash deficiencies of the existing asset.

- If the expected restructuring results in a derecognition of the existing asset, the expected fair value of the new asset is treated as the final cash flow of the financial asset existing at the time of its derecognition.

This amount is included in the calculation of the cash insufficiencies arising from the existing financial asset discounted from the estimated date of the derecognition until the closing date, using the original effective interest rate of the existing financial asset.

Determination of significant increases in credit risk

At each balance sheet date, the Bank assesses whether the financial assets carried at amortized cost and the financial instruments at fair value through Other Comprehensive Income are subject to impairment, as well as other financial instruments subject to this assessment.

A financial asset is "subject to impairment" when one or more events that have a negative impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is subject to impairment includes the following observable data:

- significant financial difficulty of the debtor or issuer;

- delays in contractual obligations;

- breach of contract, such as defaults or delays;

- the restructuring of a loan or advance by the Bank under conditions which the Bank would not consider as interesting to carry out;

- the likelihood of the debtor going bankrupt or making another financial reorganization; or

- the disappearance of an active market for a security due to financial difficulties.

A financial instrument that has been renegotiated due to deterioration in the condition of the borrower is generally considered to be subject to impairment unless there is evidence that the risk of not receiving the contractual cash flows has been significantly reduced and there is no other indicator of impairment.

Provision for expected credit losses in the balance sheet

Provisions for expected credit losses are presented in the balance sheet as follows:

- financial assets measured at amortized cost: as a deduction from the gross book value of the assets;

- loan commitments and financial guarantee contracts: as a provision; and

- debt instruments measured at fair value through Other Comprehensive Income: no provision for losses is recognized in the balance sheet, since the carrying amount of these assets corresponds to the fair value.

F-20

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Objective evidence of impairment

At each closing date, the Bank assesses the existence of objective evidence that financial assets not measured at fair value through profit or loss were reduced in their recoverable value. A financial asset or group of financial assets presents a reduction in its recoverable amount when objective evidence shows that a loss event occurred after the initial recognition of the asset (s) and that the loss event had an impact on the cash flows. cash of the asset (s) that could be estimated safely.

Objective evidence that financial assets have had a decline in their recoverable value include:

- significant financial difficulty of a debtor or issuer;

- default or default by a debtor;

- the restructuring of a loan or advance by the Bank under conditions which the Bank would not consider as interesting to carry out;

- indications that a debtor or issuer could go bankrupt;

- the disappearance of an active market for a security; or

- observable data related to a group of assets, such as adverse changes in the payment status of borrowers or issuers in the group, or economic conditions correlated with default in the group.

Loans that have been renegotiated due to deterioration in the debtor's condition are generally considered as reduced to recoverable value unless there is evidence that the risk of not receiving the contractual cash flows has been significantly reduced and there is no other indicator of impairment.

All loans and advances and securities measured at individually significant amortized cost were subject to a specific impairment test. Loans and advances and securities measured at amortized cost not considered as individually significant were collectively tested for impairment by grouping loans and advances and securities at amortized cost with similar credit risk characteristics.

Individual or collective evaluation

An individual measurement of impairment was based on Management's best estimate of the present value of the cash flows expected to be received. In estimating these cash flows, Management has judged the financial position of a debtor and the net realizable value of any underlying collateral. Each asset reduced to its recoverable value was evaluated for its merits, while the test strategy and estimated cash flows considered to be recoverable were approved by the Bank's credit risk managers.

In assessing the need for a collective provision for losses, management considered factors such as credit quality, portfolio size, concentrations and economic factors. To estimate the necessary provision, assumptions were made to define how inherent losses were modeled and to determine the required data parameters, based on historical experience and current economic conditions.

Measurement of impairment

Impairment losses on assets measured at amortized cost were calculated as the difference between the book value and the present value of the estimated future cash flows, discounted at the effective interest rate of the asset. Impairment losses on assets measured at fair value through Other Comprehensive Income were calculated as the difference between book value and fair value.

Reversal of impairment

For assets measured at amortized cost: If an event occurred after the impairment caused a reduction in the value of the impairment loss, the reduction in the impairment loss was reversed through profit or loss.

For debt securities measured at fair value through Other Comprehensive Income: If, in a subsequent period, the fair value of a debt security reduced to recoverable value has increased and this increase could be objectively tied to an event occurring after recognition of the impairment loss, the impairment loss was reversed through profit or loss; otherwise, any increase in fair value was recognized through Other Comprehensive Income.

Any subsequent recovery in the fair value of an equity instrument measured at fair value through Other Comprehensive Income and reduced to recoverable value was recognized at any time in Other Comprehensive Income.

The reconciliation of stockholders' equity resulting from the initial adoption of IFRS 9 is as follows:

Equity reconciliation
Equity before IFRS 9 adjustments - 12/31/201787,087,601
Allowance for loan losses(2,149,051)
Provision for contingent liabilities(674,513)
Re-measurement of assets arising from the new categories17,806
Others237,867
Deferred tax1,026,066
Equity after IFRS 9 adjustments - 01/01/201885,545,776

F-21

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Designation at fair value through profit or loss

Financial assets

At initial recognition, the Bank designated certain financial assets at fair value through profit or loss, as this designation eliminates or significantly reduces accounting mismatch that may arise.

Values of expected credit losses

Information, assumptions and techniques used in the estimation of impairment

Classification of financial instruments by stages

The portfolio of financial instruments subject to impairment is divided into three levels, based on the stage of each instrument related to its level of credit risk:

- Stage 1: It is understood that a financial instrument at this stage does not have a significant increase in risk since its initial recognition. The provision on this asset represents the expected loss resulting from possible default during the next 12 months;

- Stage 2: If a significant increase in risk has been identified since the initial recognition, without materializing deterioration, the financial instrument will be framed within this stage. In this case, the amount referring to the provision for expected loss for delinquency reflects the estimated loss of the residual life of the financial instrument. For the assessment of the significant increase in credit risk, the quantitative measurement indicators used in the normal management of credit risk will be used, as well as other qualitative variables, such as the indication of being an undeveloped operation if considered as refinanced or included operations in a special agreement; and

- Stage 3: A financial instrument is recorded within this stage when it shows signs of deterioration evident as a result of one or more events that have already occurred and which materialize at a loss. In this case, the amount relating to the provision for losses reflects the expected losses due to credit risk over the expected residual life of the financial instrument.

Impairment estimation methodology

The measurement of the expected loss is made through the following factors:

- Exposure at Default or EAD: is the transaction value exposed to credit risk, including the current available balance balance that could be provided at the time of default. The models developed incorporate assumptions about the changes in the payment schedule of operations.

- Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered.

- Losses given default (LGD): is the resulting loss in the event of default, that is, the percentage of exposure that can not be recovered in the event of default. It depends mainly on the guarantees associated with the operation, which are considered as risk mitigation factors associated with each credit financial asset and the expected future cash flows to be recovered. As established in the regulations, future information should be taken into account for its estimation.

- Discount rate: is the rate applied to estimated future cash flows over the expected life of the asset, to bring them to present value.

In order to estimate the aforementioned parameters, the Bank has applied its experience in the development of internal models for the calculation of parameters both for the purposes of the regulatory environment and for internal management.

Definition of default

The Bank considers that a financial asset is in a default situation when:

- it is likely that the debtor will not fully pay its credit obligations to the Bank; or

- the debtor has significant credit obligations to the Bank overdue for more than 90 days as a general rule.

Overdrafts are considered past due if the customer violates a recommended limit or has been granted a lower limit than the current outstanding amount.

When assessing whether a debtor is in default, the Bank considers indicators:

- qualitative - eg breaches of covenants;

- quantitative - for example, the status of past due and non-payment of another obligation of the same issuer to the Bank; and

- based on data collected internally and obtained from external sources.

Allowance for losses

The following tables present the reconciliations of the opening and closing balances of the provision for losses by category of financial instrument. The terms expected credit losses in 12 months, expected credit losses during the maturity and impairment losses recoverable amounts are explained in the accounting practices note. The values for December 31, 2017 represent a provision for loan losses and reflect the measurement basis in accordance with IAS 39.

F-22

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

R$ millionsTotal
Allowance for loan losses - Balance 12/31/201718,261,638
Allowance for guarantees - Balance 12/31/2017312,373
IAS 39 Balance at 12/31/201718,574,011
Initial adoption effect of IFRS 9 (Note 1.2i)2,823,564
IFRS 9 Balance at 01/01/201821,397,575

As of January 1, 2018, the Allowance for Loan Losses balance related to IFRS 9 segregated by stages was represented by: Stage 1 – 20%, Stage 2 – 15% and Stage 3 – 65%. The segregation in stages related December 31, 2019, is in note 9.c.

Financial Assets and Liabilities

A. Classification of Financial Assets and Liabilities at the Initial Adoption of IFRS 9

The table below presents the financial assets classified in accordance with IAS 39 and the new measurement categories in accordance with IFRS 9.

IFRS 9 adoption first adoption effects on the Financial Assets and Liabilities (In R$ Millions)Original classification in accordance with IAS 39Balance 12/31/2017 ReclassificationsRemeasurementBalance
01/01/2018		New classification in accordance with IFRS 9
Financial AssetsIAS 39Loans and receivables355,246,574354,317,416-354,317,416Measured at Amortized cost
492,4295,197497,626Measured Mandatorily Measured At Fair Value Through Profit Or Loss
436,729(7,179)429,550Measured at Fair value through other comprehensive income
Available-for-sale85,823,3844,762,2343,7914,766,025Measured at Amortized cost
79,954,513-79,954,513Measured at Fair value through other comprehensive income
1,106,63715,9971,122,634Measured at Fair value through profit and loss
Held to maturity investments10,214,45410,214,454-10,214,454Measured at Amortized cost
Held for trading86,271,09786,271,097-86,271,097Measured at Fair value through profit and loss Held For Trading
Other financial assets measured at fair value through profit and loss1,692,0571,692,057-1,692,057Measured at Fair value through profit and loss
Total (1)539,247,566539,247,56617,806539,265,372 

(1)Does not include Provision for Losses on contingent liabilities and commitments

F-23

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

IFRS 9 adoption first adoption effects on the Financial Assets and Liabilities (In R$ Millions) Original classification in accordance with IAS 39Balance 12/31/2017ReclassificationsRemeasurement  Balance
  01/01/2018		 New classification in accordance with IFRS 9
Financial liabilitiesIAS 39 Held for trading49,322,546--49,322,546 Measured At Fair Value Through Profit Or Loss Held For Trading
 Amortized cost478,880,704--478,880,704 Measured at Amortized cost
Total 528,203,250--528,203,250  

iv.iii. Provisions for pension funds

 

Defined benefit plans are recorded based on an actuarial study, performedcarried out annually by a specialized company, at the end of each year, effective for the subsequent period and are recognized in the consolidated income statement of income under Interest and similar expenses and Provisions (net).

 

The present value of thea defined benefit obligation is the present value, without deduction ofless any plan assets, from theof expected future payments requirednecessary to settle the obligation resulting from the employee'semployee service in current and past periods.

 

Additional details arecan be found in note 2.x of2.w to the Consolidated Financial Statements as of December 31, 2019.2021.

 

v. iv. Provisions, assets and contingent liabilities

 

Provisions for judicial and administrative proceedings are constituted when the risk of loss of the judicial or administrative action is assessed as probable and the amounts involved are measurable with sufficient security, based on the nature, complexity and history of the actions and the opinion of the legal advisors internal and external.

Explanatory note 2.r2.q to the Bank's consolidated financial statements for the year ended December 31, 2019,2021, features information on provisions and contingent assets and liabilities. There were no significant changes in provisions and contingent assets and liabilities of the Bank between December 31, 20182020 and December 31, 2019,2021, the date of preparation of these consolidated financial statements.

 

vi.v. Goodwill

 

The goodwill recorded is subject to the impairment test, at least once a year or in a shorter period, in the event of any indication of impairment of the asset.

 

The basis used for the recoverability test is the value in use and, for this purpose, the cash flow is estimated for a period of 5 years. Cash flow was prepared considering several factors, such as: (i) macroeconomic projections of interest rates, inflation, exchange rate and others; (ii) behavior and growth estimates of the national financial system; (iii) increased costs, returns, synergies and investment plan; (iv) customer behavior; and (v) growth rate and adjustments applied to flows in perpetuity. The adoption of these estimates involves the probability of future events occurring and the alteration of any of these factors could have a different result. The cash flow estimate is based on a valuation prepared by an independent expert annually or whenever there is evidence of a reduction in its recoverable amount, which is reviewed and approved by Management.

management.

Further details are in note 13.

 

vi.        Expectation of realization of tax credits

Deferred tax assets and liabilities include temporary differences, identified as the amounts expected to be paid or recovered on differences between the book values ​​of assets and liabilities and their respective calculation bases, and accumulated tax credits and losses and the negative CSLL base. These amounts are measured at the rates expected to be applied in the period in which the asset is realized or the liability is settled. Deferred tax assets are only recognized for temporary differences to the extent that it is considered probable that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets can be used, and the deferred tax assets do not result from the initial recognition (except in a business combination) of other assets and liabilities in an operation that affects neither taxable income nor taxable income. Other deferred tax assets (tax credits and accumulated tax losses) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable profits to be used.

Consolidated Financial Statements | December 31, 2021 | F-15

Table of Contents

 

* Values expressed in thousands, except when indicated.

Deferred tax assets and liabilities recognized are revalued on the date of each balance sheet, making appropriate adjustments based on the findings of the analyzes carried out. The expectation of realization of the Bank's deferred tax assets is based on projections of future results and based on a technical study.

For further details, see note 2.z to the Consolidated Financial Statements of December 31, 2021.

2.Accounting policies and method of measurement

 

The accounting policies and method of measurement applied in preparing the consolidated financial statements were as follows:

 

a) Foreign currency transactions

 

The financial statements are presented in Brazilian Reais, the functional and reporting currency of Banco Santander and its subsidiaries.

 

The assets and liabilities and foreign subsidiary are converted to Real as follows:

 

- Assets and liabilities are translated at the exchange rate at the balance sheets date.

 

- Revenues and expenses are translated at the monthly average exchange rates.

 

- Gain and losses on translation of net investment are recorded in the statement of comprehensive income, in “exchange rate of investees located abroad”.

 

b) Basis of consolidation

 

i. Subsidiaries

 

“Subsidiaries” are defined as entities over which the Bank has control. Control is based on whether the Bank has: i) power over the investee; ii) exposure, or rights, to variable returns from its involvement with the investee; and iii) the ability to use its power over the investee to affect the amount of the returns, as set forth in the law, the Bylaws or agreement.

Consolidation of a subsidiary begins when the Bank obtains control over the subsidiary and ceases when the Bank loses control of the subsidiary. Specifically, income and expense of a subsidiary acquired or disposed during the year are included in the consolidated income statement and other comprehensive income from the date the Bank gains controls until the date when the Bank ceases to control the

F-24

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

subsidiary.

 

Profit or loss and each component of Other Comprehensive Income are attributed to the owners of the Bank and to the non-controlling interests even if the effect is attributed to non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling interest even if this generates a negative balance for non-controlling interests. All transactions, balances, income and expenses between the companies of the Santander Group are eliminated in the consolidated financial statements.

 

Changes in the Santander Group’s interest in a subsidiary that do not result in loss of control are registered as equity transactions. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

 

When the Bank loses control of a subsidiary,controlled delivery, or the profit or loss on disposal is calculated asrecognized in the income statement and is the difference betweenbetween: (i) the aggregatesum of the fair value of the considerationdeliveries received and the fair value of any retained interestthe residual interest; and (ii) the previous carrying amountprior balance of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amountsnon-equity interests, if any. All amounts previously recognized in other comprehensive income in relation“Other Comprehensive Income” related to are accounted for as if the Bank had directly disposed of the corresponding assets or liabilities of the subsidiary are registered (i.e., reclassified to income statement or transferred directly to retained earnings) in the same manneranother equity account, as it would be required if the relevant assetsmandatory or liabilities are disposed of.mandatory authorized by IFRS). The fair value of anyan investment retained inheld on the former subsidiary at the date whenof loss of control got lost is considered as the fair value on initial recognition for subsequent accounting under IAS 39IFRS 9 Financial Instruments: Recognition and MeasurementInstruments or, when applicable, the costsrecognition on initial recognition of an investment in an associate or jointly controlled entity.joint venture.

 

ii. Interests in joint ventures (jointly controlled entities) and associates

 

Joint ventures mean interests in entities that are not subsidiaries but which are jointly controlled by two or more unrelated entities. This is evidenced by contractual arrangements whereby two or more entities (“ventures”) acquire interests in entities (jointly controlled entities) so that strategic financial and operating decisions affecting the joint venture require the unanimous consent of the ventures.

 

Consolidated Financial Statements | December 31, 2021 | F-16

Table of Contents

 

* Values expressed in thousands, except when indicated.

Associates are entities over which the Bank is in a position to exercise significant influence (significant influence is the power to participate in the financial and operating decisions of the investee) but it does not control or has joint control over the investee.

 

In the consolidated financial statements, interest in joint ventures and investments in associates are registered using the equity method, i.e. at the Bank’s share of net assets of the investee, after taking into consideration the dividends received from capital reductions and other related transactions. Relevant information regarding companies registered under the equity method by the Bank is provided in note 11.

 

iii. Business combinations, acquisitions and disposals

 

A business combination is the combination of two or more separate entities or economic units into one single entity or group of entities and is registered in accordance with IFRS 3 - “Business Combinations”.

Business combinations are carried out so that the Bank obtains control over an entity and are recognized for accounting purposes as follow:

 

• The Bank measures the cost of the business combination, defined as the fair value of the assets offered, the liabilities incurred and the equity instruments issued, if any.

 

• The fair values of the assets, liabilities and contingent liabilities of the acquired entity or business, including any intangible assets which might not have been recognized by the acquiree, are estimated at the acquisition date and recognized in the consolidated financial statement.

 

• The excess of the acquisition cost over the fair value of the identifiable net assets acquired are recognized as goodwill (note 13). The excess of fair value of the identifiable net assets over the acquisition cost is an advantageous purchase gain and it is recorded as income on the date of the acquisition.

 

The note 3 includes a description of the most significant transaction carried out in 2018, 20172021, 2020 and 2016.2019.

 

iv. Investment Funds

 

These include investment funds in which the Santander Group companies hold a substantial interest or the entirety of the interests and are therefore exposed to, or have rights, to variable returns and have the ability to affect those returns through power over the fund, in accordance with IFRS 10 - Consolidated Financial Statements and are therefore, consolidated in these financial statements.

 

c) Definitions and classification of financial instruments

i. Definitions

 

“Financial instrument” is any contract that gives rise to a financial asset of one entity and, simultaneously, to a financial liability or financial interest of another entity.

“Equity instrument” is any agreement that evidences a residual interest in the asset of the issuing entity after deducting all of its liabilities.

 

“Financial derivative” is a financial instrument whose value changes in response to the change in an observable market variable (such as an interest rate, foreign exchange rate, financial instrument price, market index or credit rating), whose initial investment is zero or very small compared with other financial instruments with a similar response to changes in market factors, and which is settled at a future date.

 

“Hybrid financial instruments” are contracts that simultaneously include a non-derivative host contract together with a derivative, known as an embedded derivative, that is not separately transferable and has the effect to make part of the cash flow of the hybrid contract vary similar to a stand-alone derivative.

 

The following transactions are not treated for accounting purposes as financial instruments:

 

Consolidated Financial Statements | December 31, 2021 | F-17

Table of Contents

 

* Values expressed in thousands, except when indicated.

• Investments in subsidiaries, jointly controlled entities and associates (note 3&11).

 

F-25

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

• Rights and obligations under employee benefit plans (note 22)21).

 

ii. Classification of financial assets for measurement purposes

 

Financial assets are initially classified into the various categories used for management and measurement purposes, unless they have to be presented as Non-current assetsAssets held for sale or they relate to Cash, cash balances at Central Banks and other deposits on demand, Changes in the fair value of hedged items in portfolio hedges of interest rate risk (asset side), Hedging derivatives and Investments, which are reported separately.

 

Financial assets are included for measurement purposes in one of the following categories:

 

• Financial Assets Measured Atat Fair Value Through Profit Oror Loss Held Forfor Trading: this category includes the financial assets acquired to generate short-term profit resulting from the fluctuation of its prices and financial derivatives not classified as hedging instruments, whose primary intention of the Bank is to trade them frequently.

 

• Financial Assets Measured Atat Fair Value Through Profit Oror Loss: this category includes the financial assets that did not meet the pre-established criteria when evaluating the SPPI Test (Solely Payment of Principal and Interest).

 

• Non-Trading Financial Assets Mandatorily Measured Atat Fair Value Through Profit Oror Loss: this category includes the financial assets that at the time of initial designation was made the fair value option.

 

• Other Financial Assets AtMeasured at Fair Value Through Profit Or Loss (applicable for comparatives): this category includes hybrid financial assets not held for trading that are measured entirely at fair value and financial assets not held for trading that are included in this category in order to provide more relevant information, either because this eliminates or significantly reduces recognition or measurement inconsistencies (accounting mismatches) that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases, or because a group of financial assets or financial assets and liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided on that basis to the Group's key management personnel.

Financial instruments included in this category (and “Other financial liabilities at fair value through profit or loss”) are permanently subject to a consistent system of measurement, manage and control of all risks and returns that enables all the financial instruments involved to be identified and monitored and allows the effective reduction of risk checked. Financial assets may only be included in this category on the date they are acquired or originated.

• Financial Assets Measured At Fair Value Through Profit Or Loss: are stated at fair value. This category does not include debt instruments classified as “Held-to-maturity investments” or “Financial assets at fair value through profit or loss”, and equity instruments issued by entities other than subsidiaries, associates and jointly controlled entities, provided that such instruments have not been classified as “Financial assets held for trading” or as “Other financial assets at fair value through profit or loss”.

 

The results risingResults arising from changes in fair value are recognized at the Financial Assets Measured At Fair Value Through Other Comprehensive Income line in the Shareholders´item adjustment to market value in equity, except for cumulativewith the exception of impairment losses, which are recognized in statement of profit or loss. When the investment is solddisposed of or has evidencesevidence of decreases on thea decline in fair value due to impairment,non-recovery, the result previously recognized result ataccumulated in the same Shareholders´ Equity line, mentioned aboveaccount of adjustments to fair value in equity is reclassified to the statement of profit or loss.income.

 

• Financial Assets Measured Atat Amortized Cost: this category includes financing granted to third parties, based on their nature, irrespective of the type of borrower and the form of financing, including finance lease transactions in which the consolidated entities act as lessors. The consolidated entities generally intend to hold the loans and credits granted by them until their final maturity and, therefore, they are presented in the consolidated balance sheets at their amortized cost (which includes the required adjustments to reflect estimated impairment losses).

 

• Held-to-maturity investments(applicable for comparatives): this category includes debt instruments traded in an active market, with fixed maturity and with fixed or determinable payments, for which the Bank has both the intention and proven ability to hold to maturity. These investments are measured at amortized cost less any impairment, with revenue recognized on an effective yield basis.

iii. Classification of financial assets for presentation purposes

 

Financial assets are classified by nature into the following headings in the consolidated financial statements:

 

• Cash and balances with the Bacen: cash balances and balances receivable on demand relating to deposits with Bacen and credit institutions.

Consolidated Financial Statements | December 31, 2021 | F-18

Table of Contents

 

* Values expressed in thousands, except when indicated.

       

• Financial Assets Measured At Amortized Cost: includes the debit balances of all credit and loans granted by the Bank, other than those represented by securities, as well as finance lease receivables and other debit balances of a financial nature in favor of the Bank, such as checks drawn on credit institutions, balances receivable from clearing houses and settlement agencies for transactions on the stock exchange and organized markets, bonds given in cash, capital calls, fees and commissions receivable for financial guarantees and debit balances arising from transactions not originating in banking transactions and services, such as the collection of rentals and similar itemsitems.

 

• Loans and other amounts with credit institutions: credit of any nature in the name of financial institutions.

 

• Loans and advances to clients: includes debit balances of all the remaining credit and loans granted by the Bank, including money market operations through centralized counterparties.

 

• Debt instruments: bonds and other securities that represent a debt for their issuer, that generate an interest return, and that are in the form of certificates or book entries.

 

• Equity instruments: Financial instruments issued by other entities, such as shares, which have the nature of equity instruments for the issuer, other than investments in subsidiaries, joint ventures or associates. Investment fund units are included in this item.

 

• Trading derivatives: includes the fair value in favor of the Bank of derivatives which do not form part of hedge accounting.

 

• Hedging derivatives: includes the fair value in favor of the Bank of derivatives designated as hedging instruments in hedge accounting.

F-26

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

• Investments in associates and jointly controlled companies: includes the investments made in the share capital of associates and jointly controlled companies.

 

iv. Classification of financial liabilities for measurement purposes

 

Financial liabilities are classified for measurement purposes into one of the following categories:

 

• Other Financial Assets At Fair Value Through Profit Or Loss: this category includes financial liabilities incurred for the purpose of generating a profit in the near term from fluctuations in their prices, financial derivatives not designated as hedging instruments, and financial liabilities arising from the outright sale of financial assets acquired under reverse repurchase agreements ("reverse repos") or borrowed (short positions).

 

• Other Financial Assets At Fair Value Through Profit Or Loss: financial liabilities are included in this category when they provide more relevant information, either because this eliminates or significantly reduces recognition or measurement inconsistencies (accounting mismatches) that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases, or because a group of financial liabilities or financial assets and liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided on that basis to the Group's key management personnel.

 

• Financial liabilities at amortized cost: financial liabilities, irrespective of their instrumentation and maturity, not included in any of the above-mentioned categories which arise from the ordinary borrowing activities carried on by financial institutions.

 

v. Classification of financial liabilities for presentation purposes

 

Financial liabilities are classified by nature into the following items in the consolidated financial statements:

 

• Deposits from Bacen: deposits of any nature received from Bacen.

 

• Deposits from credit institutions: deposits of any nature, including credit received and money market operations in the name of credit institutions.

 

• Client deposits: includes deposits of any nature such as demand deposits, saving deposits and time deposits including money market operation received from client.

 

• Marketable debt securities: includes the amount of bonds and other debt represented by marketable securities, other than subordinated liabilities.

 

Consolidated Financial Statements | December 31, 2021 | F-19

Table of Contents

 

* Values expressed in thousands, except when indicated.

• Trading derivatives: includes the fair value, with a negative balance for the Bank, of derivatives which do not form part of hedge accounting.

 

• Short positions: includes the amount of financial liabilities arising from the outright sale of financial assets purchased under reverse repurchase agreements or borrowed.

 

• Subordinated liabilities: amount of financing received which, for the purposes of payment priority, ranks behind ordinary debt. This category also includes the financial instruments issued by the Bank which, although equity for legal purposes, do not meet the requirements for classification as equity.

 

• Other financial liabilities: includes the amount of payment obligations having the nature of financial liabilities not included in other items, and liabilities under financial guarantee contracts, unless they have been classified as non-performing.

 

• Hedging derivatives: includes the fair value of the Bank's liability in respect of derivatives, including embedded derivatives separated from hybrid financial instruments, designated as hedging instruments in hedge accounting.

 

•Equity instruments: financial instruments issued by other entities, such as shares, with the nature of equity instruments for the issuer, except investments in subsidiaries, jointly controlled entities or associates.

d) Funding, debt notes issued and other liabilities

 

Funding debt rates and other liabilities Instruments are recognized initially at fair value, considered primarily as the transaction price. They are subsequently measured at amortized cost and its expenses are recognized as a financial cost.

 

Among the liabilities initial recognition methods, it is important to emphasize those compound financial instruments which are classified as such due to the fact that the instruments contain both, a debt instrument (liability) and an embedded equity component (derivative).

 

The recognition of a compound instrument consists of a combination of (i) a main instrument, which is recognized as an entity’s genuine liability (debt) and (ii) an equity component (derivative convertible into ordinary share).

 

The issue of "Notes" must be registered in specific heading liabilities and updated according to the agreed rates and adjusted by the effect of exchange rate variations, when denominated in foreign currency. All remuneration related to these instruments, such as interest and Exchange variation (difference between the functional currency and the currency in which the instrument was named) shall be recognized as expenses for the period, according to the accrual basis.

 

The relevant details of these issued instruments are described in explanatory note 20.19.

 

e) Measurement of financial assets and liabilities and recognition of fair value changes

 

In general, financial assets and liabilities are initially recognized at fair value which, in the absence of evidence to the contrary, is deemed to be the transaction price. Financial instruments not measured at fair value through profit or loss, are adjusted by the transaction costs. Financial assets and liabilities are subsequently measured at each period-end as follows:

 

i. Measurement of financial assets

 

Financial assets are measured at fair value, without deduction of estimated costs of transaction that may be incurred on their disposal, except for loans and receivables, held-to-maturity investments, equity instruments whose fair value cannot be determined in a sufficiently objective manner and financial derivatives that have as equity instruments subject and are settled by delivery of those instruments.

 

F-27

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

The fair value of a financial instrument on a given date is taken to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The most objective and common reference for the fair value of a financial instrument is the price that would be paid for it on an active, transparent and deep market (quoted price or market price).

 

If there is no market price for a given financial instrument, its fair value is estimated on the basis of valuation techniques commonly used by the international financial community, according to the specific features of the instrument to be measured and, particularly, the various types of risk associated with it.

 

Consolidated Financial Statements | December 31, 2021 | F-20

Table of Contents

 

* Values expressed in thousands, except when indicated.

All derivatives are recognized in the balance sheets at fair value from the trade date. If the fair value is positive, they are recognized as assets and if the fair value is negative, they are recognized as liabilities. The changes in the fair value of derivatives from the trade date are recognized in “Gains (losses) on financial assets and liabilities” in the consolidated income statement. Specifically, the fair value of standard financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price and if, for exceptional reasons, the quoted price cannot be determined on a given date, these financial derivatives are measured using methods similar to those used to measure over the counter “OTC” derivatives.

 

The fair value of OTC derivatives is taken to be the sum of the future cash flows arising from the instrument, discounted to present value at the date of measurement (“present value” or “theoretical close”) using valuation techniques commonly used by the financial markets: “net present value” (NPV), option pricing models and other methods.

 

“Financial Assets Measured At Amortized Cost” and “Held-to-maturity investments” are measured at amortized cost using the effective interest method. “Amortized cost” is the acquisition cost of a financial asset or liability plus or minus, as appropriate, the principal repayments and the cumulative amortization (taken to the income statement) between the difference of the initial cost and the maturity amount. In the case of financial assets, amortized cost furthermore includes any reductions for impairment or uncollectibility. In the case of loans and receivables hedged in fair value hedges, the changes in the fair value of these assets related to the risk or risks being hedged are recognized.

 

The “effective interest rate” is the discount rate that exactly matches the initial amount of a financial instrument to all its estimated cash flows of all kinds over its remaining life. For fixed rate financial instruments, the effective interest rate coincides with the contractual interest rate established on the acquisition date plus, where applicable, the fees and transaction costs that, because of their nature, form part of their financial return. In the case of floating rate financial instruments, the effective interest rate coincides with the rate of return prevailing in all connections until the next benchmark interest reset date.

 

Equity instruments whose fair value cannot be determined in a sufficiently objective manner are measured at acquisition cost adjusted, where appropriate, by any related impairment loss.

 

The amounts at which the financial assets are recognized represent, in all material respects, the Bank’s maximum exposure to credit risk at each reporting date. Also, the Bank has received collateral and other credit enhancements to mitigate its exposure to credit risk, which consist mainly of mortgage guarantees, cash collateral, equity instruments and personal security, assets leased out under leasing and renting agreements, assets acquired under repurchase agreements and securities loans and derivatives.

 

ii. Measurement of financial liabilities

 

In general, financial liabilities are measured at amortized cost, as defined above, except for those included under “Financial Assets Measured Atat Fair Value Through Profit Oror Loss” and “Other financial liabilities at fair value through profit or loss” and financial liabilities designated as hedge items (or hedging instruments) in fair value hedges, which are measured at fair value.

 

iii. Recognition of fair value changes

 

As a general rule, changes in the carrying amount of financial assets and liabilities are recognized in the consolidated income statement, distinguishing between those arising from the accrual of interest and similar items -which are recognized under “Interest and similar income” or “Interest expense and similar charges”, as appropriate - and those arising for other reasons, which are recognized at their net amount in the heading “Gains (losses) on financial assets and liabilities (net)”.

 

Adjustments due to changes in fair value arising from Available-for-sale financial assets are recognized temporarily in equity in then heading “Other Comprehensive Income”. Items charged or credited to this account remain in the Bank’s consolidated equity until the related assets are written-off, whereupon they are charged to the consolidated income statement.

 

iv. Hedging transactions

 

The consolidated entities use financial derivatives for the following purposes: i) to provide these instruments to clients who request them in the management of their market and credit risks; ii) to use these derivatives in the management of the risks of the Bank entities' own positions and assets and liabilities (“hedging derivatives”); and iii) to obtain gains from changes in the prices of these derivatives (“financial derivatives”).

 

Financial derivatives that do not qualify for hedge accounting are treated for accounting purposes as trading derivatives.

 

Consolidated Financial Statements | December 31, 2021 | F-21

Table of Contents

 

* Values expressed in thousands, except when indicated.

A derivative qualifies for hedge accounting if all the following conditions are met:

 

1. The derivative hedges one of the following three types of exposure:

 

a. Changes in the fair value of assets and liabilities due to fluctuations, among other, in the interest rate and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”);

 

b. Changes in the estimated cash flows arising from financial assets and liabilities, commitments and highly probable forecast transactions (“cash flow hedge”);

 

c. The net investment in a foreign operation (hedge of a net investment in a foreign operation).

 

2. It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that:

F-28

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

a. At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (prospective effectiveness).

 

b. There is sufficient evidence that the hedge was actually effective during the whole life of the hedged item or position (retrospective effectiveness).

 

3. There must be adequate documentation evidencing the specific designation of the financial derivative to hedge certain balances or transactions and how this effective hedge was expected to be achieved and measured, provided that this is consistent with the Bank’s management of own risks.

 

The changes in value of financial instruments qualifying for hedge accounting are recognized as follows:

 

a. In fair value hedges, the gains or losses arising on both the hedging instruments and the hedged items (attributable to the type of risk being hedged) are recognized directly in the consolidated income statement.

 

b. In cash flow hedges, the effective portion of the change in value of the hedging instrument is recognized temporarily in equity under “Other comprehensive Income - Cash flow hedges” until the forecast transactions occur, when it is recognized in the consolidated income statement, unless, if the forecast transactions result in the recognition of non-financial assets or liabilities, it is included in the cost of the non-financial asset or liability. The ineffective portion of the change in value of hedging derivatives is recognized directly in the consolidated income statement.

 

c. The ineffective portion of the gains and losses on the hedging instruments of cash flow hedges and hedges of a net investment in a foreign operation are recognized directly under “Gains (losses) on financial assets and liabilities (net)” in the consolidated income statement.

 

If a derivative designated as a hedge instrument no longer meets the requirements described above due to expiration, ineffectiveness or for any other reason, the derivative is classified as a derivative measured at fair value through profit or loss.

 

When fair value hedge accounting is discontinued (expired, sold our no longer meet hedge accounting criteria) the adjustments previously recognized on the hedged item are transferred to profit or loss at the effective interest rate re-calculated at the date of hedge discontinuation. The adjustments must be fully amortized at maturity.

 

When cash flow hedges are discontinued, any cumulative gain or loss on the hedging instrument recognized in equity in the heading "Other comprehensive Income” (from the period when the hedge was effective) remains recognized in equity until the forecast transaction occurs at which time it is recognized in profit or loss, unless the transaction is no longer expected to occur, in which case any cumulative gain or loss is recognized immediately in profit or loss.

 

For the accounting and disclosure of the hedge accounting structures as of December 31, 2019, the bank used the faculty of IFRS 9, to maintain the practices determined by IAS 39.

 

f) Settlement of financial assets and liabilities

Write-off of Financial Assets

The Bank derecognizes a financial asset when the contractual rights to the cash flows from the asset expire or when it transfers the rights to receive the contractual cash flows in a transaction in which essentially all the risks and rewards of ownership of the financial asset are transferred or in which the Bank does not transfer or retain substantially all the risks and rewards of ownership of the financial asset and does not control the financial asset.

Consolidated Financial Statements | December 31, 2021 | F-22

Table of Contents

 

* Values expressed in thousands, except when indicated.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or carrying amount allocated to the portion of the asset derecognized) and the sum of (i) the consideration received (including any new asset obtained, less any new liability assumed) and (ii) any accumulated gains or losses recognized in “Other Comprehensive Income” are recorded in income.

As of the IFRS opening date, mentioned above, any accumulated gains/losses recognized in “Other Comprehensive Income” in relation to equity instruments designated at fair value through Other Comprehensive Income are not recorded in income upon derecognition of these securities.

The Bank carries out operations in which it transfers the assets recognized in its balance sheet, but retains all or substantially all the risks and benefits of the transferred assets or part of them. In these cases, the transferred assets are not written off. Examples of these operations include assignments of loan portfolios with recourse. In transactions in which the Bank does not retain or transfer substantially all the risks and rewards of ownership of a financial asset and controls the asset, the Bank continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

Write-off of Financial Assets by Assignment of Credit

 

The accounting treatment of transfers of financial assets depends on the extent to which the risks and rewards associated with the transferred assets are transferred to third parties:

 

1. If the Bank transfers substantially all the risks and rewards to third parties-unconditional sale of financial assets, sale of financial assets under an agreement to repurchase them at their fair value at the date of repurchase, sale of financial assets with a purchased call option or written put option that is deeply out of the money, securitization of assets in which the transferor does not retain a subordinated debt or grant any credit enhancement to the new holders, and other similar cases, the transferred financial asset is derecognized and any rights or obligations retained or created in the transfer are recognized simultaneously.

 

2. If the Bank retains substantially all the risks and rewards associated with the transferred financial asset -sale of financial assets under an agreement to repurchase them at a fixed price or at the sale price plus interest, a securities lending agreement in which the borrower undertakes to return the same or similar assets, and other similar cases, the transferred financial asset is not derecognized and continues to be measured by the same criteria as those used before the transfer. However, the following items are recognized:

 

a. An associated financial liability, for an amount equal to the consideration received; this liability is subsequently measured at amortized cost.

 

b. The income from the transferred financial asset not derecognized and any expense incurred on the new financial liability.

 

3. If the Bank neither transfers or retains substantially all the risks and rewards associated with the transferred financial asset - sale of financial assets with a purchased call option or written put option that is not deeply in or out of the money, securitization of assets in which the transferor retains a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar cases, the following distinction is made:

 

a. If the transferor does not retain control of the transferred financial asset, the asset is derecognized and any rights or obligations retained or created in the transfer are recognized.

 

b. If the transferor retains control, it continues to recognize the transferred financial asset for an amount equal to its exposure to changes in value and recognizes a financial liability associated with the transferred financial asset. The net carrying amount of the transferred asset and the associated liability is the amortized cost of the rights and obligations retained, if the transferred asset is measured at amortized cost, or the fair value of the rights and obligations retained, if the transferred asset is measured at fair value.

 

Write-off of Financial Liabilities

The Bank writes off a financial liability when its contractual obligations are extinguished, canceled or when they expire.

g) Offsetting of financial instruments

Financial asset and liability balances are offset (i.e. reported in the consolidated balance sheets at their net amount) only if the Bank and their subsidiaries currently have a legally enforceable right to set off the recognized amounts and intend either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Offsetting Agreements and Obligations Settlement (CMN Resolution 3.263/2005) - Thesimultaneously, as provided for in IFRS 7 / IAS 32, additionally the Bank has an agreement for the clearing and settlement of obligations under the National Financial System (SFN), signed with individuals and legal entities, whether or not members

F-29

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

of the SFN, resulting in higher financial settlement guarantee, with the parties that have this modality of agreement. These agreements establish that payment obligations to Banco Santander arising from credit and derivative operations, in the event of default by the counterparty, will be offset against Banco Santander's payment obligations with the counterparty.

Consolidated Financial Statements | December 31, 2021 | F-23

Table of Contents

 

* Values expressed in thousands, except when indicated.

The following table provides details of financial assets and liabilities subject to offsetting at December 31, 2019, 20182021, 2020 and 2017:2019:

Thousand of reais         2021
Assets:  Financial assets, grossFinancial assets
offset in the balance sheet, gross		 Financial assets
offset in the balance sheet, net
Derivatives    21,575,848 (435,925) 21,139,923 
             
Liabilities:  Financial liabilities, grossFinancial liabilities
offset in the balance sheet, gross		 Financial liabilities
offset in the balance sheet, net
Derivatives    25,054,906 (435,925) 24,618,981
             
Thousand of reais         2020
Assets:  Financial assets, grossFinancial assets
offset in the balance sheet, gross		 Financial assets
offset in the balance sheet, net
Derivatives    26,808,181   (560,666) 26,247,515 
             
   Financial liabilities, grossFinancial liabilities
offset in the balance sheet, gross		 Financial liabilities
offset in the balance sheet, net
Liabilities:    
Derivatives    29,917,498 (560,666) 29,356,832 
             
Thousand of reais         2019
Assets:  Financial assets, grossFinancial assets
offset in the balance sheet, gross		 Financial assets
offset in the balance sheet, net
Derivatives    19,279,829 (458,929) 18,820,900 
             
Liabilities:  Financial liabilities, grossFinancial liabilities
offset in the balance sheet, gross		 Financial liabilities
offset in the balance sheet, net
Derivatives    21,264,072 (458,929) 20,805,143 

 

Thousand of reais2019
Assets: Financial assets, gross Financial assets
offset in the balance sheet, gross		 Financial assets
offset in the balance sheet, net
Derivatives20,904,663(458,929)20,445,734
Repurchase agreements28,717,976-28,717,976

Liabilities: Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross		 Financial liabilities
offset in the balance sheet, net
Derivatives22,888,906(458,929)22,429,977
Repurchase agreements103,124,238-103,124,238

Thousand of reais2018
Assets: Financial assets, gross Financial assets
offset in the balance sheet, gross		 Financial assets
offset in the balance sheet, net
Derivatives18,667,611(304,165)18,363,446
Repurchase agreements44,836,491-44,836,491

Liabilities: Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross		 Financial liabilities
offset in the balance sheet, net
Derivatives18,771,000(304,165)18,466,835
Repurchase agreements101,647,013-101,647,013

Thousand of reais2017
Assets: Financial assets, gross Financial assets
offset in the balance sheet, gross		 Financial assets
offset in the balance sheet, net
Derivatives17,262,888-17,262,888
Repurchase agreements34,505,671-34,505,671

Liabilities: Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross		 Financial liabilities
offset in the balance sheet, net
Derivatives16,677,486-16,677,486
Repurchase agreements97,421,579-97,421,579

h) Regular way of financial assets purchases

Regular way of financial assets purchases are recognized on trade date. The assets are settled when the rights to receive cash flows have expired or the Bank has transferred substantially all the risks and rewards of ownership.

F-30

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

i) Impairment of financial assets

i. Definition

A financial asset is considered impaired when there is objective evidence that events have occurred which:

• Give rise to an adverse impact on the future cash flows that were estimated at the transaction date, in the case of debt instruments (loans and debt securities);

Consolidated Financial Statements | December 31, 2021 | F-24

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

• In the case of equity instruments, mean that their carrying amount may not be fully recovered.

• Arising from the violation of terms of loans, and

• During the Bankruptcy process.

As a general rule, the adjustment of the value of the impaired financial instruments is recognized in the consolidated income statement for the period in which the impairment becomes evident, and the reversal, if any, of previously recognized impairment loss is recognized in the consolidated income statement for the period in which the impairment is reversed or reduced.

ii. Debt instruments carried at amortized cost

The amount of an impairment loss incurred for determination of the recoverable amount on a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred) discounted the original effective interest rate of the financial asset (or the effective interest rate computed at initial recognition), and is presented as a reduction of the asset balance and recorded in income statements.

In estimating the future cash flows of debt instruments the following factors are taken into account:considered:

• All the amounts that are expected to be obtained over the remaining life of the instrument, in this case, the provided guarantees. The impairment loss takes into accountconsiders the likelihood of collecting accrued interest receivable.

• The various types of risk to which each instrument is subject; and

• The circumstances in which collections will foreseeably be made.

These cash flows are subsequently discounted using the instrument's effective interest rate.

Specifically, in regards to recoverable amount losses resulting from materialization of the insolvency risk of the obligors (credit risk), a debt instrument is impaired due to insolvency when there is evidence of a deterioration of the obligor's ability to pay, either because it is in arrears or for other reasons.

The Bank has certain policies, methods and procedures for covering its credit risk arising from insolvency allocable to counterparties.

These policies, methods and procedures are applied in the granting, in the examination and to document debt instruments, and contingent liabilities and commitments, the identification of their recoverable amount and the calculation of the amounts necessary to cover the related credit risk.

The procedures applied in the identification, measurement, control and reduction of the exposure to credit risk, are based on an individual basis or grouped by similarity.

• Clients with individual management: Wholesale clients, financial institutions and certain companies. Risk management is performed through an analysis complemented by tools to support the decision-making based in internal risk assessment.

• Clients with standardized management: individuals and companies not classified as individual clients. Risk management models based on automated decision-making and risk assessment procedure, complemented, when the model is not comprehensive or accurate enough, by teams of analysts specialized in this type of risk. The credits related to clients standardized, are usually considered not recoverable when they have historical loss experience and delay greater than 90 days.

Regarding the provision for impairment losses from credit risk, the Bank evaluates all loans. Loans are either individually or collectively evaluated for impairment. Loans accounted as amortized cost, which are not individually evaluated for impairment, are collectively evaluated for impairment, grouping them considering the similarity of risk. Loans individually evaluated for impairment are not included in balances that are collectively evaluated for impairment.

The Bank first assesses whether objective evidence of impairment loss individually for financial assets are individually significant, and individually or collectively for financial assets are not individually significant.

To measure the impairment loss on loans individually evaluated for impairment, the Bank considers the conditions of the borrower, such as his economic and financial situation, level of indebtedness, ability to generate income, cash flow , management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the moment of evaluation.

Consolidated Financial Statements | December 31, 2021 | F-25

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

To measure the impairment loss on loans collectively evaluated for impairment, the Bank segregates financial assets into groups considering the characteristics and similarity of credit risk, in other words, according to segment, the type of assets, guarantees and other factors associated as the historical experience of impairment and other circumstances known at the time of assessment.

In some cases, the observable data required to estimate the amount of an impairment loss on a financial asset may be limited or no longer fully relevant to current circumstances.

In such cases, an entity uses its experienced judgment to estimate the amount of any impairment loss. Similarly, an entity uses its experienced judgment to adjust observable data for a group of financial assets to reflect current circumstances.

The impairment loss is calculated by using statistical models that consider the following factors:

F-31

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

• Exposure at default (EAD) is the amount of risk exposure at the date of default by the counterparty. The timing of default is considered in the PD measurement.

• In accordance with IFRS, the exposure at default used for this calculation is the current exposure, as reported in the balance sheets.

• Probability of default, or “PD”, is the probability of the borrower failing to meet its principal and/or interest payment obligations.

PD is measured using a time horizon of one year; that is, it quantifies the probability of the borrower default in the coming year. A loan will be defaulted if either the principal or interest become past due by ninety days or more or the loan is active but there are doubts about the solvency of the counterparty (subjective doubtful assets).

• LossesLoss is given default, or “LGD”, is the loss arising in the event of default.

LGD calculation is based on the net charge offs on defaulted loans, taking into accountconsidering the guarantees/collateral associated with the loans, the income and expenses associated with the recovery process and the timing of default.

• Loss identification period, or "LIP - Loss identification period", is the period of time between the occurrence of a loss event and the identification of evidence of such loss. In other words, it represents the time horizon from the occurrence of the credit loss to the effective confirmation of such loss.

• In addition, prior to loans be written-off (which is only done after the Bank have completed all recovery efforts and after about 360 days late), it is registered fully provision of the loan´s remaining balance so this provision (allowance for loan losses) fully covers the losses. Thus, the Bank concludes that its loan loss allowance methodology has been developed to meet its risk metrics and capture loans that could potentially become impaired.

iii. Debt or equity instruments classified as financial assets measured at fair value through other comprehensive income

The difference between the amortized cost and fair value of debt or equity instruments classified as available for sale are recorded in equity under "Other Comprehensive Income."

When there is objective evidence that the aforementioned differences are due to a prolonged decline in fair value, they are no longer recognized in equity and are reclassified, at the cumulative amount at that date, to the consolidated income statement. Losses from a prolonged decline in fair value relating to an investment in equity instruments are not reversed in subsequent periods.

j) i) Repurchase agreements

Purchases (sales) of financial instruments under a non-optional resale (repurchase) agreement at a fixed price (repos) are recognized in the consolidated financial statements as financing granted (received), based on the nature of the debtor (creditor), under Loans and advances with Bacen, Loans and advances to credit institutions or Loans and advances to clients (Deposits from Bacen, Deposits from credit institutions or Client deposits).

Differences between the purchase and sale prices are recognized as interest over the duration of the contract.

Consolidated Financial Statements | December 31, 2021 | F-26

Table of Contents

 

* Values expressed in thousands, except when indicated.

j) Accounting for leases

As of January 1, 2019, the Bank adopted IFRS 16, which replaces IAS 17.

I. Lease Identification

Upon adoption of IFRS 16, the Bank recognizes lease liabilities, following the principles of IFRS 16 - Leases.

 

k)The following exemptions from recognition are also being used:

• Accounting for leases with a remaining term of less than 12 months as at 1 January 2019 as short-term leases;

i. Financial • Accounting for leases where the underlying asset is of low value;

Financial• Until January 1, 2019, leases until December 31, 2018, are leases that transferof fixed assets, in which the Bank, as lessee, held substantially all the risks and rewards incidentalof ownership were classified as leases. The balances shown are immaterial.

The Bank leases several properties and equipment. Predominantly, the assets subject to ownershipthe lease agreements are real estate business related to the branches.

Banco Santander does not have right-of-use assets that meet the definition of investment properties.

II. Lease Term

Lease agreements are individually formalized, analyzed and renegotiated and contain a wide range of different terms and conditions. The Bank assesses the term of the contract, as well as the intention to remain in the properties. Thus, time estimates may vary according to contractual conditions, considering extension options, and also according to legal provisions.

The Bank assumes that the fines for contractual termination charged before the due date do not make up a significant portion.

Lease agreements does not contain restrictive clauses, but leased assets cannot be used as collateral for loans.

Consolidated Financial Statements | December 31, 2021 | F-27

Table of Contents

 

* Values expressed in thousands, except when indicated.

III. Initial Measurement

On their initial recording, leases are recognized as a right-of-use asset and a corresponding liability on the date the leased asset becomes available for use by the Group.

The right of use to be recorded is measured at cost as a contra entry to the lessee. From January 1, 2019, see note 1.c.1.

When the consolidated entities act as the lessors of an asset, the sum oflease liability that represents the present value of lease payments that are not made to date. Lease payments are discounted using the lessee's incremental borrowing rate. There is no onerous contract that required an adjustment to the rights of use to be recorded as assets on the date of first-time adoption.

Rights of use are measured at amortized cost in accordance with the following:

• The initial measurement value of the lease liability;

• Any lease payments receivable frommade before or on the commencement date less any incentive received;

• Any directly attributable upfront cost; and

• Restoration costs, if the requirements of IAS 37 are met for recording Provisions, Contingent Liabilities and Contingent Assets.

Grupo Santander uses as an incremental rate the interest rate it would have to pay when borrowing the funds necessary to obtain the asset with a value similar to the asset subject to the lease, for a term, guarantee and similar economic scenarios, represented in Santander Brasil, by the curve cost of funding (funding) of a free asset, applied individually to each contract in accordance with the estimates projected as the lease term.

Lease liabilities include the net present value of the following lease payments:

• Reduced fixed payments of any incentive;

• Variable payments that are based on a rate or index;

• Amounts expected to be paid by the lessee includingbased on the residual value of guarantees;

• The exercise price of a call option, if the lessee’s purchaselessee has reasonable certainty about exercising the option; and

• Payment of penalties for terminating the lease if the term of the transaction reflects the exercise of the option atby the endlessee.

Lease liabilities are mainly adjusted for inflation (IGP-M), whose estimated projections on the base date of December 31, 2021 are presented below:

IGP-M Projection (annual)
   Until 3 months17.8%
From 3 to 12 months6.6%
From 1 to 3 years3.5%
From 3 to 5 years3.5%
More than 5 years3.5%

IV. Subsequent Measurement

After the initial measurement, the values ​​of the assets recorded as right of use are being updated using the cost method, thus any accumulated depreciation is deducted monthly, in accordance with the criteria of IAS 16 / CPC 27 - Fixed Assets on asset depreciation right of use and corrected any remeasurement of the lease termliability, where applicable.

The lease liability initially recorded is updated monthly by increasing the amount of the liability for the interest portion of each lease agreement and reducing the amount of monthly lease payments and corrected for any lease remeasurement, when such exercise priceapplicable.

The lease liability is sufficiently below fair value at the option date such that it is reasonably certain that the option will be exercised, is recognized as lending to third parties and is therefore included under Financial Assets Measured At Amortized Costremeasured, in the consolidated financial statements.

The finance income arising from these contracts is creditedevent of changes in the heading “Interest and similar income” inlease term or contract value, the consolidated income statement in order to achieve a constant rate of return overamount resulting from the deadlinenew determination of the lease.lease liability is recorded as a contra entry to the corresponding right-of-use asset.

 

Consolidated Financial Statements | December 31, 2021 | F-28

Table of Contents

 

* Values expressed in thousands, except when indicated.

l) Non-current assets

The effects of the adoption of IFRS 16 have an impact exclusively on the operating segment – ​​Commercial Banking.

k) Assets held for sale

“Non-current assetsAssets held for sale” includes the carrying amount of individual items or disposal groups or items forming part of a business unit earmarked for disposal (“Discontinued operations”), whose sale in their present condition is highly probable and is expected to occur within one year, the property or other non-current assets received by the consolidated entities as total or partial settlement of their debtors' payment obligations to them are deemed to be non-current assets held for sale through the completion of actions which normally occurs up to one year.

Non-current assetsAssets held for sale are measured at the lower of fair value less costs to sell and their carrying amount at the date of classification in this category. These assets held for sale are not depreciated.

Impairment losses on an asset or disposal group arising from a reduction in its carrying amount to its fair value (less costs to sell) are recognized in the heading “Gains (losses) on disposal and expenses of non-current assets held for sale not classified as discontinued operations” in the consolidated income statement. The gains on a non-current asset held for sale resulting from subsequent increases in fair value (less costs to sell) increase its carrying amount and are recognized in the consolidated income statement up to an amount equal to the impairment losses previously recognized.

m) l) Residual maturity periods and average interest rates

The analysis of the maturities of the balances of certain items in the consolidated financial statements at December 31, 2019, 20182021, 2020 and 20172019 is provided in note 44-d.43-d.

n) m) Tangible assets

“Tangible assets” includes the amount of buildings, land, furniture, vehicles, computer hardware, right-of-use of assets and other fixtures owned by the Bank, including tangible assets received by the Bank in full or partial satisfaction of financial assets representing receivables from third parties which are intended to be held for continuing use and tangible assets acquired under finance leases are presented at acquisition cost, less the related accumulated depreciation and any impairment losses (net carrying amount higher than recoverable amount).

F-32

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

amount).

Depreciation is calculated, using the straight-line method, on the basis of the acquisition cost of the assets less their residual value. The land on which the buildings and other structures are located has an indefinite life and, therefore, it is not depreciated.

The Depreciation expense on tangible asset depreciation chargeassets is recognized in the consolidated statement of income statement and is basically calculated basically using the following depreciation rates (based on the average years of estimated maturityuseful lives of the variousdifferent assets):

Annual

Rate
Buildings for own use4%
Furniture10%
Fixtures10%
Office and IT equipment20%
Leasehold improvements10% or up to contractual maturity

The Bank assesses at end of each reporting period, if there is indication that the items of tangible assets carrying amount may be impaired, that is if there is an asset with its carrying amount bigger than its recoverable amount, either for useuse or sale.

 

Once an impairment loss of tangible assets is identified, it is adjusted to reach its recoverable amount by recognizing an impairment loss recorded in the heading "Impairment loss on other assets (Net)". Additionally, the value of depreciation of that asset is recalculated in order to adjust the value of the life of the asset.

 

Consolidated Financial Statements | December 31, 2021 | F-29

Table of Contents

 

* Values expressed in thousands, except when indicated.

In case of evidence or indication of a recovery of a tangible asset value, the Bank recognizes the reversal of the impairment loss amount recorded in prior years and should adjust the future depreciation expenses according to the lifetime value of the asset. Under no circumstance, a reversal of impairment loss of an asset will increase its carrying amount higher than the amount that it would have had no impairment loss been recognized in prior years.

 

Upkeep and maintenance expenses relating to property, plant and equipment for own use are recognized as an expense in the period in which they are incurred.

 

o) n) Intangible assets

 

Intangible assets are identifiable non-monetary assets (separable from other assets) without physical substance which arise as a result of a legal transaction or software development. Only assets whose cost can be estimated reliably and from which the consolidated entities consider it probable that future economic benefits will be generated are recognized.

 

Intangible assets are recognized initially at acquisition or production cost and are subsequently measured deducting any accumulated amortization and any accumulated impairment losses.

 

i. Goodwill

 

In the acquisition and/or merger of investment in subsidiary, any difference between the investment cost and the investor's share in net fair value of assets, liabilities and contingent liabilities of the investee (subsidiary or affiliate) is accounted for in accordance with IFRS 3 "Business Combination ".

 

Goodwill is only recognized when it has been acquired for consideration and represents, therefore, a payment made by the acquirer in anticipation of future economic benefits from assets of the acquired entity that are not capable of being individually identified and separately recognized.

 

At the end of each annual reporting period or whenever there is any indication of impairment goodwill is reviewed for impairment (i.e. a reduction in its recoverable amount to below its carrying amount) and, if there is any impairment, the goodwill is written down with a charge to Impairment on non financial assets (net) - Intangible assets in the consolidated income statement.

 

The net fair value adjustments of assets, liabilities and contingent liabilities of the investee in relation to their carrying amount are allocated to individual identifiable assets acquired and liabilities assumed that comprise them based on their respective fair values ​​at the date of purchase.

 

In the case of a business combination made in stages, prior interest in the acquired is measured again at fair value at the acquisition date when control of the acquired is obtained.

 

ii. Other intangible assets

 

Other intangible assets are non-monetary assets without physical substance. Generally arising from software development and acquisition of rights that can generate benefits for the Bank. They can have characteristics of definite or indefinite period.

 

Other intangible assets can have an indefinite maturityuseful life -when, based on an analysis of all the relevant factors, it is concluded that there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the consolidated entities- or a finite maturity,useful life, in all other cases.

 

Intangible assets with indefinite maturityuseful lives are not amortized, but rather at the end of each reporting period or whenever there is any indication of impairment the consolidated entities review the remaining maturityuseful lives of the assets in order to determine whether they continue to be indefinite and, if this is not the case, to take the appropriate steps.

 

Intangible assets with finite maturityuseful lives are amortized over those maturityuseful lives using methods similar to those used to depreciate tangible assets. The amortization expense is recognized under "Depreciation and amortization" in the consolidated income statement.

F-33

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

The Bank assesses at the end of each period, if there is any indication that the items of intangible assets may present an impairment loss, i.e. an asset that presents the carrying amount higher than the net realizable value. After identifying any reduction in impairment loss, it is adjusted to reach its fair value.

 

Measurement of the recoverable amount of other intangible assets - software is made based on the value in use, as well as the analysis of the discontinuity of the asset in relation to the activities of the Bank.

Consolidated Financial Statements | December 31, 2021 | F-30

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

Expenditures for acquisition and development of software are amortized over a maximum period of 5 years.years.

 

p)

o) Other assets

 

Other Assets include the balances of all prepayments and accrued income (excluding accrued interest), acquired client list, the net amount of the difference between pension plan obligations and the fair value of the plan assets with a balance on the entity’s behalf, when this net amount shall be disclosed in the consolidated financial statements, and the amount of any other assets not included in other items.

 

The Bank uses the value in use of client relationship as a basis for measuring the impairment since it is not reasonably possible to determine the net value of sales, because there is no basis for making a reliable estimate of the value to be obtained by selling the asset in a transaction at cumulative basis, between knowledgeable, willing parties. The value in use of client lists acquired related to the purchase of the "payroll" will be determined individually. An analysesanalysis that aims to demonstrate the expectation of generating future economic benefit and the present value of expected cash flows is prepared by the business areas. Quarterly, these analyses are reviewed based on the actual cash flows of each business (value in use), which are compared with the carrying amount, checking whether there is a need to record a loss on non-recoverability.

 

q) p) Liabilities for insurance contracts

 

The liabilities for insurance contracts are comprised substantially by actuarial provisions for current and future benefits (PMBaC and PMBC). Insurance contracts are contracts under which the Bank accepts a significant risk, other than a financial risk, from a policyholder by agreeing to compensate the beneficiary on the occurrence of an uncertain future event by which the policyholder will be adversely affected.

 

Insurance liabilities are recognized when the contract is entered into and the premiums are charged. Contracts that have been classified as insurance are not reclassified subsequently. The liability is derecognized when the contract expires or is cancelled.

 

All valuation methods used by the subsidiaries are based on the general principle that the carrying amount of the net liability must be sufficient to meet any reasonably foreseeable obligation resulting from the insurance contracts. Investment assumptions are either determined by the local regulator and based on management’s future expectations. In the later case, the anticipated future investment yield is set by management, considering the available market information and economic indicators. A significant assumption related to estimated gross profits on variable annuities, is the annual long-term growth rate of the underlying assets.

 

At each financial statement date an assessment is made in order to verify whether the actuarial provisions are adequate.

 

In the years ended December 31, 2019, 20182021, 2020 and 2017,2019, as determined by IFRS 4 - Contracts classification and subsequent amendments, the adequacy of the technical provisions constituted were evaluated through Liability Adequacy Test (LAP).

 

At December 31, 2019,2021, the LAT indicated the need for the additional constitution of technical provisions amounted to R$215,754209,277 (12/31/20182020 - R$130,307285,554 and 12/31/20172019 - R$85,395)357,539) for Indemnity Funds for Benefit (FGB) plans.

 

r) q) Provisions for legal and administrative proceedings, commitments and other provisions

 

Banco Santander and its subsidiaries are involved in lawsuits and administrative proceedings related to tax, labor and civil, in the normal course of their activities.

 

The provisions include legal obligations, lawsuits and administrative proceedings related to tax and social security obligations, whose object is to challenge their legality or constitutionality, regardless of the assessment that the probability of success, the amounts are fully recognized in the financial statements.

 

Provisions are reviewed at each financial statement date and adjusted to reflect the current best estimate and may be fully or partially reversed or reduced when the outflows of resources and obligations relevant to the process are no longer probable, including decay of legal deadlines, among others.

 

Consolidated Financial Statements | December 31, 2021 | F-31

Table of Contents

 

* Values expressed in thousands, except when indicated.

Provisions for the lawsuits and administrative proceedings are recorded when their risk of loss is considered probable and the amounts can be reliably measured, based on the nature, complexity and history of lawsuits, the legal opinion of the internal and external advisors, based on the best available information. For those lawsuits for which the risk of loss is possible, are not recorded and the information is disclosed in the financial statements and for the lawsuits for which the risk of loss is remote, no disclosure is required.

 

Contingent assets are not recognized, except when there are guarantees or favorable lawsuits decisions, about which features no longer fit, characterizing the gain as practically certain. Assets with probable success, if any, are only disclosed in the financial statements.

 

On the favorable decisions to Santander, the counterparty has the right, in the event of specific legal requirements, to file a rescission lawsuit within a period determined by current legislation. Rescission lawsuits are considered as new events and will be evaluated for contingent liability purposes if and when they are filed.

 

s) r) Other liabilities

“Other liabilities” includes the balance of all accrued expenses and deferred income, excluding accrued interest, and the amount of any other liabilities not included in other categories.

 

F-34

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

t) s) Share-based compensation

 

The Bank has long-term compensation plans with vesting conditions. The main vesting conditions are: (1) service conditions, since it is necessary that the participant continues to be employed by the Bank during the term of the Plan for his rights to vest; (2) performance conditions, since the number of Units that ultimately vest will be determined according to the result of certain performance parameter of the Bank, such as: total Shareholder Return (TSR) and may be reduced in case of failure to achieve the goals of reducing the Return on Risk Adjusted Capital (RORAC), comparison between actual and budget in each year, as determined by the Board of Directors and (3) market conditions, since some parameters are linked to the market price of the Bank´s shares. The Bank measures the fair value of the services rendered by reference to the fair value of the equity instruments granted at the grant date, taking into accountconsidering the market conditions for each plan when estimating the fair value.

 

Settlement in shares

 

The Bank measures the fair value of the services received by reference to the fair value of the equity instruments granted at the grant date, taking into accountconsidering the market conditions for each grant when estimating the fair value. In order to recognize the personnel expenses against equity reserves throughout the vesting period, as the services are received, the Bank considers the treatment of service conditions and recognize the amount for the services received during the vesting period based on the best available estimate of the number of equity instruments expected to vest. Semi-annually, the Bank reviews the estimate of the number of equity instruments expected to vest.

 

Settlement in cash

 

For cash-settled share-based compensation (in the form of share appreciation rights), the Bank measures the fair value of services rendered and the corresponding liability incurred, based on the fair value of the share appreciation rights at the grant date and until the liability is settled. The Banks remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period. In order to recognize the personnel expenses against a provision in “other liabilities” throughout the vesting period, reflecting the period as the services are received, the Bank bases the total liability on the best estimate of the number of share appreciation rights that will vest at the end of the vesting period and recognizes the amount for the services received during the vesting period based on such best available estimate. Periodically, the Bank reviews such estimate of the number of share appreciation rights that will vest at the end of vesting period.

 

u) t) Recognition of income and expenses

 

The most significant criteria used by the Bank to recognize its income and expenses are summarized as follows:

 

i. Interest income, interest expenses and similar items

 

Interest income, interest expenses and similar items are generally recognized on an accrual basis using the effective interest method.

 

Consolidated Financial Statements | December 31, 2021 | F-32

Table of Contents

 

* Values expressed in thousands, except when indicated.

ii. Commissions, fees and similar items

 

Fees and commission income and expenses are recognized in the income statement using criteria that vary according to their nature (note 35)34). The main criteria are as follows:

 

• Fee and commission income and expenses relating to financial assets and financial liabilities measured at fair value through profit or loss are recognized when paid;

 

• Those arising from transactions or services that are performed over a period of time are recognized over the life of these transactions or services; and

 

• Those relating to services provided in a single act are recognized when the single act has been performed.

iii. Non-financial income and expenses

 

These are recognized for accounting purposes on an accrual basis.

 

iv. Deferred collections and payments

 

These are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market rates.

 

v. Loan arrangement fees

 

Loan arrangement fees, mainly loan origination and application fees, are accrued and recognized in the income statement over the term of the loan. In the case of loan origination fees, the portion relating to the associated direct costs incurred in the loan arrangement is recognized immediately in the consolidated income statement.

 

v) u) Guarantees

 

v.1) Financial guarantees

 

“Financial guarantees” are defined as contracts whereby an entity undertakes to make specific payments for a third party if the latter does not do so, irrespective of the various legal forms they may have, such as guarantees, irrevocable documentary credits issued or confirmed by the entity, among others.

 

The Bank initially recognizes the commission of the financial guarantees as liability in the consolidated financial statements at fair value, which is generally the present value of the fees, commissions and similar interest receivable from these contracts over their term.

 

Financial guarantees, regardless of the guarantor, type of instrument or other circumstances, are reviewed periodically so as to determine the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required. The credit risk is determined by application of criteria similar to those established for quantifying impairment losses on debt instruments measured at amortized cost.

 

The provisions made for these transactions are recognized in the heading “Provisions - Provisions for contingent liabilities, commitments and other provisions” in the consolidated financial statements (note 23)22).

F-35

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

If a specific provision is required for financial guarantees, the related unearned commissions are recognized in the heading “Financial liabilities at amortized cost – Other financial liabilities” in the consolidated financial statements are reclassified to the appropriate provision.

 

v.2) Guarantees and Credit Risk Mitigation Policy

 

Banco Santander controls the credit risk using the collateral in its operations. Each business unit is responsible for credit risk management and formalizes the use of collateral in its lending policies.

 

Banco Santander uses guarantees in order to increase its ability to recover operations subject to credit risk. The guarantees can be fiduciary, real, legal structures with power mitigation and compensation agreements. Annually the bank reviews its guarantees policies to capture changes in the market, in the caracteristicscharacteristics of the assets given as guarantees and the conditions of the assets, thosethese are examples of technical parameters reviewed.

 

Credit limits are continually monitored and changed in client behavior function. Thus, the potential loss values represent a fraction of the amount available.

 

w)

Consolidated Financial Statements | December 31, 2021 | F-33

Table of Contents

 

* Values expressed in thousands, except when indicated.

v) Assets under management and investment and pension funds managed by the Bank

 

Assets owned by third parties and managed by the consolidated entities are not presented in the consolidated financial statements. Management fees are included in “Fee and commission income” in the consolidated income statement. Note 44-b43-b contains information on the third-party assets managed by the Bank.

 

The investment funds and pension funds managed by the consolidated entities are not recorded in the consolidated financial statements since the related assets are owned by third parties. The fees and commissions earned in the year for the services rendered by the Bank entities to these funds (asset management and custody services) are recognized in the heading “Fee and commission income” in the consolidated income statement.

 

x) w) Post-employment benefits

 

Post-employment benefit plans include the commitments of the Bank: (i) addition to the benefits of public pension plan; and (ii) healthcare in case of retirement, permanent disability or death for those employees, and their direct beneficiaries.

 

Defined contribution plans

 

Defined contribution plans isare the post-employment benefit plan which the Bank, and its subsidiaries, as the sponsoring entity pays fixed contributions into a pension fund, not having a legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all benefits relating to services provided in the current and in previous periods.

 

The contributions made are recognized in the heading "Interest Expense and Similar Charges" in the income statement.

Defined benefit plans

 

Defined benefit plan is the post-employment benefit plan which is not a defined contribution plan and is shown in Note 22.21. For this type of plan, the sponsoring entity's obligation is to provide the benefits agreed with the former employees, assuming the potential actuarial risk that benefits will cost more than expected.

 

For defined benefit plan, the amendment of IAS 19 established fundamental changes in the accounting for and disclosure of employee post-employment benefits such as removing the corridor approach in the accounting for the obligation of the plans, as well as changes in the criteria for recognition of conventional interest of plan assets (valuation based on the discount rate actuarial liability).

 

In addition, there is full recognition in liabilities heading of actuarial losses (actuarial deficit) not recognized previously when they occur, which its counterparty is a heading in the stockholders’ equity (Other Comprehensive Income).

 

Main Definitions

 

- The present value of the defined benefit obligation is the present value without any deduction from the plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and past periods.

 

- Deficit or surplus is: (a) the present value of the defined benefit obligation, less (b) the fair value of plan assets.

 

- The sponsoring entity may recognize the plan assets in the financial statements when they meet the following characteristics: (i) the fund assets are sufficient to meet all employee benefit plan or the sponsor obligations; or (ii) the assets are returned to the sponsoring entity in order to reimburse it for employee benefits already paid.

 

- Actuarial gains and losses correspond to changes in the present value of defined benefit obligation resulting from: (a) adjustments by experience (the effects of differences between the actuarial assumptions adopted and what has actually occurred); and (b) effects of changes in actuarial assumptions.

 

- Current service cost is the increase in the present value of the defined benefit obligation resulting from employee service provided in the current period.

 

- The past service cost is the change in present value of defined benefit obligation for employee service provided in prior periods resulting from a change in the plan or reductions in the number of employees covered.

 

Consolidated Financial Statements | December 31, 2021 | F-34

Table of Contents

 

* Values expressed in thousands, except when indicated.

Post-employment benefits are recognized in income in the headings "Interest expense and similar Charges" and "Provisions (net)".

 

The defined benefit plans are recorded based on an actuarial study, conducted annually by an external consulting firm, at the end of each year to be effective for the subsequent period.

 

F-36

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

y) x) Other long-term employee benefits

 

“Other long-term employee benefits”, defined as obligations to early retirees considered as those who have ceased to render services at the entity but who, without being legally retired, continue to have economic rights relating to the entity until they acquire the legal status of retiree, long-service bonuses, obligations for death of spouse or disability before retirement that depend on the employee's length of service at the entity and other similar items, are treated for accounting purposes, where applicable, as established above for defined benefit post-employment plans, except that all past service costs and actuarial gains and losses are recognized immediately (note 22)21).

 

z) y) Termination benefits

 

Termination benefits are recognized when there is a detailed formal plan identifying the basic changes to be made, provided that implementation of the plan has begun, its main features have been publicly announced or objective facts concerning its implementation have been disclosed.

 

aa) z) Income taxes (IRPJ), Social Contribution (CSLL), Social Integration Program (PIS) and Tax for Social Security Financing (COFINS)

 

The income tax expense is obtained by adding the Income tax is calculated atTax, Social Contribution, PIS and COFINS. Current Income Tax and Social Contribution arise from the rateapplication of 15% plus a surcharge of 10% leviedthe respective rates on taxable income, and the PIS and COFINS rates applied on the profit, after adjustments determined byrespective calculation base provided for in the specific legislation, also added to the changes in deferred tax legislation. The social contribution (CSLL) is calculated atassets and liabilities recognized in the rate of 15% for financial institutions and 9% for other companies, levied on the profit, after considering the adjustments determined by tax legislation.consolidated income statement. The CSLL rate, for banks of any kind, was increasedraised from 15% to 20%, effective as of March 1, 2020, pursuant to article 32 of Constitutional Amendment 103, published on November 13, 2019.

The IRPJ charge is calculated at the rate of 15%, plus a surcharge of 10%, applied on profit, after making the adjustments determined by tax legislation. The CSLL is calculated at the rate of 15% for financial institutions and legal entities of private insurance and capitalization and 9% for other companies, levied on profit, after considering the adjustments determined by tax legislation.

The CSLL rate for banks of any kind, financial institutions, private insurance companies and capitalization companies (financial sector companies) was increased by 5% for the base period between July 1, 2021 and 31 December 2021, pursuant to Law 14,183/2021 (result of the conversion into the Provisional Measure Law (MP) 1,034/2021).

 

The expense for corporate income tax is recognized in the consolidated income statement, except when it results from a transaction recognized directly in equity, in which case the tax effect is also recognized in equity.

 

The current income tax expense is calculated as the sum of the current tax resulting from application of the appropriate tax rate to the taxable profit for the year (net of any deductions allowable for tax purposes), and of the changes in deferred tax assets and liabilities recognized in the consolidated income statement.

 

Tax assets classified as "Current" are amounts of tax to be recovered within the next twelve months.

 

Tax liabilities includes the amount of all tax liabilities (except provisions for taxes), which are broken down into “current” amount payable in respect of the income tax on the taxable profit for the year and other taxes in the next twelve months.

 

Deferred tax assets and liabilities include temporary differences, which are identified as the amounts expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their related tax bases, and tax loss and tax credit carry forwards. These amounts are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled.

 

Deferred tax assets are only recognized as temporary differences to the extent that it is considered probable that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets can be utilized, and the deferred tax assets do not arise from the initial recognition (except in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit or accounting profit. Other deferred tax assets (tax loss and tax credit carry forwards) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable profits against which they can be utilized.

 

Due to the change in social contribution tax rate, the group companies made the remeasurement of tax credit assets and deferred liabilities at the rates applicable to the period in which estimates the realization of assets and settlement of liabilities.

 

Income and expenses recognized directly in stockholders equity are accounted as temporary differences.

 

The deferred tax assets and liabilities recognized are reassessed at each financial statementsstatement date in order to ascertain whether they still exist, and the appropriate adjustments are made on the basis of the findings of the analyses performed.

 

Under the current regulation, the expected realization of tax credits is based on the Bank's projections of future results and on technical technical analysis of the realization of the temporary differences, as shown in Note 24.note 23.

Consolidated Financial Statements | December 31, 2021 | F-35

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

PIS (Social Integration Program)

• IFRIC 23 - Published in June 2017 by the IASB, IFRIC 23 - Uncertainty about the Treatment of Income Tax on Income is mandatory from January 1, 2019 and COFINS (Taxaims to clarify procedures for Social Security Financing) have been computed at a combined ratethe application of 4.65% on certain gross revenuesrecognition and expenses. Financial institutions may deduct financial expensesmeasurement requirements established in determining the PIS/COFINS tax basis. PIS and COFINS are considered a profit-base component (net basis of certain revenues and expenses), therefore and accordingly to IAS 12 itIncome Taxes when there is recordeduncertainty as income taxes.to the treatment to be adopted for Income Taxes. Said standard did not generate significant impacts on these Financial Statements.

 

ab)aa) Consolidated cash flow statements

 

The following terms are used in the consolidated cash flow statements with the following meanings:

 

• Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value and original maturity of three months or less.

 

• Operating activities: the primary revenue-generating activities of credit institutions and other activities that are not investing or financing activities.

 

• Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.

 

• Financing activities: activities that result in changes in the size and composition of the equity and liabilities that are not operating activities.

 

In preparing the consolidated cash flows statement, the high liquidity investments with insignificant risk of changes in their values were classified as "Cash and cash equivalents". The Bank classifies as cash and cash equivalents balances recorded in the headings "Cash and balance with the Brazilian Central Bank""Cash" and "Loans and amounts due from credit institutions" in the consolidated financial statements, except restricted resources and long-term transactions.

 

The interest paid and received correspond to operating activities of Banco Santander.

 

F-37

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

Consolidated Financial Statements | December 31, 2021 | F-36

Table of Contents

 

* Values expressed in thousands, except when indicated.

3.Basis of consolidation

 

Below are highlighted the controlled entities and investment funds included in the consolidated financial statements of Banco Santander. Similar information regarding companies accounted by the equity method by the Bank is provided in Note 11.

   Quantity of Shares or Quotas Owned (in Thousands) 12/31/2021
Investments ActivityCommon Shares and QuotasPreferred SharesDirect ParticipationConsolidated Participation
Controlled by Banco Santander       
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Recovery of Defaulted Credits2,142,011 -   100.00%100.00%
Aymoré Crédito, Financiamento e Investimento S.A. (Aymoré CFI)Financial2,877 -   100.00%100.00%
BEN Benefícios e Serviços S.A.  (BEN Benefícios) Other Activities90,000 -   100.00%100.00%
Esfera Fidelidade S.A. Other Activities10,001 -   100.00%100.00%
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A.Tecnology381 -   80.00%80.00%
Rojo Entretenimento S.A. Other Activities7,417 -   94.60%94.60%
Sanb Promotora de Vendas e Cobrança Ltda. Other Activities30,988 -   100.00%100.00%
Sancap Investimentos e Participações S.A. (Sancap)Holding23,538,159 -   100.00%100.00%
Santander Brasil Administradora de Consórcio Ltda. (Santander Brasil Consórcio)Buying Club436,441 -   100.00%100.00%
Santander Corretora de Títulos e Valores Mobiliários S.A. (Santander CCVM)Broker14,067,640 14,067,640 99.99%100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A. (Santander Corretora de Seguros)Other Activities7,184 -   100.00%100.00%
Santander Holding Imobiliária S.A. Holding558,601 -   100.00%100.00%
Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing)Leasing164 -   100.00%100.00%
F1RST Tecnologia e Inovação Ltda. Other Activities196,979 -   100.00%100.00%
Paytec Tecnologia em Pagamentos Ltda. Other Activities348 -   100.00%100.00%
SX Negócios Ltda. Other Activities75,050 -   100.00%100.00%
Controlled by Aymoré CFI       
Bank PSA   Bank105 -   0.00%50.00%
Bank Hyundai Capital Brasil S.A. Bank150,000 -   0.00%50.00%
Solutions 4Fleet Other Activities328 -   0.00%80.00%
Controlled by Santander Leasing      
Bank Bandepe S.A. Bank3,589 -   0.00%100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A.Leasing348 -   0.00%100.00%
Controlled by Sancap      
Santander Capitalização S.A. (Santander Capitalização) Capitalization64,615 -   0.00%100.00%
Evidence Previdência S.A. Private Pension42,819,564 -   0.00%100.00%
Controlled by Santander Holding Imobiliária S.A.      
Summer Empreendimentos Ltda. Other Activities17,084 -   0.00%100.00%
Apê11 Tecnologia e Negócios Imobiliários S.A. Other Activities3,808 -   0,00%90,00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.   
Return Capital Serviços de Recuperação de Créditos S.A. Collection and Recover of Credit Management200 -   0.00%100.00%
Liderança Serviços Especializados em Cobranças Ltda. Collection and Recover of Credit Management250 -   0.00%100.00%
Controlled by Paytec Tecnologia em Pagamentos Ltda.    
Paytec Logística e Armazém Ltda. Other Activities100 -   0.00%100.00%
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A.    
Toro Corretora de Títulos e Valores Mobiliários Ltda.Broker19,140 -   0.00%60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.    
Toro Investimentos S.A. Broker98,400 -   0.00%100.00%
Jointly Controlled Companies by Sancap      
Santander Auto S.A. Other Activities22,452 -   0.00%50.00%
       

Consolidated Financial Statements | December 31, 2021 | F-37

Table of Contents

 

* Values expressed in thousands, except when indicated.

Consolidated Investment Funds

 

●
Participation %
Directly and Indirectly controlled by Banco Santander (Brasil) S.A.ActivityConsolidated
Banco Bandepe S.A. (2) Bank100.00%
Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing)Leasing99.99%
Aymoré Crédito, Financiamento e Investimento S.A. (Aymoré CFI) (3) (19) Financial100.00%
Santander Brasil Administradora de Consórcio Ltda. (Santander Brasil Consórcio) (1) Buying club100.00%
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (formerly named as Atual Companhia Securitizadora de Créditos Financeiros) (Atual) (7)(17)Credit recovery services100.00%
Santander Corretora de Câmbio e Valores Mobiliários S.A. (Santander CCVM) (4) Broker100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A. (Santander Corretora de Seguros) Other activities100.00%
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Getnet) (5)Payment Institution100.00%
Sancap Investimentos e Participações S.A. (Sancap) (6) Holding100.00%
Santander Brasil Establecimiento Financiero de Crédito S.A. (EFC)Financial100.00%
Santander Holding Imobiliária S.A. (formerly named Webcasas S.A.) (8) Holding100.00%
Santander Brasil Tecnologia S.A.Technology100.00%
Super Pagamentos e Administração de Meios Eletrônicos Ltda. (Super Pagamentos) (19)Payment Institution100.00%
Banco Olé Bonsucesso Consignado S.A. (Olé Consignado) (12) (19)Bank60.00%
Rojo Entretenimento S.A. (9) Other Activities94.60%
BEN Benefícios e Serviços S.A (10) Other Activities100.00%
Esfera Fidelidade S.A. (11) Other Activities100.00%

Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.
Return Capital Serviços de Recuperação de Créditos e Meios Digitais S.A. (formerly named Ipanema Empreendimentos e Participações S.A.) (16) (17) Credit Management and Recovery Management100.00%

Controlled by Return Capital Serviços de Recuperação de Créditos S.A. ( Previously named as Ipanema Empreendimentos e Participações)
Return Gestão de Recursos S.A. (formerly named Gestora de Investimentos Ipanema S.A.) (16)Resource Manager-100.00%
Controlled by Getnet S.A.
Auttar HUT Processamento de Dados Ltda. (Auttar HUT) Other Activities-100.00%
Toque Fale Serviços de Telemarketing Ltda. (Toque Fale) Other Activities-100.00%
Controlled by Sancap
Santander Capitalização S.A. (Santander Capitalização)Savings and annuities-100.00%
Evidence Previdência S.A. (15)Social Securities-100.00%
Controlled by Aymoré CFI
Banco PSA Finance Brasil S.A.Bank-50.00%
Banco Hyundai Capital Brasil S.A. (13)Bank-50.00%
Controlled by Olé Consignado
Crediperto Promotora de Vendas e Cobrança Ltda. (current name of da BPV Promotora de Vendas e Cobrança Ltda.) Other Activities-100.00%
Olé Tecnologia Ltda. Other Activities-100.00%
Controlled by Santander Leasing
PI Distribuidora de Títulos e Valores Mobiliários S.A. (PI DTVM) (14)Leasing100.00%

F-38

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Consolidated Investment FundsActivityParticipation %
Consolidated
Santander Fundo de Investimento UnixAmazonas Multimercado Crédito Privado de Investimento no Exterior (Santander FI Amazonas);
Investment Fund●(a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior (Santander FI Diamantina);
Investment Fund●(a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no ExteriorInvestment Fund(a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito PrivadoInvestment Fund(a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior (Santander FI Guarujá);
Investment Fund●Santander Fundo de Investimento Unix Multimercado Crédito Privado (Santander FI Unix);
(a)●Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado (Santander FI SBAC);
●Santander Paraty QIF PLC (Santander Paraty) (2);
Investment Fund●Prime 16 – Fundo de Investimento Imobiliário (atual denominação do BRL V - Fundo de Investimento Imobiliário - FII) (1);
(a)●
Santander FI Hedge Strategies Fund (Santander FI Hedge Strategies) (2);
Investment Fund●(a)
Prime 16 – Fundo de Investimento Imobiliário (formerly named BRL V - Fundo de Investimento Imobiliário - FII)Real Estate Investment Fund(a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado (Fundo Investimento Ipanema NPL VI) (3);
Investment Fund●(a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema V - Não Padronizado (Fundo Investimento Ipanema NPL V)Investment Fund(a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos (4);
●Fundo de Investimentos em Direitos Creditórios Atacado – Não Padronizado (5);
●Atual - Multimarket Investment Fund Private Credit Investment Abroad (6);
●(a)
Verbena FCVS – Fundo de Investimento em Direitos Creditórios Atacado - Não Padronizado (FIDC NRA)Investment Fund(a)rios(7).

