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 – Bloco~~2041, Suite 281, Block A

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

Federative Republic of Brazil

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

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.

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

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.

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.

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).

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.

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. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

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

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.

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).

In this annual report, the terms “Santander Brasil,” the “Bank,” “we,” “us,” “our,” “our company” and “our organization” ~~mean~~refer 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,~~2022, which was R$~~4.0307~~5.2177 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.

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, 2018~~2022, 2021 and ~~2017.~~2020. Such consolidated financial statements have been prepared in accordance with ~~International Financial Reporting Standards, or “IFRS”~~IFRS (as defined in “—Certain Definitions”), as issued by the ~~International Accounting Standards Board, or “IASB”~~IASB (as defined in “—Certain Definitions”) 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, 2018~~2022, 2021 and ~~2017~~2020 have been audited by PricewaterhouseCoopers Auditores Independentes ~~or “PwC.” PwC is~~Ltda., 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, 2018~~2022, 2021 and ~~2017,~~2020, included herein, contains information relating to certain differences between IFRS and Brazilian GAAP.

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

National Monetary Council ((CMN - Conselho Monetário Nacional)~~, or “CMN,”~~; (iii) the Brazilian Central Bank ~~and document template provided~~including the regulatory reports set forth in the ~~Accounting~~Standard Chart of Accounts for ~~National~~Brazilian 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 markets for insurance, open private pension funds and capitalization bonds 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.

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

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 association~~National Association of ~~financial~~Financial and ~~capital markets entities~~Capital Markets Entities (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais) or “ANBIMA”; the Brazilian Central Bank; the Brazilian ~~social and economic development bank~~Development 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 federation~~Bank Federation (Federação Brasileira de Bancos), or “FEBRABAN”; the ~~national federation~~National Federation of ~~private retirement~~Private Retirement and ~~life insurance~~Life Insurance (Federação Nacional de Previdência Privada e Vida); the Getúlio Vargas Foundation (Fundação Getúlio Vargas) or “FGV”; the Brazilian Central Bank ~~system~~Information System (Sistema de Informações do Banco Central); the SUSEP; and the CVM, among others.

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

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

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

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

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

“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.

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

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

“CSLL” means the Brazilian social contribution over net income (Contribuição Social Sobre o Lucro Líquido).

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

“ESG” is an acronym for the words “environmental,” “social” and “governance.”

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

“FGTS” means the Brazilian governmental employee severance indemnity fund (fundo de garantia por tempo de serviço).

“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— Important Events—Spin-Off of Getnet” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

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

“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 IBGE.

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

“IOF” means the Brazilian tax on financial transactions (imposto sobre operações financeiras).

“IRPJ” means the Brazilian federal corporate income tax (imposto sobre a renda de pessoas jurídicas).

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

“ISS” means the Brazilian municipal services tax (imposto sobre serviços de qualquer natureza).

“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.

~~FORWARD-LOOKING STATEMENTS~~“SELIC” means the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custódia), 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.

“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— Important Events—Spin-Off of Getnet” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

“SUSEP” means the Superintendence of Private 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.

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 words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast,” “commitment,” “commit,” “focus,” “pledge” 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.

~~Financial~~The following tables set forth the selected financial information ~~for~~of Santander Brasil ~~as of and~~ for the years ended December 31, ~~2019, 2018, 2017, 2016~~2022, 2021 and ~~2015 has been~~2020 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 year ended December 31, 2020 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.

* 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, 2022, for reais into U.S. dollars of R$5.2177 to U.S.$1.00.

(2) 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 year ended December 31, 2020 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.

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

~~(1) “Net yield” is defined as net interest income divided by average interest earning assets.~~

~~(2) “Adjusted return~~See also “Item 4. Information 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”, both in 2014, Banco Olé Consignado S.A. (current name of Banco Consignado S.A.) in 2015, 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 GetNet and Super both during 2014, the acquisition of an interest in Banco Olé Consignado S.A. in 2015. 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)~~Company—B. Business Overview—Selected Statistical Information—Selected 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.Ratios.”

(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 profit 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. For more details, see the table below.

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 ~~GetNet~~Getnet 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.

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.

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~~

~~of excluding a portion of gains/losses on~~(see also note 23 to our audited consolidated financial ~~assets and liabilities (net) plus exchange differences (net) line item, which is offset by excluding a portion~~statements included elsewhere in ~~the Income tax line item.~~this annual report). 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.

The Brazilian foreign exchange system allows the ~~purchase and sale~~buying or selling 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 foreign~~moderate 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.

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.”

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

Our parent company, Santander Spain, reports its financial ~~condition~~ and operating results ~~of operations~~ in euros. As of December 31, ~~2019,~~2022, the exchange rate for the euro toreal was R$~~4.4097~~5.5666 per €1.00.

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.

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

~~The below risks could materially~~Summary of Risks Relating to the Brazilian Financial Services Industry and ~~adversely affected~~Our Business

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)

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

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.~~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:

Uncertainty over whether the newly inaugurated Brazilian government will implement changes in policy or regulation creates 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 instability and political ~~instability has~~uncertainties have 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.

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-makers~~policymakers may impact our business. In addition, due to the ~~current political instability,~~inauguration of a new administration, there ~~exists~~is 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 ongoing~~Lava Jato~~ ~~investigations.~~

There are uncertainties regarding the policies to be followed by the newly inaugurated government, the ability of ~~the current~~this new government to implement policies and reforms, as well as the external perception ~~regarding~~of 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, which has not been voted on by both houses of the Brazilian Congress, has proposed 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 and could impact our capacity to receive future cash dividends or distributions net of taxes from our subsidiaries. The Brazilian administration that took office on January 1, 2023 has stated that tax reform is among their priorities. Any such new policies or changes to current policies may have a material adverse effect on us.

Furthermore, ~~Brazil’s~~expenditures by the Brazilian federal government have historically led to fiscal deficits at the federal level, resulting in seven straight years of deficits between 2014 and 2020. While the Brazilian federal government recorded a budget ~~has been~~surplus in ~~deficit since 2014. Similarly,~~2021 and 2022, 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.

Uncertainty about the Brazilian government’s implementation of changes in policies or regulations that affect such implementation, in particular in light of the newly inaugurated new administration’s policies, 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 facing 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 (the~~Lava Jato~~ ~~investigations). The Brazilian Federal Police ins 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”, a tax appeals tribunal (the so-called~~~~Operação 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 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. 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 (according to data from the IBGE, the Brazilian economy’s gross domestic product, or “GDP,” contracted by 3.3% in 2016 but increased by 1.3% in 2017 and 2018 and 1.1% in 2019). In addition, although we have reduced our exposure to companies involved in the~~Lava 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 the~~~~Lava Jato~~ investigations and the economic downturn, Brazil was downgraded to non-investment grade status by S&P in September 2015, by 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. Brazil’s sovereign rating is currently rated by the three major risk-rating agencies as follows: BB- by S&P and Fitch and Ba2 by Moody’s. 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, the~~Lava Jato~~investigations 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 December~~The SELIC rate had previously been on a downward trend since mid-2016. The SELIC rate reached a high of 14.25% in 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 rate~~fell 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. As a result of inflationary pressures that have arisen in ~~Brazil) was lowered to 13.75%,~~Brazil in early 2021 and which grew in ~~January 2017, the SELIC rate was further lowered to 13.0%, and to 12.25% in February 2017. In May 2017, the Monetary Policy Committee (Comitê de Política Monetária) of~~intensity on a global scale throughout 2022, the Brazilian Central Bank ~~or “COPOM”, decided~~began to ~~lower~~tighten its monetary policy and began to increase the SELIC rate ~~to 10.25%, then lowering it to~~in mid-March 2021, ultimately reaching 9.25% ~~in July 2017, to 7.50% in October 2017 and to 7.0% in December 2017. In February 2018,~~at the ~~COPOM lowered~~end of 2021. This cycle continued into 2022, with the SELIC rate reaching a high of 13.75% in August 2022, at which point the Brazilian Central Bank resolved to ~~6.75% and then to 6.50% in March 2018 and kept throughout the year 2018. In 2019, the~~

~~COPOM continued this trend for the first half~~keep it at that rate. As 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 cutdate of this annual report, the SELIC rate ~~to 4.25%.~~

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,~~2022, a 1.0% increase or decrease in the ~~basic~~base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$~~334 million.~~945 million within the following 12-month period. 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, ~~generally~~such 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,~~2022, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$9392 million and R$7681 million, respectively.

Inflation ~~has increased during 2019, reaching 4.31%~~ for the ~~12-month period ending~~years ended December 31, ~~2019 (compared~~2022, 2021 and 2020, as measured by the IPCA, was 5.79%, 10.06% and 4.52%, respectively. Increased inflation in the year ended December 31, 2021 resulted mainly from temporary supply shocks affecting the prices of foodstuffs. These inflationary pressures persisted in 2022 and early 2023, and have also been compounded by additional pressures, including climate events that hit electricity generation and led to ~~3.75%~~an increase in ~~2018)~~energy prices, disruption in supply chains, the depreciation of the real, asthe ongoing war between Ukraine and Russia and the continued COVID-19 pandemic (particularly in China), among others. As a result, inflation in 2022 peaked at multiple-year highs of 12.1% in Brazil (as measured by the ~~current market conditions.~~IPCA) and 9.1% in the United States (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. The significant increase in the cost of living led the Brazilian government to introduce tax cuts on selected items, which helped ease pressures in Brazil and meant the accumulated IPCA for the year ended December 31, 2022 was 5.79%, which was still significantly higher than the 3.50% targeted level set by the Brazilian Central Bank pursuant to the applicable law.

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.~~economy. Any of these actions may adversely affect our asset quality. Furthermore, Brazil’s persistently high rate of inflation, compounded by high ~~and increasing~~ interest rates, declining consumer spending and ~~increasing~~unstable levels of 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,~~2022, approximately ~~17.8%~~14.5% of our total assets, and ~~78.4%~~70.3% of our securities portfolio, consisted of debt securities issued by the Brazilian federal government. Any failure by the Brazilian ~~Government~~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 ~~that~~for 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 to~~see note 2221 to our audited consolidated financial ~~statements.~~statements included elsewhere in this annual report.

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.

~~Decreases~~Increases in interest rates can ~~increase~~decrease the present value of obligations under our legacy defined benefit pension plans and ~~may materially and adversely affect~~lifetime medical assistance plan, which contributed to the ~~funded status~~reduction of our ~~legacy~~provisions when compared to 2021, alongside the creation of a defined contribution plan at Banesprev with the purpose of receiving, through voluntary migration, participants and beneficiaries of certain defined benefit plans that we had previously sponsored, including Plan I, II, V, Pre-75, DCA, DAB, CACIBAN and ~~require us to make additional contributions to these plans to meet our pension funding obligations.~~

As of December 31, ~~2019, we had~~2022, our provisions for pensions and similar obligations totaled R$1.8 billion (out of total provisions for legal and administrative proceedings, commitments, pensions and other ~~obligations in the amount~~matters of R$~~16 million. See more~~9.1 billion), a 35.0% decrease from R$2.7 billion as of December 31, 2021. 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.

Although long-term depreciation of thereal is 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. ~~From~~As 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, the~~~~real~~ ~~depreciated against the U.S. dollar due to a decrease in commodities prices, reaching~~with an exchange rate of R$2.34 per U.S.$1.00, ~~on December 31, 2013 and~~the real/U.S. dollar exchange rate was R$2.65 per U.S.$1.00 on December 31, ~~2014. During 2015, due~~2014, depreciating further to ~~the poor economic conditions in Brazil, including as a result of political instability, the~~~~real~~ ~~devalued at a much higher rate than in previous years. On September 24, 2015, the~~~~real~~ ~~depreciated to R$4.20 per U.S.$1.00. Overall, in 2015, the~~~~real~~ ~~depreciated 47% against the U.S. dollar, reaching~~ R$3.91 per U.S.$1.00 on December 31, 2015. ~~In 2016,~~Despite the~~real~~ ~~faced continuing fluctuations, primarily as~~ instability caused by a ~~result of Brazil’s political instability, but had~~change in the country’s presidency, the real 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, thereal remained relatively stable against the U.S. dollar, with an exchange rate of R$3.31 per U.S.$1.00 as of December 31, ~~2017. In 2018, the~~~~real~~2017, but continued to depreciate ~~against~~in the ~~U.S. dollar with the exchange rate~~following years, reaching R$~~3.88~~3.87 per U.S.$1.00 as of December 31, ~~2018. In 2019, the~~~~real~~ ~~continued to depreciate against the U.S. dollar, with the exchange rate reaching~~2018, 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.$1.00. In 2021, the fallout of the COVID-19 pandemic continued to weigh on the performance and prospects of the Brazilian economy. The adverse economic effects of the COVID-19 pandemic have led to pressure on the Brazilian government to increase its support for the economy, which has led it to increase its already high indebtedness. Along with an ongoing perception that the Brazilian government could continue such support and further increase its indebtedness, this has led to a depreciation of the real. As of December 31, 2021, the exchange rate was R$~~4.50~~5.58 per U.S.$1.00. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.62 to R$5.70 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.22 per U.S.$1.00. There can be no assurance that thereal will not substantially depreciate or appreciate further against the U.S. dollar.

In the year ended December 31, ~~2019,~~2022, 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$~~1,264~~0.82 million.

~~Depreciation~~depreciation 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 thereal 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 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 ~~dampen~~hinder 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 followed by a three-year streak of growth in 2017 (1.3%), 2018 (1.8%) and 2019 (1.2%). In 2020, the Brazilian GDP contracted by 3.3% as a result of the effects of the COVID-19 pandemic, and despite the significant economic support measures put in place by the Brazilian government (although it is believed that these measures averted an even stronger contraction). In 2021, the extension of income support programs and the relaxation of certain mobility restrictions that allowed some businesses to resume their activities boosted the industrial and services sectors and resulted in GDP growth of ~~1.0%~~5.0% in 2021. This level of growth was in part due to a low basis of comparison given the significant contraction in GDP in 2020 (against which 2021 growth was measured), an effect which was not present in 2022 and ~~1.1%~~helps explain the deceleration of the GDP’s growth in ~~2017 and 2018, respectively, and a growth~~2022 (estimated at 3.0% notwithstanding the significant volume of ~~1.0% in 2019.~~fiscal incentives). 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, pandemics or other disruptive events. 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~~

Investors’ perceptions of the risks associated with our securities may also be affected by allegations of fraud, accounting misstatements, corruption, bribery or other matters involving other Brazilian issuers. Investors’ perceptions of the risks associated with our securities may also be affected by perception of risk conditions in Spain. Additionally, crises in other emerging market countries may ~~diminish~~reduce 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.

In ~~2019, 2018~~2021, 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 2020 and 2021, the fallout of the COVID-19 pandemic also significantly affected the performance of Brazilian markets, an effect that was less pronounced in 2022 in Brazil. These ~~uncertainties~~factors have persisted in 2022 and have been compounded by the war between Russia and Ukraine, which has contributed to inflationary pressures worldwide and spurred central banks to increase interest rates, thereby spurring fears of a global economic slowdown. Continued COVID-19 outbreaks in China in 2022 and early 2023 and the response of the Chinese government to these have adversely affected usthe Chinese economy and, as a result of its global impact, the market value of our securities.

In addition, we continue to be exposed to disruptions and volatility in the global financial markets ~~because of~~due to their effects on the financial and economic environment, particularly in Brazil, ~~such as~~which have included a slowdown in the economy, an increase in the unemployment rate, a decrease in the purchasing power of consumers and ~~the~~a 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~~nonperforming 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.

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 ~~Contents~~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 or may emerge against which existing vaccines and acquired immunity may not be effective. Restrictions will likely remain in place or once again be enacted if contagion levels increase, thereby suppressing economic activity. 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 global macroeconomic environment is facing challenges, including economic setbacks derived from the ~~economic slowdown in China~~COVID-19 pandemic, supply chain disruptions, high energy prices, inflation and the ~~Eurozone, the end of funding by the U.S. Federal Reserve, the uncertain impact of Brexit~~ongoing war between Russia and ~~potential adoption of U.S. tariffs on steel imported from Brazil and Argentina.~~Ukraine. There is considerable uncertainty over the ~~long-term~~ effects of the ~~expansionary~~tight monetary ~~and fiscal~~ policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United ~~States.~~States, which may result in GDP contractions across major economies in the short and medium term.

In 2022, the war between Russia 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. 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~~are involved in ~~controversy over~~controversies related to trade barriers in China that have threatened a trade war between the countries, ~~and~~which have implemented or proposed to implement tariffs on certain imported products. Tensions have also arisen between the United States and China over the future of Taiwan. Sustained tension between the United States and China ~~over trade policies~~ could significantly undermine the stability of the global economy. 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.

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, the 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 prices of most of the assets traded on B3 were adversely affected due to the COVID-19 pandemic. Impacts similar to these may reoccur, causing the prices of securities traded on the B3 to fluctuate.

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 and communities most affected by the COVID-19 pandemic and high inflation 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. China’s deceleration based on structural low economic growth coupled with real estate distress and slow population growth could negatively affect the world economy which would also impact our operating results, financial condition and prospects.

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.

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.

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~~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~~or 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 war in Ukraine could materially affect our financial position and increase our operational risk.

On February 24, 2022, Russia launched a large-scale military action against Ukraine. The ~~exit~~war in Ukraine has caused an ongoing humanitarian crisis in Europe as well as volatility in financial markets globally, heightened inflation, shortages and increases in the prices of energy, oil, gas and other commodities. The continuance or escalation of the war, including its extension to other countries in the region, could lead to further increases in energy, oil and gas prices (particularly if supplies to Europe are interrupted) and heightened inflationary pressures, which in turn could lead to further increases in interest rates and market volatility. In addition, the war has exacerbated supply chain problems, particularly to those businesses most sensitive to rising energy prices. The war and its effects could exacerbate the current slowdown in the global economy and could negatively affect the payment capacity of some of our customers, especially those with more exposure to the Russian or Ukrainian markets.

In response to the Russian military action against Ukraine, several countries, including the United States, the European Union member states, the United Kingdom ~~(the “UK”) from~~and other UN member states, have imposed severe sanctions on Russia and Belarus, including freezing/blocking assets, targeting major Russian banks, the ~~European Union (the “EU”)~~Russian central bank, and ~~the definition of its future relationship with the EU could adversely impact global economic or market conditions,~~certain Russian companies and individuals, imposing trade restrictions against Russia and Russian interests, as well as ~~our operations, financial condition~~the disconnection of certain Russian banks from the SWIFT system (Society for Worldwide Interbank Financial Telecommunication). In addition, the sanctions imposed also include a ban on trading in sovereign debt and ~~prospects.~~

~~On 31 January 2020~~other securities. The scale of sanctions is unprecedented, complex and rapidly evolving, and poses continuously increasing operational risk to us. Our corporate framework and policies are designed to ensure compliance with applicable laws, regulations and economic sanctions in the ~~UK ceased to be a member~~countries in which we operate, including U.S., EU, U.K. and UN economic sanctions. We cannot predict whether Brazil or any of the jurisdictions whose sanctions frameworks we adhere to will enact additional economic sanctions or trade restrictions in response to the Russian military action against Ukraine. While we do not knowingly engage in direct or indirect dealings with sanctioned parties according to applicable sanctions, or in direct dealings with the sanctioned countries/territories, we may on occasion have indirect dealings within the sanctioned countries/territories, but aim to operate in line with applicable U.S., EU, U.K. and UN blocking and sectoral sanctions regulations.

Furthermore, the risk of cyberattacks on ~~withdrawal terms which establish~~companies and institutions is expected to increase as a ~~transition period until 31 December 2020 during which the UK will be treated as if it were still a member~~result of the ~~European Union. Although~~war and in response to the ~~withdrawal agreement foresees~~sanctions imposed, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures. We are actively monitoring the ~~possibility~~situation to ~~extend the transition period for one~~ensure that cyber defenses remain updated against current and emerging threats.

While we do not have a physical presence in Russia and Ukraine and our direct exposure to Russian or ~~two more years after the 31 January 2020, this~~Ukrainian markets and assets is not ~~automatic~~material, the impact of the war in Ukraine and the ~~UK has enshrined~~sanctions imposed on global markets and institutions, the ~~31 December 2020 date~~impact on macroeconomic conditions generally, and other potential future geopolitical tensions and consequences arising from the war remain uncertain and may exacerbate our operational risk. Episodes of economic and market volatility and pressure on supply chains and inflation may continue to occur and could worsen if the war persists or increases in ~~domestic legislation passing~~severity. As a result, our businesses, results of operations and financial position could be adversely affected by any of these factors directly or indirectly arising from the ~~withdrawal agreement as~~war in Ukraine.

Ongoing or future investigations relating to corruption, diversion of public funds, money laundering fraud and other matters that are being conducted by 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

~~economic growth may be negatively impacted. The uncertainty regarding and terms of the UK’s future relationship with the EU,~~Brazilian federal police as well as ~~any adverse effect which it~~other Brazilian and non-Brazilian regulators and law enforcement officials may ~~have on the UK, the EU and the wider global economy could~~ adversely affect ~~global economic or market conditions~~the growth of the Brazilian economy and ~~investor confidence. This~~ could ~~in turn,~~ have a material adverse effect on us.

Certain Brazilian companies have faced and continue to face investigations and prosecutions 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, money laundering and other allegations of wrongdoing. Anticorruption or other investigations may lead to significant reputational harm, which may affect the investigated corporations’ images and revenues and result in downgrades from rating agencies or funding restrictions, among other negative effects. Allegations of bribery, corruption, fraud, money laundering improper accounting practices or other similar matters among certain large Brazilian companies may also adversely affect investors’ perceptions of the risks involved in investing in Brazilian companies and result in volatility in financial markets. Given the significance of the companies that historically have been subject to investigations in the Brazilian economy, the investigations and their fallout have had and may continue to have an adverse effect on Brazil’s economic growth prospects in the short to medium term.

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. Although we have reduced our ~~operations, financial condition and prospects~~exposure to companies involved in 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 ~~the market value of our securities.~~

~~Our operations and results~~other sanctions that may be ~~negatively impacted~~imposed upon them or reputational or commercial damage as a result of investigations, we may also be materially adversely affected. In addition, investigations have involved members of the Brazilian executive and legislative branches, which caused considerable political instability, and, as a result, persistently poor economic conditions in Brazil could have a material adverse effect on us.

As a result of the allegations under the Lava Jato investigations and the economic downturn, Brazil was downgraded to non-investment grade status by Standard & Poor’s, or “S&P,” in September 2015, by Fitch Ratings, or “Fitch,” in December 2015 and 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. Brazil’s sovereign rating is currently rated by the ~~coronavirus outbreak.~~three major risk-rating agencies as follows: BB- by S&P and Fitch (stable outlook) and Ba2 by Moody’s (stable outlook). Further downgrading of Brazil’s credit rating could reduce the trading price of units and ADRs. Downgrades of various major Brazilian companies could worsen the conditions of the Brazilian economy and the condition of Brazilian companies in general, especially those relying on foreign investments.

~~Global or national health concerns, including~~In addition, the ~~outbreak~~Lava Jato investigations also reached members of ~~pandemic or contagious disease,~~the Brazilian executive and legislative branches, which 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 calculate the size and extension of the effects derived from 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 informationpolitical instability, 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

Our growth, asset quality and profitability, among others, may be adversely affected by a slowdown in Brazil, as well as volatile macroeconomic and political conditions.

~~Climate change can create transition risks, physical risks~~A slowdown or recession in Brazil and other ~~risks that could adversely affect us.~~

~~Climate change may imply three primary drivers of financial risk that could adversely affect us:~~

~~• Transition risks associated with the move to a low-carbon economy, both at idiosyncratic and systemic levels,~~major world economies, such as ~~through~~the severe recession caused by the COVID-19 pandemic, 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, ~~regulatory~~including reductions in interest rates. As a result, inflation rates in 2021 and ~~technological changes.~~2022 have increased considerably in Brazil and globally, due to the strong increase in aggregate demand and bottlenecks in supply and production chains due to shortages 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 increase the SELIC rate from 2.0% at the end of 2020 to 13.75% at the end of 2022. This increase in interest rates has had an adverse effect on economic growth in 2022 that may continue into 2023. Moreover, in 2022, the Brazilian economy was adversely affected by economic uncertainty and economic volatility due to the general and presidential elections held in October 2022.

~~• Physical~~Volatile 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 impacts~~the 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.

Any of the ~~conditions described~~developments mentioned above ~~could~~may 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 and 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. The quality of our loan portfolio may deteriorate as a result of these risks and our loan loss reserves could be insufficient to cover our loan losses, which could have a material adverse effect on us. 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, 2022 was R$142.7 billion (or 14.5% of our total assets as of that date) and consisted principally of National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and 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 a 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 and 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 accelerated the economic recovery in 2021 but significantly increased governmental debt. In 2022, although the Brazilian Central Bank withdrew previously granted COVID-19-related monetary stimuli and increased basic interest rates, the Brazilian government extended the provision of some fiscal incentives to support the economy. Because of positive developments from a revenue standpoint, the level of governmental debt (as a percentage of the GDP) remained materially unchanged in the period, but we cannot assure that it will not increase significantly in 2023 as a result of the proposed economic policies of the new Brazilian federal government, deterioration of Brazil’s economic condition or other factors. Among the risks that could lead to an economic slowdown and adverse conditions in the financial markets are (i) the continuance or escalation of the war in Ukraine; (ii) further increases in the prices of energy and other commodities that can cause inflation or lead to further inflationary pressures; (ii) the continued breakdown of global supply chains; (iii) additional fiscal incentives, which have hitherto contributed to keeping inflation above target levels; (iv) a decline in governmental revenue, which could lead to a steep growth in governmental debt; and (v) further tightening of monetary and fiscal policies, including rising interest costs. 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.

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. In particular, we face the challenge of competing 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 that 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. This could be accelerated by the advent of open banking and open finance, which could result in our competitors gaining access to valuable data regarding our customers which may help them compete with us. In addition, the alliances that our competitors are starting to build with large technology firms can make it more difficult for us to successfully compete with them and could adversely affect us.

~~Non-traditional~~Moreover, nontraditional providers of banking services, such as ~~Internet-based~~internet-based e-commerce providers, mobile telephone companies and ~~Internet~~internet search engines, as well as payment services for blockchain technologies, may offer and/or increase their offerings of financial products and services directly to customers. These ~~non-traditional~~nontraditional 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 ~~pricing~~prices 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~~These new competitors, in addition to neobanks, have entered and ~~Supervision—Other Applicable Laws and Regulations—Regulation of New Financial Institutions That Operate in Online Lending.”~~

~~New competitors~~ 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 digital currencies, 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 addition, on November 16, 2020, the Brazilian Central Bank instituted 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. This ecosystem promotes innovation of the existing payment infrastructure. Although the regulations relating to the PIX ecosystem are subject to further developments from time to time, such initiatives may promote greater competition in the industry, and could cause customers to move away from the solutions we offer towards PIX solutions. In particular, PIX has made processing payments faster and less expensive, has fostered and is expected to continue to foster additional competition and allow new entrants to join the market, while also serving as a significant source of data that will contribute to the ongoing transformation of the financial industry in Brazil. Such developments could therefore materially and adversely affect our business and results of operations. 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. 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 large technology firms 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~~the rates offered on our 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, ~~and~~further increasing competition for investment opportunities.

The success of our operations, our profitability and our ability to maintain our competitive position 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, 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. Moreover, 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 customer behavior. If we cannot respond in a timely fashion to the changing needs and/or desires of our customers, we may lose existing or prospective customers, which could in turn materially and adversely affect us. In addition, ifthe cost of developing products is likely to affect our ~~customer service levels were perceived by~~results of operations.

As we expand the ~~market to be materially below those~~range of our ~~competitor financial institutions,~~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 ~~lose existing and potential business.~~have a material adverse effect on us. 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.

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.

Although the global economy has begun to recover from the COVID-19 pandemic, certain adverse effects of the pandemic continue to impact the macroeconomic environment and may persist for some time. Should the ongoing effects of the COVID-19 pandemic continue for an extended period of time, or worsen, our business, financial position, liquidity, results of operations and prospects could be adversely affected.

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.”

Beginning in 2021 and through 2022, 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 regions. For example, as recently as November 2022, social distancing and lockdown measures remained in place in certain locations in China as the government sought to curb new outbreaks of the contagion. Moreover, in Brazil, certain states and municipalities have recently reinstated mask mandates in public transportation and other areas of public congregation, while mask mandates at airports and on air travel have remained in place since first enacted. In addition, certain adverse consequences of the COVID-19 pandemic have continued to impact the macroeconomic environment and may persist for some time, including labor shortages and disruptions of global supply chains, which contributed to rising inflationary pressures. The COVID-19 pandemic remains dynamic and the emergence of variants resistant to existing vaccines remains uncertain.

If new COVID-19 waves or variants of the virus force countries to readopt measures that restrict economic activity, the macroeconomic environment could deteriorate and adversely impact our business and results of operations, which could include, but are not limited to, (i) a continued decreased demand for our products and services; (ii) further material impairment of our loans and other assets including goodwill; (iii) a decline in value of collateral; (iv) 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 work or bans on nonessential activities. While in 2022, we have progressively returned to the office, we still maintain flexibility to work remotely. In 2022, consistent with governmental health directives, we reinstated normal working conditions without specific health protocols in light of high vaccination rates, the sunset of the COVID-19 state of emergency that had been declared by the Brazilian government and the minimal risk of serious disease. We continue to monitor contagion levels on an ongoing basis.

We may also be adversely affected by measures taken by the Brazilian and other governments to mitigate the effects of the COVID-19 pandemic or other disruptive events. For example, in 2020, a temporary suspension on dividends and other distributions was enacted in Brazil through Resolution No. 4,820, limiting distributions to shareholders to 30% of adjusted net income (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 and 2022, but there is no assurance 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 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 administration 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 COVID-19 pandemic, and the effects on our customers, counterparties, employees and third-party service providers. Any future outbreak of any other highly contagious diseases or other public health emergencies may also have similar adverse effects on our business, financial condition, liquidity and results of operations or cause other risks to us.

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.”

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:

The ~~regulation~~regulations 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. ~~Regulation~~Regulations may be unexpectedly and immediately 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 ~~which~~that 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 apply~~applied to them, is likely to continue. Changes to current legislation and ~~their~~its 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

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.

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, ~~that~~which are required to conduct banking and financial services business. These apply to business operations, affect our 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~~high levels of 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 we believe that 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.

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

Compulsory deposit requirements in Brazil require banks to hold part of funding received from customers with the Brazilian Central Bank, which sets these requirements as a means of controlling liquidity in the financial markets and preserving the solvency of financial institutions. 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~~programs. These changes are a continuing ~~to be a potential area~~source of risk, as ~~they may~~new or an increase ~~the~~in existing reserve and compulsory deposit or allocation requirements, ~~in the future or impose new requirements, which as a result could reduce~~may adversely affect our liquidity and our ability 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:

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~~

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 and anti-terrorism, or ~~“AML,~~“AML/CFT,” ~~anti-terrorism,~~ anti-bribery and corruption, sanctions and other laws and regulations (collectively, financial crime, compliance (“FCC”)) 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~~FCC policies and procedures in place detailing what is required from those responsible. We are also required to conduct ~~AML~~FCC training for our employees and to report suspicious transactions and activity to appropriate law enforcement following full investigation by ~~the Special Incidents~~our special incidents area.

Financial crime ~~has become~~continues to be the subject of enhanced regulatory scrutiny and supervision by regulators globally. ~~AML,~~AML/CFT, anti-bribery, anti-corruption and sanctions laws and regulations are increasingly complex and detailed. ~~The Basel Committee is now introducing~~Key standard-setting and regulatory bodies continue to provide guidelines to strengthen the interaction and cooperation between prudential and AML/CFT 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~~crime-related activities. However, emerging technologies, such as cryptocurrencies (which were recently regulated by statute in Brazil) and ~~blockchain,~~innovative payment methods, could limit our ability to track the movement of funds and, therefore, present a risk to ~~our Company.~~us. 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.

Additionally, ~~in 2015 and early 2016, pursuant to a new resolution issued~~we are required by ~~the United Nations Security Council, as well as a recently enacted law and regulations issued by the~~ Brazilian Central Bank ~~for~~regulations, which derive from resolutions from the ~~implementation of the aforementioned resolution in Brazil, additional compliance requirements were imposed on us and other financial institutions operating in Brazil, which relate~~UN Security Council, to comply with certain rules relating to the local

enforcement of sanctions imposed by the ~~United Nations~~UN Security ~~Council resulting from certain resolutions.~~Council. 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,~~AML/CFT, 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.

~~The~~Furthermore, 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 to~~for 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, while we ~~rely upon our~~expect relevant counterparties to ~~a large degree to~~ maintain and ~~appropriately~~ apply their own appropriate compliance measures, procedures and internal ~~policies. Such~~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,~~AML/CFT, anti-bribery and corruption 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 nonpublic 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, regulations and standards, 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,~~We are subject to regulations enacted by Brazilian authorities. The LGPD came into effect in September 2020, with the exception of its articles 52, 53 and 54, which came into effect on August 1, 2021. The LGPD sets out several penalties, which 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. In addition, we are subject to 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,” was approved in the Federal Official Gazette on August 14, 2018 and, as amended by the Law no. 13,853/2019, will take effect in August 2020. Law 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.

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

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.

. 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~~Additionally,
following the United Kingdom’s withdrawal from the EU, we also are subject to the U.K. General Data Protection
Regulation (“U.K. GDPR”) (i.e., a version of the ~~offense, and fines of up to two percent (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, the U.K. GDPR and other data protection regimes 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-compliance~~noncompliance with the new procedures. If there are breaches of ~~the GDPR~~our data protection and ~~or the LGPD~~privacy obligations, as the case may be, we could face significant civil administrative and monetary sanctions, as well as reputational damage, which could have a material adverse effect on our ~~operations,~~operating results, 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, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Data Protection Requirements.”

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 ~~accurately~~with 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,~~2022, we had provisions for taxes, other legal contingencies and other provisions ~~for~~of R$~~11,366 million.~~ 7,340 million (compared to R$8,876 million as of December 31, 2021).

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.

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 implemented in July 2022 setting a limited amount of R$1,000 for PIX transactions carried out between 8:00 p.m. (or, at the user’s discretion, between 10:00 p.m.) and 6:00 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 if we fail to adequately comply with this rule. 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 and nonfinancial reporting may not prevent or detect all errors or acts of fraud.

Disclosure controls and procedures, including internal controls over financial and nonfinancial reporting, (including any climate-related reporting), are designed to provide reasonable assurance that information required to be disclosed by ~~the company~~us in reports filed or submitted under the U.S. Securities Exchange Act of 1934, as amended, ~~(the~~or 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

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~~our control ~~system,~~systems, 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 ~~taxing~~tax 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 ~~taxing~~tax 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 ~~taxing~~tax 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~~have a negative effect on 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~~nonperforming credit portfolio.

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~~IOF tax, 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~~and was reduced ~~the rate~~in 2012 to zero with respect to foreign exchange. ~~The~~Currently, the daily IOF ~~Tax rates applicable to local loans to individuals and legal entities have been frequently adjusted (both increases and decreases) in recent years. The currently applicable IOF Tax~~tax rates applicable to local loans are approximately ~~1.5%~~(i) 0.0082% for individuals and (ii) 0.0041% for legal ~~entities~~entities. The IOF rates have been frequently adjusted (both upwards and ~~3.0% for individuals, but could change~~downwards) in ~~the future.~~recent years. We cannot estimate the impact that a change in tax laws or tax policy could have on our operations. For example, the IOF ~~Tax~~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~~tax can impact our business volumes generally.

~~Also,~~Moreover, the Brazilian Congress ~~may discuss broad~~has from time to time enacted major 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~~and 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.

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~~Prepayments would also ~~be required~~require us 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~~mortgages and ~~collateralized mortgage~~other 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 ancould have a material adverse effect on our business, financial condition and results of operations. An increase in prepayments, in particular should the prevailing interest rates decrease from the rates in effect as of the date of this annual report, 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~~Nonperforming or low credit quality loans can negatively ~~impacted~~impact our results of operations as the amount of our reported ~~non-performing~~nonperforming 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 war in Ukraine or a prolonged COVID-19 pandemic with the emergence of variants resistant to existing vaccines. If we were unable to control the level of our ~~non-performing~~credit impaired 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~~there is no assurance 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~~above-mentioned 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 ~~expected~~incurred 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~~nonperforming or poor credit quality loans, this could have a material adverse effect on us.

On December 31, 2022, our credit risk exposure (which includes gross loans and advances to customers, guarantees and documentary credits) amounted to R$568,338 million (compared to R$540,873 million as of December 31, 2021).

Brazil has historically registered a slow GDP growth rate. The ~~recent slow~~average GDP growth rate ofbetween 2020 and 2022 (1.5% per annum) was essentially unchanged from the ~~Brazilian economy in 2019, 2018 and~~growth rate between 2017 and ~~recession in 2016,~~2019 (1.4% per annum). This pattern, as well as a slowdown in the growth of customer demand, an increase in market competition, changes in governmental regulation, ~~and~~ a ~~decrease~~recent increase of the SELIC rate, ~~since 2017~~as 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 ~~this~~these 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~~main 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 only~~such financial resources at excessive cost. This risk is inherent in any retail and ~~commercial~~wholesale banking business and can be heightened by a number of enterprise-specific

factors, including ~~over-reliance~~overreliance 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 war in Ukraine or new outbreaks of the COVID-19 pandemic, the ongoing war between Russia and Ukraine, high energy prices, inflation or other disruptive events. 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, ~~with~~and increases in these factors ~~increasing~~raise the cost of our funding. Increases in interest rates primarily as a result of monetary policy decisions taken by central banks and other monetary authorities, and have increased markedly globally and in Brazil during 2022. 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%~~2022, 87% of our customer deposits had remaining maturities of one year or less, or were payable on demand, while ~~31.6%~~52% of our assets ~~have~~had maturities of one year or more, resulting in a mismatch between the maturities of liabilities and the maturities of assets. The ongoing availability of this type of funding is sensitive to a variety of factors beyond our control, ~~including:~~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.~~crisis and the COVID-19 pandemic. As a result of inflationary pressures in 2021, 2022 and early 2023 central banks have reduced or discontinued these measures. If ~~current~~any remaining credit facilities, which are progressively being reduced, were to be 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.”

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. ~~The~~For the observations in this disclosure ~~(exercise~~(exercised with daily balances for October, November and December ~~2019) the institution~~2022), Santander Brasil had aan LCR of ~~126.7%~~137.5%, above the 100% minimum requirement. The Net Stable Funding Ratio, or “NSFR,” provides a sustainable maturity structure of assets and liabilities ~~such~~so that banks maintain a stable funding profile in relation to their activities. ~~The~~Our NSFR, which must remain at a minimum of 100% beginning from October 1, 2018 according to CMN rules, ~~stands at over 112.3% for us~~was 108.3% as of December 31, ~~2019.~~

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,~~shareholder’s 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.~~

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.~~shareholder. If Brazil’s sovereign debt or the debt of our controlling shareholder were to be downgraded, our credit rating would also likely be downgraded to a similar degree.