 

(a) Company over which(1) Banco Santander was a creditor of certain overdue credit operations that had real estate as collateral. The operation for the Bank is exposed, or has rights,recovery of these credits consists of the contribution of properties as collateral to variable returnsthe capital of the Real Estate Investment Fund and have the abilityconsequent transfer of the Fund's quotas to affect those returnsBanco Santander, by means of a payment in payment of the aforementioned credit operations. At the Extraordinary General Meeting (AGE) held on October 30, 2018, the change of name from BRL V - Fundo de Investimento Imobiliário - FII to Prime 16 - Fundo de Investimento Imobiliário was approved.

(2) Banco Santander, through its subsidiaries, holds the powerrisks and benefits of decision,Santander Paraty and the Santander FI Hedge Strategies Sub-Fund, residing in accordance with IFRS 10 -Ireland, and both are fully consolidated in their Consolidated Financial Statements. In the Irish market, an investment fund cannot act directly and, for this reason, it was necessary to create another structure (a sub-fund), Santander FI Hedge Strategies. Santander Paraty does not have an equity position, and all records come from the financial position of Santander FI Hedge Strategies.

(3) This fund was created and started to be consolidated in September 2017. It refers to a structure in which Banco Santander and its subsidiariessold certain credit operations, which had already been transferred to losses (operations overdue for more than 360 days) to this fund. Atual Serviços de Recuperação de Creditos e Meios Digitais S.A. (current corporate name of Atual Companhia Securitizadora de Creditos Financeiros), a company controlled by Banco Santander, holds 100% of the shares of these investment funds.in this fund.

(4) This fund was consolidated in November 2018 and is controlled through Banco Bandepe S.A.

(1) In the EGM held on April 30,(5) This fund started to be consolidated in June 2019 an increaseand is controlled through Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.

(6) This fund started to be consolidated in capitalAugust 2020 and is controlled through Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.

(7) This fund was consolidated in the amount of R$79,537 was approved, from R$95,349 to R$174,886 divided into 174,885,602 shares, with a nominal value of R$1.00 (one real) each. In the EGM held on August 15, 2019, a capital increase was approved, based on statutory reserves, in the amount of R$64,000, from R$174,886 to R$238,886 divided into 238,885,602 shares, with a nominal value of R$1.00 (one real) each.

(2) In the EGM held on December 7, 2018, a capital increase in the amount of R$2,000,000 was approved, from R$2,787,689 to R$4,787,689,February 2021 and is controlled through the issue of 1,405,667 (one million , four hundred and five thousand, six hundred and sixty-seven) new registered common shares, without par value. The shareholder Banco Santander subscribed all the new shares issued and paid upBrasil S.A. It holds 100% of the shares correspondingin this fund.

Corporate movements were implemented in order to 50%reorganize the operations and activities of the capital increase. entities in accordance with the business plan of the Santander Conglomerate.

i) Acquisition of equity interest in Apê11 Tecnologia e Negócios Imobiliários Ltda.

On September 16, 2019,2, 2021, Santander Holding Imobiliária S.A. (“SHI”) – a wholly owned subsidiary of the remaining 50% was paid.

(3) InCompany – celebrated, with the EGM held on April 26, 2019, a capital increase in the amountpartners of R$137,880 was approved, from R$726,561 to R$864,441 without the issue of new shares.

(4) In the EGM held on April 26, 2019, a capital increase in the amount of R$1,689 was approved, from R$296,000 to R$297,689 without the issue of new shares. In the EGM held on August 15, 2019, a capital increase in the amount of R$60,000 was approved, from R$297,689 to R$357,689 without the issue of new shares.

(5) On February 25, 2019, Banco Santander acquired all the shares of Getnet SA's Minority Shareholders, corresponding to 11.5% of Getnet SA's share capital, pursuant to the “ShareApê11 Tecnologia e Negócios Imobiliários Ltda. (“Apê11”), certain Share Purchase and Sale Agreement and Investment Agreement, by which, once the transaction is carried out, it will hold 90% of the capital stock of Apê11 (“Transaction”). Apê11 acts as a collaborative marketplace, pioneering the digitization of the purchase journey of houses and apartments. After the fulfillment of the precedent conditions established in the Share Purchase and Sale Investment Agreement, the closing of the Transaction was formalized on December 16, 2021.

Consolidated Financial Statements | December 31, 2021 | F-38

Table of Contents

 

* Values expressed in thousands, except when indicated.

ii) Acquisition of equity interest in Liderança Serviços Especializados em Cobranças Ltda. and Fozcobra Agência de Collections Ltda.

On August 4, 2021, Atual Serviços de Recovery de Créditos e Meios Digitais S.A. (“Atual”) – a wholly-owned subsidiary of the Company – celebrated, with the partners of Liderança Serviços Especializados em Cobranças Ltda. (“Liderança”), a certain Agreement for the Assignment of Quotas and Other Covenants, whereby, once the transaction is carried out, it will hold 100% of Getnet SA,the share capital of Liderança (“Transaction”). Liderança operates in the area of overdue credit recovery, providing extrajudicial collection services to financial institutions of different sizes, retail networks, telecommunications operators and automakers, among others, and has a subsidiary, Fozcobra Agência de Cobranças Ltda. After the fulfillment of the precedent conditions established in the Agreement for the Assignment of Quotas and Other Covenants, the closing of the Transaction was formalized on October 1, 2021. Subsequently, Fozcobra was merged into Leadership on October 4, 2021.

iii) Acquisition of Equity Interest in Solutions 4Fleet Consultoria Empresarial Ltda.

On July 13, 2021, Aymoré Crédito, Financiamento e Investimento S.A. (“Aymoré”), celebrated with approvalthe partners of Solution 4Fleet Consultoria Empresarial Ltda. (“Solutions 4Fleet”), certain Investment Agreement and Share Purchase and Sale Agreement, by Bacenwhich, once the transaction is carried out, Aymoré will hold 80% of the capital stock of Solution 4Fleet (“Transaction”). Solutions 4Fleet specializes in structuring vehicle rental and subscription businesses – long-term rental for individuals. After the fulfillment of the precedent conditions established in the Share Purchase and Sale Investment Agreement, the closing of the Transaction was formalized on February 18, 2019.October 8, 2021.

iv) Acquisition of equity interest in Car10 Tecnologia e Informação S.A and Pag10 Fomento Mercantil Eireli.

(6)On July 13, 2021, Webmotors S.A. (“Webmotors”), celebrated with the partners of Car10 Tecnologia e Informação S.A. (“Car10 Tecnologia”) and Pag10 Fomento Mercantil Eireli (“Pag10” and, together with Car10 Tecnologia, “Car10”), certain Investment Agreements and Share Purchase and Sale Agreements, under which, once the transaction is carried out, Webmotors will hold approximately 66.7% of the share capital of Car10 Tecnologia, which, in turn, is the sole holder of Pag10 (“Transaction”). Car10 acts as a marketplace that brings together more than 7,000 service providers such as workshops and autocenters; auto body and Paint; and cleaning and sanitizing, as well as emergency assistance and towing. After compliance with the condition’s precedent established in the Investment Agreement for the Purchase and Sale of Shares, the closing of the Transaction was formalized on September 20, 2021.

v) Acquisition of Equity Interest in Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.

On June 15, 2021, Pi Distribuidora de Títulos e Valores Mobiliários S.A. (“Pi”), Toro Corretora de Títulos e Valores Mobiliários S.A. (“Toro CTVM”), and Toro Investimentos S.A. (“Toro Investimentos” and, together, with Toro CTVM, “Toro”) entered into, with the partners of Monetus Investimentos Ltda., and Monetus Corretora de Seguros Ltda. (jointly “Monetus”), investment agreement and other covenants, whereby, once the transaction is carried out, Toro Investimentos will hold 100% of the capital stock of Monetus (“Transaction”). Monetus, originally from Belo Horizonte, carries out its activities through an automated investment application based on objectives, after considering the client's needs and risk profile, the application automatically creates, executes and tracks a diversified and personalized investment strategy that use the platform to undertake and serve customers in the best way. The execution of the Transaction will be subject to the execution of the definitive instruments and the implementation of certain usual conditions in this type of transaction, including the applicable regulatory approvals.

vi) Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.

On June 15, 2021, Pi Distribuidora de Títulos e Valores Mobiliários S.A. (“Pi”), Toro Corretora de Títulos e Valores Mobiliários S.A. (“Toro CTVM”), and Toro Investimentos S.A. (“Toro Investimentos” and, together, with Toro CTVM, “Toro”) entered into, with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda. (together “Mobills”), an investment agreement and other covenants, by which, once effective In the EGMtransaction, Toro Investimentos will hold 100% of the capital stock of Mobills (“Transaction”). Based in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning. The execution of the Transaction will be subject to the execution of the definitive instruments and the implementation of certain usual conditions in this type of transaction, including the applicable regulatory approvals.

vii) Corporate reorganization Santander Leasing S.A. Arrendamento Mercantil and Banco Bandepe S.A.

On May 11, 2021, Banco Santander (Brasil) S.A. (“Banco Santander”) and Banco Bandepe S.A. (“Bandepe”) entered into a Share Purchase Agreement through which Banco Santander acquired the entire interest shareholding held on April 2, 2019,by Bandepe in Santander Leasing S.A. Arrendamento Mercantil (“Santander Leasing”), which corresponds to 21.42%. In this operation, Banco Santander became the sole shareholder of Santander Leasing. On May 27, 2021, the merger of all the shares of Bandepe by Santander Leasing was resolved, in order to convert Bandepe into a capitalwholly owned subsidiary of Santander Leasing (“Incorporation of Shares”). The Merger of Shares resulted in an increase in the amountcapital stock of Santander Leasing of R$200,000 was approved, from R$347,135 to R$547,135, represented by 17,114,176,389 (seventeen 5,365,189,080.65 (five billion, onethree hundred and fourteensixty-five million, one hundred and seventy-six sixeighty-nine thousand, three hundredeighty reais and eighty-nine)sixty-five cents), in reason for the merger of shares issued by Banco Bandepe held by Banco Santander.

Consolidated Financial Statements | December 31, 2021 | F-39

Table of Contents

 

* Values expressed in thousands, except when indicated.

viii) Partial spin-off and segregation of Getnet Adquirência e Serviços para Meios de Pagamentos S.A.

After the approval of the studies and favorable proposal of the Board of Directors of Santander Brasil, on March 31, 2021, the shareholders of Santander Brasil approved the partial spin-off of Santander Brasil, for the segregation of shares owned by them issued by Getnet Acquirência e Serviços for Meios de Pagamentos S.A. (“Getnet”), with a version of the split portion for Getnet itself. Upon completion of the spin-off, the shareholders of Santander Brasil will become direct shareholders of Getnet in proportion to their participation in the capital of Santander Brasil and the shares and Units of Santander Brasil will be traded with the right to receive the shares and Units of issue of Getnet.

As a result of the Spin-off, Santander Brasil's share capital was reduced in the total amount of 2,000,000 (two billion reais), without the cancellation of shares, with Santander Brasil's share capital increasing to 57,000,000 (fifty-seven billion reais) to 55,000,000 (fifty-five billion reais).

ix) Signing of an agreement for the Acquisition of Paytec Tecnologia em Pagamentos Ltda. and Paytec Logística e Armazém Eireli.

On December 8, 2020, Banco Santander celebrated, with the partners and owners of Paytec Tecnologia em Pagamentos Ltda. and Paytec Logística and Armazém Eireli (together “Paytec”), a share purchase and sale agreement, transfer of ownership and other covenants, whereby, once the transaction is carried out, it will hold 100% of the share capital of Paytec. Paytec acts as a logistics operator with national coverage and focused on the payments market. After approval of the transaction by the Central Bank of Brazil, the transaction was carried out on March 12, 2021, with Banco Santander now holding 100% of the share capital of the Paytec companies.

x) Dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A.

On November 12, 2020, by decision of its sole partner, the dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A. (which had its corporate name changed to Santander Brasil, SAU), an offshore entity headquartered in Spain, was approved. fully owned by Banco Santander Brasil, which acted to complement the foreign trade strategy for corporate clients (large Brazilian companies and their operations abroad) and to offer financial products and services. The capital invested abroad was repatriated in November 2020. The company's dissolution and liquidation deed were registered commonin the Madrid Registry with effect from December 15, 2020. These activities are now carried out by the Bank's branch in Luxembourg.

xi) Disposal of Investments in Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A.

On October 8, 2020, Banco Santander (Brasil) S.A. withdrew from the shareholder structure of Norchem Participações e Consultoria SA (NPC) and Norchem Holding e Negócios S.A. (NHN), upon capital reduction in the amounts of R$19,950 million and R$14,770 million, respectively, and consequent cancellation of shares without par value.held by Banco Santander (Brasil) S.A.

xii) Acquisition of Equity Interest in Toro Controle

On September 29, 2020, Pi Distribuidora de Títulos e Investimentos S.A. (“Pi”), which is indirectly controlled by Banco Santander, entered into an investment agreement with the shareholders of Toro Controle e Participações S.A. (“Toro Controle”) and other covenants. Toro Controle had been a holding company that, ultimately, had controlled Toro Corretora de Títulos e Valores Mobiliários Ltda. (“Toro CTVM”) and Toro Investimentos S.A. (“Toro Investimentos” and, together, “Toro”). Toro is an investment platform founded in Belo Horizonte in 2010. In 2018, it received the EGMnecessary authorizations and started its operation as a securities brokerage aimed at the retail public. After compliance with all applicable conditions precedent, including approval by the Central Bank of Brazil, the transaction was carried out on April 30, 2021, with the acquisition of shares representing 60% of the capital stock of Toro Controle and its immediate incorporation by Toro CTVM, so that Pi became the direct holder of the equivalent of 60% of the share capital of Toro CTVM which, in turn, holds 100% of the share capital of Toro Investimentos.

xiii) Signing of an Agreement for the Acquisition of Equity Interest in Gira – Gestão Integrada de Recebíveis do Agronegócio S.A.

On August 11, 2020, Banco Santander signed a share purchase and sale agreement and other agreements with the shareholders of Gira – Integrated Management of Receivables of Agronegócio S.A. Gira is a technology company that operates in the management of agribusiness receivables and has a robust technological platform, capable of adding greater security to agricultural credit operations. Upon compliance with the conditions established in the contract, in particular the applicable regulatory approvals, the parties formalized the definitive instruments on January 8, 2021. With the completion of the transaction, Banco Santander now holds 80% of Gira's share capital.

xiv) Acquisition of direct equity interest in Toque Fale Serviços de Telemarketing Ltda.

On March 24, 2020, the Bank acquired the shares representing the entire share capital of Toque Fale Serviços de Telemarketing Ltda. (“Toque Fale”) for R$1,099 million, corresponding to the book value of the shares on February 29, 2020, previously held on November 11, 2019,by Getnet Acquirência e Serviços para Meios de Pagamento S.A. and Auttar HUT Processamento de Dados Ltda. As a result, the Bank became a direct shareholder of Toque Fale and holder of 100% of its capital.

Consolidated Financial Statements | December 31, 2021 | F-40

Table of Contents

 

* Values expressed in thousands, except when indicated.

xv) Disposal of the equity interest held in Super Pagamentos e Administração de Meios Eletrônicos S.A.

On February 28, 2020, the equity interest held in Super Pagamentos e Administração de Meios Eletrônicos S.A. was sold to Superdigital Holding Company, SL, a company indirectly controlled by Banco Santander, S.A., of the shares representing the totality of the share capital increase inof Super Payments and Administration of Meios Eletrônicos S.A. (“Superdigital”) for the amount of R$300,000 was approved, from R$547,135 to R$847,135, represented by 23,538,159,258 (twenty-three billion, five hundred and thirty-eight million, one hundred and fifty and nine thousand two hundred and fifty-eight) registered common shares, without par value.270 million. As a result, the Bank is no longer a shareholder of Superdigital.

xvi) Acquisition of Summer Empreendimentos Ltda.

(7) At the AGE held on January 31, 2019, a capital increase in the amount of R$100,000 was approved, through the issue of 92,174,394 (ninety-two million, one hundred and seventy-four thousand, three hundred and ninety-four) new common shares, nominative and without par value, increasing the share capital from R$270,000 to R$370,000. The shares issued due to the capital increase were fully subscribed by the shareholder Banco Santander. In the Extraordinary General Meeting held on June 25, 2019, a capital increase in the amount of R$375,000 was approved, from R$370,000 to R$745,000 through the issue of 335,240,479 (three hundred and thirty-five million, two hundred and forty thousand, four hundred and seventy-nine) new common shares, registered and without par value. In the Extraordinary General Meeting held on July 25, 2019, a capital increase in the amount of R$100,000 was approved, from R$745,000 to R$845,000 through the issue of 89,007,566 (eighty-nine million, seven thousand, five hundred and sixty-six) new common shares, registered and without par value. In the EGM held on September 25, 2019, a capital increase in the amount of R$195,000 was approved, from R$845,000 to R$1,040,000 through the issue of 171,775,899 (one hundred and seventy one million, seven hundred and seventy-five thousand, eight hundred and ninety-nine) new common shares, nominative and without par value. In the EGM held on October 23, 2019, a capital increase in the amount of R$257,000 was approved, from R$1,040,000 to R$1,297,000 through the issue of 225,715,791 (two hundred and twenty-five million, seven hundred and fifteen thousand seven hundred and ninety-one) new common shares, nominative and without par value.

(8) On May 14, 2019, Banco Santander (Brasil) S.A. and its wholly-ownedwholly owned subsidiary Santander Holding Imobiliária S.A. (“SHI”) entered into a binding document with the partners of Summer Empreendimentos Ltda. (“Summer”) establishing the terms of the negotiation of purchase and sale of quotasshares representing the total shareentirety of Summer's capital of Summer Empreendimentos.stock. The conclusion of the transaction is subject to the implementation of conditions precedent usual for this type of transaction, including prior authorization by Bacen. In the EGM held on April 18, 2019, a capital increase in the amount of R$86,000acquisition was approved from R$24,500 to R$110,500 through the issue of 108,271,434 (one hundredby BACEN on September 16, 2019 and eight million, two hundred and seventy-one thousand, four hundred and thirty-four) new common shares, registered and without par value. In the EGM held on May 30, 2019, a capital increase in the amount of R$119,162 was approved, from R$110,500 to R$229,662 through the issuance of 151,009,682 (one hundred and fifty-one million, nine thousand, six hundred and eighty and two) new common shares, nominative and without par value, at the issue price of R$0.7891 per share. In the EGM heldconcluded on September 20, 2019, aso that SHI now holds 99.999% and Banco Santander 0.001% of the shares representing Summer's capital increase instock. Due to the amount of R$45,250Entity's short-term sale plan, Summer was approved, from R$229,662 to R$274,642 through the issuance of 57,894,063 (fifty-seven million, eight hundred and ninety-four thousand and sixty and three) new common shares, registered and without parinitially recorded as an Asset Held by Sale, at its cost value. In June 2020, with the EGM held on November 6, 2019, a capital increase in the amount of R$10,000 was approved, from R$274,642 to R$284,642 through the issue of 12,970,169 (twelve million, nine hundred and seventy thousand, one hundred and sixty-nine ) new common shares, registered and without par value.

(9) Investment transferred from non-current assets held for sale in June 2018.

(10) Company incorporated on June 11, 2018. In the EGM held on March 27, 2019, a capital increase in the amount of R$49,999 was approved, from R$45,001 to R$90,000, through the issue of 44,999,000 (forty-four million, nine hundred and ninety-nine thousand) new registered common shares, without par value. The shareholder Banco Santander subscribed all the new shares issued and paid up the shares corresponding to 100%non-execution of the capital increase.established plan, Summer became part of the scope of Banco Santander's Consolidated Financial Statements.

(11) Company incorporated on August 14, 2018xvii) Sale option of interest in Banco Olé Consignado S.A. and beginning its activities in November 2018.

(12) In the AGE of February 9, 2018, the shareholdersmerger of Banco Olé Consignado approved the capital increase in the amount of R$120,000, from R$400,000 to R$520,000, through the issuance of 57,089,392 (fifty-seven million, eighty-nine thousand, three hundredS.A. and ninety-two) common shares, registered and without par value, fully subscribed and paid up by the shareholders on the date of the EGM, in proportion to their respective interest in the share capital. The capital increase was approved by Bacen on March 15, 2018.

(13) The pre-operating company BHJV Assessoria e Consultoria em Gestão Empresarial Ltda., Was incorporated on April 11, 2018 and transformed into Banco Hyundai Capital Brasil S.A. on December 13, 2018. Aymoré CFI, wholly owned subsidiary of Banco Santander , has effective operational control of the company. At the EGM held on February 19, 2019, a capital increase in the amount of R$200,000 was approved, through the issuance of 200,000,000 (two hundred million) new common shares, nominative and without par value, with the capital of R$100,000 to R$300,000. The shares issued due to the capital increase were fully subscribed by the shareholders Aymoré Financiamentos CFI in the amount of R$100,000 and Hyundai Capital Services Inc. in the amount of R$100,000.

(14) In the EGM held on May 3, 2018, the Company's shareholders approved its transformation into a securities distribution company, and the change of its corporate name to SI Distribuidora de Tulos e Valores Mobiliários S.A. The transformation process was approved by Bacen on November 21, 2018. In the EGM held on December 17, 2018, SI Distribuidora de Tulos e Valores Mobiliários S.A. approved the change of its corporate name to PI Distribuidora de Titulos e Valores Mobiliários S.A..The change process was approved by Bacen on January 22, 2019.

(15) In the EGM held on April 2, 2019, a capital increase in the amount of R$200,000 was approved, from R$250,000 to R$450,000 through the issue of 12,987,012,987 (twelve billion, nine hundred and eighty-seven million, twelve thousand, nine hundred and eighty-seven) new common shares, nominative

F-39

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

and without par value. In the EGM held on November 11, 2019, a capital increase in the amount of R$300,000 was approved, from R$450,000 to R$750,000 through the issue of 17,241,379,310 (seventeen billion, two hundred and forty-one million, three hundred and seventy-six million nine thousand three hundred and ten) new common shares, nominative and without par value.

(16) The AGE held on July 12, 2018, approved the change of the corporate name of Ipanema Empreendimentos eBosan Participações S.A. to Return Capital Serviços de Recuperação de Crutos S.A. The AGE held on July 12, 2018, approved the amendment to corporate name of Gestora de Investimentos Ipanema S.A. for Return Gestão de Recursos S.A. In an AGE held on November 11, 2019, the Company's capital increase in the amount of R$300,000 was approved by the issue of 17,241,379,310 (seventeen billion, two hundred and forty-one million, three hundred and seventy-nine thousand and three hundred and ten) new common shares, nominative and without par value.

(17) On November 1, 2019, Atual Serviços de Recuperação de Creditos concluded the acquisition of the shares issued by Return Capital Serviços e Recuperação de Creditos S.A. for the amount of R$17,000, previously held by minority shareholders, equivalent to 30% of the share capital of the company.

(18) In the EGM held on October 31, 2019, the partial spin-off of Integry Tecnologia e Serviços AHU Ltda. Was approved, with version of the spun-off portion of its equity to Getnet. At the EGM of December 16, 2019, the change of the company's name to Santander Merchant Platform Solutions Brasil Ltda was approved. (“SMPS Brasil”). On December 20, 2019, a purchase and sale agreement was signed for the totality of the company's shares for the amount of R$3 million by Santander Merchant Platform Solutions (Spain).

(19) On March 14, 2019, the minority shareholder of Banco Olé Bonsucesso Consignado S.A. (“Banco Olé”) formalized its interest in exercising the put option provided for in the Investment Agreement, signedentered into on July 30, 2014, for the sale of its interest in 40% stake in the share capital of Olé ConsignadoConsigned to Banco Santander. Santander (Brasil) S.A. (“Banco Santander”).

On December 20, 2019, the parties entered into a binding agreement for the acquisition, by Banco Santander, of all shares issued by Bosan Participações S.A. (holding company whose only asset isare shares representing 40% of Banco Olé's share capital), for the amount total of R$1.6 billion to be paid on the closing date of the Transaction. The completion of the Transaction will be subject to the signing of the definitive instruments and the implementation of certain suspensive conditions usual in this type of transaction. On October 23, 2019, Aymoré CFI had its share capital reduced, without the cancellation of shares, by transferring the common shares representing its equity interest held in Banco Olé Consignado and Super Payments to Banco Santander. On December 23, 2019, the necessary conditions for the completion of the transaction were fulfilled so that Olé Consignado and Super Payments became directly controlled by Banco Santander.

The events decribed above were implemented in order to reorganize the operations and activities of entities according to the business plan of the Conglomerate Santander, those movements have not affected the segment reporting once the companies are related to the commercial Banking segment and did not lead to a creation of a new segment.

a) Put option of equity interest in Banco Olé Consignado S.A.

On March 14, 2019, the minority shareholder of Banco Olé Bonsucesso Consignado S.A. (Olé Consignado) formalized its interest to exercise the put option right provided in the Investment Agreement, executed on July 30, 2014, to sell its 40% equity interest in the capital stock of Olé Consignado to Banco Santander (Brazil) S.A. (“Banco Santander”).

On December 20, 2019, the parties entered into a binding agreement for the acquisition, by Banco Santander, of the all the shares issued by Bosan Participações S.A. (holding company whose only asset are shares representing 40% of the capital of Banco Olé), for the total amount of R $ 1.6 billion (“Operation”Transaction”), to be paid on the closing date of the Operation.Transaction.

b) IncorporationOn January 31, 2020, the Bank and the shareholders of Bosan Participações S.A. (“Bosan”) concluded the definitive agreement and signed the purchase and sale agreement for 100% of the spun-off portionshares issued by Bosan, through the transfer of Integry Tecnologia e Serviços A.H.U Ltda.

On October 31, 2019,Bosan's shares to Bank and payment to sellers in the partial spin-off operationtotal amount of Integry Tecnologia e Serviços AHU Ltda. (“Integry”),R$1,608,772. As a wholly owned subsidiary of Getnet Adquirência e Serviços para Meios de Pagamento S.A. (“Getnet”), with version of the spun-off portion of its assets and liabilities, to Getnet was approved. The incorporation of the spun-off portion by Getnet is pending approval by the Central Bank of Brazil.

On December 20, 2019, Getnet and Santander Merchant Platform Solutions, S.L. (“SMPS Global”), company based in Spain and controlled byresult, Banco Santander S.A. (Santander Spain) executed a Purchasebecame, directly and Sale Agreement of the quotas corresponding to 100% of Integry capital stock. As a consequence, SMPS Global has becomeindirectly, the holder of 100% of the shares representatives of the capital stock of Integry. On December 23, 2019, Integry had its corporate name changed to Santander Merchant Platform Solutions Brasil Ltda.

c) Acquisition of residual equity interest in Return Capital Serviços e Recuperação de Crédito S.A.

Banco Olé.

On November 01,2019, Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (“Atual”), wholly owned subsidiary byAugust 31, 2020, Banco Santander shareholders approved the merger by the Bank of Banco Olé Consignado S.A. and the minority shareholders of Return Capital Serviços e Recuperação de CréditoBosan Participações S.A. (“Return Capital”) executed the Shares’ Sale and Purchase Agreement and Other Covenants of Return Capital,The mergers did not result in which Atual committed to acquire all of the minority shareholders’ shares, corresponding to 30% of Return Capital capital stock. The acquisition was closed on November 01, 2019. As a consequence, Atual has become the holder of 100% of the shares representatives of the capital stock of Return Capital.

d) Acquisition of Residual Interestan increase in Getnet S.A.

On December 19, 2018, Banco Santander and the Getnet S.A. Minority shareholders entered into an amendment to the Getnet S.A. Share Purchase and Sale Agreement, in which Banco Santander committed to acquire all the shares of the Minority Shareholders, corresponding to 11.5% of the share capital of Getnet SA, for the amount of R $ 1,431,000. The acquisition was approved by BACEN on February 18, 2019 and concluded on February 25, 2019, so that Banco Santander now holds 100% of the shares representing the share capital of Getnet S.A.Brasil.

e) Transfer of Control of Banco Olé Bonsucesso Consignado S.A. and Super Pagamentos e Administração de Meios Eletrônicos S.A.

On October, 23 2019, Aymoré Crédito, Financiamento e Investimento S.A. (“Aymoré”) had its capital stock reduced, without cancellation of shares, through the transfer of the common shares representing its equity held in Banco Olé Bonsucesso Consignado S.A. (“Olé”) and Super Pagamentos e Administração de Meios Eletrônicos S.A. (“Super”) to Banco Santander. On December 23, 2019 all the prior

F-40

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

conditions for the capital stock reduction were accomplished: (i) previous authorization by Bacen; and (ii) term of opposition of the company creditors established as per art. 174 of Law 6.404/76; and, thus, Olé and Super become directly controlled by Banco Santander.

f) Acquisition of Summer Empreendimentos Ltda.

On May 14, 2019, Banco Santander (Brasil) S.A. (“Banco Santander”) and its wholly owned subsidiary Santander Holding Imobiliária S.A. (“SHI”) executed a binding agreement with the partners of Summer Empreendimentos Ltda (“Summer”) defining the negotiation terms for the purchase and sale of shares fully representing the capital of Summer. The acquisition was approved by BACEN on September 16, 2019 and closed on September 20, 2019. As a consequence SHI has become the holder of 99.999% and Banco Santander 0.001% of the shares representing the capital stock of Summer.

g) Formation of Esfera Fidelidade S.A.

On August 14, 2018, Esfera Fidelidade S.A. was incorporated, with equity fully owned by Banco Santander. Esfera Fidelidade S.A. act in the development and management of customer loyalty programs.. The company started its operation in November 2018.

h) Investment in Loop Gestão de Pátios S.A.

On June 26, 2018, Webmotors S.A., company with 70% interest indirectly owned by Banco Santander, signed an investment agreement with Allpark Empreendimentos, Participações e Serviços S.A. and Celta LA Participações S.A., in order to acquire an equity interest corresponding to 51% of the capital stock of Loop Gestão de Pátios S.A. (“Loop”), through capital increase and issuance of new shares of Loop to be fully subscribed and paid-in by Webmotors S.A.. Loop operates in the segment of commercialization and physical and virtual auction of motor vehicles. On September 25, 2018, the transaction was completed with increase of the capital stock, in the amount of R$23,900, through issuance of shares representing 51% of equity interest in Loop, which were fully subscribed and paid-in by Webmotors S.A.

i) Formation of BEN Benefícios e Serviços S.A.

On June 11, 2018, BEN Benefícios e Serviços S.A. (“Ben”), with equity fully owned by Banco Santander, was incorporated, to act in the supply and administration of meal, food, transportation, cultural and similar vouchers, via printed or electronic and magnetic cards.

j) Partnership with Hyundai Capital Services, Inc.

On April 28, 2016, Aymoré Crédito, Financiamento e Investimento S.A. (“Aymoré”) and Banco Santander executed with Hyundai Capital Services, Inc. (“Hyundai Capital”) the necessary documents for the formation of Banco Hyundai Capital Brasil S.A. (“Banco Hyundai”) and an insurance brokerage company with the purpose to provide, respectively, auto finance and financial and insurance brokerage services to clients and dealers of Hyundai in Brazil.

k.i) Banco Hyundai Capital Brasil S.A.

On April 11, 2018, the parties incorporated, with an equity interest of 50% held by Aymoré and 50% held by Hyundai Capital, a non-operational entity named BHJV Assessoria e Consultoria em Gestão Empresarial Ltda. On May 8, 2018, Aymoré and Hyundai Capital took resolution on the conversion of BHJV Assessoria into the non-operational joint-stock corporation named Banco Hyundai Capital Brasil S.A. On December 13, 2018, the incorporation procedure of Banco Hyundai was concluded.

On February 21, 2019, the authorization to operate granted by BACEN for the functioning of Banco Hyundai was published in the Federal Official Gazette. Banco Hyundai began operations in April 2019.

k.ii) Hyundai Corretora de Seguros Ltda.

On April 30, 2019, BACEN authorized Banco Santander to hold an indirect interest in a company to be incorporated under the name Hyundai Corretora de Seguros Ltda. (“Hyundai Corretora”). Hyundai Corretora was incorporated on July 22, 2019. On September 10, 2019 the company got the registration of the company as insurance brokerage with SUSEP. Hyundai Corretora began operations in November 2019.

l) Creation of PI Distribuidora de Títulos e Valores Mobiliários S.A.

On May 3, 2018, Santander Finance Arrendamento Mercantil S.A., an indirectly controlled subsidiary of Banco Santander, was converted into a distribution company of bonds and securities and had its corporate name changed to SI Distribuidora de Títulos e Valores Mobiliários S.A. The conversion process of approved by BACEN on November 21, 2018. On December 17, 2018, SI Distribuidora de Títulos e Valores Mobiliários S.A. had its corporate name changed to PI Distribuidora de Títulos e Valores Mobiliários S.A., being the corporate name change process approved by BACEN on January 22, 2019. The company started its operations on March 14, 2019.

4.Cash and balances with the Brazilian Central Bank

Cash and balances with the Brazilian Central Bank

Thousand of reais 2019 2018 2017 202120202019
   
Cash and cash equivalents 20,127,364 19,463,587 20,642,321Cash and cash equivalents 16,657,201 20,148,725 20,127,364 
of which:  
Cash 4,877,849 4,235,096 4,661,348 4,026,282 4,266,197 4,877,849 
Cash and Foreign currency application abroad 15,249,515 15,228,491 15,980,973Cash and Foreign currency application abroad12,630,919 15,882,528 15,249,515 
Total 20,127,364 19,463,587 20,642,321 16,657,201 20,148,725 20,127,364 

F-41

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

5.Loans and amounts due from credit institutions

The breakdown, by classification, type and currency, of the balances of “Loans and amounts due from credit institutions” in the consolidated financial statements is as follows:

Thousand of reais 202120202019
     
Classification:    
Financial Assets Measured at Amortized Cost95,664,754 112,849,776 109,233,128 
 Of which:    
      Loans and amounts due from credit institutions, gross95,686,579 112,858,840 109,246,671 
      Impairment losses (note 9.c) (21,825)(9,064)(13,543)
Loans and amounts due from credit institutions, net95,664,754 112,849,776 109,233,128 
Loans and amounts due from credit institutions, gross95,686,579 112,858,840 109,247,248 
     
Type:    
Time deposits 73,780,552 63,673,689 66,908,232 
Reverse repurchase agreements (1) 4,129,438 699,034 100,246 
Escrow deposits 10,200,137 10,773,280 11,424,537 
Other accounts (2) 7,576,452 37,712,838 30,814,233 
Total 95,686,579 112,858,840 109,247,248 

(1)Guaranteed by debt instruments.
(2)Changes refers substantially to the effect of the write-off of receivables from Getnet spin-off.

 

Thousand of reais 2019 2018 2017
       
Classification:      
Loans and receivables - - 65,209,902
Financial Assets Measured At Amortized Cost 109,233,128 - -
 Of which:      
     Loans and amounts due from credit institutions, gross 109,246,671 79,620,562 65,278,917
     Impairment losses (note 9.c) (13,543) (13,561) (69,015)
Loans and amounts due from credit institutions, net 109,233,128 79,607,001 65,209,902
Loans and amounts due from credit institutions, gross 109,247,248 79.620.562 65,278,917
       
Thousand of reais 2019 2018 2017
       
Type:      
Time deposits (2) 66,908,232 64,547,525 53,128,272
Reverse repurchase agreements (1) (2) 100,246 3,728,963 270,735
Escrow deposits 11,424,537 10,182,936 10,136,079
Cash and Foreign currency investments(2)(3) - - -
Other accounts (3) 30,814,233 1,161,138 1,743,831
Total 109,247,248 79,620,562 65,278,917

(1) Guaranteed by debt instruments.

Consolidated Financial Statements | December 31, 2021 | F-41

Table of Contents

 

* Values expressed in thousands, except when indicated.

(2) Includes R$100,246 of short-term transactions with a low risk of change in value, considered cash equivalents.

(3) In 2019, the balances related to compulsory deposits were reclassified from cash and reserves at the Central Bank of Brazil to the item Loans and other amounts withdue from credit institutions for better presentation and, consequently, the respective comparative balances also have been reclassified.- Currency

Thousand of reais 2019 2018 2017
       
Currency:      
Brazilian Real 107,693,973 91,419,015 63,397,123
US dollar 1,401,601 422,247 15,044,088
Euro 151,097 32,058 307,633
Pound sterling - - 3,585
Other currencies - - 8,920
Total 109,246,671 91,873,320 78,761,349

Thousand of reais 2019 2018 2017
       
Cash equivalents:      
Short-term transactions and low risk of change in its value 1,216,192 5,821,573 2,028,581
Thousand of reais    2021 20202019
         
Currency:        
Brazilian Real    91,889,990  109,287,868 107,693,973 
US dollar    2,445,781  2,778,911 1,401,601 
Euro    1,350,808  792,061 151,674  
Total    95,686,579  112,858,840  109,247,248  

 

Cash equivalents

Thousand of reais 202120202019
     
Cash equivalents:    
Short-term transactions and low risk of change in its value (1)16,011,548 8,298,083 1,316,299 
(1)The Amount refers to investments in the open market (repurchase agreements) and investments in interbank deposits (CDI) at

short term

Note 44-d43-d contains a detail of the residual maturity periods of financial assets measured at amortized cost.

F-42

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

6.Debt instruments

The breakdown, by classification, type and currency, of the balances of “Debt instruments” is as follows:follows:

Thousand of reais 2019 2018 2017
       
Classification:      
Financial assets held for trading (1) - - 34,879,681
Financial Assets Measured At Fair Value Through Profit Or Loss 3,735,076 3,171,746 -
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading34,885,631 50,066,469 -
Other Financial assets designated at fair value through profit or loss - - 1,658,689
Financial assets - available-for-sale - - 84,716,747
Financial Assets Measured At Fair Value Through Other Comprehensive Income (1)95,962,927 85,395,691 -
Investments Held-to-Maturity - - 10,214,454
Loans and receivables - - 17,616,515
Financial Assets Measured At Amortized Cost 38,748,296 36,799,509 -

 

   Of which:

 

      
Debt Instruments 40,803,323 39,513,460 20,400,082
Impairment losses (2,055,027) (2,713,951) (2,783,567)
Total 173,331,930 175,433,415 149,086,086
       
Type:      
Government securities - Brazil (2) 135,848,053 116,531,146 122,362,389
Debentures and Promissory notes 13,874,883 10,555,952 12,097,230
Other debt securities 23,608,994 48,346,317 14,626,467
Total 173,331,930 175,433,415 149,086,086

Thousand of reais  202120202019
      
Classification:     
Financial assets measured at fair value through profit or loss3,122,017 3,545,660 3,735,076 
Financial assets measured at fair value through profit or loss held for trading47,752,595 68,520,799 34,885,631 
Financial assets measured at fair value through other comprehensive income101,212,600 109,668,214 95,962,927 
Financial assets measured at amortized cost73,125,011 48,367,791 38,748,296 
 Of which:     
Debt instruments  74,315,903 49,945,226 40,803,323 
Impairment losses   (1,190,892)(1,577,435)(2,055,027)
Total  225,212,223 230,102,464 173,331,930 
      
Type:     
Government securities - brazil (1) 171,436,589  191,896,439 135,848,053 
Debentures and promissory notes 19,881,934  17,071,856 13,874,883 
Other debt securities (2)  33,893,700  21,134,169 23,608,994 
Total  225,212,223 230,102,464 173,331,930 
(1)On December 31, 2018, management decided to change the classification of Financial Treasury Bills – LFT, of the securities portfolio of Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Getnet SA), Banco Bandepe SA and Santander Corretora de Cambio e Valores Mobiliários S.A. (Santander CCVM). The securities were transferred from the Trading to Available for Sale category, in the amounts of R$739,430, R$14,099 and R$375,488, respectively. Such transfers did not impact the amounts of Consolidated and also did not generate effect on the result. The change in the category occurred due to the revaluation of the recent trading history of these assets.

(2)Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) e National Treasury Notes (NTN-A, NTN-B, NTN-C e NTN-F).

(2)Substantially refer to securities issued by the Official Credit Institute (ICO) of Spain.

 

The debt instruments are composed, majority by:by:

Thousand of reais      2021 2020 2019
            
            
Currency:           
Brazilian Real      208,599,863   207,752,590  164,447,235 
US dollar      16,612,360   22,292,647  8,884,695 
Euro      -    57,227  -   
Total      225,212,223  230,102,464  173,331,930 

Consolidated Financial Statements | December 31, 2021 | F-42

Table of Contents

 

* Values expressed in thousands, except when indicated.

Debt Instruments linked to

Thousand of reais  202120202019
      
Debt Instruments linked to:    
Repo Operations  76,211,049 101,371,733 102,849,859 
Operations guarantees in B3 S.A. - Brasil, Bolsa, Balcão (B3 S.A.)19,470,624 12,963,251 6,618,651 
Associated to judiciary deposits and other guarantees (1)23,291,528 9,665,135 9,573,331 
Total  118,973,201 124,000,119 119,041,841 

(1)Substantially refers to securities issued by the Official Credit Institute (ICO) of Spain.

 

Thousand of reais 2019 2018 2017
       
Currency:      
Brazilian Real 164,447,235 166,743,410 137,420,134
US dollar 8,884,695 8,690,005 11,665,952
Euro - - -
Total 173,331,930 175,433,415 149,086,086

Thousand of reais 2019 2018 2017
       
Debt Instruments linked to:      
Repo Operations 102,849,859 90,909,891 77,781,728
Banco Central Mandatory Deposits - 1,449,207 2,305,158
Operations guarantees in B3 S.A. - Brasil, Bolsa, Balcão (B3 S.A.) 6,618,651 17,985,160 6,273,561
Associated to judiciary deposits and other guarantees 9,573,331 2,078,042 4,743,298
Total 119,041,841 112,422,300 91,103,745

Note 44-d43-d contains details of the residual maturity periods of financial assets measured at fair value through Other Results Comprehensive and corresponding financial assets measured at amortized cost.

F-43

Table of Contents

 7.

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Equity instruments

7.Equity instruments

a) Breakdown

The breakdown, by classification and type, of the balances of “Equity instruments” is as follows:follows:

Thousand of reais201920182017 202120202019
   
Classification:   
Financial assets held for trading-489,770
Financial Assets Measured At Fair Value Through Profit or Loss Held For Trading2,029,470766,333-
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit or Loss171,453298,297-
Other Financial assets designated at fair value through profit or loss-33,368
Financial assets available-for-sale-1,106,637
Financial Assets Measured At Fair Value Through Other Comprehensive Income157,30640,986-
Financial assets measured at fair value through profit or loss held for trading Financial assets measured at fair value through profit or loss held for trading 2,020,610 1,818,276 2,029,470 
Non-trading financial assets mandatorily measured at fair value through profit or lossNon-trading financial assets mandatorily measured at fair value through profit or loss477,707 438,912 171,453 
Financial assets measured at fair value through other comprehensive incomeFinancial assets measured at fair value through other comprehensive income29,187 72,173 157,306 
Total2,358,2291,105,6161,629,775 2,527,504 2,329,361 2,358,229 
  
Type:    
Shares of Brazilian companies665,027783,475389,113Shares of Brazilian companies1,869,824 1,953,128 665,027 
Shares of foreign companies-1,9335,347Shares of foreign companies48,825 13,617 -   
Investment funds (1)1,693,202320,2081,235,315 608,855 362,616 1,693,202 
Total2,358,2291,105,6161,629,775 2,527,504 2,329,361 2,358,229 
(1)Composed mainly by investment on fixed income, public and private securities.

b) Changes

The changes in the balance of “Equity instruments – Financial assets measured at fair value through profit or loss held for trading” were as follows:

Equity instruments - Financial assets measured at fair value through profit or loss held for trading

Thousand of reais 201920182017 202120202019
  
Balance at beginning of year 766,333489,770398,461Balance at beginning of year1,818,276 2,029,470 766,333 
Net additions (disposals) 1,267,243277,46290,696
Valuation adjustments (4,106)(899)613
Net additions (disposals) / adjustmentsNet additions (disposals) / adjustments202,334 (211,194)1,263,137 
Balance at end of year 2,029,470766,333489,770 2,020,610 1,818,276 2,029,470 

The changes in the balance of “Equity instruments – Non-Trading Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss” were as follows:

Equity instruments - Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss” were as follows:Loss

Thousand of reais 202120202019
     
Balance at beginning of year438,912 171,453 298,297 
Net additions (disposals) / adjustments38,795267,459 (126,844)
Balance at end of year 477,707 438,912 171,453 

 

Thousand of reais 201920182017
     
Balance at beginning of year 298,29733,36842,455
Net additions (disposals) (126,893)143,291(1,586)
Valuation adjustments 49121,638(7,501)
Balance at end of year 171,453298,29733,368

Consolidated Financial Statements | December 31, 2021 | F-43

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

The changes in the balance of “Equity instruments – Financial Assets Measured Atat Fair Value Through Other Comprehensive Income” were as follows:

Equity instruments - Financial Assets Measured At Fair Value Through Other Comprehensive Income

Thousand of reais 201920182017 202120202019
   
Balance at beginning of year 40,9861,106,6371,985,473Balance at beginning of year72,173 157,306 40,986 
Net additions (disposals) 238,758(1,034,219)(830,395)
Valuation adjustments (122,438)(31,432)(48,441)
Net additions (disposals) / adjustmentsNet additions (disposals) / adjustments(42,986)(85,133)116,320
Balance at end of year 157,30640,9861,106,637 29,187 72,173 157,306 

F-44

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

8.8.Derivative financial instruments and Shortshort positions

The main risk factors associated to derivatives contracted are related to exchange rates, interest rates and equities.stocks. To manage these and other market risk factors the Bank uses practices which include the measurement and follow up of the limit´s usage previously defined on internal committees, as well as the daily follow up of the portfolios values in risk, sensitivities and changes in the interest rate and exchange exposure, liquidity gaps, among other practices which allow the control and follow up on the main risk metrics that can affect the Bank´s position in the several markets which it acts. Based on this management model the Bank has accomplished its goal, using operations with derivatives, in optimize the relation risk/benefits even in situation with great volatility.

The derivatives fair value is determined through quotation of market prices. The swaps contracts fair value is determined using discounted cash flow modeling techniques, reflecting suitable risk factors. The fair value of NDF and Future contracts are also determined based on the quotation of market prices for derivatives traded in specific chamber (i.e..(i.e. stock Exchange for example) or using the same methodology applied for swap contracts. The fair value of options derivatives (call and put) is determined based on the mathematical models, such as Black & Scholes, using yield rates, implied volatilities and the fair value of the corresponding asset. The current market prices are used to price the volatilities. For the derivatives which do not have prices directly disclosed by specific chamber, their fair values are obtained through pricing models which use market information, based on disclosed prices of more liquid assets. Interest rate curves and market volatilities are extracted from thesesthese prices to be used as first input in these models.

a) Trading and hedging derivatives

a.1) Derivatives recorded in the balance sheet and compensation accounts

Portfolio summary of trading derivative and used as hedge

  2021202020202020201920192019
   As Previously ReportedAdjustmentAs RevisedAs Previously ReportedAdjustmentAs Revised
Assets        
Swap Differentials Receivable7,641,35514,729,642-14,729,64214,634,863 - 14,634,863 
Option Premiums to Exercise 1,385,8894,974,618-4,974,6181,065,753 - 1,065,753 
Forward Contracts and Others12,112,6799,166,360(2,623,106)6,543,2544,745,118 (1,624,834) 3,120,284 
Total 21,139,92328,870,620(2,623,106)26,247,51420,445,734 (1,624,834) 18,820,900 
         
Liabilities        
Swap Differentials Payable 8,538,70518,327,611-18,327,61116,458,397 - 16,458,397 
Option Premiums Launched 2,256,2444,926,994-4,926,9941,699,729 - 1,699,729 
Forward Contracts and Others13,824,0328,725,333(2,623,106)6,102,2274,271,851 (1,624,834) 2,647,017 
Total 24,618,98131,979,938(2,623,106)29,356,83222,429,977 (1,624,834) 20,805,143 

In 2021, the Company revisited the accounting treatment in relation to the electric energy commercialization contracts, which no longer include the amount of the "principal" and, therefore, only the adjustments to fair value and interest determined in these operations are recorded in equity accounts.

 

a.1) Derivatives RecordedFor better comparability purposes, the amounts of “principal” of energy trading operations recorded in equity accounts, on December 31, 2020 and 2019, were reduced from the headings of “Derivatives => Forward and Other Contracts” in the Balance Sheetamounts of BRL 2,623,106 (2019 - BRL 1,624,834), with corresponding impact on total assets and Compensation Accountsliabilities and between the lines "Financial assets measured at fair value in profit or loss held for trading" and "Financial liabilities measured at fair value in Income Held for Trading" in the statement of cash flows as of December 31, 2020 and 2019. There was no change in the balance of stockholders' equity or income. The financial statements as of December 31, 2020 and 2019, presented for comparison purposes, already include the aforementioned adjustments.

Consolidated Financial Statements | December 31, 2021 | F-44

Table of Contents

 

* Values expressed in thousands, except when indicated.

Summary by Category

 

Portfolio Summary of Trading Derivative and Used as Hedge

   201920182017
      
Assets     
Swap Differentials Receivable  14,634,86314,640,28915,781,207
Option Premiums to Exercise  1,065,753716,936553,217
Forward Contracts and Others  4,745,1013,006,221928,464
Total  20,445,71718,363,44617,262,888
      
Liabilities     
Swap Differentials Payable  16,458,39715,952,28314,643,016
Option Premiums Launched  1,699,729563,787385,183
Forward Contracts and Others  4,271,8521,950,7651,649,287
Total  22,429,97818,466,83516,677,486
Summary by Category              
               
Trading     2021     2020 2019
                 
  Notional (1) Curve Value Fair Value Notional (1) Curve Value Fair Value Notional (1) Fair Value
Swap  837,762,019 (1,804,744)  (897,350)  398,925,842 (3,076,947) (3,597,969) 561,967,799 (1,823,534)
Assets  418,137,448  13,162,674 7,641,355  278,752,387  6,249,519 14,729,642 282,164,189 147,010,930
CDI (Interbank Deposit Rates)  66,837,268 318,541 (778,177)  41,316,315 326,586 3,010,880 40,550,627 16,908,791
Fixed Interest Rate - Real  231,741,021  9,269,271 6,412,471  54,159,848  4,013,563 9,607,342 47,140,927 -
Indexed to Price and Interest Rates  2,089,110 - (234,488)  5,124,411 - - 2,388,118 -
Foreign Currency  91,837,446 799,550 2,003,728  178,076,136 959,322 1,039,529 192,084,517 130,102,139
Others  25,632,603  2,775,313  237,822 75,676 950,048 1,071,891  - -
Liabilities  419,624,571 (14,967,418) (8,538,705)  120,173,455 (9,326,465) (18,327,611) 279,803,610 (148,834,464)
CDI (Interbank Deposit Rates)  321,402,883 (4,171,481)  (12,327,484)  33,239,801 (6,911,748)  (13,693,733) 24,353,405 -
Fixed Interest Rate - Real  48,874,762 (6,760,576) 2,467,425  45,088,689 (2,183,507)  (2,772,479) 67,937,624 (24,079,732)
Indexed to Price and Interest Rates  22,827,336 - (728,677)  33,026,692 - (450,958) 125,829,755 (123,445,067)
Foreign Currency 887,129  (28,407) 2,287,852  6,636,885 (25)  153,695 60,394,529 -
Others  25,632,461 (4,006,955) (237,822)  2,181,388  (231,186)  (1,564,135) 1,288,297 (1,309,665)
Options 1,130,172,099  (595,345)  (885,703) 2,043,286,085  (282,110)  47,624  1,446,536,133 (1,222,465)
Purchased Position  564,829,758  1,240,879 1,385,889 1,006,266,897  1,869,806 4,974,618 678,089,904 381,706
Call Option - US Dollar  9,898,179 271,464  382,237  1,188,387 47,898  39,202  171,871 (281)
Put Option - US Dollar  4,094,316 140,280  187,123  1,948,673 79,019  109,075 1,456,975 4,355
Call Option - Other  31,248,540 459,995  510,976  134,761,947 558,794 1,093,583 98,154,363 818,664
Interbank Market  28,499,055 444,446  495,214  101,421,659 557,167  556,039 98,154,363 819,262
Others (2)  2,749,485  15,549 15,763  33,340,288 1,627  537,544  - (598)
Put Option - Other  519,588,723 369,140  305,553  868,367,889  1,184,095 3,732,758 578,306,695 (441,032)
Interbank Market  519,588,723 369,140  305,553  864,852,555  1,183,630 3,729,297 578,306,695 (440,959)
Others (2) - - -  3,515,334  464  3,461  - (73)
Sold Position  565,342,341 (1,836,224) (2,256,244) 1,037,019,188 (2,151,915) (4,926,994) 768,446,229 (1,604,171)
Call Option - US Dollar  4,111,016  (170,553) (152,348)  1,537,670  (70,201)  699,243  254,945 (1,472)
Put Option - US Dollar  4,017,161  (348,715) (287,825)  2,315,919  (137,061) (192,335)  263,994 (2,842)
Call Option - Other  33,383,234  (719,460)  (872,335)  130,919,394  (588,023)  (453,919) 174,166,802 (440,731)
Interbank Market  31,730,928  (713,773) (858,586)  120,156,285  (566,813) (464,405) 174,166,802 (440,959)
Others (2)  1,652,305  (5,687) (13,749)  10,763,109  (21,210)  10,486  - 228
Put Option - Other  523,830,930  (597,497)  (943,736)  902,246,206 (1,356,630) (4,979,984) 593,760,488 (1,159,126)
Interbank Market  523,830,930  (597,497) (943,736)  869,328,317 (1,350,314)  (4,597,427) 593,760,488 (1,159,038)
Others (2) - - -  32,917,888  (6,316) (382,557)  - (88)
                 
Futures Contracts  287,984,278 - -  270,258,566 - - 433,873,180 -
Purchased Position  148,237,279 - -  110,275,866 - - 72,912,029 -
Exchange Coupon (DDI)  85,931,389 - -  12,438,695 - - 7,394,951 -
Interest Rates (DI1 and DIA)  28,491,764 - -  97,837,171 - - 55,430,519 -
Foreign Currency  33,797,350 - - - - - 9,978,419 -
Indexes (3) 16,776 - - - - -  - -
Others - - - - - -  108,140 -
Sold Position  139,746,999 - -  159,982,699 - - 360,961,151 -
Exchange Coupon (DDI)  60,606,204 - -  73,114,014 - - 146,032,485 -
Interest Rates (DI1 and DIA)  53,267,620 - -  67,958,767 - - 196,170,105 -
Foreign Currency  25,678,296 - -  18,653,658 - - 17,305,604 -
Indexes (3) 194,879 - - 256,261 - -  290,254 -
Treasury Bonds/Notes -  - - -  - - 1,162,703 -
Forward Contracts and Others  167,611,313  2,836,843 (1,711,352)  165,663,806  2,693,759  441,028 169,401,317 483,267
Purchased Commitment  93,097,212  5,345,415 12,112,679  96,309,648  1,370,654 6,543,254 79,970,842 3,120,284
Currencies  83,752,185  2,738,485 8,501,934  87,254,202 1,370,654 5,026,566 78,344,925 2,794,330
Others  9,345,027 2,606,930 3,610,745  9,055,447 - 1,516,688 1,625,917 325,954
Sold Commitment  74,514,101 (2,508,572) (13,824,032)  69,354,158  1,323,105 (6,102,227) 89,430,475 (2,647,017)
Currencies  71,611,500 (1,141,826)  (11,932,009)  64,986,757 1,323,328  (4,846,929) 87,801,864 (2,275,227)
Others  2,902,602 (1,366,746)  (1,892,023)  4,367,401 (223)  (1,255,298) 1,628,611 (371,790)

 

F-45

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Summary by Category
 
Trading 201920182017
        
  Notional (1)Fair Value (4)Notional (1)Fair Value (4)Notional (1)Fair Value (4)
Swap  (1,823,534) (1,431,110) 1,108,760
Assets 282,164,189147,010,930177,233,86944,487,274202,081,21457,294,179
CDI (Interbank Deposit Rates) 40,550,62716,908,79136,135,01524,267,59133,289,52222,409,496
Fixed Interest Rate - Real 47,140,927-47,968,999-95,700,715-
Indexed to Price and Interest Rates 2,388,118-2,581,215-5,592,892-
Foreign Currency 192,084,517130,102,13990,495,24020,219,68367,493,63534,884,683
Others --53,400-4,450-
Liabilities 279,803,610(148,834,464)176,385,349(45,918,384)199,709,355(56,185,419)
CDI (Interbank Deposit Rates) 24,353,405-11,801,600-16,664,176-
Fixed Interest Rate - Real 67,937,624(24,079,732)88,317,044(23,075,374)114,055,076(21,687,884)
Indexed to Price and Interest Rates 125,829,755(123,445,067)24,308,601(21,775,017)40,146,968(34,107,210)
Foreign Currency 60,394,529-50,748,008-28,420,467-
Others 1,288,297(1,309,665)1,210,096(1,067,993)422,668(390,325)
Options 1,446,536,133(1,222,465)335,073,080153,149190,061,609168,034
Purchased Position 678,089,904381,706149,076,796716,93687,503,833553,217
Call Option - US Dollar 171,871(281)14,518,058239,0799,369,821169,542
Put Option - US Dollar 1,456,9754,3558,893,62090,7365,130,39242,389
Call Option - Other 98,154,363818,6643,118,344131,2971,953,48159,220
Interbank Market 98,154,363819,262639,4884,5371,185,310389
Others(2) -(598)2,478,856126,760768,17158,831
Put Option - Other 578,306,695(441,032)122,546,774255,82471,050,139282,066
Interbank Market 578,306,695(440,959)121,782,816217,72670,295,282257,943
Others(2) -(73)763,95838,098754,85724,123
Sold Position 768,446,229(1,604,171)185,996,284(563,787)102,557,776(385,183)
Call Option - US Dollar 254,945(1,472)7,615,856(101,034)5,595,163(117,059)
Put Option - US Dollar 263,994(2,842)12,160,912(169,431)5,919,598(77,145)
Call Option - Other 174,166,802(440,731)31,679,919(66,002)19,880,180(35,961)
Interbank Market 174,166,802(440,959)29,609,298(13,195)19,151,110(515)
Others(2) -2282,070,621(52,807)729,070(35,446)
Put Option - Other 593,760,488(1,159,126)134,539,597(227,320)71,162,835(155,018)
Interbank Market 593,760,488(1,159,038)133,703,672(179,841)70,494,622(126,743)
Others(2) -(88)835,925(47,479)668,213(28,275)
        
Futures Contracts 433,873,180-289,508,200-161,725,596-
Purchased Position 72,912,029-86,203,734-54,806,022-
Exchange Coupon (DDI) 7,394,951-20,590,068-9,616,936-
Interest Rates (DI1 and DIA) 55,430,519-32,690,685-26,456,303-
Foreign Currency 9,978,419-32,456,813-16,733,437-
Indexes(3) --466,168-1,780,311-
Others 108,140---219,035-
Sold Position 360,961,151-203,304,466-106,919,574-
Exchange Coupon (DDI) 146,032,485-146,948,795-55,016,928-
Interest Rates (DI1 and DIA) 196,170,105-54,160,203-51,135,994-
Foreign Currency 17,305,604-1,992,574-745,849-
Indexes(3) 290,254-202,894-20,803-
Treasury Bonds/Notes 1,162,703-----
Forward Contracts and Others 169,401,317473,24990,910,8411,055,45647,823,561(720,823)
Purchased Commitment 79,970,842426,99138,666,2691,303,56123,506,096647,376
Currencies 79,969,759426,98638,095,6251,250,70621,525,220618,007
Others 1,0835570,64452,8551,980,87629,369
Sold Commitment 89,430,47546,25852,244,572(248,105)24,317,465(1,368,199)
Currencies 89,426,69846,17051,958,529(252,160)22,096,104(1,364,617)
Others 3,77788286,0434,0552,221,361(3,582)

(1) Accrued notional.

(2) Includes options of index, mainly being options involving US treasury, shares and stock indexes.

(3) Includes Bovespa and S&P index.

(4) The balances of Swaps are disclosed netting the receivables and payables differentials per indexes. If the net balance is positive it is being disclosed on the asset side and if is negative on the liability side.

F-46

Table of Contents

 (1)Nominal value of updated contracts.
(2)Includes options of index, mainly being options involving US treasury, shares and stock indexes.
(3)Includes Bovespa and S&P index.

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-45

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

a.2) Derivatives Financial Instruments by Counterparty

 Notional    2019
   RelatedFinancial 
  Customers PartiesInstitutions(1) Total
"Swap" 66,976,26238,784,704176,403,223282,164,189
Options 17,041,979154,9031,429,326,0731,446,522,955
Futures Contracts 1,430,470-432,442,712433,873,182
Forward Contracts and Others 47,199,547118,612,6073,589,163169,401,317

(1)
Notional      2021
     RelatedFinancial 
    Customers PartiesInstitutions (1)Total
Swap    152,650,125  233,667,783 31,819,540  418,137,448 
Options    1,127,446,708 1,641,361 1,084,030  1,130,172,099 
Futures Contracts    287,984,278 -   -    287,984,278 
Forward Contracts and Others  70,457,399 96,857,222 296,692  167,611,313 
(1)Includes trades with B3 S.A. and other securities and commodities exchanges.

Notional     20202019
    RelatedFinancial  
   Customers PartiesInstitutions (1)TotalTotal
Swap   40,241,232  97,784,443 140,726,712    278,752,387  282,164,189 
Options   23,788,051 922,740 2,018,575,293    2,043,286,085  1,446,522,955 
Futures Contracts   3,198,239 -   267,060,326    270,258,566  433,873,182 
Forward Contracts and Others 67,837,797 49,447,532 45,755,371    163,040,700  169,401,317 
(1)Includes trades with B3 S.A. and other securities and commodities exchanges.

 Notional    2018
   RelatedFinancial 
  Customers PartiesInstitutions(1) Total
"Swap" 34,296,82132,669,900110,267,148177,233,869
Options 14,636,0171,086,323319,350,740335,073,080
Futures Contracts --289,508,200289,508,200
Forward Contracts and Others 39,024,97848,641,8943,243,96990,910,841

(1) Includes trades with B3 S.A. and other securities and commodities exchanges.

 Notional    2017
   RelatedFinancial 
  Customers PartiesInstitutions(1) Total
"Swap" 32,912,72119,599,395149,569,098202,081,214
Options 11,263,5131,240,309177,557,787190,061,609
Futures Contracts --161,725,596161,725,596
Forward Contracts and Others 25,470,28718,816,9913,536,28347,823,561

(1) Includes trades with B3 S.A. and other securities and commodities exchanges.

a.3) Derivatives Financial Instruments by Maturity

Notional      2021
    Up toFrom 3 toOver  
     3 Months12 Months12 MonthsTotal
Swap   30,501,795  99,817,727  287,817,926  418,137,448 
Options    749,406,698  128,500,299  252,265,102  1,130,172,099 
Futures Contracts    167,320,563 45,239,639 75,424,076  287,984,278 
Forward Contracts and Others  72,761,669 67,060,436 27,789,208  167,611,313 
        
Notional     20202019
   Up toFrom 3 toOver   
    3 Months12 Months12 MonthsTotalTotal
Swap  58,388,872 98,073,784  122,289,731  278,752,387  282,164,189 
Options   931,156,902  572,661,800  539,467,382  2,043,286,084  1,446,522,962 
Futures Contracts   181,521,486 36,328,390 52,408,689  270,258,566  433,873,181 
Forward Contracts and Others  104,098,351 33,788,798 25,153,551  163,040,700  169,401,317 

 

Notional    2019
  Up toFrom 3 toOver 
   3 Months12 Months12 MonthsTotal
"Swap" 58,298,876106,268,113117,597,200282,164,189
Options 681,033,183646,187,139119,302,6401,446,522,962
Futures Contracts 140,882,437179,337,860113,652,884433,873,181
Forward Contracts and Others 91,779,01150,070,36627,551,940169,401,317
      
Notional    2018
  Up toFrom 3 toOver 
   3 Months12 Months12 Months Total
"Swap" 12,347,86470,975,477177,233,869260,557,210
Options 63,376,042220,982,952335,073,080619,432,074
Futures Contracts 67,578,07862,708,213159,221,909289,508,200
Forward Contracts and Others 31,255,38419,469,14740,186,31090,910,841

F-47

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-46

Table of Contents 

Notional    2017
  Up toFrom 3 toOver 
   3 Months12 Months12 Months Total
"Swap" 20,705,24751,021,102130,354,865202,081,214
Options 46,139,54589,403,70054,518,364190,061,609
Futures Contracts 65,489,47655,490,15940,745,961161,725,596
Forward Contracts and Others 25,015,55714,250,4958,557,50947,823,561

 

 

* Values expressed in thousands, except when indicated.

a.4) Derivatives by Market Trading

Notional StockOver the2019
  Exchange(1)Counter Total
"Swap" 150,179,790131,984,399282,164,189
Options 1,423,788,84522,734,1171,446,522,962
Futures Contracts 433,873,181-433,873,181
Forward Contracts and Others 42,651,980126,749,337169,401,317

(1)
Notional    Stock Exchange (1)Over the Counter2021
     Total
Swap     111,418,682  306,718,767  418,137,448 
Options     1,094,484,434 35,687,665  1,130,172,099 
Futures Contracts     287,984,278 -    287,984,278 
Forward Contracts and Others   7,108,898  160,502,415  167,611,313 
(1)Includes trades with B3 S.A.

Notional   Stock Exchange (1)Over the Counter20202019
     TotalTotal
Swap   82,122,957  196,629,429  278,752,387  282,164,189 
Options    1,940,172,322  103,113,762  2,043,286,084  1,446,522,962 
Futures Contracts    270,258,566 -    270,258,566  433,873,181 
Forward Contracts and Others  25,182,494  137,858,206  163,040,700  169,401,317 
(1)Includes trades with B3 S.A.

Notional StockOver the2018
  Exchange(1)Counter Total
"Swap" 39,880,578137,353,291177,233,869
Options 307,644,53027,428,550335,073,080
Futures Contracts 289,508,200-289,508,200
Forward Contracts and Others 323,41390,587,42890,910,841

(1) Includes trades with B3 S.A.

Notional StockOver the2017
  Exchange(1)Counter Total
"Swap" 67,112,505134,968,709202,081,214
Options 172,144,70017,916,909190,061,609
Futures Contracts 161,725,596-161,725,596
Forward Contracts and Others 395,21247,428,34947,823,561

(1) Includes trades with B3 S.A.

a.5) Information on Credit Derivatives

Banco Santander uses credit derivatives with the objectives of performing counterparty risk management and meeting its customers' demands, performing protection purchase and sale transactions through credit default swaps and total return swaps, primarily related to Brazilian sovereign risk securities.

TotalReturn Swaps – TRS

Credit derivatives are where the exchange of the return of the reference obligation occurs through a cash flow and where, in the event of a credit event, the protection buyer is usually entitled to receive from the protection seller the equivalent of the difference between the and the fair value (market value) of the reference obligation on the settlement date of the contract.

Credit Default Swaps – CDS

TheseThey are credit derivatives where, in the event of a credit event, the protection buyer is entitled to receive from the protection seller the equivalent ofto the difference between the face value of the CDS agreementcontract and the fair value (market value) of the reference obligation on the settlement date of the contract. In return, the seller receives compensationa fee for the sale of the protection.

Below, the composition of the Credit Derivatives portfolio shown by its reference value and effect on the calculation of Required Shareholders' Equity (PLE).

Composition of the Credit Derivatives portfolio shown by its reference value and effect in the calculation of Required Stockholders' Equity.Equity

            
     2021  2020  2019
            
            
   Nominal Value Nominal ValueNominal Value Nominal ValueNominal Value Nominal Value
   Retained Risk Transferred Risk -Retained Risk Transferred Risk -Retained Risk Transferred Risk -
   Total Rate of Return Swap Credit SwapTotal Rate of Return Swap Credit SwapTotal Rate of Return Swap Credit Swap
Credit swaps  3,984,392  - 3,483,628  519,670  2,435,880  - 
Total  3,984,392  - 3,483,628  519,670  2,435,880  - 

F-48

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

          
     2019   2018
          
          
   Nominal Value Nominal Value Nominal Value Nominal Value
   Retained Risk Transferred Risk - Retained Risk Transferred Risk -
   Total Rate of Return Swap Credit Swap Total Rate of Return Swap Credit Swap
Credit Swaps 2,435,880 - 1,959,128 416,541
Total 2,435,880 - 1,959,128 416,541

(*) In 2017, there was no CDS operations that the Bank was into.

Value referring to the premium paid on CDS for use as collateral (transfer of risks) in the amount of R$602.

The effect in the Required Stockholder’s Equity of the risk received was R$3.286.

During the period, there was no occurrence of credit event related to thetriggering events generated byprovided for in the contracts.

 

       
   2019  2018
   Over   Over   
Maximum Potential for Future Payments – Gross  12 Months Total 12 Months  Total
Per Instrument      
CDS 2,435,8802,435,8801,959,128 1,959,128
Total 2,435,8802,435,8801,959,128 1,959,128
Per Risk Classification      
Below Investment Grade 2,435,8802,435,8801,959,128 1,959,128
Total 2,435,8802,435,8801,959,128 1,959,128
Per Reference Entity      
Brazilian Government 2,435,8802,435,8801,959,128 1,959,128
Total 2,435,8802,435,8801,959,128 1,959,128

Consolidated Financial Statements | December 31, 2021 | F-47

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

          
     2021 2020 2019
    Over  Over  Over  
Maximum Potential for Future Payments - Gross   12 MonthsTotal12 MonthsTotal12 MonthsTotal
Per Instrument         
CDS   3,984,392 3,984,392 4,003,298 4,003,298  2,435,880 2,435,880 
Total   3,984,392 3,984,392 4,003,298 4,003,298  2,435,880 2,435,880 
Per Risk Classification         
Below Investment Grade   3,984,392 3,984,392 4,003,298 4,003,298  2,435,880 2,435,880 
Total    3,984,392 3,984,392 4,003,298 4,003,298  2,435,880 2,435,880 
Per Reference Entity         
Brazilian Government   3,984,392 3,984,392 4,003,298 4,003,298  2,435,880 2,435,880 
Total    3,984,392 3,984,392 4,003,298 4,003,298  2,435,880 2,435,880 

a.6) Hedge Accounting

There are three types of hedge accounting: Fair Value Hedge, Cash Flow Hedge and Foreing Currency Investments Hedge.

The derivatives used as hedging instruments are represented as follows:

a.6.I ) Fair Value Hedge

Banco Santander’s fair value hedging strategy consists of hedging the exposure to changes in fair value related to recognized assets and liabilitiesliabilities.

The fair value strategy adopted by management segregates transactions by risk factor (e.g. Real/Dollar foreign exchange risk, fixed Reais interest rate risk, Dollar foreign exchange coupon risk, inflation risk, interest rate risk, etc.). The transactions generate exposures that are consolidated by risk factor and compared with internal pre-established limits.

In order to hedge the changes of fair value in receivables and interest payments, Santander uses interest rate Swap contracts related to pre-fixed (pre defined(pre-define interest rate at inception) assets and liabilities.

Banco Santander applies fair value hedge as follows:

•Designates Foreign Currency + Coupon versus %CDI and Pre - Real Interest Rate or contracts dollar futures (DOL, DDI/DI) as derivatives instruments in Hedge Accounting structures, with foreign currency loan operations being the object of such transactions.

• The Bank has a portfolio of credit assets denominated in US dollars at the fixed rate in the balance sheet of Santander EFC, whose operations are recorded in Euro. As a way of managing this mismatch, the Bank designates each Euro Floating Foreign Currency swap versus Fixed Dollar as the market risk hedge of the corresponding loan.

• The Bank has a portfolio of assets indexed to the Euro and traded at offshore branches. In the transaction, the value of the asset in Euro will be converted to the Dollar by the rate of the exchange contract of the transaction. As from the conversion, the principal amount of the funding, already expressed in US dollars, will be adjusted by a floating or fixed rate. The assets will be covered with Swap Cross Currency in order to cross the risk in Euro for LIBOR + Coupon.

F-49

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

• The Bank has a pre-fixed interest rate risk generated by government securities (NTN-F and LTN) in the Financial Assets portfolio measured through Other Comprehensive Income. To manage this mismatch, the entity contracts DI futures on the Stock Exchange and designates them as a derivative instrument in a hedge accounting framework.

• The Bank has pre-fixed interest rate risk on its liabilities through issues of real estate credit bills (LCI). To manage this risk, the entity contracts DI futures on the Exchange and designates them as a hedging instrument in a hedge accounting structure.

 

• The Bank has a risk to the IPCA index generated by the issuance of Guaranteed Real Estate Bills. To manage this risk, the Bank contracts IPCA futures (DAP) on the Exchange and designates them as a hedging instrument in a Hedge Accounting structure.

• The Bank has a risk to the IPCA (Broad pricing to consumers index) generated by debentures in the portfolio of securities available for sale. To manage this mismatch, it contracts IPCA (DAP) futures on the Stock Exchange and designates them as a derivative instrument in a Hedge Accounting structure.

In order to assess the effectiveness and measure the ineffectiveness of the strategies, the institution complies with international accounting standard IAS 39, which requires that the effectiveness test be performed at the beginning (prospective test) of the hedge structure and be repeated periodically (prospective and retrospective tests) in order to demonstrate that the hedge ratio remains effective.

Consolidated Financial Statements | December 31, 2021 | F-48

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

To assess the effectiveness and measure the ineffectiveness of the strategies, the Bank follows IAS 39, which requires that the effectiveness test be performed at the beginning (prospective test) of the hedge structure, and repeated periodically (prospective and retrospective test) to demonstrate that the hedge relationship remains effective.

a) Prospective test: according to the standard, the prospective test must be done on the start date (inception) and quarterly to demonstrate that the expectation regarding the effectiveness of the hedge relationship is high.

a.1) The initial prospective test (at inception):it is restricted to a qualitative review of the critical terms and conditions of the instrument and the hedged object, to a conclusion that changes in the market value of both instruments are expected to completely cancel each other out.

a.2) The prospective periodic test: the sensitivity of the present value of the hedged object and the hedging instrument to a parallel variation of 10 Basis Points in the interest rate curve will be computed periodically. For the purposes of effectiveness, the ratio of the two sensitivities must be between 80% and 125%.

b) Retrospective test: the retrospective effectiveness test will be conducted by comparing the market to market (mtm) variation of the hedge instrument from the beginning date with the variation of the hedge object's mtm from the beginning.

In fair value hedges, gains or losses, both on hedge instruments and on hedged items (attributable to the type of risk being protected) are recognized directly in the consolidated income statement.

Attributable to the type of risk being hedged

    2019   2018   2017
 

Hedge Structure

Accumulated Effective Portion

 

Ineffective Portion

 Accumulated Effective Portion Ineffective Portion Accumulated Effective Portion Ineffective Portion
 Fair Value Hedge           
 Government Bonds (LTN, NTN-F)(2,853,807) - (1,381,156) - (388,446) -
 Eurobonds- - - - - -
 LEA Government Bonds(61,761) - (191,472) - (1,200) -
 Resolution 2,770(94) - 689 - 304 -
 Trade Finance Off(4,015) - (58,020) - (57,386) -
 Total(2,919,677) - (1,629,959) - (446,728) -

   202120202019
 Hedge Structure Effective Portion AccumulatedPortion IneffectiveEffective Portion AccumulatedPortion IneffectiveEffective Portion AccumulatedPortion Ineffective
  Fair Value Hedge       
 Brazilian Treasury Bonds (LTN, NTN-F) 3,756,394  0   (2,183,841)0   (2,853,807)0   
 Bonds (LEA) 0   0   -   0   (61,761)0   
 Resolution 2770 0   0   -   0   (94)0   
 Trade Finance Off 728 0   (5,092)0   (4,015)0   
 Total 3,757,122  0   (2,188,933)0   (2,919,677)0   

 

Hedge Instruments

        
       12/31/2019
   Hedge Instruments   Hedge Objects
 AccruedAdjustment toAccounting AccruedAdjustment toAccounting

Strategies

CostMarket ValueValue CostMarket ValueValue
Swap Contracts3,249,742101,2643,351,005 3,555,326662,7734,218,099
Credit Operations Hedge1,118,21028,9931,147,202 1,423,80963,2311,487,040
Hedge of Securities2,131,53272,2712,203,802 2,131,517599,5422,731,059
Future Contracts789,631-789,631 45,427,1253,000,49048,427,614
Hedge of Securities789,631-789,631 45,427,1253,000,49048,427,614
         
      
        12/31/2021
        Hedge
     Hedge Instruments  Objects
   CurveAdjustment toAccountingCurveAdjustment toAccounting
 Strategies ValueMarket ValueValueValueMarket ValueValue
 Swap Contracts 84,767 (2,204)82,563 84,937 3,175 88,112 
 Credit Operations Hedge 84,767 (2,204)82,563 84,937 3,175 88,112 
 Future Contracts 41,437,967 (7,913)41,430,054 46,351,128 (2,031,108)44,320,021 
 Credit Operations Hedge 2,850,589 (14,439)2,836,150 2,738,830 15,685 2,754,515 
 Hedge of Securities 38,587,378 6,527 38,593,904 43,612,299 (2,046,793)41,565,506 
         
      
        12/31/2020
        Hedge
     Hedge Instruments  Objects
   CurveAdjustment toAccountingCurveAdjustment toAccounting
 Strategies ValueMarket ValueValueValueMarket ValueValue
 Future Contracts 46,649,331 -   46,649,331 42,529,036 2,802,690 45,331,727 
 Hedge of Securities 46,649,331 -   46,649,331 42,529,036 2,802,690 45,331,727 
         
      
        12/31/2019
        Hedge
     Hedge Instruments  Objects
   CurveAdjustment toAccountingCurveAdjustment toAccounting
 Strategies ValueMarket ValueValueValueMarket ValueValue
 Swap Contracts 3,249,741 101,264 3,351,004 3,555,326 662,773 4,218,099 
 Credit Operations Hedge 1,118,210 28,993 1,147,202 1,423,809 63,231 1,487,040 
 Hedge of Securities 2,131,532 72,271 2,203,802 2,131,517 599,542 2,731,059 
 Future Contracts 789,631 -   789,631 45,427,125 3,000,490 48,427,614 
 Hedge of Securities 789,631 -   789,631 45,427,125 3,000,490 48,427,614 
(*)The Bank has market risk hedge strategies, the objects of which are assets in its portfolio, which is why we demonstrate the passive edge of the respective instruments. For structures whose instruments are futures, we show the balance of the calculated daily adjustment, recorded in a clearing account.

 

        
       12/31/2018
   Hedge Instruments   Hedge Objects
 AccruedAdjustment toAccounting AccruedAdjustment toAccounting
StrategiesCostMarket ValueValue CostMarket ValueValue
Swap Contracts3,908,082140,4474,048,529 3,921,24965,0143,986,263
Credit Operations Hedge1,152,249115,1801,267,429 1,166,38750,6681,217,055
Hedge of Securities2,755,83325,2672,781,100 2,754,86214,3462,769,208
Future Contracts41,286,091-41,286,091 44,130,671(205,941)43,924,730
Hedge of Securities41,286,091-41,286,091 44,130,671(205,941)43,924,730

F-50

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-49

Table of Contents 

        
       12/31/2017
   Hedge Instruments   Hedge Objects
 AccruedAdjustment toAccounting AccruedAdjustment toAccounting
StrategiesCostMarket ValueValue CostMarket ValueValue
Swap Contracts 3,027,723 108,626 3,136,349  3,049,206 77,623 3,126,829
Credit Operations Hedge 1,286,522 109,604 1,396,126  1,302,830 79,496 1,382,326
Hedge of Securities 1,741,201 (978) 1,740,223  1,746,376 (1,873) 1,744,503
Future Contracts 22,206,615 - 22,206,615  24,415,397 364,434 24,779,831
Hedge of Securities 22,206,615 - 22,206,615  24,415,397 364,434 24,779,831

 

 

* Values expressed in thousands, except when indicated.

(*) The Bank has market risk hedge strategies, the objects of which are assets in its portfolio, which is why we demonstrate the passive edge of the respective instruments. For structures whose instruments are futures, we show the balance of the calculated daily adjustment, recorded in a clearing account.

a.6.I)a.6.II) Cash Flow Hedge

The Bank's cash flow hedge strategies consist of hedging exposure to changes in cash flows, interest payments and exchange rate exposure, which are attributable to changes in interest rates on recognized assets and liabilities and changes exchange rates for unrecognized assets and liabilities.

The Bank applies the cash flow hedge as follows:

• Enters into fixed-rate asset swaps and foreign currency liabilities and designates them as a hedging instrument in a Cash Flow Hedge structure, with the object of foreign currency loan operations negotiated with third parties through offshore agencies and securities Brazilian foreign debt held to maturity.

• It contracts Dollar futures or DDI + DI futures (Synthetic Dollar Futures) and designates them as a protection instrument in a Cash Flow Hedge structure, having as object item the Bank's credit portfolio in Dollars and Promissory Notes in securities portfolio available for sale.

• The Bank has a post-fixed interest rate risk (varies according to an index) arising from the treasury billsportfolio of credit classified as available for sale, which present expected cash flows subject to Selic variations over their duration. To manage these fluctuations, the Bank contracts DI futures and designates them as a protection instrument in a Cash Flow Hedge structure.

• Banco RCI Brasil SA has hedge operations whose purpose is to raise funds with bills of exchange (LF), bills of exchange (LC) and certificates of interbank deposits (CDI)assets indexed to CDIthe Euro and uses interesttraded at Offshore agencies. In the transaction, the value of the asset in Euro will be converted to Dollar at the exchange contract rate swapsfor entering the transaction. As of the conversion, the principal amount of the transaction, already expressed in dollars, will be corrected by a floating or pre-fixed rate. The assets will be hedged with Swap Cross Currency, in order to make pre-fixed funding and predicting future cash flows.transfer the risk in Euro to IBOR + Coupon.

To assess the effectiveness and measure the ineffectiveness of these strategies, Banco Santander follows IAS 39, which indicates that the effectiveness test must be carried out in the design / design/start of the hedge structure (prospective test) and repeated periodically (prospective and retrospective test) for demonstrate that the expectation of the hedge relationship remains effective (between 80 and 125%).

In this hedge strategy, the effectiveness tests (prospective / (prospective/retrospective) are conducted by comparing two proxies, one for the hedged object and the other for the instrument.

The hedge object proxy is a “conceptual” swap, where the passive “tip” simulates the part of the Stable Portion to be protected and the active pre-fixed “tip” is identical to the set of futures designated as a hedge, being consistent with market rates practiced on the day the hedge is designated. The hedge instrument proxy is a “conceptual” swap, where the active “tip” is made up of the number of futures contracts designated as hedging, and the passive pre-fixed “tip” is the rate negotiated in the acquisition of these contracts. The proxy is stable throughout the strategy since the contracts are maintained until maturity.

Any ineffectiveness is recognized in the income statement in the line Gains (losses) on financial assets and liabilities (net).

a) Prospective Test: according to the regulations, the prospective test must be performed on the start date and quarterly to demonstrate that the expectation regarding the effectiveness of the hedge relationship is high, however the tests are carried out monthly for proactive monitoring and more efficient projections, in addition to better maintenance of testing-related routines.

a.1) Periodic Prospective Test:Market Risk makes the projections of three scenarios for the tests, being: 1st 10bps on the curve; 2nd 50bps on the curve and 3rd 100bps on the curve. Using the validated estimates, prospective tests are performed by valuing the two variable legs of the transaction to market.

a.2) Initial Prospective Test:the methodology of the periodic prospective test should also be applied on the start date of each new strategy.

b) Retrospective test:test: it must be performed monthly with historical data to demonstrate cumulatively that the hedge was effective, according to the methodology presented above. Any ineffectiveness is recognized in the income statement.

Consolidated Financial Statements | December 31, 2021 | F-50

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

The Ineffective portion is recognized throughmeasured using the prospective hedge test.test and if identified recognized in the income statement in the line Gains (losses) on financial assets and liabilities (net).

Effectiveness should be between 80% and 125%.

In cash flow hedges, the effective portion of the variation in the value of the hedge instrument is temporarily recognized in equity under the caption “Other comprehensive income - cash flow hedges” (Note 26)25) until the anticipated transactions occur, when this portion is recognized in the consolidated income statement, except if the anticipated transactions result in the recognition of non-financial assets or liabilities, this portion will be included in the cost of the financial asset or liability. The non-effective portion of the variation in the value of foreign exchange hedge derivatives andis recognized directly in the consolidated income statement. And the ineffective portion of the gains and losses on cash flow hedge instruments in an operation abroad is recognized directly in “Gains (losses) on financial assets and liabilities (net)” in the income statements.consolidated statements of income.

Hedge Structure - Cash Flow

   202120202019
 Hedge Structure Effective Portion AccumulatedPortion IneffectiveEffective Portion AccumulatedPortion IneffectiveEffective Portion AccumulatedPortion Ineffective
  Cash Flow Hedge       
 Eurobonds 0   0   14,666 0   (6,074)0   
 Trade Finance Off (236,630)0   58,088 0   139,852 0   
 Government Securities (LFT) (982,648)-   727,437 -   503,665 -   
 Bank Deposit Certificate - CDB 402,779 -   -   -   -   -   
 Total (816,500)-   800,190 -   637,443 -   

 

Hedge Instruments / Hedge Object

F-51

Table of Contents

         
     12/31/2021
         
       Hedge InstrumentsHedge Object
   CurveAccountingAdjustment toCurveMarketAccounting
 Strategies ValueValue - liabilityMarket ValueValueValueValue
 Future Contracts 110,932,644(616,062)110,316,582 128,673,067(8,912,769)119,760,298  
 Credit Operations Hedge (1) 28,542,862(577,845)27,965,018 28,659,5451,508,397 30,167,942  
 Hedge of Securities 71,320,781(26)71,320,756 89,837,000(10,543,430)79,293,570  
 Funding Hedge 11,069,000(38,191)11,030,809 10,176,522122,264 10,298,786  
         
     12/31/2020
         
       Hedge InstrumentsHedge Object
    AccountingAdjustment to MarketAccounting
 Strategies  Value - liabilityMarket Value ValueValue
 Swap Contracts  1,428,053 1,428,053  1,302,666 1,302,666 
 Hedge of Securities  1,428,053 1,428,053  1,302,666 1,302,666 
 Future Contracts  19,500,234 19,500,234  23,447,934 23,447,934 
 Credit Operations Hedge (1)  19,500,234 19,500,234  23,447,934 23,447,934 
         
     12/31/2019
         
       Hedge InstrumentsHedge Object
    AccountingAdjustment to MarketAccounting
 Strategies  Value - liabilityMarket Value ValueValue
 Swap Contracts  1,361,658 35,110  1,396,768 1,324,685 
 Credit Operations Hedge  435,872 (3,494) 432,378 399,831 
 Hedge of Securities  925,786 38,604  964,390 924,854 
 Future Contracts  54,460,972 -    54,460,972 7,726,566 
 Credit Operations Hedge (1)  50,975,253 -    50,975,253 4,506,878 
 Hedge of Securities  3,485,719 -    3,485,719 3,219,688 
 (*)

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(ThousandThe Bank has cash flow hedge strategies, the objects of Brazilian Reais - R$ - unless otherwise stated) 

which are assets in its portfolio, which is why we have shown the liability side of the respective instruments. For structures whose instruments are futures, we show the notional's balance, recorded in a clearing account.

 

    2019   2018   2017
 

Hedge Structure

Accumulated Effective Portion

 

Ineffective Portion

 Accumulated Effective Portion Ineffective Portion Accumulated Effective Portion Ineffective Portion
 Cash Flow Hedge           
 Eurobonds(6,074) - (8,925) - (25,576) -
 Trade Finance Off139,852 - (16,453) (3,981) (94,896) 9,267
 Government Bonds (LFT)503,665 - 331,922 - 129,995 -
 Bancary Deposit Receipt - CDB- - 1,225 - 129,995 -
 Total637,443 - 307,769 (3,981) 139,518 9,267

 

    12/31/2019
     
   Hedge InstrumentsHedge Object
 AccruedAdjustment toMarketAccrued
StrategiesCostMarket ValueValueCost
Swap Contracts1,361,65835,1101,396,7681,324,685
Credit Operations Hedge435,872(3,494)432,378399,831
Hedge of Securities925,78638,604964,390924,854
Future Contracts54,460,972-54,460,9727,726,566
Credit Operations Hedge (1)50,975,253-50,975,2534,506,878
Hedge of Securities3,485,719-3,485,7193,219,688

    12/31/2018
     
   Hedge InstrumentsHedge Object
 AccruedAdjustment toMarketAccrued
StrategiesCostMarket ValueValueCost
Swap Contracts2,227,004(24,206)2,202,7982,423,678
Credit Operations Hedge1,032,28368,7301,101,0121,198,921
Hedge of Securities1,194,721(92,936)1,101,7861,224,757
Future Contracts44,541,939-44,541,93917,224,115
Credit Operations Hedge (1)44,000,952-44,000,95216,910,915
Hedge of Securities540,987-540,987313,200

(*) The Bank has cash flow hedge strategies, the objects of which are assets in its portfolio, which is why we have shown the liability side of the respective instruments. For structures whose instruments are futures, we show the notional's balance, recorded in a memorandum account.

(1) Updated value of the instruments on December 31, 2019 is R$8,425,386 (12/31/2018 - R$16,738,641).

Consolidated Financial Statements | December 31, 2021 | F-51

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

In Consolidated, the mark-to-market effect of swap and future asset contracts corresponds to a credit in the amount of R$11,063193,793 (12/31/20182020 - R$19,523)11,169) and is recorded in equity, reduced tax effects, of which R$6,327569 will be realized against revenue in the next twelve months.

a.7)

a.6) Derivative Financial Instruments - Margins Pledged as Guarantee

The margin given in guarantee for transactions traded at B3 S.A. with its own and third party derivative financial instruments is composed of federal public securities.

Composed of government securities

 201920182017
    
Financial Treasury Letters – LFT5,342,9927,552,926708,960
National Treasury Letters – LTN1,086,5563,392,8864,371,286
National Treasury Notes – NTN660,918873,1341,193,315
Total7,090,46611,818,9466,273,561
     202120202019
Financial Treasury Bills - LFT    31,305,549 4,363,666 5,342,992 
National Treasury Bills - LTN    3,751,223 6,155,276 1,086,556 
National Treasury Notes - NTN    7,725,538 2,814,274 660,918 
Total    42,782,310 13,333,215 7,090,466 

 

b) Short Positions

As of December 31, 2019,2021, the balance of short positions totaled R$23,501,417 (201812,780,599 (2020 - R$32,695,67745,807,946 and 20172019 - R$32,808,392)23,835,653) which includes the amount of financial liabilities resulting from the direct sale of financial assets purchased under commitments for resale or borrowed.

F-52

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

9.9.Loans and advances to clients

a) Breakdown

The breakdown, by classification, of the balances of “Loans and advances to clients” in the consolidated financial statements is as follows:

Thousand of reais201920182017 202120202019
  
Classification:  
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss-619,180-
Loans and Receivables-272,420,157
Financial Assets Measured At Amortized Cost326,699,480301,072,207-
Non-trading financial assets mandatorily measured at fair value through profit or lossNon-trading financial assets mandatorily measured at fair value through profit or loss392,455 60,808 -   
Loans and receivablesLoans and receivables -   -   -   
Financial assets measured at amortized costFinancial assets measured at amortized cost 464,451,587 393,707,229 326,699,480 
Of which:  
Loans and receivables at amortized cost347,256,660321,314,010287,829,213 Loans and receivables at amortized cost 492,962,247 417,761,218 347,256,660 
Impairment losses(20,557,180)(20,241,803)(15,409,056) (28,510,660)(24,053,989)(20,557,180)
Loans and advances to customers, net326,699,480301,691,387272,420,157Loans and advances to customers, net 464,844,042 393,768,037 326,699,480 
Loans and advances to customers, gross347,256,660321,933,190287,829,213Loans and advances to customers, gross 493,354,702 417,822,026 347,256,660 
  
Thousand of reaisThousand of reais 202120202019
 
Type:  
Loans operations (1) 457,384,432 390,941,415 329,910,319 
Lease Portfolio 2,532,048 2,096,240 2,111,842 
Repurchase agreementsRepurchase agreements 6,044,808 4,530,041 10,500 
Other receivables (2) 27,393,414 20,254,330 15,223,999 
Total 493,354,702 417,822,026 347,256,660 
(1)Includes loans and other loans with credit characteristics.
(2)Refers substantially to Foreign Exchange Transactions and Other Receivables with credit granting characteristics.

Thousand of reais201920182017
    
Type:   
Loans operations(1)329,910,319308,364,517272,561,017
Lease Portfolio2,111,8421,836,5041,888,444
Repurchase agreements10,500509,147403,415
Other receivables(2)15,223,99911,223,02212,976,337
Total347,256,660321,933,190287,829,213

(1) Includes loans and other loans with credit characteristics.

(2) Refers substantially to Foreign Exchange Transactions and Other Receivables with credit granting characteristics.

Note 44-d43-d contains a detaildetails of the residual maturity periods of loans and receivables.

financial assets measured at the corresponding amortized cost. There are no loans and advances to clients for materialcustomers in significant amounts without fixed maturity dates.

 

Consolidated Financial Statements | December 31, 2021 | F-52

Table of Contents

 

* Values expressed in thousands, except when indicated.

b) Detail

Following is a detail,Below, the details, by loancondition and type and status, borrowerof credit, debtor sector and interest rate formula, of the loans and advances to clients,customers, which reflect the Bank’sBank's exposure to credit risk in its core business,main activity, gross of impairment losses:reduction losses to recoverable value:

Thousand of reais201920182017 202120202019
Loan borrower sector:  
Commercial, and industrial145,387,439146,293,616140,619,110Commercial, and industrial 215,967,128 191,281,653 145,387,439 
Real estate - construction39,720,71336,515,35234,808,681
Real estate-constructionReal estate-construction 54,738,606 45,791,869 39,720,713 
Installment loans to individuals160,036,668137,287,593110,512,978Installment loans to individuals 220,115,963 178,652,145 160,036,668 
Lease financing2,111,8401,836,6291,888,444 2,533,004 2,096,359 2,111,840 
Total347,256,660321,933,190287,829,213 493,354,702 417,822,026 347,256,660 

Interest rate formula

Thousand of reais     202120202019 
Interest rate formula:         
Fixed interest rate     337,583,246 292,884,352 258,760,620  
Floating rate     155,771,456 124,937,674 88,496,040  
Total     493,354,702 417,822,026 347,256,660  
           

 

Debt sector by maturity

Thousand of reais201920182017
Interest rate formula:   
Fixed interest rate258,760,620240,772,724202,592,491
Floating rate88,496,04081,160,46685,236,722
Total347,256,660321,933,190287,829,213
         2021 
Debt Sector by MaturityLess than 1 year% of totalBetween 1 and 5 years% of totalMore than 5 years% of totalTotal% of total 
 
Commercial and industrial 165,729,422 61.37% 73,723,212            45.81% 8,221,617 13.18%247,674,251 50.20% 
 
Real estate 3,985,684 1.48% 10,137,988             6.30% 40,614,935 65.12%54,738,607 11.10% 
Installment loans to individuals 99,050,959 36.68% 75,832,619           47.12% 13,525,262 21.69%188,408,840 38.19% 
 
Lease financing 1,284,868 0.48% 1,238,498            0.77%9,638 0.02%2,533,004 0.51% 
Loans and advances to customers, gross270,050,934 100.00%160,932,317     100.00% 62,371,452100.00%493,354,702 100.00% 
 
           
           
         2020 
Debt Sector by MaturityLess than 1 year% of totalBetween 1 and 5 years% of totalMore than 5 years% of totalTotal% of total 
 
Commercial and industrial 127,569,542 58.23% 60,190,422 40.94% 3,521,688 6.81%191,281,652 45.78% 
 
Real estate 3,419,553 1.56% 8,973,495 6.10% 33,398,822 64.54%45,791,870 10.96% 
Installment loans to individuals 87,174,594 39.79% 76,667,187 52.15% 14,810,364 28.62%178,652,145 42.76% 
 
Lease financing899,055 0.41% 1,182,713 0.80%14,591 0.03%2,096,359 0.50% 
Loans and advances to customers, gross219,062,744 100.00%147,013,817 100.00%51,745,465100.00%417,822,026 100.00% 
 
           
         2019 
Debt Sector by MaturityLess than 1 year% of totalBetween 1 and 5 years% of totalMore than 5 years% of totalTotal% of total 
 
Commercial and industrial 102,083,249 54.83% 39,408,727 33.44%3,895,4639.01%145,387,439 41.87% 
 
Real estate 3,633,231 1.95% 8,145,568 6.91% 27,941,913 64.65%39,720,713 11.44% 
Installment loans to individuals 79,624,744 42.76% 69,034,596 58.58% 11,377,328 26.33%160,036,668 46.09% 
 
Lease financing855,624 0.46% 1,252,673 1.06%3,543 0.01%2,111,840 0.61% 
Loans and advances to customers, gross 186,196,848 100.00%   117,841,564 100.00%43,218,247100.00%347,256,660 100.00% 
 

 

F-53

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-53

2019
Debt Sector by MaturityLess than 1 year     % of totalBetween 1 and 5 years% of totalMore than 5 years% of totalTotal% of total
Commercial and industrial102,083,24954.83%39,408,72733.44%3,895,4639.01%145,387,43941.87%
Real estate3,633,2311.95%8,145,5686.91%27,941,91364.65%39,720,71311.44%
Installment loans to individuals79,624,74442.76%69,034,59658.58%11,377,32826.33%160,036,66846.09%
Lease financing855,6240.46%1,252,6731.06%3,5430.01%2,111,8400.61%
Loans and advances to customers, gross186,196,848100.00%117,841,564100.00%43,218,247100.00%347,256,660100.00%

2018
Debt Sector by MaturityLess than 1 year% of totalBetween 1 and 5 years% of totalMore than 5 years% of totalTotal% of total
Commercial and industrial109,802,82858.92%32,538,99932.77%3,951,78910.90%146,293,61645.44%
Real estate4,298,9252.31%7,964,3088.02%24,252,11966.90%36,515,35211.34%
Installment loans to individuals71,433,09938.33%57,808,60058.21%8,045,89422.20%137,287,59342.64%
Lease financing838,6590.45%997,6441.00%3260.00%1,836,6290.57%
Loans and advances to customers, gross186,373,511100.00%99,309,551100.00%36,250,128100.00%321,933,190100.00%

2017
Debt Sector by MaturityLess than 1 year% of totalBetween 1 and 5 years% of totalMore than 5 years% of totalTotal% of total
Commercial and industrial103,377,57161.65%31,262,49237.90%5,979,04719.25%140,619,11048.85%
Real estate7,791,7535.35%10,970,00413.29%16,046,92451.65%34,808,68112.09%
Installment loans to individuals62,078,22532.29%39,393,69947.74%9,041,05429.10%110,512,97838.40%
Lease financing1,000,4180.71%886,8331.07%1,1930.00%1,888,4440.66%
Loans and advances to customers, gross174,247,967100.00%82,513,028100.00%31,068,218100.00%287,829,213100.00%

F-54

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.Table of Contents 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated)  

* Values expressed in thousands, except when indicated.

Thousand of reais201920182017
    

Maturity 

   
Less than 1 year186,196,849 186,373,511174,247,968
Between 1 and 5 years117,841,56499,309,55182,513,030
More than 5 years43,218,24736,250,12831,068,215
Loans and advances to customers, gross347,256,660321,933,190287,829,213
    
Internal risk classification   
Low257,133,115240,440,294226,098,497
Medium-low56,549,19650,485,68233,635,378
Medium11,754,80611,967,26210,423,293
Medium - high 8,512,386 7,722,1988,215,024
High3,307,15611,317,7549,457,021
Loans and advances to customers, gross347,256,660321,933,190287,829,213

Maturity

Thousand of reais     202120202019
         
Maturity        
Less than 1 year     270,050,934 219,062,744 186,196,849 
Between 1 and 5 years     160,932,317 147,013,817 117,841,564 
More than 5 years     62,371,451 51,745,465 43,218,247 

Loans and advances to customers, gross

   493,354,702 417,822,026 347,256,660 
         
Internal risk classification     
Low     374,505,212 347,315,357 257,133,115 
Medium-low     79,216,725 24,277,404 56,549,196 
Medium     14,589,977 26,231,871 11,754,806 
Medium - high     9,413,110 3,896,457 8,512,386 
High     15,629,678 16,100,937 13,307,156 

Loans and advances to

Customers, gross

     493,354,702 417,822,026 347,256,660 
         

c) Impairment losses

The following tables below show the reconciliationreconciliations of the initialbeginning and finalending balances of the provisionallowance for losses by category of financial instrument. The terms ofexpected credit losses expected inover 12 months, expected credit losses expected during the maturityover their useful life and impairment losses are explained in the note on accounting practices. practices note.

The comparative values ​​referring to 01/01/2018 represent the provision for losses of credit on 12/31/2017 after the initial adoption adjustments of IFRS 9 (note 1)

The variationschanges in the provisions for impairment losses due to non-recovery in the balances of the item “Financial"Financial assets measured at amortized cost" are as follows:

Considering the amounts recognized in "Loss due to impairment of the amount of the recoverable value against the result" and the "Recoveries of loans written off as loss", and "PDD of Avals", the "Loss with financial assets - Financial assets measured at amortized cost" totaled in December 31, 2021, R$17,112,734 (2020 - R$17,450,188 and 2019 - R$13,369,905).

Changes in the allowances for the impairment losses on the balances of Loans and receivables

Thousand of reais       2021
     Stage 1Stage 2Stage 3 
     Credit losses expected in 12 monthsExpected credit losses over a useful life not subject to impairmentExpected credit losses during the useful life subject to impairmentTotal
         
Balance at beginning of year    5,837,199 4,928,606 14,874,684 25,640,489 
Impairment losses charged to income for the year   3,200,608 4,883,553 8,902,534 16,986,695 
Transfers between stages    (553,054)31,154 10,221,329 9,699,429 
Movement of the period    3,753,662 4,852,399 (1,318,795)7,287,266 
Of which:        
Commercial and industrial   347,3591,779,043 1,213,9073,340,309
Real estate-construction   4,411(50,798) 162,418116,031
Installment loans to individuals    2,851,6863,155,946 7,524,18313,531,815
Lease financing    (2,848) (638) 2,026(1,460) 
Variation by Stage     (2,060,142)(4,058,304)6,118,446 -
Write-off of impaired balances against recorded impairment allowance-   -   (12,903,807)(12,903,807)
Of which:        
Commercial and industrial   -   -   (5,153,345)(5,153,345)
Real estate-construction   -   -   (166,579)(166,579)
Installment loans to individuals   -   -   (7,575,967)(7,575,967)
Lease financing    -   -   (7,916)(7,916)
         
Balance at end of year     6,977,664 5,753,855 16,991,855 29,723,376 
Of which:        
Loans and advances to customers   6,861,404 5,703,285 15,945,970 28,510,659 
Loans and amounts due from credit institutions (Note 5)    21,825 -   -   21,825 
Provision for Debt Instruments  (Note 6)  94,435 50,570 1,045,887 1,190,892 
            
Recoveries of loans previously charged off  -   -   1,536,336 1,536,336 
Of which:        
Commercial and industrial   -   -   462,523 462,523 
Real estate-construction   -   -   64,257 64,257 
Installment loans to individuals   -   -   1,002,257 1,002,257 
Lease financing    -   -   7,299 7,299 
Discount granted    -   -   (1,662,375)(1,662,375)

Consolidated Financial Statements | December 31, 2021 | F-54

Table of Contents

 

* Values expressed in thousands, except when indicated.

         
Thousand of reais     202120202019
Balance at beginning of year    25,640,489 22,625,750 22,969,315 
Impairment losses charged to income for the year   16,986,695 18,311,441 14,361,382 
Of which:        
Commercial and industrial    3,340,309 6,918,671 2,376,910 
Real estate-construction    116,031 81,415 94,957 
Installment loans to individuals    13,531,815 11,308,689 11,866,475 
Lease financing     (1,460)2,666 23,040 
Write-off of impaired balances against recorded impairment allowance(12,903,808)(15,296,703)(14,704,948)
Of which:        
Commercial and industrial    (5,153,346)(4,616,722)(5,713,369)
Real estate-construction    (166,579)(232,262)(108,294)
Installment loans to individuals    (7,575,967)(10,433,131)(8,834,391)
Lease financing     (7,916)(14,588)(48,893)
Balance at end of year     29,723,376 25,640,488 22,625,750 
Of which:        
Loans and advances to customers   28,510,659 24,053,989 20,557,180 
Loans and amounts due from credit institutions (Note 5)  21,825 9,065 13,543 
Provision for Debt Instruments  (Note 6)   1,190,892 1,577,435 2,055,027 
         
Recoveries of loans previously charged off   1,536,336 861,253 991,476 
Of which:        
Commercial and industrial    462,523 422,023 519,594 
Real estate-construction    64,257 55,631 46,639 
Installment loans to individuals    1,002,257 370,491 417,477 
Lease financing     7,299 13,107 7,767 

Considering the amounts recognized in “Loss due to impairment of income against income” and “Recoveries of loans written off as loss”, and “Available allowances” the “Losses on financial assets - Financial assets measured at amortized cost” are as follows:

Thousand of reais    2019
  Stage 1Stage 2Stage 3 
  Credit losses expected in 12 monthsExpected credit losses over a maturity not subject to impairmentExpected credit losses during the maturity subject to impairmentTotal
      
Balance at beginning of year 3,917,2783,779,11915,272,91822,969,315
Impairment losses charged to income for the year 1,549,095365,19112,447,09614,361,382
Transfers between stages (1,386,769)(784,480)9,478,6987,307,449
Movement of the period 2,935,8641,149,6712,968,3987,053,934
Of which:     
Commercial and industrial (463,647)(77,270)2,917,8272,376,910
Real estate - construction (44,548)29,206110,29994,957
Installment loans to individuals 2,060,043415,8959,390,53711,866,475
Lease financing (2,753)(2,640)28,43323,040
Variation by Stage (1,107,772)(850,621)1,958,393-
Write-off of impaired balances against recorded impairment allowance --(14,704,948)(14,704,948)
Of which:     
Commercial and industrial --(5,713,369)(5,713,369)
Real estate - construction --(108,294)(108,294)
Installment loans to individuals --(8,834,391)(8,834,391)
Lease financing --(48,893)(48,893)
      
Balance at end of year 4,358,6013,293,69014,973,45922,625,750
Of which:     
Loans and advances to customers 4,291,7343,282,25212,983,19420,557,180
Loans and amounts due from credit institutions (Note 5) 13,543--13,543
Provision for Debt Instruments (Note 6) 53,32411,4381,990,2652,055,027
     -
Recoveries of loans previously charged off --991,476991,476
Of which:     
Commercial and industrial --519,594519,594
Real estate - construction --46,63946,639
Installment loans to individuals --417,477417,477
Lease financing --7,7677,767
      

F-55

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Thousand of reais2018
 Stage 1Stage 2 Stage 3  
Credit losses expected in 12 monthsExpected credit losses over a maturity not subject to impairment Expected credit losses during the maturity subject to impairmentTotal
       
Balance at beginning of year3,833,5533,767,490 13,122,019 20,723,062
Impairment losses charged to income for the year83,725389,100 13,067,280 13,540,105
Transfers between stages(1,096,539)(273,048) 4,502,795 3,133,208
Movement of the period1,180,264662,148 8,564,485 10,406,897
Of which:      
Commercial and industrial(311,546)(161,669) 4,093,507 3,620,292
Real estate - construction(10,173)(28,581) 231,655 192,901
Installment loans to individuals406,011581,068 8,721,164 9,708,243
Lease financing(567)(1,718) 20,954 18,669
Write-off of impaired balances against recorded impairment allowance-(377,471) (10,916,381) (11,293,852)
Of which:      
Commercial and industrial-(132,770) (3,848,644) (3,981,414)
Real estate - construction-(877) (189,783) (190,660)
Installment loans to individuals-(243,824) (6,855,729) (7,099,553)
Lease financing-- (22,225) (22,225)
       
Balance at end of year3,917,2783,779,119 15,272,918 22,969,315
Of which:      
Loans and advances to customers3,831,8123,727,264 12,682,727 20,241,803
Loans and amounts due from credit institutions (Note 5)-13,561 - 13,561
Provision for Debt Instruments (Note 6)85,46538,296 2,590,190 2,713,951
      -
Recoveries of loans previously charged off-- 826,573 826,573
Of which:      
Commercial and industrial-- 345,085 345,085
Real estate - construction-- 103,433 103,433
Installment loans to individuals-- 369,557 369,557
Lease financing-- 8,498 8,498

Thousand of reais

2017
Balance at beginning of year18,191,126
Impairment losses charged to income for the year13,492,072
Of which:
Commercial and industrial5,499,018
Real estate - construction471,366
Installment loans to individuals7,460,458
Lease financing61,230
Write-off of impaired balances against recorded impairment allowance(13,421,560)
Of which:
Commercial and industrial(5,715,903)
Real estate - construction(341,804)
Installment loans to individuals(7,312,310)
Lease financing(51,543)
Balance at end of year18,261,638
Of which:
Loans and advances to customers15,409,056
Loans and amounts due from credit institutions (Note 5)69,015
Provision for Debt Instruments (Note 6)2,783,567
Recoveries of loans previously charged off1,153,931
Of which:
Commercial and industrial412,514
Real estate - construction209,940
Installment loans to individuals521,589
Lease financing9,888

Taking into account these amounts recognizedtotaled in “Impairment losses charged to income for the year” and the "Recoveries of loans previously charged off", the "Impairment losses on financial assets - Loans and receivables” amounted on December 31, 2021, R$17,112,734 (2020- R$17,450,188 and 2019

F-56

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

R$13,369,905 (2018 - R$12,713,532 and 2017 - R$12,338,141)13,369,905).

The balances of the provision for losses due to non-recovery by debtor sector are as follows:

Thousand of reais     202120202019
         
Commercial and industrial    8,324,614 9,757,193 7,455,243 
Real estate - Construction    154,248 193,935 344,782 
Installment loans to individuals    21,240,296 15,675,765 14,800,208 
Lease financing     4,218 13,594 25,517 
Total     29,723,376 25,640,488 22,625,750 

Thousand of reais201920182017
    
Commercial and industrial7,455,24310,791,70210,338,225
Real estate - Construction344,782358,119493,422
Installment loans to individuals14,800,20811,768,1247,373,969
Lease financing25,51751,37056,022
Total22,625,75022,969,31518,261,638

d) Impaired assets

The details of the changes in the balance of the financial assets classified as “Loans and receivables – loans and advances to clients” (as defined at Note 1.i) and considered to be impaired due to credit risk are as follows:

Loans and receivables - loans and advances to customers

Thousand of reais     202120202019
         
Balance at beginning of year23,176,039 23,426,076 22,425,801 
Net additions     18,428,727 14,757,908 16,000,733 
Written-off assets     (14,681,454)(15,007,946)(15,000,458)
Balance at end of year     26,923,312 23,176,039 23,426,076 

Thousand of reais201920182017
    
Balance at beginning of year on 01/01/2018 previously to the initial adoption IFRS 9)22,425,80119,144,99518,887,132
IFRS9 initial adoption effects-702,992-
Balance at beginning of year on 01/01/2018 after the initial adoption IFRS 9)22,425,80119,847,98718,887,132
Net additions16,000,73313,871,66613,679,423
Written-off assets(15,000,458)(11,293,852)(13,421,560)
Balance at end of year23,426,07622,425,80119,144,995

Following is a detail of the financial assets considered to be impaired classified by age of the oldest past-due amount:

Thousand of reais201920182017
    
With no Past-Due Balances or Less than 3 Months Past Due11,729,92012,000,86710,844,831
With Balances Past Due by   
 3 to 6 Months3,961,0423,473,5914,123,796
 6 to 12 Months5,721,7624,929,0993,791,805
 12 to 18 Months985,4761,144,035271,965
 18 to 24 Months523,441325,70120,825
More than 24 Months504,435552,50891,773
Total23,426,07622,425,80119,144,995
    
Debt Sector   
Commercial and industrial10,072,65511,832,30211,993,953
Real estate - Construction826,8631,035,352781,886
Installment loans to individuals12,497,1799,499,1486,304,134
Lease financing29,37958,99965,022
Total23,426,07622,425,80119,144,995

F-57

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-55

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

Thousand of reais     202120202019
         
With no Past-Due Balances or Less than 3 Months Past Due 12,885,506 12,966,813 11,729,920 
With Balances Past Due by       
3 to 6 Months     4,717,302 3,049,974 3,961,042 
6 to 12 Months     6,866,628 4,798,859 5,721,762 
12 to 18 Months     1,253,046 1,243,809 985,476 
18 to 24 Months     659,702 607,527 523,441 
More than 24 Months     541,129 509,056 504,435 
Total     26,923,312 23,176,039 23,426,076 
         
Thousand of reais     202120202019
Debt Sector        
Commercial and industrial    11,439,692 10,558,213 10,072,655 
Real estate - Construction    470,115 456,130 826,863 
Installment loans to individuals    14,996,152 12,144,238 12,497,179 
Lease financing     17,353 17,458 29,379 
Total     26,923,312 23,176,039 23,426,076 

e) Loan past due for less than 90 days but not classified as impaired

Thousand of reaisThousand of reais2019% of total loans past due for less than 90 days2018% of total loans past due for less than 90 days2017% of total loans past due for less than 90 daysThousand of reais2021% of total loans past due for less than 90 days2020% of total loans past due for less than 90 days2019% of total loans past due for less than 90 days
          
Commercial and industrial Commercial and industrial 3,517,08615.42%4,424,14319.77%3,559,34919.90%Commercial and industrial  4,892,277 20.68% 5,131,885 25.80%3,517,086 15.42%
Real estate - Construction 5,781,97725.35%4,527,43220.23%4,879,56327.29%Real estate - Construction  3,605,641 15,24% 3,085,498 15.51%5,781,977 25.35%
Installment loans to individualsInstallment loans to individuals13,489,51359.13%13,255,64659.24%9,266,36651.82%Installment loans to individuals  15,150,254 64.04% 11,660,666 58.62%13,489,513 59.13%
Financial LeasingFinancial Leasing 24,3250.11%167,7410.75%176,5280.99%Financial Leasing 10,961 0,05%13,292 0.07%24,325 0.11%
Total(1) 22,812,900100.00%22,374,962100.00%17,881,806100.00%  23,659,133 100.00% 19,891,340 100.00%22,812,900100.00%
(1)Refers exclusively to loans between 1 and 90 days.

f) Lease at present value

As at December 31, 2019, 20182021, 2020 and 20172019 there were no leasing agreements or commitments that are considered individually relevantrelevant.

Breakdown by maturity

Gross investment in lease transactions

Thousand of reais   202120202019
         
Overdue     3,531 2,740 3,233 
Due to:        
Up to 1 year     1,067,567 952,172 978,748 
From 1 to 5 years     1,642,506 1,394,525 1,442,244 
Over 5 years     132,459 20,128 4,014 
Total     2,846,063 2,369,565 2,428,239 

 

Thousand of reais201920182017
     
Overdue 3,2334,81711,412
Due to:    
Up to 1 year 978,748975,1831,057,023
From 1 to 5 years 1,442,2441,160,9861,101,104
Over 5 years 4,0141,0712,177
Total 2,428,2392,142,0572,171,716

Consolidated Financial Statements | December 31, 2021 | F-56

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

g) Transfer of financial assets with retention of risks and benefits

On December 31, 2019,2021, the amount recorded on “Loans and advances to clients” related to loan portfolio assigned is R$76,028 (201840,790 (2020 - R$122,27155,284 and 20172019 - R$431,397)76,028) and R$75,500 (201840,511 (2020 - R$126,90655,105 and 20172019 - R$428,248)75,500) of “Other financial liabilities - Financial Liabilities Associated with Assets Transfer” (Note 21)20).

The assignment operation was carried out with a co-obligation clause, with compulsory repurchase in the following situations:

- defaulted contracts for a period of more than 90 consecutive days;

- contracts subject to renegotiation;

- contracts subject to portability, pursuant to Resolution 3,401 of the National Monetary Council (CMN);

- contracts subject to intervention.

10.Non-current assets held for sale

At December 31, 2019, 20182021, 2020 and 2017,2019, the total amount of non-current assets held for sale includes foreclosed assets and other tangible assets. The change in the "Non-current assets"Assets held for sale" is as follows:follows:

Thousand of reais 201920182017  202120202019
  
Balance at beginning of year 1,598,3671,507,5481,418,308 1,362,602 1,580,496 1,598,367 
Loan repayments - repossession of assets 735,864785,139524,497 235,904 445,173 735,864 
Capital Increase in Companies held for sale (1) 55,245- 66,197 -   55,245 
Additions / disposals (net) due to change in the scope of consolidation (2)-(130,713)-
Sales (808,980)(563,607)(434,553) (599,283)(663,067)(808,980)
Others -(704)
Final balance, gross 1,580,4961,598,3671,507,548 1,065,420  1,362,602 1,580,496 
Impairment losses (3) (255,161)(218,136)(352,092)
Impairment losses (2) (249,075)(269,693)(255,161)
Impairment as a percentage of foreclosed assets 16.14%13.65%23.37% 23.38% 19.79%16.14%
Balance at end of year 1,325,3351,380,2311,155,456 816,345 1,092,909 1,325,335 
(1)(1)On September 20, 2019, Santander Holding Imobiliária completed the acquisition of the company Summer Empreendimentos Ltda. (“Summer”), whose main asset is a branch located on Avenida Faria Lima in the city of São Paulo, for the amount of R$45,245. At the conclusionUpon completion of the transaction, a structured plan for the sale of this company to a third party in the short term was formalized. In December 2019, Santander Holding Imobiliária carried out a capital increase in Summer in the amount of R$10,000.

F-58

Table of Contents

 (2)

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

transaction, a structured plan for the sale of this company to a third party was formalized in the short term. In December 2019, Santander Holding Imobiliária carried out a capital increase in Summer in the amount of R$ 10,000.

(2)On June 30, 2018, Banco Santander management reevaluated its strategy on investing in Real TJK Empreendimento Imobiliário SA (currently called Rojo Entretenimento SA), a company that owns Teatro Santander, and decided to transfer the non-assets item -currents held for sale for investments in associates and controlled companies (Note 11).

(3)In 2019, it2021, includes the amount of R$ 251,945 (2018182,448 (2020 – R$159,120, 201724,751 and 2019 – R$271,670)251,945) of reversal of provisions for devaluations on propertiesreal estate and R$ 3,216 (2018 –2,194 (2020 - R$59,015)122) of provisions for devaluations on vehicles constituted, based on appraisal reports prepared by a specialized external consultancy, recordedaccounted for as a provision for losses due to non-recovery – Impairment.impairment losses.

11.11.Investments in associates and joint ventures

Jointly controlled

Banco Santander considers investments classified as jointly controlled when they possess a shareholders' agreement, which sets that the strategic, financial and operating decisions requires the unanimous consent of all investors.

Significant Influence

Associates are entities over which the Bank is in a position to exercise significant influence (significant influence is the power to participate in the financial and operating decisions of the investee) but it does not control or has joint control over the investee.

a) Breakdown

Jointly controlled and Significant Influence - Participation

Participation %
Jointly Controlled by Banco SantanderActivityCountry20192018 2017
Banco RCI Brasil S.A. BankBrazil39.89%39.89% 39.89%
Norchem Participações e Consultoria S.A. (1) Other ActivitiesBrazil50.00%50.00% 50.00%
Cibrasec - Companhia Brasileira de Securitização(1)(4) SecuritizationBrazil0.00%9.72% 9.72%
Estruturadora Brasileira de Projetos S.A. - EBP (1)(4)(6) Other ActivitiesBrazil11.11%11.11% 11.11%
Gestora de Inteligência de Crédito (2) Credit BureauBrazil20.00%20.00% 20.00%
Campo Grande Empreendimentos (10) Other ActivitiesBrazil25.32%25.32% 25.32%
Banco Hyundai Capital Brasil S.A. (11) BankBrazil50.00%50.00% 0.00%
Santander Auto S.A. (12) Other ActivitiesBrazil50.00%50.00% 0.00%
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.)      
Webmotors S.A. (7) Other ActivitiesBrazil70.00%70.00% 70.00%
Tecnologia Bancária S.A. - TECBAN (1) Other ActivitiesBrazil18.98%19.81% 19.81%
Hyundai Corretora de Seguros Insurance BrokerBrazil50.00%50.00% 50.00%
PSA Corretora de Seguros e Serviços Ltda. (8)(9) Insurance BrokerBrazil50.00%50.00% 50.00%
       
Significant Influence of Banco Santander      
Norchem Holding e Negócios S.A. (1)Other ActivitiesBrazil21.75%21.75% 21.75%

 Investments
 20192018 2017
Jointly Controlled by Banco Santander595,230613,366 495,264
Banco RCI Brasil S.A.509,890458,292 427,801
Norchem Participações e Consultoria S.A.21,07826,105 25,550
Cibrasec - Companhia Brasileira de Securitização-7,298 7,438
Estruturadora Brasileira de Projetos S.A. - EBP3,8893,690 4,707
Gestora de Inteligência de Crédito47,74459,098 29,513
Campo Grande Empreendimentos255255 255
Banco Hyundai Capital Brasil S.A. (anteriormente denomina da BHJV Assessoria e Consultoria Empresarial Ltda.)-51,073 -
Santander Auto S.A.12,3747,555 -
     
        Participation %
Jointly Controlled by Banco Santander  Activity Country202120202019
Banco RCI Brasil S.A.   BankBrazil39.89%39.89%39.89%
Norchem Participações e Consultoria S.A. (1)    Other ActivitiesBrazil0.00%0.00%50.00%
Estruturadora Brasileira de Projetos S.A. - EBP (1)(2)   Other ActivitiesBrazil11.11%11.11%11.11%
Gestora de Inteligência de Crédito (1)   Credit BureauBrazil19.45%20.00%20.00%
Campo Grande Empreendimentos (5)  Other ActivitiesBrazil25.32%25.32%25.32%
Santander Auto S.A.    Other ActivitiesBrazil50.00%50.00%50.00%
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.)      
Webmotors S.A. (3)  Other ActivitiesBrazil70.00%70.00%70.00%
Tecnologia Bancária S.A. - TECBAN (1)  Other ActivitiesBrazil18.98%18.98%18.98%
Hyundai Corretora de Seguros  Insurance BrokerBrazil50.00%50.00%50.00%
PSA Corretora de Seguros e Serviços Ltda. (4)     Insurance BrokerBrazil50.00%50.00%50.00%
Jointly Controlled by Aymoré CFI         
Solutions 4Fleet    Other ActivitiesBrazil80.00%0.00%0.00%
Significant Influence of Banco Santander       
Norchem Holding e Negócios S.A. (1)  Other ActivitiesBrazil0.00%0.00%21.75%

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA)454,280419,016 350,440
Webmotors S.A.296,216273,721 197,930
Tecnologia Bancária S.A. - TECBAN156,589144,090 151,019
Hyundai Corretora de Seguros934- -
PSA Corretora de Seguros e Serviços Ltda.5411,205 1,491
     
Significant Influence of Banco Santander21,25220,933 20,860
Norchem Holding e Negócios S.A.21,25220,933 20,860
Total1,070,7621,053,315 866,564

F-59

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

  Results of Investments
 20192018 2017
Jointly Controlled by Banco Santander92,97641,212 39,904
Banco RCI Brasil S.A.105,25046,244 44,384
Norchem Participações e Consultoria S.A.9751,120 1,333
Cibrasec - Companhia Brasileira de Securitização75193 389
Estruturadora Brasileira de Projetos S.A. - EBP199(1,017) (1,560)
Gestora de Inteligência de Crédito(11,354)(6,466) (4,642)
Banco Hyundai Capital Brasil S.A. (anteriormente denomina da BHJV Assessoria e Consultoria Empresarial Ltda.)-1,083 -
Santander Auto S.A.(2,169)55 -
     
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA)55,93624,161 30,430
Webmotors S.A.42,84830,626 21,290
Tecnologia Bancária S.A. - TECBAN12,498(6,929) 8,307
Hyundai Corretora de Seguros(66)- -
PSA Corretora de Seguros e Serviços Ltda.656464 833
     
Significant Influence of Banco Santander576585 1,217
Norchem Holding e Negócios S.A.576585 1,217
Total149,48865,958 71,551

    2019
 Total assetsTotal liabilities Total Income(11)
Jointly Controlled by Banco Santander14,121,61812,502,780 206,482
Banco RCI Brasil S.A.13,452,71612,174,504 263,851
Norchem Participações e Consultoria S.A.69,86527,709 1,949
Estruturadora Brasileira de Projetos S.A. - EBP35,314311 1,790
Gestora de Inteligência de Crédito527,362288,643 (56,769)
Santander Auto S.A.36,36111,613 (4,339)
     
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA)2,873,1401,628,364 125,439
Webmotors S.A.484,45460,734 61,212
Tecnologia Bancária S.A. - TECBAN2,382,9071,564,801 63,046
Hyundai Corretora de Seguros Ltda.1,90941 (132)
PSA Corretora de Seguros e Serviços Ltda.3,8702,788 1,313
     
Significant Influence of Banco Santander126,93729,226 2,650
Norchem Holding e Negócios S.A.126,93729,226 2,650
Total17,121,69514,160,370 334,571

F-60

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

          
         2018
      Total assetsTotal liabilities Total Income(11)
Jointly Controlled by Banco Santander     10,500,0558,755,688 80,954
Banco RCI Brasil S.A. 9,849,5088,679,715 115,928
Norchem Participações e Consultoria S.A. 79,63327,423 2,240
Cibrasec - Companhia Brasileira de Securitização 80,3003,893 1,989
Estruturadora Brasileira de Projetos S.A. - EBP 33,389176 (9,151)
Gestora de Inteligência de Crédito   338,38242,894 (32,328)
Banco Hyundai Capital Brasil S.A. (anteriormente denomina da BHJV Assessoria e Consultoria Empresarial Ltda.)   103,7031,557 2,166
Santander Auto S.A.   15,14030 110
          
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) 2,463,2621,573,082 9,703
Webmotors S.A.  221,31360,905 43,751
Tecnologia Bancária S.A. - TECBAN  2,238,1561,510,794 (34,976)
PSA Corretora de Seguros e Serviços Ltda.   3,7931,383 928
          
Significant Influence of Banco Santander     123,95927,714 2,690
Norchem Holding e Negócios S.A.   123,95927,714 2,690
Total     13,087,27610,356,484 93,347
          
         2017
      Total assetsTotal liabilities Total Income(11)
Jointly Controlled by Banco Santander     9,432,7388,043,604 43,866
Banco RCI Brasil S.A. 9,057,2617,985,647 74,452
Norchem Participações e Consultoria S.A.  78,67427,574 2,665
Cibrasec - Companhia Brasileira de Securitização86,3789,884 4,000
Estruturadora Brasileira de Projetos S.A. - EBP42,627264 (14,040)
Gestora de Inteligência de Crédito167,79820,235 (23,211)
          
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) 1,967,9891,077,782 74,861
Webmotors S.A.  490,45850,413 31,264
Tecnologia Bancária S.A. - TECBAN  1,472,7741,025,593 41,932
 PSA Corretora de Seguros e Serviços Ltda.   4,7571,776 1,665
          
Significant Influence of Banco Santander     122,17626,267 5,597
Norchem Holding e Negócios S.A.   122,17626,267 5,597
Total     11,522,9039,147,653 124,324

b) Changes

The changes in the balance of this item in the years ended December 31, 2019, 2018 and 2017 were:

      20192018 2017
Jointly Controlled by Banco Santander         
Balance at beginning of year   1,032,382845,704 969,097
Additions / disposals (net) due to change in the scope of consolidation  (51,073)- -
Additions /disposals (5)     746119,557 34,154
Capital reduction     -36,051 -
Share of results of entities accounted for using the equity method148,91265,373 70,334
Dividends proposed/received     (69,904)(35,351) (200,620)
Others     (11,553)1,048 (27,261)
Balance at end of year     1,049,5101,032,382 845,704
          
Significant Influence of Banco Santander         
Balance at beginning of year     20,93320,860 20,980
Share of results of entities accounted for using the equity method  576585 1,217
Dividends proposed/received     (257)(512) (1,337)
Balance at end of year     21,25220,933 20,860

F-61

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

(1) Companies with a delay of one month forone-month lag in the equity calculation. To registeraccount for the equity income, itthe position of 11/30/2021 was used on 12/31/2019 the position of 11/30/2019.2021. 

(2) Company incorporated in April 2017 and is in the pre-operational phase. Pursuant to the shareholders' agreement, control is shared between shareholders who hold 20% of their capital share each. At the Extraordinary General Meeting held on July 6, 2017, the capital increase of Gestora de Crédito was approved in the total amount of R$65,822, so that the capital share increased from R$1 to R$65,823, through the issue of 6,582,200 (six million, five hundred and eighty-two thousand and two hundred) new shares, of which 3,291,100 (three million, two hundred and ninety-one thousand and one hundred), 1,316,440 (one million, three hundred and sixteen thousand, four hundred and forty) preferred shares Class A and 1,316,440 (one million, three hundred and sixteen thousand, four hundred and forty) preferred shares Class B and 658,220 (six hundred and fifty eight thousand, two hundred and twenty) class C preferred shares, with no par value, at the issue price of R$10.00, corresponding to the equity value of the shares. The shares issued in the capital increase were fully subscribed on the same date by the shareholders in the proportion of 20% of their capital share each.  

(3) In 2017 refers to the incorporation of Gestora de Inteligência de Crédito - partnership between Banco Santander and other banks from brazilian market (according to note 3).

(4) Although the participations wasinterest is less than 20%, the Bank exercises jointly-control overjoint control in the entity together with the other major stockholders'majority shareholders, through a stockholders'shareholders' agreement wherein which no business decision can be taken by a single stockholder.shareholder. 

(5) At(3) Although the EGM held in October 5, 2017, it was approved the share capital increase of the Gestora de Crédito in the amount of R$285,205, that way its share capital increased from R$65,823 to R$351,028, through the issuance of 29,013,700 new shares, being 14,506,850 as ordinary shares, 5,802,740 preferred shares Class A, 5,802,740 preferred shares Class B, and 2,901,370 preferred shares Class C, without par value, at the issuance price of R$ 9,83 per share. It was also approved by unanimous decision the payment timetable of the new shares issuance made by the Management of Gestora de Crédito. That way, the share capital increase was fully subscribed at the same day by the shareholders in the proportion of 20% of each interest which were partially paid.

(6) According to its Bylaws, EBP was formed in order to carry out projects to contribute for the brazilian economic and social development for the period of 10 years. After the conclusion of the timetable set EPB closes its activities this year of 2018. The dissolution of its rights and liquidation were aproved in the EGM held on january 29, 2018.

(7) Although participation exceeds 50%, in accordance with the shareholders' agreement, the control is shared by Santander Corretora de Seguros (Current corporate name of Santander Participações S.A.), and Carsales.com.Carsales.com Investments PTY LTDLTD. (Carsales), shareholder based in Australia.. 

(8) Pursuant to(4) In accordance with the shareholders' agreement, the control is shared by Santander Corretora de Seguros (current corporate name of Santander Participações SA) and PSA Services LTD.

(9) In December 2017, according to the contractual change, the PSA Corretora de Seguros shareholders decided to increase its share capital in R$401, that way the share capital increased(5) Interest arising from R$ 500 to R$901, through the issuance of 400,532 new shares, which each new share has the value of R$1. The new shares issued were subscribed and paid at the same date, in local currency, according to the proportion of each shareholder equivalent to 50% to the company´s share capital, that is, 200.266 shares.
(10) Participation resulting from the credit recovery from theof Banco Comercial ande de Investimentos Sudameris S.A. incorporated, merged in 2009 by Banco ABN AMRO Real S.A., which in the same year was incorporatedmerged into the Banco Santander (Brasil) S.A., one of the Company partner.Company's partners. The partners are conducting the procedures for extinctionthe dissolution of the company, whosewhich depends on the sale of a property. Once it has been sold, the liquidation of the company will be liquidated and each partner will receive itstheir share of the equity.

Consolidated Financial Statements | December 31, 2021 | F-57

Table of Contents

 

* Values expressed in thousands, except when indicated.

Jointly controlled and Significant Influence - Investments

Investments
       202120202019
Jointly Controlled by Banco Santander       628,040 590,219 595,230 
Banco RCI Brasil S.A.591,745 544,236 509,890 
Norchem Participações e Consultoria S.A.-   -   21,078 
Estruturadora Brasileira de Projetos S.A. - EBP 1,257 1,273 3,889 
Gestora de Inteligência de Crédito 13,522 28,680 47,744 
Campo Grande Empreendimentos255 255 255 
Santander Auto S.A.     21,261 15,775 12,374 
          
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.)593,002 504,766 454,280 
Webmotors S.A.    359,092 316,597 296,216 
Tecnologia Bancária S.A. - TECBAN     232,109 186,357 156,589 
Hyundai Corretora de Seguros      1,260 1,044 934 
PSA Corretora de Seguros e Serviços Ltda.     541 768 541 
Jointly Controlled by Aymoré CFI      11,604 -   -   
Solutions 4Fleet      11,604 -   -   
Significant Influence of Banco Santander    -   -   21,252 
Norchem Holding e Negócios S.A.     -   -   21,252 
Total      1,232,646 1,094,985 1,070,762 

Jointly controlled and Significant Influence - Results of Investments

Results of Investments

       202120202019
Jointly Controlled by Banco Santander    54,493 50,915 92,976 
Banco RCI Brasil S.A. 62,813 72,057 105,250 
Norchem Participações e Consultoria S.A.   -   333 975 
Cibrasec - Companhia Brasileira de Securitização -   -   75 
Estruturadora Brasileira de Projetos S.A. - EBP (16)9 199 
Gestora de Inteligência de Crédito    (14,419)(19,064)(11,354)
Santander Auto S.A.     6,115 (2,421)(2,169)
          
          
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) 91,833 61,380 55,936 
Webmotors S.A.  45,817 38,823 42,848 
Tecnologia Bancária S.A. - TECBAN  45,752 22,219 12,498 
Hyundai Corretora de Seguros      216 110 (66)
PSA Corretora de Seguros e Serviços Ltda.    48 226 656 
          
Jointly Controlled by Aymoré CFI(2,142)-   -   
Solutions 4Fleet    (2,142)-   -   
          
Significant Influence of Banco Santander -   (33)576 
Norchem Holding e Negócios S.A.   -   (33)576 
Total      144,184 112,261 149,488 

Consolidated Financial Statements | December 31, 2021 | F-58

Table of Contents

 

* Values expressed in thousands, except when indicated.

Jointly controlled and Significant Influence - Total

         2021
       Total AssetsTotal LiabilitiesTotal Income
Jointly Controlled by Banco Santander    12,488,103 12,473,458 95,420 
Banco RCI Brasil S.A.  11,147,493 11,080,238 157,462 
Estruturadora Brasileira de Projetos S.A. - EBP  11,339 11,476 (136)
Gestora de Inteligência de Crédito    1,173,234 1,237,937 (74,136)
Santander Auto S.A.     156,037 143,807 12,230 
          
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) 3,055,130 2,824,094 231,035 
Webmotors S.A.   342,195 276,743 65,452 
Tecnologia Bancária S.A. - TECBAN   2,707,571 2,542,515 165,056 
Hyundai Corretora de Seguros Ltda.      3,353 2,921 431 
PSA Corretora de Seguros e Serviços Ltda.     2,011 1,915 96 
          
Controlled by Aymoré CFI 14,871 17,548 (2,677)
Solutions 4Fleet.  14,871 17,548 (2,677)
Total      15,558,104 15,315,100 323,778 
          
         2020
       Total AssetsTotal LiabilitiesTotal Income
Jointly Controlled by Banco Santander      12,900,571 11,255,396 51,847 
Banco RCI Brasil S.A. 11,620,304 10,255,995 99,951 
Norchem Participações e Consultoria S.A.  70,475 27,781 534 
Estruturadora Brasileira de Projetos S.A. - EBP  11,562 39 148 
Gestora de Inteligência de Crédito    1,126,424 933,115 (45,410)
Santander Auto S.A.   71,807 38,466 (3,376)
          
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) 2,952,308 1,692,770 68,469 
Webmotors S.A.  512,687 78,856 21,529 
Tecnologia Bancária S.A. - TECBAN   2,435,377 1,612,822 46,735 
Hyundai Corretora de Seguros Ltda.  2,076 251 (43)
PSA Corretora de Seguros e Serviços Ltda.   2,168 841 247 
          
Significant Influence of Banco Santander    126,877 29,391 (225)
Norchem Holding e Negócios S.A.     126,877 29,391 (225)
Total      15,979,756 12,977,558 120,091 
          
         2019
       Total AssetsTotal LiabilitiesTotal Income 
Jointly Controlled by Banco Santander    14,121,618 12,502,780 206,482 
Banco RCI Brasil S.A.13,452,716 12,174,504 263,851 
Norchem Participações e Consultoria S.A. 69,865 27,709 1,949 
Estruturadora Brasileira de Projetos S.A. - EBP35,314 311 1,790 
Gestora de Inteligência de Crédito527,362 288,643 (56,769)
Santander Auto S.A.36,361 11,613 (4,339)
          
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) 2,873,140 1,628,364 125,439 
Webmotors S.A.   484,454 60,734 61,212 
Tecnologia Bancária S.A. - TECBAN   2,382,907 1,564,801 63,046 
Hyundai Corretora de Seguros Ltda.      1,909 41 (132)
 PSA Corretora de Seguros e Serviços Ltda.    3,870 2,788 1,313 
          
Significant Influence of Banco Santander    126,937 29,226 2,650 
Norchem Holding e Negócios S.A.    126,937 29,226 2,650 
Total      17,121,695 14,160,370 334,571 

Consolidated Financial Statements | December 31, 2021 | F-59

Table of Contents

 

* Values expressed in thousands, except when indicated.

(11) Company incorporated on December 13, 2018, upon transformation of BHJV Assessoria e Consultoria em Gestão Empresarial Ltda. Aymoré CFI, a wholly-owned subsidiary of Banco Santander, holds the company's operational control. (Note 3).

In 2019, based on the shareholders' agreement, it was concluded that Banco SantanderThe Bank has theno guarantees granted to companies with joint control and therefore, began to consolidate the Company.significant influence.

(12) Insurance company incorporated on October 9, 2018, through transformation of the corporate vehicle L.G.J.S.P.E. Empreendimentos e Participações S.A., submitted to Susep to obtain authorization to operate. In accordance with the shareholders' agreement, the control is shared by Sancap and HDI Seguros S.A., (Note 3).

(*) The Bank does not have collateral with associates and joint ventures.

(**) The Bank does not have contingent liabilities with significant possible risk of loss as possible related to investments in affiliatesfor companies with joint control and significant influence.

(***) Asb) Changes

The changes in the balance of this item in the years ended December 31, 2021, 2020 and 2019 2018were:

Jointly controlled and 2017,Significant Influence - Changes in the balances of Assets, Liabilities and Profit refer to 100% of the company balance sheet. There is no balance for the caption "Other Comprehensive Income" in these companies, except for the RCI Bank which recorded R$57,139 (2018- R$30,357 and 2017 - R$40,671).

       202120202019
Jointly Controlled by Banco Santander       
Balance at beginning of year   1,094,985 1,049,510 1,032,382 
Additions / disposals (net) due to change in the scope of consolidation (739)(41,851)(51,073)
Additions /disposals      13,746 13,571 746 
Share of results of entities accounted for using the equity method 144,184 112,293 148,912 
Dividends proposed/received      (66,878)(59,784)(69,904)
Others      47,348 21,246 (11,553)
Balance at end of year      1,232,646 1,094,985 1,049,510 
          
Significant Influence of Banco Santander       
Balance at beginning of year      -   21,252 20,933 
Share of results of entities accounted for using the equity method  -   (33)576 
Dividends proposed/received      -   (239)(257)
Alienation      -   (20,980)-   
Balance at end of year      -   -   21,252 

 

c) Impairment losses

No impairment losses were recognized on investments in associates and joint ventures in 2019, 20182021, 2020 and 2017.2019.

d) Other information

Details of the principal jointly controlled entities:

Banco RCI Brasil S.A.:A company incorporated in the form of a joint stock company with headquarters in Paraná, aims to the main practice of investment, leasing, credit, financing and investment operations, with a view to sustain the growth of the automotive brands Renault and Nissan in the Brazilian market, with operations focused on, mainly to financing and leasing to the final consumer. It is a financial institution that is part of the RCI Group Banque and Santander Conglomerate, their operations being conducted in the context of a set of institutions that operate in the financial market. According to the Shareholders' Agreement, the main decisions that impact this company is taken jointly between Banco Santander and other controlling shareholders.

Webmotors S.A.: A company incorporated in the form of a privately held company with headquarters in São Paulo and has as its object

development, implementation and / or availability of electronic catalogs, space, product, services or means for the sale of products and / or services related to the automobile industry, on the Internet through the "website" www.webmotors.com.br (owned by Webmotors) or other means related to electronic commerce activities and other uses or applications of the Internet, as well as participation in the capital of other companies and the management of related businesses and ventures. It is a member of the Santander Economic-Financial Conglomerate (Conglomerado Santander) and Carsales.com Investments PTY LTD (Carsales), with its operations conducted in the context of a set of institutions that act in an integrated manner. According to the Shareholders' Agreement, the main decisions that impact this company are taken jointly between Banco Santander and other controllers.

F-62

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

    2019 2018  2017
   Banco RCI BrasilWebmotorsBanco RCI BrasilWebmotorsBanco RCI Brasil Webmotors
 Current assets 12,052,008241,9199,849,508221,3139,057,261 490,458
Current liabilities 10,781,92161,2908,679,71560,9057,985,647 50,413
Cash and cash equivalents 489,4001,66737,1151,03447,782 1,989
Depreciation and amortization (1,666)(9,234)(977)(7,423)(1,600) 16,353
Revenue 661,215165,0491,316,687167,8811,315,695 127,064
Interest income 1,401,1545,0791,290,7034,1341,294,119 7,178
Interest expense (547,546)-(575,944)-(626,654) -
Tax Income / (expense) (83,455)(26,863)(147,266)(16,013)(122,544) (12,568)
Current financial liabilities (excluding trade and other payables and provisions) 4,178,76153,8073,130,90849,7093,897,010 33,320
Non-current financial liabilities (excluding trade and other payables and provisions) 6,470,0811,0064,813,9095,4584,058,986 3,247

 

Consolidated Financial Statements | December 31, 2021 | F-60

Table of Contents

 

* Values expressed in thousands, except when indicated.

Principal jointly controlled entities

     2021 2020 2019
   Banco RCI Brasil WebmotorsBanco RCI BrasilWebmotorsBanco RCI BrasilWebmotors
 Current assets 10,187,883  342,195  11,270,565 276,170 12,052,008 241,919 
Current liabilities 8,754,744  71,742 9,825,654 220,707 10,781,921 61,290 
Cash and cash equivalents 341,015  2,746 201,142 1,411 489,400 1,667 
Depreciation and amortization (1,628) (19,152)(1,577)(14,949)(1,666)(9,234)
Revenue 637,856  331,586 732,253 277,270 661,215 165,049 
Interest income 1,308,649  3,938 1,354,283 2,283 1,401,154 5,079 
Interest expense (592,776) -   (483,506)-   (547,546)0   
Tax Income / (expense) (105,266) (32,819)(169,957)(26,314)(83,455)(26,863)
Current financial liabilities (excluding trade and other payables and provisions) 3,293,251  58,910 3,279,806 58,910 4,178,761 53,807 
Non-current financial liabilities (excluding trade and other payables and provisions) 5,218,945  796 5,947,683 796 470,081 1,006 

12.Tangible assetsProperty, plant and equipment

Tangible assets of the Bank relate to property plant and equipment for the its own use. The Bank does not have tangible assets held as investment property nor leased out under operating leases. The Bank is also not a part of any financial lease contracts as of and during fiscal years ended December 31, 2019, 2018 and 2017.

a) Breakdown

The detail, by class of asset, of the tangible assets in the consolidated balance sheets is as follows:

Tangible assets in the consolidated balance sheets

Thousand of reais        
Cost Land and buildingsIT equipment and fixturesFurniture and vehiclesRight-of-use of Assets Others TotalLand and buildingsIT equipment and fixturesFurniture and vehiclesLeased Fixed AssetsOthersTotal
Balance at December 31, 2016 2,711,1933,367,0157,858,881- 3,759 13,940,848
Balance on December 31, 20182,779,038 4,628,325 9,231,131 -   1,683 16,640,177 
Initial adoption IFRS 16-   -   -   2,465,750 -   2,465,750 
Additions -382,571723,835- - 1,106,40685,333 826,685 1,012,395 -   370 1,924,783 
Additions resulting mergers-   -   -   689,982 -   689,982 
Cancellation of lease agreements-   -   -   (72,951)-   (72,951)
Write-off (52,102)(180,036)(31,053)- - (263,191)(17,041)(122,926)(122,279)-   -   (262,246)
Transfers (9,779)718,666(721,520)- - (12,633)(7,160)13,236 51,445 -   -   57,521 
Balance at December 31, 2017 2,649,3124,288,2167,830,143- 3,759 14,771,430
 
Additions 2,534450,857942,358- 381 1,396,130
Write-off (18,230)(162,497)(199,877)- - (380,604)
Change in the scope of consolidation 99,75919,51717,749- 1,302 138,327
Transfers 45,66332,232640,758- (3,759) 714,894
Balance at December 31, 2018 2,779,0384,628,3259,231,131- 1,683 16,640,177
Balance on December 31, 20192,840,170 5,345,320 10,172,692 3,082,781 2,053 21,443,016 
  
Initial adoption IFRS 16 -2,465,750 - --   -   -   -   -   -   
Additions 85,333826,6851,012,395689,982 370 2,614,7658,831 559,388 667,704 -   -   1,235,923 
Additions resulting mergers-   -   -   738,603 -   738,603 
Cancellation of lease agreements -(72,951) (72,951)-   -   -   (246,308)-   (246,308)
Write-off (17,041)(122,926)(122,279)- - (262,246)(23,771)(2,241,220)(416,600)-    (2,681,591)
Transfers (7,160)13,23651,445- - 57,521(8,485)120,158 39,861 -   (806)150,728 
Balance at December 31, 2019 2,840,1705,345,32010,172,6923,082,781 2,053 21,443,016
Balance on December 31, 20202,816,745 3,783,646 10,463,657 3,575,076 1,247 20,640,371 
  
Accumulated depreciation Land and buildingsIT equipment and fixturesFurniture and vehiclesRight-of-use of Assets Others Total
Balance at December 31, 2016 (594,210)(2,509,099)(4,172,234)- - (7,275,543)
Initial adoption IFRS 16-   -   -   -   -   -   
Additions (81,910)(499,542)(609,515)- - (1,190,967)32,959 435,858 693,957 -   -   1,162,774 
Additions by Company Acquisition-   -   -   103,449 -   103,449 
Cancellation of lease agreements-   -   -   (254,101)-   (254,101)
Write-off 37,136154,47122,196- - 213,803(50,181)(1,584,956)(402,817)-   -   (2,037,954)
Transfers 9,734(437,527)427,506- - (287)-   651,607 (468,561)-   -   183,046 
Balance at December 31, 2017 (629,250)(3,291,697)(4,332,047)- - (8,252,994)
Balance on December 31, 20212,799,523 3,286,155 10,286,236 3,424,424 1,247 19,797,585 
  
Additions (82,714)(485,607)(649,557)- - (1,217,878)
Write-off 8,816140,332109,447- - 258,595
Change in scope of consolidation (5,602)(1,448)(7,136)- - (14,186)
Transfers (52,094)(76,292)(631,965)- - (760,351)
Balance at December 31, 2018 (760,844)(3,714,712)(5,511,258)- - (9,986,814)
 
Additions (93,455)(482,256)(730,993)(564,132) - (1,870,836)
Write-off 10,517148,48665,0168,316 - 232,335
Transfers 15,09110,272(9,183)- - 16,180
Balance at December 31, 2019 (828,691)(4,038,210)(6,186,417)(555,816) - (11,609,134)
 
Losses from non-recovery (impairment) 
Balance at December 31, 2016 (13,031)-(5,841)- - (18,872)
Impacts on results 9,784-1,047- - 10,831
Transfers -(512)- - (512)
Balance at December 31, 2017 (3,247)-(5,306)- - (8,553)
 
Impacts on results (10,607)-(49,556)- - (60,163)
Transfers (5)-4,333- - 4,328
Balance at December 31, 2018 (13,859)-(50,529)- - (64,388)
 
Impacts on results (587)-13,050- - 12,463
Transfers - - -
Balance at December 31, 2019 (14,446)-(37,479)- - (51,925)
 
Carrying amount 
Balance at December 31, 2017 2,016,815996,5193,492,790- 3,759 6,509,883
Balance at December 31, 2018 2,004,335913,6133,669,344- 1,683 6,588,975
Balance at December 31, 2019 1,997,0331,307,1103,948,7962,526,965 2,053 9,781,957

 

F-63

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-61

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

Accumulated depreciationLand and buildingsIT equipment and fixturesFurniture and vehiclesLeased Fixed AssetsOthersTotal
Balance on December 31, 2018(760,844)(3,714,712)(5,511,258)-   -   (9,986,814)
Additions(93,455)(482,256)(730,993)(564,132)-   (1,870,836)
Write-off10,517 148,486 65,016 8,316 -   232,335 
Transfers15,091 10,272 (9,183)-   -   16,180 
Balance on December 31, 2019(828,691)(4,038,210)(6,186,418)(555,816)-   (11,609,135)
       
Additions(86,954)(537,908)(846,881)(568,062)-   (2,039,805)
Write-off11,020 2,263,857 359,618 -   -   2,634,495 
Transfers1,765 66,717 (88,612)-   -   (20,130)
Balance on December 31, 2020(902,860)(2,245,544)(6,762,293)(1,123,878)-   (11,034,575)
       
Additions(108,946)(291,174)(896,705)(553,955)-   (1,850,780)
Write-off38,337 940,737 448,471 572,833 -   2,000,378 
Transfers-   10 (102,187)-   -   (102,177)
Additions by Company Acquisition-   -   -   -   -   -   
Change in scope of consolidation-   -   -   -   -   -   
Balance on December 31, 2021(973,469)(1,595,971)(7,312,714)(1,105,000)-   (10,987,154)
       
Losses from non-recovery (impairment)     
Balance on December 31, 2018(13,859)-   (50,529)-   -   (64,388)
 Impacts on results(587)-   13,050 -   -   12,463 
Balance on December 31, 2019(14,446)-   (37,479)-   -   (51,925)
       
 Impacts on results(11,162)-   7,789 -   (13,387)(16,760)
Balance on December 31, 2020(25,608)-   (29,690)-   (13,387)(68,685)
       
Impacts on results3,310 -   38,729 -   -   42,039 
Balance on December 31, 2021(22,298)-   9,039 -   (13,387)(26,646)
       
Carrying amount      
Balance on December 31, 20191,997,033 1,307,110 3,948,795 2,526,965 2,053 9,781,957 
Balance on December 31, 20201,888,277 1,538,102 3,671,674 2,451,198 (12,140)9,537,111 
Balance on December 31, 20211,803,756 1,690,184 2,982,561 2,319,424 (12,140)8,783,785 

The depreciation expenses has been included in the heading “Depreciation and amortization” in the income statement.

b) Tangible asset purchase commitments

On December 31, 20192021 the Bank has no contractualowns R$58,413 on commitments for the acquisition of tangible assets (2018(2020 - R$3.2 million0 and 20172019 R$75.00 million).

13.Intangible assets - Goodwill

Goodwill is the differenceexcess between the acquisition cost and the Bank's participationinterest in the net fair value of the acquiree's assets, liabilities and contingent liabilities of the acquired company.liabilities. When the differenceexcess is negative (negative goodwill), it is immediately recognized immediately throughin the income statement. In accordance with IFRS 3 Business Combinations,IAS 36, goodwill is stated at cost and is not amortized but tested annually for impairment purposes or whenever there is an evidence of reduction on the recoverable valueimpairment of the cash generatingcash-generating unit to which the goodwillit was allocated. Goodwill is recognizedrecorded at cost considering theless accumulated impairment losses. ImpairmentRecognized impairment losses related toon goodwill are not reversible.reversed. Gains and losses related toon the saledisposal of an entity include the carrying amount of goodwill relating to the entity sold.

The goodwill recorded is subject to impairment test (note 2.o.i)2.n.i) and has been allocated according to the operating segments (note 45)44).

Based on the assumptions described bellow,below, no impairment loss was recognized for goodwill at December 31, 2019, 20182021, 2020 and 2017.2019.

Consolidated Financial Statements | December 31, 2021 | F-62

Table of Contents

 

* Values expressed in thousands, except when indicated.

Breakdown

Thousand of reais   2021 2020 2019
         
Breakdown        
Banco ABN Amro Real S.A. (Banco Real)   27,217,565 27,215,749 27,217,565 
Toro Corretora de Títulos e Valores Mobiliários Ltda.   305,937 - -   
Liderança Serviços Especializados em Cobranças Ltda.   237,663 - -   
Olé Consignado (current denomination of Banco Bonsucesso Consignado)   62,800 62,800 62,800 
Solutions 4Fleet Consultoria Empresarial S.A.   32,613 - -   
Return Capital Serviços de Recuperação de Créditos S.A. (current denomination of
Ipanema Empreendimentos e Participações S.A.)		   24,346 24,346 24,346 
Santander Brasil Tecnologia S.A.   16,381 16,381 16,382 
Paytec Tecnologia em Pagamentos Ltda.   11,336 - -   
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A.   5,271    -    -   
Banco PSA Finance Brasil S.A.   1,557    1,557    1,557 
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet)   -    1,039,304    1,039,304 
Super Pagamentos e Administração de Meios Eletrônicos Ltda. (Super)   -   -    13,050 
Total   27,915,469 28,360,137  28,375,004 

 

Main assumptions

Thousand of reais    201920182017
        
Breakdown       
Banco ABN Amro Real S.A. (Banco Real)    27,217,56527,217,56527,217,565
Olé Consignado (Current Company name of Banco Bonsucesso Consignado)  62,80062,80062,800
Super Pagamentos e Administração de Meios Eletrônicos Ltda. (Super)    13,05013,05013,050
Banco PSA Finance Brasil S.A.    1,5571,5571,557
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet)    1,039,3041,039,3041,039,304
Return Capital Serviços de Recuperação de Créditos S.A. (Current Company name of Ipanema Empreendimentos e Participações S.A.)  24,34627,63028,120
Santander Brasil Tecnologia S.A.    16,38216,382-
Others    --1,860
Total    28,375,00428,378,28828,364,256

 

 

       
        
     Commercial Banking
     201920182017
Main assumptions:       
Basis of determining recoverable amounts    Value in use: cash flows
Period of the projections of cash flows(1)     5 years 5 years 5 years
Growth rate perpetual (1)    4.8%5.1%8.3%
Discount rate(2)    12.5%13.6%14.6%

(1)

 

 

        
         
    Commercial Banking
    2021 2020 2019
Main assumptions:        
Basis of determining recoverable amounts  Value in use: cash flows
Period of the projections of cash flows (1)   5 years 5 years 5 years
Growth rate perpetual (1)   4.8% 4.3% 4.8%
Discount rate (2)   12.3% 12.4% 12.5%
(1)The projections of cash flow are prepared using Management´s growth plans and internal budget, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.
(2)The discount rate is calculated based on the capital asset pricing model (CAPM). The discount rate before tax is 18.77% (2020 – 19.56% and 2019 – 17.88%).

Changes of cash flowgoodwill

Thousand of reais   2021 2020 2019
         
Balance at beginning of the year   28,360,137  28,375,004  28,378,288 
Additions (loss):        
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet) (1,039,304) -  - 
Toro Corretora de Títulos e Valores Mobiliários Ltda. 305,937  -  - 
Liderança Serviços Especializados em Cobranças Ltda. 237,663  -  - 
Solution 4Fleet Consultoria Empresarial S.A. 32,613  -  - 
Paytec Tecnologia em Pagamentos Ltda. 11,336  -  - 
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. 5,271  -  - 
Others   1,816  (14,867) (3,284)
Balance at end of the year   27,915,469 28,360,137  28,375,004 

Goodwill tests are prepared using Management´s growth plansperformed annually or when there are indications of impairment. A quantitative goodwill impairment test is carried out annually in the second half of 2021 and internal budget, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.  

(2) The discount rate is calculated based on the capital asset pricing model (CAPM). The discount rate before tax is 17,78% (2018 - 19.33% and 2017 - 20.42%).

Thousand of reais    201920182017
        
Balance at beginning of the year    28,378,28828,364,25628,355,039
Additions (loss):       
BW Guirapá (Note 3.c) --(22,320)
Banco PSA Finance Brasil S.A.    --1,557
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)(3,284)(490)28,120
Produban Serviços de Informática S.A.    -16,382-
Others    -(1,860)1,860
Balance at end of the year    28,375,00428,378,28828,364,256

Goodwill is tested for impairment at the end of each year or whenever therean analysis is any indicationcarried out on the existence of signs of impairment. OverFor the twelve-month period ended December 31,year 2021, 2020 and 2019, there waswere no evidenceindications of impairment that would have led to the need to update the test performed in 2018 before its regular performance.impairment.

F-64

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

In the goodwill impairment test, discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows. With a variation of +0.25% or -0.25% in these rates, the value of future cash flows discounted to present value continues to indicate the absence of impairment.Right-of-use of Assets

 

Consolidated Financial Statements | December 31, 2021 | F-63

Table of Contents14.

 

* Values expressed in thousands, except when indicated.

14.Intangible assets - Other intangible assets

The details, by asset category, of the other intangible assets in the consolidated balance sheets are as follows:

Cost  IT developments Other assets Total
Balance at December 31, 2016  5,866,944 405,998 6,272,942
Additions  824,411 12,072 836,483
Write-off  (125,307) (7,096) (132,403)
Transfers  4,633 - 4,633
Balance at December 31, 2017  6,570,681 410,974 6,981,655
        
Additions  804,782 137 804,919
Write-off  (477,434) (40) (477,474)
Transfers  11,567 - 11,567
Additions by Acquisitions of Subsidiaries 590 - 590
Corporate Restructuring  87 - 87
Balance at December 31, 2018  6,910,273 411,071 7,321,344
        
Additions  1,290,686 15,757 1,306,443
Write-off  (2,544,403) (130,622) (2,675,025)
Transfers  (26,758) (2,481) (29,239)
Balance at December 31, 2019  5,629,798 293,725 5,923,523
        

Accumulated amortization
Balance at December 31, 2016  (3,120,982) (277,155) (3,398,137)
Additions  (449,709) (21,571) (471,280)
Write-off  854 5,500 6,354
Transfers  17,402 464 17,866
Balance at December 31, 2017  (3,552,435) (292,762) (3,845,197)
        
Additions  (504,009) (19,246) (523,255)
Write-off  25,242 - 25,242
Transfers  (1,000,893) 58 (1,000,835)
Additions by Acquisitions of Subsidiaries(583) - (583)
Corporate Restructuring  (15) - (15)
Balance at December 31, 2018  (5,032,693) (311,950) (5,344,643)
        
Additions  (501,682) (19,339) (521,021)
Write-off  2,326,982 79,945 2,406,927
Transfers  (241,395) (288) (241,683)
Balance at December 31, 2019  (3,448,788) (251,632) (3,700,420)
        
Losses from non-recovery (Impairment) – IT  IT developments Other assets Total
Balance at December 31, 2016  (977,711) (15,291) (993,002)
Impact on net profit (1)  (306,110) - (306,110)
Write-off  441 - 441
Balance at December 31, 2017  (1,283,380) (15,291) (1,298,671)
        
Impact on net profit (1)  (300,865)-- (300,865)
Transfers  1,263,535 - 1,263,535
Balance at December 31, 2018  (320,710) (15,291) (336,001)
        
Impact on net profit (1)  (103,924) - (103,924)
Write-off  422,315 15,291 437,606
Balance at December 31, 2019  (2,319) - (2,319)
        
Carrying amount       
Balance at December 31, 2017  1,734,866 102,921 1,837,787
Balance at December 31, 2018  1,556,870 83,830 1,640,700
Balance at December 31, 2019  2,178,691 42,093 2,220,784

(1) It refers
Cost      IT Developments Other Assets Total
Balance on December 31, 2018      6,910,273  411,071  7,321,344 
Additions      1,290,686  15,757  1,306,443 
Write-off      (2,544,403) (130,622) (2,675,025)
Transfers      (26,758) (2,481) (29,239)
Balance on December 31, 2019      5,629,798  293,725  5,923,523 
            
Additions      990,184  73,238 1,063,422 
Write-off      (240,626) (7,803) (248,429)
Transfers      (25,515) 3,036  (22,479)
Balance on December 31, 2020      6,353,841  362,196  6,716,037 
            
Additions      1,429,459  71,103  1,500,562 
Write-off      (633,534) (3,270) (636,804)
Transfers      (124,157) -    (124,157)
Balance on December 31, 2021      7,025,609  430,029  7,455,638 
            
Accumulated amortization         
Balance on December 31, 2018        (5,032,693) (311,950) (5,344,643)
Additions      (501,682) (19,339) (521,021)
Write-off      2,326,982  79,945  2,406,927 
Transfers      (241,395) (288) (241,683)
Balance on December 31, 2019      (3,448,788) (251,632) (3,700,420)
            
Additions      (534,000) (5,322) (539,322)
Balance on December 31, 2020      (3,982,788) (256,954) (4,239,742)
            
Additions      (569,370) (13,771) (583,141)
Write-off      343,216  (4,558) 338,658 
Balance on December 31, 2021      (4,208,942) (275,283) (4,484,225)
            
Losses from non-recovery (Impairment) - IT      IT developments Other assets Total
Balance on December 31, 2018      (320,710) (15,291) (336,001)
Impact on net profit (1)     110,466  -    110,466 
Write-off      207,925  15,291  223,216 
Balance on December 31, 2019      (2,319) -    (2,319)
            
Impact on net profit (1)    (66,269)            -    (66,269)
Transfers      (1,346) -    (1,346)
Balance on December 31, 2020      (69,934) -    (69,934)
            
Impact on net profit (1)    (23,066) (7,094) (30,160)
Write-off      -    -    -   
Balance on December 31, 2021      (93,000) (7,094) (100,094)
            
Carrying amount           
Balance on December 31, 2019      2,178,691  42,093  2,220,784 
Balance on December 31, 2020      2,301,119  105,242  2,406,361 
Balance on December 31, 2021      2,723,667  147,652  2,871,319 
(1)Refers to the impairment loss of assets in the acquisition and development of software. The loss in the acquisition and development of software. The loss in the acquisition and development of

software was recorded due to obsolescence function and disruptiondiscontinuity of thesethe referred systems.

The amortizationAmortization expenses has beenwere included in the heading “Depreciationunder "Depreciation and amortization”amortization" in the income statement.

F-65

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

Consolidated Financial Statements | December 31, 2021 | F-64

Table of Contents15.

 

* Values expressed in thousands, except when indicated.

15.Other assets

The breakdown of the balance of “Other assets” is as follows:follows:

Thousand of reais 20192018 2017
      
Contracts costs 1,926,5361,674,187 1,679,305
Prepayments and accrued income 1,059,223685,755 784,456
Contractual guarantees of former controlling stockholders (Note 23.c.5)102,903605,638 707,130
Actuarial asset (Note 22) 346,422273,281 198,189
Other receivables(1) 1,626,2531,561,606 1,209,190
Total 5,061,3374,800,467 4,578,270

(1)
Thousand of reais     20212020 2019
          
Customer relationships     922,860 1,873,048  1,926,536 
Prepayments and accrued income     797,365 1,007,792  1,059,223 
Contractual guarantees of former controlling stockholders (Note 22.c.5)    496 496  103,272 
Actuarial asset (Note 21)     287,808 361,149  346,422 
Other receivables (1)     4,040,499 3,979,926  1,625,884 
Total     6,049,028 7,222,411  5,061,337 
(1)Corresponds mainly to receivables from third parties.

16.Deposits from the Brazilian Central Bank and Deposits from credit institutions

The breakdown, by classification, type and currency, of the balances of these items is as follows:

Thousand of reais 20192018 2017
      
Classification:     
Financial liabilities at amortized cost 99,271,41599,022,806 79,374,685
Total 99,271,41599,022,806 79,374,685
      
Type:     
Deposits on demand(1) 685,026709,605 306,081
Time deposits(2) 56,602,47047,227,456 52,739,163
Repurchase agreements 41,983,91951,085,745 26,329,441
Of which:     
Backed operations with Private Securities(3) 9,506,2556,977,766 -
Backed operations with Government Securities 32,477,66344,107,979 26,329,441
Total 99,271,41599,022,806 79,374,685

(1) Non-interest bearing accounts.

(2) Includes operations with credit institutions resulting from exportClassification, type and import financing lines, transfers fromcurrency, of the country (BNDES and Finame) and abroad, and other credit lines abroad.balances

(3) Refers primarily to repurchase agreements backed by own-issued debentures.