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 ~~ratings~~rating downgrade could adversely affect our ability to sell or ~~market~~trade 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~~on 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:~~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 ~~stable~~negative outlook by ~~Standard & Poor’s Ratings Services, or “S~~S&P” and A- with a negative outlook by Fitch, while its long-term debt in foreign currency is currently rated A+ with a stable outlook by Fitch Ratings Ltd., or “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. Following the upgrade of the Spanish sovereign 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.~~

~~Santander Brasil’s~~with a stable outlook by Moody’s. Our long-term debt in foreign currency is currently rated BB- with a stable outlook by S&P and ~~Ba3~~Ba1 with a stable outlook by ~~Moody’s.~~

~~S&P lowered Brazil’s credit rating in September 2015 from BBB- to BB+ (a non-investment-grade rating),~~Moody’s, 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 ongoing~~~~Lava Jato~~ ~~investigations, and uncertainty~~was affected as to whether the Brazilian government will enact reforms in the 2016 federal budget to improve the country’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. 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~~rating. See “—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—Ongoing or future investigations relating to corruption, diversion of public funds, money laundering fraud and other matters that are being conducted by the ~~course~~Brazilian federal police as well as other Brazilian and non-Brazilian regulators and law enforcement officials may adversely affect the growth of ~~2015~~the Brazilian economy and ~~in early 2016. On August 12, 2015, Moody’s lowered our credit rating from Baa2 to Baa3, lowering it again~~could have a material adverse effect on ~~February 25, 2016 to Ba3, and in March and~~

May 2017 it affirmed the rating at Ba3. 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 was 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: Ba1 by S&P and Ba3 by Moody’s, both with a stable outlook.us.” Any further downgrade in our long-term debt in foreign currency, including as a result of adverse economic conditions in Brazil or globally (such as those caused by the ongoing war between Russia and Ukraine), 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 general macroeconomic outlook which includes the impact of the war in Ukraine and the COVID-19 pandemic (including, for example, additional waves, new variants and the reinstatements of restrictive measures), inflation and interest rates 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.

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.

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

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.

As part of the risk analysis that we ~~undertake~~conduct with respect to our customers, some of the risk factors which we ~~take into account~~consider include environmental ~~factors~~aspects (such as soil and ~~water~~groundwater contamination, ~~vegetation suppression,~~deforestation, or ~~lack~~absence of environmental ~~authorizations) as well as~~permits) and social ~~factors~~aspects (such as the existence of working conditions akin to ~~slavery).~~slavery or impacts on indigenous people from projects) and, most recently, climate aspects, with a focus on physical and transition risks. Any failure or noncompliance 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.

Moreover, we are exposed to the risk that our assessment that a product or service we provide, or an investment that we have made, is socially or environmentally responsible will be challenged by customers, regulators or third parties. There has been increased investor and regulatory focus on ESG-related practices of financial institutions. A growing interest on the part of investors and regulators in ESG factors, and increased demand for, and scrutiny of, ESG-related disclosures by financial institutions, has likewise increased the risk that we could be perceived as, or accused of, making inaccurate or misleading statements regarding the investment strategies of our self-managed investment funds, or our and our funds’ ESG efforts or initiatives, commonly referred to as “greenwashing.” Such perceptions or accusations could damage our reputation, result in litigation or regulatory enforcement actions, and adversely affect our business.

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. Most of these regulations have been in effect since July 2022. Any failure or noncompliance 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 ESG requirements applicable to Brazilian financial institutions, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations— 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 macroeconomic factors globally and in Brazil, the war in Ukraine or a prolonged COVID-19 pandemic with the emergence of variants resistant to existing vaccines 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 applied~~we 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 ~~may~~either have to enforce ~~the~~such collateral through the courts or through extrajudicial measures. However, ~~we may face delays on~~even where the enforcement mechanism is duly established by applicable 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 by~~collateral. 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 collateral~~operations.

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%~~90.2% of our total assets as of December 31, ~~2019.~~ 2022. As of December 31, 2022, the notional value of derivatives in our books amounted to R$2,282 million (with a market value of R$21,976 million of debit balance and R$18,699 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

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 ~~increased~~ongoing international, national and other regulatory ~~scrutiny. For example, regarding~~scrutiny and initiatives for reform.

On March 5, 2021, the ~~interest rate benchmarks, in 2017, the UK’s~~U.K. Financial Conduct Authority, or the “FCA,” ~~announced that it will no longer persuade or compel banks to submit rates for the calculation of~~which regulates the London interbank offered rate, or “LIBOR,” ~~benchmark~~published an announcement to confirm the dates immediately after ~~2021.~~which all LIBOR settings would either cease to be provided by any administrator or no longer be representative. The FCA announced that on December 31, 2021 all tenors would cease to be provided by any administrator except for the overnight, 1-, 3-, 6- and 12-month and for the USD LIBOR tenors, which will be discontinued on June 30, 2023.

In March 2022, the U.S. Congress passed the Adjustable Interest Rate (LIBOR) Act (“the LIBOR Act”). This ~~announcement indicates that~~legislation establishes a uniform process, on a nationwide basis, for replacing LIBOR in existing contracts the ~~continuation~~terms of which do not contain fallback provisions by automatically replacing LIBOR, on the ~~current basis cannot and will not be guaranteed after 2021. Therefore, after 2021~~ LIBOR ~~may cease~~replacement date (expected to be ~~produced. The Bank~~the first London banking day after 30 June 2023), with the “Board-selected benchmark replacement”. On 16 December 2022, the Federal Reserve Board adopted a final rule that implements the LIBOR Act and identifies these benchmark replacements, which differ for different contracts, but are all based on SOFR.

We have focused and continue to focus on making all the contractual, commercial, operational and technological changes necessary to address relevant pending milestones.

Our exposure to LIBOR-linked contracts as of ~~England~~December 31, 2021 was limited and related only to USD LIBOR. In 2021, we adopted the ~~FCA~~SOFR (Secured Overnight Finance Rate) and CME TERM SOFR as a replacement for USD LIBOR for new agreements and since January 1, 2022 we are ~~working~~no longer entering into new USD LIBOR transactions, except in cases for which there are specific exceptions given by international regulators (such as market making activities). We are communicating with ~~market participants~~our customers to ~~catalyze a transition~~amend existing agreements to using Sonia. In addition, the European Money Market Institute (“EMMI”) announced the discontinuation of the Euro OverNight Index Average, or “EONIA,” after January 3, 2022 and that from October 2, 2019 until its total discontinuation it willinclude appropriate fallback clauses for when USD LIBOR ceases to be ~~replaced by the euro short-term rate, or “€STR,”) plus a spread of 8.5 basis points.~~ 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 introduces~~introduce 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 the~~of 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. The replacement benchmarks~~period and ~~their~~inquiries, reviews or other actions from regulators regarding our preparation, readiness and transition ~~path have been defined, but the mechanisms for implementation are under development. Accordingly, it is not currently possible~~plans and (vii) litigation risks and risks relating to ~~determine whether, or to what extent, any such changes would affect us. However, the~~other disputes and actions with customers, counterparties, investors and other parties regarding our existing products and services, which could adversely impact our profitability.

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.

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.

~~The~~Risk management ~~of risk~~ is ~~an integral~~a central part of our activities. We seek to ~~monitor~~manage and ~~manage~~control our risk exposure through a ~~variety of separate but complementary financial, credit, market, operational, compliance~~forward-looking management model, based on governance and ~~legal reporting systems, among others. We employ~~other tools, supported by our risk culture. While our management model uses a broad and diversified set of risk monitoring and ~~risk~~ mitigation techniques, ~~which~~such management model may not be fully effective inat 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~~on 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. ~~Our~~Thus, our losses ~~thus~~ could be significantly ~~greater~~higher than the historical measures indicate. In addition, our ~~quantified modeling does~~statistical models may not

take all risks into ~~account.~~account or measure emerging risks correctly. 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, to misunderstand or misuse such information for purposes for which it was not designed. In addition, if existing or potential customers or counterparties believe that 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 our customers’ current or future credit risk behavior, of our ~~customers, our employees~~management models may not always be able to assign an accurate credit rating, which may result in ~~our~~a 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 or 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~~improve our credit risk management system may result in an increase in the level of ~~non-performing~~nonperforming 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~~to the intrusion into 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-attacks~~end-user technology, social engineering and phishing attacks, and cyberattacks causing systems degradation or service unavailability that may result in business losses.

We may not be able to successfully protect our information technology systems and platforms against such threats. WeIn recent years, we have seen ~~in recent years~~increased targeting of the computer systems of companies and organizations, ~~being 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,~~cybercriminals, 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-attacks~~Cyberattacks 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-attacks~~cyberattacks could ~~give rise to the disablement of~~disrupt our ~~information technology~~electronic systems used to service our customers.

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

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~~which 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-attacks~~cyberattacks against critical infrastructures of Brazil. Our information technology systems are dependent on such critical infrastructure, and any ~~cyber-attack~~cyberattack 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.

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~~clearinghouses 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.~~customers, as well as counterparties in various other industries. Defaults by, and even rumors or questions about the solvency of, certain of our counterparties, including 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.~~counterparties. 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.

We or certain of our counterparties may incur losses or defaults for a wide variety of reasons, including defaults by certain of our counterparties, by business with which our counterparties transact, rumors or questions about the solvency of our counterparties or significant market participants, as well as evidence or rumors of fraud or improper accounting practices among certain of our counterparties or significant market participants, including both financial and non-financial institutions. If any of these problems were to materialize, as they have in past among large Brazilian corporations, the otherwise routine transactions that we have entered into with our counterparties could have a material adverse effect on our business, financial condition and results of operations.

If these risks give rise to losses, this could materially and adversely affect us. ~~We have a diversified~~Our loan portfolio ~~with no~~does not have any specific concentration exceeding 10% of our total loans. ~~Furthermore, currently, 0.9%~~As of December 31, 2022, 1.0% of our loan portfolio is allocated to our largest debtor and ~~6.9%~~4.5% to our next 10 largest debtors.

However, we cannot assure this will continue to be the ~~case.~~ case or that we will not incur significant losses from counterparty defaults despite the concentration levels described above.

If these counterparty risks give or continue to give rise to losses, ~~this~~our business, financial condition and
results of operations could materially and adversely be affected.

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.

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 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).

Interest rates have been increasing in Brazil since March 2021 and the SELIC rate has reached 13.75% as of the date of this annual report. 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 customer needs. Sustained high interest rates may also 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 volume of loans we originate. Sustained high interest rates have historically discouraged customers from borrowing and have resulted in increased or fluctuations in 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. Additionally, a shrinking yield premium between short-term and long-term market interest rates coupled with inflation could adversely affect our business and results of ~~operations~~operations.

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 ~~condition.~~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.

Our financial results are constantly exposed to market risk. In 2022, inflationary pressures, increases in the prices of energy, oil, gas and other commodities, the war in Ukraine and the lingering effects of the COVID-19 pandemic have caused and may continue to cause significant market volatility which may materially and adversely affect us and our trading and banking book.

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 war in Ukraine, the COVID-19 pandemic, high inflation (including high energy prices) and other disruptive events. 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, judgments 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.

Concentration risk is ~~an essential factor~~the risk associated with potential high financial losses triggered by significant exposure to a 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 ~~management~~same 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 the “Item 3. Key Information—D. Risk Factors” section of ~~credit~~this annual report. We recognize the importance of this risk and ~~is therefore monitored continuously. Aspects such as~~ the ~~economic sector, concentration~~potential 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.~~

~~Market~~Potential market turmoil and economic recession could materially and adversely affect the liquidity, credit ratings, businesses and/or financial conditions of our ~~borrowers,~~customers, which could in turn increase our ~~non-performing~~nonperforming loan ratios, impair our loan and other financial assets, and result in decreased demand for borrowings and deposits in general. We have credit exposure to borrowers ~~which~~that 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- length~~arm’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, consulting, 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—B. Related Party Transactions.”

~~The accounting~~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 of~~that impact the results of our ~~operations and financial position.~~

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 ~~which~~that 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

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 or misstated, 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. We have experienced interruptions in our information technology systems in the past and we cannot assure you that we will not suffer any such interruptions in the future, or that we will be able to identify and rectify these within a window of time that prevents any disruption. Any such events or 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 ~~effectively~~in an effective, timely and cost-effective manner, including in response to new or modified cybersecurity and data privacy laws, rules, regulations and standards, could have a material adverse effect on ~~a timely basis could materially and adversely affect~~ us.

WeLike other financial institutions, in conducting our banking operations, we receive, manage, hold, transmit, 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.~~information. 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 ~~disclosures~~access or ~~security breaches~~disclosures 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~~noncompliance with policies, ~~employee~~ misconduct, or negligence ~~and~~or 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

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, if~~If we cannot maintain an effective and secure electronic data and information, management ~~system~~and 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, during the heights of the COVID-19 pandemic, we permitted or required a majority of our employees to work remotely, which led to increased vulnerability of our systems and the risk of cyber-attacks. Though substantially all of our employees are now working in-person at our offices, work-from-home policies may lead to continued vulnerability to the extent certain of our employees elect to work away from our premises and access our networks remotely. This trend, combined with our customers’ increased reliance on digital banking products and other digital services, including mobile payment products, has increased the risk of data breaches and other security incidents.

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 customers, 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 global environment, with the war in Ukraine resulting in an increased risk of cyber-attacks, and other disruptions in response to, or retaliation for, the sanctions and costs imposed on Russia and certain other countries directly or indirectly involved in the war. 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.”

Maintaining a ~~positive reputation~~robust risk management framework based on robust ethical principles and corporate values is critical to protect our reputation and our brand, attract and retain customers, investors and employees and conduct business transactions with counterparties. Damage to our reputation ~~can~~could therefore cause significant harm to our business and prospects. Harm to our reputation ~~can~~could arise from numerous sources, including, among others, ~~employee~~ misconduct by our directors, officers or employees (either in connection with their duties at the Company or with other positions they may hold elsewhere), including the possibility of fraud perpetrated by ~~our employees,~~such persons, litigation or regulatory enforcement, failure to deliver minimum standards of service and quality, negative perceptions
regarding our ability to maintain the security of our technology systems and protect customer data (including as a
result of a cybersecurity incident), 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, actual or alleged conduct in any number of activities, including lending practice, sales and marketing, corporate governance and corporate culture, 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.

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.

Additionally, we could suffer significant reputational harm that could affect our business, results of operations and prospects from any negative perceptions regarding topics related to environmental, social and corporate governance policies. There has been increased focus by customers, shareholders, investor advocacy groups, employees, regulators and other stakeholders on these topics, and our policies, practices and disclosures in these areas could come under scrutiny. Governments may implement new or additional regulations and standards or investors, customers and other stakeholders may impose new expectations or focus investments in ways that cause significant shifts in disclosure, consumption and behaviors that may have negative impacts on our business. If regulators or stakeholders consider our efforts to be ineffective, inadequate or unsatisfactory, whether real or perceived, it could harm our reputation, business and prospects and we could be subject to enforcement, other supervisory actions or other harm.

We could also suffer significant reputational harm if we fail to identify and manage potential conflicts of interest ~~properly.~~properly, including conflicts of interests involving our directors and executive officers. The failure, or perceived failure, to adequately address conflicts of interest could affect the willingness of ~~clients~~customers 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~~us, which could ~~cause material harm to us.~~

have an adverse effect on our operating results, financial condition and prospects.

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, or to execute successfully any of our strategic actions, which could have an adverse impact on us, including on 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:

Any failure to manage growth effectively, or to execute successfully any of our strategic actions, 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.

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

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, social and corporate governance policies 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.

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. ~~Replacing~~While 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 arrangements 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.

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 to, among other factors, 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), behavior, capital calculation, provisions, market risk, structural risk (i.e., interest rate risk in the banking book), 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 and forecasts. 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. We manage model risk on a consolidated basis with the Santander Group, which includes internal model risk policies and a tiering mechanism to categorize the levels of importance of non-regulatory models and model risk management. Nonetheless, 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 regulatory 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.

Additionally, unprecedented changes in economic and market drivers related to the COVID-19 pandemic and the ongoing war between Russia and Ukraine impact the performance of financial models, including credit loss models, capital models, traded risk models and models used in the asset/liability management process. This has required additional monitoring and adjustments to comply with the guidance and recommendations of standard setters, regulators and supervisors, particularly for credit loss models. It also has 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 has been and may continue to be impacted by the consequences of these events. While it is too early to be entirely certain of the magnitude of change required for our models, it is likely that capital, credit risk and other models will need to be adjusted.

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.

Risks associated with climate change are gaining increasing social, regulatory, economic and political relevance, both in Brazil and globally. New regulations related to climate change may affect our operations and business strategy, leading us to incorporate financial costs resulting from the following driver risk:

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

As a financial institution, we are already subject to certain regulatory ESG requirements as detailed under “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—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 and 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; 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.

We periodically disclose information such as emissions and other climate-related performance data, statistics, metrics and/or targets. If we lack robust and high quality climate-related procedures, controls and data, we may not be able to disclose reliable climate-related information. In addition, because the climate-related information is based on current expectations and future estimates about our and third-parties' operations and businesses and addresses matters that are uncertain to varying degrees, we may not be able to meet our estimates, targets or commitments or we may not be able to achieve them within the timelines we announce. Actual or perceived shortcomings with respect to these emissions and other climate-related initiatives and reporting could result in litigation or regulatory enforcement and impact our ability to hire and retain employees, increase our customer base, and attract and retain certain types of investors.

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.

As of February 24, 2023, 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:

~~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~~standalone 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

will limit other ~~stockholders’~~shareholders’ 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,~~2022, the aggregate market capitalization of the B3 was equivalent to approximately R$ ~~4.8~~4.2 trillion (U.S.$~~1.2 trillion)~~0.8 billion), and the top ~~ten~~10 stocks in terms of trading volume accounted for approximately ~~36%~~48% of all shares traded on B3 in the year ended December 31, ~~2019.~~2022. In contrast, as of December 31, ~~2019,~~2022, the aggregate market capitalization of the NYSE was approximately U.S. ~~24.1~~$31.7 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.

The uncertainties caused by the outbreak of COVID-19 had an adverse impact on the global economy, global capital markets, including in Brazil, and the prices of most of the securities traded on the NYSE and the B3, including the price of our securities during the course of 2020 and 2021 and, to a lesser extent, in 2022. In 2022, these effects have been compounded by the ongoing war between Russia and Ukraine, continued supply chain disruptions, high inflation (including high energy prices) and higher interest rates globally and in Brazil. 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 in the past as a result of these or other factors.

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

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.

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.~~

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 ofin 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%~~25% 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 availability. We paid R$~~10.8~~8.1 billion, R$~~6.6~~9.6 billion and R$~~6.3~~3.8 billion (R$~~2.90,~~2.17, R$~~1.77~~2.59 and R$~~1.68~~1.03 per unit, respectively) as dividends and interest on stockholders’ equity (considering gross value) in ~~2019, 2018~~2022, 2021 and ~~2017,~~2020, 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. See~~equity, such as a temporary restriction in 2020 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 ~~8. Financial Information—A. Consolidated Statements~~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 ~~Financial Information—History of Payment of Dividends and Interest Attributable to Stockholders’ Equity.”~~

Payments”). Although this restriction was not reinstated in 2021 or 2022, we cannot assure you that this or other restrictions 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~~are not be our direct shareholders and ~~will be~~are 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’~~shareholders’ meetings in specified newspapers in Brazil. Holders of our units will be able to exercise their voting rights by attending a ~~stockholders’~~shareholders’ meeting in person or voting by proxy. By contrast, holders of ADRs will receive notice of a ~~stockholders’~~shareholders’ meeting by mail from the ADRs depositary following our notice to the depositary requesting the depositary to do so. To

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 that 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-residents~~nonresidents 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 generally 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.~~liability. 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.

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

of process in the United States or to the jurisdiction of any U.S. court. As a result, it may not be ~~difficult~~possible for ~~investors~~holders 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.~~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 ~~amongst~~among 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.

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~~Holders 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.

Holders of ADRs who exchange ADRs for their underlying units may 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 ~~Contents~~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 any 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, such 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 nonjury trial would be less favorable to the plaintiff(s) or otherwise less desirable.

We are a publicly held corporation ~~(sociedade~~(sociedade anô~~nima)~~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, Bloco~~2041, 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 ~~the~~our 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.

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

We are part of the Santander Group, a ~~Spanish bank~~financial 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, under~~Under 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:

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

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 establish~~established its presence in Latin America, particularly in Brazil, by capitalizing on organic growth ~~as well as~~and pursuing an acquisition strategy, including the following most notable acquisitions:

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.”

We have set forth below important recent events in the development of our business. For further information, please ~~refer~~see note 3 to ~~Note 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.

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

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.

~~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 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. (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.

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 creation of a credit 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. have a 20% ownership stake in the corporation.

The purpose of the CIB is to develop a database that, in conformity with applicable laws, will collect, reconcile and handle the credit information of registered individuals and legal entities who expressly authorize the inclusion of their credit information on the CIB’s database. On April 14, 2017, the definitive documents were signed by the shareholders. The necessary regulatory authorizations, including by the Brazilian Central Bank and the CADE, have already been granted. The CIB became fully operational in 2019.

On April 28, 2016, our wholly-owned subsidiary Aymoré CFI entered into a joint venture with Hyundai Capital Services, Inc., or “Hyundai 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 finance and insurance brokerage services and products to consumers through the 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 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.

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 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. 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.

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

of a partnership ~~through~~involving 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~~holds 50% of the issued share capital of Santander Auto with the remaining 50% being held by HDI Seguros. Santander Auto ~~will focus~~focuses 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.~~

~~Creation~~SUSEP and effectively started its operations in the second half 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 DTVM. The corporate name change was approved by the Brazilian Central Bank on January 22,~~ 2019.

~~PI DTVM is a securities brokerage company, with an open digital platform, which will broaden the portfolio of financial products we are able to offer to our clients.~~

On June 11, 2018, we incorporated BEN ~~Beneficios,~~Benefícios, 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. BEN ~~Beneficios~~Benefícios began operating in the second quarter of 2019.

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

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 ~~Getnet~~

~~On December 19,~~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 the minority shareholders of Getnet exercised their right to sell all of their shares to Santander Brasil, or the “Put Option”, pursuant to the Shares’ Purchase and Sale Agreement and Other Covenants executed between the parties on April 4, 2014, 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% of the entity’s equity interest, infor the amount of R$~~1.431 billion.~~23.9 million.

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.

On July 29, 2020, we informed the market that we will no longer disclose guidance, as previously announced in the material fact dated October 8, 2019. This decision comes in response to 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.

Following our acquisition ~~transaction~~in 2020 of the remaining outstanding equity interest in Banco Olé, through the acquisition of equity interests in its indirect shareholder, 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 merger of the Olé Companies was 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 S.A.

On September 29, 2020, Santander Brasil’s subsidiary, PI Distribuidora de Títulos e Valores Mobiliários S.A., or “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 S.A., or “Toro Corretora,” and Toro Investimentos S.A., or “Toro Investimentos,” which jointly run an investment platform focused on ~~February 18, 2019~~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 and technology and operates 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 customers 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 and Sale 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 (collectively, “Paytec”) for the acquisition of the entirety of Paytec’s issued share capital. Paytec is a logistics operator with Brazil-wide coverage that focuses on the payments market. The transaction closed on ~~February 25, 2019.~~March 12, 2021. On April 1, 2022, we sold Paytec to Getnet, a subsidiary of Santander Spain and an affiliate of ours, for an amount of R$38.7 million (including cash and the assumption of certain obligations).

Corporate reorganization of 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 ~~currently owns~~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 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 ~~Getnet’s~~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. After the conditions precedent established in the investment agreement were fulfilled, the transaction closed on January 4, 2022.

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 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, 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 the “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 auto centers, 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,” our wholly owned subsidiary 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.

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.

In November and December 2021, Santander Brasil issued financial bills (letras financeiras), or 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. These Financial Bills have a term of 10 years, and ~~outstanding share~~redemption and repurchase options in accordance with the applicable regulations. These Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.

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 the B3, and Getnet ADSs are traded on The Nasdaq Stock Market LLC, or the “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.”

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. Following closing on May 26, 2022, Santander Corretora holds a 20% interest in CSD BR.

On September 26, 2022, we acquired the entire issued share capital of SX Tools Soluções e Serviços Compartilhados Ltda., or “SX Tools”, becoming its sole shareholder. As part of the acquisition, we increased the share capital of SX Tools from R$1,000 to R$192 million. SX Tools will primarily provide us and our subsidiaries back-office services to improve the efficiency of our routines.

Total spin-off of Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. to Return Capital S.A. and Liderança Serviços Especializados em Cobrança Ltda.

On October 31, 2022, Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., or “Atual”, was fully spun off and its assets were absorbed by both of its direct subsidiaries, Return Capital S.A., or “Return”, and Liderança Serviços Especializados em Cobrança Ltda., or “Liderança,” in accordance with the proportions established in the transaction documents. With the implementation of the total spin-off, Return's capital was increased by R$3,991 million and Liderança’s was increased by R$267 million, with both now being held directly by us, as the sole shareholder.

On November 9, 2022, our wholly owned subsidiary, Santander Corretora, entered into an investment agreement to acquire up to 20% of the share capital of Biomas – Serviços Ambientais, Restauração e Carbono S.A., or “Biomas”. Biomas provides biodiversity and ecosystem restoration and conversation services, which is aligned with our ESG objectives. Closing of this transaction is subject to customary closing conditions, including regulatory approval.

Sale of equity stake in ~~CIBRASEC – Companhia Brasileira~~Banco PSA and PSA Corretora de ~~Securitização~~

On ~~July 24, 2019,~~November 29, 2022, we, ~~completed the sale to ISEC Securitizadora S.A. (“ISEC”) of~~through our ~~entire~~subsidiaries, sold our 50% equity interest in ~~CIBRASEC – Companhia Brasileira~~each of Banco PSA Finance Brasil S.A, or “Banco PSA,” and PSA Corretora de ~~Securitizaç~~Seguros e Serviços Ltda., or “PSA Corretora,” to Banque PSA Finance, S.A. and Stellantis Services Ltd. Upon closing of the transaction, which is subject to customary conditions precedent, we will no longer be a shareholder of either of these entities.

On December 20, 2022, Lexisnexis Serviços de Análise de Risco Ltda., ~~corresponding~~or “Lexisnexis” agreed to ~~4,000 common~~acquire newly-issued shares of Gestora de Informação de Crédito S.A., or “GIC,” a
company in which hold an equity interest. GIC develops a database with the objective of aggregating, reconciling and ~~50 Class A preferred shares, representing in~~processing registration and credit information of individuals and legal entities to support credit granting, pricing and marketing activities. Upon closing of 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 by Santander Brasil, the other shareholders of Cibrasec, ISEC and Cibrasec, as intervening party. We received consideration of R$ 9.8 million for our interest in ~~Cibrasec. As a result, we are no longer a shareholder~~the share capital of ~~Cibrasec.~~GIC as diluted and decreased from 20% to 15.6%.

On ~~October 8, 2019,~~February 16, 2023, we ~~informed~~announced that our current executive vice-president, who performs the ~~market that we have decided to disclose projections (guidance) with respect to certain~~roles of our indicators for the year of 2022. While we believe that the projections, which we intend to disclose, are based on reasonable assumptions made by our management, such projections are nevertheless subject to significant uncertaintiesChief Financial Officer and ~~matters outside of our control, including: the future average growth of our loan portfolio, return on equity (ROE), cost~~

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

On November 1, 2019, our board of directors approved, in continuation of the buyback program set to expire on November 5, 2019, a buyback program of units and ADRs issued by us, directly or through our branch in the Cayman Islands, toInvestor Relations Officer, Mr. Angel Santodomingo Martell will be held in treasury or subsequently sold. The buyback program will cover the acquisition of up to 37,256,072 units or ADRs, representing a combination of 37,256,072 common and 37,256,072 preferred shares, corresponding to approximately 1% of our share capital. The term of the buyback program is up to 12 months beginning November 5, 2019, and expiring on November 4, 2020.

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 Offer”.

resigning from his positions at Santander Brasil effective March 20, 2023. Our board of directors will appoint Mr. Gustavo Alejo Viviani to succeed Mr. Angel Santodomingo Martell in all his positions with us. Mr. Gustavo Alejo Viviani is already an Executive Vice-president of Santander Brasil and previously worked in our risks, corporate banking and collections areas. For additional information on Mr. Gustavo Alejo Viviani, see “Item 6. Directors, Senior Management and Employees—6A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers—Gustavo Alejo Viviani.”

We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally. The following is a summary of the main effects of the COVID-19 pandemic on our business and results of operations:

See also ~~approved the redemption of instruments issued~~“Item 3. Key Information—D. Risk Factors—Risks Relating to ~~form part of our Tier 1 and Tier 2 regulatory capital, in accordance with the board resolution of January 14, 2014. The redemption were carried out with funds raised through the Notes Offer.~~

~~On December 18, 2018,~~ the Brazilian ~~Central Bank authorized the transactions contemplated in the Notes Offer~~Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the ~~redemption, which were completed on January 29, 2019.~~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.”

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, 2018~~2022, 2021 and ~~2017,~~2020, total investments in ITinformation technology were R$~~1,858~~1,885 million, R$~~1,276~~1,905 million and R$~~1,132~~1,432 million, respectively.

In ~~2019,~~2022, 2021 and 2020, we ~~realized meaningful transformations~~continued to improve our technology platforms by investing in our ~~operations and technologic infrastructure,~~digital applications, especially through the implementation of ~~various and modern~~new 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~~We believe that the application of these new technologies ~~allowed the renovation of~~improved our ~~digital channels for continually improve the experience of~~ interaction ~~between clients~~with our customers and ~~the bank, searching for offer services more~~enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness and ~~more practical and intuitive, besides makes possible the launch of products all digital and innovative~~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 the~~our physical ~~service’s scope (Branch,~~distribution network (branches, PABs and PAEs), ~~applying new functionalities, including: biometry~~including biometric 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, consult~~see 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 ~~divestiture~~divestitures in the past three fiscal years and until the date of this annual report ~~was~~were the ~~sale~~Spin-Off and the sales of ~~BW I in 2017.~~

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.”).

Our strategy is centered on pursuing profitable and sustainable growth. We believe that the expansion of our customer base throughout the years stems from our ability to capture new customers and increase their loyalty. This strategy is supported by a product and service offering designed to support the needs of our customers. Furthermore, our quest for service quality, combined with increasingly integrated sales channels, has led to a higher level of satisfaction among our customers, with an individual NPS of 54 points as of December 31, 2022. We have continued to develop our business by steadily enhancing our ecosystem, broadening our presence through new services and advancing into new markets via both organic and inorganic growth, whereby we have made acquisitions and partnerships in recent years, incorporating greater expertise into the business, as well as by endeavoring to increase cross-selling and leveraging the consistent use of data and customer relationship management tools. We also endeavor to ~~grow in a profitable, recurring and sustainable manner by providing services~~maintain sound risk management, which entails continuously improving our lending models to maintain our credit risk indicators at levels consistent with ~~excellence and consistently~~our risk management policies. Additionally, we strive to enhance ~~customer satisfaction levels, expand~~ our ~~customer base~~operational efficiency ratio by streamlining processes and ~~increase~~implementing technologies.

We recorded net income of R$14,339 million, R$15,559 million and R$13,451 million in the ~~loyalty~~years ended December 31, 2022, 2021 and 2020, a decrease of ~~our customers.~~

~~To accomplish this goal,~~7.8% in the year ended December 31, 2022 compared to the year ended December 31, 2021. In the years ended December 31, 2022, 2021 and 2020, we achieved capital adequacy ratios of 13.9%, 14.9% and 15.3%, respectively. In the years ended December 31, 2022, 2021 and 2020, we have ~~been deeply focused~~achieved efficiency ratios of 27.4%, 27.1% and 35.5%, and adjusted efficiency ratios of 27.5%, 28.2% and 27.8%, respectively. In addition, we achieved an adjusted return on ~~understanding how the Brazilian market works~~average stockholders’ equity of 14.2%, 20.2% and 18.4% in 2022, 2021 and 2020, 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 address its demands effectively. As a consequence 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 believe we have been able to redirect our efforts toward a customer-centric business model with efficiency and risk model accuracy.

We have sought to identify our different types of customers and their specific consumption needs. Based on that, we have adopted 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 portfolio 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.Their Most Directly Comparable IFRS Financial Measures.” We believe that ~~continuing~~these metrics demonstrate our track record of consistent performance and the results of our constant efforts to ~~cross-sell and upsell across~~improve our ~~business and investing in initiatives, which~~productivity.

In recent years, we ~~believe to be promising, are key pillars for~~have undergone significant transformations, thereby enabling us to ~~attract new customers~~identify and ~~retain existing ones.~~

~~Further evidence that we are~~capitalize 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~~business opportunities. We have ~~taken during these last years:~~

• ~~Net promoter score or NPS~~~~. We introduced the NPS as~~expanded our ~~main customer satisfaction metric in 2017 and in 2018, we were pioneers in disclosing this index~~platform to ~~the market. After each interaction with Santander Brasil,~~diversify 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 NPSoffering 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 launched a new service model in large part of our low-income portfolio, where we have transformed five types of careers into a single business and service manager career, further optimizing 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 decrease in the time needed for customers to finalize the purchase of certain products and ~~an increase in the number of agreements issued.~~

• ~~Digital strategy.~~We are in constant digital transformation 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 consists of multidisciplinary teams, with employees from

business and technology areas, who are given autonomy to make decisions rapidly. Thanks to that, we have been able to offer products and services, as well as add system updates through all our available channels quickly. These tools include: (i) providing a wide range of services across all channels according to customers' choices and/or needs; (ii) giving customers the ability to meet all their needs through digital channels; 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 commercial 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, as well as the feeling of being part of their own branch's success. Additionally, we have made some adjustments to the compensation structure of branch employees and managers to ensure that the variable components of their compensation depend on the performance of the branch where they work.

• ~~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 year as one of the Best Companies to Work for in Brazil, according to the GPTW (Great Place to Work) survey.

Finally, aligned with the Santander Group’s responsible growth strategy, Santander Brasil has made several public commitments to society, including: (i) having 30% 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 component in fulfilling our responsibilities to society is 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 named Company of the Year on Exame Magazine’s diversity ranking, in addition to being recognized as the financial institution with the best inclusion and diversity practices in the country.

We provide ~~our 26.3 million active customers as of December 31, 2019 with~~ our complete portfolio of products and services to our 31.8 million active customers (consisting of current account-holding customers who carried out an unprompted transaction in the 90 days preceding the relevant measurement date and customers who do not have a current account with us but have minimum balances, transaction frequency levels or active contracts) as of December 31, 2022 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.

We outline below the ~~operating~~business divisions ~~under~~for each of our operating segments, as well as the breakdown of our net interest income and ~~profit~~operating income before tax by segment:

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

We launched the following products or functionalities for retail customers in 2022:

~~Private Banking~~Retail – 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.

• ~~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~~

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 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.

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, 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.

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

It is worth noting that we also offer an attendance channel, the Negócios Direct (Direct Business), which is responsible for companies with annual revenues of up to R$1 million. We support these clients through 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 a customer’s daily life.

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~~other brands.

The following table sets forth ~~certain key financial and operating data regarding~~auto loans portfolio market share for auto loans (a subset of our ~~credit~~consumer finance ~~for motor vehicles to individuals for~~business) as of the ~~periods~~dates indicated:

We ~~offer~~provide 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~~purchases, with the real estate serving as ~~collateral.~~collateral for the loan. We ~~consider~~view mortgages ~~to be~~as a strategic product due to their lower risk (since the acquired property serves as collateral) and ~~ability~~potential to ~~increase~~foster customer loyalty ~~with the Bank (especially given that~~(since we offer customers more attractive rates if they choose to bank with us). ~~In this market, our~~Our primary customers, ~~and~~as well as those of our competitors, are ~~primarily~~predominantly individuals.

We only provide mortgage loans that adhere to prime lending regulatory standards for this type of loan. This means that: (i) we limit the financing to a maximum of 90% of the value of the property to be purchased, (ii) the borrower’s monthly income must meet certain minimum requirements, as evidenced by recent payroll information and tax returns confirming their employment status or other revenue sources, thereby allowing us to assess their credit risk profile, and (iii) any other debt added to the financing cannot exceed 35% of the borrower’s monthly gross income.

To simplify the mortgage lending process for our customers, we have developed a digital platform for real estate financing. We were the first bank in Brazil to offer customers the ability to obtain mortgages online, except for the signing and registration of the agreement, which must be done in person. We have established a partnership with the largest real estate platform in Brazil to expand our sales network and bolster our digital presence in this market.

The following table sets forth certain key financial and operating data regarding our mortgage business as of the dates indicated:

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. We are the main private bank for this type of loan in Brazil, with a market share of 22.4% as of December 31, 2022, according to the Brazilian Association of Real Estate Credit and Savings Entities (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança). Our portfolio was R$3.9 billion as of December 31, 2022, an increase of 20% compared to our portfolio as of December 31, 2021. In the year ended December 31, 2022, we remained focused on improving the customer journey and experience, and achieved a 40% reduction in lead time to grant home equity loans (from 24 working days to 14 working days).

We do not offer ~~mortgage~~home equity loans that do not meet the applicable prime lending regulatory standards, which means that (i) we do not ~~make any financing for~~finance more than ~~90%~~60% 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 ~~types of~~ revenue ~~which allows~~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 ~~improve practicality for our~~facilitate the process, customers ~~we have launched~~can obtain home equity loans completely online through our real estate ~~portal, a~~ digital ~~channel that enable~~platform. When using this option, 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~~when signing the contract and ~~then return~~when returning it once it is 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.~~

WeAs stated above, our customers have access to a ~~complete offering~~full range of services and ~~products worldwide. In this way, we have a~~products. Thus, our portfolio ~~that ranges~~encompasses offerings from basic to tailor-made and highly ~~complex~~intricate solutions inacross the following areas:

·~~Global Transaction Banking -~~which includes the sale and management of local and global transactional banking products, which includes local loans, commercial finance (confirming), transfers of BNDES onlending, trade finance, guarantees, structured loans, cash management solutions and funding from international banks.

Global Transaction Banking – responsible for the sale and management of local transactional banking products, which include local loans, commercial financing options such as confirming, transfers with funds from development banks, local loan structuring, and cash management solutions (cash management).

Global Transactional Services ~~- which is~~– responsible for ~~sales and management~~the sale of global transactional ~~banking, trade finance,~~products, financing for export and import (trade finance), guarantees, ~~structured loans, and funding~~structuring of assets in foreign currency, in addition to raising funds from international ~~banks;~~

banks.

Global Debt Financing - ~~which includes funding~~– responsible for providing financing and financial advisory services ~~related to~~for infrastructure projects, origination, and distribution of ~~fixed-income securities~~fixed income instruments in ~~the~~capital markets (local and international debt capital ~~markets,~~markets), financing offor acquisitions, and syndicated loans ~~other structured financing arrangements, subordinated debt~~in both local and ~~energy efficiency transactions.~~

foreign currency.

Investment Banking ~~- which includes~~– advisory services infor mergers and acquisitions, ~~and equity capital markets transactions, including initial public offering and follow-on offerings.~~

·~~Equities~~ ~~- which includes stock brokerage and advisory services, equity services for individuals, corporate and financial institutional investors in stocks, derivatives,~~ as well as equity ~~research.~~

transactions in capital markets.

Equities – this area operates brokerage services for corporate, institutional and individual investors in stocks and listed derivatives, and also offers research services.

Treasury Customers (Sales) ~~- which is~~– responsible for structuring and offering foreign exchange ~~derivative~~products, derivatives and ~~investment products for~~investments to customers ~~from several~~across our various segments, ~~of Santander Brasil,~~ including institutional investors, corporate customers and ~~retail customers.~~

individuals.

Market Making – ~~- which is~~ responsible for pricing operations (foreign exchange and derivatives) for customers originated from the ~~pricing~~sales efforts of ~~customer deals originated by~~ our ~~sales force from~~ corporate, institutional, private banking and retail ~~segments.~~

~~We are one of the leading banks~~areas. This area is also responsible for managing our proprietary books.

Energy Trading – performs transactions with both qualified and end customers, in ~~capital~~addition to acting as a hedge and market making provider in energy markets ~~and financial advisory services in the Brazilian and international markets as evidenced by the awards we have received, the principal among which~~

We are a leading bank in capital markets and financial advisory services, both in Brazil and abroad, as evidenced by the numerous awards we have received. A few of our most notable accolades are listed in the table below.