Thousand of reais 20192018 2017
      
Currency:     
Reais 58,282,79374,159,613 56,562,950
Euro 39,522105,119 407,814
US dollar 40,949,10024,758,074 22,156,054
Other currencies -- 247,867
Total 99,271,41599,022,806 79,374,685

F-66

Table of Contents

Thousand of reais 2021 2020 2019
       
Classification:      
Financial liabilities at amortized cost 121,005,909  131,656,962  99,271,415 
Total 121,005,909  131,656,962  99,271,415 
       
Type:      
Deposits on demand (1) 126,203  296,340  685,026 
Time deposits (2) 75,754,363  76,489,490  56,602,470 
Repurchase agreements 45,125,343  54,871,132  41,983,919 
Of which:      
Backed operations with Private Securities (3)13,478,131  13,843,463  9,506,255 
Backed operations with Government Securities 31,647,212  41,027,669  32,477,663 
Total 121,005,909  131,656,962  99,271,415 
 (1)

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Non-interest bearing accounts.

(2)17.Client depositsIncludes operations with credit institutions resulting from export and import financing lines, transfers from the country (BNDES and Finame) and abroad, and other credit lines abroad.
(3)Refers primarily to repurchase agreements backed by own-issued debentures.

  

Deposits from the Brazilian Central Bank and Deposits from credit institutions - by currency

Thousand of reais  20212020 2019
       
Currency:      
Reais  62,322,887 77,743,482  58,282,793 
Euro  9,309 13,156  39,522 
US dollar  58,673,713 53,900,324  40,949,100 
Total  121,005,909 131,656,962  99,271,415 

17.Client deposits

The breakdown, by classification and type, of the balance of “Customer deposits” is as follows:

Balance of Customer deposits

Thousand of reais 2019                    2018    2017
       
Classification:      
Financial liabilities at amortized cost 336,514,597 304,197,800 276,042,141
Total 336,514,597 304,197,800 276,042,141
       
Type:      
Demand deposits      
Current accounts(1) 28,231,479 18,853,519 17,559,985
Savings accounts 49,039,857 46,068,346 40,572,369
Time deposits 200,739,544 190,982,541 146,817,650
Repurchase agréments 58,503,717 48,293,394 71,092,137
Of which:      
Backed operations with Private Securities(2) 9,506,255 6,977,766 33,902,890
Backed operations with Government Securities 48,997,462 41,315,628 37,189,247
Total 336,514,597 304,197,800 276,042,141

(1) Non-interest bearing accounts.

(2) Refers primarily to repurchase agreements backed by own-issued debentures.

Thousand of reais    2021 2020 2019
          
Classification:         
Financial liabilities at amortized cost    468,961,069 445,813,972  336,514,597 
Total      468,961,069 445,813,972  336,514,597 
          
Type:         
Demand deposits         
Current accounts (1)    41,742,247 35,550,105  28,231,479 
Savings accounts        65,248,913 62,210,443  49,039,857 
Time deposits      280,955,456 269,929,085  200,739,544 
Repurchase agreements      81,014,453 78,124,340  58,503,717 
Of which:         
Backed operations with Private Securities (2)       20,103,099 14,944,250  9,506,255 
Backed operations with Government Securities      60,911,354 63,180,090  48,997,462 
Total    468,961,069 445,813,972  336,514,597 
(1)Non-interest bearing accounts.
(2)Refers primarily to repurchase agreements backed by own-issued debentures.

 

Note 44-d43-d contains a detail of the residual maturity periods of financial liabilities at amortized cost.

F-67

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

Consolidated Financial Statements | December 31, 2021 | F-65

Table of Contents18.

 

* Values expressed in thousands, except when indicated.

18.Marketable debt securities

The breakdown, by classification and type, of the balance of “Marketable debt securities” is as follows:

Thousand of reais 201920182017  202120202019
   
Classification:  
Financial liabilities at amortized cost 73,702,47474,626,23270,247,012 79,036,792 56,875,514 73,702,474 
Total 73,702,47474,626,23270,247,012 79,036,792 56,875,514 73,702,474 
  
Type:  
Real estate credit notes - LCI (1) 21,266,07927,159,98227,713,873 21,459,182 18,846,138 21,266,079 
Eurobonds 8,715,3824,516,6471,992,828 12,952,068 9,399,277 8,715,382 
Treasury Bills (2) 27,587,34030,721,20631,686,259 25,074,264 12,749,911 27,587,340 
Agribusiness credit notes - LCA 14,776,87711,925,0188,854,052 16,989,434 14,746,831 14,776,877 
Guaranteed Real Estate Credit Notes (3) 1,356,796303,379-Guaranteed Real Estate Credit Notes (3) 2,561,845 1,133,356 1,356,796 
Total 73,702,47474,626,23270,247,012 79,036,792 56,875,514 73,702,474 
(1)Real estate credit bills are fixed-income securities backed by real estate credits and guaranteed by mortgage or fiduciary sale of real estate. On December 31, 2021, they mature between 2022 and 2028 (2020 - with maturity between 2021 to 2027 2019 - with maturity between 2020 to 2026).
(2)The main characteristics of the financial bills are a minimum term of two years, a minimum face value of R$50 and early redemption permit of only 5% of the issued amount. As of December 31, 2021, they mature between 2022 and 2031 (2020 – with maturity between 2021 to 2025 and 2019 – with maturity between 2020 to 2025).
(3)Guaranteed Real Estate Bills are fixed-income securities backed by real estate credits guaranteed by the issuer and by a pool of real estate credits separated from the other assets of the issuer. As of December 31, 2021, they have a maturity period between 2022 and 2035 (12/31/20120- with a maturity period between 2021 and 2023).

Indexers

Indexers:DomesticDomesticAbroad
Treasury Bills100% to 112% of CDI-
100% of IGPM-
100% of IPCA-
Pre fixed: 3.41% to 16.97%-
104.75% of SELIC-
Real estate credit notes - LCI86% to 105.8% of CDI-
Pre fixed: 3.03% of 13.29%-
    
Treasury Bills  97%100% of IPCA-
1.5% to 105.25%1.7% of CDIIPCA-
100% of TR-
Agribusiness credit notes - LCA70% to 104% of CDI-
3.33% to 12.33% da SELIC
Guaranteed Real Estate Credit Notes - LIG94% to 98% of CDI-
   100% of IGPM -
   100% of95% TO 108.5 do IPCA -
Eurobonds Pre fixed: 5.06%-0.0% to 17.29% -9%
 100% of SELIC -
Real estate credit notes – LCI 80% to 100% of CDI-
 Pre fixed: 3.9% of 10.33% -
 100% of IPCA -
 100% of TR -
Agribusiness credit notes – LCA 80% to 98.6% of CDI -
Guaranteed Real Estate Credit Notes – LIG 94% to 98% of CDI -
Eurobonds- 0.0% to 10%
-CDI+6.4%

(1) Real Estate Credit Notes are fixed income securities pegged by mortgages and mortgage-backed securities or liens on property. On December 31, 2019, have maturities between 2020 and 2026 (2018 - there are maturities between 2019 to 2026 and 2017 - there are maturities between 2018 to 2026).

(2) The main features of the Treasury Bills are the minimum period of two years, minimum notional of R$300 and permission for early redemption of only 5% of the issued amount. On December 31, 2019, have a maturity between 2020 to 2025 (2018 - have a maturity between 2019 to 2025 and 2017 - there are maturities between 2018 to 2025).

(3) Guaranteed Real Estate Letters are real estate investment securities guaranteed by the issuer and by a pool of real estate credits separated from the other assets of the issuer. As of December 31, 2019 maturity until 2020 and 2021 (2018 - have a maturity until 2021).

Consolidated Financial Statements | December 31, 2021 | F-66

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

The breakdown, by currency, of the balance of this account is as follows:

Thousand of reais       
Currency:    202120202019
        
Real    66,084,725 47,490,706 64,987,092 
US dollar    12,952,068 9,384,808 8,715,382 
Total    79,036,792 56,875,514 73,702,474 

 

Thousand of reais  
  
Currency: 201920182017
 
Real 64,987,09270,109,58568,335,103
US dollar 8,715,3824,516,6471,911,909
Total 73,702,47474,626,23270,247,012
      
 Average interest (%) Average interest (%)
Currency: 201920182017 202120202019
  
Real 5.0%5.5% 1.5%2.5%5.0%
US dollar 4.1%5.9%6.8% 5.7%5.2%4.1%
Total 4.5%5.6%5.7% 3.5%3.9%4.5%

F-68

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

The variations in the balance “Obligations for bonds and securities” were as follows:follows:

Thousand of reais 201920182017  202120202019
  
Balance at beginning of the year 74,626,23270,247,01299,842,955 56,875,514 73,702,474 74,626,232 
Issuances     53,017,03973,765,08159,663,420 101,784,961 60,047,656 53,017,039 
Payments   (61,914,716)(78,903,009)(97,009,957) (97,220,580)(82,900,914)(61,914,716)
Interest (Note 33) 5,138,3064,606,9497,901,199
Interest (Note 32) 4,536,849 2,785,942 5,138,306 
Exchange differences and Others(1)       2,835,6134,910,199(150,605) 13,060,048 3,240,356 2,835,613 
Balance at end of the year 73,702,47474,626,23270,247,012 79,036,792 56,875,514 73,702,474 
(1)Exchange variation linked to “Obligations for bonds and securities” are related to Eurobonds.

On December 31, 2019, 20182021, 2020 and 2017,2019, none of these instruments was convertible into Bank shares or granted privileges or rights which, in certain circumstances, make them convertible into shares.

The note 44-d43-d contains a detail of the residual maturity periods of financial liabilities at amortized cost in each year.

The breakdown of "Bonds and other securities" is as follows:follows:

        
IssuanceMaturity CurrencyInterest rate (p.y)201920182017IssuanceMaturityCurrencyInterest rate (p.y)202120202019
    
Eurobonds20152018 USD2.2%-40,33320172020BRL4.4%-   929,042 
Eurobonds20172018 USDZero Coupon to 2.4%-1,195,66820182020USDUntil 3.5%-   37,476 
Eurobonds20172019 USDLIBOR 3M + 1.00%-194,243165,67720182020USDOver 3.5%-   35,438 
Eurobonds20182021 BRL4.4%63,181855,035-20192020USD0% to 4.4%-   3,556,724 
Eurobonds20182024 USD2.4% a 10.0%664,99619,386-20172025USD4.4%117,150 14,469 63,181 
Eurobonds20182019 USDZero Coupon to 9%-197,055-20182025USD0% to 4.4%771,300  -   
Eurobonds20182019 USDLIBOR 3M + 0.95%-34,776-20172024USD2.4% to 10%- 853,929 664,996 
Eurobonds20182020 USDUp to 3.5%37,4761,211,361-20182024USD6.6% to 6.7%- 1,625,192 1,260,099 
Eurobonds20182019 USDLIBOR 1M + 1.5%-1,287,821-20182025USDUntil 9%- 1,720,187 1,427,601 
Eurobonds20172020 BRL4.4%929,042639,275541,48720192025USD0% to 4.4%225,533 -   
Eurobonds20182020 USDAbove 3.5%35,438 20192026USD4.4%75,716 -   
Eurobonds20182024 USD6.6% to 6.7%1,260,099 20192027USD0% to 4.4%632,831 -   
Eurobonds20182025 USDUp to 9%1,427,601 20202022USD4.4%306,253 -   
Eurobonds20192020 USD0% to 4.4%3,556,724 20202023USD0% to 4.4%455,666 -   
Eurobonds20192027 USDCDI + 6.4%727,118 20192027USDCDI+6.4%- 1,279,506 727,118 
Eurobonds 20202021USD0% to 4%- 3,252,482 -   
Eurobonds 20202021USDCDI+1.9%- 170,257 -   
Eurobonds 20202022USD0% to 4%- 16,923 -   
Eurobonds 20202022USDCDI+1.9%- 121,926 -   
Eurobonds 20202025USD0% to 8%                46,65522,888 -   
Eurobonds 20202023USDCDI+1.9%- 223,435 -   
Eurobonds 20202024USDCDI+1.9%- 98,082 -   
Eurobonds20212022USD0% a 4.4%            2,005,534-   
Eurobonds 20212022USDUntil 9%41,749 -   
Eurobonds 20212022USDCDI+1.9%205,624 -   
Eurobonds20212022USDCDI + 2.65%181,116 -   
Eurobonds20212023USD0% to 4.4%408,824 -   
Eurobonds20212023USDCDI+1.9%157,370 -   
Eurobonds20212023USDCDI + 2.65%5,316 -   
Eurobonds20212024USD0% to 4.4%246,192 -   
Eurobonds 20212025USD0% to 4.4%593,036 -   
Eurobonds 20212026USD0% to 4.4%3,890,578 -   
Eurobonds 20212026USDCDI + 2.65%210,639 -   
Eurobonds 20212027USD0% to 4.4%101,029 -   
Eurobonds 20212028USDUntil 9%30,126 -   
Eurobonds20212028USDCDI+6.4%26,018 -   
Eurobonds20212031USD0% a 4.4%2,217,811 -   
Other  13,70777,69549,663 -     -   13,707 
Total 8,715,3824,516,6471,992,828 12,952,068 9,399,276 8,715,382 

 

19.Subordinated liabilities

The detail of the balance of “Subordinated liabilities” is as follows:

Thousand of reais           
  Issuance Maturity(1)Amount (millions)Interest rate2019 2018 2017
            
Subordinated Liabilities May-08 May-15 to May-18R$283CDI (2)- - 109,572
Subordinated Liabilities May-08 to June-08 May-15 to June-18R$268IPCA (3)- - 409,658
Notes (4) January-14 PerpetualR$3.0007.375%- 4,906,880 -
Notes (4) January-14 January-24R$3.0006.000%- 4,978,727 -
Total      - 9,885,607 519,230

(1) Subordinated time deposits issued by Banco Santander S.A. with yield paid at the end of the term together with the principal.

(2) Between December 2017 and May 2018, indexed by 100% and 112% of the CDI.

(3) Between December 2017 and June 2018, indexed by the IPCA (extended consumer price index) plus interest of 8.3% p.a. to 8.4% p.a.

(4) On December 18, 2018, the Bank Central of Brazil issued approval for the repurchase of the notes issued on January 29, 2014, this approval led to the reclassification of these instruments from the Debt Instruments Eligible to Compose Capital to Subordinated Debt (Note 20).

F-69

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

The detail by currency, of the balance of “Subordinated liabilities” is as follows:

   Thousand of reaisAverage Interest Rate (%)
Currency:  20192018201720192018 2017
          
Real  -9,885,607519,2300.0%4.9% 7.5%
Total  -9,885,607519,2300.0%4.9% 7.5%

Changes in the balance of "Subordinated liabilities" in twelve-months period ended December 31, 2019, 2018 and 2017 were as follows:

  2019 2018 2017
       
Balance at beginning of year 9,885,607 519,230 466,246
Payments (9,885,607) (544,566) -
Interest (Note 33) - 25,336 52,984
Transfers (Note 20) - 9,885,607 -
Balance at end of year - 9,885,607 519,230

Note 44-d contains a detail of the residual maturity periods of subordinated liabilities at each year-end.

20.Debt Instruments Eligible to Compose Capital

Details of the balance of "Debt Instruments Eligible to Compose Capital" for the issuance of such instruments to compose the Tier I and Tier II of regulatory capital due to the Regulatory Capital Optimization Plan, (Note 28.e), are as follows:

      201920182017
  IssuanceMaturityIssuance ValueInterest Rate (p.a.)(3)   
Tier I (1)(5) Jan-14no maturity (perpetual) R$3,0007.375%--4,187,531
Tier II (2) (5) Jan-14jan-24 R$3,0006.000%--4,249,370
Tier I(4) Nov-18no maturity (perpetual) US$1,2507.250%5,092,1534,893,668-
Tier II (4) Nov-18nov/18 US$1,2506.125%5,083,8084,886,276-
Total     10,175,9619,779,9448,436,901

(1)Notes repurchased in 2019; As authorized by Bacen on

Consolidated Financial Statements | December 17, 2018, as of the date of their issuance, Level I and II of RC must be excluded.31, 2021 | F-67

(2)Notes repurchased

Table of Contents

 

* Values expressed in 2019; As authorized by Bacen on December 17, 2018, as of the date of their issuance, Level I and II of RC must be excluded.thousands, except when indicated.

     202120202019
 IssuanceMaturityIssuance Value Interest Rate (p.a.)    
Tier I (1)nov-18No-Maturity
(Perpetual)		US$1,2507.250%7,050,080 6,554,451 5,092,153 
Tier II (1)nov-18nov/28US$1,2506.125%7,038,527 6,565,209 5,083,808 
Financial Bills - Tier II (2)nov-21nov-31R$ 5,300CDI+2%5,351,046 -   -   
Financial Bills - Tier II (2)dez-21dez-31R$ 200CDI+2%201,755 -   -   
Total    19,641,408 13,119,660 10,175,961 
(1)(3)The debts of January 2014issues were made by Banco Santander in Brazil, therefore, ascarried out through the Cayman Branch and there is no Income Tax at source, assumed by the issuer, in the form of a corresponding exchange rate,and interest is 8.676% and 7.059% for the instruments Level I and Level II, respectively. The emissions generated from November 2018 were made through the Cayman Agency and, consequently, there is no incidence of Income Tax at Source.

(4)Interest paid semiannually, as of May 8, 2019.
(2)Letras Financeiras issued in November 2021 have a redemption and repurchase option.

(5)On December 18, 2018, the Bank issued the approval for the repurchase of the notes issued on January 29, 2014, this approval led to the reclassification of these instruments from the Debt Instruments Eligible to Compose Capital to Subordinated Debt (Note 19).

     201920182017
Balance at beginning of the year    9,779,9448,436,9018,311,918
Issuance - Tier I-4,673,875-
Issuance - Tier II-4,673,875-
Interest payment Tier I (1)272,947331,677273,123
Interest payment Tier II (1)230,594272,539222,065
Exchange differences / Others    221,3681,960,467252,941
Payments of interest - Tier I    (178,278)(381,008)(344,867)
Payments of interest - Tier II    (150,614)(302,775)(278,279)
Repurchase    -(9,885,607)-
Balance at end of the year    10,175,9619,779,9448,436,901

(1) The remuneration of interest relating to the Debt Instruments Eligible to Compose Capital Tier I and II was recorded against income for the period as "Interest expense and similar charges" (Note 33).

On November 5, 2018, the Board of Directors approved the issuance of the equity instruments, which was held on November 8, 2018. Such issuance was in the form of Notes issued in US dollars, US$2.5 billion, for payment in Tier I and Tier II of Reference Equity. The offer of these notes was made outside Brazil and the United States of America, for non-US Persons, based on Regulation S under the Securities Act, and was fully paid in by Santander España, controlling shareholder of Banco Santander Brasil. On the same date, the Board of Directors approved the redemption of the Tier I and Tier II notes issued on January 29, 2014, in the total amount of U$2.5 billion (Note 26.e).

The specific characteristics of Notes issued to make up Tier I are: (a) Principal: US$1.250 billion (b) Interest Rate: 7.25% p.a; (c) no

F-70

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

maturity (perpetual); (d) Periodicity of payment of interest: semiannually from May 8, 2019.

The specific characteristics of Notes issued to make up Tier II are: (a) Principal: US$1.250 billion; (b) Interest Rate: 6.125% p.a.; (c) Maturity Term: on November 8, 2028; and (d) Periodicity of payment of interest: semiannually, as of May 8, 2019.

Notes have the following common characteristics:

(a) Unit value of at least US$150 thousand and in integral multiples of US$1 thousand in excess ofwhich exceeds such minimum value;

(b) The Notes may be repurchased or redeemed by Banco Santander after the fifth5th (fifth) anniversary as offrom the date of issue of the Notes, at the Bank's sole discretion of the Bank or as a result ofdue to changes in the tax legislation applicable to the Notes; or at any time, due to the occurrence of certain regulatory events.

On December 18, 2018, the Bank issued approval for the Notes to comprise Tier I and Tier II of Banco Santander's Reference Equity as of such date, as well as the repurchase of the notes issued on January 29, 2014. As a result,Changes in the balance relating to the notes issued on January 29, 2014 were reclassified fromof Debt Instruments Eligible to Compose Capital to Subordinated Debts (Note 19).

     202120202019
Balance at beginning of the year   13,119,660 10,175,961 9,779,944 
Issuance - Tier II   5,500,000 -   -   
Interest payment Tier I (1)   505,300 506,771 272,947 
Interest payment Tier II (1)   449,899 402,622 230,594 
Exchange differences / Others    977,855 2,948,951 221,368 
Payments of interest - Tier I    (493,071)(495,789)(178,278)
Payments of interest - Tier II    (418,235)(418,856)(150,614)
Balance at end of the year    19,641,408 13,119,660 10,175,961 

(1)The remuneration of interest relating to the Debt Instruments Eligible to Compose Capital Tier I and II was recorded against income for the period as "Interest expense and similar charges" (Note 32).

21.20.Other financial liabilities

The breakdown of the balances of these items is as follows:

Thousand of reais 2019 2018 2017   2021 2020 2019
  
Credit card obligations 38,531,519 39,761,739 32,049,712 45,976,315  48,912,963  38,531,519 
Unsettled financial transactions(2)(1) 7,239,785 3,356,871 3,905,236 10,861,143  7,210,396  7,239,785 
Dividends and Interest on Capital payable 7,826,247 4,508,569 4,553,914 1,029,952  1,223,310  7,826,247 
Tax collection accounts - Tax payables 883,768 1,205,746 1,077,860 969,939  864,292  883,768 
Liability associated with the transfer of assets (Note 9.g)Liability associated with the transfer of assets (Note 9.g)75,500 126,906 428,248Liability associated with the transfer of assets (Note 9.g) 40,511  55,105  75,500 
Other financial liabilities(1)(2) 6,328,551 2,769,005 2,245,765 10,030,440  8,595,084  6,328,551 
Total 60,885,370 51,728,836 44,260,735 68,908,300  66,861,150  60,885,370 
(1)Includes operations to settle with B3 S.A. (Current Company Name of BM&FBovespa) and payment orders in foreign currency.
(2)Refers substantially to cancelable financial liabilities, designated at fair value through profit or loss.

(1) As of December 31, 2019, it includes the financial liability in the total amount of R$1,600 million (2018 - R$519 million and 2017 - R$484 million), related to the commitment of the put option of the shares held by Banco Bonsucesso (Note 3.a ) and R$0 (2018 - R$1,427 million and 2017 - R$1,223 million), referring to the put option for the shares issued by Getnet SA, which was authorized by BACEN on February 18, 2019 and settled on February 25, 2019.

(2) Includes operations to settle with B3 S.A. (Current Company Name of BM&FBovespa) and payment orders in foreign currency.

21.22.Provisions for pensions and similar obligations

On December 31, 20192021 the balance of provisions for pension funds and similar obligations totaled R$4,956,851 (20182,728,126 (2020 - R$3,357,6543,929,265 and 20172018 - R$3,923,457)4,960,620).

 

Consolidated Financial Statements | December 31, 2021 | F-68

Table of Contents

 

* Values expressed in thousands, except when indicated.

i.

I. Supplemental Pension Plan

Banco Santander and its subsidiaries sponsor the closed pension entities for the purpose of granting pensions and supplementary pensions over those granted by the Social Security, as defined in the basic regulations of each plan.

·●Banesprev - Fundo Banespa de Seguridade Social (Banesprev)

- Plan I: defined benefit plan fully sponsored by Banco Santander, it covers employees hired after May 22, 1975 called Participants Recipients, and those hired until May 22, 1975 called Participants Aggregates, who are also entitled to death benefits. This plan is closed to new entrants since March 28, 2005.

- Plan II: defined benefit plan, constituted from July 27, 1994, effective of the new text of the Statute and Regulations of the Basic Plan II, Plan I participants who chose the new plan began to contribute to the rate of 44.9% stipulated by the actuary for funding each year, introduced in April 2012 extraordinary cost to the sponsor and participants, as agreed with the PREVIC - Superintendence of Pension Funds, due to deficit in the plan. This plan is closed to new entrants since June 3, 2005.

- Plan V:III: defined benefit plan fully sponsored by Banco Santander, it covers employees hired until May 22, 1975, closed and paid off.

- Supplemental Pension Plan Pré 75: defined benefit plan was created in view of the privatization of Banespa and is managed by Banesprev and offered only to employees hired before May 22, 1975, which its effective date is January 1, 2000. This plan is closed to new entrants since April 28, 2000.

- Plan III:I: variable contribution plan, for employees hired after May 22,1975, previously served by the Plans I and II. This plan receives contributions from the sponsor and the participants. The benefits are in the form of defined contribution during the period of contribution and defined benefit during the receipt of benefit, if paid as monthly income for life. Plan is closed to new entrants since September 1, 2005.

- Plan IV:II: variable contribution plan, designed for employees hired as of November 27, 2000, in which the sponsor only contributes to the risk benefits and administrative expenses. In this plan the benefit is set in the form of defined contribution during the period of contribution and defined benefit during the receipt of benefits in the form of monthly income for life, in whole or in part of the benefit. The risk benefits of the plan are in defined benefit. This plan is closed to new entrants since July 23, 2010.

- Three plans (DCA, DAB and CACIBAN): additional retirement and former employees associated pension, arising from the process of acquisition of the former Banco Meridional, established under the defined benefit plan. The plans were closed to new participants prior to the acquisition of Grupo Bozano Simonsen by Banco Santander in November 1999.

F-71

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

- Plan Sanprev I: defined benefit plan, established on September 27, 1979, covering employees enrolled in the plan sponsor and it is in process of extinction since June 30, 1996.

- Plan Sanprev II: plan that provides insurance risk, pension supplement temporary, disability retirement annuity and the supplemental death and sickness allowance and birth, including employees enrolled in the plan sponsor and is funded solely by sponsors through monthly contributions, as indicated by the actuary. This plan is closed to new entrants since March 10, 2010.

- Plan Sanprev III: variable contribution plan covering employees of the sponsors who made ​​the choice to contribute, by contribution freely chosen by participants from 2% of their salary. That the benefit plan is a defined contribution during the contribution and defined benefit during the receipt of the benefit, being in the form of monthly income for life, in whole or in part of the benefit. This plan is closed to new entrants since March 10, 2010.

·●Sanprev – Santander Associação de Previdência (Sanprev)

Closed-End Private Pension Entity (EFPC) that used to manage three benefit plans, 2 in the Defined Benefit modality and 1 in the modality of Variable Contribution, whose process of management transfer of these plans to Banesprev occurred in January 2017. According to Portaria 389 of PREVIC, of May 8, 2018, it was approved the closure of the authorization of operation of Sanprev.

·●Bandeprev - Bandepe Previdência Social (Bandeprev)

Defined benefit plan, sponsored by Banco Bandepe and Banco Santander, managed by Bandeprev. The plans are divided into basic plan and special retirement supplement plan, with different eligibility requirements, contributions and benefits by subgroups of participants. The plans are closed to new entrants since 1999 for Banco Bandepe’s employees and for others since 2011.

·●Other Plans

SantanderPrevi - Sociedade de Previdência Privada (SantanderPrevi): it´s a closed-end private pension entityentity with the purpose of constitution and implementation of social security pension plans, complementary to the social security contribution, in the form of actual legislation.

Consolidated Financial Statements | December 31, 2021 | F-69

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

The Retirement Plan of SantanderPrevi is structured as Defined Contribution and closed to new members since July 2018 as approved by PREVIC, with contributions shared between sponsors and plan participants. The appropriate values by the sponsors in the year of 20192021 was R$110,325 (201869,142 (2020 – R$89,95969,142 e 20172019 – R$86,449)110,325).

It has 10 cases of lifetime income with benefits arising from the previous plan.

 

SBPREV - Santander Brasil Open Pension Plan:As from January 2, 2018, Santander started to offer this new optional supplementary pension plan for new employees hired and for employees who are not enrolled in any other pension plan managed by the Closed Entities Complementary Pension Plan of the Group. This new program includes the PGBL- Free Benefit Generation Plan and VGBL-Free Benefit Generator Life managed by Icatu Seguros, the Open Entity of Complementary Pension Plan, which are open for new accessions, with similar characteristics to SantanderPrevi's plan. the instituting / stipulating companies and the participants in the plans.Theplans. The appropriated values by the sponsors in the year of 20192021 were R R$8,917 (201817,880 (2020 – R$ $1,597)14,054).

 

ii.II. Health and Dental Care Plan

 

• Cabesp - Caixa Beneficente dos Funcionários do Banco do Estado de São Paulo S.A.:

 

Entity that covers health and dental care expenses of employees hired until Banespa privatization in 2000, as defined in the entity's bylaws.

 

• HolandaPrevi’s Retirees (current corporate name of SantanderPrevi):

 

For the health care plan Retirement has lifetime nature and is a closed group. In his termination the employee should have completed 10 years of employment with Banco Real and 55 years of age. In this case it was offered the continuity of health care plan where the employee pays 70% and the Bank pays 30% of the monthly payment. This rule lasted until December, 2002 and after this period that the employee got terminated with the status Retired Holandaprevi, he pays 100% of the health plan monthly payment.

 

• Former employees of Banco Real S.A. (Retiree by Circulars):

 

It grants entitlement to healthcare to former employees of Banco Real, with lifetime benefit it was granted in the same condition as the active employee, in this case, with the same coverage and plan design.

 

Eligible only for basic plans and premium apartment, if the beneficiary chooses for the apartment plan he pays the difference between the plans plus the co-participation in the basic plan. Not allowed new additions of dependents. It is subsidized in 90% of the plan.

 

• Bandeprev’s retirees:

 

Health care plan granted to Bandeprev’s retirees as a lifetime benefit, for which Banco Santander is responsible for subsidizing 50% of the benefits of employees retired until November 27, 1998. For whom retired after this date, the subsidy is 30%.

 

• Directors with Lifetime Benefits (Lifetime Directors):

 

Lifetime health care benefit granted to a small closed group of former directors coming from Banco Sudameris, being 100% subsidized by the Bank.

 

• Health Directors:

 

Directors, Executive Directors, Vice-President Directors and Chief Executive Officer, may, by choice, choose to remain medical assistance, in case of termination of the link with Banco Santander or companies in its conglomerate without cause; as long as they comply the following requirements: have contributed for at least 3 (three) years to the health plan; having served as a director at Banco Santander or companies its conglomerate for at least 3 (three) years; be 55 years of age. The plan will be maintained in the same way as the DIRECTOR enjoyed at the time of his dismissal, including the payment of his share, which must be paid by bank slip. The

F-72

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

dependents active at the time of termination will be kept on the same plan as the director, and the inclusion of new dependents in no chance.

 

• Free Clinic:

 

Health care plan (free clinic) is offered for a lifetime to retirees who have contributed to the Foundation Sudameris for at least 25 years and has difference in default if the user chooses apartment. The plan is only offered in standard infirmary where the cost is 100% of the Foundation Sudameris.

 

Consolidated Financial Statements | December 31, 2021 | F-70

Table of Contents

 

* Values expressed in thousands, except when indicated.

• Life insurance for Banco Real’s retirees (Life Insurance):

 

For Retirees from Circulars: indemnity in case of Natural Death, Disease Disability, Accidental Death. The subsidy is 45% of the value. It is a closed group.

 

• Life Insurance Assistance Boxes (Life Insurance):

 

Included in the bulk of the life insurance in December 2018 the insurance of the retirees of the DCA, DAB and CACIBAN plans. This insurance was granted to retirees of the former Southern Bank, coverage was according to the choice of retiree at the time of joining the benefit. The Bank's allowance is 50% of the premium amount for the holder and some retirees have the spouse clause bearing 100% of the cost. The plan is closed for new participants.

 

Additionally, it is assured to retired employees, since they meet to certain legal requirements and fully pay their respective contributions, the right to be maintaining as a beneficiary of the Banco Santander health plan, in the same conditions for healthcare coverage, taken place during their employment contract. Banco Santander provisions related to thisthese retired employees are calculated using actuarial based in the present value of the current cost.

 

iii.III. Actuarial Techniques

 

The amount of the defined benefit obligations was determined by independent actuaries using the following actuarial techniques:

 

• Valuation method:

 

Projected unit credit method, which uses each year of service as giving rise to an additional unit of benefit entitlement and measures each unit separately.

 

• Nominal discount rate for actuarial obligation and calculation of interest on assets:

assets

- Banesprev, Sanprev, SantanderPrevi, Bandeprev and Other Plans – 7.1% (20188.39% (2020 – 9.1%6.8% e 20172019 – 9.53%7.1%).

- Cabesp, Law 9,656 and others obligations – 7.2% (20188.44% (2020 – 9.3% 7.1% e 20172019 – 9.65% 7.2%).

 

• Estimated long-term inflation rate:

rate

- Banesprev, Sanprev, SantanderPrevi, Bandeprev and Other Plans – 3.5% (20183.0% (2020 – 4.0% 3.3% e 20172019 – 4.0%3.5%).

 

• Estimate salary increase rate:

rate

- Banesprev, Sanprev, SantanderPrevi, Bandeprev Básico and Other Plans – 4.0% (20183.52% (2020 – 5.0% 3.8% e 20172019 – 5.0% 4.0%).

 

The funding status of the defined benefit obligations in 20192021 and in the last 2 years are as follows:

Funding status of the defined benefit obligations

 201920182017  202120202019
  
Present value of the obligations - Post-employment plans:Present value of the obligations - Post-employment plans:  Present value of the obligations - Post-employment plans:   
To current employees 687,786716,492796,243 320,202 478,837 687,786 
Vested obligations to retired employees 27,369,69623,296,71521,205,366Vested obligations to retired employees 26,183,758 28,202,580 27,369,696 
 28,057,48224,013,20722,001,609
Total 26,503,960 28,681,417 28,057,482 
  
Less:  
Fair value of plan assets 25,822,89022,708,99020,689,637 28,321,826 28,634,891 25,822,890 
Unrecognized assets(1) (1,346,547)(1,079,808)(1,090,682) (3,645,083)(2,762,220)(1,346,547)
Provisions – Post-employment plans, netProvisions – Post-employment plans, net3,581,1392,384,0252,402,654Provisions – Post-employment plans, net 1,827,217 2,808,746 3,581,139 
   
Present value of the obligations - Other similar obligations:Present value of the obligations - Other similar obligations:  Present value of the obligations - Other similar obligations:   
To current employees 204,439184,606228,107 97,004 135,902 204,439 
Vested obligations to retired employees 6,047,3684,604,4664,815,654Vested obligations to retired employees 5,026,865 5,782,124 6,047,368 
 6,251,8074,789,0725,043,761
Total 5,123,869 5,918,026 6,251,807 
  
Less:  
Fair value of plan assets 5,222,5174,157,2513,721,147 5,096,262 5,398,667 5,222,517 
Unrecognized assets(1) -(68,527)- (585,495)(240,010)-   
Provisions – Other similar obligations, netProvisions – Other similar obligations, net1,029,290700,3481,322,614Provisions – Other similar obligations, net 613,101 759,370 1,029,290 
 
Total provisions for pension plans, net 4,610,4293,084,3733,725,268Total provisions for pension plans, net 2,440,318 3,568,115 4,610,429 
Of which:  
Actuarial provisions 4,960,6203,357,6543,923,457 2,728,126 3,929,265 4,960,620 
Actuarial assets (note 15) 350,191273,281198,189 287,808 361,149 350,191 
(1)Refers to fully funded surplus plans Banesprev I and III, Sanprev I,II and III and Bandeprev (asset ceiling).Bandeprev.

 

F-73

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-71

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

On the fourth quarter of 2018, the Management settled the actuarial deficit of Banesprev V and DAB in 2017 in the amount of R$ 295,529 and R$ 1,246, respectively, and the contribution in the estimated amount of R$ 152,329 to cover the actuarial deficit from 2018 to Banesprev Pré 75.

In the first half of 2018, there was an increase in the cost contribution established for a post-employment benefit plan, which is calculated as a percentage of the total monthly compensation of members. The increase in the contribution resulted in a decrease in the past service cost due to changes in the plan. The envisaged changes implied a reduction in the present value of the obligations of the defined benefit plan, which is supported by actuarial valuations.

The amounts recognized in the consolidated income statement in relation to the aforementioned defined benefit obligations are as follows:

          
   Post-Employment Plans
       202120202019
          
Staff costs - Current service costs (note 39)    1,799 4,186 2,774 
Interest and similar income and expenses - Interest cost (net) (notes 31 and 32) (81,681) 108,268 149,232 
Interest and similar income and expenses - Interest on unrecognized assets (notes 31 and 32)252,608 97,291 100,346 
Other movements -
Extraordinary charges		      2,117 16,786 (1,101)
Total      174,843 226,532 251,251 

 

  Post-Employment Plans
  201920182017
     
Staff costs - Current service costs (note 40)2,7743,14214,605
Interest and similar income and expenses - Interest cost (net) (notes 32 and 33)149,232124,75470,429
Interest and similar income and expenses - Interest on unrecognized assets (notes 32 and 33)100,346104,160105,832
Other movements (1) (1,101)12,4325,323
Total 251,251244,488196,189
     
  Other Similar Obligations
  201920182017
     
Staff costs - Current service costs (note 40)8,1425,7975,476
Interest and similar income and expenses - Interest cost (net) (notes 32 and 33)61,84576,12499,575
Interest and similar income and expenses - Interest on unrecognized assets (notes 32 and 33)3,17315,521-
Other movements (1) 22,624(816,230)-
Total 95,784(718,788)105,051

Amounts recognized in the consolidated income statement in relation to defined benefit obligations - Other Similar Obligations

          
   Other Similar Obligations
       202120202019
          
Staff costs - Current service costs (note 39)    6,820 5,860 8,142 
Interest and similar income and expenses - Interest cost (net) (notes 31 and 32) 14,985 71,374 61,845 
Interest and similar income and expenses - Interest on unrecognized assets (notes 31 and 32)31,500 -   3,173 
Other movements -
Extraordinary charges(2)		      (135)(142)22,624 
Total      53,170 77,092 95,784 

 

The changes in the present value of the accrued defined benefit obligations were as follows:

 

     
 Post-Employment Plans Post-Employment Plans
 201920182017    202120202019
    
Present value of the obligations at beginning of yearPresent value of the obligations at beginning of year24,013,20722,001,60920,769,126Present value of the obligations at beginning of year 28,681,417 28,057,482 24,013,207 
Current service cost (Note 40) 2,7743,14214,605
Current service cost (Note 39)Current service cost (Note 39) 1,799 4,186 2,774 
Interest cost 2,087,4842,029,0992,170,639 1,971,031 1,940,515 2,087,484 
Benefits paid (1,960,103)(1,876,014)(1,834,681) (2,159,866)(2,060,960)(1,960,103)
Actuarial (gains)/losses 3,908,3501,674,908871,308 (1,992,512)722,261 3,908,350 
Others 5,770180,46310,612 2,091 17,933 5,770 
Present value of the obligations at end of yearPresent value of the obligations at end of year28,057,48224,013,20722,001,609Present value of the obligations at end of year 26,503,960 28,681,417 28,057,482 
 
 Other Similar Obligations
 201920182017
 
Present value of the obligations at beginning of year4,789,0725,043,7614,246,489
Current service cost (Note 40) 8,1425,7975,476
Interest cost 443,837438,567447,653
Benefits paid (378,782)(346,185)(339,538)
Actuarial (gains)/losses 1,366,837455,193683,681
Other (1) 22,701(808,061)-
Present value of the obligations at end of year6,251,8074,789,0725,043,761

(1)           In the year ended December 31, 2018 there was an increase in the cost contribution established for a postemployment benefit plan, which is calculated as a percentage of the total monthly compensation of associates. The increase in the contribution resulted in a decrease in the past service cost, due to changes in the plan. The envisaged changes implied a reduction

Consolidated Financial Statements | December 31, 2021 | F-72

Table of Contents

 

* Values expressed in thousands, except when indicated.

Changes in the present value of the obligations of theaccrued defined benefit plan, which is supported by actuarial valuations. In the Consolidated Statements of Income, this amount was recorded under Provision (Net).obligations - Other Similar Obligations

F-74

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

          
   Other Similar Obligations
       202120202019
          
Present value of the obligations at beginning of year   5,918,026 6,251,807 4,789,072 
Current service cost (Note 39)     6,820 5,860 8,142 
Interest cost      417,536 448,836 443,837 
Benefits paid      (373,341)(337,742)(378,782)
Actuarial (gains)/losses      (845,173)(450,735)1,366,837 
Other      -   -   22,701 
Present value of the obligations at end of year    5,123,869 5,918,026 6,251,807 

 

The changes in the fair value of the plan assets were as follows:

    Post-Employment Plans
        202120202019
           
 Fair value of plan assets at beginning of year    28,634,891 25,822,890 22,708,990 
 Interest (Expense) Income     2,052,712 1,832,247 1,938,252 
 Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net
   interest expense		      (791,317)2,994,598 3,087,544 
 Contributions/(surrenders)      589,006 49,716 51,807 
  Of which:         
     By the Bank      585,437 44,970 44,752 
     By plan participants      3,569 4,746 7,055 
 Benefits paid      (2,159,866)(2,060,960)(1,960,103)
 Exchange differences and other items     (3,600)(3,600)(3,600)
 Fair value of plan assets at end of year    28,321,826 28,634,891 25,822,890 

 

  Post-Employment Plans
  201920182017
     
Fair value of plan assets at beginning of year22,708,99020,689,63720,116,916
Interest (Expense) Income 1,938,2521,904,3452,100,211
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net
  interest expense		3,087,5441,347,689268,309
Contributions/(surrenders) 51,807481,95938,883
 Of which:    
   By the Bank 44,752472,72327,439
   By plan participants 7,0559,23611,444
Benefits paid (1,960,103)(1,876,014)(1,834,682)
Exchange differences and other items (3,600)161,374-
Fair value of plan assets at end of year 25,822,89022,708,99020,689,637
     
  Other Similar Obligations
  201920182017
     
Fair value of plan assets at beginning of year4,157,2513,721,1473,310,895
Interest (Expense) Income 381,992362,444348,078
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net interest expense915,626304,632303,504
Contributions/(surrenders) 107,03772,54861,803
 Of which:    
   By the Bank 107,03772,54861,803
Benefits paid (339,389)(310,458)(303,133)
Exchange differences and other items -6,938-
Fair value of plan assets at end of year 5,222,5174,157,2513,721,147

Changes in the fair value of the plan assets - Other Similar Obligations

           
    Other Similar Obligations
        202120202019
           
 Fair value of plan assets at beginning of year    5,398,667 5,222,517 4,157,251 
 Interest (Expense) Income     402,551 377,462 381,992 
 Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net interest expense      (521,100)(34,409)915,626 
 Contributions/(surrenders)      151,926 132,416 107,037 
  Of which:         
     By the Bank       151,926 132,416 107,037 
 Benefits paid      (335,781)(299,319)(339,389)
 Fair value of plan assets at end of year    5,096,263 5,398,667 5,222,517 

 

Breakdown of gains (losses) actuarial by experience, financial assumptions and demographic hypotheses:

Opening of gains (losses) Actuarial from experience, financial assumptions and demographic hypotheses

     Post-Employment Plans
  201920182017
Experience Plan (446,444)(803,717)686,204
Changes in Financial Assumptions (2,615,119)(871,176)(1,557,689)
Changes in Financial Demographic 1,228-146
Gain (Loss) Actuarial - Obligation (3,060,335)(1,674,893)(871,339)
Return on Investment, Return Unlike Implied Discount Rate2,624,9601,344,089270,158
Gain (Loss) Actuarial - Asset 2,624,9601,344,089270,158
Changes in Surplus / Deficit Uncollectible(164,428)117,320(15,690)
     
     Other Similar Obligations
  201920182017
Experience Plan (209,175)(79,810)(303,396)
Changes in Financial Assumptions (1,157,662)(376,949)(380,285)
Changes in Financial Demographic ---
Gain (Loss) Actuarial - Obligation (1,366,837)(456,759)(683,681)
Return on Investment, Return Unlike Implied Discount Rate915,626307,048303,504
Gain (Loss) Actuarial - Asset 915,626307,048303,504
Changes in Surplus Uncollectible 71,698(52,604)-

F-75

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-73

Table of Contents

 

* Values expressed in thousands, except when indicated.

          
         Post-Employment Plans
       202120202019
Experience Plan      (2,640,120)(807,895)(446,444)
Changes in Financial Assumptions     4,632,632 85,634 (2,615,119)
Changes in Financial Demographic     -   -   1,228 
Gain (Loss) Actuarial - Obligation     1,992,512 (722,261)(3,060,335)
Return on Investment, Return Unlike Implied Discount Rate   (791,317)2,994,598 2,624,960 
Gain (Loss) Actuarial - Asset     (791,317)2,994,598 2,624,960 
Changes in Surplus / Deficit Uncollectible    (630,255)(1,318,382)(164,428)

Opening of gains (losses) Actuarial from experience, financial assumptions and demographic hypotheses - Other Similar Obligations

          
         Other Similar Obligations
       202120202019
Experience Plan      (290,878)289,237 (209,175)
Changes in Financial Assumptions     1,136,497 182,120 (1,157,662)
Changes in Financial Demographic     (446)(20,621)-   
Gain (Loss) Actuarial - Obligation     845,173 450,735 (1,366,837)
Return on Investment, Return Unlike Implied Discount Rate   (521,100)(34,409)915,626 
Gain (Loss) Actuarial - Asset     (521,100)(34,409)915,626 
Changes in Surplus Uncollectible     (313,984)(240,010)71,698 

 

The experience adjustments arising from plan assets and liabilities are shown bellow:

 

     Post - Employment Plans
       201920182017
          
Experience in Net Assets Adjustments     3,087,5441,347,689268,309
          
    Other Similar Obligations
       201920182017
         
Experience in Net Assets Adjustments     915,626304,632303,504
    Post - Employment Plans
        202120202019
           
Experience in Net Assets Adjustments      (791,317)2,994,598 2,624,960 
           
   Other Similar Obligations
        202120202019
          
Experience in Net Assets Adjustments      (521,100)(34,409)915,626 

 

The amounts of actuarial obligation of defined benefit plans not covered and defined benefit plans partially or totally covered are shown below:

 

      201920182017
         
         
      815,929700,347701,551
      33,493,36028,101,93226,343,818
       202120202019
          
          
 Defined benefit plans uninsured      613,101 759,370 815,929 
 Defined benefit plans partially or totally covered      31,014,727 33,840,073 33,493,360 

 

The main categories of plan assets as a percentage of total plan assets are as follows:

 

       201920182017
          
 Equity instruments     0.00%4.81%4.60%
 Debt instruments     92.92%94.59%94.70%
 Properties     0.26%0.28%0.35%
 Other     6.82%0.32%0.35%
       202120202019
          
Debt instruments      96.68%97.41%92.92%
Properties      0.17%0.17%0.26%
Other      3.15%2.45%6.82%

Consolidated Financial Statements | December 31, 2021 | F-74

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

The expected return on plan assets was determined based on the market expectations for returns over the duration of the related obligations.

 

The actual return on plan assets was R$6,301,111 (20181,198,815 (2020 - R$3,823,0044,826,845 e 20172019 - R$3,021,950)6,301,111).

 

The following table shows the estimated benefits payable for the next 10ten years from December 31, 2019:2021:

 

   
   
2020 2,195,627
2021 2,232,813
2022 2,292,622
2023 2,350,054
2024 2,406,310
2025 to 2029 12,762,480
Total 24,239,906

F-76

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

          
          
2022        2,511,841 
2023        2,561,598 
2024        2,608,572 
2025        2,651,957 
2026        2,691,303 
2027 to 2031        13,884,478 
Total        26,909,749 

 

Assumptions about the rates related to medical care costs have a significant impact on the amounts recognized in income. The change of one percentage point in the medical care cost rates would have the effects as follows:

 

         Sensitivity
     2019 2018 2017
     Current Service Cost and InterestPresent Value of Obligations Current Service Cost and InterestPresent Value of Obligations Current Service Cost and InterestPresent Value of Obligations
Discount RateDiscount Rate        
 (+)0,5%  (31,672)(440,072)(29,066)(307,980)(28,742)(301,237)
 (-)0,5%  35,572494,25732,403343,34031,876334,085
 Boards of Mortality        
 Applied (+) 2 years  (51,720)(718,632)(45,937)(486,742)(43,310)(453,912)
 Applied (-) 2 years  56,687787,63649,355522,95845,808480,101
 Cost of Medical Care        
 (+)0,5%  38,388533,38035,949380,90631,758332,850
 (-)0,5%  (35,060)(487,146)(32,100)(340,122)(28,501)(298,705)
          Sensitivity
    2021   2020 2019
   Current Service Cost and Interest  Present Value of Obligations  Current Service Cost and Interest  Present Value of Obligations Current Service Cost and Interest Present Value of Obligations
 Discount Rate         
 (+)0,5%(25,444) (305,114) (28,711) (402,547)(31,672)(440,072)
 (-)0,5%28,133  337,349  32,099  450,049 35,572 494,257 
 Boards of Mortality         
 Applied (+) 2 years(44,619) (535,039) (47,637) (667,904)(51,720)(718,632)
 Applied (-) 2 years47,934  574,793  54,226  760,289 56,687 787,636 
 Cost of Medical Care         
 (+)0,5%31,280  375,089  34,718  486,769 38,388 533,380 
 (-)0,5%(28,762) (344,891) (31,637) (443,569)(35,060)(487,146)

 

The following table shows the durationduration of the actuarial liabilities of the plans sponsored by Banco Santander:

 

PlansPlansPost - Employment Plans
Duration (in years)
Banesprev Plans I12.3112.57 
Banesprev Plans  II12.8312.92 
Banesprev Plans  III10.5211.54 
Banesprev Plans  IV15.4714.82 
Banesprev Plans  V9.539.51 
Banesprev Pre-7510.3810.45 
Sanprev I6.816.79 
Sanprev II11.7012.76 
Sanprev III10.5911.06 
Bandeprev Basic10.4810.53 
Bandeprev Special I7.047.23 
Bandeprev Special II6.776.46 
SantanderPreviSantanderPrevi 7.788.11 
CACIBAN / DAB / DCA 7.33/6.03/6.677.27/ 5.93/ 6.47

Plans

Consolidated Financial Statements | December 31, 2021 | F-75

Table of Contents

 

* Values expressed in thousands, except when indicated.

Duration of the actuarial liabilities of the plans sponsored - Other Similar Obligations

PlansOther Similar Obligations
CabespCabesp 15.4516.03 
BandepeBandepe 16.4818.03 
Free Clinic11.9112.28 
Lifetime officers9.179.36 
Health officers27.5330.28 
Circulars(1)12.15 e 11.9311.62 E 12.97
Life Insurance8.398.04 

(1) The duration 11.1512.15 refers to the plan of Former Employees of Banco ABN Amro and 11.93 to the plan of Former Employees of Banco Real.

 

F-77

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Actuarial Assumptions Adopted in Calculations

 

    2019 2018 2017  2021   2020 2019
 PensionHealthPensionHealthPensionHealth Pension Health Pension HealthPensionHealth
Nominal Discount Rate for Actuarial ObligationNominal Discount Rate for Actuarial Obligation 7.1%7.2%9.1%9.3%9.5%9.7%Nominal Discount Rate for Actuarial Obligation 8.4% 8.4% 6.8% 7.1%7.1%7.2%
Rate Calculation of Interest Under Assets to the Next YearRate Calculation of Interest Under Assets to the Next Year 7.1%7.2%9.1%9.3%9.5%9.7%Rate Calculation of Interest Under Assets to the Next Year8.4% 8.4% 6.8% 7.1%7.1%7.2%
Estimated Long-term Inflation RateEstimated Long-term Inflation Rate 3.5%4.0%Estimated Long-term Inflation Rate3.0% 3.0% 3.3% 3.3%3.5%3.5%
Estimated Salary Increase RateEstimated Salary Increase Rate 4.0%5.0%Estimated Salary Increase Rate3.5% N/A 3.8% N/A4.0%4.0%
Mortality tablesMortality tables AT2000Mortality tables AT2000 AT2000 AT2000 AT2000AT2000AT2000

 

22.23.Provisions for judicial and administrative proceedings, commitments and other provisions

 

a) Breakdown

 

The breakdown of the balance of “Provisions” is as follows:

The breakdown of the balance of Provisions

Thousand of reais      2019 2018 2017
            
Pension fund provisions and similar requirements (2)4,960,620 3,357,654 3,923,457
Provisions for lawsuits and administrative proceedings, commitments and other provisions      11,371,205 11,338,244 10,063,459
 Judicial and administrative proceedings under the responsibility of former controlling stockholders (Note 15)103,272 605,638 707,131
 Judicial and administrative proceedings      9,226,735 9,507,240 8,365,320
        Of which:           
  Civil      3,201,061 3,377,338 2,522,005
  Labor      3,504,296 3,819,107 3,448,388
  Tax and Social Security      2,521,378 2,310,795 2,394,927
Provisions for contingent commitments (Note 23.b)      683,918 626,267 -
    Others provisions(1)      1,357,280 599,099 991,008
Total      16,331,825 14,695,898 13,986,916
(1)In 2019, includes R$700,000 (2018 - R$126.561 and 2017 - R$287,446) relating to the expenses of projects aimed at improving operational productivity and efficiency.
Thousand of reais 2021 2020 2019
       
Pension fund provisions and similar requirements2,728,126  3,929,265  4,960,620 
Provisions for lawsuits and administrative proceedings, commitments and other provisions 8,876,356  9,885,713  11,371,205 
  Judicial and administrative proceedings under the responsibility of former controlling stockholders (Note 15)496  496  103,272 
  Judicial and administrative proceedings  7,668,914  8,648,892  9,226,735 
         Of which:      
   Civil 3,231,004  3,429,155  3,201,061 
   Labor 2,071,811  2,886,990  3,504,296 
   Tax and Social Security 2,366,099  2,332,747  2,521,378 
Provisions for contingent commitments (Note 22.b.1) 908,027  724,779  683,918 
    Others provisions  298,919  511,546  1,357,280 
Total 11,604,482  13,814,978  16,331,825 

(2)In the year ended

Consolidated Financial Statements | December 31, 2018, there was an increase in the costing contribution established for a certain post-employment benefit plan, which is calculated as a percentage2021 | F-76

Table of the total monthly remuneration of members. This increase in contribution resulted in a decrease in the cost of past service, due to the change in the plan. The envisaged changes implied a reduction in the present value of the defined benefit plan obligations, which is supported by an actuarial assessment. In the Consolidated Statements of Income, this amount was recorded in the caption Provisions (Net).

b) ChangesContents

 

 

* Values expressed in thousands, except when indicated.

b) Changes

The changes in “Provisions” were as follows:

Changes in Provisions

Thousand of reais 2021
   
  Pensions (1) Other Provisions Total
Balance at beginning of year3,929,265  9,885,713  13,814,978 
Additions charged to income:    
Interest expense and similar charges 217,413  -    217,413 
Personnel Expenses (Note 39)8,619  -    8,619 
Constitutions / Reversals and Adjustment of provisions(1,618) 1,997,788  1,996,170 
Other Comprehensive Income  (833,511) -    (833,511)
Additions to provisions for contingent commitments -    183,248  183,248 
Payments to external funds (619,086) -    (619,086)
Amount paid -    (3,222,395) (3,222,395)
Transfer to other assets - actuarial assets (Note 15)27,045  -    27,045 
Transfers, exchange differences and other changes-    32,002  32,002 
Balance at end of year 2,728,126  8,876,356  11,604,482 

 

Thousand of reais  2019 2020
     
 Pensions (1) Other Provisions Total Pensions (1) Other Provisions Total
Balance at beginning of yearBalance at beginning of year 3,357,654 11,338,244 14,695,898Balance at beginning of year4,960,620  11,365,589  16,326,209 
Additions charged to income:Additions charged to income: Additions charged to income: 
Interest expense and similar chargesInterest expense and similar charges 314,596 - 314,596Interest expense and similar charges276,933  -    276,933 
Personnel Expenses (Note 40) 10,917 - 10,917
Personnel Expenses (Note 39)Personnel Expenses (Note 39)10,046  -    10,046 
Constitutions / Reversals and Adjustment of provisionsConstitutions / Reversals and Adjustment of provisions21,523 2,936,187 2,957,710Constitutions / Reversals and Adjustment of provisions13,044  1,565,402  1,578,446 
Other Comprehensive Income 1,416,815 - 1,416,815 (1,133,245) -    (1,133,245)
Additions to provisions for contingent commitments - (57,651) (57,651) -    40,861  40,861 
Payments to external fundsPayments to external funds (187,667) - (187,667)Payments to external funds (215,829) -    (215,829)
Amount paid - (2,870,703) (2,870,703) -    (3,136,423) (3,136,423)
Transfer to other assets - actuarial assets (Note 15)Transfer to other assets - actuarial assets (Note 15)23,014 - 23,014Transfer to other assets - actuarial assets (Note 15)17,695  -    17,695 
Transfers, exchange differences and other changesTransfers, exchange differences and other changes- 19,512 19,512Transfers, exchange differences and other changes-    50,284  50,284 
Balance at end of year 4,956,852 11,365,589 16,322,441 3,929,265  9,885,713  13,814,978 

 

F-78

Table of Contents

Thousand of reais 2019
   
  Pensions (1) Other Provisions Total
Balance at beginning of year3,357,654  11,338,244  14,695,898 
Additions charged to income:    
Interest expense and similar charges314,596  -    314,596 
Personnel Expenses (Note 39)10,917  -    10,917 
Constitutions / Reversals and Adjustment of provisions 21,523  2,936,187  2,957,710 
Other Comprehensive Income  1,416,815  -    1,416,815 
Additions to provisions for contingent commitments -    (57,651) (57,651)
Payments to external funds (183,899) -    (183,899)
Amount paid -    (2,865,087) (2,865,087)
Transfer to other assets - actuarial assets (Note 15)23,014  -    23,014 
Transfers, exchange differences and other changes-    19,512  -   19,512 
Balance at end of year 4,960,620  11,371,205  16,331,825 
 (1)For further information, see note 22. Provisions for pension funds and similar obligations.

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-77

Thousand of reais  2018
    
     Pensions (1) Other Provisions Total
Balance at beginning of year  3,923,456 10,063,459 13,986,915
Additions charged to income:       
Interest expense and similar charges 320,559 - 320,559
Personnel Expenses (Note 40) 8,939 - 8,939
Constitutions / Reversals and Adjustment of provisions(801,332) 3,556,512 2,755,180
Other Comprehensive Income    483,058 - 483,058
Additions to provisions for contingent commitments    - (48,246) (48,246)
Payments to external funds  (594,024) - (594,024)
Amount paid    - (2,247,172) (2,247,172)
Transfer to other assets - actuarial assets (Note 15)16,998 - 16,998
Transfers, exchange differences and other changes- 13,691 13,691
Balance at end of year    3,357,654 11,338,244 14,695,898

Thousand of reais  2017
    
     Pensions (1) Other Provisions Total
Balance at beginning of year  2,710,626 9,065,864 11,776,490
Additions charged to income:       
Interest expense and similar charges 275,836 - 275,836
Personnel Expenses (Note 40) 20,081 - 20,081
Constitutions / Reversals and Adjustment of provisions    1,723 3,112,684 3,114,407
Other Comprehensive Income    1,028,090 - 1,028,090
Payments to external funds  (127,357) - (127,357)
Amount paid    - (2,123,483) (2,123,483)
Transfer to other assets - actuarial assets (Note 15)14,457 - 14,457
Transfers, exchange differences and other changes- 8,3948,394
Balance at end of year    3,923,456 10,063,459 13,986,915

(1) For further information, see note 15. Provisions for pension funds and similar obligations.

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

b.1) Provisions for contingent payments

 

According to note 2.iii.ix,1.iii, IFRS 9 requires that the provision for expected credit losses be recorded for contracts of financial guarantees rendered, which have not yet been honored. Provision expense reflecting credit risk should be measured and accounted for when the honor of these guarantees occurs and the client accused does not comply with its contractual obligations. The movement of these provisions in 20192021 and 20182020 is as follows:

Movement of provisions

Thousand of reais 2019 2018
     
Balance at beginning of year (in 1/01/2018 after the initial adoption of the IFRS 9) 626,267 674,513
 Creation of provision for contingent commitments 57,651 (48,246)
Balance at end of year 683,918 626,267

Thousand of reais  2021 20202019
       
Balance at beginning of year  724,779  683,918 626,267 
 Creation of provision for contingent commitments  183,248  40,861 57,651 
Balance at end of year  908,027  724,779 683,918 

 

c) Provisions for Civil, Labor, Tax and Social Security, ContingenciesLabor and Civil Provisions

 

Banco Santander and its subsidiaries are involved in lawsuits and administrative proceedings related to tax, labor, social security and civil arising in the normal course of its activities.

 

The provisions were constituted based on the nature, complexity, lawsuits historic and company´s assessment of lawsuit losses based on the opinions of internal and external legal advisors. The Santander has the policy to constitute provision of full amount of lawsuits who’s the result of loss assessment is probable. The legal obligation of tax and social security were fully recognized in the financial statements.

 

Management understands that the provisions made are sufficient to meet legal obligations and any losses arising from legal and administrative proceedings as follows:

c.1) Lawsuits and Administrative Proceedings – related to Tax and Social Security

 

The main legal obligations and administrative proceedings, recorded at the line of “Tax Liabilities – Current”, recorded integrality as an obligation are described as follows:

 

Main lawsuits and administrative proceedings related to legal obligations, tax and social security

• PIS and Cofins - R$3,755,556 (20184,075,496(2020 - R$3,632.467 and 2017 - R$3,501,464)3,993,873): Banco Santander and its subsidiaries filed lawsuits seeking to eliminate the application of Law 9,718/1998, which modified the calculation basis for PIS and Cofins to cover all revenues of legal entities and not only those arising from the provision of services and sale of goods. Regarding the Banco Santander Process, on April 23, 2015, a STF decision was issued admitting the Extraordinary Appeal filed by the Federal Government regarding PIS and denying

F-79

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

the follow-up to the Extraordinary Appeal of the Federal Public Prosecutor regarding Cofins. Both appealed this decision, without any success, so that the suit relating to Cofins is defined, ruling the judgment of the Federal Regional Court of the 4th Region of August 2007, favorable to Banco Santander. Pursuant to the STF, Banco Santander’s PIS and the PIS and Cofins of other subsidiaries are pending final judgment.

 

Main lawsuits and administrative proceedings with probable loss risk

 

Banco Santander and its subsidiaries are parties in lawsuits and administrative proceedings related to tax and social security matters, which their risk of loss areis classified as probable, based on the opinion of legal counsel. Those are thede main themes ofat the proceedings:

 

• Provisional Contribution on Financial Transactions (CPMF) on Customer Operations - R$906,355 (2018945,715 (2020 - R$729,919 and 2017 - R$714,604):924,457 ): in May 2003, the Federal Revenue Service issued a tax assessment against Santander Distribuidora de Títulos e Valores Mobiliários Ltda. (Santander DTVM) and another tax assessment against Banco Santander Brasil S.A. The tax assessments refer to the collection of CPMF tax on transactions conducted by Santander DTVM in the cash management of its customers’ funds and clearing services provided by Banco to Santander DTVM in 2000, 2001 and 2002. Based on the risk assessment of legal counsel, the tax treatment was accurate. Santander DTVM had a favorable decision at the Board of Tax Appeals (CARF). Banco Santander had aan unfavorable decision and was considered responsible for the collection of the CPMF tax. Both decisions were appealed by the respective losing party to the highest jurisdiction of CARF. In June 2015, Bank and DTVM had obtained a non favorablenon-favorable decision at CARF. On July 3, 2015, Banco and Santander Brasil Tecnologia S.A. (current name of Produban Serviços de Informática S.A. and Santander DTVM) filed a lawsuit seeking to cancel both tax debts. This lawsuit was ruled groundless and is currently awaiting judgment by the Regional Federal Court (TRF 3). Based on the legal advisors' assessment, a provision was set up to cover the loss considered probable in the lawsuit.

Consolidated Financial Statements | December 31, 2021 | F-78

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

• Social Security Contribution (INSS) - R$282,053 (201853,936 (2020 - R$273,233 and 2017 - R$265.022):51,409 ): Banco Santander and its subsidiaries are involved in administrative and judicial proceedings regarding the collection of income tax on social security and education allowance contributions over several funds that, according to the evaluation of legal advisors, do not have nature of salary.

 

• Tax on Services (ISS) - Financial Institutions - R$224,631 (2018283,528 (2020 - R$228.403263,183 and 20172019 - R$228.403)224,631):Banco Santander and its subsidiaries discuss administrative and legal requirements, by several municipalities, of the payment of ISS on various revenues arising from operations that are usually not classified as services (Note 23.c.4(Part of this process is at risk of possible loss as per note note 22.c.4 – Possible Risk Loss).

 

c.2) LawsuitsLegal and Administrative ProceedingsLawsuits of a Labor Nature

 

These are lawsuits filed by labor Unions, Associations, the Public ProsecutorsMinistry of Labor and former employees claiming labor rights they believe aredeem to be due, especiallyin particular the payment for overtimeof “overtime” and other labor rights, including lawsuits related to retirement benefit lawsuits.benefits.

 

For claimslawsuits considered to becommon and similar and usual,in nature, provisions are recognizedrecorded based on the payments and successes historic.historical average of closed proceedings. Claims that do not fitmeet the previousabove criteria have their provisions constituted according toare provisioned based on an individual assessment performed,carried out, and the provisions being constitutedare set up based on the probable risk of loss, as probable,in the law and jurisprudence according toin case law, in accordance with the assessment of loss madecarried out by the legal counsel.advisors.

 

Former employees of Banespa employees. Action distributed in 1998 by the Association of Retired Persons of Banespa Retired Association (AFABESP) requiringrequesting the payment of a semiannual bonus provided for in the regulations of Banco Banespa regulations,for approximately 8,400 former employees (retirees), according to which the payment will be made in the event that the Bank makes a profit and the distribution of this profit is approved by the board of directors. management or, alternatively, PLR, to retired employees of the extinct Banco do Estado de São Paulo SA - Banespa, hired until May 22, 1975. The bonus was not paid in 1994 and 1995 because theBanespa bank did not make a profit during these years. Partial payments were made between 1996 and 2000 as approved by the board of directors. The aforementionedSaid clause was excluded from the regulation in 2001. The lawsuitRegional Labor Court and the Superior Labor Court ordered Santander Brasil, as successor to Banespa, to pay the semiannual bonus for the periods relating to the second semester of 1996 and the semesters of 1997. On March 20, 2019, a decision of the Federal Supreme Court (Supreme Federal Court, or “STF”) rejected the extraordinary appeal filed by Banco Santander, which did not resolve the merits of the case. We filed a rescission action to annul the sentence due to the lack of legitimacy of AFABESP (second precedent No. 573.232 of the STF) or to recognize the nullity of the TRT judgment that did not notify Banco Santander about the modifying effects of the decision, as well as to suspend the execution in the main process. The rescission action was uphelddismissed, and this decision was filed a motion for clarification, due to the absence of an explicit statement about the arguments brought by the Bank. Regarding the Motions for Clarification, the points of omission were not answered as required by law, which is why an Extraordinary Appeal was filed, which was denied by the TST. From this decision, the Bank filed an interlocutory appeal, which is pending admissibility, considering that the decisions rendered by the Superior Labor Court. The Bank filedCourt contradict the appropriate funds withalready peaceful position in the STF (precedent No. 573,232), according to which duethe Association needs a specific power of attorney to a monocratic decision, rejected the appeal. A rescissory action was brought to dismisssue in judgment, and also the decision affronts constitutional precepts about access to justice (item XXXV of art. 5 of the CF) by determining excessive collection of costs. In relation to the main action, and suspend execution. There isin August 2021, a preliminary injunction in forcedecision was rendered that authorizesdetermined that the execution be carried out individually in the court corresponding to each defendant and AFABESP filed an appeal, however, so far there has been no decision in this regard.

Our legal advisors classified the risk of necessary enforcement acts to proceed with the execution until the attachment, however, any acts of seizure of assets or blocking of cash are prohibited until the judgmentloss as probable. The current decisions of the rescission action. Ascourt, and neither of the court in the main proceedings, do not define a specific amount to be paid by the substituted, and the amounts must be calculated in regular settlement of the sentence.

On December 31, 2019,2021, the case is classified as a probable loss and the provision was recordedconstituted based on the estimated loss.loss

 

c.3) LawsuitsCivil Judicial and Administrative Proceedings of Civil

 

These contingencies areprovisions generally caused by:arise from: (1) Lawsuits with a request forlawsuits requesting revision of contractual terms and conditions or requests for monetary adjustments, including supposedalleged effects of the implementation of various government economic plans, (2) lawsuits deriving ofarising from financing agreements,contracts, (3) lawsuits of execution;execution actions; and (4) lawsuits of indemnity by loss and damage.damages claims. For civil lawsuitsactions considered common and similar in nature, provisions are recorded based on the historical average of cases closed.closed proceedings. Claims that do not fitmeet the previousabove criteria are provisioned according tobased on an individual assessment performed,carried out, and the provisions are set up based on the probable risk of loss, as probable,in the law and jurisprudence according toin case law, in accordance with the assessment of loss madecarried out by the legal counsel.advisors.

Consolidated Financial Statements | December 31, 2021 | F-79

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

The main processes with the classification oflawsuits classified as risk of probable loss as probable are described below:

 

• Lawsuits for Indemnity -Actions seeking indemnity- These refer to compensation for material and emotionaland/or moral damage, regardingrelating to the consumer relationship, on matters relateddealing mainly with issues relating to credit cards, direct consumer credit, bankchecking accounts, collection and loans and other operations.matters. In the civil lawsuitsactions related to causes considered to be similar and usual provisions are recordedfor the business, in the normal course of the Bank's activities, the provision is constituted based on the historical average of cases closed. Civil lawsuitsclosed processes. Claims that do not fit intomeet the previousabove criteria are provisioned according to thebased on an individual assessment made, beingcarried out, and the provisions recognizedare set up based on the probable risk of loss, as probable,in the law and jurisprudence according toin case law, in accordance with the assessment of loss madecarried out by the legal counsel.advisors.

 

• Economic Plans – they referred- Refer to lawsuits filed by savings accountholders, related to supposed inflation purgelegal disputes, claiming alleged inflationary purges arising from the Economic Plans (Bresser, Verão, Collor I and II), based on the understandingas they understand that such plans violated acquired rights relatingrelated to the application of inflation indexes on Savingindices supposedly due to Savings Accounts, LawsuitsJudicial Deposits and Time Deposits (CDB)(CDBs). Provisions arising from suchThe lawsuits are recordedprovisioned based on the individual evaluationindividualized assessment of loss madecarried out by externalthe legal consultants.advisors.

 

F-80

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

The Banco Santander is also party into public class lawsuitscivil actions, on the same matter, filed by consumer rights organizations,protection entities, the Public Prosecutor’s Offices andMinistry or Public Defender’s Offices.Defenders. The constitution of a provision is made only for the lawsuitscases with the classification ofprobable risk, as probable, based on therequests for individual execution orders.executions. The STFissue is still analyzingunder review at the subject and has already orderedSTF. There is jurisprudence in the suspension of all the procedures except those that were not already decided in courts or in phase of definitive execution. There are decisionsSTF favorable to banks at the STF with regard to theBanks regarding economic phenomenon similar to thethat of savings, accounts, as in the case of monetary restatementcorrection of time deposits - CDB(CDBs) and agreements (present value table)corrections applied to contracts (table).

 

However, the Supreme Court´s jurisprudence of the STF has not come to a conclusion regardingyet been consolidated on the constitutionality of the norms that changed Brazil’smodified the monetary standard.standard in Brazil. On April 14, 2010, the STJ was recently decidedSupreme Court of Justice (STJ) ruled that the deadline for bringing public civil actions discussing the filingpurges is 5 years from the date of civil lawsuits that argue the government's purge is five years,plans, but this decision has not been handed down on the lawsuits yet.yet become final. Thus, with this decision, a majority lawsuits,large part of the actions, as they were filedproposed after thea period of five5 years, is likely towill probably be rejected,dismissed, reducing the valuesamounts involved. Still, the STFThe STJ also decided that the deadlineperiod for individual savers to become party on the public civil litigations,qualify for Public Civil Actions is also five5 years, counted from the final and unappealable decision of the respective sentence. Banco Santander believes in the success of the argumentstheses defended inbefore these courts based onfor their content and the legal basis.foundation.

 

At the end of 2017, the Federal General Union LawCounsel (AGU), Bacen, Institute ofthe Consumer ProtectionDefense Institute (Idec), the Brazilian Savings Front of the Money savers (Febrapo), and the Brazilian Federation of Banks Federation (Febraban) have signed an agreement withthat seeks to end the purpose to close all lawsuits related tolegal disputes over the Economic Plans.

 

The discussionsDiscussions focused on the definition ofdefining the amount that would be paid to each personauthor, according to the outstanding balance in the saving account.passbook on the date of the plan. The total amountvalue of the payments will depend on the number of the additional clients,subscriptions, and also on the number of money savers that approvedwho have proven in court the courtsexistence of the existance of their account and the balance inon the birthdayanniversary date of the indexes changes.change in the indices. The term of agreement negotiated between the parties was submitted to the STF, which approved the terms of the agreement.

Recently, the STF ordered the suspension of all economic plan (in the country), for two years considering the judicial homologation.

The Management considers that the accrued provisions are due to charge interest in accordance with the plans, including considering the agreement approved by the STF.

 

In a decision handed down by the STF, there was a national suspension of all processes that deal with the issue for the period of validity of the agreement, with the exception of cases in which the sentence was definitively complied with.

On March 11, 2020, the agreement was extended by means of an amendment, with the inclusion of actions that involve only the discussion of the Collor I Plan. June 2020

Management considers that the provisions made are sufficient to cover the risks involved with the economic plans, considering the approved agreement.

c.4) Civil, Labor, Tax and Social Security, SocialLabor and Civil Contingent Liabilities Contingent Classified withas Risk of Possible Loss Risk as Possible:

 

Refer to lawsuitsThese are legal and administrative proceedings involvingof a tax, social security, labor and civil mattersnature classified, bybased on the opinion of legal counsels withadvisors, as a possible risk of loss, riskand therefore not provisioned.

Tax lawsuits classified as possible which they were not recorded.

The tax lawsuits classification with loss risk as possiblelosses totaled R$25,380 million, being29,498,172 in the Consolidated, with the main lawsuits being as follow:follows:

 

• INSS on Profits or ResultsProfit Sharing (PLR) - the Bank and theits subsidiaries have several lawsuitslegal and administrative proceedings arising from questioningquestionings by the tax authorities in connection withregarding the taxation forcollection of social security purposes of certain items which are not considered to be employee remuneration.contributions on payments made as profit sharing. As of December 31, 2018,2021, the amounts related to these proceedings totaledamount was approximately R$5,052 million.7,340,746.

 

• Tax on Services (ISS) - Financial Institutions - Banco Santander and its subsidiaries discuss administrativeare discussing administratively and legal requirements,in court the demand, by several municipalities, of the payment of ISS on various revenues arising from operations that are not usually not classified as services. Onservices rendered. As of December 31, 2019,2021, the amounts related to these proceedings totaledamount was approximately R$3,139 million.4,145,661.

Consolidated Financial Statements | December 31, 2021 | F-80

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

• UnapprovedNon-Approved Compensation - The the Bank and its affiliates discuss administrativeare discussing administratively and legal proceedingsjudicially with the Federal Revenue Office to grantService the non-approval of tax reliefoffsets with credits arising from overpayments. Onoverpayments or undue payments. As of December 31, 2019,2021, the amounts related to these proceedings totaledamount was approximately R$4,835 million.5,351,349.

 

• Goodwill Amortization of Banco RealReal's Goodwill - the Federal Tax OfficeRevenue Service of Brazil issued infraction noticesa tax assessment notice against the Bank to requiredemand the income taxpayment of IRPJ and social payments,CSLL, including late payment charges, for the period of 2009.2009 base period. The Tax Authorities considered that the goodwill related to the acquisition of Banco Real, amortized for accounting purposes prior to thebefore its merger, could not be deduceddeducted by Banco Santander for tax purposes. The infractiontax assessment notice was contested. On July 14, 2015,duly challenged and we are currently awaiting judgment before the Police Judging RFB decided favorably to Banco Santander, fully canceling the tax debt. On November 10, 2016, the appeal was filed, prompting the Bank to lodge an appeal with CARF, which is awaiting judgment. OnCARF. As of December 31, 2019,2021, the balanceamount was approximately R$1,419 million.1,466,444.

 

•Losses on Credit LossesOperations - the Bank and its subsidiaries challenged the tax assessments issued by the Federal Revenue Services claimingof Brazil alleging the improper deduction of losses on credit operations from the IRPJ and CSLL calculation bases for credit losses because they fail to meetallegedly not complying with the relevant requirements underof applicable law.laws. As of December 31, 20192021, the amount related to this claim iswas approximately R$607 million.1,175,511.

 

• Use of CSLL Tax Loss and Negative Basis – Tax Loss -Tax assessmentsassessment notices issued by the Brazilian Federal Revenue Service in 2009 for alleged undue compensation of CSLL tax loss carryforwards and negative basis, of CSLL, as a consequenceresult of tax assessments drawn upassessment notices issued in previous periods. Judgment is pendingAwaiting judgment at the administrative level. As of December 31, 2019,2021, the amount was approximately R$1,055 million.1,092,625.

 

• Goodwill Amortization of Banco Sudameris –Goodwill - the Tax Authorities havetax authorities issued infractiontax assessment notices to requiredemand the income taxpayments of IRPJ and social contribution payments,CSLL, including late payment charges, relatingreferring to the tax deduction of the amortization of the goodwill frompaid on the acquisition of Banco Sudameris, relatedreferring to the base period of 2007 to 2012. Banco Santander timely presented its appeals,the respective administrative defenses, which were judged unfavorably. Currently, the processes are pending. Onawaiting judgment at CARF. As of December 31, 2019,2021, the amounts related to these proceedings totaledamount was approximately R$635 million.569,114.

F-81

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

• IRPJ and CSLL - Capital Gain - the Federal Tax OfficeInternal Revenue Service of Brazil issued infraction noticesa tax assessment notice against Santander Seguros (legal successor company of ABN AMRO Brasil Dois Participações S.A.SA (AAB Dois Par), charging income Taxtax and Social Contributionsocial contribution related to related basethe fiscal year de 2005. The Federal Tax OfficeRevenue Service of Brazil claims that the capital gain in saleson the sale of the shares fromof Real Seguros S.ASA and Real Vida e Previdência S.A.SA by AAB Dois Par should be taxed by theat a rate of 34%34.0% instead 15%.of 15.0 %. The assessment was contestedchallenged administratively based on the understanding that the tax treatment adopted atin the transaction was in complianceaccordance with current tax lawslegislation and the capital gain was taxed properly.duly taxed. The administrative proceeding ended unfavorably to the Company. In July 2020, the Company filed a lawsuit seeking to cancel the debt. The lawsuit is awaiting trial. Thejudgment. Banco Santander is responsible for any adverse outcome in this lawsuitproceeding as the former controlling shareholder of the Zurich Santander Brasil Seguros e Previdência S.A. stockholder. As of December 31, 2019,2021, the amount related to this lawsuit iswas approximately R$400 million.496,231.

 

The laborLabor claims with classification of loss riskclassified as possible loss totaled R$ 134 million,267,267 in the Consolidated, excluding the lawsuitsprocess below:

 

Readjustment of the Pension Supplements of Banesprev retirement complements by the IGPDI- lawsuit – action filed in 2002 in the Federal Court by the Association of Retired Employees of the Banco do Estado deBank of the State of São Paulo S.A. - Banespa, requesting the readjustment of the retirementpension supplementation by the IGPDI for Banespa retirees who have been admitted until May 22 of 1975. The judgment granted the correction, but only in the periods in which no other form of adjustment could bewas applied. The Bank and Banesprev have appealed this decision and although the appeals have not yet been judged, the Bank's success rate in this matter in the High Courts is around 90%.are still pending judgment. In Provisional Execution, calculations were presented by the Bank and Banesprev with "zero" result due to the exclusion of participants who, among other reasons, are listedappear as authorsplaintiffs in other lawsuitsactions or have already had some type of adjustment.readjustment. The amount related to this claiminvolved is not disclosed due to the current procedural stage of the lawsuitcase and such disclosure may impactpotentially affecting the progress of the claim.action.

 

The liabilitiesLiabilities related to civil lawsuits with classificationpossible risk of loss risk as possible totaled R$2,058 million, being2,380,226 in the Consolidated, with the main lawsuits as follow:lawsuits:

 

• Action for Indemnity Lawsuit Arising of the Banco Bandepe - related to mutual agreement on appeal to the Justice Superior Court (STJ - Superior Tribunal de Justiça).

Indemnity Lawsuit RelatedReferring to Custody Services - provided by Banco Santander at an earlyinitial stage which was notand still without a sentence handed down yet.down.

 

• LawsuitAction Arising from a Contractual Dispute - in the acquisition of Banco Geral do Comércio S.A. onSA under appeal toby the Court of Justice of the State of São Paulo (TJSP - Tribunal de Justiça do Estado de São Paulo)(TJSP).

 

c.5) Other Lawsuits Underfor the ResponsibilityLiability of Former Controlling StockholdersControllers

 

ReferThey refer to tax, labor and civil lawsuits, in the amounts of R$102.482, R$213 and R$578 (2018496 (12/31/2020 - R$598,544, R$327 and R$6,767)496), respectively, which the responsible people wereof responsibility of the former controlling stockholderscontrollers of the Bankbanks and acquired companies. Based on the agreement signed contracts, these lawsuits haveactions are guaranteed full reimbursement from part ofby the former controllers, whose respective dutiesrights were recorded in other receivables – others.

In the year ended December 31, 2019, the Bank signed a contract with a former controller, in which the registered obligations became the Bank's responsibility.assets.

 

F-82

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-81

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

23.24.Tax assets and liabilities

 

a) Income and Social Contribution Taxes

 

The total charge for the year can be reconciled to accounting profit as follows:

 

Thousand of reais201920182017  202120202019
  
Operating Profit Before Tax22,273,14915,909,77114,513,684Operating Profit Before Tax 24,750,329 9,663,975 22,273,149 
Interest on capital(1)-(4,080,000)(3,800,000)
Operating Profit Before Tax22,273,14911,829,77110,713,684Operating Profit Before Tax 24,750,329 9,663,975 22,273,149 
Rates (25% income tax and 15% social contribution tax)(8,909,260)(5,323,397)(4,821,158)
PIS and COFINS (net of income and social contribution taxes) (2) (6)(1,983,839)(1,490,190)(1,427,960)
Rates (25% income tax and 25% social contribution tax)Rates (25% income tax and 25% social contribution tax) (12,375,164)(4,348,789)(8,909,260)
PIS and COFINS (net of income and social contribution taxes) (1)PIS and COFINS (net of income and social contribution taxes) (1) (1,679,789)(1,589,260)(1,983,839)
Non-taxable/Non-deductible: Non-taxable/Non-deductible: 
Equity in affiliates59,79529,68132,198 72,114 85,723 59,795 
Goodwill(3)(137,175)(101,305)(669,963)
Exchange variation - foreign branches (4)715,4242,792,995440,857
Net Indeductible Expenses of Non-Taxable Income (6)214,242384,554194,737
Goodwill  (559,247)(183,854)(137,175)
Exchange variation - foreign branches (2)Exchange variation - foreign branches (2) 768,902 6,831,484 715,424 
Net Indeductible Expenses of Non-Taxable Income (3)Net Indeductible Expenses of Non-Taxable Income (3) (230,958)(57,663)214,242 
Adjustments:  
Constitution of income and social contribution taxes on temporary differences70,223136,3531,138,005Constitution of income and social contribution taxes on temporary differences 264,191 551,983 70,223 
Interest on capital(1)1,064,000                       -                         -
Effects of change in rate of social contribution taxes (5)2,796,493(90,013)(1,427,667)
Effects of change in rate of social contribution taxesEffects of change in rate of social contribution taxes 1,820,072 1,478,138 1,604,000 
CSLL Aliquot Differential Effect (4)CSLL Aliquot Differential Effect (4) 1,192,687 353,777 2,796,493 
Other adjustments(71,602)551,4691,165,315 1,536,187 665,239 (71,602)
Income taxes(5,641,699)(3,109,853)(5,375,636) (9,191,005)3,786,778 (5,641,699)
Of which:  
Current tax (6)(6,692,328)(4,704,293)(4,969,241) (8,087,119)(5,111,380)(6,692,328)
Deferred taxes1,050,6291,594,440(406,395) (1,103,886)8,898,158 1,050,629 
Taxes paid in the year(5,301,184)(3,668,571)(3,280,230)Taxes paid in the year (4,534,538)(1,269,150)(5,301,184)
(1)PIS and COFINS are considered as components of the profit base (net base of certain income and expenses); therefore, and in accordance with IAS 12, they are accounted for as income taxes.
(2)Permanent differences related to investment in overseas subsidiaries are considered to be non-taxable/deductible (see details below).
(3)Mainly includes the tax effect on income from judicial deposit updates and other income and expenses that do not qualify as temporary differences
(4)Effect of the rate differential for other non-financial and financial companies, whose social contribution rates are 9% and 20%

(1) Amount distributed to shareholders as interest attributable to shareholders’ equity. For accounting purposes, although the interest should be reflected in the income statement for tax deduction, the charge is reversed before the calculation

Currency Hedge of the net income in the financial statements and deducted from the shareholders’ equity since it is considered as dividend.