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~~Equities~~ ~~Ranked as 4~~^th ~~place among Brazilian banks and 6~~^th ~~place among banks in Latin America. Ranked as 1~~^st 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 1~~^st ~~place in stock picking since 2012, according to Valor Econômico~~
~~Clients Treasury~~ 1^st~~place 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~~
ü~~1st place~~ ~~as Financial Advisor and Structurer (number of projects)~~
ü~~1st place~~ ~~as Financial Advisor for Auctions~~
~~(financial volume)~~
~~2018:~~
ü~~1st place~~ ~~- Financial Advisor by Volume~~
ü~~1st place~~ ~~- Auction Financial Advisor by Volume~~
ü~~1st place~~ ~~- Arranger by Volume~~

Institutional Investors
~~Customer Solutions~~Full Year 2022
#1 Best Analyst in the ESG Research LatAm
#3 Best ESG Team Research LatAm
# Top 3 in Brazil II for Sales, Trading and Corporate Access

FX Markets
~~Agribusiness~~Best Bank for USD/BRL (2nd consecutive year)
Best Bank for LatAm (4th consecutive year)

Latin Finance
~~Agribusiness remains one~~Bank 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.Year: Southern Cone 2021

Brazilian Central Bank
~~The following table sets forth certain key financial and operating data regarding our agribusiness for the periods indicated.~~#1 Total FX September 2022

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
The Banker Best Transaction Bank for ~~services previously not available to them, because they do otherwise have access to financial services, such as property finance, consortium and investment services.~~
Latam 2021
Global Capital #1 Most Impressive Local Bank for Latin America Bonds 2022
Infralogic 2022
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#2 Latin America Bond Arrangers by value
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#1 Latin America Loan Arrangers by value
#1 Latin America Financial Advisors by deal count – Project Finance
#1 Latin America Loan Providers by value – Project Finance
#2 Latin America Bond Arrangers by value  – Project Finance
#3 Latin America Financial Advisors by deal count – M&A
#1 Latin America Financial Advisory by deal count – DCM
#2 Latin America Loan Providers by value – DCM
#2 Latin America Loan Arrangers by value – DCM
#3 Latin America Bond Arrangers by value – DCM
#1 Latin America Financial Advisors by deal count – Project Finance
#2 Latin America Loan Providers by value – Project Finance
#3 Latin America Bond Arrangers by value – Project Finance
#9 Latin America Loan Arrangers by value – M&A
#2 Latin America Financial Advisors by deal count – M&A
Customer Solutions
Agribusiness
Agribusiness remains one of our main levers of growth, and we are focused on developing our agribusiness solutions, both by covering geographical areas where we did not previously operate, and by investing in technology and people.
As of December 31, 2022, our agribusiness portfolio (including credit, securities and other products) amounted to R$37.5 billion. Since 2015 our portfolio has risen by an average of 30% per year. As a result of this strategy, our portfolio in the agribusiness sector increased significantly so that by 2020 we believe we had already established ourselves as a leading bank in the agribusiness sector. In addition, in 2021, we launched a new commercial strategy in the agribusiness sector whereby we aimed to offer our agribusiness products across all of the regions of Brazil. As a result, since we were able to grow our agribusiness portfolio by 84% from December 31, 2020 to December 31, 2022.
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~~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
We plan to continue to build our agribusiness portfolio with a wide array of solutions along the entire agribusiness supply chain, from support in financing equipment to extending credit to agricultural producers. In addition, our ecosystem is complemented by Gira, which is specialized in the management of agribusiness receivables.
The following table sets forth certain key financial and operating data regarding our agribusiness as of the dates indicated.

As of
December 31,
Change between 2021 and 2022
Change between 2020 and 2021

2022
2021
2020
(in billions of R$, except percentages)
Agribusiness portfolio (1) 37.5 27.3 20.4 37.4% 33.8%
(1)       Including credit, securities and other products.
Microfinance
We believe Prospera Santander Microfinance is a leading microcredit-oriented operation among private-sector banks in Brazil based on market share and portfolio value. Prospera Santander Microfinance’s mission is to offer credit alternatives, alongside financial guidance to micro and small entrepreneurs through a fully digitalized process, enabling them to grow their businesses. In doing so, we not only support these entrepreneurs, but also endeavor to contribute to the development of local communities and to job creation. In addition to providing microcredit solutions, we offer basic banking services, notably to our unbanked clients, such as current accounts, debit cards, savings accounts, and point-of-sale terminals, for those who require other payment options. The following table sets forth certain key financial and operating data regarding our microfinance business as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Number of Prospera Microfinance stores 142 119 99 19.3 % (20.0 %)
Microfinance loan portfolio (R$ billion) 2.7 1.9 1.3 38.3 % 49.2 %
Santander Insurance Ecosystem
We offer our insurance products through Santander Corretora de Seguros, helpS, Auto Compara and Santander Auto. Our insurance business as a whole generated premiums of R$10.8 billion in the year ended December 31, 2022.
Insurance
Santander Corretora de Seguros is one of the largest insurance brokers in the Brazilian market, according to SUSEP’s report for the year ended December 31, 2022, offering a full range of products, particularly in the retail segment. Our goal is to build a comprehensive insurance ecosystem for our customers, providing them with all-encompassing solutions to support their daily activities. Our insurance portfolio includes a broad range of life and personal accident insurance, vehicle and property insurance, credit insurance, and travel insurance products. These insurance products are sold through our website, mobile app, branches, call center, ATMs, and bank correspondents.
We totaled R$9.5 billion in earned premiums for the year ended December 31, 2022, representing increases of 1% from the year ended December 31, 2021 and 33% relative to the year ended December 31, 2020. According to SUSEP’s report for the year ended December 31, 2022, we are one of the market leaders in personal insurance (which includes life, personal accident, and credit insurance), with a 13% share of premiums in 2022. 64% of credit originations eligible for insurance in the year ended December 31, 2022.
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Table of ~~contracts by sellers and a 15% decrease in the time~~Contents
Our main objective in this area is to continuously innovate and tailor our insurance solutions to address the needs of our customers, ensuring a seamless experience from purchase to renewal, and especially in the usage of insurance when needed. Furthermore, we are increasingly focused on utilizing data to offer personalized experiences and simplify our value proposition, with optimized customer support across our various service channels. We believe this makes our insurance policies more appealing to potential customers.
helpS
helpS is a personal assistance service that offers solutions for different types of 24/7 emergencies in the home, automobile, pets, tech, game and bicycle segments. It is available to all Santander Brasil customers as an optional monthly subscription starting at R$19.90 per month. Officially launched in May 2022, Santander helpS sold thereabout 40,000 subscriptions exclusively through the Santander app by the end of 2022. In 2023 Santander helpS plans to expand its offering across our entire branch network.
Auto Compara
Auto Compara is our digital auto insurance marketplace in Brazil, and we believe it is the first to provide Brazilian customers with the ability to quote and purchase insurance coverage through an entirely online process. We believe this platform allowed us to expand our customer base by attracting non-Santander Brasil customers, resulting in over R$924 million in new insurance premiums for the year ended December 31, 2022. We currently offer products from seven insurance companies.
Santander Auto
Launched in 2019, Santander Auto is a fully digital auto insurance solution that uses big data analytics to determine pricing and utilizes a one-click buy approach, integrated with car financing options.
The Brazilian insurance market is characterized by: (i) low insurance penetration relative to its GDP; (ii) lagging technological advancement and dominated by companies with low innovation rates that prioritize financial results (due to a history of high interest rates); and (iii) retail brokers serving as the primary distribution channel. As a result, the purchasing process still generally requires customers to fill out a lengthy questionnaire (approximately 40 questions). Consequently, only approximately 20% of Brazilian vehicles were insured as of December 31, 2022.
Using actuarial techniques and behavioral models, Santander Auto can provide insurance quotes without requesting extra information from customers. This is made possible by utilizing data that is already available to us. In its inaugural year of operation in 2019, nearly 110 thousand policies were sold, representing a product penetration rate of 16% (i.e., the total number of insurance contracts sold as a proportion of all loan contracts signed by Santander Financiamentos).
In 2020 and 2021, we focused on strengthening our insurance offerings by making sure they were available for all customer types and types of vehicles. We sought to grow the business by leveraging our ecosystem and reaching more of our customer base. This strategy helped us increase our product penetration rate, which reached 20% in the year ended December 31, 2021, along with a 80% increase in the number of policies sold compared to the year ended December 31, 2020. In the year ended December 31, 2022, Santander Auto started offering insurance to non-financed vehicles and achieved a product penetration rate of 30% in the year ended December 31, 2022, recording a 16.3% increase in the number of policies sold compared to the prior year.
Webmotors
Webmotors is a Brazilian technology company specializing in car buying and selling solutions for dealers, original equipment manufacturers, as well as private sellers. Moreover, it is the largest automotive ecosystem platform in Brazil, according SimilarWeb.
According to Adobe Analytics, Webmotors received an average of more than 30 million visits each month in 2022. It also recorded 7.9 million unique visitors in 2022, as reported by ComScore. Through Cockpit, a platform that integrates offerings for the entire network outlined above, we provide the following solutions: business management/performance, buyer profile (CRM), data intelligence, predictive pricing models, and market data (Auto Insights).
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Table of ~~these contracts with end-customers. With that, we experienced a 30% growth in the number~~Contents
Webmotors aims to be a platform that accompanies individual and business customers throughout the lifecycle of their vehicles, from purchase to use and sale. To achieve this goal, Webmotors recently restructured its subsidiary, Loop, which was a traditional auctioning business, into an omni-channel dealer, which we believe has the potential to deliver a higher sales value for demobilized fleets in both its digital and physical stores. Additionally, Webmotors introduced "Agenda Fácil," a product that allows customers to schedule services via WhatsApp.
Solution4Fleet
In 2021, we acquired Solution4Fleet, a consultancy company that offers solutions for car rental companies. Solution4Fleet offers solutions for the entire ecosystem of a (light or heavy) vehicle rental company, including green and yellow lines (i.e. trucks, buses and agricultural machinery), including services such as pricing and sales management, fleet management, telemetry, purchase and sale of vehicles, financial services for rental companies, as well as its own vehicle management system for rental companies, among other services.
We believe that Solution4Fleet offers the most complete ecosystem for fleet management and leasing operations in the Brazilian market. In the year ended December 31, 2022, the vehicle fleet managed using Solution4Fleet’s products increased by 83% compared to the year ended December 31, 2021, while the average ticket per vehicle grew by 88.2%.
Solution4Fleet has focused on diversification by prospecting smaller car rental companies and special projects for large automakers. In addition, Solution4Fleet continues to invest in technology to improve user experience.
+Negócios | 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 2022, +Negócios went through a technological transformation with the “Pioneer” project and became “+Negócios Turbo.” The main goals of this project are the improvement and modernization of the systems architecture to simplify user experience (with the reuse of internal data), the tailoring of offers with a new price platform and greater security through facial biometrics.
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.
In 2022, +Fidelidade was also updated and improved to become “+Fidelidade Turbo,” a loyalty program with the objective of offering incentives to banking correspondents in their relationship with our ecosystem. The improvements were launched to simplify, facilitate and ensure greater timeliness in dealing with these agents. The “turbo” version has technological resources that bring the gaming aspect of the program to the platform.
We also offer “+Fidelidade Vendedor,” a program which grants rewards and bonuses accordingly to the seller’s level of adhesion to our products, (i.e., based on the percentage of sellers’ revenue generated by our products and services). In 2021, this program was launched for the automotive store segment, then to dealerships, and then to goods and services segments. In 2022, it was extended to the motorcycle store segment. It had an average of 35,000 registered sellers during 2022.
The former “+Vezes” program, a goods and services financing platform, was upgraded to “+Vezes Turbo” by introducing changes to the user experience geared towards simplification of use, data reutilization, hyper-segmentation of offers and improved security patterns with facial biometrics processes. “+Vezes Turbo” is operational and was deployed to over 10,000 partner retailers during the second semester of 2022.
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Table of ~~dealerships with a high level of engagement with us.~~
~~We have also launched “+Fidelidade,” a loyalty program aimed at providing~~Contents
As part of our consumer finance strategy, 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 an 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 financing business (i.e., “ +Vezes”) was integrated with SIM, a fintech created in 2019 that offers personal loans to the open market on a digital lending platform. See “—Our Portfolio of Products and Services—SIM.” With this integration, SIM became a full-service consumer financing business which we believe has bolstered the value proposition of both businesses.
Cash Management
We offer cash management solutions to corporate customers and SMEs online through our internet banking and mobile banking 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~~ 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 customers pay and receive 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, in 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 we offer: (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) payroll, which is intended to facilitate the management of salary and benefits payments to our customers’ employees via an online tool; (iv) collection of values, which consists of the payment of cash values and checks at the customer’s points of sale; and (v) custody, by which we perform the custody, control and deposit of predated checks up to the date of clearing. In addition, other products generate revenue and 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~~offering for retail customers seeks to provide qualified guidance and help them to achieve their financial objectives based on ~~four~~five major pillars:
· Client investment profile - – We ~~appraise the~~assess our customer’s situation ~~of our costumer~~ to understand their level of financial knowledge, investment horizons, and 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 applicable regulations.
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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 diversification~~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 ~~ours~~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 ~~with~~and selected investment providers, real ~~Estate~~estate funds and ~~exchange traded~~exchange-traded funds, among other capital markets instruments. Our partnership with Zurich Santander completes this offering with a wide range of private pension plans.
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· Follow-up- – Our advisory team performs ~~along with the client,~~ a thorough and frequent ~~revision~~review of ~~their~~our customers’ profile, objectives, and results ~~seeking~~alongside each client in order to ~~keep~~maintain the ~~investments~~client’s investment within the parameters established ~~parameters~~ and ~~Model Portfolio’s guidance.~~the guidance provided by the model portfolio.
AAA
In June 2022 we launched AAA, a new investment advisory services model that had enrolled 592 advisors across 41 Brazilian cities as of December 31, 2022. AAA offers a comprehensive product portfolio, coupled with an advanced digital experience and specialized guidance to bolster our investment advisory services offering. AAA provides an exclusive investment advisory service to high-income clients. In order to ~~identify possible deviations~~incentivize our AAA investment advisors, their compensation includes a significant variable component reflecting the results they produce for our clients.
Toro
Toro is an investment platform licensed to operate in Brazil that offers what we believe to be a leading user experience, highly qualified advisors, and an integrated journey from education to execution. We believe that Toro was the ~~positions from~~first fintech in Brazil to open a full-service broker with proprietary technology, which allowed it to achieve a new level of customer experience and infrastructure for real end-to-end agile development. Toro’s current product offering includes an open platform of equities, real estate investment trusts, exchange-traded funds, global stocks (offered through Brazilian depositary receipts), fixed income notes, bonds, mutual funds, and derivatives. Toro also offers an ecosystem of financial apps, including a budgeting and financial consolidation app and a marketplace for related financial products.
SX Integra
SX Integra is our new supply chain finance digital platform. This channel was launched in September 2022 to provide financial services for companies based on their receivables. Both the ~~investment profile, we also rely on automated monitoring systems. These controls warns~~supplier (i.e. the ~~costumers~~company supplying goods to other companies) and the buyer (i.e. the company receiving the goods and delivering payment) are customers of ~~any operations~~SX Integra. The supplier advances the receivables at no risk and does not have to be an accountholder of ours. Buyers, which are primarily large corporations that ~~compromise~~must be accountholders of ours, incur the ~~suitability~~risks of ~~their portfolio~~the transaction and are ~~in line to our commitment to protect our costumer’s interests.~~responsible for paying invoices.
~~Furthermore, each customer has direct access to its positions through a private access site on~~The following table sets forth certain key financial and operating data regarding SX as of the ~~Internet and Mobile App, enabling them to view the evolution of their investment strategies.~~dates indicated
As of
December 31, 2022(1)
Main SX Integra indicators:
Number of active buyers (2) 1,014
Number of active suppliers (3) 6,619
(1) SX Integra began operating on September 1, 2022. The figures presented refer to December 31, 2022.
(2) We define an active buyer as a company that has signed an agreement with us and has a credit limit that enables it to incur the risk of the advance as of December 31, 2022.
(3) We define active suppliers as suppliers that performed at least one anticipation of receivables with SX Integra in the 60 days preceding December 31, 2022.

Programa Avançar
We also have a ~~non-financial~~nonfinancial solution, known as “Programa Avançar,” which is aimed at entrepreneurial ~~customers, which we make available a web platform through which~~customers. 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.
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In addition, we offer a digital account solution where corporate and 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) remote channels, such as call centers; (iii) external channels, consisting of bank correspondents and ~~(iii)~~ other third parties who sell our products and services; and (iv)digital channels, such as ~~Internet~~internet banking and mobile banking.
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,
2022 2021 2020
(%)
Internet banking 21.7 27.7 37.8
ATMs 2.4 3.6 5.9
Mobile (1) 73.6 62.3 46.9
Branch 0.6 1.1 2.2
IVR (2) 0.8 4.6 6.4
Call Center 0.9 0.7 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.

Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network, all of which is located in Brazil, as of the dates indicated.

As of December 31, As of December 31,
2019 2018 2017 2022 2021 2020
Branches 2,328 2,283 2,255 1,701 1,987 2,153
Mini-branches 1,512 1,267 1,211 1,266 1,384 1,411
Own ATMs 13,296 13,641 13,522 11,527 12,561 12,949
Shared ATMs 23,780 23,049 21,195 24,374 24,255 23,798

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Branch Network
Our branch network offers ~~our customers~~ our entire portfolio of products and services ~~with~~to 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,
2022 2021 2020
Northeast 9.99 % 9.74 % 9 %
North and Midwest 8.94 % 8.42 % 7 %
Southeast 66.20 % 67.31 % 70 %
South 14.87 % 14.53 % 14 %
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As of December 31,
2019 2018 2017
Northeast 9 % 8 % 8 %
North and Midwest 7 % 7 % 6 %
Southeast 70 % 71 % 72 %
South 13 % 13 % 13 %
PABs (Mini-branches)
We offer daily banking services to our ~~SME and~~SMEs, as well as corporate customers and their employees through our PABs ~~(the acronym stands for~~ (“Postos de Atendimento Bancário ~~in Portuguese)~~”), 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.
ATMs
We operate an extensive network of ~~13,296~~11,527 ATMs, including those located in our branches and ~~Mini-branches.~~mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates ~~23,780~~24,374 ATM units. Through this network, our customers ~~are able to~~can 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 Brasil customers (account~~ and ~~single product holders)~~online messaging apps available to all our customers. In the year ended December 31, 2022, we received 10.3 million inquiries per month with ~~consultation, financial transactions~~50% of these being outside regular business hours.
We also improved our efficiency and ~~product hiring services. This important distribution~~increased our first call resolution from 81% as of January 31, 2021 to 95% as of December 31, 2022. In the last two years, we have sought to transform the channel by focusing on solving customer needs and seizing these contacts as opportunities to offer additional products and services to our customers. In the year ended December 31, 2022, we made an average of 700,000 sales and services per month on this channel.
External Channel
Our external channel consists of third-party salespersons and banking correspondents that market our products and services beyond our branches and ATMs. In the year ended December 31, 2022, we increased the footprint of our external channel in the Brazilian market by adding an additional 9,620 points-of-sale to our portfolio for a total number of 15,647 points-of-sale covering 44% of all municipalities in Brazil as of December 31, 2022, and by extending more than R$18 billion in credit in the year ended December 31, 2022. In addition, in 2022, we launched our new store model, “Santander Perto”, to put us closer and improve our visibility and availability to our customers. We also launched our external sales force website in the second half of 2022, which has ~~a variety of customer self-service facilities. Our call centers received over 150 million contacts in 2019.~~generated 50,000 business deals per month since its inception.
Digital Channels
We have sought to develop our digital solutions to meet the needs of our consumers and, in 2022, we were able to achieve milestones, offering personalized insights, improve our artificial intelligence, or “AI,” services and transform our digital experience. Our digital ~~channels include Internet~~platforms, such as mobile and internet banking, ~~mobile banking and other digital solutions intended to provide~~reached over 71% of our customers ~~a convenient manner in~~as of December 31, 2022, which makes them our primary channel to ~~access the products and services that we offer.~~connect with our customers. We ~~highlight~~note the following ~~key features:~~with respect to our progress in this channel in the year ended December 31, 2022:
· We improved our digitization by 11% compared to the year ended December 31, 2021 in terms of customers reached and began selling new products over our digital channel, such as transaction insurance, personal insurance (personal injury, life and property), consortium plans, HelpS services, Divide PIX (personal loans for instant transactions), and FGTS Personal Credit (Crédito Pessoal FGTS), or “CP FGTS,” which advances personal loans on severance payouts customers may be owed as part of the FGTS program.
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· In the month of December 2022, our main mobile app for individual accounts reached a total of 462 million accesses, a 34% increase compared to the month of December 2021, while our website reached over 68 million accesses, a 21% increase also compared to the previous year. We also launched an embedded blog with specialized consumer content that reached over 3.3 million views in 2022 (without relying on paid marketing activities specifically for this purpose) and which we believe will be a new tool for lead generation and financial education.

· ~~OnePay – This~~Despite a difficult year from a macroeconomic perspective and with greater restrictions on credit, we closed approximately 45 million contracts through our digital platforms during the year ended December 31, 2022, a 17% increase compared with the year ended December 31,2021, which growth was driven by an assertive product and service promotion strategy and improvement in the sales of our main products.
· We launched our “Investment Portal” in August 2022, which reached approximately 2.9 million users in the month of September 2022. Through our Investment Portal, our investor client has access, in addition to their consolidated investment position, to guidance and recommendations with video and podcast tools embedded in the app.
· We recorded a 16% increase in digital-only accounts for individuals as of December 31, 2022 compared to December 31, 2021. We also had a 46% decrease in cost per acquisition of lead, or “CPA,” in the year ended December 31, 2022 compared to the year ended December 31, 2021. We believe that this improvement is ~~available through~~linked to a better customer experience in the ~~Santander App~~account opening process, automated anti-fraud processes and ~~enables customers~~our efforts to ~~transfer funds to foreign countries in various currencies.~~improve customer experience.

• 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.
· In the year ended December 31, 2022, we opened over 282,000 new corporate accounts, a 75% increase compared to the year ended December 31, 2021 and a 33% reduction in the CPA. We also recorded an increase of 10 p.p. in the number of new corporate accounts approved in the year ended December 31, 2022 compared to the year ended December 31, 2021, which was primarily due to an optimized accounts opening process for existing individual account holders, an automated approval engine for SMEs and processes permitting multiple corporate accounts for multiple partners. We believe that this final improvement accounted for approximately 50% of all of our new corporate accounts and ensured that 100% of SME accounts were opened through this channel in the year ended December 31, 2022.
· 61% of Santander Brasil’s credit card sales were completed through our digital channels in the month of December 2022. We have taken actions to improve our acquisition numbers by implementing new forms of authentication and prioritizing seasonal commercial campaigns to attract new customers, which resulted in a growth of 9 p.p. increase in the mobile app conversion rate (i.e., the rate of customers who accessed the first screen of the credit card contracting flow in the mobile app and actually signed up for the credit card through the app) in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent& is our AI solution for individuals and businesses in digital platforms, such as our mobile app, internet banking and through WhatsApp.
· We began 2022 with 54 services, which were deployed between 2020 and 2021, and offered a total of 153 services through Gent& by December 31, 2022. We recorded a 43% decrease in customer service calls relating to these services in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent&’s NPS was twelve points above that of our other channels in the year ended December 31, 2022. We offer through Gent& transactional services such as personal loan offerings, debt renegotiation, and credit limit increases and decreases (which is offered exclusively on Gent&). We also offer advisory services that include credit card holds, reissues and delivery tracking.
The following table provides certain key operating information ~~with regards to~~regarding our digital channels as of the dates ~~indicated.~~ indicated:

For the Year Ended December 31,

2022
2021
2020
(in millions)
Number of digital customers (1) 20.4 18.3 15.6
Number of digital transactions (2) 9,813 7,482 5,262

(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 prior to the end of the applicable year.
(2) Refers to transactions carried out through internet banking, mobile banking and other digital platforms. Data refer to the year ended December 31.
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Technology and Infrastructure
In 2022, we sought to ensure greater integration between our business and technology, and to use the latter as a strategic lever to support the expansion of ~~Contents~~
digital and personalized products and services through available, secure and integrated sales channels. Our objective was to significantly improve our customers’ experience by streamlining and enhancing self-service and customer service channels. Moreover, as part of our digital acceleration strategy as a result of the COVID-19 pandemic, we sought to make technology a key factor in leveraging multichannel distribution and business growth by using data to make strategic decisions at the executive leadership level.
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
To facilitate this role, our IT department focused on the transformation of its operating model through four strategies:
~~(1)~~· ~~We define digital customers as customers who have used~~Improved Alignment between Business and Technology: development of technology solutions guided by a business mindset, placing the customer at ~~least one~~the center of the strategy and ensuring that more business representatives are involved in development teams activities.
· Innovative Architecture and Robust Engineering: investment in new technologies (open banking, digital ~~channels made available by Santander Brasil (i.e.~~assets, smart contracts, AI, digital currencies), ~~mobile banking~~data framework transformation, an increase in cloud development and ~~internet banking)~~the reuse of architectural components to ensure greater efficiency and speed combined with cost reduction.
· Improved Infrastructure and Production: significant advances in the ~~preceding 30 days~~hybrid public/private cloud model (with 91% of ~~year end.~~
~~(2)~~ ~~Refers to transactions carried out through internet banking, mobile banking and other digital platforms. The data relating to~~total operations processed in the cloud in the year ended December 31, ~~2018 has been revised as a consequence~~2022), the growth of ~~a change~~automation in production (AIOps) and deployment pipeline (DevSecOps), investments in reliability engineering (telemetry) and the reduction of technological obsolescence.
· Improved Delivery: expansion and maturation of our agile software delivery model through an increase in the ~~criteria applicable~~number of development teams (with over 460 agile squads), in addition to ~~digital transactions accounting.~~
refinements in productivity metrics facilitating more efficient and transparent management processes.
~~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,
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 refers~~These efforts in the technology domain were necessary to ~~total transactions (account holder~~ensure the standards of, security in and ~~unique product-holder).~~the growth of our operations in light of our increased digital customer base as we reached 20.4 million digital customers as of December 31, 2022 (an 11% increase as compared to December 31, 2021), and of increased demand for digital products and services as we recorded an average of 541 million monthly accesses in our digital channels in the year ended December 31, 2022. Additional initiatives carried out in 2022 include the following:
~~(2)~~· ~~Interactive voice response is an automated telephony system~~Investments: We launched a new investments portal that can be accessed by mobile or internet banking. This new portal offers our current investment products and services. Our customers are granted access to market analysis content in ~~which a computer interacts with callers (who can use their voice and tones input via a keypad to communicate with the computer)~~various formats (e.g., ~~gathers information and routes calls to the appropriate recipient.~~
~~In addition to Internet banking and mobile banking, 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 our investments in technology. Our goal was to deliver an innovative and agile bank, being able to face pertinent challenges to our digital transformation with competitiveness and service quality. Through technology, we aimed to boost our efficiency to grow faster.
~~In 2019, we launched a program to simplify and digitize our sales network and customer support~~
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processes by 2022. We have also improved our development and system implementation chain by adopting a more automated, robust and scalable architecture based on micro services and cloud computing as well as by refining our DevSecTestOps practices for application development and infrastructure operations. We have listed below a few 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 authentication 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.
• ~~Santander Way Transformation:~~We improved our payment platform by launching version 2.0 of the Santander Way App. We believe that the improved layout emphasizes important functionalities, such as ID Santander, NFC (Near Field Communication) and OPC (“Online Purchase Card”), besides many upgrades to ensure an even better customer experience. Additionally, new features were incorporated to the application, allowing customers to 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.
• ~~Investments Platform Evolution –~~~~We simplified the customer registration experience on the brokerage platform~~videos, articles, podcasts) in order to make ~~it faster~~better investment decisions. In addition, they receive portfolio allocation recommendations based on the macroeconomic context, their risk appetite and ~~intuitive.~~liquidity. Furthermore, significant improvements in the user interface allow our customers to manage their investments, obtain market information, find solutions for their needs and monitor their investments more intuitively, therefore offering a better digital experience.
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· Individual Bank Account (Mobile): We have improved the digital experience we offer to our customers with several improvements to existing journeys, together with the inclusion of new functions. We have sought to simplify the digital interface for several products and services, including by improving the registration of facial biometrics, access to our virtual AI assistant (Gent&), personal information updates and digital tools relating to investments in funds managed or offered by Santander Brasil. We have also ~~increased~~simplified the customer experience for loans by reducing the number of ~~investment~~steps required for contracting. In addition, we have provided more flexibility for payments by introducing a new option to break the total value of instant payments (PIX) into up to 24 installments.
· Corporate Bank Account (Mobile): We have added new features to our mobile application, allowing our corporate customers to manage their businesses with more agility and strategy. We have extended the statement checking period up to 365 days and also included a new option on Santander On to update the company’s annual billing, in order to enable better credit solutions for our customers. Moreover, we have sought to improve the user interface by simplifying the visualization of the functionalities in the menu, ensuring a better experience for browsing and using the application, along with the addition of facial biometrics.
· Credit Cards: We further expanded our digital services in order to provide more efficiency and transparency in the management of card expenses for our customers. In our mobile application for cards, we have added a new option to check payments history for past invoices, along with a tool to check and manage active credit card installments. In addition, a new feature was included allowing our customers to view disputed purchases for fraud or trade disagreement. Regarding card loss or theft, we have provided our customers a new option to choose a location to pick up the reissued card. Finally, we increased flexibility by enabling the use of instant payment (PIX) to settle credit card invoices and now permit users to register their Visa/Mastercard cards on Apple and Samsung digital wallets.
· Customer Service: Through our “Bank to Go” initiative, we have sought to transform customer service in our branches. We provided tablets to account managers so they can assist customers with account openings and product sales, which ensures a faster, more dynamic, and personalized banking service. The system running in the tablets is integrated with our external portals (e.g., credit cards and insurance) and also ensures more flexibility in capturing and serving customers due to the greater mobility granted to account managers by the use of tablets.
· Insurance and Customer Assistance: We have upgraded our digital processes in the sale of insurance through a revamped product screen in our mobile application for individual customers, where all coverage types are presented with their respective initial values. We have also included a new feature in the offering of our 24-hour assistance service, helpS, which offers solutions for day-to-day customer needs such as car repairs or maintenance services. Our customers can easily choose service packages for automotive, motorcycle, bicycle, pet, and technology services.
· Data Transformation: Investments were made to improve our use of data in modern technologies to generate business value from customer data. These include investments in: (i) the development of a new machine learning model, which uses market and our proprietary data (from our Financing and SIM platforms) to identify new customers prone to credit offer and improve our revenue; and (ii) new solutions to assess a customer’s transactional behavior and identify the most opportune moment to offer credit card limit increases and improve customer spending.
· Business Agility: We have sought to improve our organizational model in the delivery of technological solutions to ensure we meet the needs of the modern consumer through faster decisions, increased interaction with customers and greater value delivery. Our new Business Domains model promotes the integration between our business units, platforms and the technology department for the design of products ~~offered~~that offer an improved end-to-end experience for our customers. These areas work together in the activities related to customer journey, software development, implementation, operations and product governance. This work model, developed from benchmarks and proven market frameworks, is supported by lead executives in our investment, ~~platform.~~data, technology and information security departments to embed the technical skills from these vertical structures directly into the Business Domains structures, improving the operational flow of these teams.
~~• 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.
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•· ~~Brazilian General Data Protection Act (Law no. 13,709/2018), or “LGPD”):~~Security:We Given that Santander ID is our main security device in the authorization of customer transactions on digital channels, we must ensure its activation process is safe and reliable. With the “Frictionless” initiative, we have ~~begun taking steps~~implemented several models that analyze customer behavior information, ensuring that the customer is the one who is actually activating the security device. As a result, customers no longer need to ~~make our systems comply with~~go to an ATM to complete 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, adaptationactivation of ~~technical and structural components processes, policies and procedures review.~~their Santander ID, which we believe provides a simpler experience.
~~• 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 a variety of tools to communicate with our employees and ~~monitor several communication tools in order to achieve our multiple customer portfolio with a unique approach and visual identity.~~customers effectively. This ~~include~~includes not only ~~the~~ traditional media, such as television, newspapers and print magazines, but also ~~internet~~digital and ~~mobile advertising.~~
~~We had over 7.8 million users connected~~innovative communication to ~~us across social media (Facebook, Instagram, Twitter, LinkedIn~~make a difference in the lives of all those who are related, in some way, to Santander Brasil. In 2022, we launched a major debt renegotiation campaign called “Desendivida,” which provided better terms for customers to honor their commitments with us. This initiative featured influencers from the popular reality TV show Big Brother Brasil and, ~~Youtube) as of December 31, 2019, which enables us~~during an entire month, we dedicated time to ~~reach significant audiences. We also carried out important television campaigns, which we believe demonstrated~~this matter in our ~~constant search for democratization in access to information and financial services,~~stores (two extra hours a day), in addition to ~~maintaining transparency about all~~a task force on a Saturday. We also introduced large-scale campaigns for “consórcios” (a product that offers credit at lower costs for customers than conventional financing). Internally, we debuted the monthly live event “Together with Mario Leão,” in which Mario Leão, our chief executive officer, interacts with over 40,000 employees via the Santander NOW app. The first edition took place in Salvador, State of Bahia, and was followed by editions in Inhumas (State of Goiás), Novo Hamburgo (State of Rio Grande do Sul), Rio de Janeiro (State of Rio de Janeiro), Campinas (State of São Paulo), Curitiba (State of Paraná), Mirassol (State of São Paulo), São Paulo (State of São Paulo), Juazeiro do Norte (State of Ceará), Manaus (State of Manaus), Ouro Preto (State of Minas Gerais) and again in São Paulo (State of São Paulo).
In 2022, we also produced 472 videos to instruct our teams on how to better serve our customers and offer our products and services, exploring a wide range of topics such as the “Investment is Santander” campaign and on themes that reinforce our culture, such as diversity, ESG, corporate behavior, development, feedback, health and well-being, training and qualification, and others. Externally, we ran 14 video ads on TV and social media. In 2022, our communication campaigns resulted in over 11,000 mentions in the Brazilian national media (e.g., websites, newspapers and magazines), as well as nearly 8,000 reports published in local media. On social networks, we had more than 2,000 publications, with 1.5 billion impressions in 2022. We also strengthened our operations, both internally and externally, using new formats such as Telegram, TikTok, WhatsApp and podcasts. We held over 20 internal and external livestreams and events, which featured our leadership, experts and authorities discussing a broad array of subjects, including ESG, the current economic environment, social investment, business, female leadership, entrepreneurship and culture. The “Legacy” event, organized in collaboration with Movimento Bem Maior and several of Brazil’s largest companies, on the role of philanthropy, was a highlight, as was the fifth edition of “Global Citizen,” held in partnership with the newspaper Valor Econômico, with an ESG-focused debate with participants such as Sanda Ojiambo, chief executive officer and secretary general of the UN Global Compact, and Jeremy Oppenheim, co-founder of SYSTEMIQ.
Sustainability and ESG Initiatives
The purpose of our ~~actions.~~
~~Sustainability~~
~~Based on a responsible internal management, a consistent risk culture, ethical values as a basis~~sustainability and ~~technology at~~ESG initiatives is to contribute to the ~~service~~progress of people and ~~business we seek to support the Brazilian society in its transformation into the Brazil of the 21st century by fostering the economic growth in a resilient and inclusive manner, stimulating~~businesses, while also supporting the development of ~~human potential~~a fairer and ~~promoting an efficient~~more sustainable Brazil. We have sought to develop a clear strategy for our environmental aspirations (seeking to become a benchmark company in sustainable business), social aspirations(working to ensure everyone has opportunities) and ~~strategic use of natural resources.~~
~~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 Sustainability Committee (responsible for clarifications and recommendations to the Board of Directors regarding the development of guidelines related to sustainability), our executive committee and the Sustainability Executive Superintendence
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~~Resilient and Inclusive Economy~~
aspirations (having leading ESG management practices).
Our broad commercial activity ~~allows~~enables us to advise and support ~~both from large clients~~our customers and ~~projects as well as informal entrepreneurs. Thus, our role is to be a facilitator~~their projects. In the year ended December 31, 2022, we helped approximately 430,000 people through financial inclusion products and ~~contribute to the generation of jobs, income, improvement of logistics and infrastructure, in order to contribute to the development of Brazil.~~
~~Through this pillar, for~~financial education guidance. For example, we ~~seek to financially empower people who are unbanked, underbanked or who may be financially vulnerable by offering~~offer access to banking services, products and ~~non-financial~~nonfinancial initiatives. ~~Regarding~~We have specific products to support microentrepreneurs and SMEs, such as the Prospera Microfinance, “Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include financial ~~education,~~management as a topic in ~~2019,~~customer relationships, using tools such as Santander On. As an example, Prospera Microfinance has supported microentrepreneurs in their businesses since 2002, and as of December 31, 2022 it had a portfolio of R$2.7 billion (a 38% growth as compared to December 31, 2021) and 885,000 active customers (a 25% growth as compared to December 31, 2021).
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The following is a description of some of the social activities and programs that we ~~trained approximately 28,000 people.~~have held or continued in the year ended December 31, 2022:
· In 2022, we held the 20th edition of the Amigo de Valor program. Since 2002, it has benefited more than 1.6 million children and teenagers in 293 municipalities in Brazil, mobilizing more than R$180 million from our customers and employees.
· In 2022, we helped about 220,000 people through blood donation and volunteering programs.
· Through Santander Universities, we granted 103,000 scholarships in 2022.
· We became founding members of the Alliance for Productive Inclusion (Aliança pela Inclusão Produtiva), or Aipê, in partnership with industry leaders, whose objective is to promote, through training, the inclusion of the lower-income population in the labor market.
· We increasingly invest in the structuring of endowments—equity or philanthropic funds—to support the long-term financial sustainability of institutions and nonprofit organizations, such as universities and hospitals. In 2022, these investments amounted to R$51 million.
· In April 2022, we held the Legado event, which addressed philanthropy in Brazil and the role of the individual in building a more inclusive society. This event was attended by over 600 participants.
· In 2022, we transformed 70,000 plastic bags into 12,000 eco-friendly bags in partnership with Sewing Dreams, an NGO from Paraisópolis in the State of São Paulo.
· We support social projects which foster professional training and fostering entrepreneurship. In 2022, we selected 31 projects for support through our “Chama Indica” and “Prepara Futuro” initiative.
· We continued to promote female representation in leadership positions at Santander Brasil. In 2022, the percentage of women among our leadership (defined as senior managers and officers of Banco Santander (Brasil) S.A., Aymoré Crédito, Financiamento e Investimento S.A. and Santander Corretora de Seguros, Investimento e Serviços S.A.) increased by 1.9 p.p. compared to 2021 and reached 33%.
We also ~~included providing in-person training~~developed actions to increase the representation of black people at Santander Brasil. As of December 31, 2022, 30% of our ~~branches~~employees identified as black, which represents a growth of 2.7 p.p. compared to December 31, 2021.
· In the year ended December 31, 2022, we believe that we helped facilitate approximately R$32.2 billion in sustainable business (including disbursements for renewable energy, sanitation, sustainable agribusiness, ESG-linked loans, Prospera Santander Microfinance, other businesses (accessibility and mobility, other financial operations), as well as project finance advisory and disbursements (renewable energy and sanitation), in addition to green bonds) through the following initiatives:
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· We were guarantors in a BNDES financing for the construction of a subway line in the city of São Paulo that we expect will bring socioeconomic development to the regions along its tracks.
· We maintained a leading role in the Brazilian market for decarbonization credits (CBIO) market, which we first helped create in 2020 and in which, in the year ended December 31, 2022, we held a 54.4% market share according to B3.
· We disbursed R$394 million in our sustainable agribusiness credit lines, which promote low-carbon agriculture and solar energy.
· Since 2021, we created the Sustainable Finance Forum, a forum responsible for analyzing sustainable operations and ensuring alignment with the Sustainable the Finance Classification System (SFCs) - the Santander Group framework and market standards.
· In June 2022, we hosted the Zero Carbon Emission livestream, which promoted a debate on zero carbon emission and our next steps in this journey.
· In November 2022, in partnership with other Brazilian corporations, we launched Biomas, a joint venture whose objective is to restore, conserve and preserve four million hectares of forest in the Amazon, Caatinga, Mata Atlântica and Cerrado biomes in Brazil. This alliance plans to remove approximately 900 million tons of carbon equivalent substances from the atmosphere over a two-decade period. Each partner will initially commit R$20 million to support the early years of Biomas activities.
· We participated in the launch of the Bioeconomy Business Innovation Platform in the Amazon, led by the CERTI Foundation, with the objective of training 3,000 people and creating 200 startups in three years.
· We have progressed towards our commitment of achieving zero illegal deforestation in the Amazon across our customers involved in meat production by 2025.
The following is a description of some of the ~~weekend, where volunteers taught over 1,961 people.~~environmental activities that we have held or continued in 2022:
· In February 2022, we launched a solar power plant at two of our administrative buildings, the largest urban power plant installed in the State of São Paulo and one of the largest in Latin America.
· As of December 31, 2022, 100% of our domestic electricity consumption derive from renewable sources, a milestone that we had originally targeted to reach in 2025. In addition, we have been carbon neutral since 2010 and have significantly cut down on our use of single-use plastic within our organization.
· By the end of 2022, 100% of the new SX- and Elite-branded cards were made from recycled plastic. We expect that this will reduce the use of common plastic in the cards we issue.
· Climate change was the agenda of our continuing education program (programa de educação continuada), or “PEC,” which is aimed at independent members of our governance bodies. The PEC seeks to promote integration and deeper knowledge about the financial industry and a better understanding of our internal dynamics. We also held an inaugural class for a select group of executives to discuss decarbonization in partnership with the Santander Academy—the first in a series of meetings that will continue to take place in 2023 to develop knowledge on the subject and share good practices, challenges and solutions for the mitigation and removal of greenhouse gases. The engagement of companies is part of our Net Zero commitment, which aims to eliminate indirect issues of carbon in our credit portfolio by 2050.
· We co-drafted “An Introductory Guide for Net Zero Target Setting for Farm-Based Agricultural Emissions,” which was led by the Banking for Impact on Climate in Agriculture initiative of the World Business Council for Sustainable Development. The study aims to address the challenges of net zero for the sector, where data and methodologies on measuring financed emissions is lacking.
· In July 2022, we published our social, environmental and climate responsibility policy, or the “PRSAC,” in accordance with CMN Resolution No. 4,945, which improves socio-environmental risk management rules, including climate change-related rules. PRSAC focuses on a positive agenda, such as pacts, commitments, relationships with stakeholders and socio-environmental impacts and opportunities.
• In December, 2022 we sponsored the fifth edition of the Global Citizen Forum to discuss ESG matters, which was attended by our chief executive officer and the general secretary of the United Nations Global Compact, Sanda Ojiambo, the economist and co-founder of SYSTEMIQ, Jeremy Oppenheim and Paul Polman, a climate and equality activist. The event was attended by approximately 612participants.
• Our sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through our board of directors, executive committee and executive sustainability superintendents. Our sustainability committee is responsible for providing clarification and recommendations to the board of directors relating to the development of sustainability-related guidelines. Our governance seeks to include ESG in our culture and in our day-to-day through internal training and the inclusion of ESG criteria in the compensation of executives, who are responsible for addressing issues of diversity, financial empowerment and green financing. Independent members account for 44.44% of our board of directors and women for 33.33%, while women also account for 20.41% of our executive committee. For more information, see “Item 6. Directors, Senior Management and Employees.”
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~~In addition,~~As a result of our efforts, we ~~have specific offers supporting microentrepreneurs and small and medium enterprises such~~were recognized by Revista Exame as ~~above mentioned Santander ON and Prospera Santander~~~~Microfinanças~~.
~~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~~ESG company in the ~~Great Place to Work survey since 2016. Guided by~~financial services category in 2022, and we also received a Euromoney award in the ESG category. Moreover, our corporate culture and internal policies, we offer opportunities supporting the development and professional growth, in order to build a culture of delivering results, respect, innovation, inclusion and diversity.
~~We also contribute to the promotion of the rights of children and adolescents. Through Amigo de Valor Program, Santander Brasil, employees and clients directly donate a~~equity securities form part of the ~~due income tax to the Funds for the Rights of Children~~B3’s Corporate Sustainability Index (Indice de Sustentabilidade Empresarial) and ~~Adolescents~~Efficient Carbon Index (~~Fundo dos Direitos da Criança e do Adolescente~~Índice de Carbono Eficiente – ICO2). ~~In 2019, this program raised funds R$19 million.~~
Through the Santander Universities Program, we offer initiatives focused on granting national and international scholarships, programs for the development of entrepreneurs and internship and employment programs. On December 31, 2019, about 6,000 scholarships and entrepreneurships were granted with a total investment of about R$27 million.
~~Efficient and strategic use of the Natural Resource~~
In 2019, the total amount of environmental financing with Santander Brasil facilitated across Santander Financiamentos, Responsible Agribusiness, Corporate, Retail (Individual and Corporate clients), Project Finance and Santander Corporate and Investment Banking, including Green Bonds, totaled approximately R$13 billion.
In relation 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 have 100% of our operations powered by renewal energy by 2025. In December 2019, approximately 24% of the electricity we consumed was derived from renewable sources.~~
~~Socio-Environmental Responsibility Policy~~
Our Socio-Environmental Responsibility Policy or PRSA meets the requirements of CMN Resolution n° 4.327/14 and SARB Regulation 14 of FEBRABAN. It defines guidelines and consolidates specific policies for socio-environmental practices in business and relationships with certain parties. These practices include socio-environmental opportunities, impacts and risk management related to subjects,
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such as suitability in granting and using credits, management of suppliers and socio-environmental risk analysis. There is a Senior Group of our PRSA, which consists of our vice-presidents of Risks, Corporate, Human Resources, Finance, and Communication, Marketing, Institutional Relationships and Sustainability, as well as the Agribusiness and the Compliance Officers. This Senior Group is involved in the decision-making related to the PRSA and operates as a connection with our Executive Committee.
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial services industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal. Together, these financial institutions accounted for ~~73.3%~~70.8% of the credit and ~~68.8%~~70.7% of the deposits available in ~~the country in~~Brazil as of September ~~2019,~~30, 2022, according to the Brazilian Central Bank and the interim 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:~~as of September 30, 2022:
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
Santander Brasil Bradesco Itaú
Unibanco Banco
do Brasil Caixa Econômica Federal Financial System
(in billions of R$)
Total loans (1) 484.3 644.7 685.6 861.5 976.8 5,161.4
Total deposits (1) 410.7 588.0 813.2 539.4 433.6 3,940.8

~~(1)       According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (December 2019).~~
(1) According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 30, 2022). Data as of December 31, 2022 was not available as of the date of this annual report.

Insurance Coverage
We maintain insurance policies that ~~we renew~~are renewed annually in order to protect our assets. ~~All~~Substantially all of our branches, affiliates and administrative buildings are insured against ~~loss~~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.~~cybercrimes.
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 ~~with~~or applied through the ~~National Institute of Intellectual Property (Instituto~~Brazilian 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,
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the owner has exclusive rights ofto use of the trademark ~~throughout~~in Brazil for a ~~ten-year~~10-year period that can be successively renewed for equal periods.
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As of the date of this annual report, we own ~~567~~or have a license to use a total of 568 trademarks in Brazil, ~~among them,~~with Santander Brasil ~~owns~~owning over ~~100 trademark registrations in Brazil with~~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, 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. 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 as regards~~particularly in regard to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out by financial institutions ~~as well as~~and their financial information. The Brazilian Central Bank ~~has committees to address~~addresses specific ~~issues. COPOM, one of these, has~~issues through the ~~purpose of~~Monetary Policy Committee (COPOM), a committee responsible for adopting measures to ~~fulfill the~~meet inflation targets defined by the CMN and establishing monetary policy guidelines. ~~The activity of~~In order to meet inflation targets, the COPOM ~~in the control of inflation targets includes the definition of~~must set the target for the SELIC ~~Rate~~rate (the average rate for daily financing, backed by federal instruments, as assessed under the ~~Special Settlement~~SELIC) and ~~Custody System) and publication of~~publish reports on the Brazilian economic and financial environment and projections for the inflation rate.
CVM
The CVM is responsible for the implementation of ~~the~~CMN 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, ~~and~~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. ~~The~~These 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 (Associação Brasileira das Companhias Abertas – ABRASCA) and the B3.
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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 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:
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· 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 ~~change of~~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 one, or “S1” (i.e., banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity), as is ~~the~~our case, ~~of Santander Brasil,~~ cannot lend more than 25% of its Tier 1 ~~Regulatory Capital~~regulatory capital (patrimônio de referência) to a single person or a group and the maximum exposure to concentrated individual ~~clients~~customers or group of connected ~~clients~~customers of such Segment 1 financial institution is 600% of its Tier 1 ~~Regulatory Capital~~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)~~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:~~ 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;
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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 management of third-party assets must be segregated from other activities and must follow the regulations issued by the CVM;
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· 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 of~~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”~~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 ~~the~~any information ~~necessary for~~that it ~~to perform~~deems useful in performing its supervisory functions, which ~~include~~includes 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 III~~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 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’
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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,~~In 2010, the Basel Committee issued ~~the~~its Basel III framework, which ~~supplements~~was revised and ~~amends Basel II.~~republished in 2011. The Basel III ~~includes higher~~framework increases minimum capital requirements, ~~and~~creates new conservation and countercyclical ~~buffer capital requirements, revised~~buffers, changes risk-based capital measures, and ~~the introduction of~~introduces a new leverage ~~ratio~~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 of 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 ~~index~~ratio of 6.0% (according to the schedule established by the Brazilian Central Bank), divided into two portions: (i) ~~Principal Capital~~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) ~~Supplementary Capital~~Additional Tier I capital 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 ~~Supplementary~~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.
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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~~debts 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.
In accordance with the Basel III standards, the Brazilian Central Bank created the ~~Premium Principal Capital (~~~~Adicional~~additional core capital buffer (adicional de ~~Capital Principal~~)capital principal), which ~~corresponds~~is composed of 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 buildup 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~~the challenging macroeconomic environment resulting from the COVID-19 pandemic, the CMN issued Resolution No. 4,783 which establishes the percentage to be ~~used in periods~~applied to the risk-weighted assets value for the purpose of ~~stress. In accordance with CMN regulation,~~calculating the ~~Brazilian Central Bank is entitled to establish the~~capital conservation buffer. This percentage increased gradually until April 2022, when it reached 2.5%. Resolution No. 4,783 was subsequently replaced by Resolution No. 4,955 of ~~the Premium Principal 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~~October 21, 2021, which maintained the risk weighted asset ~~ratio.~~percentage at 2.5%.
The chart below shows the evolution of our core capital:
On December 29, 2014, the Brazilian Central Bank established that the amount of the Premium Principal Capital was to start at 0.625% of the risk weighted asset ratio 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. Timeline

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~~In 2015, the CMN and the Brazilian Central Bank enacted a set of rules which determined that the Premium Principal Capital will be equivalent~~Financial Institutions in Brazil are subject to the ~~sum of the Capital Conservation Buffer (~~~~Adicional de Conservação de Capital Principal~~~~), the Countercyclical Buffer (~~~~Adicional Contracíclico de Capital Principal~~),capital rules set by CMN Resolutions No. 4,955/2021 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
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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.
No. 4,958/2021. The Basel III rules also provide for the implementation of a leverage ratio calculated by ~~the division of~~dividing 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.
S1 financial institutions, as is our case, or segment 2, or “S2,” for purposes of the application of prudential rules, are required to maintain a minimum Leverage Ratio (Razão de Alavancagem or “RA”) of 3% as from January 1, 2018.
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 enacted~~these rules, the largest Brazilian banks ~~have been~~were required to maintain an LCR of at least 60% since October 2015. This ratio ~~will increase~~increased 10% annually until it ~~reaches~~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 ~~result~~ratio of ~~the division of the high quality~~high-quality liquidity assets byto net outflows. High Quality Liquidity Assets are composed mainly byof Brazilian federal government bonds and reserve ~~requirements~~requirement 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”)~~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~~current regulatory minimum NSFR of 1.00. The RA consists of the 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 buffer~~ ~~up 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~~ %
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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.100%.
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, which serve~~member. Such information serves as the basis for calculation of the required ~~Regulatory Capital~~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~~or segment three, or “S3” financial institutions 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 come~~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.
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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.
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;
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~~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 financial institutions 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.
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·~~Time Deposits (CDBs)~~~~. The~~
Additionally, as from the issuing of Brazilian Central Bank ~~imposes a reserve requirement of 31% in relation to time deposits. Financial institutions must~~Resolution No. 145 on September 24, 2021, collateral deposit ~~an amount equivalent to~~for the ~~surplus of (i) R$3.6 billion~~new 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 base~~this type of ~~the compulsory~~ reserve ~~requirement for time deposits of financial institutions of the same conglomerate.~~requirement.
·~~Demand Deposits~~~~. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits.~~
·~~Savings Deposit~~~~s. 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.
· 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,
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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~~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~~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,~~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.~~regulatory capital. Within that limit, repurchase transactions involving private securities may not exceed five times the ~~Regulatory Capital.~~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~~July 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~~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~~regulatory capital allocated to focused exposure, that is 10% of their ~~Regulatory Capital –~~ Tier 1.1 regulatory capital. 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 ~~Rule~~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.
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Resolution No. 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,~~Resolution No. 264/22 deals in particular with the procedures for the registration of receivables, and
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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. Resolution No. 264/22 came into effect on December 1, 2022.
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 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 Custódia), 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 implement~~implemented 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 be~~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 March 3, 2022, the Brazilian Central Bank issued Resolution No. 195/22, which regulates the SPI. Resolution 195/22 also approved the regulation with which the direct and indirect participants in the SPI must comply. Brazilian Central Bank Normative Ruling No. 243/22 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 291/22, in turn, establishes the procedures for the adherence to 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 clearinghouses 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. Resolution 195/22 came into effect on April 1, 2022.
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On ~~February 18,~~August 12, 2020, the Brazilian Central Bank ~~published Circular~~issued Central Bank Resolution No. ~~3,985, which sets out implementation procedures~~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 ~~criteria~~in the PIX System is mandatory for ~~the Brazilian Instant Payments System (Sistema de Pagamentos Instantâneos or “SPI”)~~financial institutions and payment institutions authorized to operate by the Brazilian Central ~~Bank’s instant payments arrangement. The rule determines~~Bank that ~~all financial and payment institutions with a license to operate granted by the Central Bank and which~~ have more than 500,000 active ~~client~~customer 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 mandatorily~~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 clearinghouses, 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.
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 enter~~Brazilian 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 customers 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 means 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 should have implemented, 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 entity’s audit and risk committees (if in place), internal audit unit, executive board and board of directors (if in place).
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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 Finance Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open finance. Open finance 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.
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 or S2 segments, as is our case, are required to participate in open finance.
Open finance has a four stage implementation plan, as follows:
· Phase 1 (launched 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.
· Phase 2 (launched on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
· Phase 3 (launched on October 30, 2021): start of PIX transactions offered by payment transaction initiators through the Open Finance channel, without the need to access the specific channels of the institutions with whom the client maintains a relationship. The possibility of using other payment methods (other than PIX) and of accepting credit transaction proposals through Open Finance is expected to be gradually implemented in the future.
· Phase 4 (launched on December 15, 2021): sharing of customer transactional data related to additional products, including: (i) insurance, open-end private pension and capitalization products; (ii) merchant acquiring services; (iii) foreign exchange transactions; and (iv) time deposit accounts and other investment products. Phase 4 is still currently under implementation and the Brazilian Central Bank’s expectation is that it should be completed by the end of 2023.
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 Finance 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 Finance, 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 Finance; (iv) services to be rendered by the Open Finance 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 Finance and its implementation; and (v) minimal security standards and certifications.
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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 Finance, to be further detailed by the Open Finance 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.
Finally, the data referring to insurance products and pension plans will follow the scope defined by the National Council of Private Insurance (Conselho Nacional de Seguros Privados), or “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.
Phase 4 of Open Finance 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 to 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 lasted for one year and was extended for a second year through November 2023. As of the date of this annual report, a second cycle still has not commenced.
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.
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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
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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.
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 ~~onlending~~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
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and payment or that the fee and charging method are defined in the contract.
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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.~~
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.
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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.
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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 Unit~~Activities Control Council (~~Unidade~~Conselho de ~~Inteligência~~Controle de Atividades Financeiras or ~~“UIF”~~“COAF”), which operates under the jurisdiction of the Ministry of Finance. The purpose of the ~~UIF~~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 ~~UIF~~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 ~~National~~Brazilian Treasury ~~Attorney-General’s~~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.
The regulations also impose an obligation on financial institutions to request that both ~~clients~~customers and ~~non-clients a~~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
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the regulation applicable to financial institutions, by expanding the adoption of a risk-based approach and ~~will enter~~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~~know-your-client, or “KYC” procedures were also improved and ~~includes~~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~~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 (their representatives,~~client’s (including their representatives’, family ~~members~~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.
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On ~~December 5, 2019,~~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 KYC procedures. The CVM also issued CVM ~~Instruction~~Resolution No. ~~617,~~50 on August 31, 2021, which establishes ~~a new~~the framework for the prevention of money laundering and the financing of terrorism in the Brazilian securities market. CVM ~~Instruction~~Resolution No. ~~617~~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.
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;
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· 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.
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The ~~government of the Federal Republic~~governments of Brazil and the ~~government of the~~ United States ~~of America~~ executed an agreement ~~on March 20,~~in 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
Brazil
The ~~GDPA~~LGPD (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 take~~LGPD 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 ~~GDPA brings~~LGPD brought 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 ~~GDPA~~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 data subjects ~~of the data~~ are located in Brazil at the time their personal data are collected. The ~~GDPA~~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 ~~GDPA~~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 ~~GDPA.~~LGPD. Penalties include, among others, 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~~has 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 ~~GDPA~~LGPD and request information of controllers and
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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 ~~GDPA~~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.
The ANPD has been assured technical independence, although it is subordinated to the ~~Presidency~~Brazilian Ministry of ~~the Republic.~~Justice and Public Safety. It ~~will be~~is 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.
Other
In addition, we are subject to Regulation (EU) 2016/279 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”). 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 2% of annual worldwide turnover or €10 million (whichever is highest) for other specific infringements. Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the U.K. General Data Protection Regulation (“U.K. GDPR”) (i.e., a version of the GDPR as implemented into U.K. law). While the U.K. GDPR currently imposes substantially the same obligations as the GDPR, the U.K. GDPR will not automatically incorporate changes to the GDPR going forward (which would need to be specifically incorporated by the United Kingdom government). Moreover, the United Kingdom government has publicly announced plans to reform the U.K. GDPR in ways that, if formalized, are likely to deviate from the GDPR, all of which creates a risk of divergent parallel regimes and related uncertainty, along with the potential for increased compliance costs and risks for affected businesses.
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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 be~~were 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’s~~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, ~~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
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· errors that result in major incorrectness in the financial statements of the audited entity.
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The executive ~~office~~officers of the financial institution must ~~inform~~notify the independent auditor and the audit committee ~~when established,~~ if any of the above situations occur.
CMN regulation also requires financial institutions and certain other entities holding ~~Regulatory Capital~~regulatory capital equal to or greater than R$1 billion to create a corporate body designated as the “audit ~~committee”. To obtain~~committee,” which we have created. For more information ~~concerning the~~on our 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~~
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). 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) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
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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 the “PRSA.” The new rule provides for the inclusion of a climate aspect to the PRSA, which we refer to as the 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 Climáticas, or the “GRSAC Report”) by financial institutions classified in S1 (such as us), S2, S3 or 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 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 us), S2, S3, or segment four, 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 climate 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 general provisions of CMN Resolution No. 4,945/21 came into effect on July 1, 2022, CMN Resolution No. 4,944/21, article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) and Central Bank Resolution No. 139/21 came into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 came 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~~).level. 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.
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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
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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.
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, as further detailed under “—Auditing Requirements” above.
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 the 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:
· 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.
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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.
On July 27, 2022, the Brazilian federal government adopted Decree No. 11,150/22, or Decree No. 11,150, which seeks to prevent and foster the repayment and settlement of consumer over-indebtedness. The rule grants consumers certain basic rights, including the right to responsible credit practices, financial education and relief from over-indebtedness situations through debt review and renegotiation. To preserve a consumer’s “existential minimum,” Decree No. 11,150 creates an “existential minimum income” threshold for consumers, which is fixed at R$303.00, or one-quarter of the federal minimum wage that was in effect at the time the decree was adopted. However, the annual adjustment of the minimum wage will not lead to this amount being updated.
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 customers 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.
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 came into effect on March 1, 2022, and Central Bank Resolution No. 155 came 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:
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· 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); and
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· to act as a communication channel between the financial institutions and their customers, including for dispute ~~resolution; and~~resolution.
· ~~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 as~~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.
~~As of~~Since August 29, 2019, securities brokers and dealers may loan their own securities to their ~~clients~~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~~regulatory capital (~~Patrimô~~patrimônio de ~~Referê~~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).
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On ~~October 7, 2019,~~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, ~~sent~~overhauls 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 also~~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 ~~Bill~~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 ~~US$1,000~~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. ~~As 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.~~
Law No. 14,286 came into effect on December 30, 2022.
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~~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 ~~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.
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 revoked 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 be 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.
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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 customers.
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.
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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.
On January 3, 2023, the Brazilian Central Bank published Normative Ruling No. 342, which amended Normative Ruling No. 299/22 and provides procedures, documents, terms and necessary information for requests related to the participation of financial institutions, such as us, on other companies’ corporate capital; and establishment of branches abroad. This new rule came into force on its publication date.
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.~~
1-345-769-4601.
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.
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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,~~2022, CI$1 was equivalent to R$~~4.88,~~6.2480 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 April 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.~~Avenue J. F. Kennedy, 2nd floor, L-
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~~1855~~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 June 26, ~~June~~ 2013 on prudential requirements for credit institutions and investment firms apply to it.
~~Foreign Subsidiary~~
We 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 allows 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 has been operational since March 2012.
U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States ~~Congress.~~Congress and U.S. bank regulatory agencies. 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 "Federal~~or the “Federal Reserve ~~Board")~~Board,” retains the right to apply enhanced prudential standards to ~~FBOs~~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, ~~(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.
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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
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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 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 October~~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 ~~early~~June 2020, the five federal agencies ~~proposed~~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.
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.
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U.S. Sanctions
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~~The~~“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, the Office of Foreign Assets Control, ~~(“OFAC”~~or “OFAC”), the UN Security Council, the European Union or His Majesty’s Treasury. 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~~imposed various sanctions that ~~target~~prevent non-U.S. persons, including non-U.S. financial institutions ~~that engage~~from engaging 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. under the specially Designated Global Terrorist (SDGT) sanctions program.~~. If a non-U.S. financial institution were determined to have engaged in activities targeted by certain U.S. 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.
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.
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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
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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:
· 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.
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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.
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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 ~~which~~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.
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
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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.
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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.
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.
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~~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
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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~~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~~Law No. ~~897 (“MP 897/2019”)~~13,986/2020, 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~~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.
~~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 regulation~~regulated, through Circular No. 4,036/20, the electronic issuance of book-entry CCBs and ~~self-regulation yet~~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 all obligatory information related to ~~be issued. Within this context, Brazilian Central Bank-licensed entities opting to join~~CCBs and CCRs, as well as ancillary documents and/or information for the ~~open banking ecosystem must share~~purposes of verifying the ~~information listed above with other participating institutions. At its inception~~outstanding balance of the ~~open banking model will only be compulsory~~underlying 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~~
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~~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 Brazil~~obligations available to the ~~public, so as to collect comments and suggestions on~~debtor; (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 ~~institutions~~assets; (vii) make information about the CCBs and ~~prudential conglomerates belonging~~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.
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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.
~~Limitations~~interest 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 come~~came into force on January 6, 2020, for agreements executed after the referred date, ~~will come~~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 will enter 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 come~~came into force on ~~May~~March 1,^st~~, 2020.~~ 2021, CMN Resolution No. 4,790 repealed CMN Resolution 4,771.
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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% for banks, 15.0% for other financial institutions ~~(until February, 2020)~~except banks and 9.0% for ~~companies,~~most other Brazilian legal entities, after adjustments determined by the tax legislation.
~~Constitutional amendment No. 103/2019 increased the~~ CSLL ~~tax~~ rate for ~~financial institutions~~banks was revised to 21.0% from ~~15.0%~~August 1 to ~~20.0% from March 1, 2020.~~
December 31, 2022.
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.
IRPJ and CSLL on Foreign Exchange Variation of Hedges for Investments Held Abroad
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, as of 2022, 100% of the exchange rate variation will be considered as taxable.
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.
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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 ~~Law~~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 ~~the Complementary~~Supplementary 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 discussing~~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 ~~Complementary law proposition~~unified ISS collection system, in which taxpayers would be able to ~~centralize~~collect ISS in every municipality in Brazil. It’s an effort to facilitate tax collection ~~in order to tackle~~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 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 ~~financial~~certain revenues ~~and commissions,~~ net of ~~financial expenses, which are~~certain expenses) payable by financial ~~institutions. The~~institutions 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.
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~~The non-financial~~Nonfinancial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to ~~non-cumulative~~noncumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Tax on Financial Transactions ~~(IOF)~~
The IOF tax is a tax levied on credit, currency exchange, insurance and securities ~~transactions and it~~transactions. It is imposed on the following transactions and at the following ~~rates:~~
rates.
~~Transaction(1)~~Transaction (1)
Maximum
Legal Rate
Current Rate
Credit extended by financial institutions and ~~non-financial~~nonfinancial entities 1.5% or 3% 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.
Transactions relating to ~~securities(2)~~securities (2) 1.5% per day 0.5% per day for certain investment funds.
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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 ~~25.0%~~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%~~5.38% on credit card transactions as from ~~April 27, 2011.~~January 2, 2023.
~~6.38%~~5.38% on withdrawals abroad using
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~~Transaction(1)~~
~~Maximum Legal Rate~~
~~Current Rate~~
credit or debit cards as from ~~December 28, 2013.~~January 2, 2023.
~~6.38%~~5.38% on purchase of ~~travelers~~traveler’s checks or loading of international prepaid card as from ~~December 28, 2013.~~January 2, 2023.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
6%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 equal or less than 180 days.
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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
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~~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.
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Pursuant to Decree No. 10,997/2022, the Brazilian government will gradually reduce, each year, the IOF, levied on exchange operations, rates with the reduction to zero for all currency exchange operations form 01.01.2029. In addition, external loan and financing operations, including through the issuance of titles, had the rate reduced to zero, as of March 31, 2022, regardless of the term of the operation.
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.
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. ~~8,506~~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~~(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° 1,680~~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 ~~Organisation~~Organization for Economic ~~Co-operation~~Cooperation 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°No. 1,571, dated July 2, 2016.
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On the same date, the Normative Ruling ~~n° 1,681~~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”~~“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 ~~(“Law~~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.
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The provisions of Law 13,259/16 may apply to ~~Non Resident~~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 ~~4373~~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 ~~25.0%~~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 reduction~~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.
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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, 2022 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 United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by the Belgian branch on these accounts in the year ended December 31, 2022.
(c) Santander Brasil holds three blocked accounts for three customers with domicile in Brazil designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander Brasil on these accounts in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(d) Santander Consumer Finance, S.A. also held through its branch in Greece an auto finance loan for a client designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship was terminated before the year end. Revenues or profits generated by the branch in Greece on this position in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(e) The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the United States 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,~~2022 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.
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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. 4,820 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: (i) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (ii) 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 regarding amounts related to results for the year ended December 31, 2020, as amended by 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 and 2022.
Reduction of Capital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduced 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% remained in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the capital conservation buffer requirement was gradually restored to 2.5%. 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.
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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 and 2022.
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. CMN Resolution No. 4,805/2020 increased the cap to R$400 million cap for DPGEs held by other financial institutions affiliated with the FGC, while maintaining the R$40 million cap for other non-affiliated entities.
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.
Flexibility 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.
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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 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, were permitted to, 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%. However, as of the revocation of CMN Resolution No. 4,788/20 by CMN Resolution No. 5,007, issued on March 24, 2022, the repurchase ceiling returned to the previous percentage 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 COVID-19 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.
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.”
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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, 2016~~2022, 2021, and ~~2015~~2020 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 “—~~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~~“—Other assets.”
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 %
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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 %
For the Year Ended December 31,

2022
2021
2020

Average Balance
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
(in millions of R$, except percentages)
Assets and Interest
Income
Cash and balances with the Brazilian Central Bank 109,977 10,202 9.3% 58,494 2,581 4.4% 54,531 1,552 2.8%
Loans and amounts due from credit institutions 71,836 2,722 3.8% 95,513 1,116 5.4% 104,759 1,519 1.4%
Of which:
  Reverse repurchase
agreements 49,357 7,197 14.6% 45,458 2,154 4.7% — — —
Loans and advances to customers 503,548 73,596 14.6% 461,141 55,775 10.7% 384,389 44,104 11.5%
Debt instruments 213,647 22,002 10.3% 224,890 16,958 8.5% 203,578 13,556 6.7%
Other interest – earning assets — 6,703 — — 1,557 – – 2,044 –
Total interest – earning assets 899,008 115,225 12.8% 840,038 77,987 9.3% 747,257 62,775 8.4%
Equity instruments 2,807 38 1.4% 2,279 90 3.9% 1,730 34 2.0%
Investments in associates 1,593 — — 952 — — 1,098 — —
Total earning assets 903,408 115,263 12.8% 843,269 78,077 9.3% 750,085 62,809 8.4%
Cash and balances with the Brazilian Central Bank 4,371 — — 4,633 — — 4,800 — —
Loans and amounts due from credit institutions (6,136) — — 441 — — 6,668 — —
Impairment losses (31,665) — — (26,908) — — (23,936) — —
Other assets 78,869 — — 81,669 — — 76,642 — —
Property, plant and equipment 8,346 — — 8,823 — — 9,587 — —
Intangible assets 31,084 — — 30,250 — — 30,769 — —
Total average assets 988,277 115,263 11.7% 942,177 78,077 8.3% 854,615 62,809 7.3%

Liabilities and Interest Expense

Deposits from the Brazilian Central Bank and Deposits from credit institutions 120,512 6,737 5.7% 149,111 4,712 3.2% 111,684 4,327 3.9%
Of which:
Repurchase agreements 87,567 11,197 12.8% 103,809 4,567 4.4% — — —
Customer deposits 438,846 38,509 8.7% 420,185 13,188 3.1% 380,058 7,504 2.0%
Of which:
   Repurchase agreements 4,974 — — 58,264 — — — — —
Marketable debt securities 94,612 6,952 7.3% 63,906 4,537 7.1% 68,585 2,786 4.1%
Subordinated debts 19,086 863 4.5% 14,550 902 6.6% 13,102 909 6.9%
Other interest-bearing liabilities — 14,661 — — 3,329
—
—
2,805 —
Total interest-bearing liabilities 673,056 67,722 10.1% 647,752 26,669 4.2% 573,429 18,332 3.2%
Noninterest bearing demand deposits 34,524 — — 33,893 — — 28,581 — —
Other liabilities 151,417 — — 155,133 — — 150,759 — —
Non-controlling interests 431 — — 329 — — 315 — —
Stockholders’ Equity 128,849 — — 105,070 — — 101,531 — —
Total average liabilities and equity 988,277 67,722 6.9% 942,177 26,669 2.8% 854,615 18,332 2.1%
(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 year ended December 31, 2020 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.
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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,~~2022, compared to the year ended December 31, ~~2018,~~2021, and for the year ended December 31, ~~2018~~2021 compared to the year ended December 31, ~~2017.~~2020. 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 )
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~~Total interest-bearing liabilities~~
For the Years Ended 2022/2021
For the Years Ended 2021/2020

Increase (decrease) due to changes in
Volume
Rate
Net change
Volume
Rate
Net change
(24 in millions of R$) ~~(13~~ ) ~~(37~~ ) ~~2,721~~
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank   3,383   4,238 7,621 120 909 1,029
Loans and amounts due from credit institutions (338) 1,944 1,606 (126) (277) (403)
Loans and advances to customers 5,456 12,365 17,821 9,181 2.492 11,671
Debt instruments (885) 5,929 5,044 1,502 1.900 3,402
Other interest-earning assets 5,146 —   5,146 (487) — (487)
Total interest-earning assets 12,762 24,476 37,238 10,190 5.024 15,214
Equity Instruments   17 (69) (52) 13 43 56
Total earning assets 12,779 24,407 37,186 10,203 5.067 15,268
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions (1,042) 3,067 2,025 1,278 (893) 385
Customer deposits 611 24,710 25,321 857 4,827 5,684
Marketable debt securities 2,251 164 2,415 (454) 2,205 1,751
Subordinated liabilities 240 (279) (39) 46 (53) (7)
Other interest-bearing liabilities 11,332 — 11,332 523 — 524
Total interest-bearing liabilities 13,392 27,662 41,053 2,250 6,086 8,337

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~~(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$, except percentages)
Average total interest – earning assets 652,642 605,855 553,380
Interest and dividends on equity securities(1) 72,860 70,511 71,501
Net interest income 44,340 41,954 35,029
Gross yield(2) 11.2 % 11.6 % 12.9 %
Net yield(3) 6.8 % 6.9 % 6.3 %
Yield spread(4) 5.3 % 5.4 % 4.0 %
For the Year Ended December 31,
2022 2021 2020
(in millions of R$, except percentages)
Average earning assets 899,008 840,038 747,257
Interest and dividends on equity securities(1) 115,263 78,077 62,809
Average Net interest income 47,541 51,408 44,480
Gross yield(2)(*) 12.8 % 9.3 % 8.4 %
Net yield(3)(*) 5.3 % 6.1 % 6.0 %
Yield spread(4)(*) 2.7 % 5.1 % 5.2 %

(*) 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.
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,
2022 2021 2020
ROA: Return on average total assets 1.5 % 1.7 % 1.6 %
ROE: Return on average stockholders’ equity 11.1 % 14.8 % 13.3 %
ROE (adjusted) (1) 14.2 % 20.2 % 18.5 %
Average stockholders’ equity as a percentage of average total assets 13.0 % 11.2 % 11.9 %
Payout(2) 56.5 % 62.0 % 24.7 %

(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, 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.”
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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).

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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 2022 2021 2020
Cash and balances with the Brazilian Central Bank 7.5 % 13.4 % 19.0 % 12.2 % 7.0 % 7.3 %
Loans and amounts due from credit institutions 15.6 % 9.3 % 4.2 % 8.0 % 11.4 % 14.1 %
Loans and advances to customers 49.5 % 50.3 % 50.2 % 56.0 % 54.9 % 51.4 %
Debt instruments 27.4 % 27.0 % 26.5 % 23.8 % 26.8 % 27.2 %
Total interest-earning assets 100 % 100 % 100 % 100.0 % 100.0 % 100.0 %

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, ~~2019~~2022 and ~~2018,~~2021, the book value of investment securities was R$~~176~~206 billion and R$~~177~~228 billion, respectively (representing ~~23%~~20.9% and 24.5%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$~~136~~143 billion, or ~~77.3%~~69.4%, and R$~~117~~171 billion, or ~~66.0%~~75.3% of our investment securities as of December 31, ~~2019~~2022 and ~~2018,~~2021, 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,
2019 2018 2017
(in millions of R$)
Debt securities
Government securities—Brazil 135,848 116,531 122,362
Debentures and promissory notes 13,875 10,556 12,097
Other debt securities 23,609 48,346 14,626
Total domestic/debt securities 173,332 175,433 149,086

Equity securities
Shares of Brazilian companies 665 783 389
Shares of foreign companies -   2 5
Investment fund units and shares 1,693 320 1,235
Total equity securities 2,358 1,106 1,629
Total investment securities 175,690 176,539 150,715
As of December 31,
2022 2021 2020
(in millions of R$)
Debt securities
Government securities—Brazil 142,749 171,437 191,896
Debentures and promissory notes 28,251 19,882 17,072
Other debt securities 31,913 33,894 21,134
Total domestic/debt securities 202,913 225,212 230,102

Equity securities
Shares of Brazilian companies 1,459 1,870 1,953
Shares of foreign companies 60 49 14
Investment fund units and shares 1,120 609 363
Total equity securities 2,639 2,528 2,329
Total investment securities 205,551 227,740 232,432
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As of December 31, ~~2019~~2022 and ~~2018,~~2021, we held no securities of single issuers or related groups of companies whose aggregate book or market value ~~exceed~~exceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented ~~140%~~129.0% and ~~127%~~151.5%, respectively, of our stockholders’ equity. As of December 31, ~~2019~~2022 and ~~2018,~~2021, the total value of our debt securities was
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approximately ~~179%~~185.7% and ~~191%~~212.5%, 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.~~2022. 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 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

Maturing within 1 year

Maturing between 1 and 5 years

Maturing between 5 and 10 years

Maturing after 10 years

Total
(in millions of R$)
Debt securities
Government securities—Brazil (1) —   14,997 —   1,100 16,097
Other debt securities (2) 21,936 34,511 6,310 2,475 65,232
Total debt investment securities 21,936 49,508 6,310 3,575 81,329
(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%~~12.96%.
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, 2022. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2022. 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 millions of R$, except percentages)
Weighted-average yields % % % %
Domestic:
Brazilian Government         17,315 11.37    58,456 13.39      2,910 6.70    10,593 6.46
Other fixed-income securities         16,563 12.77    27,258 14.40      4,298 8.90         884 9.20
Impaired financial assets 160 12.77         213 14.40         214 8.90         553 6.80
Impairment losses (287) 12.77       (691) 14.40       (227) 8.90 (593) —
Total domestic        33,751 12.07 85,236 13.90     7,195 7.80 11,437 6.70
International:
Foreign government           4,999 9.80 — — — — — —
Other fixed-income securities           1,055 10.40      3,189 10.40 — — — —
Impaired financial assets                 2 10.40 — — — — — —
Impairment losses — 10.40 — — — — — —
Total international          6,056 10.10     3,189 10.40 — — — —
Total weighted-average yields 11.46 8.00 6.60 6.70
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Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.
As of December 31,
2022 2021 2020
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank 11,346 10,657 5,806 10,851 4,532 15,617
Debt instruments 185,814 17,098 208,132 17,080 226,787 3,315
Loans and amounts due from credit institutions 19,784 929 22,689 3,797 50,553 3,520
Loans and advances to customers 416,127 74,503 398,335 66,509 372,946 20,822
Equity Instruments 2,582 57 2,483 45 2,329 —
Total assets 635,653 103,244 637,445 98,282 657,147 43,274
Liabilities
Financial Liabilities at amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 59,366 56,713 62,332 58,674 86,564 45,093
Customer deposits 457,188 32,765 468,961 —   445,814 —
Marketable debt securities 92,638 14,483 66,028 13,009 47,477 9,399
Debt instruments eligible to compose capital 19,538 —   —   19,641 —   13,120
Other financial liabilities 71,371 143 68,496 413 66,708 153
Total liabilities 700,101 104,104 665,817 91,737 646,563 67,765

As of December 31,
2019 2018 2017
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank (1) 4,878 15,250 16,651 15,065 18,144 15,981
Debt instruments 164,447 8,885 166,743 8,690 137,420 11,666
Loans and amounts due from credit institutions, gross (1) 107,694 1,553 79,166 454 65,279 -
Loans and advances to customers, gross 326,421 20,835 304,031 17,902 269,126 18,703
Equity Instruments 2,358 -   1,106 -   1,624 6
Total assets 605,798 46,523 567,697 42,111 491,593 46,356
Liabilities
Financial Liabilities at Amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 58,283 40,988 74,160 24,863 56,563 22,812
Customer deposits 336,515 -   304,198 -   276,042 -
Marketable debt securities 64,987 8,715 70,109 4,517 68,335 1,912
Subordinated debts -   -   9,886 -   519 -
Debt instruments eligible to compose capital -   10,176 -   9,780 8,435 -
Other financial liabilities 60,885 -   51,729 -   44,261 -
Total liabilities 520,670 59,879 510,082 39,160 454,155 24,724
~~(1)~~ In the fiscal year ended December 31, 2019, the balances related to compulsory deposits were reclassified from cash and reserves at the Brazilian Central Bank to the item Loans and other amounts with credit institutions for better presentation and, consequently, the respective comparative balances also have been reclassified.
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Loan Portfolio
As of December 31, ~~2019,~~2022, our ~~total~~ loans and advances to customers ~~were~~totaled R$~~347~~524 billion ~~(45.6%~~(53.2% of our total assets). Net impairment losses, loans and advances to customers ~~were~~totaled R$~~327~~491 billion as ofDecember 31, ~~2019 (42.9%~~2022 (49.8% of our total assets). In addition to loans, we had outstanding ~~as of December~~
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~~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$158.7 billion, R$146.0 billion, R$131.7 billion as of December 31, 2022, 2021, 2020, respectively.
Types of Loans by Type of Customer
~~Substantially all~~The majority of ~~our~~the 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.~~ For each loan category, ~~of loan,~~ we maintain specific risk management policies that are in line with the standards of the Santander Group, ~~and as~~which in turn, are managed and monitored by our board of officers through the credit committee. ~~Our~~The credit approval ~~processes~~process for each loan category ~~of loan are~~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~~Our loan portfolio ~~with no~~does not have any specific concentration exceeding 10% of our total ~~loans. Furthermore, currently, 1.01%~~loans, As of December 31, 2022, 1.0% of our loan portfolio is allocated to our largest debtor and ~~6.79%~~4.5% to ~~our~~the next 10 largest debtors.
For further information about the breakdown of our Loans ~~breakdown~~ and Maturity see sections “a – Breakdown” and “b – Detail” of note “9 – Loans and advances to ~~clients” sections “a - Breakdown” and “b – Detail” in “Item 18. Financial Statements,” which contains~~customers” to our audited consolidated financial statements ~~prepared~~included in ~~accordance with IFRS~~this 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, 2022.