(2) PIS and COFINS are considered a profit-base component (net basis of certain revenues and expenses), therefore and accordingly to IAS 12 they are recorded as income taxes.

(3) The difference between the tax basis and accounting basis of goodwill on acquisition of Banco ABN Amro Real S.A. is a permanent and definitive difference. Administration in this case the possibility of loss on impairment or disposal is remote and only applies to the entity as a whole and according to the characteristics of the business combination performed, it is not possible to segregate and identify the business originally acquired. Therefore deferred tax liability is not record.

(4) Permanent difference related of foreign currency exchange variation on investments abroad nontaxable/ deductible (see details below).

(5) Effect of the rate differential for other non-financial corporations, with a social contribution rate of 9%, as well as the effect of the additional 5% applicable to financial institutions, valid until the end of 2018.

(6) Includes mainly the tax effect on expenses with donations, revenues from judicial deposit updates and other income and expenses that do not qualify as temporary differences.

Exchange Hedge of Grand Cayman branch inAgency, Luxembourg and of Santander Brasil EFC

 

Banco Santander operates an agencya branch in the Cayman Islands, a branch in Luxembourg and a subsidiary called Santander Brasil Establecimiento Financiero de Credito, EFC, or "Santander Brasil EFC" (an independent subsidiary in Spain), which arethat is used primarily to raise funds in the international capital and financial markets, to provide the Bank with lines of credit lines that are extended to its clientscustomers for financing foreign trade and working capital financing.capital. of spinning.

 

To hedge thecover exposure to exchange rate variations, the Bank uses derivatives and funding (economic hedge). In accordance withfunding. Under Brazilian tax rules, gains or losses arising from the impact of the appreciation or depreciationdevaluation of the Real on foreign investments arewere not taxable, but from January 2021 onwards, they became taxable or deductible for PIS / Cofins / PIS/Cofins/IR / CSLL purposes,purposes. /CSLL, while the gains or losses of theon derivatives used as hedgeshedging are taxable or deductible. The purpose of these derivatives is to protect net income after taxes.

 

F-83

TableLaw 14,031, of ContentsJuly 28, 2020, determined that as of January 2021, 50% of the exchange rate variation on investments abroad must be computed in the determination of taxable income and the basis for calculating the Social Contribution on Net Income ( CSLL) of the investing company domiciled in the country. As of 2022, the exchange variation will be fully computed in the taxable bases of IRPJ and CSLL.

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

Tax distinct treatment from such exchange rate differences results in volatility in "Operating Income Before Tax" and "Income taxes". The foreign exchange variations recorded as a result of foreign investments in the year ended on December 31, 2019, 20182021, 2020 and 2017.2019.

 

   201920182017
Exchange differences (net)    
Result generated by the exchange rate variations on the Bank's investment in the Cayman, Luxemburg and EFC Branch 1,512,3226,673,535892,863
Gains (losses) on financial assets and liabilities (net)    
Result generated by derivative contracts used as hedge (2,776,601)(12,540,855)(1,702,557)
Income Taxes    
Tax effect of derivative contracts used as hedge - PIS / COFINS (106,497)255,48180,170
Tax effect of derivative contracts used as hedge - IR / CS 1,370,7765,611,839729,524

Foreign exchange variations recorded as a result of foreign investments

        202120202019
Exchange differences (net)        
Result generated by the exchange rate variations on the Bank's investment in the Cayman, Luxemburg and EFC Branch  3,862,128 16,791,857 1,512,322 
Gains (losses) on financial assets and liabilities (net)      
Result generated by derivative contracts used as hedge  (6,374,108)(30,374,869)(2,776,601)
Income Taxes         
Tax effect of derivative contracts used as hedge - PIS / COFINS  275,052 311,819 (106,497)
Tax effect of derivative contracts used as hedge - IR / CS  2,236,928 13,271,193 1,370,776 
           
           

Consolidated Financial Statements | December 31, 2021 | F-82

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

b) Effective tax rate calculation

 

The effective tax rate is as follows:

The effective tax rate

Thousand of reais 201920182017  202120202019
  
Operating Profit Before TaxOperating Profit Before Tax22,273,14915,909,77114,513,684Operating Profit Before Tax 24,750,328 9,663,975 22,273,149 
Income tax 5,641,6993,109,8535,375,636 9,191,005 (3,786,778)5,641,699 
Effective tax rate 25.33%19.55%37.04% 37.13%(39.18%)25.33%

 

c) Tax recognized in equity

 

In addition to the income tax recognized in the consolidated income statement, the Bank recognized the following amounts in consolidated equity:

Thousand of reais 201920182017
     
Tax credited to equity 3,517,5902,785,3303,373,984
Measurement of available-for-sale securities --1,016,121
Measurement at fair value through other comprehensive income416,748369,805-
Measurement of cash flow hedges 1862,0811,063
Measurement of investment hedges 562,353562,353562,353
Defined benefit plan 2,538,3031,851,0911,794,447
Tax charged to equity (3,952,457)(2,168,758)(2,541,177)
Measurement of available-for-sale securities --(2,426,459)
Measurement at fair value through other comprehensive income(3,618,126)(1,997,600)-
Measurement of cash flow hedges (322,080)(163,038)(111,134)
Defined benefit plan (12,251)(8,120)(3,584)
Total (434,867)616,572832,807

The Bank recognized the following amounts in consolidated equity

Thousand of reais      202120202019
          
Tax credited to equity     4,583,297 3,008,035 3,517,590 
Measurement at fair value through other comprehensive income  1,978,165 472,472 416,748 
Measurement of cash flow hedges    388,307 1,533 186 
Measurement of investment hedges    562,353 562,353 562,353 
Defined benefit plan     1,654,472 1,971,677 2,538,303 
Tax charged to equity     (2,349,500)(3,087,311)(3,952,457)
Measurement at fair value through other comprehensive income  (2,340,394)(2,700,991)(3,618,126)
Measurement of cash flow hedges    -   (386,284)(322,080)
Defined benefit plan     (9,106)(36)(12,251)
Total      2,233,797 (79,276)(434,867)

Relates to deferred taxes recognized in equity due to temporary differences accounted for in equity.

 

d) Deferred taxes

 

The detail of the balances of “Tax assets – Deferred” and “Tax liabilities – Deferred” is as follows:

Thousand of reais201920182017
    
Tax assets:30,295,06227,680,57824,778,078
 Of which:   
Temporary differences (1)29,565,70226,416,52723,375,600
Tax loss carry forwards367,120846,587866,579
Social contribution taxes 18%362,240417,464535,899
 Total deferred tax assets30,295,06227,680,57824,778,078
    
Tax liabilities:5,540,8733,031,3892,496,531
 Of which:   
Excess depreciation of leased assets148,839123,257124,909
Adjustment to fair value of trading securities and derivatives5,392,0342,908,1322,371,622
 Total deferred tax liabilities5,540,8733,031,3892,496,531

(1) Temporary differences relate mainly to impairment losses on loansBalances of Tax assets - Deferred and receivables and provisions for lawsuitsTax liabilities - Deferred

Thousand of reais      202120202019
          
Tax assets:      37,640,297 37,981,698 30,295,062 
  Of which:         
    Temporary differences (1)     32,884,314 32,113,436 29,565,702 
    Tax loss carry forwards     4,755,983 5,693,104 367,120 
Social contribution taxes 18%     -   175,158 362,240 
 Total deferred tax assets      37,640,297 37,981,698 30,295,062 
          
Tax liabilities:       2,225,190 4,546,595 5,540,873 
  Of which:         
    Excess depreciation of leased assets    -   166,903 148,839 
    Adjustment to fair value of trading securities and derivatives  2,225,190 4,379,692 5,392,034 
 Total deferred tax liabilities     2,225,190 4,546,595 5,540,873 
(1)Temporary differences that refer mainly to impairment losses on loans and receivables, provisions for legal and administrative proceedings and the effect of the fair value of financial instruments.

 

F-84

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-83

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

The changes in the balances of “Tax Assets – Deferred” and “Tax Liabilities – Deferred” in the last three years were as follows:

Thousand of reais  Balances at December 31, 2018 Adjustment to
Income		 Valuation adjustments(1) Other(2)Acquisition / MergerBalance at December 31, 2019
            
Tax assets:  27,680,578 3,693,727 471,499 (1,550,742)-30,295,062
   Temporary differences26,416,527 4,240,405 471,499 (1,562,729)-29,565,702
   Tax loss carry forwards846,587 (491,454) - 11,987-367,120
   Social contribution taxes 18%417,464 (55,224) - --362,240
Tax liabilities:  3,031,389 781,448 1,773,065 (45,029)-5,540,873
   Temporary differences3,031,389 781,448 1,773,065 (45,029)-5,540,873
Total  24,649,189 2,912,279 (1,301,566) (1,505,713)-24,754,189
            
Thousand of reais  Balances at December 31, 2017 Adjustment to
Income		 Valuation adjustments(1) Other(2)Acquisition / MergerBalance at December 31, 2018
            
Tax assets:  24,778,078 1,674,317 (186,260) 1,369,93444,50927,680,578
   Temporary differences23,375,600 1,812,744 (186,260) 1,369,93444,50926,416,527
   Tax loss carry forwards866,579 (19,992) - --846,587
   Social contribution taxes 18%535,899 (118,435) - --417,464
Tax liabilities:  2,496,531 79,877 607,773 (153,623)8313,031,389
   Temporary differences2,496,531 79,877 607,773 (153,623)8313,031,389
Total  22,281,547 1,594,440 (794,033) 1,523,55743,67824,649,189
            
Thousand of reais  Balances at December 31, 2016 Adjustment to
Income		 Valuation adjustments(1) Other(2)Acquisition / MergerBalance at December 31, 2017
            
Tax assets:  24,437,112 668,483 254,733 (620,401)38,15124,778,078
   Temporary differences23,398,886 304,231 254,733 (620,401)38,15123,375,600
   Tax loss carry forwards382,867 483,712 - --866,579
   Social contribution taxes 18%655,359 (119,460) - --535,899
   1,268,037 262,088 582,363 378,6935,3502,496,531
   Temporary differences1,268,037 262,088 582,363 378,6935,3502,496,531
Total  23,169,075 406,395 (327,630) (999,094)32,80122,281,547

(1) It relates to deferred taxes recognizedChanges in equity due to temporary differences accounted in equity.the balances of Tax Assets - Deferred and Tax Liabilities - Deferred

Thousand of reaisBalances at December 31, 2018Adjustment to
Income		Valuation adjustments (1)Other (2)Acquisition / MergerBalance on December 31, 2021
       
Tax assets:37,981,699 (3,609,495)1,696,091 1,572,002 -   37,640,297 
    Temporary differences32,113,436 (2,497,215)1,696,091 1,572,002 -   32,884,315 
    Tax loss carry forwards5,693,104 (937,121)-   -   -   4,755,983 
Social contribution taxes 18%175,159 (175,159)-   -   -   -   
Tax liabilities: 4,546,595 (1,344,268)(977,137)-   -   2,225,190 
Temporary differences4,546,595 (1,344,268)(977,137)-   -   2,225,190 
Total33,435,104 (2,265,227)2,673,228 1,572,002 -   35,415,107 
       
Thousand of reaisBalances at December 31, 2017Adjustment to
Income		Valuation adjustments (1)Other (2)Acquisition / MergerBalance on December 31, 2020
       
Tax assets:30,295,060 8,362,100 (400,583)(418,784)161,603 37,999,396 
    Temporary differences29,565,700 3,223,197 (400,583)(418,784)161,603 32,131,133 
    Tax loss carry forwards367,120 5,325,984 -   -   -   5,693,104 
Social contribution taxes 18%362,240 (187,081)-   -   -   175,159 
Tax liabilities: 5,540,873 129,231 (1,063,160)(60,349)-   4,546,595 
Temporary differences5,540,873 129,231 (1,063,160)(60,349)-   4,546,595 
Total24,754,187 8,232,869 662,577 (358,435)161,603 33,452,801 
       
Thousand of reaisBalances at December 31, 2016Adjustment to
Income		Valuation adjustments (1)Other (2)Acquisition / MergerBalance on December 31, 2019
       
Tax assets:27,680,578 3,693,727 471,499 (1,550,744)-   30,295,060 
    Temporary differences26,416,527 4,240,405 471,499 (1,562,731)-   29,565,700 
    Tax loss carry forwards846,587 (491,454)-   11,987 -   367,120 
Social contribution taxes 18%417,464 (55,224)-   -   -   362,240 
  3,031,389 781,448 1,773,065 (45,029)-   5,540,873 
Temporary differences3,031,389 781,448 1,773,065 (45,029)-   5,540,873 
Total24,649,189 2,912,279 (1,301,566)(1,505,715)-   24,754,187 

(2) In 2019, it mainly refers to net of deferred taxes amounted to R$1,595,773 (2018 - R$1,216,311 and 2017 - R$241,708), which have the same counterparty and realization period.

(1)It relates to deferred taxes recognized in equity due to temporary differences accounted in equity.
(2)In 2021, it mainly refers to net of deferred taxes amounted to R$1,572,003 (2020 - R$1,358,435 and 2019 - R$1,505,715), which have the same counterparty and realization period.

 

e) Expected realization of deferred tax assets

   Tax assets  Tax liabilities
Year  Temporary differences  Tax loss carry forwards Social contribution taxes 18% TotalTemporary differencesTotal
            
2020  8,945,648 74,742 362,240 9,382,6301,838,8741,838,874
2021  8,275,410 43,711 - 8,319,1211,834,7811,834,781
2022  7,562,496 22,820 - 7,585,3161,760,1671,760,167
2023  819,647 23,194 - 842,84115,95415,954
2024  2,682,021 39,116 - 2,721,13715,95415,954
2025 a 2027  662,021 163,172 - 825,19345,30145,301
2028 a 2029  618,459 365 - 618,82429,84229,842
Total  29,565,702 367,120 362,240 30,295,0625,540,8735,540,873

Expected realization of deferred tax assets

   Tax assets   Tax liabilities
 Year Temporary differences Tax loss carry forwards  TotalTemporary differencesTotal
          
 2022 10,032,946 1,917,879   11,950,826 573,982 573,982 
 2023 10,544,315 1,781,778   12,326,093 573,982 573,982 
 2024 8,684,796 987,568   9,672,364 458,404 458,404 
 2025 1,870,257 40,732   1,910,989 546,114 546,114 
 2026 976,574 7,063   983,637 12,717 12,717 
 2027 a 2031 775,250 21,139   796,388 59,991 59,991 
 Total 32,884,138 4,756,159   37,640,297 2,225,190 2,225,190 

 

F-85

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

Consolidated Financial Statements | December 31, 2021 | F-84

Table of Contents25.

 

* Values expressed in thousands, except when indicated.

24.Other liabilities

 

The breakdown of the balance of “Other Liabilities” is as follows:

 

Thousand of reais      2019 2018 2017
            
Accrued expenses and deferred income (1)   5,038,011 3,193,291 3,036,374
Transactions in transit (3)      785,418 925,336 980,501
Provision for payment of variable remuneration   317,539 260,739 270,626
Liabilities for insurance contracts   1,901,801 1,797,167 1,587,603
Other(2)      2,878,175 2,918,615 2,138,817
Total      10,920,944 9,095,148 8,013,921

(1) Corresponds, mainly, to payments to be made - personnel expenses.

(2) Includes credits for funds to be released, such as Administratives expenses, amounts due to associates and suppliers.

(3)
Thousand of reais      2021 2020 2019
            
Accrued expenses and deferred income (1)     2,649,744  5,115,936  5,038,011 
Transactions in transit (3)     796,671  674,162  785,418 
Provision for share-based payment     319,660  325,930  317,539 
Liabilities for insurance contracts     2,011,596  1,987,577  1,901,801 
Other (2)      4,723,707  5,947,640  2,878,175 
Total      10,501,378  14,051,245  10,920,944 
(1)Corresponds, mainly, to payments to be made - personnel expenses.
(2)Includes credits for funds to be released, such as Administratives expenses, amounts due to associates and suppliers.
(3)Includes mainly the amounts to transfer to the credit card companies (resources in transit) and amount to release referred to the real estate credits.

26.Other Comprehensive Income

 

25.Other Comprehensive Income

The balances of Other Comprehensive Income include the amounts, net of the related tax effect, of the adjustments to assets and liabilities recognized temporarily in equity stated in the Consolidated Statement of Changes in Equity and Consolidated Statements of Comprehensive Income until they are extinguished or realized, when they are recognized in the consolidated income statement. The amounts attributable to subsidiaries, investments in associates and joint ventures are presented, on a line by line basis, in the appropriate items based on their nature.

It should be noted that the consolidated Statements of Comprehensive Income includes the changes to Other Comprehensive Income as follows:

- Revaluation gains (losses): This includes the amount of the gains, net of losses incurred in the year, recognized directly in equity. The amounts recognized in equity in the year remain under this heading, even if in the same year they are transferred to the income statement or to the initial carrying amount of the assets or liabilities or are reclassified to another heading.

- Amounts transferred to income statement: This includes the amount of the revaluation gains (losses) previously recognized in equity, even in the same year, which are subsequently recognized in the income statement.

- Amounts transferred to the initial carrying amountnumber of hedged objects: This includes the amount of the revaluation gains (losses) previously recognized in Equity, even in the same year, which are recognized in the initial carrying amount of assets or liabilities as a result of cash flow hedges.

- Other transfers: This includes the amount of the transfers made in the year between the various Other Comprehensive Income items.

In the Consolidated Statements of Comprehensive Income, the amounts in "Other Comprehensive Income" are recognized gross, including the amount relating to non-controlling interests, and the corresponding tax effect is presented under a separate heading, except in the case of entities accounted for using the equity method, the amounts for which are presented net of the tax effect.

a) Financial assets measured at fair value through other comprehensive income

a.1) Financial assets measured at fair value through other comprehensive income

Other Comprehensive Income – Financial assets measured at fair value through other comprehensive income includes the net amount of unrealized changes in the fair value of assets classified as available-for-sale financial assets (see Notes 6 and 7), net of taxes.

The breakdown, by type of instrument and geographical origin of the issuer, of Other Comprehensive Income Financial assets measured at fair value through other comprehensive income (IFRS 9) on December 31, 20192021 is as follows:

Thousand of reais    2019
     Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments           
Government debt securities  7,251,721 (3,952,558) 3,299,163 95,961,823
Private-sector debt securities 824,294 (778,175) 46,119 1,104
Total    8,076,015 (4,730,733) 3,345,282 95,962,927
            
            
Thousand of reais    2018
     Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments           
Government debt securities  3,917,451 (1,608,673) 2,308,778 85,395,136
Private-sector debt securities 1,546,895 (1,863,092) (316,197) 555
Total    5,464,346 (3,471,765) 1,992,581 85,395,691

 

F-86

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-85

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

a.2) Financial assets - available-for-sale

Thousand of reais  2021
   Revaluation gainsRevaluation lossesNet revaluation gains (losses)Fair value
Debt Instruments      
Government debt securities  6,756,252 (9,937,757)(3,181,505)101,158,055 
Private-sector debt securities 795,765  (3,965)791,800 54,545 
Total  7,552,017 (9,941,722)(2,389,705)101,212,600 
       
       
Thousand of reais  2020
   Revaluation gainsRevaluation lossesNet revaluation gains (losses)Fair value
Debt Instruments      
Government debt securities  11,061,691 (8,832,504)2,229,187 109,317,614 
Private-sector debt securities 953,043 (840,101)112,942 38,131 
Total  12,014,734 (9,672,605)2,342,129 109,355,745 
       
       
Thousand of reais  2019
   Revaluation gainsRevaluation lossesNet revaluation gains (losses)Fair value
Debt Instruments      
Government debt securities  7,251,721 (3,952,558)3,299,163 95,961,823 
Private-sector debt securities 824,294 (778,175)46,119 1,104 
Total  8,076,015 (4,730,733)3,345,282 95,962,927 

 

Other Comprehensive Income – Financial assets measured at fair value through other comprehensive income includes the net amount of unrealized changes in the fair value of assets classified as available-for-sale financial assets (see Notes 6 and 7), net of taxes.

The breakdown, by type of instrument and geographical origin of the issuer, of Other Comprehensive Income – available-for-sale (IAS 39) on December, 31, 2017 is as follows:

Thousand of reais    2017
     Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments           
Government debt securities  1,616,486 (6,942) 1,609,544 79,462,303
Private-sector debt securities 10,694 (2,227) 8,467 5,254,444
            
Equity instruments           
Domestic    230,722 (35,159) 195,563 1,106,637
 Of which:           
Listed    156,236 (5,322) 150,914 965,547
Unlisted    74,486 (29,837) 44,649 141,090
Total    1,857,902 (44,328) 1,813,574 85,823,384
            

At each reporting date, the Bank assesses whether there is any objective evidence indicating that the available-for-sale financial assets (debt securities and equity instruments) are impaired.

b) Cash flow hedges

Other Comprehensive Income—Income — Cash flow hedges includes the gains or losses attributable to hedge instruments that qualify as effective hedges. These amounts will remain under this heading until they are recognized in the consolidated income statement in the periods in which the hedged items affect them (see Note 8).

c) Hedges of net investments in foreign operations and Translation adjustments foreign investment

Other Comprehensive Incomes—Incomes — Hedges of net investments in foreign operations includes the net amount of changes in the value of hedging instruments in hedges of net investments in foreign operations. In 20172019 this hedge was discontinued (Note 8.a5).

Other Comprehensive Income—Income — Exchange differences includes the net amount of the differences arising on the translation to Reais of the balances of the consolidated entities whose functional currency is not the Reais (Note 2.a).

 

27.26.Non-controlling interests

 

"Non-controlling interests" refer to the net equity value attributable to equity instruments that do not belong, directly or indirectly, to the Bank, including the portion of the annual profit attributed to the subsidiaries.

 

a) Breakdown

 

The detail, by company, of the balance of “Equity - Non-controlling interests” is as follows:

 

Thousand of reais 2019 2018 2017  202120202019
  
Financial Position of non-controlling interest 334,349 312,885 558,581 
Santander Leasing S.A. Arrendamento MercantilSantander Leasing S.A. Arrendamento Mercantil447 447 395Santander Leasing S.A. Arrendamento Mercantil -   -   447 
Getnet S.A. - 249,007 206,105
Olé Consignado S.A.Olé Consignado S.A.271,078 116,967 82,432Olé Consignado S.A.  -   -   271,078 
Banco PSA Finance Brasil S.A.Banco PSA Finance Brasil S.A.131,222 155,399 147,295Banco PSA Finance Brasil S.A. 129,289 138,644 131,222 
Rojo Entretenimento S.A.Rojo Entretenimento S.A. 6,939 7,087 7,245 
Banco Hyundai Capital 7,245 7,015 -Banco Hyundai Capital 183,538 167,155 148,589 
Rojo Entretenimento S.A. 148,589 - -
Return Capital Serviços de Recuperação de Créditos S.A. (Current name of Ipanema Empreendimentos e Participações Ltda.)- 1,155 667
Total 558,581 529,990 436,894
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. 3,109 -   -   
Toro Corretora de Títulos e Valores Mobiliários Ltda.Toro Corretora de Títulos e Valores Mobiliários Ltda. 11,474 -   -   

 

F-87

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-86

Table of Contents

 

* Values expressed in thousands, except when indicated.

Balance of Profit attributable to non-controlling interests

  

     
Thousand of reais     202120202019
         
Profit attributable to non-controlling interests   31,272 32,224 224,518 
Of which:        
Santander Leasing S.A. Arrendamento Mercantil   -   (444)3 
Getnet S.A.     -   -   3,962 
      Olé Consignado S.A.      -   -   199,332 
      Banco PSA Finance Brasil S.A.    12,688 14,146 15,887 
Rojo Entretenimento S.A.    (148)(159)230 
Banco Hyundai Capital     21,563 18,681 2,520 
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A.  1,569 -   -   
Toro Corretora de Títulos e Valores Mobiliários Ltda.  (4,400)-   -   
Return Capital Serviços de Recuperação de Créditos S.A. (Current name of Ipanema Empreendimentos e Participações Ltda.)-   -   2,584 

 

       
Thousand of reais 2019 2018 2017
       
Profit attributable to non-controlling interests224,518 213,300 213,984
Of which:      
      Santander Leasing S.A. Arrendamento Mercantil3 25 48
      Getnet S.A. 3,962 55,518 48,842
      Olé Consignado S.A.199,332 138,527 53,286
      Santander Serviços Técnicos, Administrativos e de Corretagem de Seguros- - 92,365
     BW Guirapá S.A.- - (776)
     Banco PSA Finance Brasil S.A.15,887 17,914 19,884
      Rojo Entretenimento S.A. 230 166 -
      Banco Hyundai Capital 2,520 - -
      Return Capital Serviços de Recuperação de Créditos S.A. (Current name of Ipanema Empreendimentos e Participações Ltda.)2,584 1,150 335

b) Changes

 

The changes in the balance of “Non-controlling interests” are summarized as follows:

 

Thousand of reais 2019 2018 2017 202120202019
  
Balance at beginning of yearBalance at beginning of year529,990436,894725,504Balance at beginning of year 312,885 558,581 529,990 
Additions / disposals (net) due to change in the scope of consolidation (1) (2)Additions / disposals (net) due to change in the scope of consolidation (1) (2)51,073 6,849 (660,230)Additions / disposals (net) due to change in the scope of consolidation (1) (2) 17,415 (271,078)51,073 
Incorporation / Acquisition (4)- - 296,184
Dividends paid / Interest on CapitalDividends paid / Interest on Capital(92,734) (60,936) (133,641)Dividends paid / Interest on Capital (19,138)-   (92,734)
Capital increase (3) 100,000 48,000 -
Capital increase (2) -   -   100,000 
Profit attributable to non-controlling interestsProfit attributable to non-controlling interests224,518 213,300 213,984Profit attributable to non-controlling interests 31,272 32,224 224,518 
Transition Adjustments to the amendments to the IAS 19- - (1,790)

Update PUT Olé Consignado S.A.		 (240,000) (106,440) -  -   -   (240,000)
Others (14,266) (7,677) (3,117) (8,085)(6,842)(14,266)
Balance at end of year 558,581 529,990 436,894 334,349 312,885 558,581 
(1)In 2017, it2019, mainly refers to the participation of non-controlling shareholders of BW Guirapá. In 2019, it refers mainly to Banco Hyundai Capital, which was consolidated using the equity method.

(2)In 2017,2020, it mainly refers to the balancemerger of non-controlling interestsBanco Olé Consignado S.A by the Company. In 2021, it refers to the merger of SantanderToro Corretora de Seguros.Increase in the share capital of Olé Consignado.Títulos e Valores Mobiliários S.A and Gira – Gestão Integrada de Receivíveis do Agronegócio S.A.

(2)(3)In 2019, and 2018, it refers to the capital increase of Olé Consignado.

(4)27.In 2017, it mainly refers to the balance of non-controlling interests of Santander Corretora de Seguros, before the merger events (Note 3).

28.Stockholders’Shareholders’ equity

 

a) Capital

 

According to the by-laws, Banco Santander's capital stock may be increased up to the limit of its authorized capital, regardless of statutory reform, by resolution of the Board of Directors and through the issuance of up to 9,090,909,090 (nine billion, ninety million, nine hundred and nine thousand and ninety) shares, subject to the established legal limits on the number of preferred shares. Any capital increase that exceeds this limit will require stockholders' approval.

 

At the Extraordinary Shareholders' Meeting held on March 31, 2021, it was approved in the context of the partial spin-off of Santander Brasil, which resulted in the segregation of the shares of its ownership issued by Getnet Adquirência e Serviços para Meios de Contas SA. (“Getnet”), with version of the spun-off portion for Getnet, the reduction in the share capital of Santander Brasil in the total amount of two billion reais, without the cancellation of shares, increasing the share capital of Santander Brasil from fifty-seven billion reais to fifty-five billion of reais.

The capital stock, fully subscribed and paid, is divided into registered book-entry shares with no par value.

 

  Thousand of shares
  2019 2018
  CommonPreferredTotal Common Preferred Total
Brazilian residents 90,069115,785205,854 82,043 107,699 189,742
Foreign residents 3,728,6263,564,0517,292,677 3,736,652 3,572,137 7,308,789
Total shares 3,818,6953,679,8367,498,531 3,818,695 3,679,836 7,498,531
(-) Treasury shares (16,702)(16,702)(33,404) (13,317) (13,317) (26,634)
Total outstanding 3,801,9933,663,1347,465,127 3,805,378 3,666,519 7,471,897

 

F-88

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-87

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

           
  Thousand of shares
    2017
      Common Preferred Total
Brazilian residents     66,207 91,779 157,986
Foreign residents     3,752,488 3,588,057 7,340,545
Total shares     3,818,695 3,679,836 7,498,531
(-) Treasury shares     (5,845) (5,845) (11,690)
Total outstanding     3,812,850 3,673,991 7,486,841

   Thousand of shares
   20212020
    CommonPreferredTotalCommonPreferredTotal
 Brazilian residents  109,718 135,345 245,063 109,885 135,438 245,323 
 Foreign residents  3,708,977 3,544,491 7,253,468 3,708,810 3,544,398 7,253,208 
 Total shares  3,818,695 3,679,836 7,498,531 3,818,695 3,679,836 7,498,531 
 (-) Treasury shares  (15,755)(15,755)(31,510)(18,829)(18,829)(37,658)
 Total outstanding  3,802,940 3,664,081 7,467,021 3,799,866 3,661,007 7,460,873 
          
   Thousand of shares
    2019
       CommonPreferredTotal
 Brazilian residents     90,069 115,785 205,854 
 Foreign residents     3,728,626 3,564,051 7,292,677 
 Total shares     3,818,695 3,679,836 7,498,531 
 (-) Treasury shares     (16,702)(16,702)(33,404)
 Total outstanding     3,801,993 3,663,134 7,465,127 

 

b) Dividends and Interest on Capital

 

According to the Bank’s bylaws, stockholdersBy-laws, shareholders are entitled toguaranteed a minimum dividend equivalent toof 25% of net income for theeach year, adjusted according toin accordance with legislation. Preferred shares are nonvotingdo not have voting rights and nonconvertible,cannot be converted into common shares, but they have the same rights and advantages granted to common shares, in addition to priority in the paymentdistribution of dividends at a rate that isand an additional 10% higher than thoseon dividends paid onto common shares, and in the reimbursement of capital, reimbursement, without premium, in the event of liquidation of the Bank.Bank's dissolution.

 

Prior toDividends were calculated and paid in accordance with Brazilian Corporate Law.

Before the Annual StockholdersShareholders' Meeting, the Board of Directors may resolvedecide on the declaration and payment of dividends on earningsthe profits earned, based on: (i) balance sheets or earningprofit reserves showedexisting in the last balance sheet;sheet or (ii) balance sheets issued in the period shorterperiods of less than 6six months, sinceprovided that the total of dividends paid in each halfsemester of the fiscal year shalldoes not exceed the amount of capital reserves. These dividends are fully attributedimputed to the mandatory dividend. The amount of R $ 7,800,000 in dividends and interest on own capital paid in February 2020, is recorded under the caption of other obligations - social and statutory (R $ 4,800,000 in 2018);

 

   2019
   Thousand of reais Real per Thousand Shares / Units
    Common Preferred Units
          
Interest on Capital (1) (6)  1,000,000 127.5853 140.3438 267.9291
Interest on Capital (2) (6)  1,000,000 127.6399 140.4039 268.0438
Interest on Capital (3) (6)  1,000,000 127.6610 140.4271 268.0881
Interest on Capital (4) (6)  1,010,000 128.9673 141.8641 270.8314
Interim Dividends (5) (6)  6,790,000 867.0180 953.7197 1,820.7377
Total  10,800,000      

(1) EstablishedCMN Resolution No. 4,885, of December 23, 2020, prohibits institutions authorized to operate by the Central Bank of Brazil from remunerating equity above the highest between: i) 30% of net income adjusted pursuant to item I of article 20 of Law No. 6.404/76; or ii) mandatory minimum dividends established by article 202 of Law 6,404/76, including in the form of Interest on Equity, until December 31, 2020. The rule also prohibits the reduction of the share capital, except in specific situations, and the increase in the remuneration of its officers, administrators and members of the Board of Directors in March 29, 2019, Common Shares - R$108.4475, preferred - R$119.2922 e Units - R$227.7397 net of taxes and was paid in May 28, 2019, without any remuneration for monetary indexation.the Fiscal Council.

(2) Established byWe present below the Board of Directors in June 28, 2019, Common Shares - R$108.4939, preferred - R$119.3433 e Units - R$227.8373 net of taxes and was paid in July 31, 2019, without any remuneration for monetary indexation.

(3) Deliberated by the Board of Directors on September 30, 2019, common - R$108.5119, preferred - R$119.3631 and Units - R$227.8749 net of taxes and were paid on October 30, 2019, without any remuneration monetary indexation.

(4) Deliberated by the Board of Directors on December 27, 2019, common - R$109.6222, preferred - R$120.5844 and Units - R$230.2067 net of taxes that will be paid in February 2020, without any monetary indexation.

(5) Deliberated by the Board of Directors on December 27, 2019, that was paid in February 21, 2020, without any monetary indexation. 

(6) The amountdistribution of dividends and interestInterest on equity will be fully charged to the minimum mandatory dividends to be distributed by the Bank for the yearEquity made on December 31, 2021 and December 31, 2020 and 2019.

 

   2018
   Thousand of reais Real per Thousand Shares / Units
    Common Preferred Units
          
Interest on Capital (1) (6)  600,000 76.3304 83.9634 160.2938
Interim Dividends (2) (6)  600,000 76.4956 84.1451 160.6407
Interest on Capital (3) (6)  600,000 76.4985 84.1484 160.6469
Interest on Capital (4) (6)  2,880,000 367.4149 404.1564 771.5713
Interim Dividends (5) (6)  1,920,000 244.9433 269.4376 514.3809
Total  6,600,000      

(1) Established by the Board of Directors in March 27, 2018, Common Shares - R$ 64.8808, preferred - R$71.3689 and Units - R$ 136.2497 net of taxes, and was paid on April 26, 2018 without any compensation as monetary indexation.

(2) Established by the Board of Directors in June 26, 2018, was paid on July 27, 2018 without any compensation as monetary indexation.

(3) Established by the Board of Directors in September 28, 2018, common - R$ 65.0237, preferred - R$ 71.5261 and Units - R$ 136.5498 net of taxes and paid on October 26, 2018, without any compensation as monetary indexation. 

(4) Established by the Board of Directors in December 28, 2018, common - R$ 312.3027, preferred - R$ 343.5329 and Units - R$ 655.8356 net of taxes and paid on February 26, 2019, without any compensation as monetary indexation.

(5) Deliberated by the Board of Directors on December 28, 2018 and paid as of February 26, 2019, without any monetary indexation.

(6) The amount of dividends and interest on shareholders' equity will be fully charged to the minimum mandatory dividends to be distributed by the Bank for the financial year 2018.

F-89

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

      2017
      Thousand of reais Reais per Thousand Shares / Units
       Common Preferred Units
             
Interest on Capital (1) (6)     500,000 63.3780 69.7158 133.0938
Interest on Capital (2) (6)     500,000 63.5280 69.8808 133.4088
Interest on Capital (3) (6)     500,000 63.5917 69.9509 133.5426
Interim Dividends (4) (6)     2,500,000 318.2994 350.1293 668.4287
Interest on Capital (3) (5)     2,300,000 292.8354 322.1190 614.9544
Total     6,300,000      
     2021
      Real per Thousand Shares / Units
     Thousand of reaisGrossNet
     CommonPreferredUnitsCommonPreferredUnits
            
Dividends (1)(5)    3,000,000 382.98 421.28 804.26 382.98 421.28 804.26 
Interest on Capital (2)(5)    3,400,000 434.04 477.45 911.49 368.94 405.83 774.77 
Dividends (3)(5)    3,000,000 382.98 421.28 804.26 382.98 421.28 804.26 
Interest on Capital (4) (5)    249,000 31.79 34.97 66.75 27.02 29.72 56.74 
Total     9,649,000       
(1) EstablishedResolved by the Board of Directors inon April 2017, common - R$ 53.8713, preferred - R$ 59.2584 and Units - R$ 113.1297 net of taxes. They were27, 2021, paid as of May 26, 2017,on June 2, 2021, without any remuneration as monetary restatement.
(2) EstablishedResolved by the Board of Directors inon July 2017, common - R$ 53.9988, preferred - R$ 59.3987 and Units - R$ 113.3975 net of taxes. They were27, 2021, paid as of August 25, 2017,on September 3, 2021, without any remuneration as monetary restatement.
(3) EstablishedResolved by the Board of Directors in September 2017, common - R$ 54.0530, preferred - R$ 59.4583 and Units - R$ 113.5113 neton October 26, 2021, paid on December 3, 2021, without any remuneration as monetary restatement.
(4)Resolved by the Board of taxes. Directors on December 28, 2021, paid on February 3, 2022, without any remuneration as monetary restatement.
(5)They were fully imputed to the mandatory minimum dividends distributed by the Bank for the year 2021.

Consolidated Financial Statements | December 31, 2021 | F-88

Table of Contents

 

* Values expressed in thousands, except when indicated.

     2020
      Real per Thousand Shares / Units
     Thousand of reaisGrossNet
     CommonPreferredUnitsCommonPreferredUnits
Interest on Capital (1) (5)    890,000 113.71 125.08 238.80 96.65 106.32 202.97 
Interest on Capital  (2) (5)    770,000 98.37 108.21 206.58 83.62 91.98 175.61 
Interest on Capital (3) (5)    1,000,000 127.76 140.54 268.30 108.59 119.45 228.04 
Interest on Capital (4) (5)    665,000 84.96 93.45 178.41 72.21 79.44 151.65 
Dividends (5)(6)    512,085 65.43 71.97 137.39 65.43 71.97 137.39 
Total     3,837,085       
(1)Resolved by the Board of Directors on April 27, 2020, paid on June 24, 2020, without any remuneration as restatement.
(2)Resolved by the Board of Directors on July 28, 2020, paid on September 25, 2020, without any remuneration on account of monetary restatement.

(3)Resolved by the Board of Directors on October 26, 2017,2020, paid on December 23, 2020, without any remuneration to monetary indexation.restatement title.

(4)Resolved by the Board of Directors on December 28, 2020, paid from February 1, 2021, without any remuneration by way of monetary restatement.

(5)They were fully allocated to the mandatory minimum dividends to be distributed by the Bank for the year 2020.
(6)Deliberated by the Board of Directors in December 2017. They wereon February 2, 2021, paid on February 26, 2018,March 3, 2021, without any monetary indexation.restatement.

     2019
      Reais per Thousand Shares / Units
     Thousand of reaisGrossNet
     CommonPreferredUnitsCommonPreferredUnits
            
Interest on Capital (1) (6)   1,000,000 127.59 140.34 267.93 108.45 119.29 227.74 
Interest on Capital (2) (6)   1,000,000 127.64 140.40 268.04 127.64 140.40 268.04 
Interest on Capital (3) (6)   1,000,000 127.66 140.43 268.09 108.51 119.36 227.87 
Interim Dividends (4) (6)   1,010,000 128.97 141.86 270.83 109.62 120.58 230.21 
Interest on Capital (5) (6)   6,790,000 867.02 953.72 1,820.74 867.02 953.72 1,820.74 
Total     10,800,000       

(5) Deliberated(1)Resolved by the Board of Directors inon March 29, 2019, paid on May 28, 2019, without any remuneration as monetary restatement.
(2)Resolved by the Board of Directors on June 28, 2019, paid on July 31, 2019, without any remuneration as monetary restatement.
(3)Resolved by the Board of Directors on September 30, 2019, paid on October 30, 2019, without any remuneration as monetary restatement.
(4)Resolved by the Board of Directors on December 2017, common - R $ 248.9101, preferred - R$ 273.8011 and Units - R$ 522.7112 net of taxes. They were27, 2019, paid on February 26, 2018,21, 2020, without any remuneration as monetary indexation.restatement.

(6) The amount of interest on own capital and interim dividends will be fully charged to the mandatory dividends for the 2017 financial year.

(5)Resolved by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any remuneration as monetary restatement.
(6)The amount of interest on equity and interim dividends were fully allocated to the mandatory minimum dividends distributed by the Bank for the year 2019.

 

c) Reserves

 

The reserves are allocated as follows after the deductions and statutory provisions, from the net income:

 

Legal reserve

 

In accordance with Brazilian Corporate Law, 5% is transferred to the legal reserve, until it reaches 20% of the share capital. This reserve is designed to ensure the integrity of the capital and can only be used to offset losses or increase capital.

 

Capital reserve

 

The Bank´s capital reserve consists of: goodwill reserve for subscription of shares and other capital reserves, and can only be used to absorb losses that exceed retained earnings and profit reserves, redemption, reimbursement or acquisition of shares for the Bank´s own issue; capital increase, or payment of dividends to preferred shares under certain circumstances.

 

Consolidated Financial Statements | December 31, 2021 | F-89

Table of Contents

 

* Values expressed in thousands, except when indicated.

Reserve for equalization dividend

 

After the allocation of dividends, the remaining balance if any, may, upon proposal of the Executive Board and approved by the Board of Directors, be allocated to reserve for equalization of dividends, which will be limited to 50% of the capital. This reserve aims to ensure funds for the payment of dividends, including as interest on own capital, or any interim payment to maintain the flow of shareholders remuneration.

 

At the Extraordinary General Meeting held on March 31, 2021, it was approved in the context of the partial spin-off of Santander Brasil, which resulted in the segregation of the shares owned by it issued by Getnet Adquirência e Serviços para Meios de Pagamentos S.A. (“Getnet”), with version of the spun-off portion to Getnet, the reduction of reserves for equalization of dividends of Santander Brasil in the total amount of R$1,167,674.

The reduction includes the remaining balance of the equity of the spun-off portion, as well as the write-off of the option to acquire an equity instrument.

d) Treasury shares

 

In theAt a meeting held on November 1, 2019,February 2, 2021, the Bank’s Board of Directors approved, in continuation ofcontinuity with the buyback program that expired on November 5, 2019, the4, 2020, a new buyback program of itsfor Units and ADRs issued by the BankBanco Santander, directly or through its agencybranch in Cayman, to be heldfor maintenance in treasury or subsequently sold.subsequent disposal.

 

TheThe Buyback Program will covercovers the acquisition of up to 37,256,07236,956,402 Units, representing 37,256,07236,956,402 common shares and 37,256,07236,956,402 preferred shares, which corresponded, on December 31, 2019, corresponded2021, to approximately 1% of the Bank’s share capital. OnBank's capital stock. As of December 31, 2019, the Bank held 15,843,5872021, Banco Santander had 355,661,814 common shares and 15,843,587383,466,228 preferred shares being traded.outstanding.

 

The Buyback has the purposerepurchase aims to (1) maximize the generation of value creation to stockholders by means offor shareholders through an efficient management of the capital structure management;structure; and (2) enable the payment of officers,administrators, management level employees and others Bank’sother employees of the Bank and of companies under its control, according tounder the Long Termterms of the Long-Term Incentive Plans. The term of the Buyback Program is 12up to 18 months counted from November 5, 2019, and will expireFebruary 3, 2021, ending on November 4, 2020.August 2, 2022.

 

F-90

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 2019 2018 2017     202120202019
 Quantity Quantity Quantity Quantity
 Units Units Units Units
Treasury shares at beginning of the period 13,317 1,773 25,786 18,829 16,702 13,317 
Shares Acquisitions 6,465 15,816 12,768 91 5,052 6,465 
Cancellation of Shares (2) - - (32,276)
Payment - Share-based compensation (3,080) (4,272) (4,505)Payment - Share-based compensation (3,165)(2,925)(3,080)
Treasury shares at end of the period 16,702 13,317 1,773Treasury shares at end of the period 15,755 18,829 16,702 
Balance of Treasury Shares in thousand of reais R$ 679,364 R$ 460,550 R$ 148,246Balance of Treasury Shares in thousand of reais R$ 711,268R$ 789,587R$ 679,364

Emission Costs in thousands of Reais		 R$ 1,771 R$ 882 R$ 194
Emission Costs in thousands of Reais		 R$ 1,771
Balance of Treasury Shares in thousands of reais R$ 681,135 R$ 461,432 R$ 148,440Balance of Treasury Shares in thousands of reais R$ 713,039R$ 791,358R$ 681,135
  
Cost/Share Price Units Units Units Units
Minimum cost (1) R$7.55 R$7.55 R$7.55    R$7.55 R$7.55 R$7.55 
Weighted average cost (1) R$32.10 R$28.59 R$24.41Weighted average cost (1)   R$33.86 R$33.24 R$28.59 
Maximum cost (1) R$49.55 R$43.84 R$32.29    R$49.55 R$49.55 R$43.84 
Share Price R$42.60 R$42.70 R$31.88    R$29.98 R$44.83 R$42.70 
(1)Considering since the beginning of operations on the stock exchange.

(2)At the EGM held on September, 18, 2017, it was approved the cancellation of 64,551,366 treasury shares (equivalent to 32,276 thousand Units) with the counterparty headings Capital Reserves and Profit Reserves, which represent the total of treasury shares registered in the book of common shares at that date, without reduction of the capital and consequent change in the clause 5th from the Bylaws in order to reflect the new quantities of common and preferred shares, nominatives and without value which represent the Banco Santander´s capital.

 

Additionally, in the year ended December 31, 2019,2021, treasury shares were sold, that resulted in a gain of R$5,796 (201840,820 (2020 - loss of R$15,8689,274 and 20172019 - loss of R$2.498)5,796) recorded directly in equity in capital reserves.

 

29.28.Earnings per share

 

a) Basic earnings per share

 

Basic earnings per share is calculated by dividing the net profit attributable to the Parent by the weighted average outstanding shares during the year average number, excluding the average number of own shares held during the year and held in treasury.treasury.

 2019 2018 2017
      
Profit attributable to the Parent16,406,932 12,582,477 8,924,064
      
Earnings per share (Brazilian Reais)     
Basic earnings per 1,000 shares (Brazilian Reais)     
Common shares2,094.83 1,604.34 1,133.43
Preferred shares2,304.32 1,764.78 1,246.77
Net Profit attributable - Basic (Brazilian Reais)     
Common shares7,965,194 6,108,349 4,332,026
Preferred shares8,441,738 6,474,128 4,592,038
      
Weighted average shares outstanding - Basic     
Common shares3,802,303 3,807,386 3,822,057
Preferred shares3,663,444 3,668,527 3,683,145

 

F-91

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-90

Table of Contents

 

* Values expressed in thousands, except when indicated.

   2021 2020 2019    
            
Profit attributable to the Parent 15,528,052 13,418,529  16,406,932     
            
Earnings per share (R$)          
Basic earnings per 1,000 shares (R$)           
Common shares  1,981.65  1,713.45  2,094.83     
Preferred shares  2,179.82  1,884.80  2,304.32     
Net Profit attributable - Basic (R$)           
Common shares  7,535,924  6,511,367  7,965,194     
Preferred shares  7,992,128  6,907,162  8,441,738     
          
Weighted average shares outstanding (in thousands) - Basic           
Common shares  3,802,851  3,800,140  3,802,303     
Preferred shares  3,666,423  3,664,666  3,663,444     

 

b) Diluted earning per share

 

The diluted earnings per share is calculated by dividing the net profit attributable to the Parent by the weighted average outstanding shares during the year average number, excluding the average number of own shares held during the year and held in treasury, including the effect of dilutive potential programs long-term compensation.

Diluted earnings per share

 2019 2018 2017
      
Profit attributable to the Parent16,406,932 12,582,477 8,924,064
      
Earnings per share (Brazilian Reais)     
Diluted earnings per 1,000 shares (Brazilian Reais)     
Common shares2,094.83 1,604.34 1,132.44
Preferred shares2,304.32 1,764.78 1,245.69
Net Profit attributable - Basic (Brazilian Reais)     
Common shares7,965,194 6,108,349 4,331,955
Preferred shares8,441,738 6,474,128 4,592,109
      
Weighted average shares outstanding (in thousand) - Diluted     
Common shares3,802,303 3,807,386 3,686,401
Incremental shares from stock options granted under Stock Option Plan - Units (1)- - 3,257
      
Preferred shares3,663,444 3,668,527 3,686,401
Incremental shares from stock options granted under Stock Option Plan - Units (1)- - 3,257

(1) The exercise period of the SOP 2013 Long Term Incentive Plan purchase option ended in June 2018. The Bank does not have stock-based compensation plans in force (Note 40) and consequently has no anti-dilution items.

       2021 2020 2019 
             
Profit attributable to the Parent     

 

15,528,052

 13,418,529  16,406,932  
             
Earnings per share (R$)           
Diluted earnings per 1,000 shares (R$)            
Common shares      1,981,65  1,713,45  2,094,83  
Preferred shares      2,179,82  1,884,80  2,304,32  
Net Profit attributable - Basic (R$)            
Common shares      7,535,924  6,511,367  7,965,194  
Preferred shares      7,992,128  6,907,162  8,441,738  
             
Weighted average shares outstanding (in thousand) - Diluted            
Common shares      3,802,851  3,800,140  3,802,303  
Preferred shares      3,666,423  3,664,666  3,663,444  

 

29.30.Fair value of financial assets and liabilities

 

Under IFRS 13, the fair value measurement uses a fair value hierarchy that reflects the model used in the measurement process which should be in accordance with the following hierarchical levels:

Level 1: Determined on the basis of public (unadjusted) quoted prices in highly active markets for identical assets and liabilities, these include public debt securities, stocks, derivatives listed.

Level 2: They are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3: They are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Trading Financial Assets, Other financial assets at fair value on through income statement, Available-for-sale financial assets and Financial liabilities held for trading.

Level 1: The securities with high liquidity and quoted prices in active market are classified as level 1. At this level there were classified most of the Brazilian Government Securities (mainly LTN, LFT, NTN-B, NTN-C and NTN-F), shares in stock exchange and other securities traded in the active market.

 

Consolidated Financial Statements | December 31, 2021 | F-91

Table of Contents

 

* Values expressed in thousands, except when indicated.

Level 2: When quoted price cannot be observed, the Management, using its own internal models, make its best estimate of the price that would be set by the market. These models use data based on observable market parameters as an important reference. Various techniques are used to make these estimates, including the extrapolation of observable market data and extrapolation techniques. The best evidence of fair value of a financial instrument on initial recognition is the transaction price, unless the fair value of the instrument can be obtained from other market transactions carried out with the same instrument or similar instruments or can be measured using a valuation technique in which the variables used include only data from observable market, especially interest rates. These securities are classified at level 2 of the fair value hierarchy and compound securities hierarchy,are composed mainly byof Government Bonds (mainly NTN-A), committedSecurities (repo, LCI Cancelable and Cancelable LCI andNTN) in a less liquid market than those classified at level 1.

Level 3: When there is information that is not based on observable market data, Banco Santander uses internally developed models, from curves generated according to the internal model. Level 3 comprises mainly unlisted shares.

Derivatives

Level 1: Derivatives traded on stock exchanges are classified in Level 1 of the hierarchy.

F-92

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Level 2: For derivatives traded over the counter, the valuation (primarily swaps and options) usually uses observable market data, such as: exchange rates, interest rates, volatility, correlation between indexes and market liquidity.

When pricing the financial instruments aforementioned, it is used the Black-Scholes Model (exchange rate options, interest rate options; caps and floors) and the present value method (discount of future values by market curves).

Level 3: Derivatives not traded in the stockon an exchange and that do not have an observable datainformation in an active market were classified as Level 3. Theselevel 3, and are composed, byincluding exotic derivatives.

Below are the valuation carachteristics considered for the main financial instruments classified as Level 3.

CategoryType Asset/LiabilityValuation techniqueMain unobservable inputs
Linear derivativesCoupon FraBMF Closing PricesCurrency Coupon rate - long term
Inflation SwapDiscounted cash flowIGPM Coupon rate
Interest Rate SwapDiscounted cash flowPre-fixed rates – long term
Non linear derivativesEquities OptionsBlack&ScholesImplicit volatility- long term
Inflation OptionsBlack&ScholesIPCA Implicit volatility- long term
Interest Rate OptionsBlack&ScholesIDI Implicit volatility- long term
Currency OptionsBlack&ScholesUSD/BRL Implicit volatility- long term
CashPension Plan LiabilityActuarial ModelIGPM Coupon rate
Private BondsDiscounted cash flowDiscount rate ("Yields")
Public BondsDiscounted cash flowNTN-C and TDA Discount rate ("Yields")
Put optionsPut OptionsDiscounted cash flowGrowth and Discount rates

 

The new Banco Santander´s policy related to instrument classification in the fair value hierarchy existing since September/2018, introduced detailed procedures about the instrument classification process. Definitions were included related to instruments, risk factors and deadlines as well as observability degree of market prices and its importance in the fair value measurement model. The application of such definitions since December 2019 resulted in reclassifications of certain financial instruments, as shown in the section “Changes of Fair Value Level 3”.

The following table below shows a summary of the fair values ​​of financial assets and liabilities for the periodyears ended December 31, 2019, 20182021, 2020 and 2017,2019, classified based on severalthe various measurement methods adopted by the Bank to determine their fair value:value

Summary of the fair values of financial assets and liabilities

        12/31/2021
  
Level 1(1)		 Level 2 Level 3 Total
Financial Assets Measured at Fair Value Through Profit or Loss 601,204  15,736,825 2,520,813  18,858,842 
Debt instruments 601,204  -  2,520,813  3,122,017 
Balances with The Brazilian Central Bank  -    15,736,825   -    15,736,825
Financial Assets Measured at Fair Value Through Profit or Loss  Held for Trading 49,462,429  20,608,008  500,228  70,570,665 
Debt instruments 47,582,871  19,329  150,395  47,752,595 
Equity instruments 1,879,558  85,029  56,023  2,020,610 
Derivatives  -    20,503,650  93,810  20,797,460 
Non-Trading Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss -    420,898  449,264  870,162 
Equity instruments  -    98,921  378,786  477,707 
Loans and advances to customers  -    321,977  70,478  392,455 
Financial Assets Measured at Fair Value Through Other Comprehensive Income 98,977,403  1,662,779  601,605  101,241,787 
Debt instruments 98,975,973  1,649,925  586,702  101,212,600 
Equity instruments 1,430  12,854  14,903  29,187 
Hedging derivatives (assets)  -    342,463   -    342,463 
Financial Liabilities Measured at Fair Value Through Profit or Loss  Held For Trading -    36,484,135  468,432 36,952,567 
Trading derivatives  -    23,703,576  468,432  24,172,008 
Short positions  -    12,780,559   -    12,780,559 
Financial Liabilities Measured at Fair Value Through Profit or Loss   -    7,459,784   -    7,459,784 
Other financial liabilities  -    7,459,784   -    7,459,784 
Hedging derivatives (liabilities)  -    446,973   -    446,973 
         

 

Thousand of reais   2019
  Level 1 (1) Level 2 Level 3 Total
         
Financial Assets Measured At Fair Value Through Profit Or Loss975,393 28,739,507 2,627,405 32,342,305
Debt instruments 975,393 132,277 2,627,405 3,735,075
Equity instruments - 28,607,230 - 28,607,230
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 35,057,803 21,247,552 715,548 57,020,903
Debt instruments 33,028,333 1,726,441 130,857 34,885,631
Equity instruments 2,029,470 - - 2,029,470
Derivatives - 19,521,111 584,691 20,105,802
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 143,077 627 27,749 171,453
Loans and advances to customers- - - -
Equity instruments 143,077 627 27,749 171,453
Other Financial Assets At Fair Value Through Profit Or Loss- - - -
Debt instruments - - - -
Financial Assets Measured At Fair Value Through Other Comprehensive Income93,555,527 1,612,741 951,966 96,120,234
Debt instruments 93,531,617 1,612,741 818,569 95,962,927
Equity instruments 23,910 - 133,397 157,307
Hedging derivatives (assets)- 339,932 - 339,932
Financial Liabilities Measured At Fair Value Through Profit Or Loss- 45,499,913 564,757 46,064,670
Derivatives - 21,664,260 564,757 22,229,017
Short positions - 23,835,653 - 23,835,653
Financial Liabilities Measured At Fair Value Through Profit Or Loss- 3,719,416 1,600,000 5,319,416
Other Financial Liabilities - 3,719,416 1,600,000 5,319,416
Hedging derivatives (liabilities)- 200,961 - 200,961

Consolidated Financial Statements | December 31, 2021 | F-92

Table of Contents

 

* Values expressed in thousands, except when indicated.

         
        12/31/2020
  
Level 1(1)		 Level 2 Level 3 Total
Financial Assets Measured At Fair Value Through Profit Or Loss 588,778     57,354,806    2,956,882   60,900,466 
Debt instruments 588,778  -    2,956,882  3,545,660 
Balances with The Brazilian Central Bank -    57,354,806  -    57,354,806 
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 70,139,962  27,508,722  817,548  98,466,232 
Debt instruments 68,461,854  11,848  47,097  68,520,799 
Equity instruments 1,678,108  128,251  11,917  1,818,276 
Derivatives -    27,368,623  758,534  28,127,157 
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss -    217,569  282,151  499,720 
Equity instruments -    185,790  253,122  438,912 
Loans and advances to customers -    31,779  29,029  60,808 
Financial Assets Measured At Fair Value Through Other Comprehensive Income 106,456,132  1,987,234  1,297,021  109,740,387 
Debt instruments 106,454,645  1,953,504  1,260,065  109,668,214 
Equity instruments 1,487  33,730  36,956  72,173 
Hedging derivatives (assets) -    743,463  -    743,463 
Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading -    76,890,170  753,121  77,643,291 
Trading derivatives -    31,082,223  753,121  31,835,344 
Short positions -    45,807,947  -    45,807,947 
Financial Liabilities Measured At Fair Value Through Profit Or Loss  -    7,038,467  -    7,038,467 
Other Financial Liabilities -    7,038,467  -    7,038,467 
Hedging derivatives (liabilities) -    144,594  -    144,594 
         
        12/31/2019
  
Level 1(1)		 Level 2 Level 3 Total
Financial Assets Measured At Fair Value Through Profit Or Loss 975,393     28,739,507   2,627,405     32,342,305 
Debt instruments 975,393  132,277  2,627,405  3,735,075 
Balances with The Brazilian Central Bank -    28,607,230  -    28,607,230 
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 35,057,803  21,247,552  715,548  57,020,903 
Debt instruments 33,028,333  1,726,441  130,857  34,885,631 
Equity instruments 2,029,470  -    -    2,029,470 
Derivatives -    19,521,111  584,691  20,105,802 
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 143,077  627  27,749  171,453 
Equity instruments 143,077  627  27,749  171,453 
Financial Assets Measured At Fair Value Through Other Comprehensive Income 93,555,527  1,612,741  951,966  96,120,234 
Debt instruments 93,531,617  1,612,741  818,569  95,962,927 
Equity instruments 23,910  -    133,397  157,307 
Hedging derivatives (assets) -    339,932  -    339,932 
Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading -    45,499,913  564,757  46,064,670 
Trading derivatives -    21,664,260  564,757  22,229,017 
Short positions -    23,835,653  -    23,835,653 
Financial Liabilities Measured At Fair Value Through Profit Or Loss  -    3,719,416  1,600,000  5,319,416 
Hedging derivatives (liabilities) -    200,961  -    200,961 

 

F-93

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-93

Thousand of reais   2018
  
Level 1		 Level 2 Level 3 Total
         
Financial Assets Measured At Fair Value Through Profit Or Loss2,660,859 40,540,054 510,887 43,711,800
Debt instruments 2,660,859 - 510,887 3,171,746
Equity instruments - 40,540,054 - 40,540,054
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 49,855,112 17,626,932 1,370,270 68,852,314
Debt instruments 49,094,924 432,910 538,635 50,066,469
Equity instruments 757,843 8,490 - 766,333
Derivatives 2,345 17,185,532 831,635 18,019,512
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 142,732 619,798 154,947 917,477
Loans and advances to customers- 619,180 - 619,180
Equity instruments 142,732 618 154,947 298,297
Other Financial Assets At Fair Value Through Profit Or Loss- - - -
Debt instruments --- -
Financial Assets Measured At Fair Value Through Other Comprehensive Income83,283,924 1,442,797 709,956 85,436,677
Debt instruments 83,253,117 1,442,797 699,777 85,395,691
Equity instruments 30,807 - 10,179 40,986
Hedging derivatives (assets)- 343,934 - 343,934
Financial Liabilities Measured At Fair Value Through Profit Or Loss32,697,510 17,600,024 641,458 50,938,992
Derivatives 1,833 17,600,024 641,458 18,243,315
Short positions 32,695,677 - - 32,695,677
Hedging derivatives (liabilities)- 223,520 - 223,520
         
         
Thousand of reais   2017
  
Level 1		 Level 2 Level 3 Total
         
Financial assets held for trading34,380,542 18,059,034 - 52,439,576
Debt instruments 33,891,360 988,321 - 34,879,681
Equity instruments 489,182 588 - 489,770
Derivatives - 17,070,125 - 17,070,125
Financial assets designated at fair value through profit or loss1,593,951 64,738 33,368 1,692,057
Debt instruments 1,593,951 64,738 - 1,658,689
Equity instruments - - 33,368 33,368
Financial assets - available-for-sale79,301,016 6,382,225 140,143 85,823,384
Debt instruments 78,335,629 6,381,118 - 84,716,747
Equity instruments 965,387 1,107 140,143 1,106,637
Hedging derivatives (assets)- 192,763 - 192,763
Financial liabilities held for trading32,808,392 16,514,154 - 49,322,546
Derivatives - 16,514,154 - 16,514,154
Short positions 32,808,392 - - 32,808,392
Hedging derivatives (liabilities)- 163,332 - 163,332

F-94

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.Table of Contents 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated)  

* Values expressed in thousands, except when indicated.

 

Movements in fair value of Level 3

The following tables demonstrate the movements during 2019, 20182021, 2020 and 20172019 for the financial assets and liabilities classified as Level 3 in the fair value hierarchy:

Fair value hierarchy

Thousand of reais Fair value 2018 Gains/ losses (Realized-Not Realized) Transfers in and/ or out of Level 3 Additions / Settled Impact of IFRS 9 Fair value 2019
  Fair Value
12/31/2020		 Gains/ losses (Realized/Not Realized)  Transfers to Level 3 Additions / Low Fair value 12/31/2021
Financial Assets Measured At Fair Value Through Profit Or LossFinancial Assets Measured At Fair Value Through Profit Or Loss510,887 290,773 1,700,499 125,246 - 2,627,405 2,956,882  99,401  -    (535,470) 2,520,813 
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 1,370,270 238,632 (1,031,076) 137,722 - 715,548 817,548  (802,760) (36,051) 483,419  462,156
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 154,947 (101,541) - (25,657) - 27,749 282,151  78,853  -    88,260 449,264 
Financial Assets Measured At Fair Value Through Other Comprehensive Income 709,956 253,803 291 (12,084) - 951,966 1,297,021  (268,095) -    (427,322) 601,604 
Financial Liabilities Measured At Fair Value Through Profit Or LossFinancial Liabilities Measured At Fair Value Through Profit Or Loss641,458 190,813 (586,346) 318,832 - 564,757 753,121  (337,847) (137,963) 156,272  433,583 
 
 
Thousand of reais Fair value 2017 Gains/ losses (Realized-Not Realized) Transfers in and/ or out of Level 3 Additions / Settled Impact of IFRS 9 Fair value 2018
 
Financial Assets Measured At Fair Value Through Profit Or Loss33,368 60,887 - 445,991 (29,359) 510,887
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading - (181,355) 1,264,576 246,051 40,998 1,370,270
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss - (7,280) - - 162,227 154,947
Financial Assets Measured At Fair Value Through Other Comprehensive Income 140,143 47,773 645,708 - (123,668) 709,956
Financial Liabilities Measured At Fair Value Through Profit Or Loss- 115,212 710,219 (183,973) - 641,458
 
Thousand of reais Fair value 2016 Gains/ losses (Realized-Not Realized) Transfers in and/ or out of Level 3 Additions / Settled Fair value 2017
 
Financial assets designated at fair value through profit or loss 37,509 (2,555) - (1,586) 33,368
Financial assets - available-for-sale 951,612 18,474 - (829,943) 140,143
 

 

  Fair Value
12/31/2019		 Gains/ losses (Realized/Not Realized)  Transfers to Level 3 Additions / Low Fair value 12/31/2020
Financial Assets Measured At Fair Value Through Profit Or Loss 2,627,405  83,832     (239,512)    485,157  2,956,882 
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 715,548  502,596  (231,468)    (169,128) 817,548 
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 27,749  100,091  125,282  29,029  282,151 
Financial Assets Measured At Fair Value Through Other Comprehensive Income 951,966  (21,677) (197,098) 563,830  1,297,021 
Financial Liabilities Measured At Fair Value Through Profit Or Loss 564,757  500,159  (406,971) 95,176  753,121 
Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading 1,600,000  -    -    (1,600,000) -   
           
           
  Fair Value
12/31/2018		 Gains/ losses (Realized/Not Realized)  Transfers to Level 3 Additions / Low Fair value 12/31/2019
Financial Assets Measured At Fair Value Through Profit Or Loss 510,887  290,773  1,700,499  125,246  2,627,405 
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 1,370,270  238,632  (1,031,076) 137,722  715,548 
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 154,947  (101,541) -    (25,657) 27,749 
Financial Assets Measured At Fair Value Through Other Comprehensive Income 709,956  253,803  291  (12,084) 951,966 
Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading 641,458  190,813  (586,346) 318,832  564,757 

Consolidated Financial Statements | December 31, 2021 | F-94

Table of Contents

 

* Values expressed in thousands, except when indicated.

Fair value movements linked to credit risk

Changes in fair value attributable to changes in credit risk are determined based on the basis of changes in the prices of credit default swaps compared to similar obligations of the same obligor when such prices are observable, sinceas these credit default swaps better reflect the marketmarket's valuation of the debtors. credit risk assessment for a specific financial asset. When such prices are not observable,unobservable, changes in fair value attributable to changes in credit risk are determined as the total valueamount of changes in fair value not attributable to changes in the underlyingbenchmark interest rate or other observed market rates. In the absence of specific observable data, this approach provides a reasonable approximation of changes attributable to

F-95

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

credit risk, as it estimates the change in margin change above the reference valuebenchmark that the market may requiredemand for the financial asset. In 2018, there were no significant changes between the fair value categories due to changes in credit risk.

 

Financial assets and liabilities not measured at fair value

 

The financial assets owned by the Bank are measured at fair value in the accompanying consolidated balance sheets, except for loans and receivables.

 

Similarly, the Bank’s financial liabilities except for financial liabilities held for trading and those measured at fair value - are measured at amortized cost in the consolidated balance sheets.

 

i) Financial assets measured at other than fair value

 

Below is a comparison of the carrying amounts of financial assets of the Bank measured by a value other than the fair value and their respective fair values on December 31, 2019, 20182021, 2020 and 2017:2019:

Comparison of the carrying amounts of the Bank's financial assets measured at other than fair value and their respective fair values

 Thousand of reais     2019
    Carrying Amount Fair Value Level 1 Level 2 Level 3
 Assets      
             
 Money market investments - Brazilian Central Bank (note 4)15,249,515 15,249,515 - 15,249,515 -
 Financial Assets Measured At Amortized Cost:           
 Loans and amounts due from credit institutions (note 5)109,233,128 109,233,128 - 109,233,128 -
 Loans and advances to customers (note 9)326,699,480 327,278,243 - - 327,278,243
 Financial Assets Measured At Amortized Cost - Debt instruments (note 6)38,748,296 39,678,192 5,378,791 7,858,612 26,440,789
 Total  489,930,419 491,439,078 5,378,791 132,341,255 353,719,032

             
 Thousand of reais     2018
    Carrying Amount Fair Value Level 1 Level 2 Level 3
 Assets      
             
 Money market investments - Brazilian Central Bank (note 4)15,228,491 15,269,809 - 15,269,809 -
 Financial Assets Measured At Amortized Cost:        
 Loans and amounts due from credit institutions (note 5)79,607,001 79,607,197 - 79,607,197 -
 Loans and advances to customers (note 9)301,702,207 303,495,240 - - 303,495,240
 Financial Assets Measured At Amortized Cost - Debt instruments (note 6)36,799,509 38,927,356 9,766,162 29,161,194 -
 Total  433,337,208 437,299,602 9,766,162 124,038,200 303,495,240

             
 Thousand of reais     2017
    Carrying Amount Fair Value Level 1 Level 2 Level 3
 Assets      
             
 Money market investments - Brazilian Central Bank (note 4)33,831,521 33,914,021 - 33,914,021 -
 Investments Held-to-Maturity (note 6)10,214,454 10,587,117 7,251,246 3,335,871 -
 Loans and receivables:           
 Loans and amounts due from credit institutions (note 5) 65,209,902 65,209,902 - 65,209,902 -
 Loans and advances to customers (note 9) 272,420,157 275,647,324 - - 275,647,324
 Loans and receivables - Debt instruments (note 6) 17,616,515 17,127,511 - 17,127,511 -
 Total  399,292,549 402,485,875 7,251,246 119,587,305 275,647,324
          12/31/2021
Assets Accounting Value Fair Value Level 1 Level 2 Level 3
Open market investments - Central Bank of Brazil 16,657,201     16,657,201     16,657,201      -       -   
Financial Assets Measured At Amortized Cost -   -   -   -    -   
Loans and amounts due from credit institutions 95,664,754  95,664,754   -    73,308,279  22,356,475 
Loans and advances to customers 464,451,587  460,525,749   -    6,044,808  454,480,941 
Debt instruments  73,125,011  74,074,095  28,472,612  12,124,154  33,477,329 
Total 649,898,553  646,921,799  45,129,813  91,477,241  510,314,745 
           
           
           
          12/31/2020
Assets Accounting Value Fair Value Level 1 Level 2 Level 3
Open market investments - Central Bank of Brazil 20,148,725  20,148,725  20,148,725  -    -   
Financial Assets Measured At Amortized Cost -   -   -   -   -  
Loans and amounts due from credit institutions 112,849,776  112,849,776  -    59,492,738  53,357,038 
Loans and advances to customers 393,707,229  396,878,319  -    4,530,041  392,348,278 
Debt instruments  48,367,791  49,963,947  4,425,723  17,486,057  28,052,167 
Total 575,073,521  579,840,767  24,574,448  81,508,836  473,757,483 
           
           
          12/31/2019
Assets Accounting Value Fair Value Level 1 Level 2 Level 3
Open market investments - Central Bank of Brazil 15,249,515  15,249,515  -    15,249,515  -   
Financial Assets Measured At Amortized Cost -   -   -   -   -  
Loans and amounts due from credit institutions 109,233,128  109,233,128  -    109,233,128  -   
Loans and advances to customers 326,699,480  327,278,243  -    -    327,278,243 
Debt instruments  38,748,296  39,678,192�� 5,378,791  7,858,612  26,440,789 
Total 489,930,419  491,439,078  5,378,791  132,341,255  353,719,032 

 

F-96

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-95

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

ii) Financial liabilities measured at other than fair value

 

Following is a comparison of the carrying amounts of Bank´s financial liabilities measured by a value other than fair value and their respective fair values on December 31, , 2019, 20182021, 2020 and 2017:2019:

 

Thousand of reais     2019
   Carrying Amount Fair Value Level 1 Level 2 Level 3
Liabilities      
            
Financial liabilities at amortized cost:         
Deposits from Bacen and credit institutions (note 16)98,586,389 98,605,373 - 98,605,373 -
Customer deposits (note 17)336,514,597 336,593,455 - 336,593,455 -
Marketable debt securities (note 18)73,702,474 73,889,348 - 10,205,065 63,684,284
Subordinated liabilities (note 19)10,175,961 10,175,961 - 10,175,961 -
Other financial liabilities (note 21)60,885,370 60,885,370 - - 60,885,370
Total  579,864,790 580,149,506 - 455,579,853 124,569,654

During 2020, The Bank reclassified R$ 73,075,341 of “Deposits of Brazil's Central Bank and deposits of credit institutions” and R$

390,760,088 of “Customer deposits” from level 2 to level 3, as there was no active trading market for these instruments.”

 

            
Thousand of reais     2018
   Carrying Amount Fair Value Level 1 Level 2 Level 3
Liabilities      
            
Financial liabilities at amortized cost:         
Centrals banks (note 16)  98,716,735 98,713,988 - 98,713,988 -
Customers (note 17)  285,344,281 285,417,696 - 285,417,696 -
Marketable debt securities (note 18)74,626,232 74,783,289 - 4,599,204 70,184,085
Subordinated liabilities (note 19)9,885,607 9,853,157 - 9,853,157 -
Debt Instruments Eligible to Compose Capital (note 20)9,779,944 9,782,373 - 9,782,373 -
Other financial liabilities (note 21)49,782,780 49,782,780 - - 49,782,780
Total  528,135,579 528,333,283 - 408,366,418 119,966,865

Comparison of the carrying amounts of the Bank's financial liabilities measured at other than fair value and their respective fair values

          12/31/2021
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 121,005,909     121,005,909      -       26,200,162     94,805,747 
Customer deposits  468,961,069  468,960,950   -    60,911,279  408,049,671 
Marketable debt securities 79,036,792  79,035,644   -     -    79,035,644 
Subordinated Debt  -     -     -     -     -   
Debt instruments Eligible Capital 19,641,408  19,641,408   -     -    19,641,408 
Other financial liabilities 61,448,516  61,448,516   -     -    61,448,516 
Other financial liabilities 750,093,694  750,092,427  -    87,111,441  662,980,986 
           
           
          12/31/2020
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 131,656,962  131,654,431  -    58,579,090  73,075,341 
Customer deposits  445,813,972  445,856,090  -    55,096,002  390,760,088 
Marketable debt securities 56,875,514  57,265,307  -    -    57,265,307 
Subordinated Debt -    -    -    -    -   
Debt instruments Eligible Capital 13,119,660  13,119,660  -    -    13,119,660 
Other financial liabilities 59,822,683  59,822,683  -    -    59,822,683 
Other financial liabilities 707,288,791  707,718,171  -    113,675,092  594,043,080 
           
           
          12/31/2019
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 99,271,415  99,271,415  -    99,271,415  -   
Customer deposits  336,514,597  336,593,455  -    336,593,455  -   
Marketable debt securities 73,702,474  73,889,348  -    10,205,065  63,684,284 
Subordinated Debt 10,175,961  10,175,961  -    10,175,961  -   
Other financial liabilities 55,565,954  55,565,954  -    -    55,565,954 
Other financial liabilities 575,230,401  575,496,132  -    456,245,896  119,250,238 

 

            
Thousand of reais     2017
   Carrying Amount Fair Value Level 1 Level 2 Level 3
Liabilities      
            
Financial liabilities at amortized cost:         
Centrals banks (note 16)  79,068,604 79,068,564 - - 79,068,564
Customers (note 17)  258,482,156 258,576,177��- - 258,576,177
Marketable debt securities (note 18)70,247,012 70,245,820 - 2,000,552 68,245,268
Subordinated liabilities (note 19)519,230 528,799 - - 528,799
Debt Instruments Eligible to Compose Capital (note 20)8,436,901 8,436,901 - 8,436,901 -
Other financial liabilities (note 21)44,260,735 43,003,735 - - 43,003,735
Total  461,014,638 459,859,996 - 10,437,453 449,422,543

The methods and assumptions used to estimate the fair values summarized in the tables above are set forth below:

 

- Loans and amounts due from credit institutions and from clients – Fair value are estimated for groups of loans with similar characteristics. The fair value was measured by discounting estimated cash flow using the average interest rate of new contracts. That is, the future cash flow of the current loan portfolio is estimated using the contractual rates, and then the new loans spread over the risk free interest rate are incorporated to the risk free yield curve in order to calculate the loan portfolio fair value. In terms of behavior assumptions, it is

F-97

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

important to highlight that a prepayment rate is applied to the loan portfolio, thus a more realistic future cash flow is achieved.

 

- Deposits from Bacen and credit institutions and Client deposits – The fair value of deposits was calculated by discounting the difference between the cash flows on a contractual basis and current market rates for instruments with similar maturities. For variable-rate deposits, the carrying amount was considered to approximates fair value.

 

- Debt

Consolidated Financial Statements | December 31, 2021 | F-96

Table of Contents

 

* Values expressed in thousands, except when indicated.

Bonds and Subordinated Securities and Debt Instruments Eligible to Compose Capital securities – The fair value values ​​of long-term loansthese items were estimated by calculating the discounted cash flow discounted atusing the interest raterates offered onin the market for bonds with similar terms and maturities.

Debt Instruments Eligible for Capital – refer to the transaction fully agreed with a related party, in the context of the Capital Optimization Plan, whose book value is similar to the fair value.

 

The valuation techniques used to estimate each level are defined in note 2.e.

 

Management revised the criteria assigned to classify the fair value level of assets and liabilities measured at amortized cost, presented exclusively for disclosure purposes, and concluded that they are better classified as level 3 in light of observable market data.

31.30.Operational Ratios

 

In July 2008 came into forceBacen determines that financial institutions maintain a Reference Equity (PR), Tier I Equity and Core Capital compatible with the rules on regulatory capital measurementrisks of their activities, higher than the minimum requirement of the Required Reference Equity, represented by the Standardized Approach of Basel II. On 2013 was issued a set of Resolutions and Circulars, aligned with the recommendationssum of the Basel Committee on Banking Supervision. These rules were repealed by CMN Resolution nº 4,192credit risk, market and 4,193 which took effect from October 2013, establishing the model for calculating the minimum Regulatory Capital requirements, Tier I and Common Equity Tier I. These Resolutions states that the composition of the Regulatory Capital is done through equity, subordinated debt and hybrid capital instruments.operational risk.

 

As required byestablished in CMN Resolution nºResolutions No. 4,193/2013 and No. 4,783/2020, until September 2021 the PR requirement for PR in 2018 was 11.0%10.625%, composedincluding 8.00% of 8.625% ofMinimum Reference Equity Minimum plus 1.875%1.625% of Additional for Capital Conservation and 1 .00% Systemic Additional. Considering this additional,Tier I PR Level I increased to 8.375%was 8.625% and Minimum Principal Capital to 6.875%was 7.125%.

 

ForIn October 2021, the base year 2019,Additional for Capital Conservation increased to 2.00%. Thus, in December the PR requirement remains at 10.5%, including 8.0%is 11.00%. It is considered 8.00% of Minimum of Reference Equity plus 2.00% of Additional for Capital Conservation and a further 2.5%1.00% of Additional Systemic, with the requirement of Tier I PR of 9.00% and of Core Capital Minimum of 7.50%. As of April 2022, the PR requirement will reach 11.50%, considering 8.00% of Minimum Reference Equity plus 2.50% of Capital Conservation Additional. TheAdditional and 1.00% of Systemic Additional, with requirement Tier I PR Level I reaches 8.5% and theMinimum Principal Capital Minimum 7.0%.of 9.50% and 8.00%, respectively.

 

As a continuationContinuing the adoption of the rules established by CMN Resolution nºNo. 4,192/2013, as of January 2015, came into force the Prudential Conglomerate,Consolidated, defined by CMN Resolution nºNo. 4,280/2013.The2013, came into force.

The Basel index is calculated on a consolidated basis based onin accordance with the informationFinancial Statements of Consolidatedthe Prudential Conglomerate prepared in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by Bacen, as shown below:

  Financial Conglomerate
Thousand of reais 2019 (1) 2018 (1) 2017 (1)
Tier I Regulatory Capital 66,481,661 61,476,715 56,386,001
Principal Capital 61,389,509 56,581,518 52,196,893
Supplementary capital 5,092,153 4,895,197 4,189,108
Tier II Regulatory Capital 5,083,808 4,887,175 4,250,447
Regulatory Capital (Tier I and II)71,565,469 66,363,890 60,636,448
Credit Risk (1) 407,786,238 358,955,592 324,696,458
Market Risk (2) 20,235,208 39,231,773 25,857,109
Operational Risk 47,965,481 42,375,554 32,579,126
Total RWA (3) 475,986,927 440,562,919 383,132,693
Basel I Ratio 13.97 13.95 14.72
Basel Principal Capital 12.90 12.84 13.62
Basel Regulatory Capital 15.04 15.06 15.83

Financial Conglomerate

BASEL INDEX %dec-21dec-20dec-19 
    
Tier I Regulatory Capital76,969.9 77,571.5 66,481.7 
Principal Capital69,919.9 71,006.3 61,389.5 
Supplementary Capital 7,050.1 6,565.2 5,092.2 
Tier II Regulatory Capital12,591.3 6,554.5 5,083.8 
Regulatory Capital (Tier I and II) 89,561.3 84,126.0 71,565.5 
Credit Risk527,119.3 478,303.5 407,786.2 
Market Risk15,122.2 15,846.3 20,235.2 
Operational Risk58,499.8 57,419.4 47,965.5 
Total RWA600,741.3 551,569.2 475,986.9 
Basel I Ratio12.8114.0613.97 
Basel Principal Capital11.6412.8712.90 
Basel Regulatory Capital 14.9115.2515.04 

(1)Exposures to credit risk subject to the calculation of the capital requirement using a standardized approach (RWACPAD) are based on the procedures established by Circular Bacen 3,644, dated March 4, 2013 and its subsequent complements through the wording of Circular Bacen 3,174 of August 20, 2014 and Bacen Circular 3,770 of October 29, 2015.

(2)Includes portions for market risk exposures subject to variations in rates of foreign currency coupons (RWAjur2), price indexes (RWAjur3) and interest rate (RWAjur1/RWAjur4), the price of commodities (RWAcom), the price of shares classified as trading portfolios (RWAacs), and portions for gold exposure and foreign currency transactions subject to foreign exchange (RWAcam).

(3)Risk Weighted Assets.

 

Banco Santander, quarterly discloses Pillar III information relating to risk management, Regulatory Capital and Risk Weighted Assets. A report with further details of the structure and methodology will be disclosed on the website www.ri.santander.com.br/ri.

 

Financial institutions are required to maintain investments in permanent assets compatible with adjusted regulatory capital. Funds invested in permanent assets, calculated on a consolidated basis, are limited to 50% of adjusted regulatory capital, as per prevailing regulation. Banco Santander classifies for said index. The Bank is in compliance withfollowing the requirements aforementioned.

 

F-98

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-97

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

32.

31.

Interest and similar income

 

“Interest and similar income”income in the consolidated income statement comprises theconsists of interest accruingaccrued in the year on all financial assets with an implicit or explicit return, calculated by applyingusing the effective interest method, regardless of the fair value measurement;measurement, and the rectifications of incomeresult as a result of hedge accounting. Interest is recognized through itson a gross value,basis, without deducting any taxtaxes withheld at source.

 

The breakdown of the main items of interest and similar charges accrued in 2019, 20182021, 2020 and 20172019 is as follows:

 

Thousand of reais   2019 2018 2017     2021 2020 2019
  
Cash and balances with the Brazilian Central BankCash and balances with the Brazilian Central Bank 3,827,648 5,095,828 5,953,765Cash and balances with the Brazilian Central Bank  2,581,083  1,552,121  3,827,648 
Loans and advances - Credit institutionsLoans and advances - Credit institutions 3,843,798 2,977,670 5,107,355Loans and advances - Credit institutions   5,190,799  1,518,557  3,843,798 
Loans and advances - CustomersLoans and advances - Customers 50,406,078 46,471,507 44,507,217Loans and advances - Customers   49,537,564  44,103,997  50,406,078 
Debt instruments 13,528,096 13,629,167 13,456,802   19,041,947  13,556,403  13,528,096 
Pension Plans (Note 22.b) 27,353 - -
Pension Plans 19,613  16,720  27,353 
Other interest 1,208,087 2,304,221 2,393,210 1,616,302  2,027,142  1,208,087 
Total 72,841,060 70,478,393 71,418,349 77,987,308  62,774,940  72,841,060 

 

33.32.Interest expense and similar charges

 

“"Interest expense and similar charges”expenses" in the consolidated income statement includes theconsist of interest accruingaccrued in the year on all financial liabilities with an implicit or explicit return, including remuneration in kind, calculated by applyingusing the effective interest method, regardless of the measurement of the fair value, measurement; the rectifications of cost adjustments as a result of hedge accounting;accounting and the interest cost attributablecosts attributed to pension funds.

 

The breakdown of the main items of interest expense and similar charges accrued in 2019, 20182021, 2020 and 20172019 is as follows:follows:

 

Thousand of reais   2019 2018 2017 202120202019
  
Credit institutions deposits 4,866,357 5,367,471 3,782,781Credit institutions deposits 4,712,388 4,327,276 4,866,357 
Customer deposits 14,965,958 13,576,866 19,490,807 13,187,967 7,504,276 14,965,958 
Marketable debt securities and subordinated liabilities:Marketable debt securities and subordinated liabilities:    Marketable debt securities and subordinated liabilities:  
Marketable debt securities (note 18)Marketable debt securities (note 18) 5,138,306 4,606,949 7,901,199 Marketable debt securities (note 18)4,536,849 2,785,942 5,138,306 
Subordinated liabilities (note 19) - 25,336 52,984
Debt Instruments Eligible to Compose Capital (note 20) 659,715 604,216 495,188
Pension Plans (note 22.b) 342,068 343,137 292,628
Debt Instruments Eligible to Compose Capital (note 19)Debt Instruments Eligible to Compose Capital (note 19)955,199 909,393 503,541 
Pension Plans 248,312 301,389 342,068 
Other interest(1) 2,547,549 4,033,076 4,456,273 3,028,127 2,503,953 2,703,723 
Total 28,519,953 28,557,051 36,471,860 26,668,842 18,332,228 28,519,953 

(1)(1)It is mainly composed of Expenses with Interest on Repo Agreements

 

34.33.Income from equity instruments

 

“Income from equity instruments” includes the dividends and payments on equity instruments out of profits generated by investees after the acquisition of the equity interest.

 

The breakdown of the balance of this item is as follows:

Thousand of reais      2019 2018 2017
            
Equity instruments classified as:        
Financial assets held for trading   - - 18,458
Financial Assets Measured At Fair Value Through Profit Or Loss 13,398 27,047 -
Financial assets - available-for-sale   - - 64,662
Financial Assets Measured At Fair Value Through Other Comprehensive Income5,535 5,576 -
Total      18,933 32,623 83,120

Breakdown of the balance of this item

Thousand of reais      2021 2020 2019
            
Equity instruments classified as:           
Financial Assets Measured At Fair Value Through Profit Or Loss      89,563  30,232  13,398 
Financial Assets Measured At Fair Value Through Other Comprehensive Income      477  3,522  5,535 
Total      90,040  33,754  18,933 

 

F-99

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

Consolidated Financial Statements | December 31, 2021 | F-98

Table of Contents35.

 

* Values expressed in thousands, except when indicated.

34.Fee and commission income

 

The heading “Fee and commission income” comprises the amount of all fees and commissions accruing in favor of the Bank in the year, except those that form an integral part of the effective interest rate on financial instruments.

 

The breakdown of the balance of this item is as follows:follows:

 

Thousand of reais   2019 2018 2017     2021 2020 2019
  
Collection and payment services:Collection and payment services:        
Bills 1,143,229 1,070,258 970,293 1,163,616  1,083,262  1,143,229 
Demand accounts 2,554,559 2,311,925 2,156,384 2,664,586  2,425,416  2,554,559 
Cards (Credit and Debit) and Acquiring ServicesCards (Credit and Debit) and Acquiring Services 6,620,708 5,854,503 4,985,306 5,338,649  6,009,780  6,620,708 
Checks and other 188,249 169,872 172,718 127,509  138,483  188,249 
Orders 720,521 622,405 471,763 695,293  856,723  720,521 
Total 11,227,266 10,028,962 8,756,464 9,989,653  10,513,664  11,227,266 
  
Marketing of non-Banking financial products:Marketing of non-Banking financial products:    Marketing of non-Banking financial products:    
Investment funds 725,494 717,924 819,748   731,817  450,940  725,494 
Insurance 3,120,471 2,975,661 2,414,478 3,566,596  3,134,723  3,120,471 
Capitalization plans 829,852 402,859 363,516 711,351  634,775  829,852 
Total 4,675,817 4,096,444 3,597,742 5,009,764  4,220,438  4,675,817 
  
Securities services:        
Securities underwriting and placementSecurities underwriting and placement 721,793 448,914 513,727Securities underwriting and placement  935,464  695,978  721,793 
Securities trading 186,847 137,617 114,015   318,590  281,686  186,847 
Administration and custodyAdministration and custody 401,310 41,794 191,987 647,054  495,457  401,310 
Asset management 2,291 2,173 2,353 987  1,144  2,291 
Total 1,312,241 630,497 822,082 1,902,095  1,474,265  1,312,241 
     
Other:     
Foreign exchange 1,512,326  1,450,636  968,270 
Financial guarantees 838,790  728,232  650,241 
Other fees and commissionsOther fees and commissions  1,135,461  2,219,472  1,558,623 
Total   3,486,577  4,398,340  3,177,134 
 
Total 20,388,089  20,606,707  20,392,458 

 

            
Other:           
Foreign exchange      968,270 934,801 742,676
Financial guarantees      650,241 708,819 672,801
Other fees and commissions    1,558,623 1,328,928 1,223,778
Total      3,177,134 2,972,549 2,639,255
            
Total      20,392,458 17,728,452 15,815,543

F-100

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

36.35.Fee and commission expense

 

Fee and commission expense” shows the amount of all fees and commissions paid or payable in the year, except those that form an integral part of the effective interest rate on financial instruments.

 

The breakdown of the balance of this item is as follows:

Amount of all fees and commissions paid or payable in the year

Thousand of reais      2019 2018 2017
            
Commissions assigned to third parties(1)   3,639,239 2,364,119 1,975,379
Other fees and commissions   1,040,066 1,232,174 1,118,296
Total      4,679,306 3,596,293 3,093,675

(1) Composed, mainly, by credit cards.

Thousand of reais 2021 2020 2019
       
Commissions assigned to third parties (1) 2,743,339  2,685,005  3,639,239 
Other fees and commissions  2,371,449  1,693,488  1,040,066 
Total 5,114,788  4,378,493  4,679,306 
(1)Composed, mainly, by credit cards.

 

Consolidated Financial Statements | December 31, 2021 | F-99

Table of Contents37.

 

* Values expressed in thousands, except when indicated.

36.Gains or losses on financial assets and liabilities

 

Gains (losses) on financial assets and liabilities (net) includes the amount of the valuation adjustments of financial instruments, except those attributable to interest accrued as a result of application of the effective interest method and to allowances, and the gains or losses derived from the sale and purchase thereof.

 

The breakdown of the balance of this item, by type of instrument, is as follows:

Thousand of reais      2019 2018 2017
            
Financial Assets Held For Trading (1)   - -1,174,111
Financial Assets Measured At Fair Value Through Profit Or Loss 252,253 (138,673) -
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading (1)2,391,080 (2,764,859) -
Non-Tranding Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss11,501 61,239 -
Other Financial Assets At Fair Value Through Profit Or Loss (2) - - 30,694
Financial Assets Not Measured At Fair Value Through Profit Or Loss (57,522) (138,104) (122,115)
Financial Assets available-for-sale        
  Debt instruments      (46,136) (111,750) (156,802)
  Equity instruments      (11,386) (26,354) 34,687
Financial Assets Measured At Fair Value Through Other Comprehensive Income    
Gains or losses from hedge accounting, net   (134,767) 197,595 (113,600)
Total      2,462,545 (2,782,802) 969,090

(1) Includes the exchange hedgeThe breakdown of the Bank’s interest in Cayman (note 24).balance of this item, by type of instrument, is as follows:

Thousand of reais  2021 2020 2019
        
Financial Assets Measured At Fair Value Through Profit Or Loss1,555,837  711,949  252,253 
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading (1)3,519,626  12,122,794  2,391,080 
Non-Tranding Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss205,016  172,828  11,501 
Financial Assets Not Measured At Fair Value Through Profit Or Loss(665,853) (239,054) (57,522)
Financial Assets available-for-sale        
   Debt instruments  (432,510) (207,011) (46,136)
   Equity instruments  (233,344) (32,043) (11,386)
Financial Assets Measured At Fair Value Through Other Comprehensive Income       
Gains or losses from hedge accounting, net (4,392,844) 229,543  (134,767)
Total  221,782  12,998,060  2,462,545 
(1)Includes the exchange hedge of the Bank’s interest in Cayman (note 23).

 

(2) Includes the net gain arising from transactions involving debt securities, equity instruments and derivatives included in this portfolio, since the Bank manages its risk in these instruments on a global basis.

 

38.37.Exchange differences (net)

 

“Exchange differences”differences" demonstrate the gains or losses on foreign currency transactions, the differences that arise on translations of monetary items in foreign currencies to the functional currency, and those disclosed on non-monetary assets in foreign currency at the time of their disposal.

 

Thousand of Reais   2019 2018 2017     2021 2020 2019
  
Revenue with Exchange variationsRevenue with Exchange variations 23,622,963 12,752,765 24,008,382 196,480,319 78,578,786  23,622,963 
Expenses with Exchange VariationsExpenses with Exchange Variations (26,411,500) (15,559,237) (23,403,326) (198,482,605) (103,279,748) (26,411,500)
Total (2,788,537) (2,806,471) 605,056 (2,002,286) (24,700,962) (2,788,537)

 

F-101

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

39.38.Other operating income and expenses

 

TheThe breakdown of "Other operating income (expense)" is as follows:

 

Thousand of reais   2019 2018 2017     2021 2020 2019
     
Other operating income 591,125 556,715 896,279 914,084  792,639  591,125 
Other operating expense (1,351,568) (1,281,764) (1,259,338) (1,559,663) (1,237,133) (1,351,568)
Contributions to fund guarantee of credit - FGCContributions to fund guarantee of credit - FGC (347,276) (330,801) (308,954) (473,801) (428,016) (347,276)
Total (1,107,719) (1,055,850) (672,013) (1,119,380) (872,510) (1,107,719)

 

40.39.Personnel expenses

 

a) Breakdown

 

The breakdown of “Personnel expenses” is as follows:

 

Thousand of reais   2019 2018 2017     2021 2020 2019
Wages and salaries 5,876,328 5,812,688 5,713,702 5,905,394  5,730,779  5,876,328 
Social security costs 1,276,620 1,404,537 1,381,229 1,153,164  1,222,352  1,276,620 
Benefits 1,491,485 1,387,078 1,309,314 1,434,815  1,390,044  1,491,485 
Defined benefit pension plans (note 22)Defined benefit pension plans (note 22) 10,917 8,939 20,081 6,415  6,892  10,917 
Contributions to defined contribution pension plansContributions to defined contribution pension plans 131,885 131,388 87,099 152,156  117,216  131,885 
Share-based compensationShare-based compensation 88,248 58,050 87,293 24,045  19,348  88,248 
Training 66,215 62,756 58,338 54,858  49,037  66,215 
Other personnel expenses 386,016 340,571 280,222 294,855  335,814  386,016 
Total 9,327,714 9,206,007 8,937,278 9,025,702  8,871,482  9,327,714 

 

Consolidated Financial Statements | December 31, 2021 | F-100

Table of Contents

 

* Values expressed in thousands, except when indicated.

b) Share-Based Compensation

 

Banco Santander has long-terms compensation plans linked to the market price of the shares. The members of the Executive Board of Banco Santander are eligible for these plans, as well as other members selected by the Board of Directors, whose selection will take into account seniority of the group. For the Board of Directors members in order to be eligible, it is necessary to exercise Executive Board functions. These amounts are recorded under Other liabilities (Note 25)24) and personnel expenses (Note 40.a)39.a).

b.1) Local Program

Those are the compensation long-term programs and their characteristics.Global Program

 

ProgramPlanLiquidity TypeVesting PeriodPeriod of Exercise/Settlement
LocalLong-Term Incentive Plan - Private Ultra High (1)MoneyApr/2017 to Dec/19In March/2020 and March/2021
GlobalGlobal Long-Term – ILP CRDIV - Granted 2015 (2) (3)Santander Global Group Shares2015 to 2018In 2019/2020
LocalLong-Term Incentive Plan – TechnologySantander Brasil Bank SharesJul/2019 to Jun/2022In July/2022
LocalLong-Term Incentive Plan – Pi InvestmentsSantander Brasil Bank SharesJan/2019 to Dec/2021In March/2022 and March/2023
LocalLong-Term Incentive Plan – Ben'Santander Brasil Bank SharesJan/2019 to Dec/2021In March/2022 and March/2023
          
     01/01 to
12/31/2021		  01/01 to
12/31/2020		  
ProgramSettlement TypeVesting PeriodPeriod of Exercise      
    01/2019 to 12/20212022 and 2023  R$ 4,216,667 (*)  R$ 4,916,667  
    01/2020 to 12/20222023  R$ 3,668,000 (*)  R$  -    
    01/2020 to 12/20222023 and 2024  R$ 2,986,667 (*)  R$ 9,440,000    
    01/2021 to 09/20242024  R$ 13,520,000 (*)  R$ -    
    01/2021 to 12/20232023  R$ 1,834,000 (*)  R$ -    
LocalSantander Brasil Bank Shares  07/2019 to 06/20222022 111,962 SANB11109,677 SANB11
    09/2020 to 09/20222022 301,583 SANB11450,738 SANB11
    01/2020 to 09/20232023 249,666 SANB11281,031 SANB11
    01/2021 to 12/20222023 177,252 SANB11-   SANB11
    01/2021 to 12/20232024 327,065 SANB11-   SANB11
    01/2021 to 01/20242024 30,545 SANB11-   SANB11
    01/2020 to 12/20222023  309,576 SAN (**) 318,478 SAN (**)
GlobalSantander Spain Shares and Options01/2020 to 12/20222023, with limit for options' exercise until 20301,618,445 Options s/ SAN (**)1,664,983 Options s/ SAN (**)  
  01/2021 to 12/2023 02/2024   135,632 SAN (**)-    
  01/2021 to 12/2023 02/2024, with limit for options' exercise until 02/2029404,630 Options s/ SAN (**)-    
       R$ 26,225,334 (*)  R$ 14,356,667 (*)
Balance of Plans on December 31, 2021      1,198,073 SANB11 841,446 SANB11
      445,208 SAN 318,478 SAN
      2,023,075 Options s/ SAN 1,664,983 Options s/ SAN

 

(1) It aims at the growth and profitability of the Private business and the recognition of the Participant's contribution.

(2) Subject(*) Plan target in Reais, to be converted into SANB11 shares according to the achievement of the Santander Group's RTAplan's performance indicator, comparingindicators at the Group's evolution in this indicator with thatend of the main global competitors.

(3) The Plans do not cause dilutionvesting period, based on the quotation of the Bank's share capital, since they arelast 15 trading sessions of the month immediately preceding the grant.

(**) Target of the plan in SAN shares and options, to be paid in shares of Banco Santander Spain. In April 2019,cash at the type of settlementend of the Global grant programs 2015 was changedvesting period, according to cash.the achievement of the plan's performance indicators.

 

Fair ValueOur long-term programs are divided into Local and ParametersGlobal plans, with specific performance indicators and condition of maintaining the participant's employment relationship until the payment date in order to be entitled to receive.

The calculation of payment for Performance for Actuality Plansthe plans is based on the percentage of achievement of the indicators applied to the reference value (target), with the Local plans being paid in SANB11 units and the Global plans in shares and options of Grupo Santander (SAN).

 

Each participant has a target reference value defined in Reaiscash, converted into SANB11 units or into shares and options of Grupo Santander (SAN), normally based on the exact amountquotation of the bonus will be determined by the measurementlast 15 trading sessions of the following performance indicators, with payments mademonth immediately preceding the granting of each plan. At the end of the vesting period, the payment of either the resulting shares in two installments: the first in March 2020 andcase of local plans, or the second in March 2021.

Indicators - Phase 1 (Reference Value)

• BAI of 2017.

Indicators - Phase 2 (Calculation of Cash Incentive)

F-102

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

• BAI - 50% (Benefit Indicator before Private Ultra High Segment Taxes);

• MOL - 25% (Private Ultra High Segment Net Margin Indicator); and

• AUM - 25% (Assets Under Management Indicator of Private Ultra High Segment).

In December 2018, the provision recorded for the local long-term incentive plan - Private Ultra High was reversed duecash value corresponding to the probability of non-compliance with the acquisition condition related to the performance target. Management followed the performance parametershares/options of the plan until December 2019. The amount of the expenseglobal plans, is made with the provision related toa 1-year restriction, and this plan recorded in 2017 was R $ 2,935.

i.Long-Term Incentive Plan – Technology

Thispayment is a retention plan for key positions where the participant must remain active during the term of the plan in order to be entitled to receive it.

Each executive had a target in Reais, which was converted to Santander Brasil shares (SANB11) at the price of R$ 44,66, which will be delivered in July/2022, with lockup of 1 year.

Payment isstill subject to the application of the Malus/ClawbackMalus clauses /Clawback, which may reduce or cancel the shares to be delivered in the eventcases of non-compliance with internal regulationsrules and exposure to excessive risk.

 

 
 Number of Shares Granted Year Employees Date of Commencement of the PeriodDate of Expiry of Period
ILP Technology123,158 2019 Executives Jul-19Jun-22
Delivered shares- 2019 Executives Jul-19Jun-22
Canceled shares- 2019 Executives Jul-19Jun-22
Balance Plans on December 31, 2019123,158       

 

ii.Long-Term Incentive Plan – Pi Investments

Consolidated Financial Statements | December 31, 2021 | F-101

The agreed values ​​of the ILP for each participant will be obtained based on determination of the achievement of indicators in two moments: 2020 and 2021.

Table of Contents

 

Indicators 2020Indicators 2021
Active Clients - Clients with average monthly balanceActive Clients - Clients with average monthly balance
Clients Base (AuM) - Distributed volume including balance accountClients Base (AuM) - Distributed volume including balance account
Revenue 2020Revenue 2021
BAI (Indicador de Lucro antes do Imposto)

 

* Values expressed in thousands, except when indicated.

This is a retention plan for key positions where the participant must remain active until the payment date.Impact on Income

 

Payment will be madeThe impacts on the result are recorded in SANB11 shares, 50% in March / 2022 and 50% in March / 2023, with lockup of 1 year after each payment and subject to the application of the Malus / Clawback clauses, which may reduce or cancel the shares to be delivered in case of non-compliance with internal regulations and exposure to excessive risks.Personnel Expenses item, as follows:

 

iii.ILP Ben
          
      Consolidated
        01/01 to
12/31/2021		01/01 to
12/31/2020
Program Settlement Type      
Local Santander Actions (Brazil)    20,72010,776
Global Santander Spain shares and stock options    3,534846

 

The agreed values ​​of the ILP for each participant will be obtained based on determination of the achievement of indicators in two moments: 2020 and 2021.

Indicators
Number of Corporate Clients
Number of Personal Clients
Number of Accredited Establishments
Revenue
BAI (Earnings before Tax indicator)

This is a retention plan for key positions where the participant must remain active until the payment date.

 

Payment will be made in SANB11 shares, 50% in March / 2022 and 50% in March / 2023, with lockup of 1 year after each payment and subject to the application of the Malus / Clawback clauses, which may reduce or cancel the shares to be delivered in case of non-compliance with internal regulations and exposure to excessive risks.

F-103

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

b.2) Global Program

In 2019, were not recognized daily pro-rata expenses (2018 - R$5,726 e 2017 – R$4,797), for total plans of the Global Program.

b.3) Variable Remuneration based in shares

In theThe long-term incentive plan (deferral), sets forth the requirements for payment of future deferred installments of variable remuneration, are determined, considering the long-term sustainable financial bases, including the possibility of applying reductions or cancellations depending ondue to the risks assumed and fluctuations of the cost of capital.

The variable remuneration plan with payment referenced in Banco Santander variable remuneration planshares is divided into 2 programs: (i) Identified Collective and (ii) Unidentified Collective.Other Employees. The impacts on the result are accounted for under Personnel Expenses, as follows:

Variable Remuneration Referenced to Shares

Program Participant Liquidity Type 01/01 to 12/31/2021 01/01 to 12/31/2020
Collective Identified Members of the Executive Committee, Statutory Officers and other executives who assume significant and responsible risks of control areas 50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11) 63,658 103,696
Other Employees Superintendence level employees and other employees with variable remuneration above a minimum amount established 50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11) 111,995 98,069

 

a) Collective Identified - Participants of the Executive Committee, Statutory Directors and other executives who take significant risks in the Bank and are responsible for the control areas. The deferral will be half in cash, 50% indexed by 100% of CDI and 50% in shares (SANB11). On the exercise ended on December 31, 2019, was recorded loss amounted to R$98,441 (2018 - R$50,896 and 2016 - R$81,838), regarding the provision of the deferral plan in shares.

b) Collective Unidentified - managerial employees and other employees of the organization that will be benefited from the deferral plan. The deferred amount will be paid 100% cash, indexed by 100% of CDI. On the year ended on December 31, 2019, there were expense of R$104,068 (2018 - R$74,871 and 2016 - R$124,926).

 

41.40.Other general administrative expenses

 

a) Breakdown

The detail of other general administrative expenses is as follows:

 Thousand of reais 2019 2018 2017
        
 General maintenance expenses748,196 1,330,549 1,284,490
 Technology maintenance expenses2,058,619 1,786,416 1,364,720
 Advertising 712,855 621,645 617,563
 Communications 472,873 457,323 593,272
 Per diems and travel expenses140,016 127,277 106,956
 Taxes other than income tax112,012 88,977 122,570
 Surveillance and cash courier services630,585 617,129 630,466
 Insurance premiums 34,778 29,434 27,289
 Specialized and technical services2,172,566 2,089,614 1,901,056
 Technical reports 360,990 359,468 370,546
 Others specialized and technical services1,811,577 1,730,146 1,530,510
 Other administrative expenses (1)531,312 437,767 534,935
 Total 7,613,812 7,586,131 7,183,317

(1) In December 31, 2019, includes mainly Data Processing Expenses in the balance of R$2.392 (2018 – R$67.724 and 2017Breakdown - R$73.664), Service Expenses in the balance of R$2.172 (2018 - revenue of R$26.852 and 2017 - R$87.199), Expenses with Benefit Guarantor Fund - FGB R$53.548 (2018 – R$34.996 and 2017 - R$5.334), Interest on Own Capital R$0 (2018 – R$38.006 and 2017 - R$20.826) and Recovery of Charges and Expenses R$97.426 (2018 – R$92.408 and 2017 – R$89.409)Other administrative expenses

Thousand of reais   2021 2020 2019
         
Genreal maintenance expenses  889,077  743,580  748,196 
Technology maintenance expenses 2,474,348  2,355,310  2,058,619 
Advertising   621,425  654,175  712,855 
Communications   353,271  648,856  472,873 
Per diems and travel expenses  71,840  68,922  140,016 
Taxes other than income tax  202,440  280,098  112,012 
Surveillance and cash courier services597,946  594,953  630,585 
Insurance premiums   22,374  16,620  34,778 
Specialized and technical services  2,184,139  2,171,460  2,172,567 
Technical reports   355,343  319,814  360,990 
Others specialized and technical services1,828,795  1,851,646  1,811,577 
Other administrative expenses (1)  873,857  709,504  531,311 
Total   8,290,717  8,243,479  7,613,812 
(1)In December 31, 2021, includes mainly Data Processing Expenses in the balance of R$160,716 (2020 – R$176,105 and 2019 - R$67,724), Service Expenses in the balance of R$51,689 (2020 - revenue of R$27,751 and 2019 - R$87,199), Expenses with Benefit Guarantor Fund - FGB R$3,864 (2020 – R$8,478 and 2019 - R$34,996) and Recovery of Charges and Expenses R$378,604 (2020 – R$ 212,850 and 2019 – R$92,408).

 

b) Other information

 

The balance of “Technical reports” includes the fees paid by the consolidated companies to their respective auditors, the detail are as follows:

Balance of Technical reports

Millions of Reais 2019 2018 2017
       
Audit of the annual financial statements of the companies audited by external audit(1)(2) (constant scope of consolidation) 25.2 19.9 17.5
Audit Related 0.1 0.5 3.9
Others 0.3 0.1 1.3
Total 25.6 20.5 22.7

Consolidated Financial Statements | December 31, 2021 | F-102

Table of Contents

 

* Values expressed in thousands, except when indicated.

(1) In 2019, it includes R$ 1.9 million and R$ 1.8 million referring to the audit work for the 2017 and 2018 fiscal year. In 2017, includes R$2.3 million, referred to the audit work of 2016 fiscal year.

Millions of Reais  202120202019 
       
Audit of the annual financial statements of the companies audited by external audit (constant scope of consolidation) 26.3 24.0 25.2  
 
Audit Related  0.2 0.4 0.1  
Others  0.4 0.0 0.3  
Total  26.9 24.4 25.6  

 

The approximate value of taxes according to law 12.741/12,741/2012 totaled R$1.9 million (2020 - R$1.5 million e 2019 - R$ 3.6 million (2018 - R$2.9 million e 2017 - R$3.7million)).

 

Services provided by other audit firms totaled R$1.2 million (2018 - R$1.3 million e 2017 - R$13.2 million).

F-104

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

42.41.Gains or losses on non financialnon-financial assets and investments, net

 

The breakdown of the balance of this item is as follows:

Thousand of reais      2019 2018 2017
            
Gains      55,709 11,627 1,798
Tangible and intangible assets   55,709 11,627 1,798
Losses      (45,063) (37,103) (66,100)
Tangible and intangible assets   (45,063) (37,103) (13,719)
Investments (1)      - - (52,381)
Total      10,646 (25,476) (64,302)

(1) In 2017, includesGains (losses) on disposal of assets not classified as non-current assets held for sale the amountbreakdown of R$41,999 related to the sale of BW Guirapá I S.A.balance

Thousand of reais      2021 2020 2019
            
Gains      45,780  285,335  55,709 
Tangible and intangible assets       45,780  36,778  55,709 
Investments      -    248,557  -   
Losses      (60,893) (54,622) (45,063)
Tangible and intangible assets       (32,863) (14,517) (45,063)
Investments       (28,030) (40,105) -   
Total      (15,113) 230,713  10,646 

 

43.42.Gains (losses) on disposal and expenses of non-current assets held for sale not classified as discontinued operations

 

OnAs of December 31, 2019,2021, revenue of R$1048 million is mainly composed of revenue of R$101 million from the sale of assets received in the recovery of credits with customers, and as of December 31, 2020, revenue from R$77 million is mainly comprisedcomposed of an expenserevenue of R$1624 million withfrom the reversal of the provision for losses on other assets and assets, net of the constitution of the provision for the loss of the recoverable value of properties, the constitution of a provision for losses on other values ​​and assets, net of the reversal of the provision for loss of recoverable value of properties, constitution of a provision for losses on other values ​​and assets and revenueR$49 million of R$34 million resultingincome from the sale of assets received in the creditprocesses of recovery processesof credits with customers and on December 31, 2018,2019 mainly includes, R$10416 million in revenue from of expense with the reversalconstitution of the provision for loss of recoverable valueimpairment of properties, constitution of provision for losses onin other values ​​and assets and aof R$7834 million result on in income from the sale of assets received in the creditprocesses of recovery processesof credits with customers and on December 31, 2017 mainly includes R$272 million of provisions for devaluations on properties, based on appraisal reports prepared by external consultants the specialized.customers.

 

44.43.Other disclosures

 

a) Guarantees and commitments

 

The Bank provides a variety of guarantees to its clients to improve their credit standing and allow them to compete Thethe following table summarizes at December 31, 2019, 20182021, 2020 and 20172019 all of the guarantees.

 

As required, the “maximum potential amount of future payments” represents the notional amounts that could be considered as a loss if there were a total default by the guaranteed parties, without consideration of possible recoveries from collateral held or pledged, or recoveries under recourse provisions. There is no relationship between these amounts and probable losses on these guarantees. In fact, "maximum potential amount of future payments" significantly exceeds inherent losses.

 

Thousand of reais      2019 2018 2017
            
Maximum potential amount of future payments        
            
Contingent liabilities           
Guarantees and other sureties   41,870,332 39,081,803 40,729,544
Financial guarantees      29,397,344 27,216,418 37,007,057
Performance guarantees      1,009,367 907,856 486,091
Financial letters of credit      11,387,788 10,860,425 3,110,918
Other      75,833 97,104 125,478
Other contingent exposures    2,442,235 3,178,671 1,915,492
Documentary Credits      2,442,235 3,178,671 1,915,492
Total Contingent Liabilities      44,312,567 42,260,474 42,645,036
            
Commitments           
Loan commitments drawable by third parties(1)   125,876,671 122,652,229 106,913,219
Total Commitments      125,876,671 122,652,229 106,913,219
            
Total      170,189,238 164,912,704 149,558,255

(1) Includes the approved limits and unused overdraft, credit card and others.

Consolidated Financial Statements | December 31, 2021 | F-103

Table of Contents

 

* Values expressed in thousands, except when indicated.

Maximum potential amount of future payments

Thousand of reais      2021 2020 2019 
             
Maximum potential amount of future payments           
             
Contingent liabilities            
Guarantees and other sureties     49,391,839  45,930,486  41,870,332 
Financial guarantees       33,192,559  32,477,336  29,397,344  
Performance guarantees      1,167,603  989,979  1,009,367  
Financial letters of credit      14,990,887  12,407,888  11,387,788  
Other      40,790  55,283  75,833  
Other contingent exposures      4,028,516  2,351,530  2,442,235  
Documentary Credits      4,028,516  2,351,530  2,442,235  
Total Contingent Liabilities      53,420,355  48,282,016  44,312,567  
             
Commitments            
Loan commitments drawable by third parties (1)     145,958,258  131,706,433  125,876,671 
Total Commitments      145,958,258  131,706,433  125,876,671  
             
Total       199,378,613  179,988,449  170,189,238  
(1)Includes the approved limits and unused overdraft, credit card and others.

 

Financial guarantees are provided to Bank´s clients in respect of their obligations to third parties. The Bank has the right to seek reimbursement from the clients for any amount it shall have to pay under such guarantee. Additionally, the Bank may hold cash or other highly liquid collateral for these guarantees.

 

These guarantees are subject to the same credit evaluation performed on the origination of loans.

 

The Bank´s expectation is that many of these guarantees to expire without the need of cash disbursement in advance. Therefore, in the ordinary course of business, the Bank expects that these guarantees will have virtually no impact on its liquidity.

 

Performance guarantees are issued to guaranteed clients obligations such as to make contractually specified investments, to supply specified products, commodities, or maintenance or warranty services to a third party, completion of projects in accordance with contract

F-105

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

terms, etc. Financial standby letters of credit include guarantees of payment of loans, credit facilities, promissory notes and trade acceptances. The Bank always requires collateral to grant this kind of financial guarantees. In Documentary Credits, the Bank acts as a payment intermediary between trading companies located in different countries (import-export transactions). Under a documentary credit transaction, the parties involved deal with the documents rather than the commodities to which the documents may relate. Usually the traded commodities are used as collateral to the transaction and the Bank may provide some credit facilities. Loan commitments draw able by third parties include mostly credit card lines and commercial commitments. Credit card lines are unconditionally cancelable by the issuer. Commercial commitments are mostly 1 year1-year facilities subject to information requirements to be provided by Banks´s clients.

 

The risk criteria followed to issue all kinds of guarantees, financial standby letters of credit, documentary credits and any risks of signature are in general the same as those used for other products of credit risk, and therefore subject to the same admission and monitoring standards. The guarantees granted on behalf of Bank´s clients are subject to the same credit quality review process as any other risk product. On a regular basis, at least once a year, the solvency of the mentioned clients is checked as well as the probability of those guarantees to be executed. In case that any doubt on the client’s solvency may arise, we create allowances with charge to net income, by the amount of the inherent losses even if there is no claim to us.

 

The provision for losses on the non-recovery guarantees and other securities (Note 9.c) is recorded as "Impairment losses on financial assets (net)” on consolidated income statement and its calculation is described in note 2.i.

 

Additionally, the liability recognized as deferred revenue for the premium received for providing the above guarantees, which is being amortized into income over the life of the related guarantees is R$285,218 (2018382,255 (2020 - R$330,018 e 2017356,226 and 2019 - R$446,143)285,218 ).

 

b) Off-balance funds under management

 

Banco Santander has under its management investment funds for which it does not hold any substantial participation interests and does not act as principal over the funds, and it does not own any shares of such funds. Based on the contractual relationship governing the management of such funds, third parties who hold the participation interests in such funds are those who are exposed to, or have rights, to variable returns and have the ability to affect those returns through power over the fund. Moreover, though Santander Brasil acts as fund manager, in analyzing the fund manager’s remuneration regime, the remuneration regime is proportionate to the service rendered, and therefore does not create exposure of such importance to indicate that the fund manager is acting as the principal (Note 2.w)2.v).

Consolidated Financial Statements | December 31, 2021 | F-104

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

The funds managed by Banco Santander not recorded in the balance sheet are as follows:

 

Thousand of reais     2019 2018 2017     2021 2020 2019
   
Funds under management 2,034,999 1,896,689 1,747,623 2,770,684  2,716,477  2,034,999 
Managed Funds 230,199,261 200,366,261 188,728,634 192,927,475  191,873,169  230,199,261 
Total 232,234,260 202,262,950 190,476,257 195,698,159  194,589,646  232,234,260 

 

c) Third-party securities held in custody

 

On December 31, 2019,2021, the Bank held in custody debt securities and equity instruments totaling R$27,283,548 (201837,998,502 (2020 - R$34,040,74235,519,498 e 20172019 - R$40,459,429)27,283,548) entrusted to it by third parties.

 

d) Residual maturity

 

The breakdown, by maturity, of the balances of certain items in the consolidated balance sheets is as follows:

 

             2019
             Thousand of reais
 On
Demand		 Up to
3 Months		 3 to
12 Months		 1 to
3 Years		 3 to
5 Years		 After 5
Years		 Total
Assets:             
Cash and balances with the Brazilian Central Bank6,549,535 13,577,829 - - - - 20,127,364
Debt instruments7,747,516 1,174,094 22,926,088 45,058,398 35,118,355 61,307,480 173,331,930
Equity instruments- - - - - 2,358,229 2,358,229
Loans and amounts due from credit institutions69,135,371 1,943,291 21,064,571 14,525,161 2,411,265 153,469 109,233,128
Loans and advances to customer9,451,762 84,839,695 43,180,508 89,624,089 34,092,967 65,510,459 326,699,480
Derivatives6,806,370 1,893,308 2,649,730 3,546,082 1,950,678 3,599,566 20,445,734
Total99,690,554 103,428,217 89,820,897 152,753,730 73,573,265 132,929,202 652,195,865
              2021
              Thousand of reais
  On
Demand		 Up to
3 Months		 3 to
12 Months		 1 to
3 Years		 3 to
5 Years		 After 5
Years		 Total
 Assets:             
 Cash and balances with the Brazilian Central Bank15,430,680  1,226,521  -    -    -    -    16,657,201 
 Debt instruments1,612,213  119,780,229  20,352,554  5,834,524  38,904,369  38,728,334  225,212,223 
 Equity instruments-    -    -    -    -    2,527,504  2,527,504 
 Loans and amounts due from credit institutions80,355,763  2,717,359  1,748,733  10,827,639  15,057  203  95,664,754 
 Loans and advances to customer70,399,332  82,203,458  84,986,074  152,608,938  31,902,231  42,744,009  464,844,042 
 Derivatives-    8,667,809  2,836,098  1,645,538  5,989,792    2,000,686    21,139,923 
 Total167,797,988  214,595,376  109,923,459  170,916,639  76,811,449  86,000,736  826,045,647 
               
              2021
              Thousand of reais
  On
Demand		 Up to
3 Months		 3 to
12 Months		 1 to
3 Years		 3 to
5 Years		 After 5
Years		 Total
 Liabilities:             
 Financial liabilities at amortized cost:             
 Deposits from credit institutions(1)10,052,363       60,636,478     39,748,331     6,681,493     1,656,909     2,230,335     121,005,909 
 Customer deposits(1)86,051,583  79,687,549  56,178,087   163,641,875  83,326,774  75,201  468,961,069 
 Marketable debt securities (1)-    28,052,200  5,038,906  35,844,265  9,341,229  760,192  79,036,792 
 Debt Instruments Eligible to Compose Capital-    5,552,801  -    14,088,607  -    -    19,641,408 
 Other financial liabilities3,935,498  10,732,613  19,132,399  35,107,790  -    -    68,908,300 
 Short positions-    12,780,559  -    -    -    -    12,780,559 
 Derivatives641,571    7,239,697  2,503,888  9,117,265  3,773,251  1,343,309  24,618,981 
 Total100,681,015  204,681,897  122,601,611  264,481,295  98,098,163  4,409,037  794,953,018 
 Difference (assets less liabilities)67,116,973 9,913,479 (12,678,152) (93,564,656) (21,286,714) 81,591,699  31,092,629 

 

Consolidated Financial Statements | December 31, 2021 | F-105

Table of Contents

 

* Values expressed in thousands, except when indicated.

               
              2020
              Thousand of reais
  On
Demand		 Up to
3 Months		 3 to
12 Months		 1 to
3 Years		 3 to
5 Years		 After 5
Years		 Total
 Assets:             
 Cash and balances with the Brazilian Central Bank7,373,662  12,775,063  -    -    -    -    20,148,725 
 Debt instruments432,579  13,195,527  33,903,698  64,225,680  70,182,705  48,162,275  230,102,464 
 Equity instruments-    -    -    -    -    2,329,361  2,329,361 
 Loans and amounts due from credit institutions57,722,384  2,777,562  36,783,150  15,155,444  363,135  48,101  112,849,776 
 Loans and advances to customer29,385,631  80,281,579  93,750,065  98,550,271  47,160,700  44,639,790  393,768,036 
 Derivatives-    14,558,434  1,994,418  4,103,735  1,869,509  3,721,418  26,247,514 
 Total94,914,256  123,588,165  166,431,331  182,035,130  119,576,049  98,900,945  785,445,876 
               
 Liabilities:             
 Financial liabilities at amortized cost:             
 Deposits from credit institutions(1)-    83,922,876  43,315,412  3,764,159  -    654,516  131,656,962 
 Customer deposits(1)85,433,287  139,191,140  121,804,752  62,768,886  36,578,335  37,572  445,813,972 
 Marketable debt securities(1)-    8,815,410  18,736,230  28,158,133  747,340  418,401  56,875,514 
 Debt Instruments Eligible to Compose Capital-    220,425  -    12,899,235  -    -    13,119,660 
 Other financial liabilities23,352  21,858,532  20,730,398  17,203,162  4,787  2,452  59,822,683 
 Short positions-    45,807,946  -    -    -    -    45,807,946 
 Derivatives-    2,046,924  1,973,701  5,387,607  7,744,145  12,204,455  29,356,832 
 Total85,456,639  301,863,252  206,560,493  130,181,182  45,074,607  13,317,396  782,453,569 
Difference (assets less liabilities)9,457,617     (178,275,087)    (40,129,162)    51,853,948     74,501,441     85,583,548     2,992,307 
              

Consolidated Financial Statements | December 31, 2021 | F-106

Table of Contents

 

* Values expressed in thousands, except when indicated.

               
              2019
              Thousand of reais
  On
Demand		 Up to
3 Months		 3 to
12 Months		 1 to
3 Years		 3 to
5 Years		 After 5
Years		 Total
 Assets:             
 Cash and balances with the Brazilian Central Bank6,549,535  13,577,829  -    -    -    -    20,127,364 
 Debt instruments7,747,516  1,174,094  22,926,088  45,058,398  35,118,355  61,307,478  173,331,929 
 Equity instruments-    -    -    -    -    2,358,229  2,358,229 
 Loans and amounts due from credit institutions69,135,371  1,943,291  21,064,571  14,525,161  2,411,265  153,469  109,233,128 
 Loans and advances to customer9,451,762  84,839,695  43,180,508  89,624,089  34,092,967  65,510,459  326,699,480 
 Derivatives6,806,370  1,893,308  2,649,730  1,921,248  1,950,678  3,599,566  18,820,900 
 Total99,690,554  103,428,217  89,820,897  151,128,896  73,573,264  132,929,201  650,571,030 
               
 Liabilities:             
 Financial liabilities at amortized cost:             
 Deposits from credit institutions(1)390,626  16,584,181  49,097,816  25,655,631  4,877,076  2,666,086  99,271,415 
 Customer deposits(1)69,048,756  130,872,214  76,244,908  43,395,748  16,923,318  29,654  336,514,597 
 Marketable debt securities(1)-    10,675,356  695,071  37,268,809  3,900,484  21,162,755  73,702,474 
 Debt Instruments Eligible to Compose Capital-    170,939  -    10,005,022  -    -    10,175,961 
 Other financial liabilities10,334  24,360,724  14,509,911  16,678,725  4,717  1,543  55,565,954 
 Financial liabilities held for trading:             
 Short positions-    4,748,545  1,554,274  1,256,416  3,747,700  12,528,718  23,835,653 
 Derivatives6,776,746  4,345,286  406,383  3,071,989  2,502,040  3,702,699  20,805,143 
 Total76,226,462  191,757,244  142,508,362  137,332,340  31,955,334  40,091,454  621,496,030 

 

 

Difference

(assets less liabilities)

23,464,093  (88,329,028) (52,687,465) 13,796,556  41,617,931  92,837,747  30,699,834 

F-106

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

             2019
             Thousand of reais
 On
Demand		 Up to
3 Months		 3 to
12 Months		 1 to
3 Years		 3 to
5 Years		 After 5
Years		 Total
Liabilities:             
Financial liabilities at amortized cost:             
Deposits from credit institutions(1)390,626 16,584,181 49,097,816 25,655,631 4,877,076 2,666,086 99,271,415
Customer deposits(1)69,048,756 130,872,214 76,244,908 43,395,748 16,923,318 29,654 336,514,597
Marketable debt securities(1)- 10,675,356 695,071 37,268,809 3,900,484 21,162,755 73,702,474
Debt Instruments Eligible to Compose Capital- 170,939 - 10,005,022 - - 10,175,961
Other financial liabilities10,334 24,360,724 14,509,911 16,678,725 4,717 1,542 55,565,954
Short positions- 4,748,545 1,554,274 1,256,416 3,747,700 12,528,718 23,835,653
Derivatives6,776,746 4,345,286 406,383 4,696,823 2,502,040 3,702,699 22,429,977
Total76,226,461 191,757,244 142,508,363 138,957,174 31,955,334 40,091,454 621,496,030
 Difference (assets less liabilities)23,464,093 (88,329,027) (52,687,466) 13,796,556 41,617,931 92,837,748 30,699,835
              
             2018
             Thousand of reais
 On
Demand		 Up to
3 Months		 3 to
12 Months		 1 to
3 Years		 3 to
5 Years		 After 5
Years		 Total
Assets:             
Cash and balances with the Brazilian Central Bank31,323,554 392,791 - - - - 31,716,345
Debt instruments27,402 51,255,820 25,903,428 13,186,253 26,367,903 58,692,609 175,433,415
Equity instruments839,620 34,420 231,576 - - - 1,105,616
Loans and amounts due from credit institutions57,528,022 8,449,138 844,658 12,739,730 11,371 34,082 79,607,001
Loans and advances to customer- 111,595,396 75,100,836 63,043,973 21,397,689 29,934,313 301,072,207
Derivatives- 13,815,791 1,240,161 1,114,446 1,074,875 1,118,173 18,363,446
Total89,718,598 185,543,356 103,320,659 90,084,402 48,851,838 89,779,177 607,298,030
              
Liabilities:             
Financial liabilities at amortized cost:             
Deposits from credit institutions(1)1,139 55,872,675 18,564,342 19,850,530 2,598,172 2,135,948 99,022,806
Customer deposits(1)65,241,618 102,942,180 76,987,570 42,399,934 16,624,469 2,029 304,197,800
Marketable debt securities(1)- 11,104,594 26,741,036 22,479,019 5,854,091 8,447,492 74,626,232
Subordinated liabilities9,885,607 - - - - - 9,885,607
Debt Instruments Eligible to Compose Capital- - - - - 9,779,944 9,779,944
Other financial liabilities66,265 31,566,995 35,648 18,086,272 - 27,600 49,782,780
Financial liabilities held for trading:             
Short positions206,423 - 1,139,847 31,349,407 - - 32,695,677
Derivatives- 7,639,956 7,723,730 1,069,718 604,593 1,428,838 18,466,835
Total75,401,052 209,126,400 131,192,173 135,234,880 25,681,325 21,821,851 598,457,681
Difference (assets less liabilities)14,317,546 (23,583,044) (27,871,514) (45,150,478) 23,170,513 67,957,326 8,840,349
              

F-107

Table of Contents

 (1)

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

             2017
             Thousand of reais
 On
Demand		 Up to
3 Months		 3 to
12 Months		 1 to
3 Years		 3 to
5 Years		 After 5
Years		 Total
Assets:             
Cash and balances with the Brazilian Central Bank20,642,321 13,482,432 - - - - 34,124,753
Debt instruments609,220 1,887,278 21,978,394 31,669,850 19,379,308 45,731,067 121,255,117
Equity instruments66,187 124,304 305,073 842,090 - 292,121 1,629,775
Loans and amounts due from credit institutions38,137,344 15,235,629 182,721 10,382,061 18,166 1,253,981 65,209,902
Loans and advances to customer31,065,824 70,301,530 61,286,539 63,375,203 17,796,364 28,594,697 272,420,157
Derivatives- 426,577 1,034,248 9,470,073 4,357,636 1,974,354 17,262,888
Total90,520,896 101,457,750 84,786,975 115,739,277 41,551,474 77,846,220 511,902,592
              
Liabilities:             
Financial liabilities at amortized cost:             
Deposits from credit institutions(1)394,396 21,636,392 44,696,680 6,797,838 2,717,941 3,131,438 79,374,685
Customer deposits(1)64,512,105 103,511,031 48,339,761 42,494,421 17,176,009 8,814 276,042,141
Marketable debt securities(1)- 14,315,305 35,636,549 17,923,372 1,491,866 879,920 70,247,012
Subordinated liabilities- - 519,230 - - - 519,230
Debt Instruments Eligible to Compose Capital- 114,104 - - - 8,322,797 8,436,901
Other financial liabilities11,710,943 30,985,465 1,537,689 26,638 - - 44,260,735
Financial liabilities held for trading:             
Short positions- - 466,000 8,960,806 7,476,079 15,905,507 32,808,392
Derivatives- 769,619 975,945 8,244,193 4,239,198 2,448,531 16,677,486
Total76,617,444 171,331,916 132,171,854 84,447,268 33,101,093 30,697,007 528,366,582
Difference (assets less liabilities)13,903,452 (69,874,166) (47,384,879) 31,292,009 8,450,381 47,149,213 (16,463,990)

(1) Includes obligations which may be subject to early payment, being: demand and time deposits, repurchase agreements with clients, LCI and LCA.

F-108

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

e) Equivalent value in Reais of assets and liabilities

 

The main foreign currency balances in the consolidated financial statements, based on the nature of the related items, are as follows:

 

Equivalent Value in Thousand of Reais2019 2018 2017
  Assets Liabilities Assets Liabilities Assets Liabilities
             
Cash and reserves at the Central Bank of Brazil15,359,225 - 6,947,282 - 126,022 -
Financial asset/liabilities for trading- - - - 626,101 2,982,336
Financial ssets/liabilities measured at fair value through profit or loss held for trading3,349,879 3,210,360 1,211,296 101,833 - -
Available-for-sale financial assets- - - - 11,665,952 -
Financial assets measured at fair value through other comprehensive income20,386,034 - 7,049,727 - - -
Loans and receivables - - - - 18,703,454 -
Financial assets/liabilities measured at amortized cost68,996,884 44,140,284 17,912,203 35,567,194 - 36,306,000
Total 108,092,022 47,350,644 33,120,508 35,669,027 31,121,529 39,288,336

F-109

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Equivalent Value in Thousand of Reais202120202019
 AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
       
Cash and reserves at the Central Bank of Brazil10,851,016 -   15,835,124 -   15,359,225 -   
Financial ssets/liabilities measured at fair value through profit or loss held for trading2,587,588 21,784,041 27,012,315 7,867,168 3,349,879 3,210,360 
Financial assets measured at fair value through other comprehensive income17,102,273 -   17,062,156 -   20,386,034 -   
Financial assets/liabilities measured at amortized cost70,283,097 86,184,330 52,002,476 118,142,613 68,996,884 44,140,284 
Total100,823,974 107,968,371 111,912,070 126,009,781 108,092,022 47,350,644 

 

f) Other Obligations

 

The Banco Santander rents properties, mainly used for branches, based on a standard contract which may be cancelled at its own criterion and includes the right to opt for renewals and adjustment clauses. The leases are classified as operating leases.

 

Consolidated Financial Statements | December 31, 2021 | F-107

Table of Contents

 

* Values expressed in thousands, except when indicated.

The total of the future minimum payments of non-cancellable operating leases is shown below:

 

 2019 2018 2017        2021 2020 2019
  
Up to 1 Year 651.207 670.553 624.424        715,576 670,619 651,207
Between1 to 5 Years 1.492.289 1.435.970 1.545.101    1,420,853 1,607,995 1,492,289
More than 5 Years 147.125 167.868 288.420    181,417 171,420 147,125
 2.290.621 2.274.391 2.457.945
Total    2,317,846 2,450,034 2,290,621

 

Additionally, Banco Santander has contracts without maturity dates,for a matures indeterminate, totaling R$918 (2018801 (2020 - R$674)880 and 2019 - R$918) monthly rent corresponding to the contracts with this feature. Payment of operating leases recognized as expenses in 20192021 fiscal year were R$700,958 (2018369,482 (2020 - R$683,011)358,656 and 2019 R$700,958).

 

Monthly rental contracts will be adjusted on an annual basis, as per prevailing legislation, at Índice Geral de Preços do Mercado (IGPM) variation. The lessee is entitled to unilaterally rescind the agreement, at any time, as contractual clauses and legislation.

 

g) Contingent assets

 

On December 31, 2019, 20182021, 2020 and 20172019 no contingent assets were recorded.

 

h) COVID- 19

Since the Pandemic in 2000, the Bank has monitored its effects on the quality of the credit portfolio and the beginning of the continuity of its results. Strategic initiatives were implemented in a timely manner, sufficient to mitigate the impacts against the scenario of increased default events due to the pandemic.

Management procedures were structured in line with the guidelines and measures of the Federal Government through the National Monetary Council and the Central Bank of Brazil to mitigate the impacts caused by COVID-19, such as: (a) measures to facilitate the renegotiations of the credit operations without increasing provisions, (b) reduction of capital requirements, in order to expand the granting of credit by the Financial System and (c) reduction of compulsory reserve rates, to improve liquidity conditions.

The Bank, awareness of its responsibilities, availability of changes, changes in classification, availability of new products, reinforced credit in segments and more impacts and preventive recovery and collection actions. These actions carried out as a result of alerts were identified by the constant monitoring of the portfolio.

The operations benefiting from amendments made, in general, had a grace period of 60 days with the possibility of extending it for another month for individual customers. In the case of legal entities, extensions were granted with a grace period of up to 6 months in line with the BNDES (National Bank for Economic and Social Development).

These measures made it possible to extend operations in good standing, with temporary criteria for classifying problem assets and restructurings, as well as allowing the maintenance of the classifications of credit operations, extended until December 2020.

During the period of extensions, the actions adopted by the Bank benefited 1,728,197 customers, R$40,592 million in extended credit, equivalent to 9.72% of the total credit portfolio for the year. Of the total extensions that expired on December 31, 2020 of R$37,538 million, R$28,348 million were in stage 1, R$6,608 million were in stage 2 and R$2,567 million were in stage 3.

In order to face the scenario of uncertainty and increase in delinquency, in 2020 the Bank constituted an additional provision in the amount of R$3,200,000. This provision was calculated based on the analysis of potential macroeconomic effects and considered quantitative and qualitative indicators, as well as the identification of risks and a collective assessment of exposures.

Throughout 2021, follow-ups were carried out until the end of grace periods and extension actions with the resumption of operations added to the standard model of credit management adopted by the bank. In this sense, the macroeconomic scenarios were updated in the process of measuring credit risk provisions, as well as identifying the credit portfolios impacted by the pandemic, using the total balance of additional provisions constituted in 2020 to absorb the need to increase expected losses from credit.

To estimate the expected loss, Santander Brasil uses prospective information. Three macroeconomic scenarios are considered, being Base, Pessimistic and Optimistic scenarios. For the elaboration of the methodology, the 5-year evolution of the following main macroeconomic indicators was considered:

Prospectus for loss estimation

 Pessimistic Scenarios Base Scenarios Optimistic Scenarios
                  
Variables20212022202320242025 20212022202320242025 20212022202320242025
Interest rate7.3%14.3%13.0%13.0%13.0% 7.3%7.3%6.5%6.5%6.5% 7.3%5.5%5.5%4.0%4.0%
Unemployment14.4%16.3%18.2%18.5%18.2% 14.4%13.8%12.9%12.1%11.3% 14.4%11.4%9.1%8.5%7.9%
Housing Prices9.0%2.2%2.2%2.1%2.0% 9.0%9.2%9.0%8.6%8.3% 9.0%13.8%13.4%12.9%12.5%
GDP growth5.6%-3.5%-2.0%0.2%0.2% 5.6%2.7%2.2%2.0%2.0% 5.6%6.5%4.0%4.0%4.0%
Income Commitment31.7%38.2%38.9%39.1%38.9% 31.7%32.7%34.6%35.1%35.6% 31.7%29.1%29.2%29.3%29.1%
                  

In the process of estimating the expected loss, a weight is assigned to each scenario, with greater relevance being attributed to the base scenario (80%), while lower weights are attributed to the pessimistic (10%) and optimistic (10%) scenarios . The weights assigned to the scenarios in the last 3 years are as follows:

Macroeconomic scenario

Ponderations202120202019
Pessimistic Scenarios10%10%10%
Base Scenarios80%80%80%
Optimistic Scenarios10%10%10%

Consolidated Financial Statements | December 31, 2021 | F-108

Table of Contents45.

 

* Values expressed in thousands, except when indicated.

44.Business segment reporting

 

In accordance with IFRS 8, an operating segment is a component of an entity:

 

(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity),

 

(b) whose operating results are regularly reviewed by the entity’s Management responsible to make decisions about resources to be allocated to the segment and assess its performance, and

 

(c) For which different financial information are available.

Based on these guidelines, the Bank has identified the following reportable operating segments:

 

• Commercial Banking,

• Global Wholesale Banking,

 

The Bank has two segments, the commercial (except for the Corporate Banking business managed globally using the Global Relationship Model) and the Global Wholesale Banking segment includes the Investment Banking and Markets operations, including departments cash and stock trades.

Consolidated Financial Statements | December 31, 2021 | F-109

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

The Bank operates in Brazil and abroad, through the Cayman branch, Luxembourg branch and its subsidiary in Spain, with Brazilian clients and therefore has no geographical segments.

 

F-110

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

The income statements and other significant data are as follows:

Income statements and other significant data

Thousand of reais    2019
      
Income Statement   Commercial Banking Global Wholesale Banking Total
            
NET INTEREST INCOME      42,043,774 2,277,333 44,321,107
Income from equity instruments   4,864 14,069 18,933
Income from companies accounted for by the equity method 149,488 - 149,488
Net fee and commission income   13,923,272 1,789,880 15,713,152
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net)(1) (1,541,343) 1,215,351 (325,992)
Other operating expense (net)   (1,069,052) (38,668) (1,107,720)
TOTAL INCOME      53,511,003 5,257,965 58,768,968
Personnel expenses      (8,554,254) (773,460) (9,327,714)
Other administrative expenses   (7,139,828) (473,984) (7,613,812)
Depreciation and amortization   (2,297,010) (94,847) (2,391,857)
Provisions (net)      (3,668,709) (12,877) (3,681,586)
Impairment losses on financial assets (net)   (13,423,361) 53,455 (13,369,906)
Impairment losses on non-financial assets (net)   (73,216) (58,219) (131,435)
Other non-financial gains (losses)   20,489 - 20,489
OPERATING PROFIT BEFORE TAX(1)   18,375,114 3,898,033 22,273,147

Currency Hedge(1)		      1,264,279 - 1,264,279
ADJUSTED OPERATING INCOME BEFORE TAX(1) 19,639,393 3,898,033 23,537,426
            

         
Thousand of reais 2021
   
(Condensed) Income Statement  Commercial Banking  Global Wholesale Banking Total
         
NET INTEREST INCOME   46,236,026  5,082,440  51,318,466 
Income from equity instruments 10,216  79,824  90,040 
Income from companies accounted for by the equity method105,403  38,781  144,184 
Net fee and commission income 13,285,099  1,988,202  15,273,301 
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) (1,433,236) (347,268) (1,780,504)
Other operating expense (net) (974,391) (144,989) (1,119,380)
TOTAL INCOME   57,229,117  6,696,990  63,926,107 
Personnel expenses   (8,220,544) (805,158) (9,025,702)
Other administrative expenses (7,697,346) (593,371) (8,290,717)
Depreciation and amortization (2,342,639) (91,282) (2,433,921)
Provisions (net)   (2,176,774) (2,643) (2,179,417)
Impairment losses on financial assets (net) (17,169,630) 56,896  (17,112,734)
Impairment losses on non-financial assets (net)(163,935) (1,864) (165,799)
Other non-financial gains (losses) 32,512  -    32,512 
OPERATING PROFIT BEFORE TAX (1) 19,490,761  5,259,568  24,750,329 

Currency Hedge(1)		   2,511,980  -    2,511,980 
ADJUSTED OPERATING INCOME BEFORE TAX (1)22,002,741  5,259,568  27,262,309 

         
Thousand of reais 2020
   
(Condensed) Income Statement Commercial Banking  Global Wholesale Banking Total
         
NET INTEREST INCOME 41,457,352  2,985,361  44,442,713 
Income from equity instruments 3,617  30,137  33,754 
Income from companies accounted for by the equity method84,051  28,210  112,261 
Net fee and commission income 14,405,280  1,822,934  16,228,214 
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) (13,515,305) 1,812,403  (11,702,902)
Other operating expense (net) (767,088) (105,422) (872,510)
TOTAL INCOME   41,667,906  6,573,623  48,241,529 
Personnel expenses   (8,139,785) (731,697) (8,871,482)
Other administrative expenses (7,634,670) (608,808) (8,243,478)
Depreciation and amortization (2,488,517) (90,610) (2,579,127)
Provisions (net)   (1,638,787) (17,759) (1,656,546)
Impairment losses on financial assets (net) (17,379,570) (70,619) (17,450,189)
Impairment losses on non-financial assets (net)(28,403) (56,504) (84,907)
Other non-financial gains (losses) 308,176  -    308,176 
OPERATING PROFIT BEFORE TAX (1) 4,666,350  4,997,625  9,663,975 

Currency Hedge(1)		   13,583,011  -    13,583,011 
ADJUSTED OPERATING INCOME BEFORE TAX (1)18,249,361  4,997,625  23,246,986 
         

Consolidated Financial Statements | December 31, 2021 | F-110

Table of Contents

 

* Values expressed in thousands, except when indicated.

         
Thousand of reais 2019
   
(Condensed) Income Statement Commercial Banking Global Wholesale Banking Total
         
NET INTEREST INCOME 42,043,774  2,277,333  44,321,107 
Income from equity instruments 4,864  14,069  18,933 
Income from companies accounted for by the equity method149,488  -    149,488 
Net fee and commission income 13,923,272  1,789,880  15,713,152 
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) (1,541,343) 1,215,351  (325,992)
Other operating expense (net) (1,069,052) (38,668) (1,107,720)
TOTAL INCOME   53,511,003  5,257,965  58,768,968 
Personnel expenses   (8,554,254) (773,460) (9,327,714)
Other administrative expenses (7,139,828) (473,984) (7,613,812)
Depreciation and amortization (2,297,010) (94,847) (2,391,857)
Provisions (net)   (3,668,709) (12,877) (3,681,586)
Impairment losses on financial assets (net) (13,423,361) 53,455  (13,369,906)
Impairment losses on non-financial assets (net)(73,216) (58,219) (131,435)
Other non-financial gains (losses) 20,489  -    20,489 
OPERATING PROFIT BEFORE TAX (1) 18,375,114  3,898,033  22,273,147 

Currency Hedge(1)		   1,264,279  -    1,264,279 
ADJUSTED OPERATING INCOME BEFORE TAX (1)19,639,393  3,898,033  23,537,426 
(1)Includes, in the Commercial Bank, the currency hedge of the investment in dollars (a strategy to mitigate the tax effects and the variation of the exchange rate of offshore investments on net income), the result of which is recorded under “on financial assets and liabilities "fully offset in the line of Taxes

 

 

F-111

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-111

Table of Contents

 

* Values expressed in thousands, except when indicated.

Other aggregates

         
  2021
Other aggregates:   Commercial Banking Global Wholesale Banking Total
Total assets   838,267,118  92,941,277  931,208,396 
Loans and advances to customers 394,086,048  70,757,994  464,844,042 
Customer deposits   344,180,608  124,780,461  468,961,069 

 

Thousand of reais    2018
      
Income Statement   Commercial Banking Global Wholesale Banking Total
            
NET INTEREST INCOME      39,390,512 2,530,830 41,921,342
Income from equity instruments   9,974 22,649 32,623
Income from companies accounted for by the equity method 65,958 - 65,958
Net fee and commission income   12,537,112 1,595,047 14,132,159
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net)(1) (6,752,093) 1,162,820 (5,589,273)
Other operating expense (net)   (965,466) (90,384) (1,055,850)
TOTAL INCOME      44,285,998 5,220,961 49,506,959
Personnel expenses      (8,404,198) (801,809) (9,206,007)
Other administrative expenses   (7,186,035) (400,096) (7,586,131)
Depreciation and amortization   (1,637,484) (102,475) (1,739,959)
Provisions (net)      (1,947,578) (52,026) (1,999,604)
Impairment losses on financial assets (net)   (12,419,979) (293,456) (12,713,435)
Impairment losses on non-financial assets (net)   (450,201) (58,109) (508,310)
Other non-financial gains (losses)   156,258 - 156,258
OPERATING PROFIT BEFORE TAX(1)   12,396,779 3,512,992 15,909,771
Currency Hedge(1)      5,867,320 - 5,867,320
ADJUSTED OPERATING INCOME BEFORE TAX(1) 18,264,099 3,512,992 21,777,091
            
         
  2020
Other aggregates:   Commercial Banking Global Wholesale Banking Total
Total assets   837,339,314  96,239,065  933,578,379 
Loans and advances to customers 317,553,409  76,214,628  393,768,037 
Customer deposits   322,328,033  123,485,939  445,813,972 

         
  2019
Other aggregates:   Commercial Banking Global Wholesale Banking Total
Total assets   675,514,634  85,097,984  760,612,618 
Loans and advances to customers 259,644,994  67,054,486  326,699,480 
Customer deposits   253,313,187  83,201,410  336,514,597 

 

 

F-112

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Thousand of reais    2017
      
Income Statement   Commercial Banking Global Wholesale Banking Total
            
NET INTEREST INCOME      32,392,239 2,554,250 34,946,489
Income from equity instruments   83,120 - 83,120
Income from companies accounted for by the equity method 71,551 - 71,551
Net fee and commission income   11,261,952 1,459,916 12,721,868
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net)(1) (25,628) 1,599,774 1,574,146
Other operating expense (net)   (640,522) (31,491) (672,013)
TOTAL INCOME      43,142,712 5,582,449 48,725,161
Personnel expenses      (8,166,562) (770,716) (8,937,278)
Other administrative expenses   (7,011,740) (171,577) (7,183,317)
Depreciation and amortization   (1,560,465) (101,782) (1,662,247)
Provisions (net)      (3,190,388) (118,851) (3,309,239)
Impairment losses on financial assets (net)   (11,232,902) (1,105,398) (12,338,300)
Impairment losses on non-financial assets (net)   (435,960) (20,751) (456,711)
Other non-financial gains (losses)   (324,385) - (324,385)
OPERATING PROFIT BEFORE TAX(1)   11,220,310 3,293,374 14,513,684

Currency Hedge(1)		      809,694 - 809,694
ADJUSTED OPERATING INCOME BEFORE TAX(1) 12,030,004 3,293,374 15,323,378

(1) Includes, in the Commercial Bank, the currency hedge of the investment in dollars (a strategy to mitigate the tax effects and the variation of the exchange rate of offshore investments on net income), the result of which is recorded under “on financial assets and liabilities "fully offset in the line of Taxes.

     2019
Other aggregates:      Commercial Banking Global Wholesale Banking Total
Total assets      677,139,468 85,097,984 762,237,452
Loans and advances to customers   259,644,994 67,054,486 326,699,480
Customer deposits      253,313,187 83,201,410 336,514,597
            
     2018
Other aggregates:      Commercial Banking Global Wholesale Banking Total
Total assets      646,128,672 77,736,335 723,865,007
Loans and advances to customers   236,792,060 64,280,147 301,072,207
Customer deposits      227,689,079 76,508,721 304,197,800
            

F-113

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

     2017
Other aggregates:      Commercial Banking Global Wholesale Banking Total
Total assets      580,090,402 65,612,637 645,703,039
Loans and advances to customers   217,539,344 54,880,813 272,420,157
Customer deposits      225,926,433 50,115,708 276,042,141

 

46.45.Related party transactions

The parties related to the Bank are deemed to include, in addition to its subsidiaries, associates and jointly controlled entities, the Bank’s key management personnel and the entities over which the key management personnel may exercise significant influence or control.

 

Banco Santander has the Policy on Related Party Transactions approved by the Board of Directors, which aim to ensure that all transactions are made on the policy typified in view the interests of Banco Santander and its stockholders'. The policy defines powers to approve certain transactions by the Board of Directors. The rules laid down are also applied to all employees and directors of Banco Santander and its subsidiaries.

 

The transactions and remuneration of services with related parties are carried out in the ordinary course of business and under commutative conditions, including interest rates, terms and guarantees, and do not involve risks greater than normal collection or present other disadvantages.

a) Key-person management compensation

The Bank's Board of Directors' meeting,Meeting held on March 27, 201926, 2021 approved, in accordance with the favorable recommendation of the Compensation Committee, the proposal for the maximum global compensation proposal for the directorsManagers (Board of Directors and Executive Officers) overall amountingBoard) for the year of 2021, in the amount of up to R$400,000 for the 2019 financial year,433,940, covering fixed, remuneration, variable and equity-basedshare-based compensation and other benefits. The proposal was approved bydiscussed at the extraordinary stockholders' meeting (ESM)Annual General Meeting (AGM) to be held on April 26, 2019.

30, 2021.

i) Long-term benefits

The Banco Santander as well as Banco Santander Spain, as other subsidiaries of Santander Group, have long-term compensation programs tied to their share's performance, based on the achievement of goals.

ii) Short-term benefits

The following table shows the Board of Directors’ and Executive Board’s:

 

Thousand of reais       2019 2018 2017
             
Fixed Compensation       89,518 90,580 83,633
Variable Compensation - in cash     70,816 48,526 42,718
Variable Compensation - in shares     80,832 34,155 34,567
Others (1)       46,937 54,494 11,919
Total Short-Term Benefits     288,103 227,755 172,837
Variable Compensation - in cash     92,704 31,797 31,268
Variable Compensation - in shares     102,046 30,060 34,455
Total Long-Term Benefits      194,750 61,857 65,723
Total (2)       482,853 289,612 238,560

(1) In the first half of 2018, the Management of Banco Santander decided to carry out an early initiative, which was practiced by the Bank's liberality.

Consolidated Financial Statements | December 31, 2021 | F-112

Table of Contents

 

* Values expressed in thousands, except when indicated.

(2) R$310,688 refers to the amount recognized as an expense for the year ended December 31, 2019 (2018 – R$114,588) and R$172,165 refers to deferred expense from previous years approved on each respective year (2018 – R$175,024), by Banco Santander and its subsidiaries to their Directors for the positions they hold at Banco Santander and other companies of the Santander Conglomerate. The amounts related to the Variable and Share-Based Compensation will be paid in the subsequent periods.

 Thousand of reais       2021 2020 2019
              
 Fixed Compensation       96,544  90,889  89,518 
 Variable Compensation - in cash     115,627  83,352  70,816 
 Variable Compensation - in shares     94,607  81,306  80,832 
 Others (1)       67,883  47,832  46,937 
 Total Short-Term Benefits      374,661  303,379  288,103 
 Variable Compensation - in cash     101,837  98,407  92,704 
 Variable Compensation - in shares     109,918  97,729  102,046 
 Total Long-Term Benefits      211,755  196,136  194,750 
 Total (2)       586,416  499,515  482,853 

 

Additionally, in the exercise ended on December 31, 2019,2021, withholding taxes were collected on management compensation in the amount of R$33,912 (201832,086 (2020 - R$36,35629,162 and 20172019 - R$30,713)33,912).

iii) Contract termination

The termination of the employment relationship for non-fulfillment of obligations or voluntarily does not entitle executives to any financial compensation.

b) Lending operations

Under current law, it is not granted loans or advances involving:

I - directors, members of board of directors and audit committee as well as their spouses and relatives up to the second degree;

F-114

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

II - individuals or legal entities of Banco Santander, which hold more than 10% of the share capital;

III - Legal entities which hold more than 10% of the share capital, Banco Santander and its subsidiaries; and

IV - legal entities in which any of the officers, members of the Board of Directors and Audit Committee, as well as their spouses or relatives up to the second degree, hold more than 10% of the share capital.

c) Ownership Interest

The table below shows the direct interest (common shares and preferred shares) as of December 31, 2019, 20182021, 2020 and 2017:2019:

 

 20192021
 Common   Preferred   Total  Common Preferred  Total 
 Shares Common Shares Preferred Shares TotalSharesCommon SharesPreferred SharesTotal
Stockholders' (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%)(thousand)Shares (%)(thousand)Shares (%)(thousand)Shares (%)
Sterrebeeck B.V. (1)1,809,583 47.4%1,733,644 47.1%3,543,227 47.3%
Grupo Empresarial Santander, S.L.(1)Grupo Empresarial Santander, S.L.(1)1,107,673 29.0% 1,019,645 27.7% 2,127,318 28.4%1,627,891 42.6%1,539,863 41.9%3,167,754 42.2%
Sterrebeeck B.V.(1) 1,809,583 47.4% 1,733,644 47.1% 3,543,227 47.3%
Banco Santander, S.A.(1)Banco Santander, S.A.(1)521,964 13.7% 519,268 14.1% 1,041,232 13.9%2,696 0.1%-   0.0%2,696 0.0%
Employees 2,526 0.1% 2,533 0.1% 5,059 0.1%
Directors (*) 4,525 0.1% 4,524 0.1% 9,049 0.1%4,939 0.1%5,029 0.1%9,968 0.1%
Others 355,722 9.3% 383,519 10.4% 739,241 9.9%357,831 9.4%385,545 10.5%743,374 9.9%
Total 3,801,993 99.6% 3,663,133 99.5% 7,465,126 99.6%3,802,940 99.6%3,664,081 99.6%7,467,019 99.5%
Treasury shares 16,702 0.4% 16,702 0.5% 33,404 0.4%15,755 0.4%15,755 0.4%31,510 0.5%
Total 3,818,695 100.0% 3,679,835 100.0% 7,498,530 100.0%3,818,695 100.0%3,679,836 100.0%7,498,529 100.0%
Free Float(2)Free Float(2)358,248 9.4% 386,053 10.5% 744,301 9.9%357,830 9.4%385,544 10.5%743,374 9.9%
  
 20182020
 Common Preferred Total Common Preferred  Total 
 Shares Common Shares Preferred Shares TotalSharesCommon SharesPreferred SharesTotal
Stockholders' (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%)(thousand)Shares (%)(thousand)Shares (%)(thousand)Shares (%)
Sterrebeeck B.V. (1)1,809,583 47.4%1,733,644 47.1%3,543,227 47.3%
Grupo Empresarial Santander, S.L.(1)Grupo Empresarial Santander, S.L.(1)1,107,673 29.0% 1,019,645 27.7% 2,127,318 28.4%1,627,891 42.6%1,539,863 41.8%3,167,755 42.2%
Sterrebeeck B.V.(1) 1,809,583 47.4% 1,733,644 47.1% 3,543,227 47.2%
Banco Santander, S.A.(1) 521,964 13.7% 519,268 14.1% 1,041,232 13.9%2,696 0.1%-   0.0%2,696 0.04%
Employees 2,986 0.1% 2,987 0.1% 5,973 0.1%2,046 0.1%2,046 0.1%4,092 0.05%
Directors (*) 3,930 0.1% 3,930 0.1% 7,860 0.1%4,034 0.1%4,034 0.1%8,067 0.11%
Others 359,242 9.4% 387,045 10.5% 746,287 9.9%353,616 9.3%381,420 10.4%735,036 9.8%
Total 3,805,378 99.7% 3,666,519 99.6% 7,471,897 99.6%3,799,866 99.5%3,661,007 99.5%7,460,873 99.5%
Treasury shares 13,317 0.3% 13,317 0.4% 26,634 0.4%18,829 0.5%18,829 0.5%37,658 0.5%
Total 3,818,695 100.0% 3,679,836 100.0% 7,498,531 100.0%3,818,695 100.0%3,679,836 100.0%7,498,531 100.0%
Free Float(2)Free Float(2)362,228 9.5% 390,032 10.6% 752,260 10.0%355,662 9.3%383,466 10.4%739,128 9.9%
  
 2017
 Common Preferred Total 
 Shares Common Shares Preferred Shares Total
Stockholders' (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%)
Grupo Empresarial Santander, S.L.(1)1,107,673 29.0% 1,019,645 27.7% 2,127,318 28.4%
Sterrebeeck B.V.(1) 1,809,583 47.4% 1,733,644 47.1% 3,543,227 47.2%
Banco Santander, S.A.(1)521,964 13.6% 519,268 14.1% 1,041,232 13.9%
Employees 3,551 0.1% 3,556 0.1% 7,107 0.1%
Administrators (*) 4,016 0.1% 4,016 0.1% 8,032 0.1%
Others 366,063 9.6% 393,862 10.7% 759,925 10.1%
Total 3,812,850 99.8% 3,673,991 99.8% 7,486,841 99.8%
Treasury shares 5,845 0.2% 5,845 0.2% 11,690 0.2%
Total 3,818,695 100.0% 3,679,836 100.0% 7,498,531 100.0%
Free Float(2)369,614 9.7% 397,418 10.8% 767,032 10.2%

Consolidated Financial Statements | December 31, 2021 | F-113

Table of Contents

 

* Values expressed in thousands, except when indicated.

 2019
 Common Preferred  Total 
 SharesCommon SharesPreferred SharesTotal
Stockholders'(thousand)Shares (%)(thousand)Shares (%)(thousand)Shares (%)
Grupo Empresarial Santander, S.L. (1)1,107,673 29.0%1,019,645 27.7%2,127,318 28.4%
Sterrebeeck B.V. (1)1,809,583 47.4%1,733,644 47.1%3,543,227 47.3%
Banco Santander, S.A. (1)521,964 13.7%519,268 14.1%1,041,232 13.9%
Employees2,526 0.1%2,533 0.1%5,059 0.1%
Administrators (*)4,525 0.1%4,524 0.1%9,049 0.1%
Others355,722 9.3%383,519 10.4%739,241 9.9%
Total3,801,993 99.6%3,663,133 99.5%7,465,126 99.6%
Treasury shares16,702 0.4%16,702 0.5%33,404 0.4%
Total3,818,695 100.0%3,679,835 100.0%7,498,530 100.0%
Free Float (2)358,248 9.4%386,053 10.5%744,301 9.9%

(1) Companies of the Santander Spain Group.

(2) Composed by Employees, Qatar Holding and other.

(*) None of the members of the Board of Directors and the Executive Board holds 1.0% or more of any class of shares.

 

c.1) Qatar Holding LLC's Public Offering

On April 11, 2017, Banco Santander in Brazil informed its shareholders and the market in general, in furtherance of the material facts disclosed on March 28, 2017 and April 6, 2017, the settlement of the secondary public offering for the distribution of 80,000,000 units issued by Banco Santander in Brazil and held by Qatar Holding LLC (Selling Shareholder), including in the form of American Depositary Shares (ADSs), having been allocated 22,000,000 Units for the Brazilian offering and 58,000,000 ADSs for the international offering.

F-115

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

The price per Unit was set at R$25, resulting on a total amount of R$2 billion. Additionally, the amount of Units of the international offering initially offered was increased by an additional batch of 12,000,000 Units, exclusively in the form of ADSs also held by the Selling Shareholder.

 

d) Related-Party Transactions

Santander has a Policy for Related Party Transactions approved by the Board of Directors, which aims to ensure that all transactions typified by the policy to take effect  in view of the interests of Banco Santander and its stockholders. The policy defines the power to approve certain transactions by the Board of Directors. The planned rules also apply to all employees and officers of Banco Santander and its subsidiaries.

Operations and charges for services with related parties are carried out in the ordinary course of business and under reciprocal conditions, including interest rates, terms and guarantees, and do not entail greater risk than the normal collection or have other disadvantages.             

 

Beginning in 2018,

Consolidated Financial Statements | December 31, 2021 | F-114

Table of Contents

 

* Values expressed in thousands, except when indicated.