As of December 31, 2022
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 126,508 46.89% 83,448 47.02% 13,366 24.50%

—
—
223,322 42.57%
Real estate 4,298 1.59% 10,905 6.14% 20,655 37.80% 22,385   98.46% 58,243 11.09%
Installment loans to individuals 137,581 51.00% 81,680 46.02% 20,616 37.72% 351 1.54% 240,227 45.79%
Lease financing
1,398
0.52%
1,455
0.82%
11

—

—

—
2,863
0.55%
Loans and advances to customers, gross
269,784
100.00%
177,488
100.00%
54,648
100.00%
22,735
100.00%
524,655
100.00%
Fixed and Variable Rate Loans
The following table sets forth a breakdown of our fixed and variable rate loans by ~~maturity~~type and status as of December 31, ~~2019.~~2022.
Fixed and variable rate loans with maturity
Less than one year One to five years Over five years Total
Balance % of Total Balance % of Total Balance % of Total Balance % of Total
(in millions of R$, except percentages)
Fixed rate 155,506 84 91,283 77 11,972 28 258,761 75
Variable rate 30,691 16 26,558 23 31,247 72 88,496 25
Total 186,197 100 117,841 100 43,218 100 347,256 100
Fixed and variable rate loans maturing in
Less than one year
Between one and five years
Between five and 15 years
Over 15 years
Sub-total more than one year
Total
(in millions of R$, except percentages)
Fixed rate
Commercial and industrial 81,757 38,976 3,581 — 42,558 124,315
Real estate 23 74 72 41 187 209
Installment loans to individuals 127,538 80,132 19,823 351 100,306 227,843
Lease financing 406 607 — — 607 1,013
Total Fixed rate 209,723 119,790 23,476 391 143,658 353,381
Variable rate
Commercial and industrial 44,751 44,471 9,785 — 54,256 99,007
Real estate 4,275 10,832 20,582 22,344 53,758 58,034
Installment loans to individuals 10,043 1,548 793 — 2,341 12,384
Lease financing 992 847 11 — 858 1,850
Total Variable rate 60,061 57,698 31,171 22,344 111,213 171,275
Total 269,784 177,488 54,648 22,735 254,871 524,655
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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$, except percentages)
OECD countries(1)
Spain 2,589 0.3 1,984 0.3 1,217 0.2
United States 9,081 1.2 3,721 0.5 3,304 0.5
Netherlands 2,355 0,3 1,531 0.2 3,853 0.6
United Kingdom() 158 0.0 1,003 0.1 6,508 1.0
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Other OECD countries(2) 218 0.0 16,264 2.4 1,072 0.1
Total OECD 14,401 1.9 24,503 3.6 15,954 2.5
Non-OECD countries
Latin American countries(2) 189 0.0 1,382 0.2 314 -
Cayman Islands 467 0.1 3,528 0.5 (8,304 ) (1.3 )
Other(2) 483 0.1 2,397 0.3 100 -
Total non-OECD 1,139 0.1 7,307 1.1 (7,890 ) (1.3 )
Total 15,540 2.0 31,810 4.6 8,064 1.2
As of December 31,
2022 2021 2020
Balance % of Total Assets Balance % of Total Assets Balance % of Total
Assets
(in millions of R$, except percentages)

OECD countries(1)
Spain 189 —   108 —   437 —
United States 2,489 0.3 835 0.1 12,674 1.4
Netherlands 73 —   —   —   80 —
United Kingdom 277 —   20 —   29 —
Luxembourg 710 0.1 13,058 1.4 —   —
Other OECD countries(2) 1,599 0.2 1,958 0.2 3,534 0.4
Total OECD 5337 0.6 15,979 1.7 16,754 1.8
Non-OECD countries
Latin American countries(2) 529 0.1 560 0.1 1,204 0.1
Cayman Islands 1,573 0.2 1,679 0.2 2,917 0.3
Other(2) 32 —   282 —   1,189 0.1
Total non-OECD 2,134 0.3 2,521 0.3 5,310 0.5
Total 7,471 0.9 18,500 2.0 22,064 2.3

(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.

The following table presents the amounts of our cross-border outstandings as of December 31, ~~2019, 2018~~2022, 2021 and ~~2017~~2020 by type of borrower where outstandings in the borrower’s country exceeded ~~1.2%~~1.4% of our total assets.
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Government
Banks and Other Financial Institutions
Commercial and Industrial
Other Loans
Total
(in millions of R$)
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 88 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
2022 —
United States — 2,259 198 32 —
Netherlands — — 73 — 73
Austria — 57 — — 57
United Kingdom — 234 39 3 276
Cayman Islands — 180 1,354 38 1,572
Total — 2,730 1,664 73 4,467

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

Non-current assets held for sale
For further information, see note ~~“10 - Non-current assets held for sale” in “Item 18. Financial Statements,” which contains~~10 to our audited consolidated financial statements ~~prepared~~included 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 Bank~~notes 16 and ~~Deposits from Credit Institutions” and “17 – Client deposits” in “Financial Statements” in “Item 18. Financial~~
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~~Statements,” which contains~~17 to our audited consolidated financial statements ~~prepared~~included 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, ~~2019~~2022

Domestic
~~Domestic~~
International
(in millions of R$)
Under 3 months 359,142 —
3 to 6 months ~~216,896~~33,019 —
6 to 12 months 66,039 —
Over 12 months 147,832 —
Total 606,032 —
-
~~3 to 6 months~~ ~~62,672~~ -
~~6 to 12 months~~ ~~62,671~~ -
~~Over 12 months~~ ~~93,547~~ -
~~Total~~ ~~435,786~~ -  142
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The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2022.
Maturing
As of
December 31, 2022 Three Months or Less Over Three Months Through Six Months Over Six Months Through
12 Months Over 12 months
(in millions of R$)
Total uninsured deposits(1)
281,066 264,349 24 48 16,645
(1)           We define uninsured deposits as securities from credit institutions and customers that do not have collateral attached to them.

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$, except percentages)
Securities sold under agreements to repurchase
As of December 31 123,941 5.00 % 99,379 7.34 % 97,421 8.33 %
Average during the period (1) 100,473 4.84 % 102,051 9.67 % 98,567 10.63 %
Maximum month-end balance 123,941 113,691 119,007
Total short-term borrowings at year end 123,941 99,379 97,421
As of December 31,
2022 2021 2020
Amount Average Rate Amount Average Rate Amount Average Rate
(in millions of R$, except percentages)
Securities sold under agreements to repurchase
As of December 31 109,760 1.26 % 115,964 1.76 % 112,477 1.90 %
Average during the period (1) 105,233 1.85 % 114,484 2.58 % 112,096 2.71 %
Maximum month-end balance 114,056 155,484 155,174
Total short-term borrowings at year end 109,760 115,964 112,477

(1) The average annual balance sheet data has been calculated based upon the average of the monthly balances at 1312 dates: ~~at December 31 of the prior year and~~ for each of the month-end balances of the ~~12 subsequent months.~~applicable year.

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, 2018~~2022, 2021 and ~~2017—~~2020—Results of Operations—Impairment Losses on Financial Assets (Net).”
As of December 31,
2019 2018 2017 2016 2015
(in millions of R$)
Balance at beginning of year 22,969 18,262 18,191 15,412 13,563
Initial adoption of IFRS 9 -   2,461 -   -   -
Balance adjusted 22,969 20,723 18,191 15,412 13,563
Impairment losses charged to income for the year 14,361 13,540 13,493 14,383 13,723
Write-off of impaired balances against recorded impairment allowance (14,705 ) (11,294 ) (13,422 ) (11,605 ) (11,874 )
Balance at end of year 22,625 22,969 18,262 18,191 15,412
Of which:
Loans and advances to customers 20,557 20,242 15,409 16,435 15,233
Loans and amounts due from credit institutions 14 14 69 201 179
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Provision for Debt Instruments 2,055 2,714 2,784 1,555 144
Recoveries of loans previously charged off(1) 991 827 1,154 994 757
As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 29,723 25,640 22,626
Initial adoption of IFRS 9 —   —   —
Balance adjusted 29,723 25,640 22,626
Impairment losses charged to income for the year 23,801 16,987 18,311
Write-off of impaired balances against recorded impairment allowance (18,340 ) (12,935 ) (15,297 )
Exchange variation 28 31 127
Balance at end of year 35,212 29,723 25,640
Of which:
Loans and advances to customers 34,025 28,511 24,054
Loans and amounts due from credit institutions 13 22 9
Debt Instruments 1,174 1,191 1,577
Recoveries of loans previously written off(1) 983 1,536 861

(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.
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As of December 31, 2022, our allowance for impairment losses for the periods indicated amounted to R$35,212 million, an increase of R$5,489 million, or 18.5%, compared to R$29,723 million as of December 31, 2021, which primarily resulted from a greater number of nonperforming loans among individual customers and a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, the latter of which resulted in: (i) an increase in our impaired assets in the commercial and industrial loans portfolio as of December 31, 2022 of 23.7%, from R$11.4 billion to R$14.2 billion, as compared to December 31, 2021; (ii) an increase in our default rate as of December 31, 2022 by 1.9 p.p., from 5.0% to 6.9%, as compared to December 31, 2021; and (iii) an increase in our coverage ratio (i.e., our provisions for impairment losses as a percentage of impaired assets) as of December 31, 2022 by 20.6 p.p., from 110.4% to 89.8%, as compared to December 31, 2021.
As of December 31, 2021, our allowance for impairment losses for the periods indicated amounted to R$29,723 million, an increase of R$4,083 million, or 15.9%, compared to R$25,640 million as of December 31, 2020, which primarily resulted from higher volumes and our product mix.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations.”
Allowance by Type of Borrower
The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.
For the Year Ended December 31,
2019 2018 2017 2016 2015
(in millions of R$)
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,

2022
2021
2020
(in millions of R$)
Recoveries of loans previously charged off(1) 983      1,536         861
Commercial and industrial 597         463         422
Real estate – construction 36           64           56
Installment loans to individuals 346      1,002         370
Lease finance 4             7           13
Impairment losses charged to income for the year(1) 23,800 16,987 18,311
Commercial and industrial 8,854      3,340      6,919
Real estate – construction 244         116           81
Installment loans to individuals 14,686    13,532    11,309
Lease finance   16            (1)             3
Write-off of impaired balances against recorded impairment allowance (18,340)   (12,935)   (15,297)
Commercial and industrial (4,920)     (5,184)     (4,745)
Real estate – construction (115)        (167)        (232)
Installment loans to individuals (13,295)     (7,576)   (10,433)
Lease finance (11)            (8)          (15)

(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.
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As of December 31,
As of December 31,
2019 % of Total Loans 2018 % of Total Loans 2017 % of Total Loans
2022
% of Total Loans
2021
% of Total Loans
2020
%of Total Loans
(in millions of R$, except percentages) (in millions of R$, except percentages)
Borrowers
Commercial and industrial 7,836 35 10,792 47 10,338 56.6 12,259 34.8 8,325 28.0 9,757 38.1
Real estate – construction 355 2 358 2 493 2.7
Real estate 284 0.8 154 0.5 194 0.8
Installment loans to individuals 14,409 64 11,768 51 7,374 40.4 22,659 64.4 21,240 71.5 15,676 61.1
Lease financing 25 0 51 0 56 0.3 10 0.0 4 — 14 0.1
Total 22,625 100 22,969 100.0 18,261 100.0 35,212 100.0 29,723 100.0 25,640 100.0

Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:
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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

As of December 31,

2022
2021
2020
(in millions of R$)
Internal Risk Rating
Low 392,397 374,505 347,315
Medium-low 77,993 79,217 24,277
Medium 18,647 14,590 26,232
Medium-high 13,574 9,413 3,896
High 22,044 15,630 16,101
Loans and advances to customers, gross 524,655 493,355 417,822

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, ~~2019~~2022 amounted to R$1534.4 billion, compared to R$1421.7 billion for the same period in ~~2018,~~2021, an increase of R$~~1,966~~12.7 million or ~~14.5%~~58.5%. 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%~~46.3% as of December 31, ~~2019~~2022 and ~~53.9%~~44.7% as of December 31, ~~2018.~~2021. 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
(in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 5,141 5,949 6,086
Real Estate -   -   1
Installment loans to individuals 10,102 7,492 6,047
Financial leasing 239 75 79
Total 15,482 13,516 12,213
Allowances for impairment losses 7,501 7,279 6,596
Coverage ratio 48.45 % 53.85 % 54.0 %
As of December 31,
2022 2021 2020
(in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 7,638 5,322 5,862
Installment loans to individuals 26,722 16,356 14,623
Financial leasing 2 5 5
Total 34,363 21,683 20,490
Allowances for impairment losses 15,9 9,698 9,019
Coverage ratio 46.3 % 44.7 % 44.0 %
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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, through~~As established in our internal renegotiation policy, ~~require at least a minimum amount of payment of quotas~~in order for ~~any~~ renegotiated products to be ~~considered~~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 ~~the classification of such~~these 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 date~~overdue are also accounted for as impaired.
~~Since 2015, we~~We increased our efforts regarding the collection of loans that are less than 60 days past due and also in relation to ~~written off~~written-off loans. We are also continuing with our strategy ~~(in place since 2012)~~ of granting loans to persons with ~~low risk~~a low-risk profile and higher levels of collaterals and guarantees.
Impaired Assets
The following table shows our impaired ~~assets.~~ assets, excluding country risk.
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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,
2022 2021 2020
(in millions of R$, except percentages)
Impaired assets
Past due and other impaired assets(1) 39,224 26,923 23,176
Impaired assets as a percentage of total loans 7.5 % 5.5 % 5.5 %
Net loan charge-offs as a percentage of total loans 3.5 % 2.6 % 3.7 %
Net loan charge-offs as a percentage of average total loans 3.7 % 2.8 % 3.8 %

(1) ~~(1)~~ Includes as of December 31, ~~2019,~~2022, R$~~2,788~~5,814 million of doubtful loans (R$~~3,754~~2,528 million in ~~2018,~~2021 and R$~~5,439~~2,028 million in ~~2017, R$5,576 million in 2016 and R$5,549 million in 2015)~~2020) that were not past-due.

Evolution of Impaired Assets
Our impaired assets increased by ~~4.5%,~~45.7% or R$~~1,000~~12,301 million, to R$~~23,426~~39,224 million as of December 31, ~~2019,~~2022, compared to R$~~22,426~~26,923 million as of December 31, ~~2018.~~2021. Provisions for impairment losses, including total recoveries of loans previously charged off, ~~decreased 1.5%~~increased 18.5%, or R$~~344~~5,488 million, to R$~~22,626~~35,212 million as of December 31, ~~2019,~~2022, compared to R$~~22,969~~29,723 million as of December 31, ~~2018.~~2021. Offsetting these effects were recoveries of R$~~991~~983 million on loans previously written off as of December 31, ~~2019~~2022 and R$ ~~827~~1,536 million as of December 31, ~~2018.~~2021.
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, 2022.
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$)
Balance at beginning of year 22,426 19,145 18,887 18,599 14,011
Initial Adoption of IFRS9⁽¹⁾ -   703 -   -   -
Adjusted Balance 22,426 19,848 18,887 18,599 14,011
Net additions 16,001 13,872 13,679 11,893 16,462
Write-offs (15,001 ) (11,294 ) (13,422 ) (11,605 ) (11,874 )
Balance at end of year 23,426 22,426 19,145 18,887 18,599
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As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 26,923 23,176 23,426
Initial Adoption of IFRS9 ⁽¹⁾ —   —   —
Adjusted Balance 26,923 23,176 23,426
Net additions 31,921 18,429 14,758
Write-offs (19,620 ) (14,681 ) (15,008 )
Balance at end of year 39,224 26,923 23,176
(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, better~~2022, the debt restructuring options ~~to restructure debts collaborated~~were improved to maintain ~~the~~consistent 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 2022 2021
(in millions of R$) (in millions of R$)
Commercial and industrial 10,073 11,832 14,156 11,440
Real estate – construction 827 1,036
Real estate 1,058 470
Installment loans to individuals 12,497 9,499 23,999 14,996
Lease financing 29 59 10 17
Total 23,426 22,426 39,224 26,923

Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$14,156 million as of December 31, 2022, an increase of R$2,717 million, or 23.7% compared to R$11,440 million as of December 31, 2021. This increase was due to a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$1,058 million on December 31, 2022, an increase of ~~commercial and industrial loans amounted~~R$588 million, or 125% compared to R$~~10,073~~470 million as of December 31, ~~2019, a decrease of R$1,759 million, or 15%, compared to R$11,832 million as of December 31, 2018.~~2021. The ~~decrease~~increase 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~~impact on our ~~borrowers whereby we offered certain~~ customers of the ~~chance to negotiate a restructuring of their debts or asset disposal.~~
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~~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$1,036 million as of December 31, 2018. The decrease was primarily due to change ondeteriorating macroeconomic conditions ~~lead to reduction on the interest rates on real estate portfolio~~ in Brazil.
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$~~12,497~~23,999 million as of December 31, ~~2019,~~2022, with an increase of R$~~2,998~~9,003 million, or ~~31.6%~~60.0%, compared to ~~2018. This~~2021. The increase in impaired assets in this portfolio was primarily a ~~consequence~~result of the ~~recurrent growth the portfolio and the weak~~effect of deteriorating macroeconomic conditions ~~related to the portfolio in Brazil, such as unemployment rate and degree of income commitment.~~
on our customers.
Lease Financing
Impaired assets in the lease financing lending portfolio totaled R$2910 million on December 31, ~~2019,~~2022, a decrease of 40.4% or R$307 million, as of December 31, 2021, primarily due to a decrease in the non-performing loans from R$17 million to R$11 million.
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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 is 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 mitigating factors 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:
As of December 31,
2022 % of total 2021 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,941 21.4 4,892 20.7
Mortgage loans 4,063 17.6 3,606 15.2
Installment loans to individuals 14,036 60.9 15,150 64.0
Lease financing 12 0.1 11 0.1
Total (*) 23,052 100.0 23,659 100.0
(*) Refers only to loans past due between 1 and 90 days.
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Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$27.4 billion to R$568.3 billion as of December 31, 2022, compared to R$540.9 billion as of December 31, ~~2018.~~2021. Our impaired assets increased by approximately R$12.3 billion in the same period, from R$26.9 billion to R$39.2 billion. The default rate increased by 1.9 p.p. in 2022 in comparison to 2021, as a result of a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings as well as the growth of impaired assets due to the macroeconomic deterioration.
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,

2022
2021
2020
(in millions of R$, except percentages)
Loans and advances to customers, gross 524,655 493,355 417,822
Impaired assets 39,224 26,923 23,176
Provisions for impairment losses 35,212 29,723 25,640
Credit risk exposure Non-GAAP – customers (1) 568,338 540,873 466,104
Ratios
Impaired assets to credit risk exposure 6.9% 5.0% 5.0%
Coverage ratio (2) 89.8% 110.4% 110.6%
Impairment losses (24,829) (17,113) (17,450)
Losses on other financial instruments not measured at fair value (3) — — —
Impairment losses on financial assets (net) (4) (24,829) (17,113) (17,450)
(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$568,338 million as of December 31, 2022 and guarantees and documentary credits amounting to R$43,682 million as of December 31, 2022. 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, 2022, 2021 and 2020, our total of impairment losses on financial instruments included R$1,174 million, R$1,191 million and R$1,577 million, respectively, relating to debt instruments.
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The following chart shows our impaired assets to credit risk ratio from 2020 through 2022:

Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2022, 2021 and 2020.
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,
2022 2021 2020
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 35,212 29,723 25,640
Total loans outstanding 524,655 493,355 417,822
Credit ratio 6.71 % 6.02 % 6.14 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 39,224 26,923 23,176
Total loans outstanding 524,655 493,355 417,822
Credit ratio 7.48 % 5.46 % 5.55 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 35,212 29,723 25,640
Total nonaccrual loans outstanding 39,224 26,923 23,176
Credit ratio 89.8 % 110.4 % 110.6 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (18,340 ) (12,935 ) (15,297 )
Average amount outstanding 490,960 471,068 394,542
Credit ratio 3.7 % 2.7 % 3.9 %
Commercial and industrial:
Net charge-offs during the period (4,920 ) (5,184 ) (4,745 )
Average amount outstanding 219,950 214,286 176,750
Credit ratio 2.2 % 2.4 % 2.7 %

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Real estate:
Net charge-offs during the period (115 ) (167 ) (232 )
Average amount outstanding 56,724 51,883 42,368
Credit ratio 0.2 % 0.3 % 0.5 %
Installment loans to individuals:
Net charge-offs during the period (13,295 ) (7,576 ) (10,433 )
Average amount outstanding 211,653 202,578 173,336
Credit ratio 6.3 % 3.7 % 6.0 %
Lease financing:
Net charge-offs during the period (11 ) (8 ) (15 )
Average amount outstanding 2,647 2,321 2,089
Credit ratio 0.4 % 0.3 % 0.7 %
Allowance for credit losses to total loans outstanding
In 2022, our allowance for credit losses to total loans outstanding credit ratio increased by 69 basis points, from 6.02% as of December 31, 2021 to 6.71% as of December 31, 2022. This was primarily due to the growth in allowance for credit losses, driven by a recent increase in inflation, which primarily affected loans to individuals.
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.
Nonaccrual loans to total loans outstanding
In 2022, our nonaccrual loans to total loans outstanding credit ratio increased by 202 basis points, from 5.46% as of December 31, 2021 to 7.48% as of December 31, 2022. This was primarily due to the growth in total nonaccrual loans outstanding, driven by the deterioration of the macroeconomic situation in Brazil.
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.
Allowance for credit losses to nonaccrual loans
In 2022, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20.6 p.p., from 110.4% as of December 31, 2021 to 89.8% as of December 31, 2022. This was primarily due to a single customer defaulting in our large companies portfolio.
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20 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.
Net charge-offs during the period to average loans outstanding
In 2022, our net charge-offs during the period to average loans outstanding credit ratio increase by 100 basis points, from 2.7% as of December 31, 2021 to 3.7% as of December 31, 2022. This was primarily due to an increase of 4.2% in average loans outstanding and an increase of 41.8% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 120 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 15.4% in net charge-offs.
Commercial and Industrial Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans increased by 20 basis points, from 2.4% as of December 31, 2021 to 2.2% as of December 31, 2022. This was primarily due to an increase of 2.6% in average loans outstanding, while the net charge-offs decreased by 5.1%.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 20 basis points, from 2.7% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.2% in average loans outstanding, which was greater than the growth in net charge-offs of 9.3%.
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Real Estate Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 10 basis points, from 0.3% as of December 31, 2021 to 0.2% as of December 31, 2022. This was primarily due to an increase of 9.3% in average loans outstanding and a decrease of 31.1% in net charge-offs.
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.
Installment Loans to Individuals
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans increased by 260 basis points, from 3.7% as of December 31, 2021 to 6.3% as of December 31, 2022. This was primarily due to an increase of 4.5% in average loans outstanding and an increase of 75.5% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 30 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.
Lease Financing Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans increased by 10 basis points, from 0.3% as of December 31, 2021 to 0.4% as of December 31, 2022. This was primarily due to an increase of 14.0% % in average loans outstanding and an increase of 37.5% in net charge-offs.
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.
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 February 24, 2023, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
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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 as of December 31, 2022:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A.
Santander Leasing S.A. Arrendamento Mercantil Leasing Brazil 100.00 %
Aymoré Crédito, Financiamento e Investimento S.A. Financial Brazil 100.00 %
Santander Brasil Administradora de Consórcio Ltda. Buying club Brazil 100.00 %
Santander Corretora de Câmbio e Valores Mobiliários S.A. Broker Brazil 99.99 %
Santander Corretora de Seguros, Investimentos e Serviços S.A. Broker Brazil 100.00 %
Sancap Investimentos e Participações S.A. Holding Brazil 100.00 %
Santander Holding Imobiliária S.A. Holding Brazil 100.00 %
F1RST Tecnologia e Inovação Ltda. Other Activities Brazil 100.00 %
Rojo Entretenimento S.A. Other Activities Brazil 94.60 %
Sanb Promotora de Vendas e Cobrança Ltda. Other Activities Brazil 100.00 %
BEN Benefícios e Serviços Instituição de Pagamentos S.A. Means of Payment Brazil 100.00 %
Esfera Fidelidade S.A. Other Activities Brazil 100.00 %
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. Technology Brazil 80.00 %
SX Negócios Ltda. Other Activities Brazil 100.00 %
SX Tools Soluções e Serviços Compartilhados Ltda. Other Activities Brazil 100.00 %
Liderança Serviços Especializados em Cobranças Ltda. Collection Management and Credit Recovery Brazil 100.00 %
Return Capital S.A. Collection Management and Credit Recovery Brazil 100.00 %
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Capitalization Brazil 100.00 %
Evidence Previdência S.A. Private Pension Brazil 100.00 %
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. (6) Bank Brazil 50.00 %
Banco Hyundai Capital Brasil S.A  (current name of BHJV Assessoria e Consultoria Empresarial Ltda.) Bank Brazil 50.00 %
Solutions 4 Fleet Consultoria Empresarial S.A. Tecnology Brazil 80.00 %
Controlled by Santander Leasing S.A Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00 %
Santander Distribuidora de Títulos e Valores Mobiliários S.A. Distributor Brazil 100.00 %
Controlled by Santander Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários S.A. Broker Brazil 63.00 %
Toro Investimentos S.A. Investments Brazil 14.78 %
Controlled by Toro Corretora de Títulos de Valores Mobiliários S.A.
Toro Investimentos S.A. Investments Brazil 76.55 %
Controlled by Sancap
Santander Auto S.A. Technology Brazil 50.00 %
Consolidated Investment Funds
Santander Fundo de Investimento Unix Multimercado Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Paraty QIF PLC (1) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (1) Investment Fund Brazil (a)
BRL V – Fundo de Investimento Imobiliário – FII Real Estate Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado Investment Fund Brazil (a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos Investment Fund Brazil (a)
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior Investment Fund Brazil (a)
Verbena FCVS – Fundo de Investimento em Direitos Creditórios Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI – Não Padronizado Investment Fund Brazil (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) 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.
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4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 338 properties for the activities of our banking network and rent 1,681 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.
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, 2022, 2021 and 2020 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, 2022, 2021 and 2020, 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, 2022, 2021 and 2020 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.
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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$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off. For additional information, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Brazilian Macroeconomic Environment
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil. While Brazilian GDP increased in 2022, due in part to fiscal incentives granted by the Brazilian government and the resumption of activities that were suppressed by restrictions imposed to curb the spread of COVID-19, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
As of and For the Year Ended December 31,
2022 2021 2020
GDP growth(1) 3.0 % 4.6 % (4.1 )%
CDI Rate 12.4 % 4.4 % 2.1 %
TJLP 7.2 % 5.3 % 4.6 %
SELIC rate 13.75 % 9.25 % 2.00 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.22 5.58 5.20
Depreciation (appreciation) of the real against the U.S. dollar (6.5 )% 7.4 % 28.9 %
Average real to U.S. exchange rate per U.S.$1.00(2) 5.17 5.40 5.16
Inflation (IGP-M) 5.5 % 17.8 % 23.1 %
Inflation (IPCA) 5.8 % 10.6 % 4.5 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2022 is based on Santander Brasil’s internal estimates. For 2021, the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
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 also 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. In 2022, the relaxation of COVID-19 restrictions and continued fiscal incentives granted by Brazilian government have supported Brazilian GDP growth, which we estimate to have been 3.0% in 2022.
However, the macroeconomic outlook for 2023 is marred by high inflation, high interest rates, a deteriorating global economic outlook, continued political uncertainty following the presidential elections held in Brazil in the last quarter of 2022, and continued uncertainty regarding the course of the COVID-19 pandemic. 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. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—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.”
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Impact of COVID-19
Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment. 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 safe-guard 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—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.”
War in Ukraine
The ongoing war between Russia and Ukraine has caused an ongoing humanitarian crisis in Europe as well as volatility in financial markets globally, heightened inflation, shortages and increases in the prices of energy, oil, gas and other commodities. In response to the Russian military action against Ukraine, several countries, including the United States, the European Union member states, the United Kingdom and other UN member states, have imposed severe sanctions on Russia and Belarus. Furthermore, the risk of cyberattacks on companies and institutions could increase as a result of the military conflict and in response to the sanctions imposed, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures. The continuance or escalation of the war, including its extension to other countries in the region, could lead to further increases in energy, oil and gas prices (particularly if supplies to Europe are interrupted) and heightened inflationary pressures, which in turn could lead to further increases in interest rates and market volatility. In addition, the war has exacerbated supply chain problems, particularly to those businesses most sensitive to rising energy prices. The war and its effects could exacerbate the current slowdown in the global economy and could negatively affect the payment capacity of some of our customers, especially those with more exposure to the Russian or Ukrainian markets.
While we do not have a physical presence in Russia and Ukraine and our direct exposure to Russian or Ukrainian markets and assets is not material, the impact of the war in Ukraine and the sanctions imposed on global markets and institutions, the impact on macroeconomic conditions generally, and other potential future geopolitical tensions and consequences arising from the war remain uncertain and may exacerbate our operational risk. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic Conditions in Brazil and Globally—The war in Ukraine could materially affect our financial position and increase our operational risk.”
Interest Rates
In 2021, the Brazilian Central Bank began a monetary tightening cycle due to rising inflation, the depreciation of the real, and a perception of the recovery of certain economic activity following the easing of restrictions which had been imposed to suppress the circulation of COVID-19. The SELIC rate increased from 2.0% as of December 31, 2020 to 9.25% as of December 31, 2021 and 13.75% as of December 31, 2022 (the highest level since the end of 2016), a level at which it remains as of the date of this annual report.
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.
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The following table presents the low, high, average and period end SELIC rate since 2018, as reported by the Brazilian Central Bank:
Low High(1) Average(2) Period-End
Year
2018 6.50 7.00 6.58 6.50
2019 4.50 7.00 6.58 6.50
2020 2.00 4.50 2.87 2.00
2021 2.00 9.25 4.57 9.25
2022 9.25 13.75 12.57 13.75
2023 (through February 27, 2023) 13.75 13.75 13.75 13.75
(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, 2022, a 100-basis point increase in the yield curve would have resulted in R$945 million decrease in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2020, outstanding credit increased 10.5% 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 4.2% in 2020, while the household debt burden decreased to 22.4% 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 5.7% 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 (in December 2021, the former climbed to 4.4% and the latter reached 26.5% of household income). In 2022, outstanding credit increased 7.7% compared to 2021, the ratio of nonperforming loans to individuals reached 5.9% and the household debt burden reached 28.2% of household income.

As of December 31,

2022
2021
2020
(in billions of R$)
Total Credit Outstanding (1) 5,326 4,944 4,677
Earmarked credit 2,151 1,991 1,977
Non-earmarked based credit 3,175 2,953 2,700
of which:
Corporate 1,404 1,351 1,267
Individuals (retail) 1,771 1,602 1,433
(1) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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 2022, we recorded foreign exchange exposure of R$83.5 million, foreign exchange exposure of R$117.4 million in 2021 and foreign exchange exposure of negative R$124.4 million in 2020. 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, 2022, 2021 and 2020—Results of Operations—Gains (losses) on Financial Assets and Liabilities (net) and Exchange Differences (net).”
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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.$1.00. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.62 to R$5.70 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.22 per U.S.$1.00. In 2023, through the date of this annual report, the real appreciated against the U.S. dollar as a result of improvements in commodity prices and better than expected fiscal results derived from higher revenues. As of February 27, 2023, the exchange rate was R$5.20 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. In 2022, as inflation increased to levels not seen since early 2003, as a result of which the Brazilian Central Bank increased the SELIC rate to 13.75% (the highest level since the end of 2016). 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 CMN’s 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 increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Similarly to the beginning of 2018, the Brazilian Central Bank delivered a letter to the CMN explaining why it failed to meet the inflation target and what actions would be implemented to ensure that inflation would converge to target in coming years. In 2022, inflationary pressures escalated in Brazil, including as a result of the ongoing war between Ukraine and Russia, supply chain issues, the continued COVID-19 pandemic (particularly in China) and increases in energy prices. As a result, inflation peaked in 2021 at multiple-year highs of 12.1% in Brazil in April 2022 (as measured by the IPCA in year-over-year terms) and 9.1% in the U.S. in June 2022 (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. Accumulated inflation for the year ended December 31, 2022, was 5.79% in Brazil and 6.5% in the United States. This resulted in tighter monetary policy by the Brazilian Central Bank, which increased the SELIC rate from a low of 2.0% as of the end of 2020 to 13.75% as of August 2022, a level at which it has remained as of the date of this annual report.
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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 2022, 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$945 million within a one-year period. 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 the IGP-M. For example, considering the amounts in 2022, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$92 million and R$81 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, 2022 As of December 31, 2021 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 26.50 % 25.00 % Loans Cap rate: 12.0% 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) 50.50 % 52.00 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.y.
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 %

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Time deposits
Reserve requirements(3) 20.00 % 20.00 % 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 % 80.00 %
(1) Rural credits are credits granted to farmers in the amount of R$16.2 billion and R$13.6 billion as of December 31, 2022 and 2021, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of R$2.7 billion as of December 31, 2022 and R$1.9 billion December 31, 2021, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the possibility of any deduction on its website (rule numbers 189, 188 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.
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 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 2022, 2021 and 2020, 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.
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As of December 31,

2022
2021
2020
(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) 5.1% 4.8% 4.3%
Discount rate(3) 12.9% 12.3% 12.4%
(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 2022.
(3) The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 20.10% in 2022, 18.77% in 2021 and 19.56% in 2020.
(*) A quantitative goodwill impairment test is performed annually. At the end of each exercise, an analysis is carried out on the existence of appearances of disability. For the years 2022, 2021 and 2020 there was no evidence of impairment. In the goodwill impairment test, carried out considering the December 2022 scenario, and whose discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows, it was found that these continue to indicate the absence of 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
In addition, our results of operations have been influenced and will continue to be influenced by the other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events,” including the Spin-Off of Getnet.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
General
Our main accounting policies are described in note 2 to our audited consolidated financial statements. The following discussion describes areas that require use of certain critical accounting estimates and the exercise 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 apply such estimates for different durations a material impact on our financial condition and results of operations 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 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.”
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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 between market participants, in a transaction on the 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.
We use derivative financial instruments for both trading and nontrading activities. The main types of derivatives used are interest rate swaps, options and future rate agreements; foreign exchange forwards, futures, options, and swaps; 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 markets 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.
· 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 nonlinear 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 estimates and a sensitivity analysis for the valuation of financial instruments to those changes in 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.
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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);
· for equity instruments, 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 nonperforming 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 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:
· all amounts that are expected to be obtained over the 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).
We 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 and calculation of amounts necessary to cover the related credit risk.
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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~~Interest Rates
~~We evaluate all loans regarding~~In 2021, 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~~Brazilian Central Bank began a monetary tightening cycle due to rising inflation, the ~~impairment loss on loans individually evaluated for impairment, we consider the conditions~~depreciation of the ~~borrowers, such as their~~real, and a perception of the recovery of certain economic ~~and financial situation, level~~activity following the easing of ~~indebtedness, ability~~restrictions which had been imposed to ~~generate income, cash flow, management, corporate governance and quality~~suppress the circulation 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.
COVID-19. 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,
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~~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~~SELIC 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:~~
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
~~(*)~~ ~~Refers only to loans past due between 1 and 90 days.~~
~~Impaired Asset Ratios~~
~~Our Credit risk exposure portfolio~~ increased ~~by R$27.4 billion to R$391.6 billion~~from 2.0% as of December 31, ~~2019, compared~~2020 to ~~R$364.2 billion~~9.25% as of December 31, 2018. Our impaired assets increased by approximately R$1 billion in the same period, from R$22.4 billion to R$23.4 billion. The default rate decreased by 20 basis points in 2019 in comparison to 2018, explained in part by the growth of the portfolio2021 and ~~measures that Santander Brasil put in place to manage impaired assets.~~
~~The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.~~
As of December 31,
2019 2018 2017 2016 2015
(in millions of R$ 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)~~ 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 billion13.75% 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~~
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~~to better demonstrate our total managed credit risk.~~
~~(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, 2019 impairment losses on financial assets (net) included R$2,055 million relating to debt instruments.~~
~~The following chart shows our impaired assets to credit risk ratio from 2014 through 2019:~~
~~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, ~~2019, Santander Spain held, directly and indirectly, 89.5%~~2022 (the highest level since the end of ~~our voting stock (not including~~2016), a level at which it remains as of the ~~shares held by Banco Madesant - Sociedade Unipessoal).~~date of this annual report.
~~As of December 31, 2019, Santander Spain was the largest bank~~An increase in the ~~euro zone~~SELIC rate may adversely affect us by ~~market capitalization, with~~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 ~~market capitalization of approximately €61,986 million. As of December 31, 2019, Santander Spain’s attributable profit totaled €6,515 million, 17% lower than~~decrease in the ~~previous year, and the total shareholder remuneration~~SELIC rate may have a positive impact on ~~account of the earnings for the 2019 financial year is €0.23 per share (subject to the approval~~our operations 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.promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
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The following table presents the ~~name, country~~low, high, average and period end SELIC rate since 2018, as reported by the Brazilian Central Bank:
Low High(1) Average(2) Period-End
Year
2018 6.50 7.00 6.58 6.50
2019 4.50 7.00 6.58 6.50
2020 2.00 4.50 2.87 2.00
2021 2.00 9.25 4.57 9.25
2022 9.25 13.75 12.57 13.75
2023 (through February 27, 2023) 13.75 13.75 13.75 13.75
(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 ~~incorporation or residence~~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, 2022, a 100-basis point increase in the yield curve would have resulted in R$945 million decrease in the net interest income over a one-year period.
Credit Volume and ~~proportion~~Quality in Brazil
In 2020, outstanding credit increased 10.5% as a result of ~~ownership interest~~credit support programs put in place by the Brazilian government to mitigate the impact of ~~our main subsidiaries~~the COVID-19 pandemic, which resulted in ~~accordance with~~a ratio of nonperforming loans of 4.2% in 2020, while the ~~criteria for consolidation pursuant~~household debt burden decreased to ~~IFRS:~~22.4% 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 5.7% 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 (in December 2021, the former climbed to 4.4% and the latter reached 26.5% of household income). In 2022, outstanding credit increased 7.7% compared to 2021, the ratio of nonperforming loans to individuals reached 5.9% and the household debt burden reached 28.2% of household income.

As of December 31,

2022
2021
2020
(in billions of R$)
Total Credit Outstanding (1) 5,326 4,944 4,677
Earmarked credit 2,151 1,991 1,977
Non-earmarked based credit 3,175 2,953 2,700
of which:
Corporate 1,404 1,351 1,267
Individuals (retail) 1,771 1,602 1,433
(1) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.

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 2022, we recorded foreign exchange exposure of R$83.5 million, foreign exchange exposure of R$117.4 million in 2021 and foreign exchange exposure of negative R$124.4 million in 2020. 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, 2022, 2021 and 2020—Results of Operations—Gains (losses) on Financial Assets and Liabilities (net) and Exchange Differences (net).”
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~~Activity~~ ~~Country of Incorporation~~ ~~Ownership Interest~~
~~Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A.~~
~~Banco Bandepe S.A.~~ ~~Bank~~157 ~~Brazil~~
~~100.00%~~Table of Contents
~~Santander Leasing S.A. Arrendamento Mercantil~~ ~~Leasing~~ ~~Brazil~~ ~~99.99%~~
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.$1.00. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.62 to R$5.70 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.22 per U.S.$1.00. In 2023, through the date of this annual report, the real appreciated against the U.S. dollar as a result of improvements in commodity prices and better than expected fiscal results derived from higher revenues. As of February 27, 2023, the exchange rate was R$5.20 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. In 2022, as inflation increased to levels not seen since early 2003, as a result of which the Brazilian Central Bank increased the SELIC rate to 13.75% (the highest level since the end of 2016). 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 CMN’s 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 increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Similarly to the beginning of 2018, the Brazilian Central Bank delivered a letter to the CMN explaining why it failed to meet the inflation target and what actions would be implemented to ensure that inflation would converge to target in coming years. In 2022, inflationary pressures escalated in Brazil, including as a result of the ongoing war between Ukraine and Russia, supply chain issues, the continued COVID-19 pandemic (particularly in China) and increases in energy prices. As a result, inflation peaked in 2021 at multiple-year highs of 12.1% in Brazil in April 2022 (as measured by the IPCA in year-over-year terms) and 9.1% in the U.S. in June 2022 (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. Accumulated inflation for the year ended December 31, 2022, was 5.79% in Brazil and 6.5% in the United States. This resulted in tighter monetary policy by the Brazilian Central Bank, which increased the SELIC rate from a low of 2.0% as of the end of 2020 to 13.75% as of August 2022, a level at which it has remained as of the date of this annual report.
~~Aymoré Crédito, Financiamento e Investimento S.A.~~ ~~Financial~~ ~~Brazil~~ ~~100.00%~~
~~Santander Brasil Administradora de Consórcio Ltda.~~ ~~Buying club~~ ~~Brazil~~ ~~100.00%~~
~~Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.)~~ ~~Credit Recovery Services~~ ~~Brazil~~ ~~100.00%~~
~~Santander Corretora de Câmbio e Valores Mobiliários S.A.~~ ~~Broker~~ ~~Brazil~~ ~~100.00%~~
~~Santander Corretora de Seguros, Investimentos e Serviços S.A.~~ ~~Holding~~ ~~Brazil~~ ~~100.00%~~
~~Getnet Adquirência e Serviços para Meios de Pagamento S.A.(1)~~ ~~Payment Institution~~ ~~Brazil~~ ~~100.00%~~
~~Sancap Investimentos e Participações S.A.~~ ~~Holding~~ ~~Brazil~~ ~~100.00%~~
~~Santander Brasil, EFC~~ ~~Financial~~ ~~Spain~~ ~~100.00%~~
~~Santander Holding Imobiliária S.A. (current name of Webcasas S.A.)~~ ~~Holding~~ ~~Brazil~~ ~~100.00%~~
~~Santander Brasil Tecnologia S.A.~~ ~~Technology~~ ~~Brazil~~ ~~100.00%~~
~~Rojo Entretenimento S.A.~~ ~~Other Activities~~ ~~Brazil~~ ~~94.60%~~
~~BEN Benefícios e Serviços S.A.~~ ~~Other Activities~~ ~~Brazil~~ ~~100.00%~~
~~Esfera Fidelidade S.A.~~ ~~Other Activities~~ ~~Brazil~~ ~~100.00%~~
~~Super Pagamentos e Administração de Meios Eletrônicos S.A.(2).~~ ~~Other Activities~~ ~~Brazil~~ ~~100.00%~~
~~Banco Olé Consignado S.A. (current name of Banco Bonsucesso Consignado S.A.)(3).~~ ~~Bank~~ ~~Brazil~~ ~~60.00%~~
~~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~~ 158
Table of ~~Ipanema Empreendimentos e Participações S.A.)~~ ~~Credit Recovery Services~~ ~~Brazil~~ ~~100.00%~~Contents
~~Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.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 2022, 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$945 million within a one-year period. 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 the IGP-M. For example, considering the amounts in 2022, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$92 million and R$81 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, 2022 As of December 31, 2021 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 26.50 % 25.00 % Loans Cap rate: 12.0% 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) 50.50 % 52.00 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.y.
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 %

~~Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.)~~ ~~Asset Management~~ ~~Brazil~~ ~~100.00%~~
~~Controlled by Sancap Investimentos e Participações S.A.~~ 159
~~Santander Capitalização S.A.~~ ~~Savings and annuities~~ ~~Brazil~~ ~~100.00%~~Table of Contents
~~Evidence Previdência S.A.~~ ~~Social Securities~~ ~~Brazil~~ ~~100.00%~~
~~Controlled by Getnet Adquirência e Serviços para Meios de Pagamento S.A.~~
~~Auttar HUT Processamento de Dados Ltda.~~ ~~Other Activities~~ ~~Brazil~~ ~~100.00%~~
~~Toque Fale Serviços de Telemarketing Ltda.~~ ~~Other Activities~~ ~~Brazil~~ ~~100.00%~~
~~Controlled by Aymoré Crédito, Financiamento e Investimento S.A.~~
~~Banco PSA Finance Brasil S.A. (6)~~ ~~Bank~~ ~~Brazil~~ ~~50.00%~~
~~Banco Hyundai Capital Brasil S.A. (current name of BHJV Assessoria e Consultoria Empresarial Ltda.)~~ ~~Bank~~ ~~Brazil~~ ~~50.00%~~
~~Controlled by Banco Olé Consignado~~
~~Crediperto Promotora de Vendas e Cobrança Ltda.~~ ~~Other Activities~~ ~~Brazil~~ ~~100.00%~~

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~~Olé Tecnologia Ltda.~~ ~~Other Activities~~ ~~Brazil~~ ~~100.00%~~
~~Controlled by Santander Leasing S.A. Arrendamento Mercantil~~
~~Pi Distribuidora de Títulos e Valores Mobiliários S.A. (current name of Santander Finance Arrendamento Mercantil)~~ ~~Leasing~~ ~~Brazil~~ ~~100.00%~~
~~Consolidated Investment Funds~~
~~Santander FIC FI Contract I Referenciado DI~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Fundo de Investimento Unix Multimercado Crédito Privado~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Fundo de Investimento Financial Curto Prazo~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Fundo de Investimento Capitalization Renda Fixa~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Paraty QIF PLC (5)~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander FI Hedge Strategies Fund (5)~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~BRL V - Fundo de Investimento Imobiliário-FII (4)~~ ~~Real Estate Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
~~Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos~~ ~~Investment Fund~~ ~~Brazil~~ ~~(a)~~
Time deposits
Reserve requirements(3) 20.00 % 20.00 % 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 % 80.00 %

~~(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 from~~Rural credits are credits granted to farmers in the ~~Brazilian Central Bank to operate~~amount of R$16.2 billion and R$13.6 billion as ~~a payment institution.~~of December 31, 2022 and 2021, respectively.
(2) ~~On February 28, 2020, we sold~~Microcredit is a credit granted to Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain, our entire equity interest in Super Pagamentos e Administração de Meios Eletrônicos S.A. (“Superdigital”). We received considerationvery small businesses, with an open position of R$ ~~270 million for our interest in Superdigital. As a result, we are no longer a shareholder~~2.7 billion as of ~~Superdigital.~~December 31, 2022 and R$1.9 billion December 31, 2021, respectively.
(3) ~~On December 31, 2020, Santander Brasil~~Deductions can be applied on reserve requirements. The Brazilian Central Bank details the possibility of any deduction on its website (rule numbers 189, 188 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 Olé145).
(4) ~~This fund was established and became consolidated from August 2016. It is a structure in which Santander Brasil~~Interest-free financing is the ~~creditor~~amount to be used on a free 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~~interest basis for other purposes 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.~~ ~~Property, Plant and Equipment~~each financing category.

~~We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 405 properties for the activities of our banking network and rent 2,130 properties~~Taxes
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for the same purpose. Furthermore, in 2014, we opened and concluded the migration of our operation to the new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—ItemSee “Item 4. Information on the Company—B. Business Overview—~~Distribution Network.~~Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.” ~~Our headquarters~~
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 ~~located at Av. Presidente Juscelino Kubitschek, 2,041~~extended to our customers for working capital and ~~2,235 Block A, Vila Olímpia, São Paulo, State~~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 ~~São Paulo,~~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 CSLL of an investing legal entity domiciled in Brazil.
~~ITEM 4A. UNRESOLVED STAFF COMMENTS~~
~~Not applicable.~~
~~ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS~~
~~5A.~~ ~~Operating Results~~
From January 2022, the foreign exchange variation of investments abroad is fully computed in the basis of the IRPJ and the CSLL. The ~~following discussion~~reconciliation of our ~~financial condition and results of operations should be read~~effective tax rate to the statutory tax rate is set forth in ~~conjunction with~~note 23b to our audited consolidated financial statements for the years ended December 31, 2019, 2018 and 2017 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~~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 ~~the consolidated financial statements referred to in this section required the adoption~~Banco Real
We generated goodwill 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 indicatedR$27 billion as a result of ~~various~~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 2022, 2021 and 2020, 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, ~~that affect our business, including,~~including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, ~~those mentioned~~(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.
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As of December 31,

2022
2021
2020
(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) 5.1% 4.8% 4.3%
Discount rate(3) 12.9% 12.3% 12.4%
(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 2022.
(3) The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 20.10% in 2022, 18.77% in 2021 and 19.56% in 2020.
(*) A quantitative goodwill impairment test is performed annually. At the end of each exercise, an analysis is carried out on the existence of appearances of disability. For the years 2022, 2021 and 2020 there was no evidence of impairment. In the goodwill impairment test, carried out considering the December 2022 scenario, and whose discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows, it was found that these continue to indicate the absence of impairment.
We performed a sensitivity test in the ~~sections “Forward-Looking Statements”~~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
In addition, our results of operations have been influenced and will continue to be influenced by the other transactions and developments discussed under “Item ~~3. Key Information—D. Risk Factors,~~4. Information on the Company—A. History and Development of the Company—Important Events,” ~~and other factors discussed elsewhere in this annual report.~~ including the Spin-Off of Getnet.
Critical Accounting Policies
Our consolidated financial statements ~~for the years ended December 31, 2019, 2018 and 2017,~~have been prepared in accordance with IFRS as issued by the ~~IASB~~IASB.
General
Our main accounting policies are described in note 2 to our audited consolidated financial statements. The following discussion describes areas that require use of certain critical accounting estimates and the ~~report~~exercise of judgement regarding matters that are inherently uncertain and that impact our ~~independent registered public accounting firm are included in “Item 18. Financial Statements.”~~
~~Principal Factors Affecting Our Financial Condition~~financial condition and ~~Results~~results of ~~Operations~~
~~Brazilian Macroeconomic Environment~~
Asoperations. In this regard, if management decides to change these estimates, or apply such estimates for different durations a Brazilian bank, we are significantly affected by the general economic environment in Brazil. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflationmaterial impact on our financial condition and ~~currency exchange rates. Our~~ results of operations could result.
Management bases its estimates and ~~financial condition are influenced by these~~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 ~~effect~~audit committee and to our regulatory authorities and are disclosed in the 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.”
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The fair value of a financial instrument is the price that ~~these factors have~~would be received to sell an asset, or the amount paid to transfer a liability between market participants, in a transaction on ~~employment rates,~~ the ~~availability~~date of ~~credit~~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 ~~average wages in Brazil. The following table presents key data of~~liability at the ~~Brazilian economy~~time fair value is measured. An assumed transaction like this establishes an asset sale price or transfer cost for the ~~periods indicated:~~liability. In the absence thereof, price is established using valuation techniques commonly used by financial markets.
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 %
~~Sources: BNDES, Brazilian Central Bank, FGV~~We use derivative financial instruments for both trading and ~~IBGE.~~
nontrading activities. The main types of derivatives used are interest rate swaps, options and future rate agreements; foreign exchange forwards, futures, options, and swaps; 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 markets as follows:
~~(1)~~· ~~Revised series. Source: IBGE.~~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.
· 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 nonlinear 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 estimates and a sensitivity analysis for the valuation of financial instruments to those changes in 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.
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Impairment Losses on Financial Assets
Definition
A financial asset is considered impaired when there is objective evidence that shows events have occurred which:
~~(2)~~· ~~The overnight interbank deposit rate (~~~~Certificado de Depósito Interbancário~~~~), or “CDI” is~~give rise to an adverse impact on future cash flows estimated at the ~~average daily interbank deposit rate~~transaction date, in ~~Brazil (at~~ the ~~end~~case of ~~each month~~debt instruments (loans and ~~annually). This is~~debt securities);
· for equity instruments, their carrying amount may not be fully recovered;
· arise from the ~~average rate for~~violation of terms of loans; and
· during the ~~given year.~~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 nonperforming 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 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:
~~(3)~~· ~~Represents~~all amounts that are expected to be obtained over the ~~interest rate applied by the BNDES for long-term financing (at the end~~remaining life of the ~~period).~~instrument, (such as provided guarantees);
~~(4)~~· ~~The benchmark~~impairment loss considers the likelihood of collecting accrued 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.~~receivable;
~~(5)~~· ~~Average~~various types of ~~the selling exchange rate for the business days during the period.~~risk to which each instrument is subject;
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~~(6)~~· ~~The inflation rate is the general index of market prices (~~~~Índice Geral de Preços-Mercado~~~~, or “IGP-M”), as calculated by FGV.~~circumstances in which collections will foreseeably be made; and
~~(7)~~· ~~The inflation rate is~~that cash flows are subsequently discounted using the ~~consumer price index (~~~~Índice de Preços ao Consumidor – Amplo~~~~, or “IPCA”), as calculated by the IBGE.~~instrument’s effective interest rate.
~~General economic stability~~A debt instrument is impaired due to insolvency when there is evidence of deterioration in ~~Brazil following~~ the ~~onset~~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 ~~global~~insolvency risk of obligors (credit risk).
We 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 and calculation of amounts necessary to cover the related credit risk.
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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 ~~crisis~~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 ~~2009 allowed the Brazilian Central Bank~~credit risk. The credits related 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 Central Bank has been reducing interest rates since then, 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 held in Brazil in October 2018. The resolution of the political and economic crisis in Brazil depends on the approval of reforms that~~standardized customers are ~~expected~~usually considered to be ~~promoted by the President~~not recoverable when they have experience of ~~Brazil~~.~~The economic~~historical loss and ~~political crisis in Brazil 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 could increase.~~delay greater than 90 days.
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.
Interest Rates
In 2021, the Brazilian Central Bank began a monetary tightening cycle due to rising inflation, the depreciation of the real, and a perception of the recovery of certain economic activity following the easing of restrictions which had been imposed to suppress the circulation of COVID-19. The SELIC rate increased from 2.0% as of December 31, 2020 to 9.25% as of December 31, 2021 and 13.75% as of December 31, 2022 (the highest level since the end of 2016), a level at which it remains as of the date of this annual report.
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.
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The following table presents the low, high, average and ~~period-end~~period end SELIC rate since ~~2015,~~2018, 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
2018 6.50 7.00 6.58 6.50
2019 4.50 7.00 6.58 6.50
2020 2.00 4.50 2.87 2.00
2021 2.00 9.25 4.57 9.25
2022 9.25 13.75 12.57 13.75
2023 (through February 27, 2023) 13.75 13.75 13.75 13.75

(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,~~2022, a ~~100 basis~~100-basis point increase in the yield curve would have resulted in R$~~334~~945 million ~~decline~~decrease in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
~~Our annual growth~~In 2020, outstanding credit increased 10.5% 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 4.2% in 2020, while the household debt burden decreased to 22.4% 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 ~~of 6.7%, a~~continued to expand and grew 5.7% 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 ~~increased to 4.2%~~ and ~~a decrease of~~ the household debt burden on an upward trend (in December 2021, the former climbed to ~~21.2%~~4.4% and the latter reached 26.5% of household income). In ~~2016,~~2022, outstanding credit ~~contracted 3.5% in nominal terms, but delinquency continued~~increased 7.7% compared to ~~fall:~~2021, the ratio of nonperforming loans to individuals reached ~~6.1%. Subsequently, in 2017, 2018~~5.9% and ~~2019,~~ the ~~ratio~~household debt burden reached 28.2% of ~~nonperforming loans to individuals reached 5.3%, 4.8% and 5.0%, respectively.~~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.~~
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~~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

As of December 31,

2022
2021
2020
(in billions of R$)
Total Credit Outstanding (1) 5,326 4,944 4,677
Earmarked credit 2,151 1,991 1,977
Non-earmarked based credit 3,175 2,953 2,700
of which:
Corporate 1,404 1,351 1,267
Individuals (retail) 1,771 1,602 1,433

~~(*)~~(1) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.

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,~~2022, we recorded foreign exchange ~~expenses~~exposure of R$~~2,789~~83.5 million, foreign exchange ~~expenses~~exposure of R$~~2,806~~117.4 million in ~~2018~~2021 and foreign exchange ~~revenues~~exposure of negative R$~~605~~124.4 million in ~~2017.~~2020. 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, 2022, 2021 and 2020—Results of Operations—Gains (losses) on Financial Assets and Liabilities (net) and Exchange Differences (net).”
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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.$1.00. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.62 to R$5.70 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.22 per U.S.$1.00. In 2023, through to the date of this annual report, the real ~~has depreciated~~ appreciated against the U.S. ~~dollar.~~dollar as a result of improvements in commodity prices and better than expected fiscal results derived from higher revenues. As of ~~December 31, 2019,~~February 27, 2023, the exchange rate was R$~~4.03~~5.20 per U.S.$1.00.
Depreciation of thereal relative to the U.S. dollar has created additional inflationary pressures in Brazil, which ~~have~~has led to ~~decreases~~increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government. In 2022, as inflation increased to levels not seen since early 2003, as a result of which the Brazilian Central Bank increased the SELIC rate to 13.75% (the highest level since the end of 2016). Depreciation of thereal may also, in the context of an economic slowdown, lead to decreased consumer spending, ~~inflationary~~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 thereal could make our foreign ~~currency-linked~~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~~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 ~~has~~had been oscillating around the CMN’s 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 been~~were 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,
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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 ~~2018would~~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 ~~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 ~~through~~reached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Similarly to the beginning of 2018, the Brazilian Central Bank delivered a letter to the CMN explaining why it failed to meet the inflation target and what actions would be implemented to ensure that inflation would converge to target in coming years. In 2022, inflationary pressures escalated in Brazil, including as a result of the ongoing war between Ukraine and Russia, supply chain issues, the continued COVID-19 pandemic (particularly in China) and increases in energy prices. As a result, inflation peaked in 2021 at multiple-year highs of 12.1% in Brazil in April 2022 (as measured by the IPCA in year-over-year terms) and 9.1% in the U.S. in June 2022 (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. Accumulated inflation for the year ended December 31, 2022, was 5.79% in Brazil and 6.5% in the United States. This resulted in tighter monetary policy by the Brazilian Central Bank, which increased the SELIC rate from a low of 2.0% as of the end of 2020 to 13.75% as of August 2022, a level at which it has remained as of the date of this annual ~~report, inflation reached 3.3% in 12-month accumulated terms.~~report.
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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,~~2022, 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$~~443 million.~~945 million within a one-year period. 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, ~~generally~~such 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,~~2022, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$9392 million and R$7681 million, respectively.
~~Reserve~~Issuance of Notes
In November and ~~Lending Requirements~~December 2021, Santander Brasil issued financial bills (letras financeiras), or 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. These Financial Bills have a term of 10 years, and redemption and repurchase options in accordance with the applicable regulations. These Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.
Spin-Off of Getnet
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 the B3, and Getnet ADSs are traded on The Nasdaq Stock Market LLC, or the “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.”
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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. Following closing on May 26, 2022, Santander Corretora holds a 20% interest in CSD BR.
Acquisition of interest in SX Tools Soluções e Serviços Compartilhados Ltda.
On September 26, 2022, we acquired the entire issued share capital of SX Tools Soluções e Serviços Compartilhados Ltda., or “SX Tools”, becoming its sole shareholder. As part of the acquisition, we increased the share capital of SX Tools from R$1,000 to R$192 million. SX Tools will primarily provide us and our subsidiaries back-office services to improve the efficiency of our routines.
Total spin-off of Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. to Return Capital S.A. and Liderança Serviços Especializados em Cobrança Ltda.
On October 31, 2022, Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., or “Atual”, was fully spun off and its assets were absorbed by both of its direct subsidiaries, Return Capital S.A., or “Return”, and Liderança Serviços Especializados em Cobrança Ltda., or “Liderança,” in accordance with the proportions established in the transaction documents. With the implementation of the total spin-off, Return's capital was increased by R$3,991 million and Liderança’s was increased by R$267 million, with both now being held directly by us, as the sole shareholder.
Investment in Biomas – Serviços Ambientais, Restauração e Carbono S.A.
On November 9, 2022, our wholly owned subsidiary, Santander Corretora, entered into an investment agreement to acquire up to 20% of the share capital of Biomas – Serviços Ambientais, Restauração e Carbono S.A., or “Biomas”. Biomas provides biodiversity and ecosystem restoration and conversation services, which is aligned with our ESG objectives. Closing of this transaction is subject to customary closing conditions, including regulatory approval.
Sale of equity stake in Banco PSA and PSA Corretora de Seguros
On November 29, 2022, we, through our subsidiaries, sold our 50% equity interest in each of Banco PSA Finance Brasil S.A, or “Banco PSA,” and PSA Corretora de Seguros e Serviços Ltda., or “PSA Corretora,” to Banque PSA Finance, S.A. and Stellantis Services Ltd. Upon closing of the transaction, which is subject to customary conditions precedent, we will no longer be a shareholder of either of these entities.
Investment in Gestora de Informação de Crédito S.A.
On December 20, 2022, Lexisnexis Serviços de Análise de Risco Ltda., or “Lexisnexis” agreed to acquire newly-issued shares of Gestora de Informação de Crédito S.A., or “GIC,” a
company in which hold an equity interest. GIC develops a database with the objective of aggregating, reconciling and processing registration and credit information of individuals and legal entities to support credit granting, pricing and marketing activities. Upon closing of the transaction, our interest in the share capital of GIC as diluted and decreased from 20% to 15.6%.
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Change in Chief Financial Officer and Investor Relations Officer
On February 16, 2023, we announced that our current executive vice-president, who performs the roles of Chief Financial Officer and Investor Relations Officer, Mr. Angel Santodomingo Martell will be resigning from his positions at Santander Brasil effective March 20, 2023. Our board of directors will appoint Mr. Gustavo Alejo Viviani to succeed Mr. Angel Santodomingo Martell in all his positions with us. Mr. Gustavo Alejo Viviani is already an Executive Vice-president of Santander Brasil and previously worked in our risks, corporate banking and collections areas. For additional information on Mr. Gustavo Alejo Viviani, see “Item 6. Directors, Senior Management and Employees—6A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers—Gustavo Alejo Viviani.”
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally. The following is 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 in 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 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 March 2020 to October 2021, our branches operated during 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. 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. Since November 2021, we expanded our service hours at our branches from 9:00 a.m. to 4:00 p.m. from November 2021 to June 2022 and then from 9:00 a.m. to 5:00 p.m. through to the date of this annual report to enhance proximity and availability to our customers.
· From March 2020 to June 2020, we 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 these and other measures, our deferred loan portfolio reached a total of R$18.7 billion as of December 31, 2022, R$25.9 billion as of December 31, 2021 and R$40.6 billion as of December 31, 2020. 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 COVID-19 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 of government-sponsored loans reached R$8.9 billion and R$10.3 billion as of December 31, 2022 and 2021, respectively.
· 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 above-mentioned 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). In the year ended December 31, 2022, COVID-19’s impact on our result was reduced as the contagion subsided. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2022, 2021 and 2020—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, 2022, 2021 and 2020—Results of Operations—Net Fee and Commission Income.”
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· 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 of the COVID-19 pandemic and took into account both quantitative and qualitative factors. In 2021, as a response to the macroeconomic shock of the COVID-19 pandemic, we used 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, 2022, 2021 and 2020—Results of Operations—Impairment Losses on Financial Assets (Net).” However, we also experienced an improvement in our loan portfolio in 2022, in particular with respect to individuals as loans to individuals increased by 19.5% in the year ended December 31, 2022 compared to the year ended December 31, 2021. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2022, 2021 and 2020— Results of Operations—Impairment Losses on Financial Assets (Net).”
· In 2020, the 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 of 30% of adjusted net profit for the year ended December 31, 2020. This suspension on the payment of dividends was not renewed in 2021 and 2022. The CMN also published Resolution No. 4,783, which temporarily reduced 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% 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 returned to its pre-COVID level of 2.5% (at which it stands as of the date of this annual report). 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 also experienced an increase in digital business during the COVID-19 pandemic. This trend has continued in 2022 as we recorded an increase of 17% in the number of new contracts originated through digital channels in the year ended December 31, 2022 compared to the year ended December 31, 2021.
See also “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.”
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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 2022, 2021 and 2020, total investments in information technology were R$1,885 million, R$1,905 million and R$1,432 million, respectively.
In 2022, 2021 and 2020, we continued to improve our technology platforms by investing 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. We believe that the application of these new technologies improved our interaction with our customers and enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness and 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 and the sales 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 pursuing profitable and sustainable growth. We believe that the expansion of our customer base throughout the years stems from our ability to capture new customers and increase their loyalty. This strategy is supported by a product and service offering designed to support the needs of our customers. Furthermore, our quest for service quality, combined with increasingly integrated sales channels, has led to a higher level of satisfaction among our customers, with an individual NPS of 54 points as of December 31, 2022. We have continued to develop our business by steadily enhancing our ecosystem, broadening our presence through new services and advancing into new markets via both organic and inorganic growth, whereby we have made acquisitions and partnerships in recent years, incorporating greater expertise into the business, as well as by endeavoring to increase cross-selling and leveraging the consistent use of data and customer relationship management tools. We also endeavor to maintain sound risk management, which entails continuously improving our lending models to maintain our credit risk indicators at levels consistent with our risk management policies. Additionally, we strive to enhance our operational efficiency ratio by streamlining processes and implementing technologies.
We recorded net income of R$14,339 million, R$15,559 million and R$13,451 million in the years ended December 31, 2022, 2021 and 2020, a decrease of 7.8% in the year ended December 31, 2022 compared to the year ended December 31, 2021. In the years ended December 31, 2022, 2021 and 2020, we achieved capital adequacy ratios of 13.9%, 14.9% and 15.3%, respectively. In the years ended December 31, 2022, 2021 and 2020, we have achieved efficiency ratios of 27.4%, 27.1% and 35.5%, and adjusted efficiency ratios of 27.5%, 28.2% and 27.8%, respectively. In addition, we achieved an adjusted return on average stockholders’ equity of 14.2%, 20.2% and 18.4% in 2022, 2021 and 2020, 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 that these metrics demonstrate our track record of consistent performance and the results of our constant efforts to improve our productivity.
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:
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· In 2016, we initiated our commercial transformation by implementing new work models, streamlining processes and digitalizing our operations. In 2017, we took steps to improve service quality and we placed customer satisfaction at the core of our strategy. In 2018, we introduced an industrial cost approach into our banking business to complement our culture of service. This industrial cost approach covers three critical fronts: organization, technology and culture. In 2019, we expanded our ecosystem by launching Sim, emDia, Santander Auto, Auto Compara and Ben Visa Vale while taking steps to reposition 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 about by the COVID-19 pandemic. We sought to improve and expand our digital channels in order to deliver robust self-service banking to our customers 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 and functionalities, differentiating ourselves in the launch of the Brazilian Central Bank’s PIX instant payment solution.
· In 2021, we continued our efforts to improve customer experience and satisfaction across all channels: physical, digital, external and remote. Our strategy was to convert new customers into loyal customers (defined as those who have purchased and are using six or more of our products at the time of measurement). Moreover, we continued our efforts to improve our digital operations by expanding our offerings through this channel and continued to focus on streamlining processes, digitizing our operations and reducing paper consumption to operate more quickly and efficiently.
· In 2022, we continued to pursue our commitment to becoming a leading client oriented company in Brazil, underpinned by a culture of growth and a customer-centric strategy predicated on four strategic pillars:
(i) customer centricity: a focus on maximizing the experience and satisfaction of our customers by providing simple, comprehensive and suitable solutions for each profile, concurrently with the development of our sales channels, the enhancement of self-service capabilities and our customer support;
(ii) sales channels: building a fast and efficient sales platform, with channels that are more integrated and accessible to customers whenever and wherever they desire by: (a) continuing to capitalize on opportunities from the flow of customers in our stores in our physical sales channel; (b) receiving over 541 million monthly visits across our digital sales channels in 2022; (c) in the remote channel, leveraging customer support into a sales channel that focuses on sales and after-sales by addressing an average of 10.3 million consumer inquiries each month in 2022; and (d) in the external channel, bolstering our geographic expansion by adding 9,620 points-of-sale to a total of 15,647 points-of-sale covering 44% of the Brazilian municipalities;
(iii) innovation and profitability: we encourage innovation as we seek to fulfill the demands of our customers. We concentrate on advancing strategic businesses, expanding them into new markets and diversifying our portfolio offering, in addition to accelerating our core operations; and
(iv) culture: building a company in which all employees have both a business and a customer perspective, serving as brand influencers and promoters, with a horizontal and distinctive culture, where empowerment, meritocracy and diversity are the cornerstones. We believe that our environmental, social and governance culture is an integral part of our operations. Furthermore, our governance is reinforced by a diverse board of directors, with women accounting for 33% of its members.
Our Business
We provide our complete portfolio of products and services to our 31.8 million active customers (consisting of current account-holding customers who carried out an unprompted transaction in the 90 days preceding the relevant measurement date and customers who do not have a current account with us but have minimum balances, transaction frequency levels or active contracts) as of December 31, 2022 through the following business segments:
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· 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, composed 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
Individuals
SMEs
Consumer Finance
Corporate
Santander Corporate & Investment Banking (“SCIB”)
For the Year Ended December 31,
Net interest income Operating profit before tax
2022 2021 2020 2022 2021 2020
(in millions of R$)
Commercial Banking(1) 45,618 46,236 41,457 13,281 19,491 4,666
Global Wholesale Banking 1,885 5,082 2,985 6,294 5,260 4,998
Total 47,503 51,318 44,443 19,575 24,750 9,664

(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 effects of the hedge for investments held abroad in 2022, 2021 and 2020 amounted to a loss of R$129 million and a gain of R$2,512 billion and R$13,583 billion, respectively.