Principal transactions and balances with key management personnel are shown. The main transactions and balance are as follows:- Assets And Liabilities

Thousand of reais 2019 2021
 Parent(1) Joint-controlled
companies		 Other Related-Party(2)   Parent (1)Joint-controlled
companies		Other Related-Party (2)
  
Assets 5,294,152 4,387,013 874,668 895,492 3,347 32,135,748 
Financial assets for tradingFinancial assets for trading(763,547) - (113,931)Financial assets for trading (3,043,904)-   (73,209)
Banco Santander, S.A. – Espanha (763,547) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (113,931)
Banco Santander, S.A. – Espanha (1) (3,043,904)-   -   
Super Pagamentos e Administração de Meios Eletrônicos S.A. -   -   241,716 
Santander FI Santillana Multimercado Crédito Privado (2) -   -   (1,241,109)
Apolo Fundo de Investimento em Direitos Creditórios -   955,737
FIDC Venda de Veículos -   (29,553)
Loans and other values with credit institutions - Cash and overnight operations in foreign currencyLoans and other values with credit institutions - Cash and overnight operations in foreign currency5,896,120 - 70,261Loans and other values with credit institutions - Cash and overnight operations in foreign currency3,930,078 850 27,590,541 
Banco Santander Espanha (3) (4) 5,896,120 - -
Banco Santander, S.A. – Espanha (3) 3,930,078 -   -   
PSA Corretora de Seguros e Serviços Ltda. -   -   48 
Santander Bank, National Association -   -   8,538,165 
Banco Santander Totta, S.A. (2) - - 7,921 -   950 
Bank Zachodni (2) - - 94
Santander Bank Polska S.A. (2) -   99 
Santander UK plc - - 16,701 -   171,920 
Banco Santander, S.A. – México (2) - - 45,545 -   21,123 
Banco RCI Brasil S.A.  -   850 -   
Hyundai Corretora de Seguros Ltda. -   3 
Santander Global Technology, S.L., SOCI -   192 
Getnet S.A. -   18,858,041
Loans and advances to customersLoans and advances to customers912 20,367 884,696Loans and advances to customers109 -   3,570,635 
Zurich Santander Brasil Seguros e Previdência S.A. (5) - - 814,320
Zurich Santander Brasil Seguros S.A. (5) - - 58,778
Webmotors S.A. - 20,367 - -   21,763 
Banco Santander Espanha (1) 912 - - 109 -   -   
Isban Mexico, S.A. de C.V. - - 122
Santander Tecnología México, S.A. de C.V. -   -   122 
Gesban Servicios Administrativos Globales, S.L. - - 23 -   -   23 
Santander Brasil Gestão de Recursos Ltda - - 169
Key Management Personnel (8)- - 11,284
Loans and other values with credit institutions(1)86,638 4,365,518 192
Banco Santander – Espanha 86,638 - -
Santander Brasil Gestão de Recursos Ltda. -   169 
Gestora de Inteligência de Crédito -   67,511 
Loop Gestão de Pátios S.A. -   9,861 
Super Pagamentos e Administração de Meios Eletrônicos S.A. -   -   191
Getnet S.A. -    -   3,450,923
Car10 Tecnologia e Informação S.A. -    -   38
Key Management Personnel (5)Key Management Personnel (5)-   20,034 
Other Assets 9,209 2,497 1,048,039 
Banco Santander, S.A. – Espanha (1) 9,209 -   
Banco RCI Brasil S.A. - 4,365,518 - -   2,497 -   
Santander Global Technology, S.L., SOCI - - 192
Other Assets 74,029 1,128 28,476
Banco Santander – Espanha 74,029 - -
Banco RCI Brasil S.A. - 1,128 -
Zurich Santander Brasil Seguros e Previdência S.A. - - 28,476
Zurich Santander Brasil Seguros e Previdência S.A. (4) -   965,926 
Getnet S.A. -   15 
Others -   82,098 
Guarantees and Limits - - 4,974Guarantees and Limits -   -   (258)
Key Management Personnel (8)- - 4,974
Key Management Personnel (5)Key Management Personnel (5)-   (258)
     
Liabilities (17,105,753) (169,103) (1,529,828) (25,832,894)(63,599)(9,602,791)
Deposits of Brazil Central Bank and deposits of credit institutionsDeposits of Brazil Central Bank and deposits of credit institutions(42,060) (167,017) (20,571)Deposits of Brazil Central Bank and deposits of credit institutions(11,178,490)(63,599)(7,802,709)
Banco Santander, S.A. – Espanha (42,060) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (20,571)
Banco Santander, S.A. – Espanha (1) (11,178,490)-   
Banco RCI Brasil S.A. - (167,017) - -   (63,599)-   
Santander Caceis Brasil DTVM S.A.(2) -   (722,222) 
Getnet S.A. -   (7,079,955) 
Others -   -   (532) 
Securities - - (89,074) -   -   (128,593)
Key Management Personnel- - (89,074)
Key Management Personnel (5)Key Management Personnel (5)-   (128,593)
Customer deposits - (2,086) (1,008,416) -   -   (828,107)
Zurich Santander Brasil Seguros e Previdência S.A. (5) - - (199,934)
Santander Brasil Gestão de Recursos Ltda - - (332,916)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -   (63,864)
Santander Brasil Gestão de Recursos Ltda. -   (44,141)
Webmotors S.A. - (2,082) - -   (3,744)
Santander Securities Services Brasil DTVM S.A. - - (404,427)
Santander Brasil Asset (2) - - (16,762)
Key Management Personnel- - (36,104)
Santander Caceis Brasil DTVM S.A. -   (562)
Gestora de Inteligência de Crédito -   (36,097)
Super Pagamentos e Administração de Meios Eletrônicos S.A. -   (21,725)
Getnet S.A. -   (372,151)
Key Management Personnel (5)Key Management Personnel (5)-   (28,672)
Others - (4) (18,273)  -   (257,151)
Other financial liabilities - Dividends and interest on capital PayableOther financial liabilities - Dividends and interest on capital Payable(6,874,602) - (12,226)Other financial liabilities - Dividends and interest on capital Payable(564,786)-   -   
Banco Santander Espanha (1,067,623) - - (73)-   
Grupo Empresarial Santander, S.L. (1) (2,177,207) - - (464,295)-   
Sterrebeeck B.V. (1) (3,629,772) - - (100,418)-   
Banco Madesant - - (1,948)
Key Management Personnel (7) - - (10,278)
Other Payables (13,130) - (399,541) (1,011)-   (843,382)
Banco Santander Espanha (13,130) - -
Santander Brasil Asset (2) - - (7,203)
Santander Securities Services Brasil DTVM S.A. - - (5,066)
Zurich Santander Brasil Seguros e Previdência S.A. (5) - - (21,219)
Key Management Personnel- - (357,249)
Banco Santander Espanha (1) (1,011)-   
Santander Caceis Brasil DTVM S.A. -   -   (12,286)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -   -   (28,801)
Getnet S.A. -   (123,863)
Key Management Personnel (5)Key Management Personnel (5) -   -   (664,264)
OthersOthers- - (8,804)Others-   (14,168)
Debt Instruments Eligible to Compose CapitalDebt Instruments Eligible to Compose Capital(10,175,961) - -Debt Instruments Eligible to Compose Capital(14,088,607)-   -   
Banco Santander Espanha(10,175,961) - -
Banco Santander Espanha (1) (14,088,607)-   -   
   

 

F-116

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-115

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

      
Thousand of Reais 2018 2020
 Parent(1) Joint-controlled
companies		 Other Related-Party(2) Parent (1)Joint-controlled
companies		Other Related-Party (2)
  
Assets 8,169,537 3,112,734 1,381,770 2,966,012 3,589,575 8,962,950 
Financial assets for trading - Derivatives netFinancial assets for trading - Derivatives net(72,815) 205,337 266,027Financial assets for trading - Derivatives net(1,326,965)-   (2,527,296)
Banco Santander, S.A. – Espanha (72,815) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - 266,027
Banco RCI Brasil S.A. - 205,337 -
Banco Santander, S.A. – Espanha (1) (1,326,965)-   -   
Super Pagamentos e Administração de Meios Eletrônicos S.A. (2) -   -   (211,154)
Santander FI Santillana Multimercado Crédito Privado (2) -   -   (2,316,142)
Loans and other values with credit institutions - Cash and overnight operations in foreign currencyLoans and other values with credit institutions - Cash and overnight operations in foreign currency8,194,590 - 146,988Loans and other values with credit institutions - Cash and overnight operations in foreign currency4,240,680 3,587,028 10,446,557 
Banco Santander Espanha (3) (5) 8,194,590 - -
Banco Santander, S.A. – Espanha (3) 4,240,680 -   -   
PSA Corretora de Seguros e Serviços Ltda. -   -   113 
Santander Digital Assets, SL -   -   8,105 
Santander Bank, National Association -   10,315,450 
Banco Santander Totta, S.A. (2) - - 7,883 -   1,250 
Abbey National Treasury Services Plc (2) - - 87,260
Bank Zachodni (2) - - 193 -   171 
Santander UK plc - - 46,615 -   92,703 
Banco Santander, S.A. – México (2) - - 5,037 -   27,993 
Banco RCI Brasil S.A.  -   3,587,028 -   
Hyundai Corretora de Seguros Ltda. -   3 
Integry Tecnologia e Serviços A.H.U Ltda. -   45 
Super Pagamentos e Administração de Meios Eletrônicos S.A. -   532 
Santander Global Technology, S.L., SOCI -   192 
Loans and advances to customersLoans and advances to customers347 - 966,462Loans and advances to customers-   998,063 
Zurich Santander Brasil Seguros e Previdência S.A. - - 913,875
Zurich Santander Brasil Seguros S.A. - - 45,851
Zurich Santander Brasil Seguros e Previdência S.A. (4) -   823,467 
Zurich Santander Brasil Seguros S.A. (4) -   57,081 
Webmotors S.A. -   18,455 
Banco Santander Espanha (1) 347 - - -   224 
Isban Mexico, S.A. de C.V. - - 122 -   122 
Gesban Servicios Administrativos Globales, S.L. - - 23 -   -   23 
Santander Brasil Gestão de Recursos Ltda - - 169
Santander Securities Services Brasil Participações S.A. (2) - - 927
Key Management Personnel- - 5,495
Loans and other values with credit institutions(1)15,143 2,905,947 2,293
Banco Santander – Espanha 15,143 - -
Santander Brasil Gestão de Recursos Ltda. -   -   169 
Gestora de Inteligência de Crédito -   -   66,667 
Loop Gestão de Pátios S.A.   -   -   11,966 
Key Management Personnel (5)Key Management Personnel (5) -   19,889 
Other Assets 52,297 2,547 34,589 
Banco Santander, S.A. – Espanha (1) 52,297 -   
Banco RCI Brasil S.A. - 2,905,947 - -   2,547 -   
BHJV Assessoria e Consultoria em Gestão Empresarial LTDA - - 10
Produban Brasil Tecnologia - - 2,091
Santander Global Technology, S.L., SOCI - - 192
Other Assets 32,272 1,450 -
Banco Santander Espanha 32,272 - -
Banco RCI Brasil S.A.  - 1,450 -
Zurich Santander Brasil Seguros e Previdência S.A. (4)  -   34,589 
Guarantees and LimitsGuarantees and Limits  -   -   11,038 
Key Management Personnel (5)Key Management Personnel (5)-   11,038 
    
Liabilities (23,166,005) (38,380)-(2,975,342) (24,084,795)(226,046)(1,779,587)
Deposits of Brazil Central Bank and deposits of credit institutionsDeposits of Brazil Central Bank and deposits of credit institutions(107,084) (36,871) (1,410,619)Deposits of Brazil Central Bank and deposits of credit institutions(10,456,623)(226,046)(37,214)
Banco Santander Espanha (4) (107,084) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (1,151,399)
Banco Santander Río S.A. (2) - - (259,220)
Banco Santander, S.A. – Espanha (1) (10,456,623)-   
Super Pagamentos e Administração de Meios Eletrônicos S.A. -   (36,390)
Loop Gestão de Pátios S.A. -   (824)
Banco RCI Brasil S.A. - (36,871) - -   (226,046)-   
Securities obligations - - (96,133) -   0   (117,368)
Key Management Personnel- - (96,133)
Key Management Personnel (5)Key Management Personnel (5) -   (117,368)
Customer deposits - (1,509) (1,134,675) -   0   (869,888)
Santander Securities Services Brasil Participações S.A. (2) - - (58,968)
Zurich Santander Brasil Seguros e Previdência S.A. - - (234,249)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -   (64,836)
Santander Brasil Gestão de Recursos Ltda. -   (335)
Webmotors S.A. -   (1,411)
Santander Caceis Brasil DTVM S.A. -   (581,543)
Santander Brasil Asset (2) -   (100)
Gestora de Inteligência de Crédito - - (190,674) -   -   (149,257)
Santander Brasil Gestão de Recursos Ltda - - (126,988)
Webmotors S.A. - (1,509) -
Santander Securities Services Brasil DTVM S.A. - - (427,209)
Santander Brasil Asset (2) - - (18,639)
Key Management Personnel- - (37,889)
Key Management Personnel (5)Key Management Personnel (5) -   (36,762)
OthersOthers- - (40,059)Others-   (35,644)
Other financial liabilities - Dividends and interest on capital PayableOther financial liabilities - Dividends and interest on capital Payable(3,922,473) - (5,544)Other financial liabilities - Dividends and interest on capital Payable(508,491)-   -   
Banco Santander Espanha (609,159) - - (195)-   
Grupo Empresarial Santander, S.L. (1) (2) (1,242,259) - -
Sterrebeeck B.V. (1) (2) (2,071,055) - -
Banco Madesant (2) - - (1,112)
Key Management Personnel- - (4,432)
Grupo Empresarial Santander, S.L. (1) (239,890)-   
Sterrebeeck B.V. (1) (268,406)-   
Other Payables (9,603) - (424,504) (21)-   (755,117)
Banco Santander – Espanha (9,603) - -
Santander Brasil Asset - - (14,476)
Santander Securities Services Brasil DTVM S.A. - - (4,291)
Zurich Santander Brasil Seguros e Previdência S.A. - - (16,924)
Key Management Personnel- - (381,292)
Banco Santander Espanha (1) (21)-   
Santander Brasil Asset (2) -   (95)
Santander Caceis Brasil DTVM S.A. -   (9,373)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -   (78,686)
Key Management Personnel (5)Key Management Personnel (5) -   (633,276)
Others - - (7,521)  -   (33,687)
Debt Instruments Eligible to Compose CapitalDebt Instruments Eligible to Compose Capital(19,126,845) - -Debt Instruments Eligible to Compose Capital(13,119,660)-   -   
Banco Santander Espanha(19,126,845) - -
Banco Santander Espanha (1) (13,119,660)-   -   
 

Consolidated Financial Statements | December 31, 2021 | F-116

Table of Contents

 

* Values expressed in thousands, except when indicated.

Thousand of Reais   2019
    Parent (1)Joint-controlled
companies		Other Related-Party (2)
    
Assets   5,294,152 4,387,013 874,668 
Financial assets for trading - Derivatives net(763,547)-   (113,931)
Banco Santander, S.A. – Espanha (1)   (763,547)-   -   
Santander FI Santillana Multimercado Crédito Privado (2)   -   -   (113,931)
Loans and other values with credit institutions - Cash and overnight operations in foreign currency5,896,120 -   70,261 
Banco Santander, S.A. – Espanha (3)   5,896,120 -   -   
Banco Santander Totta, S.A. (2)   -   -   7,921 
Bank Zachodni (2)   -   -   94 
Santander UK plc   -   -   16,701 
Banco Santander, S.A. – México (2)   -   -   45,545 
Loans and advances to customers912 20,367 884,696 
Zurich Santander Brasil Seguros e Previdência S.A.   -   -   814,320 
Zurich Santander Brasil Seguros S.A.   -   -   58,778 
Webmotors S.A.   -   20,367 -   
Banco Santander Espanha (1)   912 -   -   
Isban Mexico, S.A. de C.V.   -   -   122 
Gesban Servicios Administrativos Globales, S.L.   -   -   23 
Santander Brasil Gestão de Recursos Ltda.   -   -   169 
Key Management Personnel (5) -   -   11,284 
Loans and other values with credit institutions (1)86,638  4,365,518 192 
Banco Santander, S.A. – Espanha (1)   86,638 -   -   
Banco RCI Brasil S.A.    -   4,365,518 -   
Santander Global Technology, S.L., SOCI   -   -   192 
Other Assets   74,029 1,128 28,476 
Banco Santander, S.A. – Espanha (1)   74,029 -   -   
Banco RCI Brasil S.A.     -   1,128 -   
Zurich Santander Brasil Seguros e Previdência S.A. (4)   -   -   28,476 
Guarantees and Limits  -   -   4,974 
Key Management Personnel (5)-   -   4,974 
       
Liabilities   (17,105,753)(169,103)(1,529,828)
Deposits of Brazil Central Bank and deposits of credit institutions(42,060)(167,017)(20,571)
Banco Santander, S.A. – Espanha (1)   (42,060)-   -   
Santander FI Santillana Multimercado Crédito Privado (2)   -   -   (20,571)
Banco RCI Brasil S.A.   -   (167,017)-   
Bonds and securities   -   -   (89,074)
Key Management Personnel (5) -   -   (89,074)
Customer deposits   -   (2,086)(1,008,416)
Zurich Santander Brasil Seguros e Previdência S.A. (4)   -   -   (199,934)
Santander Brasil Gestão de Recursos Ltda   -   -   (332,916)
Webmotors S.A.   -   (2,082)-   
Santander Caceis Brasil DTVM S.A.   -   -   (404,427)
Santander Brasil Asset (2)   -   -   (16,762)
Key Management Personnel (5)-   -   (36,104)
Others   -   (4)(18,273)
Other financial liabilities - Dividends and interest on capital payable(6,874,602)-   (12,226)
Banco Santander, S.A. – Espanha (1)   (1,067,623)-   -   
Grupo Empresarial Santander, S.L. (1)   (2,177,207)-   -   
Sterrebeeck B.V. (1)   (3,629,772)-   -   
Banco Madesant (2)   -   -   (1,948)
Key Management Personnel (5)-   -   (10,278)
Other Payables   (13,130)-   (399,541)
Banco Santander, S.A. – Espanha (1)   (13,130)-   -   
Santander Brasil Asset   -   -   (7,203)
Santander Caceis Brasil DTVM S.A.   -   -   (5,066)
Zurich Santander Brasil Seguros e Previdência S.A. (4)   -   -   (21,219)
Key Management Personnel (5)-   -   (357,249)
Others   -   -   (8,804)
Debt Instruments Eligible to Compose Capital(10,175,961)-   -   
Banco Santander, S.A. – Espanha (1)   (10,175,961)-   -   

 

F-117

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

       
Thousand of Reais 2017
  Parent(1) Joint-controlled
companies		 Other Related-Party(2)
    
Assets 8,214,739 1,214,312 926,994
Financial assets for trading - Derivatives net(173,065) - (74,873)
Banco Santander Espanha (173,065) - -
Abbey National Treasury Services Plc (2) - - (71,672)
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (3,201)
Loans and other values with credit institutions - Cash and overnight operations in foreign currency8,363,038 - 76,009
Banco Santander Espanha (3) (5) 8,363,038 - -
Banco Santander Totta, S.A. (2) - - 2,733
Abbey National Treasury Services Plc (2) - - 71,751
Bank Zachodni (2) - - 177
Banco Santander, S.A. – México (2) - - 1,348
Loans and advances to customers132 9,661 925,858
Zurich Santander Brasil Seguros e Previdência S.A. - - 925,835
Abbey National Treasury Services Plc (2) - - 23
Banco Santander Espanha (1) 132 - -
Webmotors S.A. - 9,661 -
Loans and other values with credit institutions(1)23,896 1,203,032 -
Banco Santander Espanha 23,896 - -
Banco RCI Brasil S.A. - 1,203,032 -
Other Assets 738 1,619 -
Banco Santander Espanha 738 - -
Banco RCI Brasil S.A.  - 1,619 -
       
Liabilities (12,360,383) (57,221) (2,107,677)
Deposits of Brazil Central Bank and deposits of credit institutions(387,937) (47,423) (1,862,058)
Banco Santander Espanha (4) (387,937) - -
Santander Securities Services Brasil DTVM S.A. - - (300,074)
Santander Brasil Asset - - (16,766)
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (1,543,752)
Banco Santander, S.A. – Uruguay (2) - - (1,466)
Banco RCI Brasil S.A. - (47,423) -
Customer deposits - (9,798) (222,473)
ISBAN Brasil S.A. (2) - - (20,893)
Santander Securities Services Brasil Participações S.A. (2) - - (71,947)
Santander Brasil Tecnologia S.A. (atual denominação da Produban Serviços de Informática S.A.) (2) - - (34,410)
Zurich Santander Brasil Seguros e Previdência S.A. - - (55,935)
Santander Brasil Gestão de Recursos Ltda - - (32,334)
Webmotors S.A. - (9,798) -
Others - - (6,954)
Other financial liabilities - Dividends and interest on capital Payable(3,992,820) - (1,132)
Banco Santander Espanha (620,264) - -
Grupo Empresarial Santander, S.L. (1) (2) (1,264,470) - -
Sterrebeeck B.V. (1) (2) (2,108,086) - -
Banco Madesant (2) - - (1,132)
Other Payables (2,050) - (22,014)
Banco Santander – Espanha (2,050) - -
Santander Brasil Asset - - (69)
ISBAN Brasil S.A. (2) - - 237
Produban Servicios Informáticos Generales, S.L. (Produban Espanha) (2) - - (905)
Santander Securities Services Brasil DTVM S.A. - - 6,762
Zurich Santander Brasil Seguros e Previdência S.A. - - (27,748)
Others - - (291)
Debt Instruments Eligible to Compose Capital(7,977,576) - -
Banco Santander Espanha (7,977,576) - -

(*) All loans and other amounts with related parties were made in the ordinarynormal course of business and on a sustainable basis, including interest rates and collateralguarantees and did do

not involve morerisks greater than the normal risk of collectabilitycollection or presenthave other unfavorable features.

disadvantages.

(1) Banco Santander (Brasil) S.A. is indirectly controlled by Banco Santander SpainEspanha (note 1-a), through its subsidiarythe subsidiaries Grupo Empresarial Santander, S.L. and Sterrebeeck B.V.

(2) Refers to the Company'sparent company's subsidiaries (Banco Santander Spain)Espanha).

(3) InAs of December 31, 2019,2021, it refers to the cash of R$1,089,578 (2018 - R$1,515,437 e 2017 - R$587,531). 

(4) On December 31, 2019, include foreign currency investments (overnight applications) due on January 2, 2019and cash equivalents in the amount of R$4,111,489 (2018 -1,476,611 (2020 – R$6,583,716 e 2017 - R$7,384,335) and interest of 1.53% p.a held at Santander Brasil EFC, Banco Santander Brasil and its Grand Cayman Branch.  2,459,371).

(5)(4) Significant influence of Banco Santander Espanha.

(6) Of the total dividends resolved in 2019, R$13,553 is allocated to the Key Management Personnel, remaining to pay the provisioned amount. 

(7)(5) The balance with key management personnel refers to operations contracted beforeprior to the term of the mandates.

 

F-118

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-117

Thousand of Reais   2019
        Parent(1) Joint-controlled
companies		 Other Related-Party(2)
          
Income       (1,458,386) 226,141 1,254,022
Interest and similar income - Loans and amounts due from credit institutions 109,530 218,661 630
Banco Santander Espanha     109,530 - -
Banco RCI Brasil S.A.       - 218,661 -
Key Management Personnel - - 630
Guarantees and Limits       - - 24
Key Management Personnel - - 24
Interest expense and similar charges - Customer deposits  - (25) (27,433)
Santander Brasil Gestão de Recursos Ltda - - (16,387)
Gestora de Inteligência de Crédito - - (3,275)
Webmotors S.A. - (25) -
Key Management Personnel - - (7,747)
Others - - (24)
Interest expense and similar charges - Deposits from credit institutions (174) (3,375) (96,579)
Banco Santander – Espanha (174) - -
Banco RCI Brasil S.A. (6) - (3,375) -
SAM Brasil Participações - - (37)
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (67,821)
Santander Securities Services Brasil DTVM S.A. (2) - - (27,595)
Santander Asset Management, S.A. SGIIC. - - (1,126)
Fee and commission income (expense)   2,310 10,418 2,635,325
Banco Santander – Espanha 2,310 - -
Banco RCI Brasil S.A. (6) - 10,201 -
Banco Santander International - - 35,294
Webmotors S.A. - 217 -
Zurich Santander Brasil Seguros S.A. - - 231,920
Zurich Santander Brasil Seguros e Previdência S.A. - - 2,356,596
Key Management Personnel - - 343
Others - - 11,172
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (724,169) 462 44,858
Banco Santander, S.A. – Espanha (724,169) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (598)
Santander Securities Services Brasil DTVM S.A. (2) - - (2,297)
Zurich Santander Brasil Seguros e Previdência S.A. - - 43,858
Key Management Personnel - - 168
Others - 462 3,727
Administrative expenses and Amortization   (153,332) - (1,283,788)
Banco Santander, S.A. – Espanha (153,332) - -
ISBAN Chile S.A. - - (28)
Aquanima Brasil Ltda. - - (32,032)
TECBAN - Tecnologia Bancaria Brasil - - (345,610)
Santander Securities Services Brasil DTVM S.A. (2) - - (49,241)
Santander Global Technology, S.L., SOCI - - (336,952)
Key Management Personnel - - (482,852)
Others - - (37,073)
Others Administrative expenses - Donation   - - (19,015)
Fundação Santander - - (1,615)
Instituto Escola Brasil - - (1,300)
Fundação Sudameris - - (16,100)
Debt Instruments Eligible to Compose Capital   (692,551) - -
Banco Santander Espanha (2)(8) (692,551) - -

F-119

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.Table of Contents 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated)  

* Values expressed in thousands, except when indicated.

Principal transactions and balances - Income

Thousand of Reais 2021
  Parent (1)Joint-controlled
companies		Other Related-Party (2)
  
Income (2,896,127)37,036 1,622,821 
Interest and similar income - Loans and amounts due from credit institutions7,534 - 77,832 
Banco Santander Espanha 7,534 - - 
Apolo Fundo de Investimento em Direitos Creditórios - -

76,004 

Key Management Personnel- - 1,828 
Guarantees and Limits- - 45 
Key Management Personnel- - 45 
Interest expense and similar charges - Customer deposits- - (634,659)
Santander Brasil Gestão de Recursos Ltda. - - (1,159)
Gestora de Inteligência de Crédito - - (2,354)
Webmotors S.A. - - (233)
Super Pagamentos e Administração de Meios Eletrônicos S.A. - - (6,916)
Getnet S.A. 

-

- 

(23,448)

Banco Santander (Suisse), S.A. 

-

-

(1,437)

Key Management Personnel- - (594,194)
Others- - (4,918)
Interest expense and similar charges - Deposits from credit institutions(122,318)- (4,652)
Banco Santander – Espanha(122,318)- - 
Santander FI Santillana Multimercado Crédito Privado (1)- - (30,024)
Santander Caceis Brasil DTVM S.A. (2)- - 25,372 
Fee and commission income (expense)- 37,036 3,511,120 
Banco RCI Brasil S.A.- 37,036 - 
Banco Santander International - - 43,375 
Zurich Santander Brasil Seguros  S.A.- - 118,324 
Zurich Santander Brasil Seguros e Previdência S.A.- - 3,200,930 
Getnet S.A.-

- 

        145,554

Key Management Personnel- - 399 
Others- - 2,538 
Gains (losses) on financial assets and liabilities (net) and exchange differences (net)(2,560,112)- (769,218)
Banco Santander, S.A.  Espanha(2,560,112)- - 
Santander FI Santillana Multimercado Crédito Privado- - (3,666)
Santander Caceis Brasil DTVM S.A. (2)- - (29,413)
Zurich Santander Brasil Seguros e Previdência S.A.- - (152,376)
Zurich Santander Brasil Seguros S.A. (3)

-

-

310,706

Getnet S.A.

-

-

(881,699)

Key Management Personnel- - (13,083)
Others- - 313 
Administrative expenses and Amortization(221,231)- (558,452)
Banco Santander, S.A.  Espanha(221,231)- - 
ISBAN Chile S.A. - - (4)
Aquanima Brasil Ltda. - - (29,526)
Santander Caceis Brasil DTVM S.A. (2)- - (45,196)
Santander Global Technology, S.L., SOCI- - (446,313)
Getnet S.A.

- 

-

(2,092)

Others- - (35,321)
Others Administrative expenses - Donation- - 805 
Fundação Sudameris- - 805 
     

 

             
Thousand of Reais   2018
        Parent(1) Joint-controlled
companies		 Other Related-Party(2)
          
Income       (972,799) 192,889 1,323,622
Interest and similar income - Loans and advances to customers       272,500 273,332 1,541
Key Management Personnel - - 461
Interest and similar income - Loans and amounts due from credit institutions 136,250 136,666 1,080
Banco Santander Espanha 136,250 - -
Banco RCI Brasil S.A. (6) - 136,666 -
Abbey National Treasury Services Plc - - 157
Cibrasec - - 923
Interest expense and similar charges - Customer deposits  - (92) (23,146)
ISBAN Brasil S.A. - - (90)
Santander Brasil Gestão de Recursos Ltda - - (8,329)
Santander Cultural - - (36)
Gestora de Inteligência de Crédito - - (5,743)
Webmotors S.A. - (92) -
Santander Brasil Tecnologia S.A. (atual denominação da Produban Serviços de Informática S.A.) - - (215)
Key Management Personnel - - (8,707)
Others - - (27)
Interest expense and similar charges - Deposits from credit institutions (6,889) (5,871) (134,896)
Banco Santander – Espanha (6,889) - -
Banco RCI Brasil S.A. (6) - (5,871) -
Santander Securities Services Brasil Participações S.A. (2) - - (26,378)
SAM Brasil Participações - - (47)
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (102,928)
Santander Securities Services Brasil DTVM S.A. (2) - - (4,442)
Santander Asset Management, S.A. SGIIC. - - (1,101)
Fee and commission income (expense)   6,213 32,960 2,653,014
Banco Santander – Espanha 6,213 - -
Banco RCI Brasil S.A. (6) - 31,981 -
Banco Santander International - - 30,789
Webmotors S.A. - 979 -
Zurich Santander Brasil Seguros S.A. - - 300,868
Zurich Santander Brasil Seguros e Previdência S.A. - - 2,302,295
Key Management Personnel - - 355
Others - - 18,707
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (680,903) 29,226 (199,985)
Banco Santander, S.A. – Espanha (680,903) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (210,324)
Abbey National Treasury Services Plc - - (17,726)
Santander Securities Services Brasil DTVM S.A. (2) - - 1,312
Zurich Santander Brasil Seguros e Previdência S.A. - - 40,305
Banco RCI Brasil S.A. (6) - 29,226 -
Key Management Personnel - - 239
Others - - (13,791)
Administrative expenses and Amortization   - - (952,432)
ISBAN Brasil S.A. - - (14,210)
Santander Brasil Tecnologia S.A. (atual denominação da Produban Serviços de Informática S.A.) - - (33,567)
ISBAN Chile S.A. - - (24)
Aquanima Brasil Ltda. - - (30,021)
TECBAN - Tecnologia Bancaria Brasil - - (313,433)
Santander Securities Services Brasil DTVM S.A. (2) - - (46,884)
Santander Global Technology, S.L., SOCI - - (175,466)
Key Management Personnel - - (289,612)
Others - - (49,216)
Others Administrative expenses - Donation   - - (20,013)
Santander Cultural - - (2,748)
Fundação Santander - - (1,330)
Fundação Sudameris - - (15,935)
Debt Instruments Eligible to Compose Capital   (427,470) - -
Banco Santander Espanha (2)(8) (427,470) - -
             

F-120

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-118

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

Thousand of Reais   2017
        Parent(1) Joint-controlled
companies		 Other Related-Party(2)
             
Income       389,663 126,781 1,210,444
Interest and similar income - Loans and amounts due from credit institutions 87,217 87,381 1,417
Banco Santander Espanha 87,217 - -
Banco RCI Brasil S.A. (6) - 87,381 -
Abbey National Treasury Services Plc - - 879
Cibrasec - - 538
Interest expense and similar charges - Customer deposits  - (4,486) (41,026)
ISBAN Brasil S.A. - - (2,145)
Santander Securities Services Brasil Participações S.A. - - (6,190)
Santander Brasil Gestão de Recursos Ltda - - (6,636)
Santander Securities Services Brasil DTVM S.A - - (24,344)
Santander Cultural - - (69)
Webmotors S.A. - (4,486) -
Santander Brasil Tecnologia S.A. (current name of Produban Serviços de Informática S.A.) - - (1,547)
Others - - (95)
Interest expense and similar charges - Deposits from credit institutions (13,038) (3,026) (113,569)
Banco Santander – Espanha (13,038) - -
Banco RCI Brasil S.A. (6) - (3,026) -
SAM Brasil Participações - - (95)
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (112,211)
Santander Asset Management, S.A. SGIIC. - - (1,263)
Fee and commission income (expense)   (5,099) 14,999 2,453,179
Banco Santander – Espanha (5,099) - -
Banco RCI Brasil S.A. (6) - 14,996 -
Banco Santander International - - 20,480
Webmotors S.A. - 3 -
Zurich Santander Brasil Seguros S.A. - - 295,508
Zurich Santander Brasil Seguros e Previdência S.A. - - 2,134,755
Others - - 2,436
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) 592,919 31,913 (39,534)
Banco Santander, S.A. – Espanha 592,919 - -
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (79,480)
Abbey National Treasury Services Plc - - 23,843
Banco RCI Brasil S.A. (6) - 31,913 -
Santander Securities Services Brasil DTVM S.A. - - (26,102)
Santander Investment Securities Inc. - - (13,492)
Zurich Santander Brasil Seguros e Previdência S.A. - - 52,981
Zurich Santander Brasil Seguros S.A. - - 1,788
Others - - 928
Administrative expenses and Amortization   (50,271) - (1,028,750)
Banco Santander, S.A. – Espanha (50,271) - -
ISBAN Brasil S.A. - - (337,161)
Santander Brasil Tecnologia S.A. (atual denominação da Produban Serviços de Informática S.A.) - - (242,191)
ISBAN Chile S.A. - - (23)
Aquanima Brasil Ltda. - - (25,638)
TECBAN - Tecnologia Bancaria Brasil - - (262,046)
Produban Servicios Informaticos Generales, S.L. - - (46,494)
Ingeniería de Software Bancario, S.L. - - (70,385)
Santander Securities Services Brasil DTVM S.A. - - (42,603)
Others - - (2,209)
Others Administrative expenses - Donation   - - (21,273)
Santander Cultural - - (3,513)
Fundação Santander - - (1,837)
Instituto Escola Brasil - - (873)
Fundação Sudameris - - (15,050)
Debt Instruments Eligible to Compose Capital   (222,065) - -
Banco Santander Espanha (2)(8) (222,065) - -
Thousand of Reais2020
 Parent (1)Joint-controlled
companies		Other Related-Party (2)
 
Income(2,164,484)204,209 1,442,100 
Interest and similar income - Loans and advances to customers13,934 185,646 1,485 
Banco Santander Espanha13,934 -   -   
Banco RCI Brasil S.A.-   185,646 -   
Key Management Personnel-   -   1,485 
Guarantees and Limits-   -   61 
Key Management Personnel-   -   61 
Interest expense and similar charges - Customer deposits-   -   (19,215)
Santander Brasil Gestão de Recursos Ltda.-   -   (5,664)
Gestora de Inteligência de Crédito-   -   (1,039)
Webmotors S.A.-   -   (2)
Super Pagamentos e Administração de Meios Eletrônicos S.A.-   -   (7,198)
Key Management Personnel-   -   (4,657)
Others-   -   (655)
Interest expense and similar charges - Deposits from credit institutions(569,355)(6,226)(15,032)
Banco Santander  Espanha(569,355)-   -   
Banco RCI Brasil S.A.-   (6,226)-   
SAM Brasil Participações-   -   (3)
Santander Caceis Brasil DTVM S.A. (2)-   -   (14,645)
Santander Asset Management, S.A. SGIIC. -   -   (384)
Fee and commission income (expense)(2,002)24,789 3,092,951 
Banco Santander  Espanha(2,002)-   -   
Banco RCI Brasil S.A.-   24,789 -   
Banco Santander International -   -   45,261 
Webmotors S.A.-   -   223 
Zurich Santander Brasil Seguros  S.A.-   -   321,008 
Zurich Santander Brasil Seguros e Previdência S.A.-   -   2,706,398 
Key Management Personnel-   -   308 
Others-   -   19,753 
Gains (losses) on financial assets and liabilities (net) and exchange differences (net)(541,693)-   (413,101)
Banco Santander, S.A.  Espanha(541,693)-   -   
Santander FI Santillana Multimercado Crédito Privado-   -   (396,689)
Santander Caceis Brasil DTVM S.A. (2)-   -   (4,662)
Zurich Santander Brasil Seguros e Previdência S.A.-   -   (17,344)
Key Management Personnel-   -   180 
Others-   -   5,414 
Administrative expenses and Amortization(202,787)-   (1,354,006)
Banco Santander, S.A.  Espanha(202,787)-   -   
ISBAN Chile S.A. -   -   (20)
Aquanima Brasil Ltda. -   -   (52,431)
TECBAN - Tecnologia Bancária Brasil-   -   (364,349)
Santander Caceis Brasil DTVM S.A. (2)-   -   (46,813)
Santander Global Technology, S.L., SOCI-   -   (358,364)
Key Management Personnel-   -   (499,514)
Others-   -   (32,515)
Others Administrative expenses - Donation-   -   (19,630)
Santander Cultural-   -   (330)
Fundação Santander-   -   (1,600)
Instituto Escola Brasil-   -   (700)
Fundação Sudameris-   -   (17,000)
Result on the sale of assets not classified as assets held for sale-   -   168,588 
Super Pagamentos e Administração de Meios Eletrônicos S.A.-   -   168,588 
Debt Instruments Eligible to Compose Capital(862,581)-   -   
Banco Santander Espanha(862,581)-   -   
    

Consolidated Financial Statements | December 31, 2021 | F-119

Table of Contents

 

* Values expressed in thousands, except when indicated.

Thousand of Reais2019
 Parent (1)Joint-controlled
companies		Other Related-Party (2)
    
Income(1,458,386)226,141 1,254,022 
Interest and similar income - Loans and advances to customers219,060 437,322 630 
Interest and similar income - Loans and amounts due from credit institutions109,530 218,661 630 
Banco Santander Espanha109,530 -   -   
Banco RCI Brasil S.A.-   218,661 -   
Key Management Personnel-   -   630 
Guarantees and Limits-   -   24 
Key Management Personnel-   -   24 
Interest expense and similar charges - Customer deposits-   (25)(27,433)
Santander Brasil Gestão de Recursos Ltda.-   -   (16,387)
Gestora de Inteligência de Crédito-   -   (3,275)
Webmotors S.A.-   (25)-   
Key Management Personnel-   -   (7,747)
Others-   -   (24)
Interest expense and similar charges - Deposits from credit institutions(174)(3,375)(96,579)
Banco Santander – Espanha(174)-   -   
Banco RCI Brasil S.A.-   (3,375)-   
SAM Brasil Participações-   -   (37)
Santander FI Santillana Multimercado Crédito Privado-   -   (67,821)
Santander Securities Services Brasil DTVM S.A. (2)-   -   (27,595)
Santander Asset Management, S.A. SGIIC. -   -   (1,126)
Fee and commission income (expense)2,310 10,418 2,635,325 
Banco Santander – Espanha2,310 -   -   
Banco RCI Brasil S.A.-   10,201 -   
Banco Santander International -   -   35,294 
Webmotors S.A.-   217 -   
Zurich Santander Brasil Seguros  S.A.-   -   231,920 
Zurich Santander Brasil Seguros e Previdência S.A.-   -   2,356,596 
Key Management Personnel-   -   343 
Others-   -   11,172 
Gains (losses) on financial assets and liabilities (net) and exchange differences (net)(724,169)462 44,858 
Banco Santander, S.A. – Espanha(724,169)-   -   
Santander FI Santillana Multimercado Crédito Privado-   -   (598)
Santander Caceis Brasil DTVM S.A. (2)-   -   (2,297)
Zurich Santander Brasil Seguros e Previdência S.A.-   -   43,858 
Key Management Personnel-   -   168 
Others-   462 3,727 
Administrative expenses and Amortization(153,332)-   (1,283,788)
Banco Santander, S.A. – Espanha(153,332)-   -   
ISBAN Chile S.A. -   -   (28)
Aquanima Brasil Ltda. -   -   (32,032)
TECBAN - Tecnologia Bancária Brasil-   -   (345,610)
Santander Caceis Brasil DTVM S.A. (2)-   -   (49,241)
Santander Global Technology, S.L., SOCI-   -   (336,952)
Key Management Personnel-   -   (482,852)
Others-   -   (37,073)
Others Administrative expenses - Donation-   -   (19,015)
Fundação Santander-   -   (1,615)
Instituto Escola Brasil-   -   (1,300)
Fundação Sudameris-   -   (16,100)
Debt Instruments Eligible to Compose Capital(692,551)-   -   
Banco Santander Espanha(692,551)-   -   

 

(1) Banco Santander (Brasil) S.A. is indirectly controlled by Banco Santander Spain, through its subsidiary Grupo Empresarial Santander, S.L. and Sterrebeeck B.V.

(2) Refers to the Company's subsidiaries (Banco Santander, S.A .-..- Spain).

(3) Refers the profit on disposal of the company MS Participações.

(4) Refers the profit on disposal of the company Santander Brasil Asset Management.

(5) Refers the profit on disposal of the company Santander Securities Services Brasil DTVM S.A.

 

47.46.Risk management

Risk management at Banco Santander is based on the following principles:

A. Independence of the management activities related to the business;

B. Involvement of the Senior Management in decision-making;

C. Consensus in the decision making on credit operations between the Risk and Business departments;

D. Collegiate decision-making, which includes the branch network, aiming to encourage diversity of opinions and avoiding the attribution of individual decisions;

E. The use of statistical tools to estimate default, which includes internal rating, credit scoring and behavior scoring, RORAC (Return on Risk Adjusted Capital), VaR (Value at Risk), economic capital, scenario assessment, among others;

F. Global approach, which an integrated treatment of risk factors in the business departments and the concept of economic capital as a consistent metric for risk undertaken and for business management;

G. Common management tools

H. Organizational structure

I. Scopes and responsibilities

F-121

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

J. Risk limitation

 

Consolidated Financial Statements | December 31, 2021 | F-120

Table of Contents

 

* Values expressed in thousands, except when indicated.

K. Recognition

L. Effective information channel

M. Maintenance of a medium-low risk profile, and low volatility by:

• The portfolio diversification, limiting concentration in clients, groups, sectors, products or geographically speaking; the complexity level of market operations reduction; the analysis of social and environmental risks of businesses and projects financed by the bank; continuous follow up to prevent the portfolios from deteriorating.

• Policies and procedures definition that are part of the Regulatory Framework Risk, which regulates the risk activities and processes. They follow the instructions of the Board of Directors, the regulations of the BACEN and the international best practices in order to protect the capital and ensure business' profitability.

At Banco Santander, the risk management and control process is structured using as reference the framework defined at corporate level and described according to the following phases:

I. Adaptation of corporate management frameworks and policies that reflect Banco Santander’s risk management principles.

Within this regulatory framework, the Corporate Risk Management Framework, regulates the principles and standards governing Banco Santander´s risk activities, based on the corporate organization and a management models, meeting the necessary regulatory requirements for credit management.

The organizational model comprises the management map, which defines the risk function and governance, and the regulatory framework itself.

II. Identification of risks through the constant review and monitoring of exposures, the assessment of new products, businesses and deals (singular transactions);

III. Risks measurement using methods and models periodically tested.

IV. Preparation and distribution of a complete set of reports that are reviewed daily by the heads at all levels of Banco Santander management.

V. Implementation of a risk control system which checks, on a daily basis, the degree to which the Bank´s risk profile matches the risk policies approved and the risk limits set. The most noteworthy corporate tools and techniques (aforementioned) already in use at Banco Santander are in different stages of maturity regarding the level of implementation and use in the Bank. For wholesale segment, these techniques are in line with the corporate level development. For local segments, internal ratings and scoringsscoring based models, VaR and market risk scenario analysis and stress testing were already embedded in risk management routine while Expected loss, Economic Capital and RORAC have been integrated in risk management.

VI. Internal ratings- and scorings-based models which, by assessing the various qualitative and quantitative risk components by client and transaction, making it possible to estimate, firstly, the probability of default and, subsequently, the expected loss, based on Loss Given Default (LGD) estimates.

VII. Economic capital, as a homogeneous measurement of the assumed risk and the basis for the measurement of the performance management.

VIII. RORAC, used both as a transaction pricing tool in the whole sale segment (more precisely in global ranking and markets - bottom-up approach) as for in the analysis of portfolios and units (top-down approach).

IX. VaR, which is used for controlling and setting the market risk limits for the various treasury portfolios.

X. Scenario analysis and stress testing to supplement the analysis market and credit risk in order to assess the impact of alternative scenarios, even over provisions and capital.

 

a) Corporate Governance of the Risk Function

The structure of Banco Santander’s Risk Committee is defined in accordance with the highest standards of prudent management, while respecting local legal and regulatory environment.

Its main responsibilities are:

A. Integrate and adapt the Bank's risk to local level, further than the risk management strategy, tolerance level and predisposition to the risk, previously approved by the executive committee and board of directors, all matched with corporate standards of Banco Santander Spain;

B. Approve the proposals, operations and limits of clients and portfolio;

C. Regularly monitor all the risks inherent to the business, proving if your profile is adequate to what was established in the risk appetite.

 

Consolidated Financial Statements | December 31, 2021 | F-121

Table of Contents

 

* Values expressed in thousands, except when indicated.

D. Authorize the use of management tools and local risk models and being aware of the result of their internal validation.

E. Keeping updated, assessing and monitoring any observations and recommendations periodically formulated by the supervisory authorities regarding their functions.

The organizational structure of the executive vice-presidency consists of areas which are responsible for credit risk management, market and structural, model risk management and non-financial risks. The credit risk management structure is composed by directors who act from the point of view of retail and wholesale portfolios management. A specific area has the mission to consolidate the portfolios and their respective risks, supporting the management with the integrated risk vision, as well as the Group's headquarters in Spain. There is

F-122

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

an area responsible for the attendance to regulators, external and internal auditors.

A specific structure is responsible for serving internal and external regulators, supervisors and auditors.

It has a departmentcore called ERM-Enterprise Risk Management, which includesrisk management, integrated by a set of transverse functions, oftransversal to all risk factorsrisks, necessary for anits adequate risk management.. Thismanagement. These areas are part of this structure includes the areas of Methodology & Basel Project (model development(development and parameterization)parameterization of models); Decision engines; Credit Risk Control; Risk Control and Performance;Performance (covering Risk Culture); Integrated Managementmanagement and Relationship with Supervisors (covering Risk Culture); and Local Provision & IFRS9.

Further details of the structure, methodologies and control system related to risk management is described in the report available on the website www.santander.com.br.

Stress Test.

b) Credit Risk

b.1) Introduction to the treatment of credit risk

The Credit Risk Management provides subsidies to define strategies as risk appetite, to establish limits, including exposure analysis and trends as well as the effectiveness of the credit policy. The goal is to maintain a risk profile and adequate minimum profitability to offset the estimated default, both client and portfolio, as defined by the Executive Committee and Board of Directors. Additionally, it is responsible for the risk management systems applied in the identification, measurement, control and reduction of exposure to risk in individual or clustered by similar operations.

The Risk Management is specialized according to each clients' characteristics, being segregated between individual clients (with the accompanied of dedicated analysts) and customers with similar characteristics (standardized).

• Individualized management: It is performed by a defined risk analyst, which prepares the analysis, and forwards it to the Risk Committee and monitors the client's progress. It covers the Wholesale segment clients (Corporate and GB&M), Retail (Companies 3 and Governments, Institutions and Universities);

• Standardized management: Aimed at individuals and companies not classified as individualized clients. Based on automated models of decision-making and internal risk assessment, complemented by commercial heave and analysts specialized teams to handle exceptions.

Macroeconomic aspects and market conditions, sectored and geographical concentration, as well as client profiling and economic prospects are also evaluated and considered in the appropriate measuring of credit risk.

b.2) Reduction to recoverable value (“impairment”)

The Bank recognizes adjustments for expected credit losses with respect to the following financial instruments that are not measured at fair value through profit or loss:

- financial assets that are debt instruments;

- amounts receivable from leasing;

- financial guarantee contracts issued; and

- loan commitments issued.

No impairment losses are recognized on equity instruments.

The Bank measures the adjustments for losses at an amount equal to the expected credit losses over the useful life, except for the instruments below, for which they are recorded as expected credit losses in 12 months:

- debt instruments that present a low credit risk at the closing date; and

- other financial instruments (except lease receivables) in which the credit risk has not increased substantially since their initial recognition.

Adjustments for losses on lease receivables are always measured at an amount equal to expected credit losses over their useful life.

Measurement of expected credit losses

Expected credit losses are a probability-weighted estimate of credit losses. They are measured as follows:

- financial assets subject to impairment at the closing date: as the difference between the gross book value and the present value of estimated future cash flows;

- loan commitments: as the present value of the difference between the contractual cash flows due to the Bank if the commitment is used in full and the cash flows that the Bank expects to receive; and

- financial guarantee contracts: payments expected to reimburse the holder, less any amounts that the Bank expects to recover.

Modified assets

If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced by a new asset due to the debtor's financial difficulties, it is necessary to assess whether the financial asset should be derecognized and expected credit losses are measured as follows :

- If the expected restructuring does not result in a write-off of the existing asset, the expected cash flows arising from the modified financial asset are included in the calculation of the cash insufficiencies of the existing asset.

- If the expected restructuring results in the derecognition of the existing asset, the expected fair value of the new asset is treated as the final cash flow of the existing financial asset at the time of its derecognition.

This amount is included in the calculation of cash shortfalls arising from the existing financial asset discounted from the estimated retirement date to the closing date, using the original effective interest rate of the existing financial asset.

Consolidated Financial Statements | December 31, 2021 | F-122

Table of Contents

 

* Values expressed in thousands, except when indicated.

Determination of significant increases in credit risk

On each balance sheet date, the Bank assesses whether financial assets recorded at amortized cost and debt financial instruments recorded at fair value through Other Comprehensive Income are subject to impairment, as well as other financial instruments subject to that assessment.

A financial asset is “subject to impairment” when one or more events that have a negative impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is subject to impairment includes the following observable data:

- significant financial difficulty of the debtor or issuer;

- delays in contractual obligations;

- breach of contract, such as default or delay;

- the restructuring of a loan or advance by the Bank under conditions that the Bank would not consider as interesting to carry out;

- the likelihood that the debtor will enter bankruptcy or other financial reorganization; or

- the disappearance of an active market for a security due to financial difficulties.

A financial instrument that has been renegotiated due to deterioration in the borrower's condition is generally considered to be subject to impairment, unless there is evidence that the risk of not receiving the contractual cash flows has been significantly reduced and there are no other indicators of impairment.

Presentation of the provision for impairment losses in the balance sheet

Provisions for impairment losses are presented in the balance sheet as follows:

- financial assets measured at amortized cost: as a deduction from the gross carrying amount of the assets;

- loan commitments and financial guarantee contracts: as a provision; and

- debt instruments measured at fair value through Other Comprehensive Income: no provision for losses is recognized in the balance sheet, as the book value of these assets corresponds to their fair value.

Individual or collective assessment

An individual measurement of impairment was based on Management's best estimate of the present value of cash flows expected to be received. In estimating these cash flows, Management exercised judgment as to the financial situation of a debtor and the net realizable value of any underlying collateral. Each asset reduced to recoverable value was evaluated on its merits, while the test strategy and the estimate of cash flows considered recoverable were approved by the Bank's credit risk officers.

When assessing the need for collective allowance for losses, Management considered factors such as credit quality, portfolio size, concentrations and economic factors. To estimate the necessary allowance, assumptions were established to define how the inherent losses were modeled and to determine the necessary data parameters, based on historical experience and current economic conditions.

Measurement of impairment

Losses due to impairment of assets measured at amortized cost were calculated as the difference between the book value and the present value of estimated future cash flows, discounted at the asset's original effective interest rate. Impairment losses on assets measured at fair value through Other Comprehensive Income were calculated as the difference between book value and fair value.

Reversal of impairment

For assets measured at amortized cost: If an event that occurred after the impairment caused a reduction in the amount of the impairment loss, the reduction in the impairment loss was reversed through profit or loss.

For debt securities measured at fair value through Other Comprehensive Income: If, in a subsequent period, the fair value of a debt security reduced to recoverable amount has increased and that increase could be objectively linked to an event that occurred after recognition from the impairment loss, the impairment loss was reversed through profit or loss; otherwise, any increase in fair value was recognized through Other Comprehensive Income.

Any subsequent recovery in the fair value of an equity security measured at fair value through Other Comprehensive Income and reduced to recoverable amount was recognized at any time in Other Comprehensive Income.

Information, assumptions and techniques used in estimating the impairment

Classification of financial instruments by stages

The portfolio of financial instruments subject to impairment is divided into three levels, based on the stage of each instrument related to its level of credit risk:

- Stage 1: It is understood that a financial instrument at this stage does not have a significant increase in risk since its initial recognition. The provision for this Asset represents the expected loss resulting from possible non-compliance over the next 12 months;

- Stage 2: If a significant increase in risk is identified since initial recognition, without having materialized deterioration, the financial instrument will be classified within this stage. In this case, the amount referring to the provision for expected loss due to default reflects the estimated loss of the residual life of the financial instrument. For the assessment of the significant increase in credit risk, the quantitative measurement indicators used in the normal management of credit risk will be used, as well as other qualitative variables, such as the indication that it is a non-impaired operation if considered as refinanced or operations included in a special arrangement; and

- Stage 3: A financial instrument is recorded within this stage, when it shows evident signs of deterioration as a result of one or more events that have already occurred and that materialize in a loss. In this case, the amount referring to the allowance for losses reflects the expected losses from credit risk over the expected residual life of the financial instrument. 

Consolidated Financial Statements | December 31, 2021 | F-123

Table of Contents

 

* Values expressed in thousands, except when indicated.

Impairment estimation methodology

The measurement of the impairment loss is carried out through the following factors:

- Default Exposure or EAD: is the transaction value exposed to credit risk, including the current available balance ratio that could be provided at the time of default. The models developed incorporate assumptions about changes in the payment schedule for operations.

- Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay principal and/or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - lifetime (Stages 2 and 3) , which considers the probability that the operation will default between the balance sheet date and the operation's residual maturity date. The standard requires that future information relevant to the estimation of these parameters must be considered.

- Loss on Default (LGD): is the loss resulting from default, ie the percentage of exposure that cannot be recovered in the event of default. It mainly depends on the guarantees associated with the operation, which are considered as risk mitigation factors associated with each credit financial asset and the expected future cash flows to be recovered. As established in the regulation, future information must be considered for its estimation.

- Discount rate: is the rate applied to estimated future cash flows over the expected life of the asset, to bring them to present value.

In order to estimate the aforementioned parameters, the Bank has applied its experience in the development of internal models to calculate the parameters both for regulatory purposes and for internal management.

Default definition

The Bank considers a financial asset to be in default when:

- it is probable that the debtor will not pay its credit obligations to the Bank in full; or

- the debtor has significant credit obligations to the Bank overdue for more than 90 days, as a general rule.

Overdrafts are considered overdue if the customer violates a recommended limit or has been granted a limit lower than the current outstanding amount.

When assessing whether a debtor is in default, the Bank considers indicators:

- qualitative – for example, breaches of covenants;

- quantitative – for example, overdue status and non-payment of another obligation of the same issuer to the Bank; and

- based on data collected internally and obtained from external sources.  

b.3) Measures and measurement tools

Rating tools

The Bank uses proprietary internal rating models to measure the credit quality of a given customer or transaction. Each rating relates to a certain probability of default or non-payment, determined on the basis of the customer's historical experience, to predict default. Rating/Scores models are used in the Bank’s loan approval and risk monitoring process.

The classification of loans into different categories is made according to the analysis of economic and financial situation of the client and any other registratered information updated frequently. New modes of operation are subject to credit risk evaluation, verification and adaptation to the controls adopted by the Bank.

Ratings assigned to customers are reviewed periodically to include any new financial information available and the experience in the Banking relationship. The frequency of the reviews is increased in case of customers that reach certain levels in the automatic warning systems and of customers classified as requiring special monitoring. The own rating tools are monitored and reviewed to qualifications by them awarded are progressively enhanced.

Credit risk parameters

We assess all borrowings for an allowance for impairment of credit risk. Loans are individually assessed for impairment or collectively assessed by grouping similar risk characteristics. Loans individually assessed for impairment are not collectively assessed.

The estimative

To individually measure the impairment loss of loans assessed for impairment, we consider borrowers' conditions, such as their economic and financial situation, level of indebtedness, capacity to generate cash flow, quality of management, corporate governance, quality of internal controls, payment history, industry experience, contingencies and credit limits, as well as asset characteristics, such as their nature and purpose, type, sufficiency and liquidity level of guarantees, and also based on experience historical impairment loss and other circumstances known at the time of valuation.

Consolidated Financial Statements | December 31, 2021 | F-124

Table of Contents

 

* Values expressed in thousands, except when indicated.

To measure the impairment loss of loans collectively assessed for impairment, we separate financial assets into groups considering credit risk characteristics and similarities. In other words, according to the segment, type of assets, guarantees and other factors associated with the historical impairment experience and other circumstances known at the time of the assessment. The impairment loss is calculated using statistical models that consider the following factors:

Default Exposure (EAD): is the amount of a transaction exposed to credit risk, including the proportion of current outstanding balance exposure that could be provided at default. Models developed incorporate hypotheses considering possible changes in the payment schedule.

Default probability (PD): is the probability that a counterparty will not fulfill its obligation to pay principal and/or interest. For the purposes of IFRS 9, this will consider both the PD-12 months, which is the probability that the financial instrument will default in the next 12 months, as well as the lifetime PD, which is the probability of the transaction to default considering its term. remaining. Future relevant information is considered necessary to estimate these parameters Probability of Default (PD) and as per the standard.

Loss Given Default (LGD) are based on internal experience, i.e. on default observations and on the experience in defaulted loan recoveries during a defined credit cycle.

For low risk portfolios, such as banks, sovereign risk or global wholesale clients, the parameters are based on CDS market data and with global broadness, using Group Santander´s world presence.

For the other portfolios, parameter estimative are based on the Bank’s internal experience.

In addition to the Probability of Default (PD), the Bank: is managing its credit portfolio, seeking to make loans to borrowers that have higher volumes of guarantees associated with the operations and also works constantly on strengthening its credit recovery department. These and other actions combined, are responsible for ensuring the adequacy of LGD parameters (Loss Given Default, the loss resulting from the borrower's default event to honor the principal and/or interest payments).

LGD calculation is based on net lossesproduced in case of non-performing loans, considering the guarantees associated with the transaction, revenues and expenses related to the recovery process and also the timing default.

Besides that, the Loss identification period, or “LIP,” is also considered in the estimation of the risk parameters that is represented by the time period between the occurrence of a loss event and the identification of an objective evidence of this loss. In other words, it representsreflects the time horizon frompercentage of exposure that could not be recovered in the event of a default event. It mainly depends on the guarantees, which are considered to mitigate the credit loss occurrence untilrisk associated with each financial asset, and the effective confirmation of such loss.future cash flows that are expected to be recovered. According to the standard, forward-looking information must be considered in the estimate.

 

TheDiscount rate: the rate applied to estimated future cash flows during the expected life of the asset, which is equal to the net present value of the financial instrument at its book value.

To estimate the above parameters, the Bank use proprietaryapplied its experience in the development of internal rating models to measure the credit quality of a given client or transaction. Each rating relates to a certain probability of default or non-payment, determined on the basis of the client's history, with the exception of certain portfolios classified as “low default portfolios”. These ratingscalculate parameters for both regulatory and models are used in loan approval and risk monitoring processes.management purposes.

 

F-123

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

The table shown in note 9.b shows the portfolio by the internal risk rating levels and theirits probability of default.

Thousand of reais     2019 2018 2017
           
By maturity          
Less than 1 Year     186,196,849 186,373,511 174,247,968
Between 1 and 5 years     117,841,564 99,309,551 82,513,030
More than 5 years     43,218,247 36,250,128 31,068,215
Loans and advances to customers, gross     347,256,660 321,933,190 287,829,213
           
By internal classification of risk          
Low     257,133,115 240,440,294 226,098,497
Medium-low     56,549,196 50,485,682 33,635,378
Medium     11,754,806 11,967,262 10,423,293
Medium-High     8,512,386 7,722,198 8,215,024
High     13,307,156 11,317,754 9,457,021
Loans and advances to customers, gross     347,256,660 321,933,190 287,829,213

To the portfolios which the Bank presents limited historic data, reference external information are used to complement internal available data. The portfolios for which reference external information represent significant data to measure the expected credit losses are present below.default.

 

      2019
       
  Exposure Probability of default Default loss
Commercial and industrial 145,387,439 7% 40%
Real Estate Credit - construction 39,720,713 3% 10%
Individual loans 160,036,668 10% 64%
Leasing 2,111,840 2% 41%
Thousand of reais 202120202019
     
By maturity    
Less than 1 Year 270,050,934 219,062,744 186,196,849 
Between 1 and 5 years 160,932,317 147,013,817 117,841,564 
More than 5 years 62,371,451 51,745,465 43,218,247 
Loans and advances to customers, gross 493,354,702 417,822,026 347,256,660 
     
By internal classification of risk    
Low 374,505,211 347,315,357 257,133,115 
Medium-low 79,216,725 24,277,404 56,549,196 
Medium 14,589,977 26,231,871 11,754,806 
Medium-High 9,413,111 3,896,457 8,512,386 
High 15,629,678 16,100,937 13,307,156 
Loans and advances to customers, gross 493,354,702 417,822,026 347,256,660 

Expected credit losses, measured using sufficient and available historical data, are presented below.

 

    2021
     
   Probability of default
(PD)		Default loss
(LGD)
  Exposure
  
   
Commercial and industrial 247,674,251 6%50%
Real Estate Credit - construction 54,738,606 2%8%
Individual loans 188,408,840 10%61%
Leasing 2,533,004 2%31%

The exposure above are related to the credit operations. The Bank understands that the exposure related to the avals and sureties and other financial assets at amortized cost have low risk.

Consolidated Financial Statements | December 31, 2021 | F-125

Table of Contents

 

* Values expressed in thousands, except when indicated.

    2020
     
   Probability of default
(PD)		Default loss
(LGD)
  Exposure
  
   
Commercial and industrial 191,281,653 5%41%
Real Estate Credit - construction 45,791,869 3%7%
Individual loans 178,652,145 9%52%
Leasing 2,096,359 1%31%
     
    2019
     
   Probability of default
(PD)		Default loss
(LGD)
  Exposure
  
   
Commercial and industrial 145,387,439 7%40%
Real Estate Credit - construction 39,720,713 3%10%
Individual loans 160,036,668 10%64%
Leasing 2,111,840 2%41%

 

b.3)b.4) Observed loss: measures of credit cost

The Bank periodically estimate losses related to credit risk and then we compare those estimates with actual losses of the month. Periodically conduct tests in order to monitor and maintain control over credit risk.

To complement the use of admission and rating, the Bank use other measures that supports the prudent and effective management of credit risk, based on the loss observed.

The cost of credit is measured by the sum of credit losses and to the average loansloans’ portfolio of the same year.

b.4)b.5) Credit risk cycle

Banco Santander has a global view of its credit portfolio throughout the various phases of the risk cycle, with a level of detail that allows us to evaluate the current situation of risk and any movements. This mapping is followed by the Board of Directors and the Executive Committee of the bank that no only sets policies and risk procedures, limits and delegates responsibilities. It also approves and supervises the activities of the area.

The risk management process consists of identifying, measuring, analyzing, controlling, negotiating and deciding on, as appropriate, the risks incurred in the Bank’s operations and companies of the conglomerate. The risk cycle comprises three different phases:

• Pre-sale: this phase includes the risk planning and setting targets, determination of the Bank’s risk appetite, approval of new products, risk analysis and credit rating process, and limit setting.

• Sale: this is the decision-making phase for both pre-classified and specific transactions.

• Post-sale: this phase comprises the risk monitoring, measurement and control processes and the recovery process.

Planning and setting risk limits

Risk limit setting is a dynamic process conductedthat identifies Banco Santander’s risk appetite by assessing business proposals and its risk profile.attitude. This process is defined through the risk appetite approved by the Bank's Management and the units.

In the case of individualized risks, the most basic level is the customer, for which individual limits are set.

For SCIBGCB clients, a pre-classification model is used based on a system of measurement and monitoring of economic capital. In relation to the Corporate segment, the operational limit model is used in maximum nominal credit amounts.

To the risks of customers with standardized management, the limits of the portfolios are planned using credit management programs (SGP) agreed document for the areas of business and risks, and approved by the Executive Committee. This document contains the results expected for the business in terms of risk and return, beyond the limits which govern the activity and risk management. This client group has a more automated treatment in risks.

F-124

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Risk analysis and rating process

Risk analysis is a pre-requisite for the approval of loans to clients by the Bank. This analysis consists of examining the counterparty’s ability on meeting its contractual obligations to the Banco Santander, which involves analyzing the client’s credit quality, its risk transactions, solvency, and sustainability of business and the return to be obtained in view of the risk assumed.

The risk analysis is conducted annually, at least, and can be held shortly when client profile indicates (through systems with centralized alerts, managers visits to clients or specific credit analysis), or when operations are not covered by pre-classification.

 

Consolidated Financial Statements | December 31, 2021 | F-126

Table of Contents

 

* Values expressed in thousands, except when indicated.

Decision-Making on Operations

The process of decision making on operations aims to analyze and adopt adopt in accordance with pre-established policies, taking into accountconsidering risk appetite and any elements of the operation that are important in assessing risk and return.

The Banco Santander uses, among others, the RORAC methodology (profitability on risk-adjusted capital), for risk analysis and pricing in the decision-making process on transactions and deals.

Risk monitoring and control

In Individual retail, customers are systematically reviewed through a daily credit rating process. This process allows for reassessments in credit exposure, allowing for increases in exposure for customers with good credit quality. In case of detection of deterioration in the risk level, actions to contain credit risk and preventive actions are automatically generated.

TheIn the case of individual management, preventive detection of deterioration in the operation’s credit quality of the operation is fromthe responsibility of the commercial manager responsibility in conjunctiontogether with the risk analyst. Additionally, the risk monitoring is maderisks are monitored through a permanent observation process in order to anticipate thefor early identification of incidents which can occurthat may result in the evolution of the operations, clientscustomers and their environment.

This monitoring process maycan result in the client’s classification of the client in SCAN. ThisSCAN (this is a system whichthat allows the differentiation of the management level and the action to be taken case-by-case.

on a case-by-case basis).

Risk control function

The control function is performed by assessing risks from various complementary perspectives, the main pillars are the control by geographical location, business area, management model, product and process, facilitating thus the detection of specific areas requiring measures for which decisions should be taken. To obtain an overview of the bank's loan portfolio over the various phases of the credit cycle, with a level of detail that allows the assessment of the current risk situation and any movements.

Any changes in the Bank’s risk exposure are controlled periodically.on an ongoing and systematic basis. The impacts of these changes in certain future situations, both of an exogenous nature and those arising from strategic decisions, are assessed in order to establish measures that place the profile and amount of the loss portfolio within the parameters set by Executive Commission.

b.5)b.6) Credit recovery

"Strategies and action channels are defined according to the days of past due loans and the amounts, that result in a Map of Responsibilities and always look as the first alternative, the client's recovery.

The Bank uses tools as behavioral scoring to study the collection performance of certain groups, in order to reduce costs and increase recoveries. These models seek to measure the probability of clients becoming overdue adjusting collection efforts so that clients less likely to recover, receive timely actions. In cases the payments is most likely to happen, the focus is given in maintaining a healthy relationship with clients. All clients with severe or rescheduled credits delays values have internal restrictions.

Clients with high risk index have a model of recovery, with a commercial follow-up and a recovery specialist.

b.6)b.7) Credit risk from other perspective

Certain areas and specific views of credit risk deserve a specialist’s attention, complementary to global risk management.

Concentration risk

 

Concentration risk is an essential factor to be analyzed in the area of credit risk management.management area. The Bank constantlycontinuously monitors the degree of concentration of its credit risk in its portfolios, by economic sector, geographical area/geographic location/country, productgroups of customers and client group.

products.

The risk committeeRisk Committee establishes the risk policies and reviewsanalyzes the exposure limits required to ensure adequatefor the proper management of the portfolio's credit risk portfolio concentration.

From thea sectorial standpoint,point of view, the distribution of the corporate client portfolio is adequately diversified.

The Bank’s Risk AreaBank's Executive Vice President for Risks works closelytogether with the Executive Vice President for Strategic Finance Area in the active management of credit portfolios, which includes reducing the concentration of exposures through severalvarious techniques, such asincluding the arrangementmaintenance of guarantees to mitigate the companies risk creditof companies, derivatives for hedgeprotection purposes (hedge) or the performanceexecution of securitization transactions in order to optimize the risk/return ratiorate of the total portfolio.

portfolio as a whole.

Credit risk from financial market operations

This heading includes the credit risk arising in treasury operations with clients, mainly credit institutions. These operations are performed both via money market financing products with different financial institutions and via derivative instruments arranged for the purpose of serving our clients.

Risk control is performed using an integrated, real-time system that enables the Bank to know at any time the unused exposure limit with respect to any counterparty, any product and maturity and at any Bank unit.

 

Consolidated Financial Statements | December 31, 2021 | F-127

Table of Contents

 

* Values expressed in thousands, except when indicated.

Credit risk is measured at its current market value and its potential value (exposure value considering the future variation in the underlying market factors). Therefore, the equivalent credit risk (CRE) is defined as the sum of net replacement value plus the maximum potential value of the contracts in the future.

F-125

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Environmental risk

The Banco Santander's Social and Environmental Responsibility Policy (PRSA), which follows the guidelines of CMN Resolution 3232/20144,945/2021 and the SARB Regulation Nº. 14 of Febraban, establishes guidelines and consolidates specific policies for socio-environmental practices in business and in relationships with stakeholders. These practices include the management of socio-environmental risks, impacts and opportunities related to topics such as adequacy in credit granting and use, supplier management and socio-environmental risk analysis, which is carried out through the analysis of clients' socio-environmental practices. and Varejo, of the Corporate segment 3 (one of the Corporate Retail segments of the Bank), which have limits or credit risk above R $ 5 million and which are part of the 14 socio-environmental care sectors. In this case, the socio-environmental risk is analyzed in order to mitigate the issues of operational risk, capital risk, credit risk and reputational risk. Since 2009, Santander has been a signatory to the Equator Principles and this set of guidelines is used to mitigate socio-environmental risks in the financing of large projects.

Mitigation of social and environmental risks in financing large projects is carried out based on analyzes based on the guidelines of the Equator Principles, a set of social and environmental criteria referenced in the International Finance Corporation's (IFC) Performance Standards on Social and Environmental Sustainability and in the Environmental Guidelines , Health and Safety of the World Bank Group.

The commitments assumed in the PRSA are detailed in other Bank policies, such as the Anti-Corruption Policy, Supplier Relationships and Homologation Policies and Social and Environmental Risk Policies, as well as the Private Social Investment Policy, which aims to guide the strategy in this area. and to present guidelines for social programs that strengthen this strategy.

b.7)b.8) Credit Management - Main changes

The involvement of senior management in decision making (held collectively at our Committees), besides independence Risks relating to the business allow more assertive decisions and credit risk reduction.

The analysis of credit for projects and companiestrends observed in the Wholesale segment, continueyear 2021 were consistent with the trends presented 2020, where in a challenging economic scenario. The Bank maintained the good quality of its business and did not presented major variances in its delinquency ratios. In December 2021, this ratio achieved 5.46% compared to integrate opinions5.55% of our areaDecember 2020 and 6.75%, of Environmental Risk.December, 2019.

Below is a table showing the evolution of the main credit indicators.indicators.

 

 2019 2018 2017 202120202019
  
Credit risk exposure - customers (Thousand of Reais)Credit risk exposure - customers (Thousand of Reais) 391,569,227 364,193,664 330,474,249Credit risk exposure - customers (Thousand of Reais)540,872,632 466,104,042 391,569,227 
Loans and advances to customers, gross (note 9) 347,256,660 321,933,190 287,829,213 Loans and advances to customers, gross (note 9)493,354,702 417,822,026 347,256,660 
Contingent Liabilities - Guarantees and other sureties (note 44.a) 44,312,567 42,260,474 42,645,036
Contingent Liabilities - Guarantees and other sureties (note 43.a) Contingent Liabilities - Guarantees and other sureties (note 43.a)47,517,931 48,282,016 44,312,567 
Non-performing loans ratio (%) - unaudited 6.75% 6.98% 6.65% 5.46%5.55%6.75%
Impairment coverage ratio (%) - unaudited 96.58% 102.42% 95.39% 110.40%110.64%96.58%
Specific credit loss provisions, net of RAWO (*) (Thousand of Reais) - unauditedSpecific credit loss provisions, net of RAWO (*) (Thousand of Reais) - unaudited22,625,750 22,969,315 18,261,638Specific credit loss provisions, net of RAWO (*) (Thousand of Reais) - unaudited29,723,376 25,640,488 22,625,750 
Cost of credit (% of risk) - unaudited 3.93% 3.90% 3.98% 3.73%4.35%3.93%
Data prepared on the basis of management criteria and the accounting criteria of the controller unit.Data prepared on the basis of management criteria and the accounting criteria of the controller unit. Data prepared on the basis of management criteria and the accounting criteria of the controller unit.
(*) RAWO = Recoveries of Assets Derecognized. (*) RAWO = Recoveries of Assets Derecognized.

 

The Bank incorporates information about the future both in its assessment if the credit risk of an instrument has increased substantially since the initial recognition and in its measurement of the expected credit losses. Based on guidance from its internal committees and economic experts and considering a range of actual and anticipated external information, the Bank develops a base scenario as well as other possible scenarios. This process involves the projection of two or more additional economic scenarios and considers the respective probabilities of each result. External information includes economic data and forecasts published by government agencies and monetary authorities and selected private sector analysts and academics.

The base case represents the most likely result and is in line with the information used by the Bank for other purposes, such as strategic planning and budgeting. The other scenarios represent more optimistic and pessimistic results. Periodically, the Bank conducts more extreme stress tests to adjust its determination of these other representative scenarios.scenarios

Below are the assets with excess or insufficiency of guarantees:

         12/31/2019
         In Reais Million
  Over-collateralized assets  Under-collateralized assets
            
 Carrying value of the assets Fair value of collateral % collateral coverage Carrying value of the assets Fair value of collateral % collateral coverage
Individuals (1)      53,899     150,853 280%         2,762         2,592 94%
Mortgages      39,016       84,862 218%                3                3 86%
Very small, small and middle-market companies, corporates and foreign loans (2)      34,008     116,236 342%       33,140       26,587 80%
Total    126,923     351,951 277%       35,905       29,182 81%

(1) Vehicles and others loans. 

(2) Cayman and Luxemburgo. 

Unsecured loans: 195,765.

F-126

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

The Bank identified and documented the main determinants of credit risk and credit losses for each portfolio of financial instruments and, using a historical data analysis, estimated the relationships between macroeconomic variables and credit risks and credit losses.

2019
Unemployment rates11.9%
Interest Rates4.5%
increase in GDP1.2%

The expected relation between key-indicators and default rates and several financial assets losses were predicted based on the historic analysis data of recent years.


c) Market Risk

 

Market risk is the exposure to risks such as interest rates, exchange rates, prices of goods, prices in the stock market and others values, according to the type of product, volume of operations, term and conditions of the agreement and underlying volatility.

 

The Bank operates according to global policies, within the Group’s risk tolerance level, aligned with the objectives in Brazil and in the world.

 

Consolidated Financial Statements | December 31, 2021 | F-128

Table of Contents

 

* Values expressed in thousands, except when indicated.

With this purpose, it has developed its own Risk Management model, according to the following principles:

●Functional independence;

·Functional independence;

●Executive capacity sustained by knowledge and proximity with the client;

·Executive capacity sustained by knowledge and proximity with the client;

●Global reach of the function (different types of risks);

·Global reach of the function (different types of risks);

●Collective decision-making, that evaluates a variety of possible scenarios and do not compromise the results with individual decision (including Brazil Executive Risk Committee - Comitê Executivo de Riscos Brasil). This Comitee delimits and approves the operations. The Asset and Liabilities Committee, which responds for the capital management and structural risks, including country-risk, liquidity and interest rates.

·Collective decision-making, that evaluates a variety of possible scenarios and do not compromise the results with individual decision (including Brazil Executive Risk Committee - Comitê Executivo de Riscos Brasil). This Comitee delimits and approves the operations. The Asset and Liabilities Committee, which responds for the capital management and structural risks, including country-risk, liquidity and interest rates.

●Management and improvement of the equation risk/return; and

·Management and improvement of the equation risk/return; and

·Methodologies for risk management, such as Value at Risk – VaR (historical simulation of 521 days with a confidence level of 99% and time horizon of one day), scenarios, financial margin sensibility, equity value and contingency plan.

●Advanced methodologies for risk management, such as Value at Risk – VaR (historical simulation of 521 days with a confidence level of 99% and time horizon of one day), scenarios, financial margin sensibility, equity value and contingency plan.

The Market Risks structure is part of the Vice Presidency of Credit and Market Risks, an independent area that applies risk policies taking into consideration the guidelines of the Board of Directors and the Risks Division of Santander in Spain.

 

c.1) Activities subject to market risk

The measurement, control and monitoring of the market risk area comprises all operations in which net worth risk is assumed. This risk arises from changes in the risk factors –interest rate, exchange rate, equities, commodity prices and the volatility thereof– and from the solvency and liquidity risk of the various products and markets in which the Bank operates.

The activities are segmented by risk type as follows:

I.Trading: this item includes financial services for clients, trading operations and positioning mainly in fixed-income, equity , foreign currency products and shares.

II.Balance sheets management: A risk management assessment aims to give stability to interest income from the commercial and economic value of the Bank, maintaining adequate levels of liquidity and solvency. The risk is measured by the balance sheets exposure to movements in interest rates and level of liquidity.

III.Structural risks:

●Structural foreign currency risk/hedges of results: foreign currency risk arising from the currency in which investments in consolidable and non-consolidable companies are made (structural exchange rate). This item also includes the positions taken to hedge the foreign currency risk on future results generated in currencies other than the Real (hedges of results).

·Structural foreign currency risk/hedges of results: foreign currency risk arising from the currency in which investments in consolidable and non-consolidable companies are made (structural exchange rate). This item also includes the positions taken to hedge the foreign currency risk on future results generated in currencies other than the Real (hedges of results).

·Structural equities risk: this item includes equity investments in non-consolidated financial and non-financial companies that give rise to equities risk.

●Structural equities risk: this item includes equity investments in non-consolidated financial and non-financial companies that give rise to equities risk.

The Financial Management area is responsible for the balance sheet management risk and structural risks through the application of uniform methodologies adapted to the situation of each market in which the Bank operates. Thus, in the convertible currencies area, Financial Management directly manages the Parent's risks and coordinates the management of the other units operating in these currencies. Decisions affecting the management of these risks are taken through the ALCO (Asset Liability Control committees) in the respective countries.

The Financial Management goal is to ensure the stability and recurring nature of both the net interest margin of the commercial activity and the Bank’s economic value, whilst maintaining adequate liquidity and solvency levels.

Each of these activities is measured and analyzed using different tools in order to reflect their risk profiles as accurately as possible.

 

Interest rate Risk

TheThe following table aggregates by product the cash flows of the operations of our perimeter of companies that have interest income. The transactions are presented by the book balance at the closing date of the years 2019, 20182021, 2020 and 2017.2019. It is not associated with the risk management of changes in interest rates or indexer mismatches, which is done by monitoring metrics of market.Marketplace. However, it allows to

F-127

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

evaluate the concentrations of term and possible risks and below it, the balances of the same products are presented at the redemption value at maturity, except for the line dealing with receivables and obligations linked to derivative contracts.

 

           2019
Position of accounts subject to interest rate risk     In millions of Reais
    0 to 30 days  31 to 180 days  181 to 365 days  1 to 5 years  Above 5 years  Total
              
Interest-earning assets:           
              
 Financial assets measured at fair value through profit or loss 3,891 1,091 737 8,444 4,446 18,609
 Debt instruments - 3 140 188 889 1,220
 Equity instruments 171 - - - - 171
 Trading derivatives 3,720 1,088 597 8,256 3,557 17,218
 Other Financial Assets At Fair Value Through Profit Or Loss 4,261 802 3,981 16,737 7,075 32,856
 Debt instruments 2,232 802 3,981 16,737 7,075 30,827
 Equity instruments 2,029 - - - - 2,029
 Investments Held to Maturity 98 96 280 3,679 3,981 8,134
 Reserves from Brazilian Central Bank 69,663 - - - - 69,663
 Financial Assets Measured at Amortized Cost 28,416 75,794 51,603 112,467 54,815 323,095
 Total 106,329 77,783 56,601 141,327 70,317 452,357
              
Interest-bearing liabilities:           
              
 Customer Deposits and Credit Institutions224,610 62,181 69,277 70,882 2,556 429,506
 Subordinated debts- - - 10,077 - 10,077
 Marketable debt securities3,677 25,781 19,125 28,134 3,475 80,192
 Trading derivatives4,597 1,621 1,074 9,119 3,828 20,239
 Short positions23,501 - - - - 23,501
 Total 256,385 89,583 89,476 118,212 9,859 563,515
              
           2018
Position of accounts subject to interest rate risk     In millions of Reais
    0 to 30 days  31 to 180 days  181 to 365 days  1 to 5 years  Above 5 years  Total
              
Interest-earning assets:           
              
 Financial assets measured at fair value through profit or loss 8,193 6,155 12,013 67,606 25,964 119,931
 Debt instruments 5,359 5,192 8,294 58,363 23,460 100,668
 Equity instruments 807 - - - - 807
 Trading derivatives 2,027 963 3,719 9,243 2,504 18,456
 Other Financial Assets At Fair Value Through Profit Or Loss 677 9,091 368 16,702 3,577 30,415
 Debt instruments 379 9,091 368 16,702 3,577 30,117
 Equity instruments 298 - - - - 298
 Investments Held to Maturity 24 521 89 3,603 3,826 8,063
 Reserves from Brazilian Central Bank 70,103 - - - - 70,103
 Financial Assets Measured at Amortized Cost 27,387 101,441 35,900 85,318 60,966 311,012
 Total 106,384 117,208 48,370 173,229 94,333 539,524
              
Interest-bearing liabilities:           
              
 Deposits from credit institutions200,818 47,172 65,606 71,413 5,343 390,352
 Subordinated debts9,857 - - - 9,687 19,544
 Marketable debt securities13,353 20,875 14,612 30,138 9,715 88,693
 Trading derivatives1,104 1,370 3,257 9,673 3,322 18,726
 Short positions32,440 - - - - 32,440
 Total 257,572 69,417 83,475 111,224 28,067 549,755
              

F-128

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

           2017
Position of accounts subject to interest rate risk     In millions of Reais
    0 to 30 days  31 to 180 days  181 to 365 days  1 to 5 years  Above 5 years  Total
              
Interest-earning assets:           
              
 Financial Assets Held For Trading5,541 1,779 6,556 29,968 10,194 54,038
 Debt instruments653 890 5,739 16,709 8,148 32,139
 Equity instruments490 - - - - 490
 Trading derivatives4,398 889 818 13,259 2,046 21,410
 Available-For-Sale Financial Assets2,032 1,272 17,092 46,502 23,711 90,609
 Debt instruments925 1,272 17,092 46,502 23,711 89,503
 Equity instruments1,107 - - - - 1,107
 Other Financial Assets At Fair Value Through Profit Or Loss72 13 50 479 1,008 1,622
 Debt instruments38 13 50 479 1,008 1,589
 Equity instruments33 - - - - 33
 Non-Current Assets Held For Sale80 168 222 3,082 7,040 10,593
 Reserves from Brazilian Central Bank59,051 - - - - 59,051
 Loans and Receivables22,033 81,275 34,430 86,645 71,453 295,835
 Total 88,809 84,507 58,351 166,677 113,406 511,750
              
Interest-bearing liabilities:           
              
 Deposits from credit institutions150,719 46,254 62,605 69,778 5,119 334,474
 Subordinated debts- 789 257 7,784 - 8,829
 Marketable debt securities4,436 36,208 12,313 15,544 847 69,348
 Trading derivatives4,618 659 504 12,243 2,285 20,310
 Short positions32,531 - - - - 32,531
 Total 192,304 83,909 75,679 105,349 8,251 465,492

 

F-129

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-129

Table of Contents

 

* Values expressed in thousands, except when indicated.

     2021
Position of accounts subject to interest rate risk  In millions of Reais
 0 to 30 days31 to 180 days181 to 365 days1 to 5 yearsAbove 5 yearsTotal
       
Remunerated Assets:      
       
Financial assets measured at fair value in income-   -   -   -   3,122   3,122   
Debt instruments-   -   -   -   3,122   3,122   
Equity instruments-   -   -   -   -   -   
Derivatives-   -   -   -   -   -   
Financial assets measured at fair value in profit or loss for trading 5,573   4,205   5,128   17,846   12,447   45,199   
Debt instruments355  ��858   2,358   10,267   9,963   23,801   
Equity instruments21   1   8   11   3   44   
Derivatives5,197   3,346   2,762   7,568   2,481   21,354   
Financial assets not intended for trading Mandatory measured at the fair value of the result54,053   1,012   4,779   59,267   32,808   151,919   
Debt instruments54,053   1,012   4,779   59,267   32,808   151,919   
Loans and Advances to Customers-   -   -   -   -   -   
Financial assets measured at fair value in other comprehensive income-   -   -   -   -   -   
Debt instruments-   -   -   -   -   -   
Equity instruments-   -   -   -   -   -   
Financial Assets Measured at Amortized Cost135,081   131,966   96,793   178,655   102,292   644,787   
Loans and Other Amounts with Credit stitutions 73,293   1,479   2,255   2,616   -   79,643   
Loans and advances to customers60,735   128,631   71,041   158,933   94,368   513,708   
Debt Instruments1,053   1,856   23,497   17,106   7,924   51,436   
Total194,707   137,183   106,700   255,768   150,669   845,027   
 -   -   -   -   -   -   
Remunerated Liabilities:-   -   -   -   -   -   
 -   -   -   -   -   -   
Financial Liabilities Measured at Fair Value in income Held for Trading18,955   2,564   2,191   11,196   2,703   37,609   
Derivatives 6,174   2,564   2,191   11,196   2,703   24,828   
Short Positions12,781   -   -   -   -   12,781   
Financial liabilities at amortized cost309,659   116,052   108,718   180,572   31,897   746,898   
Deposits from the Central Bank of Brazil and deposits from credit institutions 43,414   48,359   27,340   11,415   4,035   134,563   
Customer deposits260,711   50,470   70,403   110,290   24   491,898   
Bonds and securities5,534   17,223   10,975   58,867   8,334   100,933   
Debt Instruments Eligible to Capital-   -   -   -   19,504   19,504   
Total328,614   118,616   110,909   191,768   34,600   784,507   

Consolidated Financial Statements | December 31, 2021 | F-130

Table of Contents

 

* Values expressed in thousands, except when indicated.

       
     2020
Position of accounts subject to interest rate risk  In millions of Reais
 0 to 30 days31 to 180 days181 to 365 days1 to 5 yearsAbove 5 yearsTotal
       
Remunerated Assets:      
       
Financial assets measured at fair value in income-   153 50 250 1,747 2,200 
Debt instruments-   153 50 250 1,747 2,200 
Equity instruments-   -   -   -   -   -   
Derivatives-   -   -   -   -   -   
Financial assets measured at fair value in profit or loss for trading 15,635 18,487 4,867 57,091 17,707 113,788 
Debt instruments3,480 11,789 3,150 47,287 14,078 79,784 
Equity instruments1,164 -   -   -   -   1,164 
Derivatives10,992 6,698 1,717 9,804 3,629 32,840 
Financial assets not intended for trading Mandatory measured at the fair value of the result439 -   -   -   -   439 
Debt instruments439 -   -   -   -   439 
Loans and Advances to Customers-   -   -   -   -   -   
Financial assets measured at fair value in other comprehensive income3,455 3,625 12,177 63,651 22,430 105,339 
Debt instruments3,383 3,625 12,177 63,651 22,430 105,267 
Equity instruments72 -   -   -   -   72 
Financial Assets Measured at Amortized Cost50,776 130,066 55,339 152,438 63,844 452,462 
Loans and Other Amounts with Credit stitutions 25,201 39,879 2,765 3,799 -   71,644 
Loans and advances to customers25,490 88,071 50,829 134,805 61,795 360,990 
Debt Instruments85 2,117 1,745 13,833 2,049 19,828 
Total70,305 152,331 72,433 273,429 105,728 674,227  
       
Remunerated Liabilities:      
       
Financial Liabilities Measured at Fair Value in income Held for Trading55,3137,8782,08812,6293,51581,424
Derivatives 10,160 7,878 2,088 12,629 3,515 36,270 
Short Positions45,153 -   -   -   -   45,153 
Financial liabilities at amortized cost174,848 100,497 91,433 131,589 16,667 515,035 
Deposits from the Central Bank of Brazil and deposits from credit institutions 4,007 32,846 22,603 7,891 3,031 70,379 
Customer deposits163,297 44,035 61,293 98,867 203 367,694 
Bonds and securities7,544 23,616 7,537 24,832 313 63,841 
Debt Instruments Eligible to Capital-   -   -   -   13,120 13,120 
Total230,161 108,376 93,521 144,218 20,182 596,458 
       
       
       
       
       

Consolidated Financial Statements | December 31, 2021 | F-131

Table of Contents

 

* Values expressed in thousands, except when indicated.

       
       
     2019
Position of accounts subject to interest rate risk  In millions of Reais
 0 to 30 days31 to 180 days181 to 365 days1 to 5 yearsAbove 5 yearsTotal
       
Interest-earning assets:      
       
Financial Assets Held for Trading3,891 1,091 737 8,444 4,446 18,609 
Debt instruments-   3 140 188 889 1,220 
Equity instruments171 -   -   -   -   171 
Trading derivatives3,720 1,088 597 8,256 3,557 17,218 
Other Financial Assets at Fair Value Through Profit Or Loss4,261 802 3,981 16,737 7,075 32,856 
Debt instruments2,232 802 3,981 16,737 7,075 30,827 
Equity instruments2,029 -   -   -   -   2,029 
Investments Held to Maturity 98 96 280 3,679 3,981 8,134 
Reserves  from Brazilian Central Bank69,663 -   -   -   -   69,663 
Financial Assets Measured at Amortized Cost28,416 75,794 51,603 112,467 54,815 323,095 
Total106,329 77,783 56,601 141,327 70,317 452,357 
       
Interest-bearing liabilities:      
       
Deposits from credit institutions224,610 62,181 69,277 70,882 2,556 429,506 
Subordinated debts-   -   -   10,077 -   10,077 
Marketable debt securities3,677 25,781 19,125 28,134 3,475 80,192 
Trading derivatives4,597 1,621 1,074 9,119 3,828 20,239 
Short positions23,501 -   -   -   -   23,501 
Total256,385 89,583 89,476 118,212 9,859 563,515 
       

 

Currency RiskPosition of accounts subject to currency risk

Currency Risk      
       
     2021
Position of accounts subject to currency risk  In millions of Reais
       
       
Asset:  DollarEuroOthersTotal
       
Cash/Applications/Debt Instruments  114,021   1,337   5,163   120,521   
Loans and advances to customers5,529   2,218   608   8,355   
Derivatives  289,245   14,190   8,011   311,446   
Others  1,251   -   -   1,251   
Total  410,046   17,744   13,782   441,573   
       
Liabilities:  DollarEuroOthersTotal
       
Funding in foreign currency  80,991   2,194   2,130   85,315   
Derivatives  225,554   14,279   8,631   248,464   
Others  105,570   1,220   2,912   109,701   
Total  412,115   17,711   13,673   443,480   
       

Consolidated Financial Statements | December 31, 2021 | F-132

Table of Contents

 

* Values expressed in thousands, except when indicated.

      2020
Position of accounts subject to currency risk  In millions of Reais
       
       
Asset:  DollarEuroOthersTotal
       
Cash/Applications/Debt Instruments  42,860 1,870 569 45,299 
Loans and advances to customers5,803 3,187 1,140 10,130 
Investments in Foreign Subsidiaries and Dependence  57,914 215 -   58,129 
Derivatives  125,495 10,451 2,795 138,741 
Others  25,866 -   -   25,866 
Total  257,938 15,723 4,504 278,165 
       
Liabilities:  DollarEuroOthersTotal
       
Funding in foreign currency  61,173 384 -   61,557 
Derivatives  147,911 14,449 2,854 165,214 
Others  39,972 219 437 40,629 
Total  249,056 15,052 3,291 267,400 

       
     2019
Position of accounts subject to currency risk  In millions of Reais
       
       
Asset:  DollarEuroOthersTotal
       
Cash/Applications/Debt Instruments  12,406 224 1 12,631 
Loans and advances to customers4,776 1,920 -   6,696 
Investments in Foreign Subsidiaries and Dependence  50,193 3,557 -   53,750 
Derivatives  150,538 13,053 9,712 173,303 
Others  10,521 574 -   11,095 
Total  228,434 19,328 9,713 257,475 
       
Liabilities:  DollarEuroOthersTotal
       
Funding in foreign currency  59,416 925 49 60,390 
Derivatives  169,136 20,184 8,515 197,835 
Others  -   60 1,009 1,069 
Total  228,552 21,169 9,573 259,294 

Consolidated Financial Statements | December 31, 2021 | F-133

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

          2019
          In millions of Reais
             
             
Asset:     Dollar Euro Others Total
            
Cash/Applications/Debt Instruments    12,406 224 1 12,631
Loans and advances to customers 4,776 1,920 - 6,696
Investments in Foreign Subsidiaries and Dependence    50,193 3,557 - 53,750
Derivatives    150,538 13,053 9,712 173,303
Others    10,521 574 - 11,095
Total    228,434 19,328 9,713 257,475
             
Liabilities:     Dólar Euro Outros Total
            
Funding in foreign currency    59,416 925 49 60,390
Derivatives    169,136 20,184 8,515 197,835
Others    - 60 1,009 1,069
Total    228,552 21,169 9,573 259,294
             
          2018
          In millions of Reais
             
             
Asset:     Dollar Euro Others Total
            
Cash/Applications/Debt Instruments    348,797 - - 348,797
Loans and advances to customers 4,505 155 - 4,660
Investments in Foreign Subsidiaries and Dependence    45,345 3,390 - 48,735
Derivatives    231,240 18,163 2,490 251,893
Others    23,619 1,974 42 25,635
Total    653,506 23,682 2,532 679,720
             
Liabilities:     Dólar Euro Outros Total
            
Funding in foreign currency    390,418 462 145 391,025
Derivatives    262,396 24,809 2,391 289,596
Others    1,007 - - 1,007
Total    653,821 25,271 2,536 681,628

F-130

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

             
          2017
          In millions of Reais
             
             
Asset:     Dollar Euro Others Total
            
Cash/Applications/Debt Instruments    54,380 11,684 10,377 76,442
Loans and advances to customers 3,818 321 - 4,139
Investments in Foreign Subsidiaries and Dependence    36,613 3,010 - 39,623
Derivatives    262,092 45,317 9,640 317,049
Others    46,200 13,028 6,237 65,465
Total    403,102 73,361 26,254 502,717
             
Liabilities:     Dólar Euro Outros Total
            
Funding in foreign currency    32,962 3,047 17 36,025
Derivatives    277,358 54,633 9,294 341,284
Others    93,821 15,975 17,068 126,864
Total    404,140 73,654 26,378 504,173

 

c.2) Methodologies

 

Trading

The BankBanco Santander calculates its market riskminimum capital requirement for market risks using a standardthe internal model providedsince approval by Bacen and the Internal Model.

in May 2018.

The standard methodology applied to trading activities by the Banco Santander in 2019, 20182021, 2020 and 20172019 was the value at risk (VaR), which measures the maximum expected loss with a given confidence level and time horizon. This methodology was based on a standard historical simulation with a 99% confidence level and a one-day time horizon. Statistical adjustments were made to enable the efficient incorporation of the most recent events that condition the level of risk assumed.

Specifically, the Bank uses a time window of two years or 521 daily data obtained retrospectively from the reference date of the VaR calculation. Two figures are calculated each day, one by applying an exponential decline factor which gives a lesser weighting to more distant observations in time, and another with uniform weightings for all observations. The VaR reported is the higher of these two figures.

VaR is not the only measure. It is used because it is easy to calculate and because it provides a good reference of the level of risk incurred by the Bank. However, other measures are simultaneously being implemented to enable the Bank to exercise greater risk control in all the markets in which it operates.

One of these measures is scenario analysis, which consists of defining behavior scenarios for various financial variables and determining the impact on results of applying them to the Bank’s activities. These scenarios can replicate past events (such as crisis) or, conversely, determine plausible scenarios that are unrelated to past events. A minimum of three types of scenarios are defined (plausible, severe and extreme) which, together with VaR, make it possible to obtain a much more complete view of the risk profile.

The positions are monitored daily through an exhaustive control of changes in the portfolios, aiming to detect possible incidents and correct them immediately. The daily calculation of the result is also an excellent indicator of the risk, as it allows the Bank to observe and detect the impact of changes in financial variables in the portfolios.

Lastly, due to their atypical nature, derivatives and credit trading management (actively traded credit – Trading Book) activities are controlled by assessing specific measures on a daily basis. In the case of derivatives, these measures are sensitive to fluctuations in the price of the underlying (delta and gamma), in volatility (vega) and in time (theta). For credit trading management activities, the measures controlled include sensitivity to spread, jump-to-default and position concentrations by rating level.

 

In respect to the credit risk inherent in the trading portfolios (Credit Trading portfolios), and in keeping with the recommendations made by the Basel Committee of Banking Supervision, an additional measure has been introduced, the Incremental Risk Charge (IRC), in order to cover the default risk which is not properly captured in the VaR, through the variation of the related market prices of credit spreads. The instruments affected are basically fixed-income bonds, derivatives on bonds (forwards, options, etc.) and credit derivatives (credit default swaps, asset-backed securities, etc.). The method used to calculate the IRC, is defined globally at Group level.

F-131

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

c.3) Balance-sheet management

 

Interest rate risk

The Bank analyses the sensitivity of the net interest margin and market value of equity to changes in interest rates. This sensitivity arises from maturity and interest rate repricing gaps in the various balance sheets items.

On the basis of the balance-sheets interest rate position, and considering the market situation and outlook, the necessary financial measures are adopted to align this position with that desired by the Bank. These measures can range from the taking of positions on markets to the definition of the interest rate features of commercial products.

 

Consolidated Financial Statements | December 31, 2021 | F-134

Table of Contents

 

* Values expressed in thousands, except when indicated.

The measures used by the Bank to control interest rate risk in these activities are the interest rate gap, the sensitivity of net interest margin (NIM) and market value of equity (MVE) to changes in interest rates, the duration of capital, value at risk (VaR), the EaR (Earning Atat Risk) and scenario analysis.

 

Interest rate gap of assets and liabilities

The interest rate gap analysis focuses on the mismatches between the reevaluation deadlines of on-balance-sheets assets and liabilities and off-balance-sheets items. This analysis facilitates a basic snapshot of the balance sheet structure and enables concentrations of interest rate risk in the various maturities to be detected. Additionally, it is a useful tool for estimating the possible impact of potential changes in interest rates on the entity's net interest margin and market value of equity.

 

The flows of all the on and off-balance sheet headings must be broken down and placed at the point of repricing or maturity. The duration and sensitivity of contracts that do not have a maturity date they are analyzed and estimated using an internal model.

 

Net interest margin (NIM) sensitivity

The sensitivity of the net interest margin measures the change in the expected accruals for a specific period (12 months) given a shift in the interest rate curve.

The sensitivity of the net interest margin is calculated by simulating the margin both for a scenario of changes in the interest rate curve and for the current scenario. The sensitivity is the difference between the two margins calculated.

 

Market value of equity (MVE) sensitivity

The sensitivity of the market value of equity is a complementary measure to the sensitivity of the net interest margin.

This sensitivity measures the interest rate risk implicit in the market value of equity based on the effect of changes in interest rates on the present values of financial assets and liabilities.

 

Value at risk (VaR) and Earnings at Risk (EaR)

 

It is defined with 99% base points of the MVE’s loss distribution function, calculated considering the market value of the positions, based on the payback obtained in the last two years and with degree of statistical certainty (level of trust) to a defined time horizon.

It is also applied a similar methodology to calculate the maximum loss in NII (EaR), in order to consider the interest rate risk even in economic value impact as in financial margin.

The unit sums the return vectors of the VAR with the return vectors of EaR, resulting the total return vector. The composition is made considering in the metric of EaR the losses in financial margin that occur between the initial moment (reference date) and the holding period of the not-trading portfolio. The losses in the economic value takes in consideration the impact of the ending positions after the holding period.

 

c.4) Liquidity risk

Liquidity risk is associated with the Bank's ability to finance purchase commitments at reasonable market prices and to carry out its business plans with stable sources of financing.

 

Liquidity Management of Santander Bank

 

For the control and liquidity management, the Santander bank uses short and long-term metrics and stress metrics that are capable of measuring the safe liquidity buffer so that the bank comfortably honors its obligations to the market and shareholders.

Then, we can cite:

 

Short-term metrics and liquidity stress:

a. LCR

The Santander Bank uses the Liquidity Coverage Ratio (LCR) in its liquidity risk management. LCR is a short-term index for a 30 days stress scenario, results from the division of high qualityhigh-quality assets and net outflows in 30 days.

The Total High Liquidity Assets – HQLA is composed mainly of Brazilian federal government bonds and compulsory returns. The net outflows are composed mainly of losses of deposits, offset in part by inflows, mainly loans.

 

F-132

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-135

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

b. Liquidity stress scenarios:

The Liquidity management requires the analysis of financial scenarios in which potential problems whit liquidity are assessed, for which is necessary to construct and study scenarios in crisis situations. The model used for this analysis is the Stress Test

The stress test evaluateevaluates the financial structure of the institution and its capacity to resist and react to more extreme situations.

The purpose of the Liquidity Stress Test is to allow the simulation of adverse market conditions, making it possible to evaluate the impacts on the institution´s liquidity and ability to payments, in order to anticipate the solutions or even avoid positions that excessively liquidity in stress scenarios.

The scenarios are definedefined from the analysis of market behavior during previous crisis. Four crisis scenarios are develop,developed, with different intensities.

From the stress modelsmodel’s analysis, the concept of minimum liquidity was define,defined, which is sufficient to support liquidity losses for a determined day horizon in all simulated crisis scenarios.

 

Long-term metrics

Its objective is to measure the stability of sources of financing against the assets committed. The NSFR metric developed by BIS and adapted by the local regulator, which objective through determined percentages, to verify if the institution has stable source of funding to sustain its assets. This metrics has different weights by term, client’s segment and product type. It is calculated monthly by the institution.

 

c. Liquidity indicators

In order to help management, some liquidity indicators are calculated on a monthly basis, like ratios of concentration by counterparties and concentration by segments.

 

Clients Funding

The Bank has different funding sources, both in products and mix of clients, with a healthy distribution between the segments. The total of clientsclients’ resources is currently in R$ 78,6 billion and presented bellow:an increase comparing with 2019 amount, highlighting the increasing of time deposit funding and the keeping of financial letters inventory.

highlighting the increasing of time deposit funding and the keeping of financial letters

     In millions of Reais
Customers Funding20212020
 0 a 30 daysTotal%0 a 30 daysTotal%
Demand deposits39,574 39,574 100%35,550 35,550 100%
Savings accounts65,220 65,220 100%62,210 62,210 100%
Time deposits92,496 308,950 30%77,298 279,778 28%
Interbank deposit763 4,001 19%818 5,145 16%
Funds from acceptances and issuance of securities5,621 88,089 6%7,544 70,628 11%
Borrowings and Onlendings- 90,709 0%3,189 67,760 5%
Subordinated Debts / Debt Instruments Eligible to Compose Capital- 19,641 0%- 13,120 0%
Total203,674 616,184 33%186,609 534,191 100%
       
     In millions of Reais
Customers Funding 2019
    0 a 30 daysTotal%
Demand deposits   29,524 29,524 100%
Savings accounts   49,040 49,040 100%
Time deposits   53,321 190,344 28%
Interbank deposit   871 4,299 20%
Funds from acceptances and issuance of securities   3,921 85,963 5%
Borrowings and Onlendings   5,077 54,880 9%
Subordinated Debts / Debt Instruments Eligible to Compose Capital -   10,175 0%
Total   141,754 424,225 33%

 

 In millions of Reais
Customers Funding 2019 2018
  0 a 30 days  Total  %  0 a 30 days  Total  %
Demand deposits 29,524 29,524 100% 18,854 18,854 100%
Savings accounts 49,040 49,040 100% 46,068 46,068 100%
Time deposits 53,321 190,344 28% 49,771 190,971 26% 53,321 190,344 28%
Interbank deposit 871 4,299 20% 863 4,118 21% 871 4,299 20%
Funds from acceptances and issuance of securitiesFunds from acceptances and issuance of securities3,921 85,963 5% 3,681 70,110 5% 3,921 85,963 5%
Borrowings and Onlendings 5,077 54,880 9% 5,181 45,936 11% 5,077 54,880 9%
Subordinated Debts / Debt Instruments Eligible to Compose Capital - 10,175 2% 9,857 19,666 50%Subordinated Debts / Debt Instruments Eligible to Compose Capital -   10,175 0%
Total 141,754 424,225 33% 134,275 395,723 34% 141,754 424,225 33%
 
 In millions of Reais
Customers Funding   2017
  0 a 30 days  Total  %
Demand deposits 15,252 15,252 100%
Savings accounts 40,570 40,570 100%
Time deposits 39,549 170,570 23%
Interbank deposit 622 3,244 19%
Funds from acceptances and issuance of securities 4,436 69,348 6%
Borrowings and Onlendings 5,606 48,304 12%
Subordinated Debts / Debt Instruments Eligible to Compose Capital - 8,829 0%
Total 106,035 356,117 30%

 

F-133

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-136

Table of Contents

 

 

* Values expressed in thousands, except when indicated.

Assets and liabilities in accordance with the remaining contractual maturities, considering the undiscounted flows are as follows:

 

          2019
Non-Discounted Future Flows Except Derivatives     In millions of Reais
   0 to 30 days  31 to 180 days  181 to 365 days  1 to 5 years  Above 5 years  Total
             
Interest-earning assets:            
             
Financial assets measured at fair value through profit or loss3,766 1,103 802 8,894 6,157 20,722
Debt instruments46 15 205 638 2,600 3,504
Trading derivatives3,720 1,088 597 8,256 3,557 17,218
Other financial assets at fair value through profit or loss2,642 1,160 4,853 23,638 15,502 47,795
Debt instruments2,642 1,160 4,853 23,638 15,502 47,795
Investments Held to Maturity99 111 327 4,066 6,030 10,633
Financial assets at amortized cost32,417 89,335 65,395 159,615 110,607 457,369
Reserves from Brazilian Central Bank69,663         69,663
Financial Assets Measured at Amortized Cost- - - - - -
Total108,587 91,709 71,377 196,213 138,296 606,182
             
Interest-bearing liabilities:            
             
Deposits from credit institutions3,697 26,096 19,829 31,407 4,628 85,657
Subordinated Debts / Debt Instruments Eligible to Compose Capital4,597 1,621 1,074 9,119 3,828 20,239
Marketable debt securities23,501 - - - - 23,501
Trading derivatives250,678 89,178 92,856 132,865 11,116 576,693
Short positions- - - - - -
Total 282,473 116,895 113,759 173,391 19,572 706,090
       
     2021
     In millions of Reais
Future Cash Flows Except for Derivatives

0 to

30 days

31 to

180 days

181 to

365 days

1 to

5 years

Above

5 years

 Total
       
Remunerated Assets:      
       
Financial assets measured at fair value in income        -           -           -           -     3,122  3,122
Debt instruments        -           -           -           -     3,122  3,122
Financial assets measured at fair value in profit or loss for trading  5,573  4,197  5,03116,366  8,02339,191
Debt instruments     355     850  2,261  8,786  5,53917,791
Equity Instruments       21         1         8       11         3       44
Derivatives  5,197  3,346  2,762  7,568  2,48121,354
Financial assets measured at fair value in other comprehensive income54,012  1,007  4,69050,09215,833125,635
Debt instruments54,012  1,007  4,69050,09215,833125,635
Equity Instruments        -           -           -           -           -           -   
Financial assets measured at amortized cost          109,33098,84878,187172,73678,053537,155
Loans and Other Amounts with Credit Institutions73,290  1,464  2,041  2,313        -   79,108
Loans and advances to customers34,98994,87255,118150,20476,554411,737
Debt instruments  1,051  2,51221,02820,219  1,49946,310
Total168,915104,05387,907239,195105,032705,102
       
Remunerated Liabilities:      
       
Financial Liabilities Measured at Fair Value in
Income Held for Trading		18,955  2,564  2,19111,196  2,70337,609
Derivatives  6,174  2,564  2,19111,196  2,70324,828
Short positions12,781        -           -           -           -   12,781
Financial liabilities at amortized cost289,743106,358102,585165,14525,366689,197
Deposits from the Central Bank of Brazil and deposits from credit institutions33,71446,46525,62610,610  2,742119,157
Customer deposits252,07048,36467,467105,690       23473,613
Bonds and securities  3,95911,529  9,49248,845  3,09776,922
Debt Instruments Eligible to Capital        -           -           -           -   19,50419,504
Total308,698108,922104,776176,34128,069        726,806

 

F-134

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-137

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

             
             
          2018
Non-Discounted Future Flows Except Derivatives     In millions of Reais
   0 to 30 days  31 to 180 days  181 to 365 days  1 to 5 years  Above 5 years  Total
             
Interest-earning assets:            
             
Financial assets measured at fair value through profit or loss7,388 6,199 12,162 80,590 52,584 158,923
Debt instruments5,361 5,236 8,443 71,347 50,080 140,467
Trading derivatives2,027 963 3,719 9,243 2,504 18,456
Other financial assets at fair value through profit or loss379 9,230 379 18,666 6,037 34,691
Debt instruments379 9,230 379 18,666 6,037 34,691
Investments Held to Maturity24 558 126 3,904 5,119 9,731
Reserves from Brazilian Central Bank70,103 - - - - 70,103
Financial Assets Measured at Amortized Cost29,234 111,216 45,564 116,107 85,637 387,758
Total 107,128 127,203 58,231 219,267 149,377 661,206
             
Interest-bearing liabilities:            
             
Deposits from credit institutions198,259 46,926 67,142 79,161 8,819 400,307
Subordinated Debts / Debt Instruments Eligible to Compose Capital9,857 - - - 9,687 19,544
Marketable debt securities13,395 21,343 15,290 33,627 9,717 93,372
Trading derivatives1,104 1,370 3,257 9,673 3,322 18,726
Short positions32,440 - - - - 32,440
Total 255,055 69,639 85,689 122,461 31,545 564,389
             
             
          2017
Non-Discounted Future Flows Except Derivatives     In millions of Reais
   0 to 30 days  31 to 180 days  181 to 365 days  1 to 5 years  Above 5 years  Total
             
Interest-earning assets:            
             
Financial Assets Held For Trading5,051 1,788 6,737 32,841 18,848 65,265
Debt instruments654 899 5,919 19,582 16,801 43,856
Trading derivatives4,398 889 818 13,259 2,046 21,410
Available-For-Sale Financial Assets925 1,283 12,695 56,167 50,329 121,399
Debt instruments925 1,283 12,695 56,167 50,329 121,399
Other Financial Assets At Fair Value Through Profit Or Loss38 13 51 543 1,994 2,640
Debt instruments38 13 51 543 1,994 2,640
Non-Current Assets Held For Sale81 169 227 3,370 9,573 13,419
Reserves from Brazilian Central Bank59,051 - - - - 59,051
Loans and Receivables74,887 93,587 45,397 117,084 84,560 415,515
Total 140,034 96,840 65,107 210,005 165,304 677,290
             
Interest-bearing liabilities:            
             
Deposits from credit institutions150,979 50,936 66,571 84,274 8,191 360,951
Subordinated Debts / Debt Instruments Eligible to Compose Capital- 807 257 7,784 - 8,848
Marketable debt securities4,445 36,855 12,904 18,421 866 73,491
Trading derivatives4,618 659 504 12,243 2,285 20,310
Short positions32,531 - - - - 32,531
Total 192,573 89,257 80,236 122,722 11,342 496,130
       
     2020
Non-Discounted Future Flows Except Derivatives  In millions of Reais
 0 to 30 days31 to 180 days181 to 365 days1 to 5 yearsAbove 5 yearsTotal
       
Interest-earning assets:      
       
Financial assets measured at fair value in income-   174 98 667 2,900 3,839 
Debt instruments-   174 98 667 2,900 3,839 
Financial assets measured at fair value in profit or loss for trading 16,028 19,211 5,763 63,618 25,489 130,108 
Debt instruments3,873 12,513 4,046 53,814 21,859 96,104 
Equity Instruments1,164 -   -   -   -   1,164 
Derivatives10,992 6,698 1,717 9,804 3,629 32,840 
Financial assets not intended for trading
Mandatory measured at the fair value of the
result		439 -   -   -   -   439 
Equity Instruments439 -   -   -   -   439 
Financial assets measured at fair value in other comprehensive income5,000 3,874 13,850 75,849 35,538 134,110 
Debt instruments4,928 3,874 13,850 75,849 35,538 134,038 
Equity Instruments72 -   -   -   -   72 
Financial assets measured at amortized cost53,147 145,280 69,004 208,295 135,783 611,509 
Loans and Other Amounts with Credit
Institutions 		24,638 40,579 2,901 4,205 -   72,324 
Loans and advances to customers28,424 102,379 64,194 188,430 135,987 519,415 
Debt instruments85 2,321 1,909 15,660 (205)19,771 
Total74,615 168,538 88,715 348,429 199,709 880,005 
       
Remunerated Liabilities:      
       
Financial Liabilities Measured at Fair Value in
Income Held for Trading		55,313 7,878 2,088 12,629 3,515 81,424 
Derivatives10,160 7,878 2,088 12,629 3,515 36,270 
Short positions45,153 -   -   -   -   45,153 
Financial liabilities at amortized cost176,223 101,111 93,103 145,931 16,471 532,838 
Deposits from the Central Bank of Brazil and
deposits from credit institutions		3,707 33,039 22,860 8,014 2,802 70,421 
Customer deposits165,171 44,571 62,606 110,809 215 383,372 
Bonds and securities 7,345 23,502 7,637 27,109 333 65,925 
Debt Instruments Eligible to Capital-   -   -   -   13,120 13,120 
Total463,072 217,979 190,382 317,119 39,972 1,228,525 
       

F-135

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-138

Table of Contents

 

* Values expressed in thousands, except when indicated.

      2019
Non-Discounted Future Flows Except Derivatives  In millions of Reais
 0 to 30 days31 to 180 days181 to 365 days1 to 5 yearsAbove 5 yearsTotal
       
Interest-earning assets:      
       
Financial Assets Held For Trading3,766 1,103 802 8,894 6,157 20,722 
Debt instruments46 15 205 638 2,600 3,504 
Trading derivatives3,720 1,088 597 8,256 3,557 17,218 
Other financial assets at fair
value through profit or loss		2,642 1,160 4,853 23,638 15,502 47,795 
Debt instruments2,642 1,160 4,853 23,638 15,502 47,795 
Investments Held to
Maturity 		99 111 327 4,066 6,030 10,633 
Reserves from Brazilian
Central Bank		69,663 -   -   -   -   69,663 
Financial Assets Measured at Amortized Cost32,417 89,335 65,395 159,615 110,607 457,369 
Total108,587 91,709 71,377 196,213 138,296 606,182 
       
Interest-bearing liabilities:      
       
Deposits from credit institutions218,883 61,461 71,953 79,666 2,660 434,623 
Subordinated Debts / Debt Instruments Eligible to Compose Capital-   -   -   12,673 -   12,673 
Marketable debt securities3,697 26,096 19,829 31,407 4,628 85,657 
Trading derivatives4,597 1,621 1,074 9,119 3,828 20,239 
Short positions23,501 -   -   -   -   23,501 
Total250,678 89,178 92,856 132,865 11,116 576,693 

 

Scenario analysis / Contingency plan

Based on the results obtained in the Stress Test, the bank draws upBank prepares the Liquidity Contingency Plan, which constitutesconsists of a formal set of preventive and corrective actions to be triggeredtaken in timesmoments of liquidity crisis. The activation of the Plan results from the monitoring of internal parameters related to the conditions of theBank's market and the Bank’s liquidity. Theseliquidity conditions. Such parameters serve to identify different levels of crisis severity and, then,thus, determine ifwhether or not there is a need to start the activation process.

After the crisis is identified, a clear communication is established between the internal areas capable of carrying out theexecuting corrective actions and mitigating the problems originated.

caused. These corrective actions are measures capable of generating liquidity to solve or mitigate the effects of the crisis and are taken considering theirits complexities, implementation perioddeadlines and its liquidity impact.

The parameters and measures of this Plan are reviewed at any time whenthat it becomes necessary, however its minimum review period of review is annual.

 

c.5) Structural foreign currency risk / Hedges of results / Structural equities risk

These activities are monitored by measuring positions, VaR and results.

 

c.5.1) Complementary measures

 

Calibration and test measures

Back-testingThe back-testing consists of performing a comparative analysis between VaRthe estimates of Value at Risk (VaR) and the daily “clean” results (profit or loss on(result of the portfolios at the endclose of the precedingprevious day, valuedevaluated at following-day prices)the prices of the following day) and “dirty” (managerial income taking into accountresult leading to also theconsidering costs, intraday results and loading). The aimpurpose of these tests is to verify and provide a measure of the accuracy of the models used to calculate VaR.in the VaR calculation.

Back-testing analyses performed atThe back-testing analyzes carried out by Banco Santander comply, at the very least, with the BIS recommendations regarding the verification of the internal systems used to measurein the measurement and managemanagement of financial risks. Additionally, the SantanderThe Bank also conductsperforms hypothesis tests: excess tests, normality tests, Spearman’s rankSpearman correlation, average excess measures, etc.

The assessmentEvaluation models are regularly calibrated and tested by a specialized unit.

Consolidated Financial Statements | December 31, 2021 | F-139

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

c.6) Control system

 

Limit setting

The limitboundary setting process is performed together withruns alongside the budgeting activity and is thea tool used to establish the assets and liabilities available tofor each business activity. Limit settingSetting limits is a dynamic process that responds to the level of risk considered acceptable by management.

Management. The limitsboundary structure requiresconsists of developing a process to be performed that pursues,considers, among others, the following objectives:aspects:

1. To identifyIdentify and delimit, in an efficientefficiently and comprehensive manner,comprehensively, the main types of financial risk incurred,risks generated, so that they are consistent with the management of the business management and with the defined strategy.

2. To quantifyQuantify and communicate to the business areas the riskwhat levels and profile deemedrisk profiles are considered acceptable by senior management so asManagement, in order to avoid undesiredunwanted risks.

3. To provideGive flexibility to the business areas for theto assume financial risks in an efficient and timely assumption of financial risks,manner, due to changes in the market and business strategy,strategies, and always within the risks levelrisk levels considered acceptable by the Bank.institution.

4. To allowAllow business makersgenerators to assumetake risks which, althoughin a prudent areand sufficient volume to obtainachieve the budgeted results.

5. To delimitDelimit the range of products and underlying assets withunderlyings in which each Treasury unit can operate, considering featurescharacteristics such as assessment modelmodels and valuation systems, liquidity of the instruments involved, etc.

 

c.7) Risks and results in 20192021

 

Financial Intermediation Activities

The average VaR from the Bank´s trading portfolio in 20192021 ended in R$30,3 34.5 million. The dynamic management of this profile allows the Bank to change its strategy to capitalize the opportunities offered by aan uncertain environment.

 

c.7.1) Asset and liabilitybalance sheet management

F-136

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

Interest rate risk

 

Convertible currencies

At 2019 year-end,the end of 2021, the sensitivity of the net interest margin at one year to parallel increases of 100 basis points applied to Banco Santander portfolios was concentrated on the BRL interest rate curve was positive by R$334553 million.

Also, at 20192021 year-end, the sensitivity market value of equity to parallel increases of 100 basis points applied to the Banco Santander in the BRL interest rate curve was positive by R$2,0631,675 million.

 

Quantitative risk analysis

The interest rateInterest risk in balance sheetssheet management portfolios, measured in terms of sensitivity of the net interest margin (NIM) atincome sensitivity, for one year toat a parallel increaserise of 100 b.p. inbasis points of the interest rate curve, was atincreased by R$121 million between 2021 and 2020, reaching the beginningmaximum of 2019 and 2018,R$607 million in June, 2021. Value sensitivity decreased by R$96 million during the year 2021, reaching a maximum level of R$1341,882 million in December 2019. The sensitivity value decreased R$202 million during 2019, reaching a maximum of R$2,342 million in October. September, 2021. The main factors that occurred in 20192021 and influenced in sensitivitythe sensitivities were the volatilityfall in the yield curve (convexity effect), portfolio decline and updating of the exchange rate (convexity effect), portfolio’s decayment updateimplicit methodologies on the cash flows of implicit methodology on cash flow of the Bank’s products and liquidity.Banco Santander products.

 

Million of Reais                
 2019 2018 2017 202120202019
Sensibilities  
Net Interest Margin 334 200 378 553 432 334 
Market Value of Equity 2,063 1,861 2,066Market Value of Equity 1,675 1,771 2,063 
Value at Risk - Balance Value at Risk - Balance 
VaR 1,755 1,744 1,380 791 1,365 1,755 

Consolidated Financial Statements | December 31, 2021 | F-140

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

c.8) Sensitivity analysis

 

The risk management is focused on portfolios and risk factors pursuant to the requirements of regulators.

regulators and good international practices.

Financial instruments are segregated into trading and Banking portfolios, as in the management of market risk exposure, according to the best market practices and the transaction classification and capital management criteria of the New Standardized Approach of regulators. The trading portfolio consists of all transactions with financial instruments and products, including derivatives, held for trading, and the Banking portfolio consists of core business transactions arising from the different Banco Santander business lines and their possible hedges. Accordingly, based on the nature of Banco Santander’s activities, the sensitivity analysis was presented for trading and Banking portfolios.

Banco Santander performs the sensitivity analysis of the financial instruments in accordance with requirements of regulatory bodies and international best practices, considering the market information and scenarios that would adversely affect the positions and the income of the Bank.

The table below summarizes the stress amounts generated by Banco Santander’s corporate systems, related to the Banking and trading portfolio, for each one of the portfolio scenarios as of December 31, 2019.2021.

 

Trading portfolio

 

   2019 2021
Risk Factor Description   Scenario 1 Scenario 2 Scenario 3Description Scenario 1Scenario 2Scenario 3
Interest Rate - Reais  Exposures subject to changes in interest fixed rate (21,481) (269,501) (539,003)Exposures subject to changes in interest fixed rate(4,943)(108,670)(217,339)
Coupon Interest Rate  Exposures subject to changes in coupon rate of interest rate (1,940) (8,513) (17,025)Exposures subject to changes in coupon rate of interest rate(550)(7,132)(14,265)
Coupon - US Dollar  Exposures subject to changes in coupon US Dollar rate (5,612) (370) (739)Exposures subject to changes in coupon US Dollar rate(5,564)(34,407)(68,815)
Coupon - Other CurrenciesCoupon - Other CurrenciesExposures subject to changes in coupon foreign currency rate(7,349) (7,472) (14,943)Exposures subject to changes in coupon foreign currency  rate(5,270)(19,539)(39,077)
Foreign currency  Exposures subject to foreign exchange (2,132) (53,297) (106,594)Exposures subject to foreign exchange(1,127)(1,900)(3,801)
Eurobond/Treasury/GlobalExposures subject to Interest Rate Variation on Papers Traded on the International Market(426)(10,658)(21,315)
Inflation  Exposures subject to change in coupon rates of price indexes (6,527) (13,446) (26,892)Exposures subject to change in coupon rates of price indexes(5,218)(6,018)(12,035)
Shares and Indexes  Exposures subject to change in shares price (1,815) (45,365) (90,731)Exposures subject to change in shares price(1,553)(38,814)(77,629)
Commodities  Exposures subject to change in commodities' prices (3) (67) (133)Exposures subject to change in commodities' prices(1,184)(29,609)(59,217)
Total(1) (46,859) (398,031) (796,060) (25,835)(256,747)(513,493)

(1) Amounts net of taxes.

 

Scenario 1: a shock of 10 base points on the interest curves and 1% to price changes (currency and stocks);

Scenario 2: a shock of +25% and -25% in all risk factors, are considered the greatest losses per risk factor;

Scenario 3: a shock of +50% and -50% in all risk factors, are considered the greatest losses per risk factor.

 

F-137

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

Portfolio Banking

   2019 2021
Risk Factor Description    Scenario 1 Scenario 2 Scenario 3Description Scenario 1Scenario 2Scenario 3
Interest Rate – Reais Exposures subject to changes in interest fixed rate (35,618) (497,773) (992,076)
Interest Rate - ReaisExposures subject to changes in interest fixed rate(48,956)(1,673,128)(3,756,544)
TR and Long-Term Interest Rate - (TJLP)TR and Long-Term Interest Rate - (TJLP)Exposures subject to changes in Exchange of TR in TJLP (52,084) (644,255) (928,539)Exposures subject to changes in Exchange of TR in TJLP(6,413)(97,524)(145,711)
Inflation Exposures subject to change in coupon rates of price indexes(61,225) (370,602) (734,662)Exposures subject to change in coupon rates of price indexes(34,286)(455,628)(838,652)
Coupon - US Dollar Exposures subject to changes in coupon US Dollar rate (54,233) (720,883) (1,385,597)Exposures subject to changes in coupon US Dollar rate(13,530)(60,291)(117,298)
Coupon - Other CurrenciesCoupon - Other CurrenciesExposures subject to changes in coupon foreign currency rate(7,108) (93,628) (178,749)Exposures subject to changes in coupon foreign currency  rate(3,891)(7,770)(15,642)

Interest Rate Markets

International

Interest Rate Markets

International

Exposures subject to changes in interest rate negotiated roles in international market (4,716) (80,963) (144,169)Exposures subject to changes in interest rate negotiated roles in international market(31,456)(78,782)(161,417)
Foreign Currency  Exposures subject to Foreign Exchange(761) (19,022) (38,043)Exposures subject to Foreign Exchange560 13,995 27,989 
Total(1)  (215,744) (2,427,126) (4,401,836)  (137,972)(2,359,128)(5,007,275)

(1) Amounts net of taxes.

 

Scenario 1: a shock of +10bps and -10bps in interest rate curves and 1% price variance (currency and stocks); are considered the greatest losses per risk factor;

Scenario 2: a shock of +25% and -25% in all risk factors, are considered the greatest losses per risk factor;

Scenario 3: a shock of +50% and -50% in all risk factors, are considered the greatest losses per risk factor.

 

Consolidated Financial Statements | December 31, 2021 | F-141

Table of Contents

 

* Values expressed in thousands, except when indicated.

d) Bank´s business is highly dependent on the proper functioning of information technology systems.

 

Our business is highly dependent on the ability of our information technology systems to accurately process a large number of transactions across numerous and diverse markets and products in a timely manner, and on our ability to rely on our digital technologies, computer and email services, software and networks, as well as on the secure processing, storage and transmission of confidential data and other information in our computer systems and networks. The proper functioning of our financial control, risk management, accounting, customer service and other data processing systems is critical to our business and our ability to compete effectively.

 

e) Independent Structure

 

The Operational Risk & Internal Control area, subordinated to the Executive vice Presidency of Risk, operates independently as a second line of defense, supporting and challenging the first line of defense. They maintain guidelines, policies and processes to ensure the conduct and to be adequate toadequacy of the Operational Risk Control and Management Model.

The area adopts the definition of the Basel Committee, the Central Bank of Brazil and the Corporative instructions applicable locally to Operational Risk as the possibility of losses resulting from the inadequacy or failure of processes, operational and systems, or from external events. In addition, the Bank´s Board of Directors opted for the Alternative Standardized Approach (ASA) for the calculation of the portion of Reference Equity (PR) related to Operational Risk.

 

F-138

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

e.1) Operational Risks & Internal Control

 

ItsThe Operational Risk & Internal Control area has a mission towith Banco Santander is:Santander: To corroboratesupport the fulfillment of the strategic objectives and the decision-making process, in the adaptationadapting and fulfillment of the obligatorymeeting mandatory requirements, in maintaining the solidity,soundness, reliability, reductionreducing and mitigation ofmitigating losses due to risks operational, risks, besides thein addition to implementation, dissemination of culture of operational risks.the Operational Risk culture.

 

Acts in preventingAdditionally, the operational riskOperational Risk & Internal Control area works to prevent Operational Risks and supports for the continuedcontinuous strengthening of the internal controlInternal Controls system, attendingmeeting the requirements of regulatory agencies, Newthe Regulatory Bodies, Basel Agreement – BIS andAccord, resolutions of the National Monetary Council of Brazil.(CMN) and Applicable Regulators. This modelModel also follows the guidelines established by Banco Santander Spain based on COSO-Committeethe COSO - Committee of Sponsoring Organizations of the Tread way Commission-Internal Control –Treadway Commission –Internal Control– Integrated Framework 2013.

 

Control and management model

Santander Brasil has implemented a model based on lines of defense that aims to improve and continuously develop the management and control of operational risks, ensuring that structures can assess, monitor, control, mitigate, report and reduce the risks and losses to which they are exposed.

The attributions of this model include carrying out activities for the identification, evaluation, monitoring, control, mitigation and reporting of Operational Risk. Thus, different analyzes and follow-ups are carried out and reported. The main instruments that make up the Operational Risk Control and management Model are presented below:

●Definition of the operational risk appetite;
●Capture and evaluation of loss events (internal and external);
●Training, Communication and Culture;
●Evaluation of products and services;
●Self-assessment of operational risks;
●Scenario analysis;
●Risk and Control Indicators;
●Internal controls.

Model Governance

The Model has the approval of the Executive Risk Committee and approval by the Board of Directors, integrating the Organization's corporate governance structure and responsibility. Periodically, the relevant matters of Operational Risks are communicated to senior management for awareness and deliberations.

Consolidated Financial Statements | December 31, 2021 | F-142

Table of Contents

 

* Values expressed in thousands, except when indicated.

As part of the Risk Governance system, the Senior Forum on Internal Controls and Operational Risks (CIRO) is also implemented, whose objective is to deliberate for the Risk Pro Officers (RPO), of the 1st Line of Defense, policies, processes, procedures, developedstrategy and adopted are intendeddecisions on the topics to be applied in the business units, and has a bimonthly periodicity.

In order to ensure Bank´s continuous presence amonga structured process for disseminating the select groupculture of financial institutions recognized as havingOperational Risk management and control, the best operational risk management practices, thereby helping to continuously improve its reputation, solidityrelevant topics are dealt with in specific Committees and reliability in the local and international markets.

Defense Line Model

The Operational Risks & Internal Control area is the second line of defense in Santander's model and aims to maintain the fulfillment, alignment and compliance with corporate guidelines of the Santander group, the Basle Accord and resolutions of the National Monetary Council of Brazil. Also acts in the control and challenge of the activities performed by the first line of Defense.Forums.

 

e.2) Responsibilities and duties of the Operational Risks and Internal Controls area

The Operational Risks & Internal Control area acts as second line of defense in the Santander’s operational risk model and aim to achieve compliance with Santander Group’s corporate policies, and other regulations established by both local and global regulators. In addition, the area is responsible for the oversight and challenge of activities performed by the first line of defense and aim to achieve an integrated operational risk management approach. The main responsibilities attributed to the Operational Risk and Internal Control are listed below:

•

Disseminate the Operational Risk and Internal Controls management-oriented culture and converge towards the prevention and reduction of Operational Risk events and losses, mitigating the financial, legal, and reputational impacts.

• Improve risk analysis to reduce, consolidate and prioritize mitigation actions.

• Maintain the dynamics and control of operational risk exposure in line with risk appetite.

• Establish roles and responsibilities, with follow-up with those responsible in the lines of defense.

• Ensure business continuity and strengthen the Internal Controls environment.

• Provide adequate level of coverage in business units.

• Provide support for the Organization's strategic decisions based on the integrated Operational Risk profile and emerging trends.

• Implement the best practices for management and control of operational risks in the 1st and 2nd Lines of Defense.

• Identify the Operational Risk profile of the Organization.

• Provide continuous improvement of existing methodologies and deepening the culture of responsibility for Operational Risks and Internal Controls.Controls

 

e.3) Differential factor

 

The Operational Risks & Internal Control area invests in the development, training and updating of its professionals so they can keep up

F-139

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

with changes in the business environment, in addition to offering training programs for other professionals through the intranet and on-site courses. Among the personal course, we highlight the achievement of training aimed at increasing culture of RO management, training for the capture of operational losses, among others.

This has made a significant contribution to the Bank consistently achieve its strategic and operational goals, by providing knowledge of the exposure to assumed operational risks and the controlled environment, maintaining the Bank’s low-risk profile and ensuring the sustainable development of its operations.

The Bank highlights:

 

• Mandatory training for all Banco Santander employees through e-learnings ("NetCursos"), addressing the issue of operational risks;

risks,

• The creation, dissemination, and maintenance of Instruction Manuals, promoting corporate values and commitment;

commitment.

• Coordination of the annual process for projecting losses caused by operational risks, defining action plans to reduce these losses and for accountability;

accountability.

• Development of key risk indicators, aiming to monitor the main operational risks;

risks.

• CompositionManagement of lines of defense for the role of ORM“ORMN – Operational Risk Management Networks: "“Network” considering roles performed by:

i)“RPO-Risk Pro Officer” whose function is to reportmonitoring and reporting of operational risk management aspects to the executive the follow-upSenior Management, ii) “RPA-Risk Pro Agent" and iii) “Operational Risk Assistants” management and implementation of the topics of Operational Risk at the strategic level of the Executive Board, “RPA-Risk Pro Agent "Management Model within its Division and "OR Assist" covering the perimeter of RO and "experts" in cases where the“Risk Experts” specifically for “transversal” operational risk is transverse to the organization.management purposes.

 

e.4) Communication Policy

 

The Operational Risks & Internal Control area is part of Santander’s governance structure and produces a series of specific monthly reports for management through the Integrated Operational Risk Committee (“CIRO”FSCIRO”) and the “Forum“Reunião de RO”, (Operational Risk Forum detailing events that occurred, the main activities undertaken, corrective, preventive action plans and follow-up, ensuring transparency and knowledge to the governance forums.

Consolidated Financial Statements | December 31, 2021 | F-143

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

f) Reputation Risk

 

f.1) Reputation Risk

 

The reputation risk is defined as a risk of a negative economic impact, current and potential, due to a perception unfavorable of the Bank by its employees, clients, shareholders/investors and society in general.

The reputation risk may arise from multiple sources and, in many cases, is derived from other risk events. In general, these sources might be related to the business and other support activities that are realized by the Bank, the economic context, social or politic, or even by other events arising from other competitors that might affect the Bank.

 

f.2) Compliance

 

It is defined as legal risk, of regulatory sanctions, financial loss or reputation that an institution may suffer as a result of failures in the compliance with laws, rules, ethics and conduct codes and good bank practices. The compliance risk management has the goal of being preventive and includes the monitoring, educative processes, Consulting, risk evaluation and corporative communication related to the rules and legislation applicable to each business department.

 

f.3) Directives

 

a. Compliance principles – Ethics and Conduct in the Securities Markets

 

The Bank’s ethical principles and conduct parameters are established in internal policies which are made available to all employees. Conduct Code in the Securities Markets and its formal acknowledgement is mandatory to all staff working close to securities markets. Proper communication channels are in place to clarify doubts and complaints from employees, the monitoring and controlling of these information are conducted in a way that adherence to the rules established is secured.

 

b. Money Laundering Prevention

 

The Bank’s money Laundering Prevention policies and terrorism financing prevention are based on the knowledge and rigorousness of the acceptance of new clients, complemented by the continuous scrutiny of all transactions where the Bank are involved in. The importance given to the theme is reflected on the direct involvement of management, namely the Operational Money Laundering Prevention and Compliance Committee, which meets each month to deliberate on issues regarding the theme and to be directly involved with new clientsclient’s acceptance and suspicious transactions reporting.

 

c. New products and services and suitability

 

All new products and services are debated/analyzed internally at various levels until theirby different technical areas, ensuring a multidisciplinary mapping of risks, have been fully mitigated, and subsequently approved by the Commercialization Local Comercialization Committee (CLC), composed of BankSantander executives. After reviewanalysis and approval, the new products and services are monitored tryingsubject to identify them so timely events that may pose reputationalmonitoring and tests carried out to mitigate any conduct risk which if identified, are reported toin the CLC.sale.

F-140

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

g) Compliance with the new regulatory framework

 

The Banco Santander Brazil has assumed a firm commitmentan integrated management of risks and capital for the decision-making process, respecting the guidelines of Resolution BCB No. 4,557. This process contributes to the principles underlyingoptimization and efficiency in the “Revised Frameworkuse of International Convergencecapital in its operations, considering the objectives of Capital Measurementthe Institution with respect to capital ratios and Capital Standards” (Basel II). This framework allows entitiesreturn to make internal estimatesshareholders.

The Brazilian participation in the Basel Committee on Banking Supervision (BCBS) encourages the timely implementation of international prudential standards in the Brazilian regulatory framework.

Consolidated Financial Statements | December 31, 2021 | F-144

Table of Contents

 

* Values expressed in thousands, except when indicated.

Aligned with this perspective, Santander Brazil invests in the continuous improvement of capital management processes and practices, in accordance with regulatory and supervisory benchmarks.

The Institution's capital management consists of a continuous process of planning, evaluation, control and monitoring of the capital they are required to hold in ordercover the Conglomerate's relevant risks. It considers the capital necessary to safeguard their solvency against events caused by various typessupport Pillar 1 risks (credit, market and operational); development of risk. As a resultmethodologies for quantifying additional capital for Pillar 2 risks; Internal Capital Adequacy Assessment Process (ICAAP); projection and monitoring of this commitment, the Bank has devoted all the human and material resources required to ensure the successcapital ratios; preparation of the Basel II implementation plan. For this purpose, a Basel II team was created in the past, consisting of professionals from the Bank’s different departments: mainly Finance, Risks, Technologycapital plan and Operations, Internal Audit −to verify the whole process, as the last layer of control at the entity−, and Business −particularly as regards the integrationcontingency plan; preparation of the internal models into management. Additionally, specific work teams have been set up to guarantee the proper managementrecovery plan; stress tests; and preparation of the most complex aspects of the implementation.

Supplementing the efforts of the Basel II operating team, the Bank management has displayed total involvement from the very beginning. Thus, the progress of the project and the implications of the implementation of the New Capital Accord by the Banco Santander have been reported to the management committee and to the board of directors on a regular basis.

In the specific case of credit risk, the implementation of Basel II entails the recognition, for regulatory capital purposes, of the internal models that have been used for management purposes.

The institution has applied the internal models based ratings methodology (AIRB) of Basel II in part of its portfolios, in compliance with regulatory requirements.

The additional capital requirements derived from the self-assessment process (Pillar II) should be compensated by the risk profile that characterizes the Bank's business activities (low average risk), due to its focus on Commercial Bank (small and medium-sized enterprises and Individuals) and the diversification of the business. The Pillar II which considers the impact of risks not addressed under Pillar I (regulatory capital) and the benefits arising from the diversification among risks, businesses and geographical locations.

Regarding the other risks addressed under Pillar I of Basel II, Banco Santander was approved for the use of internal models for marketquarterly risk and will remain using the standardized method for operational risk, since it considers the premature use of advanced models (AMA) for this purpose . Regarding the Market Risk, Banco Santander was approved to the use of Internal Models in February 2018 and started to disclose the capital by this method from May 2018.

management report - Pillar II is another significant line of action under the Basel Corporate Framework. In addition to the methodology supporting the economic capital model review and strengthening, the technology was brought into line with the platform supporting Pillar I, so that all the information on credit risk will come from this source.

Besides the Basel II implementations, Banco Santander complies with the new regulations of Basel III, according to the standards issued by Bacen.

According to the definition proposed by the Basel Committee (Basel III), Credit Valuation Adjustment (CVA) is an adjustment to the fair value of derivative financial instruments in order to measure the credit risk of a counterparty. Thus, the CVA depends on the credit spread of the counterparty, as well as the market risk factors that drives the values of the derivatives and, therefore, their exposure. In an analytical way, the CVA can be defined by the following expression:

CVA = EE * PD * DF * LGD(1)

(1) EE=Expected Exposure; PD=Probability of Default; DF=Discount Factor; LGD=Loss Given Default

Expected Exposure (EE) is the future exposure of the derivative based on the counterparty's market risk. The probability of default (PD) is calculated based on credit spreads and is also marked to market. The discount factor (DF) is the factor that brings to the present value the projected exposure weighted by its respective probability of default. A Loss Given Default (LGD) is the estimated loss in the event of a credit.3.

 

g.1) Internal validation of risk models

 

Internal validation is an important stage of model life cycle besides of being a pre-requisite for the supervisory validation process by Basel II implementation. A specialized team of the Entity, with sufficient independence, obtains a technical opinion on the adequacy of the internal models for the intended internal or regulatory purposes, and concludes on their usefulness and effectiveness. This team must also assess whether the risk management and control procedures are adequate for the Entity’s risk strategy and profile.

In addition to the regulatory requirement compliance, the internal validation department provides aan essential support to the risk committee and management, since the internal validation area is responsible for providing a qualified and independent opinion so that the responsible authorities decide on the authorization of the use of models (for management purposes as well as regulatory use).

Internal model validation at Banco Santander encompasses credit risk models, market risk models, compliance, operational, ALM, pricing models, stress test models, the economic capital model and other models related to the exercise of ICAAP. The scope of the validation includes not only the more theoretical or methodological aspects, but also the technology systems and the quality of the data they provide, on which their effective operation relies, and, in general, all the relevant aspects of advanced risk management (controls, reporting, uses, involvement of management, etc.). Therefore, the goal of internal validation is to review quantitative, qualitative, technological and corporate governance related to regulatory and risk management aspects concerning the model risk control.

Amongprocesses.Among the main functions of the Internal Model Validation department are the following:

 

i.Establish general validation principles, conducting an independent evaluation process including (I) data quality, (II) Methodology aspects (III) technological environment, (IV) performance and (V) use and government;

F-141

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

ii.Evaluate the methodology and data used in the development of the model and challenge the model and its use, stating the implications and limitations of the model, as well as the associated risks;

iii.Issue a technical opinion on the adequacy of internal models for the intended internal and regulatory effects, concluding on their usefulness and effectiveness; and

iv.Provide essential support to risk committees and management of the Bank, through a qualified and independent opinion for responsible decision-making on the authorization of the use of models (for management purposes as well as regulatory use).

 

It is important to note that Banco Santander's internal validation function is fully consistent with the independent validation criteria for advanced approach issued by the Basel Committee, the European supervisor 'home regulator' (Banco de España and the European Central Bank) and the Bacen in compliance with the rules Circular 3,648 dated March 4, 2013 (Chapter III), Circular Letter 3,565 of September 6, 2012, Circular 3,547 of July 2011, and Circ. 3648 IRB, 3646 IMA of 4/3/13, and Res. 4.277 of 31/10/13 and 4389 of 18/12/14 fair value, Res. 4557 of 23/02/17 GIR and Circ. 3876 of 31/01/18 IRRBB.

In this case, the Bank maintains a Segregation of functions between internal validation and internal audit, which is the last layer of Bank control validation.

The Internal Audit is responsible for evaluating and reviewing the internal validation methodology and work and issues opinions with an effective level of autonomy. Internal Audit (third line of defense), as the ultimate control function in the Group, should (i) periodically assess the adequacy of policies, methods and procedures and (ii) confirm that they are effectively implemented in the management .

 

g.2) Capital Management

 

Capital management considers the regulatory and economic aspects and its objective is to achieve an efficient capital structure in terms of cost and compliance, meeting the requirements of the regulatory authorities and supporting to accomplish the goals of the classification of rating agencies and investors' expectations. Details regarding the capital management process can be found at www.ri.santander.com.br Corporate Governance -> Risk Management -> Risk and Capital Management Structure.

Consolidated Financial Statements | December 31, 2021 | F-145

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

h) Economic capital

 

h.1) Main objectives

 

The development of economic capital models in finance aims to solve a fundamental problem of regulatory capital, Sensitivity Risk.

In this context, the economic capital models are essentially designed to generate risk-sensitive estimative, allowing greater precision in risk management, as well as better allocation of economic capital by business units of Banco Santander.

The Banco Santander has directed efforts to build a model of robust and integrated economic capital to the business management.

The main objectives of the structure of economic capital of the Banco Santander are:

1 - Consolidate Pillar I and other risks which affect business in a single quantitative model, and determine estimates of capital by establishing correlations between different risks;

2 - Quantify and monitor different types of variations in risk;

3 - Distribute capital consumption between the different portfolios and manage the efficiency of return on capital (RORAC);

4 - Estimating the Economic Value Added for each business unit. Economic profit must exceed the cost of the Bank's capital;

5 - Accordance with the regulation in locations where the Bank operates in the review process of Pillar II by supervisors.

 

F-142

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

h.2) The Economic Capital Model

 

In calculating the economic capital, it is the Bank's definition of losses to be covered. Thus, it is used a confidence interval necessary to ensure business continuity..continuity. The risk profile in Brazil is distributed by Credit risk, Market, ALM, Business, Operations and materials assets. However, to successfully anticipate the changes proposed in Basel III, new risks have been incorporated to model: Intangibles, pension funds (defined benefit) and deferred tax assets, which allow the Bank to adopt a position even more conservative and prudent.

 

% Capital 2019 2018 2017 202120202019
Risk Type New Methodology New Methodology New Methodology New Methodology
Credit 72% 72% 70% 62%69%71%
Market 2% 2% 4% 2%
ALM 5% 8% 4% 6%2%5%
Business 3% 6% 8% 7%3%
Operational 7% 5% 6% 7%6%7%
Fixed Assets 2% 1% 2% 1%2%
Intangible Assets 1% 0% 1% 5%1%
Pension Funds 4% 1% 1% 1%2%4%
Deferred Tax Assets 5% 5% 4% 9%5%
TOTAL 100% 100% 100% 100%

Even so, as it is a commercial bank, Credit is Banco Santander's main source of risk and the evolution of its portfolio is one of the main factors for its fluctuation.

 

RoRAC

 

Banco Santander has used the RORAC, with the following objectives:

1 – Analyze and set a minimum price for operations (admission) and clients (monitoring).

2 – Estimate capital consumption of each client, economic groups, portfolio or business segment, in order to optimize the allocation of economic capital, maximizing the efficiency of the Bank.

3 – Measure and monitor business performance.

To evaluate the operations of global clients, the calculation of economic capital considers some variables used in the calculation of expected and unexpected losses.

Among these variables are:

1 – Counterparty rating;

2 – Maturity;

3 – Guarantees;

4 – Type of financing;

 

The economic value added is determined by the cost of capital. To create value for shareholders, the minimum return operation must exceed the cost of capital of Banco Santander.

 

Consolidated Financial Statements | December 31, 2021 | F-146

Table of Contents

 

* Values expressed in thousands, except when indicated.

48.47.Subsequent Events

 

a) Acquisition of the remaining 40% of non-controlling interest held by Bosan ParticipaçõesEquity Interest in Banco Olé ConsignadoMonetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.

 

On January 31, 2020, Santander Brasil4, 2022, upon compliance with the applicable conditions precedent, Pi Distribuidora de Títulos e Valores Mobiliários SA (“Pi”), Toro Corretora de Títulos e Valores Mobiliários SA (“Toro CTVM”), and Toro Investimentos SA ( “Toro Investimentos” and, together with Toro CTVM, “Toro”) formalized, together with the shareholderspartners of Bosan Participações S.A. (holding company whose single asset areMonetus Investimentos Ltda., and Monetus Corretora de Seguros Ltda. (together “Monetus”), the shares representing 40%closing of the corporate capital of Banco Olé) have entered intotransaction resulting from the definitive agreementsinvestment agreement and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon transferring Bosan’s shares to Santander Brasil and the payment to the sellers of the total price of R$ 1,608,772,783.47.other covenants, formalized on June 15, 2021 (“Closing”). As a result Santander Brasil became, directlyof the Closing, Toro Investimentos now holds 100% of Monetus' share capital. Monetus, originally from Belo Horizonte, carries out its activities through an automated objective-based investment application, after considering the client's needs and indirectly,risk profile, the holder of all shares issued by Banco Olé.application automatically creates, executes and monitors a diversified and personalized investment strategy that use the platform to undertake and serve customers in the best way.

 

In addition, on January 30, 2020, the nameAcquisition of Banco Olé was changed from Banco Olé Bonsucesso Consignado S.A. to Banco Olé Cosignado S.A.Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.

 

b) SaleOn January 4, 2022, upon compliance with the applicable conditions precedent, Pi Distribuidora de Títulos e Valores Mobiliários SA (“Pi”), Toro Corretora de Títulos e Valores Mobiliários SA (“Toro CTVM”), and Toro Investimentos SA ( “Toro Investimentos” and, together with Toro CTVM, “Toro”), formalized, together with the partners of equity stakeMobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda (together “Mobills”), the closing of the transaction resulting from of the investment agreement and other covenants, formalized on June 15, 2021 (“Closing”). As a result of the Closing, Toro Investimentos now holds 100% of the share capital of Mobills. Based in Super PagamentosCeará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning.

Acquisition of Equity Interest in CSD Central de Serviços de Registro e AdministraçãoDepósito aos Mercados Financeiro e de Meios EletrônicosCapitais S.A.

 

On February 28, 2020,January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A. ("Santander Corretora"), together with other investors – including Banco BTG Pactual S.A. and CBOE III, LLC – formalized, together with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A. ("CSD BR ") and their respective shareholders, an investment agreement for the Bank sold to Superdigital Holding Company, S.L.,subscription of a company indirectly controlled by Santander Spain, its entireminority equity interest in Super Pagamentos e AdministraçãCSD BR ("Transaction ").  CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Central Bank of Brazil, the Brazilian Securities and Exchange Commission (Comissão de Meios Eletrônicos S.A. (“Superdigital”)Valores Mobiliários) and the Superintendence of Private Insurance (Superintendência de Seguros Privados). The Bank received considerationeffectiveness of R$270 million for itsthe Transaction will be subject to the conclusion of the definitive instruments and the implementation of certain customary precedent conditions, with the applicable regulatory approvals. After the implementation of these conditions and with the closing of the Transaction, Santander Corretora's equity interest in Superdigital. As a result, the Bank is no longer a shareholder of Superdigital.CSD BR will be 20% (twenty percent).

 

Deliberation on Interim Dividends and Interest on Equity

The Board of Directors, at a meeting held on February 1, 2022, approved the proposal of the Executive Board, ad referendum of the Annual General Meetings to be held in 2022 and 2023 respectively, for the distribution of Interim Dividends, in the amount of R$ 1,300,000,000.00 (one billion, three hundred million reais), based on the profit for the year calculated until the balance sheet of December 31, 2021 and Interest on Equity, in the gross amount of R$ 1,700,000,000.00 (one billion and seven hundred million reais), based on the balance of the Company's Dividend Equalization Reserve. Shareholders who are registered in the Bank's records at the end of February 10, 2022 (inclusive) will be entitled to Dividends and Interest on Equity. Thus, as of February 11, 2022 (inclusive), the Bank's shares will be traded “Ex-Dividends and Ex-Interest on Equity”. The amount of Dividends and Interest on Equity will be paid as of March 4, 2022. Dividends will be fully allocated to the minimum mandatory dividends to be distributed by the Bank, referring to the year 2021 and Interest on Equity will be imputed in full to the mandatory minimum dividends to be distributed by the Bank, referring to the year 2022, without any monetary restatement for both. The decision was approved by the Fiscal Council, as per the meeting held on the same date.

 

F-143

Consolidated Financial Statements | December 31, 2021 | F-147

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

 

This page intentionally left blank. 

F-144

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

SUPPLEMENTAL INFORMATION

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

APPENDIX I – RECONCILIATION OF STOCKHOLDERS’ EQUITY AND NET INCOME - BRGAAP vs IFRS

 

The table below presents a conciliation of stockholders' equity and net income attributed to the parent between standards adopted in Brazil (BRGAAP) and IFRS, with the conceptual description of the main adjustments:

 

Thousand of ReaisNote201920182017 Note 2021 2020 2019
  
Stockholders' equity attributed under to the Parent Brazilian GAAP 69,773,23265,233,74359,499,954Stockholders' equity attributed under to the Parent Brazilian GAAP   78,739,563  78,968,183  69,773,232 
IFRS adjustments, net of taxes, when applicable: IFRS adjustments, net of taxes, when applicable:  
Reclassification of financial instruments at fair value through profit or lossi8,7678,34418,301Reclassification of financial instruments at fair value through profit or lossi (103,386) (882) 8,767 

Reclassification of available-for-sale financial instruments		j-34,818
Reclassification of fair value through other comprehensive incomek73,43172,980-Reclassification of fair value through other comprehensive incomej 182,094  (522,107) 73,431 
Impairment of loans and receivablesa-(71,091)
Impairment of financial assets measured at amortized costa(23,589)(1,483,043)-Impairment of financial assets measured at amortized costa (1,468,494) (635,194) (23,589)
Remensurations, Debt instruments, due to reclassifications IFRS 9 -26,274-Remensurations, Debt instruments, due to reclassifications IFRS 9 -    907  -   
Category transfers - IAS 39b-351,132
Category transfers - IFRS 9b(206,984)(619)- b (141,260) 357,972  (206,984)
Deferral of financial fees, commissions and inherent costs under effective interest rate methodc1,197,325851,629664,204Deferral of financial fees, commissions and inherent costs under effective interest rate methodc 1,549,438  1,324,853  1,197,325 
Reversal of goodwill amortizationd26,933,89226,764,52926,592,852 d 26,709,187  27,527,699  26,933,892 
Realization on purchase price adjustmentse477,366631,120702,436Realization on purchase price adjustmentse 603,544  615,953  477,366 
Recognition of fair value in the partial sale in subsidiariesf112,052Recognition of fair value in the partial sale in subsidiariesf -    -    112,052 
Option for Acquisition of Equity Instrumentg(1,816,799)(1,323,994)(1,287,240)Option for Acquisition of Equity Instrumentg (763,988) (1,744,336) (1,816,799)
Goodwill acquisition Santander Services (Santusa)h(239,182)(269,158)(298,978)Goodwill acquisition Santander Services (Santusa)h (179,387) (209,285) (239,182)
Tax Credit with realization over 10 years 184,005322,53962,539Tax Credit with realization over 10 years -    -    184,005 
Others 177,064119,074269,728  512,835  93,224  177,064 
Stockholders' equity attributed to the parent under IFRS 96,650,58091,065,47086,650,707Stockholders' equity attributed to the parent under IFRS105,640,146  105,776,987  96,650,580 
Non-controlling interest under IFRS 558,581529,990436,894 334,349  312,885  558,581 
Stockholders' equity (including non-controlling interest) under IFRS 97,209,16191,595,46087,087,601Stockholders' equity (including non-controlling interest) under IFRS105,974,495  106,089,872  97,209,161 
 

 

Thousand of ReaisNote201920182017
     
Net income attributed to the Parent under Brazilian GAAP 14,180,98712,166,1457,996,577
IFRS adjustments, net of taxes, when applicable:    
Reclassification of financial instruments at fair value through profit or lossi422(11,974)18,775

Reclassification of available-for-sale financial instruments		j--(46,160)
Reclassification of fair value through other comprehensive incomek45128,419-
Impairment on loans and receivablesa--(195,878)
Impairment of financial assets measured at amortized costa1,872,553140,557-
Remensurations, Debt instruments, due to reclassifications IFRS 9 (16,659)(5,360)-
Category transfers - IAS 39b--(219,829)
Category transfers - IFRS 9b6,437(16,195)-
Deferral of financial fees, commissions and inherent costs under effective interest rate methodc346,298187,425366,484
Reversal of goodwill amortizationd175,257171,6771,470,279
Realization on purchase price adjustmentse(153,752)(71,316)(76,446)
Option to Acquire Own Equity Instrumentg-(143,194)(270,240)
Goodwill acquisition Santander Services (Santusa)h29,89829,820-
Tax credit with realization over 10 years (75,995)260,00062,539
Others 41,035(153,527)(182,037)
Net income attributed to the parent under IFRS 16,406,93212,582,4778,924,064
Non-controlling interest under IFRS 224,518217,441213,984
Net income (including non-controlling interest) under IFRS 16,631,45012,799,9189,138,048

         
Thousand of Reais Note 2021 2020 2019
         
Net income attributed to the Parent under Brazilian GAAP  14,987,716  13,469,380  14,180,987 
IFRS adjustments, net of taxes, when applicable:       
Reclassification of financial instruments at fair value through profit or lossi (83,995) (27,428) 422 
Reclassification of  fair value through other comprehensive incomej 45,826  68,960  451 
Impairment of financial assets measured at amortized costa (1,028,937) (498,778) 1,872,553 
Remensurations, Debt instruments, due to reclassifications IFRS 9  -    907  (16,659)
Category transfers - IFRS 9 b 126,520  (78,057) 6,437 
Deferral of financial fees, commissions and inherent costs under effective interest rate methodc 215,525  185,478  346,298 
Reversal of goodwill amortization d 29,658  145,903  175,257 
Realization on purchase price adjustmentse (17,758) (5,348) (153,752)
Option to Acquire Own Equity Instrumentg 1,180,949  318,929  -   
Goodwill acquisition Santander Services (Santusa)h 29,898  29,898  29,898 
Tax credit with realization over 10 years  -    (184,005) (75,995)
Others   42,648  (7,311) 41,035 
Net income attributed to the parent under IFRS  15,528,051  13,418,528  16,406,932 
Non-controlling interest under IFRS   31,272  32,224  224,518 
Net income (including non-controlling interest) under IFRS  15,559,323  13,450,752  16,631,450 

 

a) Impairment on loans and receivables and financial assets measured at amortized cost:

 

In 2019 and 2018, refersRefers to the adjustment resulting from the estimate of the expected loss and losses on the portfolio of loans and receivablesassets subject to impairment, loan commitments to be released and financial guarantee contracts, which was determinedcalculated based on the criteria described in the accounting practice note and compliance in the history of impairment and other circumstances known at the time of the evaluation, in accordance with the guidance provided by IAS 39 and IFRS 9 (in 2017 refer to the resulting adjustment of the estimate of loss incurred in accordance with IAS 39, normative then effective.) "Financial Instruments: Recognition and Measurement". TheseIFRS. Such criteria differ in certain aspects from the criteriathose adopted byunder BRGAAP, which use certainuses the regulatory limits defined by the Central Bank (Bacen), in addition to the difference in the scope of calculation ofthe basis for calculating these losses, which for theIFRS purposes of IFRS considers other assets

in addition to those provided by Bacen.

F-145

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

SUPPLEMENTAL INFORMATION

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-148

Table of Contents

 

* Values expressed in thousands, except when indicated.

other than those In the Financial Statements under IFRS, this effect considers the impact related to the provisions of certain debt instruments, which for the purposes of BRGAAP are treated as Securities.

 

b) Categories of financial assets

 

As detailed in the accounting practices note, IFRS9 provides for the definition of the business models associated with each portfolio, as well as the performance of the SPPI test - if the returns of that asset are exclusively principal and interest, for classification in the categories of financial assets. BRGAAP provides for certain differences in the categorization of these financial assets, as well as establishing as an indicator the Management's intention for classification to be made. The criteria for reclassification between categories are also different between the two accounting practices.

 

c) Deferral of financial fees, commissions and other costs under effective interest rate method:

 

Under IFRS, financial fees, commissions and other costs that are integral part of effective interest rate of financial instruments measured at amortized cost are recognized in the income statement over the term of the corresponding contracts. Under BRGAAP these fees and expenses are recognized directly as income when received or paid.

 

d) Reversal of goodwill amortization:

 

Under BRGAAP, goodwill is systematically amortized over a period of up to 10 years, subject to the impairment test at least once a year or in a shorter period, in the event of any additional evidence. Under IFRS, in accordance with IAS 38 “Intangible Assets”, goodwill is not amortized, but instead, is tested for impairment, at least annually, and whenever there is an indication that the goodwill may be impaired. The tax amortization of goodwill of Banco ABN Amro Real SA represents a difference between book and tax basis of a permanent nature and definitive as the possibility of future use of resources to settle a tax liability is considered remote by management, supported by the opinion of expert external advisors. The tax amortization of goodwill is permanent and definitive, and therefore does not apply to the recognition of a deferred tax liability in accordance with IAS 12, on temporary differences.

 

e) Realization on purchase price adjustments:

 

As part of the purchase price allocation in acquisitions of an entity, substantially, in the acquisition of Banco Real, following the requirements of IFRS 3, the Bank has recognized the assets and liabilities of the acquiree to fair value, including identifiable intangible assets with finite lives. Under BRGAAP, in a business combination, the assets and liabilities are kept at their book value. This purchase price adjustment relates substantially to the allocation related to the value of assets in the loan portfolio. The initial recognition of value of the loans at fair value, adjustment to the yield curve of the loan portfolio in comparison to its nominal value, which is recognized by its average realization period.

 

f) Recognition of fair value in the partial disposal of investments in subsidiaries

 

Under IFRS 10 "Consolidated Financial Statements" on partial disposal of a permanent investment when control is lost, the fair value is recognized over the remaining portion is remeasured at its fair value, the effect of this update being recognized in result (Webmotors). Under BRGAAP, this type of operation, ongoing participation is registered by its book value.

 

g) Option for Acquisition of Equity Instrument

 

Within the context of transaction, Banco Santander has granted to the members of Getnet S.A. and Banco Olé Consignado a put option over all shares of Getnet S.A. and Banco Olé Consignado held by them. The overall out in IAS 32, a financial liability was recognized for this commitment, with a specific charge in a heading in stockholders' equity in the amount of R$950 million and R$67 million, respectively. Subsequently, the options have been updated and their effect is recognized in income. On December 19, 2018, Banco Santander and the Minority shareholders of Getnet SA entered into an addendum to the Purchase and Sale Agreement for Shares and Other Covenants of Getnet SA, in which Banco Santander committed to acquire all the shares of the Minority Shareholders, corresponding to 11.5% of the share capital of Getnet SA, for the amount of R$1,431,000. The acquisition was approved by BACEN on February 18, 2019 and concluded on February 25, 2019, so that Banco Santander now holds 100% of the shares representing Getnet SA's share capital. On March 14, 2019, the shareholder minority stake in Banco Olé Bonsucesso Consignado SA formalized its interest in exercising the put option provided for in the Investment Agreement, entered into on July 30, 2014, to sell its 40% stake in Olé Consignado to Banco Santander (Brazil) SA On December 20, 2019, the parties entered into a binding agreement for the acquisition, by Banco Santander, of all the shares issued by Bosan Participações SA, for the total amount of R$1.6 billion, to be paid on the closing date of the Operation. On January 30, 2020, the name of Banco Olé from Banco Olé Bonsucesso Consignado SA was changed to Banco Olé Cosignado SA On January 31, 2020, the Bank and the shareholders of Bosan Participações SA concluded the final agreement and signed the purchase and sale of 100% of the shares issued by Bosan, through the transfer of Bosan's shares to the Bank and payment to sellers in the total amount of R$1,608,772,783.47. As a result, the Bank became, directly and indirectly, the holder of 100% of Banco Olé's shares.

 

On March 31, 2021, the partial spin-off of Santander Brasil was approved, which resulted in the segregation of the shares owned by it issued by Getnet Adquirência e Serviços para Meios de Pagamentos SA (“Getnet”), with the spun-off portion being transferred to Getnet whose the effects are mentioned in note 27.a.

h) Santander Serviços goodwill (Santusa)

 

According to the IFRS 3 "Business Combination", when the owner acquires more shares or other equity instruments of an entity already controlled, it shall consider such amount as an equity reduction. According to the BRGAAP this amount shall be registered in the asset as goodwill or discount on the acquisition f the investment, which is the difference between the acquisionacquisition cost and the equity amount of the shares.

Consolidated Financial Statements | December 31, 2021 | F-149

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

i) Reclassification of financial instruments at fair value through profit or loss

 

Under BRGAAP, all loans, financing and deposits are recorded at amortized cost. In IFRS, in accordance with IFRS 9 "Financial Instruments: Recognition and Measurement", financial assets may be measured at fair value and included in the category "Other financial assets at fair value through profit or loss", in order to eliminate or significantly reduce accounting mismatches (accounting( accounting mismatch) of recognition or measurement derived from the measurement of assets or liabilities or from the recognition of gains or losses on these assets / liabilities on a number of bases, which are managed and their performances valued at fair value. Accordingly, the Bank classified loans, financing and deposits that meet these parameters as "fair value through profit or loss", as well as certain debt instruments classified as "available for sale" in BRGAAP. The Bank opted for this classification base in IFRS, since it eliminates an accounting mismatch in the recognition of revenues and expenses.

 

F-146

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

SUPPLEMENTAL INFORMATION

(Thousand of Brazilian Reais - R$ - unless otherwise stated) 

 

j) Reclassification of available-for-sale financial instruments

Under BRGAAP, the Bank accounts for some investments, for example, debt securities initially measured at amortized cost and equity securities at cost. When preparing the 2017 balance sheet, management revised the management strategy for its investments and, in accordance with the premises of Circular 3,068 of the Central Bank of Brazil, the debt securities were reclassified to “trading” category with their value recorded just through the result. According to IFRS, in 2017, the Bank had classified these Investments as available for sale, measuring them at fair value with the effects of this mark being recognized in the "Consolidated statements of comprehensive income", complying with the provisions of IAS 39 "Financial Instruments : Recognition and Measurement”, which does not allow the reclassification of any financial instrument to the fair value category through profit or loss after initial recognition.

k) Reclassification of financial assets measured at fair value through other comprehensive income

 

According to the BRGAAP, the Bank registers some investments, for example, debt instruments initially measured at amortized cost and equity instruments at cost. At the time of this balance sheet, the management reviewed the managing strategy of its investments and according to Bacen Circular 3.068, the debt instruments were reclassified to "trading" measured at fair value with changes in the income statement. According to the IFRS, the Bank is classifying thisthese investments as financial assets measured at fair value through other comprehensive income them at fair value with changes in "other comprehensive income", in line with IAS 9 "Financial Instruments",Instruments ", which does not allow the reclassification of any financial instrument to fair value with changes in the income statement after the initial recognition.

 

F-147

Table of Contents

 

BANCO SANTANDER (BRASIL) S.A.

SUPPLEMENTAL INFORMATION

(Thousand of Brazilian Reais - R$ - unless otherwise stated) Consolidated Financial Statements | December 31, 2021 | F-150

Table of Contents

 

* Values expressed in thousands, except when indicated.

 

APPENDIX II – STATEMENTS OF VALUE ADDED

 

The following Statements of value added is not required under IFRS but being presented as supplementary information as required by Brazilian Corporate Law for publicly-held companies, and has been derived from the Bank´s consolidated financial statements prepared in accordance with IFRS.

 

 2019 2018 2017 202120202019
Thousand of Reais                 
Interest and similar incomeInterest and similar income 72,841,060 70,478,393 71,418,349 Interest and similar income 77,987,308  62,774,940  72,841,060  
Net fee and commission incomeNet fee and commission income 15,713,152 14,132,159 12,721,868 Net fee and commission income15,273,301  16,228,214  15,713,152  
Impairment losses on financial assets (net)Impairment losses on financial assets (net) (13,369,905) (12,713,435) (12,338,300) Impairment losses on financial assets (net)(17,112,734) (17,450,188) (13,369,905) 
Other income and expenseOther income and expense (4,025,384) (6,861,406) (3,043,565) Other income and expense (3,843,999) (5,012,403) (4,025,384) 
Interest expense and similar chargesInterest expense and similar charges (28,519,953) (28,557,051) (36,471,860) Interest expense and similar charges(28,885,478) (18,332,228) (28,519,953) 
Third-party input (7,544,695) (7,219,152) (6,728,881)   (8,078,399) (7,946,539) (7,544,695) 
Materials, energy and othersMaterials, energy and others (659,656) (544,237) (495,913) Materials, energy and others (713,400) (641,831) (659,656) 
Third-party services (6,047,498) (5,572,127) (5,107,077) Third-party services (6,231,129) (6,424,755) (6,047,498) 
Impairment of assets (131,435) (508,310) (456,711) Impairment of assets (165,799) (84,908) (131,435) 
Other (706,106) (594,478) (669,180)  (968,071) (795,045) (706,106) 
Gross added value 35,094,275 29,259,508 25,557,611 Gross added value 35,339,999  30,261,796  35,094,275  
Retention  
Depreciation and amortizationDepreciation and amortization (2,391,857) (1,739,959) (1,662,247) Depreciation and amortization (2,433,921) (2,579,127) (2,391,857) 
Added value producedAdded value produced 32,702,418 27,519,549 23,895,364 Added value produced 32,906,078  27,682,669  32,702,418  
Added value received from transfer 
Investments in affiliates and subsidiariesInvestments in affiliates and subsidiaries 149,488 65,958 71,551 Investments in affiliates and subsidiaries144,184  112,261  149,488  
Added value to distributeAdded value to distribute 32,851,906 27,585,507 23,966,915 Added value to distribute 33,050,262  27,794,930  32,851,906  
Added value distributionAdded value distribution Added value distribution 
Employee 8,457,212 25.7% 8,185,896 29.7% 7,908,746 33.0% 8,045,893 24.3%7,943,711 28.6%8,457,212 25.7%
Compensation 5,961,765 5,863,584 5,795,579  5,929,439  5,749,669  5,961,765  
Benefits 1,637,099 1,534,560 1,421,910  1,593,386  1,514,611  1,637,099  
Government severance indemnity funds for employees - FGTSGovernment severance indemnity funds for employees - FGTS502,173 448,699 413,871 Government severance indemnity funds for employees - FGTS431,249  448,457  502,173  
Other 356,175 339,053 277,386  91,819  230,974  356,175  
Taxes 7,674,704 23.4% 5,813,381 21.1% 6,131,544 25.6% 9,269,368 28.0%6,298,717 22.7%7,674,704 23.4%
Federal 6,571,450 4,864,176 5,481,969  8,332,994  10,088,318  6,571,450  
State 54 224 1,260  813  (830,771) 54  
Municipal 1,103,200 948,981 648,315  935,561  (2,958,830) 1,103,200  
Compensation of third-party capital - rentalCompensation of third-party capital - rental 88,540 0.3% 786,312 2.9% 788,577 3.3%Compensation of third-party capital - rental175,677 0.5%101,749 0.4%88,540 0.3%
Remuneration of interest on capitalRemuneration of interest on capital 16,631,450 50.6% 12,799,918 46.4% 9,138,048 38.1%Remuneration of interest on capital15,559,324 47.1%13,450,753 48.4%16,631,450 50.6%
Dividends and interest on capitalDividends and interest on capital 10,800,000 6,600,000 6,300,000 Dividends and interest on capital9,649,000  3,837,085  10,800,000  
Profit Reinvestment 5,606,932 5,982,477 2,624,064 Profit Reinvestment 5,879,052  9,581,444  5,606,932  
Profit (loss) attributable to non-controlling interestsProfit (loss) attributable to non-controlling interests 224,518   217,441 213,984 Profit (loss) attributable to non-controlling interests31,272  32,224  224,518  
Total 32,851,906 100.0% 27,585,507 100.0%-23,966,915 100.0% 33,050,262 100.0%27,794,930 100.0%32,851,906 100.0%

 

 

Consolidated Financial Statements | December 31, 2021 | F-151

F-148

Table of Contents

F2A4E6A5-86EA-4413-90D6-619423C4A8DF|3|Oracle.SmartView.EPRCS|{afcc4414-f02e-4a9c-b0ac-40ef51fc9dbe}