The following table shows a managerial breakdown of our loans and advances by customer type as of dates indicated:
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
(in millions of R$)
Individuals 243,399 203,678 174,042 19.5 % 17.0 %
Consumer Finance 58,824 55,441 51,637 6.1 % 7.4 %
SMEs 62,916 59,602 54,525 5.6 % 9.3 %
Corporate(1) 159,516 174,634 137,618 (8.7 )% 26.9 %
Total Credit Portfolio 524,655 493,355 417,822 6.3 % 18.1 %
(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:
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• Private Banking – responsible for customers with at least R$5.0 million in assets available for investment. Private banking offers 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 – responsible for customers with either a monthly income of R$15,000 or more, or at least R$100,000 in investments, and for any customer that chooses to pay for this service category, regardless of their income or amount of investments. Santander Select offers differentiated products and services, exclusive branches, relationship managers who serve a small number of customers and provide asset management advisory services.
· Santander Van Gogh – responsible for customers with a monthly income ranging from R$7,000 to R$14,999, and for customers that choose to pay for this service category. Within Santander Van Gogh, 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 in which they have the option of human assistance in all channels, including financial products and services that support their building of equity and investments.
· Santander Especial – responsible for customers with a monthly income of up to R$6,999 per month. Santander Especial offers simple and efficient solutions with an attractive cost benefit to the customer, primarily through electronic channels.
We launched the following products or functionalities for retail customers in 2022:
· Gamefication of credit limits – Customers who comply with established behaviors in a game are able to increase their credit limits.
· Chat Van Gogh – Improvement of the Van Gogh customer experience by providing contracting and other services via chat through our app.
· Contracting Simplification – We simplified the process for customers to contract service packages regardless of income, for all individual customers.
Retail – 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 and current affiliate Getnet. Through this arrangement, our customers receive benefits for using the Getnet solution to process their credit card sales, with receipts being deposited into a Santander Brasil checking account.
• 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, or “Gent&”, the artificial intelligence solution for service and sales.
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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 other brands.
The following table sets forth auto loans portfolio market share for auto loans (a subset of our consumer finance business) as of the dates indicated:
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Individual auto loans portfolio market share (1) (%) 22.3 % 23.8 % 25.1 % (1.5) p.p. (1.3) 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 customers. The product offering ranges from simple cash accounts to mergers and acquisitions advisory services. We leverage our strength in consumer finance, asset and wealth management, payments and markets to serve our customers and their shareholders, employees, customers and suppliers. We serve companies with annual gross revenues in excess of R$200 million located across Brazil through physical and digital channels. Our corporate banking business has been constantly evolving as a business line relying on a disciplined analytical toolkit, consistent communication and workforce upskilling.
Global Wholesale Banking
Santander Corporate & Investment Banking, or 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 the 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 integrated services.
Our Portfolio of Products and Services
Payments
Credit and Debit Cards
We operate in the credit and debit card market by issuing cards to our customers (including both account and non-account holders), with most customers being individuals. Our strategy is to always offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
In 2022, we sought to revisit the value proposition of our high-income cards (Unique and Unlimited) to offer our customers more attractive benefits, as well as easier ways to receive fee exemptions and to improve the products’ standing in the market. Moreover, we implemented a loyalty points program in our co-branded “American Airlines” card, which we believe contributed to an increase in issuances of co-branded American Airlines cards by 140% in the year ended December 31, 2022 compared to the year ended December 31, 2021 We have also been marketing the exclusive Santander American Express Centurion card to our private banking customers, including by hosting a special event for 200 prospective and current holders of this card.
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To attract new customers, we launched several campaigns with different competitive offers, such as: (i) one-day campaigns to generate a sense of urgency regarding our service offerings; (ii) specific campaigns for the sale of co-branded American Airlines and Smiles cards; and (iii) a campaign that allowed some customers to try out a card at no cost for a specified period, with accelerated benefits.
Given that Brazilian customers have, in general, more than two cards with different banks, we bet on monetization promotions to encourage our customers to concentrate their expenses on Santander Brasil cards, including: (i) three editions of the “Bateu Ganhou” campaign, which set monthly spending goals for customers and rewarded them with bonus points, miles, or cashback; (ii) the “Desafio Santander” campaign, which set five challenges for customers to retain and increase profitability (e.g., signing onto additional cards, online card purchases, upgrades and open finance measures) in exchange for cashback rewards; (iii) the thematic “Sorte de Craque” campaign in connection with the 2022 World Cup held in Qatar, in which for every R$100 in purchases on a credit card, the customer entered a lottery for a trip to Qatar; and (iv) an edition of the “Sua Casa tá ON” campaign, which encouraged recurring payments using virtual cards with a dynamic security code to improve safety.
Regarding our ESG efforts, we issued over six million recycled PVC cards in the year ended December 31, 2022, contributing to our goal of attaining net zero greenhouse gas emissions by 2050.
In the SME segment, we believe it is essential for businesses to have greater autonomy and flexibility in handling issues that can affect their daily operations, such as cash flow management. Accordingly, we continued to develop our digital platform to provide: (i) autonomy to companies in managing their credit lines and contracts; and (ii) the ability for customers to leave their branch with a card immediately after signing up. We have also integrated additional card-related information, including available limits, bar codes, invoice amounts, and optimal purchase dates, on our AI-powered virtual assistant, Gent&.
With a focus on enhancing the customer experience, we enabled direct registration of Santander Brasil apps on Samsung Pay in March 2022 and on Apple Pay in November 2022. Our customers can now register their Santander Brasil cards on these digital wallets and easily conduct transactions via NFC (near field communication) technology using their mobile devices, providing a convenient and seamless experience.
The following table sets forth certain key financial and operating data regarding our credit card business as of the dates and for the periods indicated.
As of and For the Year Ended December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Credit card portfolio market share (1) 10.5 % 12.4 % 13.4 % (1.9 p.p.) �� (1.0 p.p.)
Credit card portfolio (R$ billion) 50.5 48 37.8 5.2 27.0
Total card turnover (R$ billion) 338.1 306.0 242.0 10.5 26.4
Credit card turnover (R$ billion) 226.5 203 158.7 11.6 27.9
Total card transactions (in millions) 4,362.5 3,555.3 2,570.8 22.7 38.3
Credit card transactions (in millions) 2,344.5 1,859.1 1,300.0 26.1 43.0
Participation of credit card in the household consumption (only debit) – Market overview (2) (%) 16.2 % 17.5 % 17.4 % (1.3 p.p.) 0.1 p.p.
Participation of credit card in the household consumption (only credit) – Market overview (2) (%) 34.1 % 30.6 % 25.2 % 3.5 p.p. 5.4 p.p.
Participation of credit card in the household consumption (total: debit, credit and pre-paid) – Market overview (2) (%) 53.8 % 50.3 % 43.5 % 3.5 p.p. 6.8 p.p.
(1) Source: Brazilian Central Bank, as of September 30, 2022. Data for the year ended December 31, 2022 was not available as of the date of this annual report.
(2) Source ABECS – “Monitor bandeiras.” as of September 30, 2022. Data for the year ended December 31, 2022 was not available as of the date of this annual report.
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Santander Way
Santander Way is an app designed for our cardholders, which allows them to manage their Santander Brasil cards from anywhere, at any time. The card management experience, provided by this platform includes the ability to make payments, transfer funds, add cards to digital wallets, and participate in campaigns, among other features. We seek to update the app regularly with new features. In 2022, we introduced notable enhancements, such as: (i) the "Credit Limit Game," which enables customers to increase their credit limits in a simple and easy way through day-to-day actions; and (ii) digital wallet integration, allowing customers to add their Santander cards to Samsung Pay or Apple Pay via push provisioning.
Esfera
Our loyalty program, Esfera, is accessible through its own website and mobile app. This platform, which is open for enrollment to any person in Brazil, provides customers with the opportunity to earn, purchase and redeem reward points for a variety of products, services, and travel benefits, including exclusive deals and discounts with Brazilian retailers and other select partners. As of the date of this annual report, Esfera also operated a marketplace that featured cashback rewards on product purchases from over 60 participating partners.
Ben
Ben is a corporate benefits company that works to enhance the flexibility, purchasing power, and quality of life of its users by designing, supplying, and managing multiple types of employee benefit vouchers (e.g., meal, food, and transportation vouchers) in the form of magnetic cards. These benefits are offered via an integrated digital platform.
Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.
Ben is currently working on the development of new products, such as fuel cards and other benefit options to expand its portfolio.
Furthermore, Ben recently added Ben Único to its portfolio. This solution offers two types of benefits on a single card, thus lowering card issuance and logistics costs, while contributing to our ESG efforts by reducing the number of cards in circulation. In line with its new product development plan, Ben applied to the Brazilian Central Bank for a license to operate as a payment institution (instituição de pagamento), which was granted in December 2021.
The following table sets forth certain key financial and operating data regarding Ben’s business as of the dates and for the periods indicated.
As of and For the Year Ended December 31,
2022 2021 2020
(in R$ millions, except as otherwise indicated)
Revenue from card sales 2,456 1,484 946
Number of Cards (in thousands) 831 565 217
Number of Transactions (in thousands) 30,442 20,477 12,192
Merchant accredited (in thousands) 399 365 338
For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
Payroll Loans
We offer payroll loans to both account and non-account holders. Repayment installments are deducted on a monthly basis directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, thereby significantly reducing our credit risk compared to other types of loans. These payroll loans are accessible to our customers via our mobile banking platform and 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 Banco Olé. For further information on relevant events relating to Banco Olé, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Market share in origination (1) 17.09 % 15.33 % 16.68 % 1.76 p.p. (1.35) p.p.
Payroll loan portfolio (R$ billion) 59.4 53.2 47.9 11.7 % 11.1 %
(1)       Source: Brazilian Central Bank, as of December 31, 2022, 2021 and 2020, as applicable.
Sim
SIM is a digital lending platform accessible to the general public, where customers can apply and receive approval for loans online. After operating for three years, SIM and +Vezes, a goods and services financing platform for retailers, merged to reinforce their value proposition and offer two business lines: (i) Sim-CP, which provides personal loans with or without collateral, and (ii) Sim-Consumer, which operates in direct consumer financing.
On a combined basis, these two Sim platforms have a total loan portfolio of approximately R$6 billion, more than nine million registered users and a high level of customer satisfaction, with an NPS of 84 points as of December 31, 2022 . Sim also benefits from a specialized sales force with a commercial team of approximately 500 people across Brazil and significant capillarity across to offer its products, with more than 30,000 points of sale offering Sim’s products as of December 31, 2022.
In March 2022, we launched “Pioneer,” a new financing software that enables better customization, flexibility and management of the sales process. As of December 31, 2022, nearly 80% of stores using our consumer finance software had taken advantage of the tool’s functionalities.
We also launched three projects focusing on collateralized loans: (i) offering car equity loans directly at the point of sale, in partnership with Santander Financiamentos, making Sim’s car equity loan available at more than 20,000 car dealers across Brazil as of December 31, 2022; (ii) FGTS Annual Withdrawal Advance (Antecipação do Saque Aniversário FGTS), which advances funds owed to customers as part of their annual, scheduled FGTS payouts, and (iii) finally, at the end of 2022, we released Energia+, an e-commerce platform that allows customers to simulate and apply for residential or commercial solar energy projects using a fully digital process that streamlines the purchase process.
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. In 2022, emDia joined forces with Liderança, a collections call center that we acquired in the second half of 2021, to become a full-service collections solution for its customers, with both call center and digital solutions. In the year ended December 31, 2022, emDia and Liderança had combined revenues of R$211 million.
Return Capital
Return is a specialized written-off collections master servicing company. It provides IT platform, data science, legal and financial advisory, marketing intelligence and back-office services to its customers, which are mostly credit rights investment funds (fundos de investimento em direitos creditórios), or “FIDCs,” such as FIDC Ipanema (a wholly owned Santander fund specialized in buying written-off portfolios).
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Mortgages
We provide long-term financing to our customers for real estate purchases, with the real estate serving as collateral for the loan. We view mortgages as a strategic product due to their lower risk (since the acquired property serves as collateral) and potential to foster customer loyalty (since we offer customers more attractive rates if they choose to bank with us). Our primary customers, as well as those of our competitors, are predominantly individuals.
We only provide mortgage loans that adhere to prime lending regulatory standards for this type of loan. This means that: (i) we limit the financing to a maximum of 90% of the value of the property to be purchased, (ii) the borrower’s monthly income must meet certain minimum requirements, as evidenced by recent payroll information and tax returns confirming their employment status or other revenue sources, thereby allowing us to assess their credit risk profile, and (iii) any other debt added to the financing cannot exceed 35% of the borrower’s monthly gross income.
To simplify the mortgage lending process for our customers, we have developed a digital platform for real estate financing. We were the first bank in Brazil to offer customers the ability to obtain mortgages online, except for the signing and registration of the agreement, which must be done in person. We have established a partnership with the largest real estate platform in Brazil to expand our sales network and bolster our digital presence in this market.
The following table sets forth certain key financial and operating data regarding our mortgage business as of the dates indicated:
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
(in billions of R$, except as otherwise indicated)
Mortgage loan portfolio 58.3 54.8 45.8 6.4 % 19.7 %
Individual sector mortgage loans 56.3 53.0 44.0 6.2 % 20.5 %
Loan to value(1) – Production (% quarterly average) 60.8 % 65.5 % 64.9 % (4.7) p.p. 0.60 p.p.
Loan to value – Portfolio (%) 50.1 % 52.5 % 52.2 % (2.4) p.p. 0.30 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. We are the main private bank for this type of loan in Brazil, with a market share of 22.4% as of December 31, 2022, according to the Brazilian Association of Real Estate Credit and Savings Entities (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança). Our portfolio was R$3.9 billion as of December 31, 2022, an increase of 20% compared to our portfolio as of December 31, 2021. In the year ended December 31, 2022, we remained focused on improving the customer journey and experience, and achieved a 40% reduction in lead time to grant home equity loans (from 24 working days to 14 working days).
We do not offer home equity loans that do not meet the applicable 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.
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Tailored Products and Services
As stated above, our customers have access to a full range of services and products. Thus, our portfolio encompasses offerings from basic to tailor-made and highly intricate solutions across the following areas:
· Global Transaction Banking – responsible for the sale and management of local transactional banking products, which include local loans, commercial financing options such as confirming, transfers with funds from development banks, local loan structuring, and cash management solutions (cash management).
· Global Transactional Services – responsible for the sale of global transactional products, financing for export and import (trade finance), guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
· Global Debt Financing – responsible for providing financing and financial advisory services for infrastructure projects, origination, and distribution of fixed income instruments in capital markets (local and international debt capital markets), financing for acquisitions, and syndicated loans in both local and foreign currency.
· Investment Banking – advisory services for mergers and acquisitions, as well as equity transactions in capital markets.
· Equities – this area operates brokerage services for corporate, institutional and individual investors in stocks and listed derivatives, and also offers research services.
· Treasury Customers (Sales) – responsible for structuring and offering foreign exchange products, derivatives and investments to customers across our various segments, including institutional investors, corporate customers and individuals.
· Market Making – responsible for pricing operations (foreign exchange and derivatives) for customers originated from the sales efforts of our corporate, institutional, private banking and retail areas. This area is also responsible for managing our proprietary books.
· Energy Trading – performs transactions with both qualified and end customers, in addition to acting as a hedge and market making provider in energy markets
We are a leading bank in capital markets and financial advisory services, both in Brazil and abroad, as evidenced by the numerous awards we have received. A few of our most notable accolades are listed in the table below.
Company
Acknowledgments
Dealogic
Full Year 2022
#7 Latin America M&A Revenue by Advisor
#7 Brazil M&A Revenue by Advisor
#3 Latin America & Caribbean DCM Volume by Bookrunner
#4 Latin America & Caribbean International DCM Volume by Bookrunner
#3 Latin America Domestic DCM Volume by Bookrunner
#7 Latin America and Caribbean Loans Volume by Bookrunner
#7 Latin America and Caribbean IB Revenue by Bank
#8 Brazil IB Revenue by Bank
Global Finance Best New Measures to Support Trade Finance Customers during Pandemic 2021
Best Supply Chain Finance Bank Global 2021
Best Post-Shipment Financing Solution 2021
Best Bank for Payments & Collections Award 2022
Best Provider of Short-Term Investments Money 2021
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Institutional Investors
Full Year 2022
#1 Best Analyst in the ESG Research LatAm
#3 Best ESG Team Research LatAm
# Top 3 in Brazil II for Sales, Trading and Corporate Access
FX Markets
Best Bank for USD/BRL (2nd consecutive year)
Best Bank for LatAm (4th consecutive year)
Latin Finance
Bank of the Year: Southern Cone 2021
Brazilian Central Bank
#1 Total FX September 2022
The Banker Best Transaction Bank for Latam 2021
Global Capital #1 Most Impressive Local Bank for Latin America Bonds 2022
Infralogic 2022
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#2 Latin America Bond Arrangers by value
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#1 Latin America Loan Arrangers by value
#1 Latin America Financial Advisors by deal count – Project Finance
#1 Latin America Loan Providers by value – Project Finance
#2 Latin America Bond Arrangers by value  – Project Finance
#3 Latin America Financial Advisors by deal count – M&A
#1 Latin America Financial Advisory by deal count – DCM
#2 Latin America Loan Providers by value – DCM
#2 Latin America Loan Arrangers by value – DCM
#3 Latin America Bond Arrangers by value – DCM
#1 Latin America Financial Advisors by deal count – Project Finance
#2 Latin America Loan Providers by value – Project Finance
#3 Latin America Bond Arrangers by value – Project Finance
#9 Latin America Loan Arrangers by value – M&A
#2 Latin America Financial Advisors by deal count – M&A
Customer Solutions
Agribusiness
Agribusiness remains one of our main levers of growth, and we are focused on developing our agribusiness solutions, both by covering geographical areas where we did not previously operate, and by investing in technology and people.
As of December 31, 2022, our agribusiness portfolio (including credit, securities and other products) amounted to R$37.5 billion. Since 2015 our portfolio has risen by an average of 30% per year. As a result of this strategy, our portfolio in the agribusiness sector increased significantly so that by 2020 we believe we had already established ourselves as a leading bank in the agribusiness sector. In addition, in 2021, we launched a new commercial strategy in the agribusiness sector whereby we aimed to offer our agribusiness products across all of the regions of Brazil. As a result, since we were able to grow our agribusiness portfolio by 84% from December 31, 2020 to December 31, 2022.
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We plan to continue to build our agribusiness portfolio with a wide array of solutions along the entire agribusiness supply chain, from support in financing equipment to extending credit to agricultural producers. In addition, our ecosystem is complemented by Gira, which is specialized in the management of agribusiness receivables.
The following table sets forth certain key financial and operating data regarding our agribusiness as of the dates indicated.

As of
December 31,
Change between 2021 and 2022
Change between 2020 and 2021

2022
2021
2020
(in billions of R$, except percentages)
Agribusiness portfolio (1) 37.5 27.3 20.4 37.4% 33.8%
(1)       Including credit, securities and other products.
Microfinance
We believe Prospera Santander Microfinance is a leading microcredit-oriented operation among private-sector banks in Brazil based on market share and portfolio value. Prospera Santander Microfinance’s mission is to offer credit alternatives, alongside financial guidance to micro and small entrepreneurs through a fully digitalized process, enabling them to grow their businesses. In doing so, we not only support these entrepreneurs, but also endeavor to contribute to the development of local communities and to job creation. In addition to providing microcredit solutions, we offer basic banking services, notably to our unbanked clients, such as current accounts, debit cards, savings accounts, and point-of-sale terminals, for those who require other payment options. The following table sets forth certain key financial and operating data regarding our microfinance business as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Number of Prospera Microfinance stores 142 119 99 19.3 % (20.0 %)
Microfinance loan portfolio (R$ billion) 2.7 1.9 1.3 38.3 % 49.2 %
Santander Insurance Ecosystem
We offer our insurance products through Santander Corretora de Seguros, helpS, Auto Compara and Santander Auto. Our insurance business as a whole generated premiums of R$10.8 billion in the year ended December 31, 2022.
Insurance
Santander Corretora de Seguros is one of the largest insurance brokers in the Brazilian market, according to SUSEP’s report for the year ended December 31, 2022, offering a full range of products, particularly in the retail segment. Our goal is to build a comprehensive insurance ecosystem for our customers, providing them with all-encompassing solutions to support their daily activities. Our insurance portfolio includes a broad range of life and personal accident insurance, vehicle and property insurance, credit insurance, and travel insurance products. These insurance products are sold through our website, mobile app, branches, call center, ATMs, and bank correspondents.
We totaled R$9.5 billion in earned premiums for the year ended December 31, 2022, representing increases of 1% from the year ended December 31, 2021 and 33% relative to the year ended December 31, 2020. According to SUSEP’s report for the year ended December 31, 2022, we are one of the market leaders in personal insurance (which includes life, personal accident, and credit insurance), with a 13% share of premiums in 2022. 64% of credit originations eligible for insurance in the year ended December 31, 2022.
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Our main objective in this area is to continuously innovate and tailor our insurance solutions to address the needs of our customers, ensuring a seamless experience from purchase to renewal, and especially in the usage of insurance when needed. Furthermore, we are increasingly focused on utilizing data to offer personalized experiences and simplify our value proposition, with optimized customer support across our various service channels. We believe this makes our insurance policies more appealing to potential customers.
helpS
helpS is a personal assistance service that offers solutions for different types of 24/7 emergencies in the home, automobile, pets, tech, game and bicycle segments. It is available to all Santander Brasil customers as an optional monthly subscription starting at R$19.90 per month. Officially launched in May 2022, Santander helpS sold thereabout 40,000 subscriptions exclusively through the Santander app by the end of 2022. In 2023 Santander helpS plans to expand its offering across our entire branch network.
Auto Compara
Auto Compara is our digital auto insurance marketplace in Brazil, and we believe it is the first to provide Brazilian customers with the ability to quote and purchase insurance coverage through an entirely online process. We believe this platform allowed us to expand our customer base by attracting non-Santander Brasil customers, resulting in over R$924 million in new insurance premiums for the year ended December 31, 2022. We currently offer products from seven insurance companies.
Santander Auto
Launched in 2019, Santander Auto is a fully digital auto insurance solution that uses big data analytics to determine pricing and utilizes a one-click buy approach, integrated with car financing options.
The Brazilian insurance market is characterized by: (i) low insurance penetration relative to its GDP; (ii) lagging technological advancement and dominated by companies with low innovation rates that prioritize financial results (due to a history of high interest rates); and (iii) retail brokers serving as the primary distribution channel. As a result, the purchasing process still generally requires customers to fill out a lengthy questionnaire (approximately 40 questions). Consequently, only approximately 20% of Brazilian vehicles were insured as of December 31, 2022.
Using actuarial techniques and behavioral models, Santander Auto can provide insurance quotes without requesting extra information from customers. This is made possible by utilizing data that is already available to us. In its inaugural year of operation in 2019, nearly 110 thousand policies were sold, representing a product penetration rate of 16% (i.e., the total number of insurance contracts sold as a proportion of all loan contracts signed by Santander Financiamentos).
In 2020 and 2021, we focused on strengthening our insurance offerings by making sure they were available for all customer types and types of vehicles. We sought to grow the business by leveraging our ecosystem and reaching more of our customer base. This strategy helped us increase our product penetration rate, which reached 20% in the year ended December 31, 2021, along with a 80% increase in the number of policies sold compared to the year ended December 31, 2020. In the year ended December 31, 2022, Santander Auto started offering insurance to non-financed vehicles and achieved a product penetration rate of 30% in the year ended December 31, 2022, recording a 16.3% increase in the number of policies sold compared to the prior year.
Webmotors
Webmotors is a Brazilian technology company specializing in car buying and selling solutions for dealers, original equipment manufacturers, as well as private sellers. Moreover, it is the largest automotive ecosystem platform in Brazil, according SimilarWeb.
According to Adobe Analytics, Webmotors received an average of more than 30 million visits each month in 2022. It also recorded 7.9 million unique visitors in 2022, as reported by ComScore. Through Cockpit, a platform that integrates offerings for the entire network outlined above, we provide the following solutions: business management/performance, buyer profile (CRM), data intelligence, predictive pricing models, and market data (Auto Insights).
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Webmotors aims to be a platform that accompanies individual and business customers throughout the lifecycle of their vehicles, from purchase to use and sale. To achieve this goal, Webmotors recently restructured its subsidiary, Loop, which was a traditional auctioning business, into an omni-channel dealer, which we believe has the potential to deliver a higher sales value for demobilized fleets in both its digital and physical stores. Additionally, Webmotors introduced "Agenda Fácil," a product that allows customers to schedule services via WhatsApp.
Solution4Fleet
In 2021, we acquired Solution4Fleet, a consultancy company that offers solutions for car rental companies. Solution4Fleet offers solutions for the entire ecosystem of a (light or heavy) vehicle rental company, including green and yellow lines (i.e. trucks, buses and agricultural machinery), including services such as pricing and sales management, fleet management, telemetry, purchase and sale of vehicles, financial services for rental companies, as well as its own vehicle management system for rental companies, among other services.
We believe that Solution4Fleet offers the most complete ecosystem for fleet management and leasing operations in the Brazilian market. In the year ended December 31, 2022, the vehicle fleet managed using Solution4Fleet’s products increased by 83% compared to the year ended December 31, 2021, while the average ticket per vehicle grew by 88.2%.
Solution4Fleet has focused on diversification by prospecting smaller car rental companies and special projects for large automakers. In addition, Solution4Fleet continues to invest in technology to improve user experience.
+Negócios | 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 2022, +Negócios went through a technological transformation with the “Pioneer” project and became “+Negócios Turbo.” The main goals of this project are the improvement and modernization of the systems architecture to simplify user experience (with the reuse of internal data), the tailoring of offers with a new price platform and greater security through facial biometrics.
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.
In 2022, +Fidelidade was also updated and improved to become “+Fidelidade Turbo,” a loyalty program with the objective of offering incentives to banking correspondents in their relationship with our ecosystem. The improvements were launched to simplify, facilitate and ensure greater timeliness in dealing with these agents. The “turbo” version has technological resources that bring the gaming aspect of the program to the platform.
We also offer “+Fidelidade Vendedor,” a program which grants rewards and bonuses accordingly to the seller’s level of adhesion to our products, (i.e., based on the percentage of sellers’ revenue generated by our products and services). In 2021, this program was launched for the automotive store segment, then to dealerships, and then to goods and services segments. In 2022, it was extended to the motorcycle store segment. It had an average of 35,000 registered sellers during 2022.
The former “+Vezes” program, a goods and services financing platform, was upgraded to “+Vezes Turbo” by introducing changes to the user experience geared towards simplification of use, data reutilization, hyper-segmentation of offers and improved security patterns with facial biometrics processes. “+Vezes Turbo” is operational and was deployed to over 10,000 partner retailers during the second semester of 2022.
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As part of our consumer finance strategy, our goods and services financing business (i.e., “ +Vezes”) was integrated with SIM, a fintech created in 2019 that offers personal loans to the open market on a digital lending platform. See “—Our Portfolio of Products and Services—SIM.” With this integration, SIM became a full-service consumer financing business which we believe has bolstered the value proposition of both businesses.
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 customers pay and receive 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, in 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 offering 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, and 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 applicable 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.
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· Follow-up – Our advisory team performs a thorough and frequent review of our customers’ 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.
AAA
In June 2022 we launched AAA, a new investment advisory services model that had enrolled 592 advisors across 41 Brazilian cities as of December 31, 2022. AAA offers a comprehensive product portfolio, coupled with an advanced digital experience and specialized guidance to bolster our investment advisory services offering. AAA provides an exclusive investment advisory service to high-income clients. In order to incentivize our AAA investment advisors, their compensation includes a significant variable component reflecting the results they produce for our clients.
Toro
Toro is an investment platform licensed to operate in Brazil that offers what we believe to be a leading user experience, highly qualified advisors, and an integrated journey from education to execution. We believe that Toro was the first fintech in Brazil to open a full-service broker with proprietary technology, which allowed it to achieve a new level of customer experience and infrastructure for real end-to-end agile development. Toro’s current product offering includes an open platform of equities, real estate investment trusts, exchange-traded funds, global stocks (offered through Brazilian depositary receipts), fixed income notes, bonds, mutual funds, and derivatives. Toro also offers an ecosystem of financial apps, including a budgeting and financial consolidation app and a marketplace for related financial products.
SX Integra
SX Integra is our new supply chain finance digital platform. This channel was launched in September 2022 to provide financial services for companies based on their receivables. Both the supplier (i.e. the company supplying goods to other companies) and the buyer (i.e. the company receiving the goods and delivering payment) are customers of SX Integra. The supplier advances the receivables at no risk and does not have to be an accountholder of ours. Buyers, which are primarily large corporations that must be accountholders of ours, incur the risks of the transaction and are responsible for paying invoices.
The following table sets forth certain key financial and operating data regarding SX as of the dates indicated
As of
December 31, 2022(1)
Main SX Integra indicators:
Number of active buyers (2) 1,014
Number of active suppliers (3) 6,619
(1) SX Integra began operating on September 1, 2022. The figures presented refer to December 31, 2022.
(2) We define an active buyer as a company that has signed an agreement with us and has a credit limit that enables it to incur the risk of the advance as of December 31, 2022.
(3) We define active suppliers as suppliers that performed at least one anticipation of receivables with SX Integra in the 60 days preceding December 31, 2022.
Programa Avançar
We also have a nonfinancial 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.
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In addition, we offer a digital account solution where corporate and 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) remote channels, such as call centers; (iii) external channels, consisting of bank correspondents and other third parties who sell our products and services; and (iv)digital channels, such as internet banking and mobile banking.
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,
2022 2021 2020
(%)
Internet banking 21.7 27.7 37.8
ATMs 2.4 3.6 5.9
Mobile (1) 73.6 62.3 46.9
Branch 0.6 1.1 2.2
IVR (2) 0.8 4.6 6.4
Call Center 0.9 0.7 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.
Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network, all of which is located in Brazil, as of the dates indicated.
As of December 31,
2022 2021 2020
Branches 1,701 1,987 2,153
Mini-branches 1,266 1,384 1,411
Own ATMs 11,527 12,561 12,949
Shared ATMs 24,374 24,255 23,798
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,
2022 2021 2020
Northeast 9.99 % 9.74 % 9 %
North and Midwest 8.94 % 8.42 % 7 %
Southeast 66.20 % 67.31 % 70 %
South 14.87 % 14.53 % 14 %
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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.
ATMs
We operate an extensive network of 11,527 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 24,374 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, and online messaging apps available to all our customers. In the year ended December 31, 2022, we received 10.3 million inquiries per month with 50% of these being outside regular business hours.
We also improved our efficiency and increased our first call resolution from 81% as of January 31, 2021 to 95% as of December 31, 2022. In the last two years, we have sought to transform the channel by focusing on solving customer needs and seizing these contacts as opportunities to offer additional products and services to our customers. In the year ended December 31, 2022, we made an average of 700,000 sales and services per month on this channel.
External Channel
Our external channel consists of third-party salespersons and banking correspondents that market our products and services beyond our branches and ATMs. In the year ended December 31, 2022, we increased the footprint of our external channel in the Brazilian market by adding an additional 9,620 points-of-sale to our portfolio for a total number of 15,647 points-of-sale covering 44% of all municipalities in Brazil as of December 31, 2022, and by extending more than R$18 billion in credit in the year ended December 31, 2022. In addition, in 2022, we launched our new store model, “Santander Perto”, to put us closer and improve our visibility and availability to our customers. We also launched our external sales force website in the second half of 2022, which has generated 50,000 business deals per month since its inception.
Digital Channels
We have sought to develop our digital solutions to meet the needs of our consumers and, in 2022, we were able to achieve milestones, offering personalized insights, improve our artificial intelligence, or “AI,” services and transform our digital experience. Our digital platforms, such as mobile and internet banking, reached over 71% of our customers as of December 31, 2022, which makes them our primary channel to connect with our customers. We note the following with respect to our progress in this channel in the year ended December 31, 2022:
· We improved our digitization by 11% compared to the year ended December 31, 2021 in terms of customers reached and began selling new products over our digital channel, such as transaction insurance, personal insurance (personal injury, life and property), consortium plans, HelpS services, Divide PIX (personal loans for instant transactions), and FGTS Personal Credit (Crédito Pessoal FGTS), or “CP FGTS,” which advances personal loans on severance payouts customers may be owed as part of the FGTS program.
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· In the month of December 2022, our main mobile app for individual accounts reached a total of 462 million accesses, a 34% increase compared to the month of December 2021, while our website reached over 68 million accesses, a 21% increase also compared to the previous year. We also launched an embedded blog with specialized consumer content that reached over 3.3 million views in 2022 (without relying on paid marketing activities specifically for this purpose) and which we believe will be a new tool for lead generation and financial education.
· Despite a difficult year from a macroeconomic perspective and with greater restrictions on credit, we closed approximately 45 million contracts through our digital platforms during the year ended December 31, 2022, a 17% increase compared with the year ended December 31,2021, which growth was driven by an assertive product and service promotion strategy and improvement in the sales of our main products.
· We launched our “Investment Portal” in August 2022, which reached approximately 2.9 million users in the month of September 2022. Through our Investment Portal, our investor client has access, in addition to their consolidated investment position, to guidance and recommendations with video and podcast tools embedded in the app.
· We recorded a 16% increase in digital-only accounts for individuals as of December 31, 2022 compared to December 31, 2021. We also had a 46% decrease in cost per acquisition of lead, or “CPA,” in the year ended December 31, 2022 compared to the year ended December 31, 2021. We believe that this improvement is linked to a better customer experience in the account opening process, automated anti-fraud processes and our efforts to improve customer experience.
· In the year ended December 31, 2022, we opened over 282,000 new corporate accounts, a 75% increase compared to the year ended December 31, 2021 and a 33% reduction in the CPA. We also recorded an increase of 10 p.p. in the number of new corporate accounts approved in the year ended December 31, 2022 compared to the year ended December 31, 2021, which was primarily due to an optimized accounts opening process for existing individual account holders, an automated approval engine for SMEs and processes permitting multiple corporate accounts for multiple partners. We believe that this final improvement accounted for approximately 50% of all of our new corporate accounts and ensured that 100% of SME accounts were opened through this channel in the year ended December 31, 2022.
· 61% of Santander Brasil’s credit card sales were completed through our digital channels in the month of December 2022. We have taken actions to improve our acquisition numbers by implementing new forms of authentication and prioritizing seasonal commercial campaigns to attract new customers, which resulted in a growth of 9 p.p. increase in the mobile app conversion rate (i.e., the rate of customers who accessed the first screen of the credit card contracting flow in the mobile app and actually signed up for the credit card through the app) in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent& is our AI solution for individuals and businesses in digital platforms, such as our mobile app, internet banking and through WhatsApp.
· We began 2022 with 54 services, which were deployed between 2020 and 2021, and offered a total of 153 services through Gent& by December 31, 2022. We recorded a 43% decrease in customer service calls relating to these services in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent&’s NPS was twelve points above that of our other channels in the year ended December 31, 2022. We offer through Gent& transactional services such as personal loan offerings, debt renegotiation, and credit limit increases and decreases (which is offered exclusively on Gent&). We also offer advisory services that include credit card holds, reissues and delivery tracking.
The following table provides certain key operating information regarding our digital channels as of the dates indicated:

For the Year Ended December 31,

2022
2021
2020
(in millions)
Number of digital customers (1) 20.4 18.3 15.6
Number of digital transactions (2) 9,813 7,482 5,262

(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 prior to the end of the applicable year.
(2) Refers to transactions carried out through internet banking, mobile banking and other digital platforms. Data refer to the year ended December 31.
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Technology and Infrastructure
In 2022, we sought to ensure greater integration between our business and technology, and to use the latter as a strategic lever to support the expansion of digital and personalized products and services through available, secure and integrated sales channels. Our objective was to significantly improve our customers’ experience by streamlining and enhancing self-service and customer service channels. Moreover, as part of our digital acceleration strategy as a result of the COVID-19 pandemic, we sought to make technology a key factor in leveraging multichannel distribution and business growth by using data to make strategic decisions at the executive leadership level.
To facilitate this role, our IT department focused on the transformation of its operating model through four strategies:
· Improved Alignment between Business and Technology: development of technology solutions guided by a business mindset, placing the customer at the center of the strategy and ensuring that more business representatives are involved in development teams activities.
· Innovative Architecture and Robust Engineering: investment in new technologies (open banking, digital assets, smart contracts, AI, digital currencies), data framework transformation, an increase in cloud development and the reuse of architectural components to ensure greater efficiency and speed combined with cost reduction.
· Improved Infrastructure and Production: significant advances in the hybrid public/private cloud model (with 91% of total operations processed in the cloud in the year ended December 31, 2022), the growth of automation in production (AIOps) and deployment pipeline (DevSecOps), investments in reliability engineering (telemetry) and the reduction of technological obsolescence.
· Improved Delivery: expansion and maturation of our agile software delivery model through an increase in the number of development teams (with over 460 agile squads), in addition to refinements in productivity metrics facilitating more efficient and transparent management processes.
· These efforts in the technology domain were necessary to ensure the standards of, security in and the growth of our operations in light of our increased digital customer base as we reached 20.4 million digital customers as of December 31, 2022 (an 11% increase as compared to December 31, 2021), and of increased demand for digital products and services as we recorded an average of 541 million monthly accesses in our digital channels in the year ended December 31, 2022. Additional initiatives carried out in 2022 include the following:
· Investments: We launched a new investments portal that can be accessed by mobile or internet banking. This new portal offers our current investment products and services. Our customers are granted access to market analysis content in various formats (e.g., videos, articles, podcasts) in order to make better investment decisions. In addition, they receive portfolio allocation recommendations based on the macroeconomic context, their risk appetite and liquidity. Furthermore, significant improvements in the user interface allow our customers to manage their investments, obtain market information, find solutions for their needs and monitor their investments more intuitively, therefore offering a better digital experience.
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· Individual Bank Account (Mobile): We have improved the digital experience we offer to our customers with several improvements to existing journeys, together with the inclusion of new functions. We have sought to simplify the digital interface for several products and services, including by improving the registration of facial biometrics, access to our virtual AI assistant (Gent&), personal information updates and digital tools relating to investments in funds managed or offered by Santander Brasil. We have also simplified the customer experience for loans by reducing the number of steps required for contracting. In addition, we have provided more flexibility for payments by introducing a new option to break the total value of instant payments (PIX) into up to 24 installments.
· Corporate Bank Account (Mobile): We have added new features to our mobile application, allowing our corporate customers to manage their businesses with more agility and strategy. We have extended the statement checking period up to 365 days and also included a new option on Santander On to update the company’s annual billing, in order to enable better credit solutions for our customers. Moreover, we have sought to improve the user interface by simplifying the visualization of the functionalities in the menu, ensuring a better experience for browsing and using the application, along with the addition of facial biometrics.
· Credit Cards: We further expanded our digital services in order to provide more efficiency and transparency in the management of card expenses for our customers. In our mobile application for cards, we have added a new option to check payments history for past invoices, along with a tool to check and manage active credit card installments. In addition, a new feature was included allowing our customers to view disputed purchases for fraud or trade disagreement. Regarding card loss or theft, we have provided our customers a new option to choose a location to pick up the reissued card. Finally, we increased flexibility by enabling the use of instant payment (PIX) to settle credit card invoices and now permit users to register their Visa/Mastercard cards on Apple and Samsung digital wallets.
· Customer Service: Through our “Bank to Go” initiative, we have sought to transform customer service in our branches. We provided tablets to account managers so they can assist customers with account openings and product sales, which ensures a faster, more dynamic, and personalized banking service. The system running in the tablets is integrated with our external portals (e.g., credit cards and insurance) and also ensures more flexibility in capturing and serving customers due to the greater mobility granted to account managers by the use of tablets.
· Insurance and Customer Assistance: We have upgraded our digital processes in the sale of insurance through a revamped product screen in our mobile application for individual customers, where all coverage types are presented with their respective initial values. We have also included a new feature in the offering of our 24-hour assistance service, helpS, which offers solutions for day-to-day customer needs such as car repairs or maintenance services. Our customers can easily choose service packages for automotive, motorcycle, bicycle, pet, and technology services.
· Data Transformation: Investments were made to improve our use of data in modern technologies to generate business value from customer data. These include investments in: (i) the development of a new machine learning model, which uses market and our proprietary data (from our Financing and SIM platforms) to identify new customers prone to credit offer and improve our revenue; and (ii) new solutions to assess a customer’s transactional behavior and identify the most opportune moment to offer credit card limit increases and improve customer spending.
· Business Agility: We have sought to improve our organizational model in the delivery of technological solutions to ensure we meet the needs of the modern consumer through faster decisions, increased interaction with customers and greater value delivery. Our new Business Domains model promotes the integration between our business units, platforms and the technology department for the design of products that offer an improved end-to-end experience for our customers. These areas work together in the activities related to customer journey, software development, implementation, operations and product governance. This work model, developed from benchmarks and proven market frameworks, is supported by lead executives in our investment, data, technology and information security departments to embed the technical skills from these vertical structures directly into the Business Domains structures, improving the operational flow of these teams.
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· Security: Given that Santander ID is our main security device in the authorization of customer transactions on digital channels, we must ensure its activation process is safe and reliable. With the “Frictionless” initiative, we have implemented several models that analyze customer behavior information, ensuring that the customer is the one who is actually activating the security device. As a result, customers no longer need to go to an ATM to complete the activation of their Santander ID, which we believe provides a simpler experience.
Communications and Marketing
We use a variety of tools to communicate with our employees and customers effectively. This includes not only traditional media, such as television, newspapers and print magazines, but also digital and innovative communication to make a difference in the lives of all those who are related, in some way, to Santander Brasil. In 2022, we launched a major debt renegotiation campaign called “Desendivida,” which provided better terms for customers to honor their commitments with us. This initiative featured influencers from the popular reality TV show Big Brother Brasil and, during an entire month, we dedicated time to this matter in our stores (two extra hours a day), in addition to a task force on a Saturday. We also introduced large-scale campaigns for “consórcios” (a product that offers credit at lower costs for customers than conventional financing). Internally, we debuted the monthly live event “Together with Mario Leão,” in which Mario Leão, our chief executive officer, interacts with over 40,000 employees via the Santander NOW app. The first edition took place in Salvador, State of Bahia, and was followed by editions in Inhumas (State of Goiás), Novo Hamburgo (State of Rio Grande do Sul), Rio de Janeiro (State of Rio de Janeiro), Campinas (State of São Paulo), Curitiba (State of Paraná), Mirassol (State of São Paulo), São Paulo (State of São Paulo), Juazeiro do Norte (State of Ceará), Manaus (State of Manaus), Ouro Preto (State of Minas Gerais) and again in São Paulo (State of São Paulo).
In 2022, we also produced 472 videos to instruct our teams on how to better serve our customers and offer our products and services, exploring a wide range of topics such as the “Investment is Santander” campaign and on themes that reinforce our culture, such as diversity, ESG, corporate behavior, development, feedback, health and well-being, training and qualification, and others. Externally, we ran 14 video ads on TV and social media. In 2022, our communication campaigns resulted in over 11,000 mentions in the Brazilian national media (e.g., websites, newspapers and magazines), as well as nearly 8,000 reports published in local media. On social networks, we had more than 2,000 publications, with 1.5 billion impressions in 2022. We also strengthened our operations, both internally and externally, using new formats such as Telegram, TikTok, WhatsApp and podcasts. We held over 20 internal and external livestreams and events, which featured our leadership, experts and authorities discussing a broad array of subjects, including ESG, the current economic environment, social investment, business, female leadership, entrepreneurship and culture. The “Legacy” event, organized in collaboration with Movimento Bem Maior and several of Brazil’s largest companies, on the role of philanthropy, was a highlight, as was the fifth edition of “Global Citizen,” held in partnership with the newspaper Valor Econômico, with an ESG-focused debate with participants such as Sanda Ojiambo, chief executive officer and secretary general of the UN Global Compact, and Jeremy Oppenheim, co-founder of SYSTEMIQ.
Sustainability and ESG Initiatives
The purpose of our sustainability and ESG initiatives is to contribute to the progress of people and businesses, while also supporting the development of a fairer and more sustainable Brazil. We have sought to develop a clear strategy for our environmental aspirations (seeking to become a benchmark company in sustainable business), social aspirations(working to ensure everyone has opportunities) and governance aspirations (having leading ESG management practices).
Our broad commercial activity enables us to advise and support our customers and their projects. In the year ended December 31, 2022, we helped approximately 430,000 people through financial inclusion products and financial education guidance. For example, we offer access to banking services, products and nonfinancial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the Prospera Microfinance, “Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include financial management as a topic in customer relationships, using tools such as Santander On. As an example, Prospera Microfinance has supported microentrepreneurs in their businesses since 2002, and as of December 31, 2022 it had a portfolio of R$2.7 billion (a 38% growth as compared to December 31, 2021) and 885,000 active customers (a 25% growth as compared to December 31, 2021).
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The following is a description of some of the social activities and programs that we have held or continued in the year ended December 31, 2022:
· In 2022, we held the 20th edition of the Amigo de Valor program. Since 2002, it has benefited more than 1.6 million children and teenagers in 293 municipalities in Brazil, mobilizing more than R$180 million from our customers and employees.
· In 2022, we helped about 220,000 people through blood donation and volunteering programs.
· Through Santander Universities, we granted 103,000 scholarships in 2022.
· We became founding members of the Alliance for Productive Inclusion (Aliança pela Inclusão Produtiva), or Aipê, in partnership with industry leaders, whose objective is to promote, through training, the inclusion of the lower-income population in the labor market.
· We increasingly invest in the structuring of endowments—equity or philanthropic funds—to support the long-term financial sustainability of institutions and nonprofit organizations, such as universities and hospitals. In 2022, these investments amounted to R$51 million.
· In April 2022, we held the Legado event, which addressed philanthropy in Brazil and the role of the individual in building a more inclusive society. This event was attended by over 600 participants.
· In 2022, we transformed 70,000 plastic bags into 12,000 eco-friendly bags in partnership with Sewing Dreams, an NGO from Paraisópolis in the State of São Paulo.
· We support social projects which foster professional training and fostering entrepreneurship. In 2022, we selected 31 projects for support through our “Chama Indica” and “Prepara Futuro” initiative.
· We continued to promote female representation in leadership positions at Santander Brasil. In 2022, the percentage of women among our leadership (defined as senior managers and officers of Banco Santander (Brasil) S.A., Aymoré Crédito, Financiamento e Investimento S.A. and Santander Corretora de Seguros, Investimento e Serviços S.A.) increased by 1.9 p.p. compared to 2021 and reached 33%.
We also developed actions to increase the representation of black people at Santander Brasil. As of December 31, 2022, 30% of our employees identified as black, which represents a growth of 2.7 p.p. compared to December 31, 2021.
· In the year ended December 31, 2022, we believe that we helped facilitate approximately R$32.2 billion in sustainable business (including disbursements for renewable energy, sanitation, sustainable agribusiness, ESG-linked loans, Prospera Santander Microfinance, other businesses (accessibility and mobility, other financial operations), as well as project finance advisory and disbursements (renewable energy and sanitation), in addition to green bonds) through the following initiatives:
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· We were guarantors in a BNDES financing for the construction of a subway line in the city of São Paulo that we expect will bring socioeconomic development to the regions along its tracks.
· We maintained a leading role in the Brazilian market for decarbonization credits (CBIO) market, which we first helped create in 2020 and in which, in the year ended December 31, 2022, we held a 54.4% market share according to B3.
· We disbursed R$394 million in our sustainable agribusiness credit lines, which promote low-carbon agriculture and solar energy.
· Since 2021, we created the Sustainable Finance Forum, a forum responsible for analyzing sustainable operations and ensuring alignment with the Sustainable the Finance Classification System (SFCs) - the Santander Group framework and market standards.
· In June 2022, we hosted the Zero Carbon Emission livestream, which promoted a debate on zero carbon emission and our next steps in this journey.
· In November 2022, in partnership with other Brazilian corporations, we launched Biomas, a joint venture whose objective is to restore, conserve and preserve four million hectares of forest in the Amazon, Caatinga, Mata Atlântica and Cerrado biomes in Brazil. This alliance plans to remove approximately 900 million tons of carbon equivalent substances from the atmosphere over a two-decade period. Each partner will initially commit R$20 million to support the early years of Biomas activities.
· We participated in the launch of the Bioeconomy Business Innovation Platform in the Amazon, led by the CERTI Foundation, with the objective of training 3,000 people and creating 200 startups in three years.
· We have progressed towards our commitment of achieving zero illegal deforestation in the Amazon across our customers involved in meat production by 2025.
The following is a description of some of the environmental activities that we have held or continued in 2022:
· In February 2022, we launched a solar power plant at two of our administrative buildings, the largest urban power plant installed in the State of São Paulo and one of the largest in Latin America.
· As of December 31, 2022, 100% of our domestic electricity consumption derive from renewable sources, a milestone that we had originally targeted to reach in 2025. In addition, we have been carbon neutral since 2010 and have significantly cut down on our use of single-use plastic within our organization.
· By the end of 2022, 100% of the new SX- and Elite-branded cards were made from recycled plastic. We expect that this will reduce the use of common plastic in the cards we issue.
· Climate change was the agenda of our continuing education program (programa de educação continuada), or “PEC,” which is aimed at independent members of our governance bodies. The PEC seeks to promote integration and deeper knowledge about the financial industry and a better understanding of our internal dynamics. We also held an inaugural class for a select group of executives to discuss decarbonization in partnership with the Santander Academy—the first in a series of meetings that will continue to take place in 2023 to develop knowledge on the subject and share good practices, challenges and solutions for the mitigation and removal of greenhouse gases. The engagement of companies is part of our Net Zero commitment, which aims to eliminate indirect issues of carbon in our credit portfolio by 2050.
· We co-drafted “An Introductory Guide for Net Zero Target Setting for Farm-Based Agricultural Emissions,” which was led by the Banking for Impact on Climate in Agriculture initiative of the World Business Council for Sustainable Development. The study aims to address the challenges of net zero for the sector, where data and methodologies on measuring financed emissions is lacking.
· In July 2022, we published our social, environmental and climate responsibility policy, or the “PRSAC,” in accordance with CMN Resolution No. 4,945, which improves socio-environmental risk management rules, including climate change-related rules. PRSAC focuses on a positive agenda, such as pacts, commitments, relationships with stakeholders and socio-environmental impacts and opportunities.
• In December, 2022 we sponsored the fifth edition of the Global Citizen Forum to discuss ESG matters, which was attended by our chief executive officer and the general secretary of the United Nations Global Compact, Sanda Ojiambo, the economist and co-founder of SYSTEMIQ, Jeremy Oppenheim and Paul Polman, a climate and equality activist. The event was attended by approximately 612participants.
• Our sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through our board of directors, executive committee and executive sustainability superintendents. Our sustainability committee is responsible for providing clarification and recommendations to the board of directors relating to the development of sustainability-related guidelines. Our governance seeks to include ESG in our culture and in our day-to-day through internal training and the inclusion of ESG criteria in the compensation of executives, who are responsible for addressing issues of diversity, financial empowerment and green financing. Independent members account for 44.44% of our board of directors and women for 33.33%, while women also account for 20.41% of our executive committee. For more information, see “Item 6. Directors, Senior Management and Employees.”
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As a result of our efforts, we were recognized by Revista Exame as the best ESG company in the financial services category in 2022, and we also received a Euromoney award in the ESG category. Moreover, our equity securities form part of the B3’s Corporate Sustainability Index (Indice de Sustentabilidade Empresarial) and Efficient Carbon Index (Índice de Carbono Eficiente – ICO2).
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial services industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal. Together, these financial institutions accounted for 70.8% of the credit and 70.7% of the deposits available in Brazil as of September 30, 2022, according to the Brazilian Central Bank and the interim financial statements of the aforementioned banks.
The following table shows the total loans and deposits of the five leading financial institutions in Brazil as of September 30, 2022:
Santander Brasil Bradesco Itaú
Unibanco Banco
do Brasil Caixa Econômica Federal Financial System
(in billions of R$)
Total loans (1) 484.3 644.7 685.6 861.5 976.8 5,161.4
Total deposits (1) 410.7 588.0 813.2 539.4 433.6 3,940.8
(1) According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 30, 2022). Data as of December 31, 2022 was not available as of the date of this annual report.
Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. Substantially 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 cybercrimes.
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.
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As of the date of this annual report, we own or have a license to use 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 regard 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 (Associação Brasileira das Companhias Abertas – 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 administration of third-party funds and microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:
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· 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 segment one, or “S1” (i.e., banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity), as is our case, 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, 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;
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· 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 that 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
In 2010, the Basel Committee issued its Basel III framework, which was revised and republished in 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 of 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 capital 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.
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There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debts 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.
In accordance with the Basel III standards, the Brazilian Central Bank created the additional core capital buffer (adicional de capital principal), which is composed of 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 buildup 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 CMN 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 increased gradually until April 2022, when it reached 2.5%. Resolution No. 4,783 was subsequently replaced by Resolution No. 4,955 of October 21, 2021, which maintained the risk weighted asset percentage at 2.5%.
The chart below shows the evolution of our core capital:
Timeline

Description automatically generated with medium confidence
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Financial Institutions in Brazil are subject to the capital rules set by CMN Resolutions No. 4,955/2021 and No. 4,958/2021. 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. S1 financial institutions, as is our case, or segment 2, or “S2,” for purposes of the application of prudential rules, are required to maintain a minimum Leverage Ratio (Razão de Alavancagem or “RA”) of 3% as from January 1, 2018.
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 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 current regulatory minimum is 100%.
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 S1, S2 or segment three, or “S3” financial institutions 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.
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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.
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 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 financial institutions 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.
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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 requirement.
· 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.
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 July 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 Tier 1 regulatory capital. 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.
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Resolution No. 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.
Resolution No. 264/22 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. Resolution No. 264/22 came into effect on December 1, 2022.
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 Custódia), 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 March 3, 2022, the Brazilian Central Bank issued Resolution No. 195/22, which regulates the SPI. Resolution 195/22 also approved the regulation with which the direct and indirect participants in the SPI must comply. Brazilian Central Bank Normative Ruling No. 243/22 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 291/22, in turn, establishes the procedures for the adherence to 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 clearinghouses 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. Resolution 195/22 came into effect on April 1, 2022.
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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 clearinghouses, 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.
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 customers 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 means 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 should have implemented, 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 entity’s audit and risk committees (if in place), internal audit unit, executive board and board of directors (if in place).
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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 Finance Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open finance. Open finance 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.
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 or S2 segments, as is our case, are required to participate in open finance.
Open finance has a ~~significant impact~~four stage implementation plan, as follows:
· Phase 1 (launched 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.
· Phase 2 (launched on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
· Phase 3 (launched on October 30, 2021): start of PIX transactions offered by payment transaction initiators through the Open Finance channel, without the need to access the specific channels of the institutions with whom the client maintains a relationship. The possibility of using other payment methods (other than PIX) and of accepting credit transaction proposals through Open Finance is expected to be gradually implemented in the future.
· Phase 4 (launched on December 15, 2021): sharing of customer transactional data related to additional products, including: (i) insurance, open-end private pension and capitalization products; (ii) merchant acquiring services; (iii) foreign exchange transactions; and (iv) time deposit accounts and other investment products. Phase 4 is still currently under implementation and the Brazilian Central Bank’s expectation is that it should be completed by the end of 2023.
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 Finance 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 Finance, 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 Finance; (iv) services to be rendered by the Open Finance 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 Finance and its implementation; and (v) minimal security standards and certifications.
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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 Finance, to be further detailed by the Open Finance 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.
Finally, the data referring to insurance products and pension plans will follow the scope defined by the National Council of Private Insurance (Conselho Nacional de Seguros Privados), or “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.
Phase 4 of Open Finance 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 to 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 lasted for one year and was extended for a second year through November 2023. As of the date of this annual report, a second cycle still has not commenced.
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.
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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.
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.
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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.
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.
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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.
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, or “KYC” 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.
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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 KYC procedures. The CVM also issued CVM Resolution No. 50 on 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.
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.
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The governments of Brazil and the United States executed an agreement in 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
Brazil
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 brought 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 data subjects 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, among others, 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 has 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.
The ANPD has been assured technical independence, although it is subordinated to the Brazilian Ministry of Justice and Public Safety. It is composed of five commissioners, 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.
Other
In addition, we are subject to Regulation (EU) 2016/279 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”). 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 2% of annual worldwide turnover or €10 million (whichever is highest) for other specific infringements. Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the U.K. General Data Protection Regulation (“U.K. GDPR”) (i.e., a version of the GDPR as implemented into U.K. law). While the U.K. GDPR currently imposes substantially the same obligations as the GDPR, the U.K. GDPR will not automatically incorporate changes to the GDPR going forward (which would need to be specifically incorporated by the United Kingdom government). Moreover, the United Kingdom government has publicly announced plans to reform the U.K. GDPR in ways that, if formalized, are likely to deviate from the GDPR, all of which creates a risk of divergent parallel regimes and related uncertainty, along with the potential for increased compliance costs and risks for affected businesses.
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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, from 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
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· errors that result in major incorrectness in the financial statements of the audited entity.
The executive officers of the financial institution must notify the independent auditor and the audit committee if any of the above situations occur.
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,” which we have created. For more information on our 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 ~~results~~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.
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). 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) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
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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 the “PRSA.” The new rule provides for the inclusion of a climate aspect to the PRSA, which we refer to as the 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 ~~Brazil. Increases~~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 Climáticas, or ~~decreases~~the “GRSAC Report”) by financial institutions classified in S1 (such as us), S2, S3 or 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 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 us), S2, S3, or segment four, 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 climate 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 general provisions of CMN Resolution No. 4,945/21 came into effect on July 1, 2022, CMN Resolution No. 4,944/21, article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) and Central Bank Resolution No. 139/21 came into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 came 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 ~~requirements may~~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 ~~impact on our operational results~~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 ~~limiting~~the institution and may be established at the consolidated enterprise level. 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.
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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.
Independent auditors and the audit committee, individually or ~~expanding~~jointly, must formally notify the ~~amounts available for commercial credit transactions.~~Brazilian Central Bank of the existence or evidence of error or fraud, within three business days of the identification of the respective occurrence, as further detailed under “—Auditing Requirements” above.
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 ~~table below shows~~Brazilian Consumer Protection Code sets forth as consumer rights, among others, the ~~requirements for reserves~~assistance/facilitation in the defense of consumers’ rights, including through reverse burden of proof in their favor, and ~~credit to which we are subject for each financing category:~~the possibility of judicial review of contractual provisions deemed abusive.
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
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~~Table~~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 ~~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 %
said procedures:
~~(1)~~· ~~Rural credits are credits granted~~ to ~~farmers in~~timely provide the ~~amount of R$12.9 billion~~necessary information including rights, duties, responsibilities, costs or advantages, penalties and ~~R$11.8 billion on December 31, 2019~~possible risks when carrying out a transaction or rendering a service to allow customers and ~~December 31, 2018, respectively.~~users free choice and decision-making;
~~(2)~~· ~~Microcredit is a credit granted~~ to ~~very small businesses, with an open position~~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 ~~R$1.2 billion and R$642.0 million on December 31, 2019 and December 31, 2018, respectively.~~timely cancellation of the agreements;
~~(3)~~· ~~Interest-free financing is~~formalization of an adequate instrument setting forth the ~~amount to be used on~~rights and obligations for opening, using and maintaining a ~~free of interest basis for other purposes in each financing category.~~postpaid payment account;
~~(4)~~· ~~According~~ to ~~Circular No. 3,823~~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 ~~CMN,~~payer, including in situations in which 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.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.
~~Taxes~~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.
~~See “Item 4. Information~~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.
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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.
On July 27, 2022, the Brazilian federal government adopted Decree No. 11,150/22, or Decree No. 11,150, which seeks to prevent and foster the repayment and settlement of consumer over-indebtedness. The rule grants consumers certain basic rights, including the right to responsible credit practices, financial education and relief from over-indebtedness situations through debt review and renegotiation. To preserve a consumer’s “existential minimum,” Decree No. 11,150 creates an “existential minimum income” threshold for consumers, which is fixed at R$303.00, or one-quarter of the federal minimum wage that was in effect at the time the decree was adopted. However, the annual adjustment of the minimum wage will not lead to this amount being updated.
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 customers 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.
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 came into effect on March 1, 2022, and Central Bank Resolution No. 155 came 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:
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· 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); 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.
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 ~~Company—B. Business Overview—~~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).
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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 came into effect on December 30, 2022.
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.
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 revoked 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 be 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.
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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 customers.
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 ~~Supervision—Other Applicable Laws~~equity requirements, as well as the submission of an economic and ~~Regulation —Taxation.”~~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.
~~Hedging~~The Brazilian Central Bank determines that financial institutions can install the following establishments in ~~Foreign Investments~~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.
On January 3, 2023, the Brazilian Central Bank published Normative Ruling No. 342, which amended Normative Ruling No. 299/22 and provides procedures, documents, terms and necessary information for requests related to the participation of financial institutions, such as us, on other companies’ corporate capital; and establishment of branches abroad. This new rule came into force on its publication date.
Cayman Islands Banking Regulation
We ~~operate two foreign branches, one~~have a branch in the Cayman Islands with its own staff and ~~another one~~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 ~~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 subsidiary~~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.
Our Grand Cayman Branch is currently engaged in ~~Spain) which are used primarily for~~the business of sourcing funds in the international banking and capital markets to provide credit lines for us, ~~that~~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.
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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, 2022, CI$1 was equivalent to R$6.2480 according to the Brazilian ~~income tax~~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 April 5, 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 June 26, 2013 on prudential requirements for credit institutions and investment firms apply to it.
U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States Congress and U.S. bank regulatory agencies. In addition to 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 ~~gains~~“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.
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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 ~~losses~~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.
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.
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U.S. Sanctions
“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, the Office of Foreign Assets Control, or “OFAC”), the UN Security Council, the European Union or His Majesty’s Treasury. 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 imposed various sanctions that prevent non-U.S. persons, including non-U.S. financial institutions from engaging in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”). If a non-U.S. financial institution were determined to have engaged in activities targeted by certain U.S. secondary 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.
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.
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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 ~~of appreciation or devaluation~~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:
· 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.
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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.
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.
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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.
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.
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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
Law No. 13,986/2020, 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.
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 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.
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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.
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 and Social Contribution Tax
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% for banks, 15.0% for other financial institutions except banks and 9.0% for most other Brazilian legal entities, after adjustments determined by the tax legislation. CSLL rate for banks was revised to 21.0% from August 1 to December 31, 2022.
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.
IRPJ and CSLL on Foreign Exchange Variation of Hedges for Investments Held Abroad
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, as of 2022, 100% of the exchange rate variation will be considered as taxable.
Tax on Services
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.
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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.
Nonfinancial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to noncumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Tax on Financial Transactions
The IOF tax is a tax levied on credit, currency exchange, insurance and securities transactions. It is imposed on the following transactions and at the following rates.
Transaction (1)
Maximum
Legal Rate
Current Rate
Credit extended by financial institutions and nonfinancial entities 1.5% or 3% 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.
Transactions relating to securities (2) 1.5% per day 0.5% per day for certain investment funds.
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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).
5.38% on credit card transactions as from January 2, 2023.
5.38% on withdrawals abroad using credit or debit cards as from January 2, 2023.
5.38% on purchase of traveler’s checks or loading of international prepaid card as from January 2, 2023.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
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 equal or less than 180 days.
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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.
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Pursuant to Decree No. 10,997/2022, the Brazilian government will gradually reduce, each year, the IOF, levied on exchange operations, rates with the reduction to zero for all currency exchange operations form 01.01.2029. In addition, external loan and financing operations, including through the issuance of titles, had the rate reduced to zero, as of March 31, 2022, regardless of the term of the operation.
FATCA
The Foreign Account Tax Compliance Act, or “FATCA,” became law in the United States on March 18, 2010. The legislation requires foreign ~~investments~~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.
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 ~~non-taxable~~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 Cooperation 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. 1,571, 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 ~~non-deductible.~~“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 ~~treatment results~~rates for income taxation over capital gains recognized by Brazilian individuals and by holders that are not domiciled in ~~volatility~~Brazil for purposes of Brazilian taxation (“Non-Resident Holders”) on the disposition of assets in general. Under Law 13,259/16, the income tax ~~line item~~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.
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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 ~~our income statement. This asymmetry is offset through~~ a ~~derivative position~~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 ~~U.S. dollar futures, which generates~~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, ~~losses dependent on any devaluation or appreciation~~in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the~~real~~, 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 ~~is our strategy to protect our after-tax results. The reconciliation of our effective tax rate~~added Section 13(r) to the ~~statutory tax rate~~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.
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, 2022 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 United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by the Belgian branch on these accounts in the year ended December 31, 2022.
(c) Santander Brasil holds three blocked accounts for three customers with domicile in Brazil designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander Brasil on these accounts in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(d) Santander Consumer Finance, S.A. also held through its branch in Greece an auto finance loan for a client designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship was terminated before the year end. Revenues or profits generated by the branch in Greece on this position in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(e) The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the United States 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, 2022 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.
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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. 4,820 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: (i) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (ii) the amount equivalent to the mandatory dividends as set forth in ~~note 23b~~article 202 of the Brazilian Corporate Law. This is the only restriction still in force regarding amounts related to results for the year ended December 31, 2020, as amended by 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 and 2022.
Reduction of Capital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduced 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% remained in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the capital conservation buffer requirement was gradually restored to 2.5%. 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.
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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 and 2022.
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. CMN Resolution No. 4,805/2020 increased the cap to R$400 million cap for DPGEs held by other financial institutions affiliated with the FGC, while maintaining the R$40 million cap for other non-affiliated entities.
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.
Flexibility 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.
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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 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, were permitted to, 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%. However, as of the revocation of CMN Resolution No. 4,788/20 by CMN Resolution No. 5,007, issued on March 24, 2022, the repurchase ceiling returned to the previous percentage 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 COVID-19 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.
SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes 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, 2022, 2021, and 2020 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.”
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For the Year Ended December 31,

2022
2021
2020

Average Balance
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
(in millions of R$, except percentages)
Assets and Interest
Income
Cash and balances with the Brazilian Central Bank 109,977 10,202 9.3% 58,494 2,581 4.4% 54,531 1,552 2.8%
Loans and amounts due from credit institutions 71,836 2,722 3.8% 95,513 1,116 5.4% 104,759 1,519 1.4%
Of which:
  Reverse repurchase
agreements 49,357 7,197 14.6% 45,458 2,154 4.7% — — —
Loans and advances to customers 503,548 73,596 14.6% 461,141 55,775 10.7% 384,389 44,104 11.5%
Debt instruments 213,647 22,002 10.3% 224,890 16,958 8.5% 203,578 13,556 6.7%
Other interest – earning assets — 6,703 — — 1,557 – – 2,044 –
Total interest – earning assets 899,008 115,225 12.8% 840,038 77,987 9.3% 747,257 62,775 8.4%
Equity instruments 2,807 38 1.4% 2,279 90 3.9% 1,730 34 2.0%
Investments in associates 1,593 — — 952 — — 1,098 — —
Total earning assets 903,408 115,263 12.8% 843,269 78,077 9.3% 750,085 62,809 8.4%
Cash and balances with the Brazilian Central Bank 4,371 — — 4,633 — — 4,800 — —
Loans and amounts due from credit institutions (6,136) — — 441 — — 6,668 — —
Impairment losses (31,665) — — (26,908) — — (23,936) — —
Other assets 78,869 — — 81,669 — — 76,642 — —
Property, plant and equipment 8,346 — — 8,823 — — 9,587 — —
Intangible assets 31,084 — — 30,250 — — 30,769 — —
Total average assets 988,277 115,263 11.7% 942,177 78,077 8.3% 854,615 62,809 7.3%

Liabilities and Interest Expense

Deposits from the Brazilian Central Bank and Deposits from credit institutions 120,512 6,737 5.7% 149,111 4,712 3.2% 111,684 4,327 3.9%
Of which:
Repurchase agreements 87,567 11,197 12.8% 103,809 4,567 4.4% — — —
Customer deposits 438,846 38,509 8.7% 420,185 13,188 3.1% 380,058 7,504 2.0%
Of which:
   Repurchase agreements 4,974 — — 58,264 — — — — —
Marketable debt securities 94,612 6,952 7.3% 63,906 4,537 7.1% 68,585 2,786 4.1%
Subordinated debts 19,086 863 4.5% 14,550 902 6.6% 13,102 909 6.9%
Other interest-bearing liabilities — 14,661 — — 3,329
—
—
2,805 —
Total interest-bearing liabilities 673,056 67,722 10.1% 647,752 26,669 4.2% 573,429 18,332 3.2%
Noninterest bearing demand deposits 34,524 — — 33,893 — — 28,581 — —
Other liabilities 151,417 — — 155,133 — — 150,759 — —
Non-controlling interests 431 — — 329 — — 315 — —
Stockholders’ Equity 128,849 — — 105,070 — — 101,531 — —
Total average liabilities and equity 988,277 67,722 6.9% 942,177 26,669 2.8% 854,615 18,332 2.1%
(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 year ended December 31, 2020 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.
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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, 2022, compared to the year ended December 31, 2021, and for the year ended December 31, ~~2019.~~2021 compared to the year ended December 31, 2020. 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 2022/2021
For the Years Ended 2021/2020
Increase (decrease) due to changes in
Volume
Rate
Net change
Volume
Rate
Net change
(in millions of R$)
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank   3,383   4,238 7,621 120 909 1,029
Loans and amounts due from credit institutions (338) 1,944 1,606 (126) (277) (403)
Loans and advances to customers 5,456 12,365 17,821 9,181 2.492 11,671
Debt instruments (885) 5,929 5,044 1,502 1.900 3,402
Other interest-earning assets 5,146 —   5,146 (487) — (487)
Total interest-earning assets 12,762 24,476 37,238 10,190 5.024 15,214
Equity Instruments   17 (69) (52) 13 43 56
Total earning assets 12,779 24,407 37,186 10,203 5.067 15,268
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions (1,042) 3,067 2,025 1,278 (893) 385
Customer deposits 611 24,710 25,321 857 4,827 5,684
Marketable debt securities 2,251 164 2,415 (454) 2,205 1,751
Subordinated liabilities 240 (279) (39) 46 (53) (7)
Other interest-bearing liabilities 11,332 — 11,332 523 — 524
Total interest-bearing liabilities 13,392 27,662 41,053 2,250 6,086 8,337
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~~Goodwill~~Assets
Earning Assets – Yield Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of ~~Banco Real~~the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2022 2021 2020
(in millions of R$, except percentages)
Average earning assets 899,008 840,038 747,257
Interest and dividends on equity securities(1) 115,263 78,077 62,809
Average Net interest income 47,541 51,408 44,480
Gross yield(2)(*) 12.8 % 9.3 % 8.4 %
Net yield(3)(*) 5.3 % 6.1 % 6.0 %
Yield spread(4)(*) 2.7 % 5.1 % 5.2 %
(*) 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.”

~~We generated goodwill of R$27 billion as a result of~~Return on Equity and Assets
The following table presents our ~~acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill~~selected financial ratios 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.periods indicated.
For the Year Ended December 31,
2022 2021 2020
ROA: Return on average total assets 1.5 % 1.7 % 1.6 %
ROE: Return on average stockholders’ equity 11.1 % 14.8 % 13.3 %
ROE (adjusted) (1) 14.2 % 20.2 % 18.5 %
Average stockholders’ equity as a percentage of average total assets 13.0 % 11.2 % 11.9 %
Payout(2) 56.5 % 62.0 % 24.7 %
(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, 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 share divided by net income per share).

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Interest-Earning Assets (other than Loans)
The following table shows the ~~main assumptions~~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,
2022 2021 2020
Cash and balances with the Brazilian Central Bank 12.2 % 7.0 % 7.3 %
Loans and amounts due from credit institutions 8.0 % 11.4 % 14.1 %
Loans and advances to customers 56.0 % 54.9 % 51.4 %
Debt instruments 23.8 % 26.8 % 27.2 %
Total interest-earning assets 100.0 % 100.0 % 100.0 %
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, 2022 and 2021, the book value of investment securities was R$206 billion and R$228 billion, respectively (representing 20.9% and 24.5%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$143 billion, or 69.4%, and R$171 billion, or 75.3% of our investment securities as of December 31, 2022 and 2021, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:
As of December 31,
2022 2021 2020
(in millions of R$)
Debt securities
Government securities—Brazil 142,749 171,437 191,896
Debentures and promissory notes 28,251 19,882 17,072
Other debt securities 31,913 33,894 21,134
Total domestic/debt securities 202,913 225,212 230,102

Equity securities
Shares of Brazilian companies 1,459 1,870 1,953
Shares of foreign companies 60 49 14
Investment fund units and shares 1,120 609 363
Total equity securities 2,639 2,528 2,329
Total investment securities 205,551 227,740 232,432
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As of December 31, 2022 and 2021, 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 129.0% and 151.5%, respectively, of our stockholders’ equity. As of December 31, 2022 and 2021, the total value of our debt securities was approximately 185.7% and 212.5%, 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, 2022. 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 millions of R$)
Debt securities
Government securities—Brazil (1) —   14,997 —   1,100 16,097
Other debt securities (2) 21,936 34,511 6,310 2,475 65,232
Total debt investment securities 21,936 49,508 6,310 3,575 81,329
(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 12.96%.
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 ~~valuation~~maturities, as of December 31, 2022. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2022. 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 millions of R$, except percentages)
Weighted-average yields % % % %
Domestic:
Brazilian Government         17,315 11.37    58,456 13.39      2,910 6.70    10,593 6.46
Other fixed-income securities         16,563 12.77    27,258 14.40      4,298 8.90         884 9.20
Impaired financial assets 160 12.77         213 14.40         214 8.90         553 6.80
Impairment losses (287) 12.77       (691) 14.40       (227) 8.90 (593) —
Total domestic        33,751 12.07 85,236 13.90     7,195 7.80 11,437 6.70
International:
Foreign government           4,999 9.80 — — — — — —
Other fixed-income securities           1,055 10.40      3,189 10.40 — — — —
Impaired financial assets                 2 10.40 — — — — — —
Impairment losses — 10.40 — — — — — —
Total international          6,056 10.10     3,189 10.40 — — — —
Total weighted-average yields 11.46 8.00 6.60 6.70
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Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.
2019 2018 2017
(Value in use: cash flows)
Main Assumptions(*)
Basis of valuation
Period of the projections of cash flows(1) 5 years 5 years 5 years
Growth rate(2) 4.8 % 5.1 % 8.3 %
Discount rate(3) 12.5 % 13.6 % 14.6 %
As of December 31,
2022 2021 2020
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank 11,346 10,657 5,806 10,851 4,532 15,617
Debt instruments 185,814 17,098 208,132 17,080 226,787 3,315
Loans and amounts due from credit institutions 19,784 929 22,689 3,797 50,553 3,520
Loans and advances to customers 416,127 74,503 398,335 66,509 372,946 20,822
Equity Instruments 2,582 57 2,483 45 2,329 —
Total assets 635,653 103,244 637,445 98,282 657,147 43,274
Liabilities
Financial Liabilities at amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 59,366 56,713 62,332 58,674 86,564 45,093
Customer deposits 457,188 32,765 468,961 —   445,814 —
Marketable debt securities 92,638 14,483 66,028 13,009 47,477 9,399
Debt instruments eligible to compose capital 19,538 —   —   19,641 —   13,120
Other financial liabilities 71,371 143 68,496 413 66,708 153
Total liabilities 700,101 104,104 665,817 91,737 646,563 67,765

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Loan Portfolio
As of ~~Contents~~December 31, 2022, our loans and advances to customers totaled R$524 billion (53.2% of our total assets). Net impairment losses, loans and advances to customers totaled R$491 billion as of December 31, 2022 (49.8% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$158.7 billion, R$146.0 billion, R$131.7 billion as of December 31, 2022, 2021, 2020, 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.
Our loan portfolio does not have any specific concentration exceeding 10% of our total loans, As of December 31, 2022, 1.0% of our loan portfolio is allocated to our largest debtor and 4.5% 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, 2022.

As of December 31, 2022
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 126,508 46.89% 83,448 47.02% 13,366 24.50%

—
—
223,322 42.57%
Real estate 4,298 1.59% 10,905 6.14% 20,655 37.80% 22,385   98.46% 58,243 11.09%
Installment loans to individuals 137,581 51.00% 81,680 46.02% 20,616 37.72% 351 1.54% 240,227 45.79%
Lease financing
1,398
0.52%
1,455
0.82%
11

—

—

—
2,863
0.55%
Loans and advances to customers, gross
269,784
100.00%
177,488
100.00%
54,648
100.00%
22,735
100.00%
524,655
100.00%
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, 2022.
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$, except percentages)
Fixed rate
Commercial and industrial 81,757 38,976 3,581 — 42,558 124,315
Real estate 23 74 72 41 187 209
Installment loans to individuals 127,538 80,132 19,823 351 100,306 227,843
Lease financing 406 607 — — 607 1,013
Total Fixed rate 209,723 119,790 23,476 391 143,658 353,381
Variable rate
Commercial and industrial 44,751 44,471 9,785 — 54,256 99,007
Real estate 4,275 10,832 20,582 22,344 53,758 58,034
Installment loans to individuals 10,043 1,548 793 — 2,341 12,384
Lease financing 992 847 11 — 858 1,850
Total Variable rate 60,061 57,698 31,171 22,344 111,213 171,275
Total 269,784 177,488 54,648 22,735 254,871 524,655
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Cross-Border Outstandings
The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.
As of December 31,
2022 2021 2020
Balance % of Total Assets Balance % of Total Assets Balance % of Total
Assets
(in millions of R$, except percentages)

OECD countries(1)
Spain 189 —   108 —   437 —
United States 2,489 0.3 835 0.1 12,674 1.4
Netherlands 73 —   —   —   80 —
United Kingdom 277 —   20 —   29 —
Luxembourg 710 0.1 13,058 1.4 —   —
Other OECD countries(2) 1,599 0.2 1,958 0.2 3,534 0.4
Total OECD 5337 0.6 15,979 1.7 16,754 1.8
Non-OECD countries
Latin American countries(2) 529 0.1 560 0.1 1,204 0.1
Cayman Islands 1,573 0.2 1,679 0.2 2,917 0.3
Other(2) 32 —   282 —   1,189 0.1
Total non-OECD 2,134 0.3 2,521 0.3 5,310 0.5
Total 7,471 0.9 18,500 2.0 22,064 2.3

(1) The ~~projections of cash flow are prepared using internal budget~~Organization for Economic Cooperation and ~~growth plans of management, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.~~Development.
(2) ~~The growth rate is calculated based on a~~~~real~~ ~~growth rate~~Aggregate outstandings in any single country in this category do not exceed 1.5% of ~~1% p.a. plus annual long-term inflation in 2019.~~our total assets.

The following table presents the amounts of our cross-border outstandings as of December 31, 2022, 2021 and 2020 by type of borrower where outstandings in the borrower’s country exceeded 1.4% of our total assets.
~~(3)~~ ~~The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 17,78%~~
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Government
Banks and Other Financial Institutions
Commercial and Industrial
Other Loans
Total
(in millions of R$)
2020
United States — 12,653 9 12 12,674
Netherlands — — 80 — 80
Austria — — — 444 444
United Kingdom — 28 — 1 29
Cayman Islands — 1,341 (1) 1,577 2,917
Total — 14,022 88 2,034 16,144
2021 —
United States — 3,943 1 12 3,956
Netherlands — — 3 — 3
Austria — — — 595 595
United Kingdom — 28 — — 28
Cayman Islands — 2,815 — 1,290 4,105
Total — 6,786 4 1,897 8,687
2022 —
United States — 2,259 198 32 —
Netherlands — — 73 — 73
Austria — 57 — — 57
United Kingdom — 234 39 3 276
Cayman Islands — 180 1,354 38 1,572
Total — 2,730 1,664 73 4,467
Non-current assets held for sale
For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.
Liabilities
Deposits
The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.
For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the maturity of time deposits (excluding inter-bank deposits) at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.”
As of December 31, 2022
Domestic
International
(in ~~2019, 19.33% in 2018 and 20.42% in 2017.~~millions of R$)
Under 3 months 359,142 —
3 to 6 months 33,019 —
6 to 12 months 66,039 —
Over 12 months 147,832 —
Total 606,032 —

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The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2022.
Maturing
As of
December 31, 2022 Three Months or Less Over Three Months Through Six Months Over Six Months Through
12 Months Over 12 months
(in millions of R$)
Total uninsured deposits(1)
281,066 264,349 24 48 16,645
(1)           We define uninsured deposits as securities from credit institutions and customers that do not have collateral attached to them.
Short-Term Borrowings
The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.
As of December 31,
2022 2021 2020
Amount Average Rate Amount Average Rate Amount Average Rate
(in millions of R$, except percentages)
Securities sold under agreements to repurchase
As of December 31 109,760 1.26 % 115,964 1.76 % 112,477 1.90 %
Average during the period (1) 105,233 1.85 % 114,484 2.58 % 112,096 2.71 %
Maximum month-end balance 114,056 155,484 155,174
Total short-term borrowings at year end 109,760 115,964 112,477
(1) The average annual balance sheet data has been calculated based upon the average of the monthly balances at 12 dates: for each of the month-end balances of the applicable year.
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, 2022, 2021 and 2020—Results of Operations—Impairment Losses on Financial Assets (Net).”
As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 29,723 25,640 22,626
Initial adoption of IFRS 9 —   —   —
Balance adjusted 29,723 25,640 22,626
Impairment losses charged to income for the year 23,801 16,987 18,311
Write-off of impaired balances against recorded impairment allowance (18,340 ) (12,935 ) (15,297 )
Exchange variation 28 31 127
Balance at end of year 35,212 29,723 25,640
Of which:
Loans and advances to customers 34,025 28,511 24,054
Loans and amounts due from credit institutions 13 22 9
Debt Instruments 1,174 1,191 1,577
Recoveries of loans previously written off(1) 983 1,536 861
(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.
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As of December 31, 2022, our allowance for impairment losses for the periods indicated amounted to R$35,212 million, an increase of R$5,489 million, or 18.5%, compared to R$29,723 million as of December 31, 2021, which primarily resulted from a greater number of nonperforming loans among individual customers and a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, the latter of which resulted in: (i) an increase in our impaired assets in the commercial and industrial loans portfolio as of December 31, 2022 of 23.7%, from R$11.4 billion to R$14.2 billion, as compared to December 31, 2021; (ii) an increase in our default rate as of December 31, 2022 by 1.9 p.p., from 5.0% to 6.9%, as compared to December 31, 2021; and (iii) an increase in our coverage ratio (i.e., our provisions for impairment losses as a percentage of impaired assets) as of December 31, 2022 by 20.6 p.p., from 110.4% to 89.8%, as compared to December 31, 2021.
As of December 31, 2021, our allowance for impairment losses for the periods indicated amounted to R$29,723 million, an increase of R$4,083 million, or 15.9%, compared to R$25,640 million as of December 31, 2020, which primarily resulted from higher volumes and our product mix.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations.”
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,

2022
2021
2020
(in millions of R$)
Recoveries of loans previously charged off(1) 983      1,536         861
Commercial and industrial 597         463         422
Real estate – construction 36           64           56
Installment loans to individuals 346      1,002         370
Lease finance 4             7           13
Impairment losses charged to income for the year(1) 23,800 16,987 18,311
Commercial and industrial 8,854      3,340      6,919
Real estate – construction 244         116           81
Installment loans to individuals 14,686    13,532    11,309
Lease finance   16            (1)             3
Write-off of impaired balances against recorded impairment allowance (18,340)   (12,935)   (15,297)
Commercial and industrial (4,920)     (5,184)     (4,745)
Real estate – construction (115)        (167)        (232)
Installment loans to individuals (13,295)     (7,576)   (10,433)
Lease finance (11)            (8)          (15)
(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.
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As of December 31,

2022
% of Total Loans
2021
% of Total Loans
2020
%of Total Loans
(in millions of R$, except percentages)
Borrowers
Commercial and industrial 12,259 34.8 8,325 28.0 9,757 38.1
Real estate 284 0.8 154 0.5 194 0.8
Installment loans to individuals 22,659 64.4 21,240 71.5 15,676 61.1
Lease financing 10 0.0 4 — 14 0.1
Total 35,212 100.0 29,723 100.0 25,640 100.0
Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:

As of December 31,

2022
2021
2020
(in millions of R$)
Internal Risk Rating
Low 392,397 374,505 347,315
Medium-low 77,993 79,217 24,277
Medium 18,647 14,590 26,232
Medium-high 13,574 9,413 3,896
High 22,044 15,630 16,101
Loans and advances to customers, gross 524,655 493,355 417,822
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, 2022 amounted to R$34.4 billion, compared to R$21.7 billion for the same period in 2021, an increase of R$12.7 million or 58.5%. This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
The renegotiation portfolio was covered by allowances for impairment losses of 46.3% as of December 31, 2022 and 44.7% as of December 31, 2021. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
As of December 31,
2022 2021 2020
(in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 7,638 5,322 5,862
Installment loans to individuals 26,722 16,356 14,623
Financial leasing 2 5 5
Total 34,363 21,683 20,490
Allowances for impairment losses 15,9 9,698 9,019
Coverage ratio 46.3 % 44.7 % 44.0 %
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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 a 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,
2022 2021 2020
(in millions of R$, except percentages)
Impaired assets
Past due and other impaired assets(1) 39,224 26,923 23,176
Impaired assets as a percentage of total loans 7.5 % 5.5 % 5.5 %
Net loan charge-offs as a percentage of total loans 3.5 % 2.6 % 3.7 %
Net loan charge-offs as a percentage of average total loans 3.7 % 2.8 % 3.8 %
(1) Includes as of December 31, 2022, R$5,814 million of doubtful loans (R$2,528 million in 2021 and R$2,028 million in 2020) that were not past-due.
Evolution of Impaired Assets
Our impaired assets increased by 45.7% or R$12,301 million, to R$39,224 million as of December 31, 2022, compared to R$26,923 million as of December 31, 2021. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 18.5%, or R$5,488 million, to R$35,212 million as of December 31, 2022, compared to R$29,723 million as of December 31, 2021. Offsetting these effects were recoveries of R$983 million on loans previously written off as of December 31, 2022 and R$1,536 million as of December 31, 2021.
We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2022.
The following table shows the changes in our impaired assets at the dates indicated:
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As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 26,923 23,176 23,426
Initial Adoption of IFRS9 ⁽¹⁾ —   —   —
Adjusted Balance 26,923 23,176 23,426
Net additions 31,921 18,429 14,758
Write-offs (19,620 ) (14,681 ) (15,008 )
Balance at end of year 39,224 26,923 23,176
(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 2022, 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,
2022 2021
(in millions of R$)
Commercial and industrial 14,156 11,440
Real estate 1,058 470
Installment loans to individuals 23,999 14,996
Lease financing 10 17
Total 39,224 26,923
Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$14,156 million as of December 31, 2022, an increase of R$2,717 million, or 23.7% compared to R$11,440 million as of December 31, 2021. This increase was due to a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$1,058 million on December 31, 2022, an increase of R$588 million, or 125% compared to R$470 million as of December 31, 2021. The increase in impaired assets in this portfolio was primarily due to the impact on our customers of the deteriorating macroeconomic conditions in Brazil.
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$23,999 million as of December 31, 2022, with an increase of R$9,003 million, or 60.0%, compared to 2021. The increase in impaired assets in this portfolio was primarily a result of the effect of deteriorating macroeconomic conditions on our customers.
Lease Financing
Impaired assets in the lease financing lending portfolio totaled R$10 million on December 31, 2022, a decrease of 40.4% or R$7 million, as of December 31, 2021, primarily due to a decrease in the non-performing loans from R$17 million to R$11 million.
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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 is 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 mitigating factors 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:
As of December 31,
2022 % of total 2021 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,941 21.4 4,892 20.7
Mortgage loans 4,063 17.6 3,606 15.2
Installment loans to individuals 14,036 60.9 15,150 64.0
Lease financing 12 0.1 11 0.1
Total (*) 23,052 100.0 23,659 100.0
(*) ~~The recoverability test was performed during~~Refers only to loans past due between 1 and 90 days.
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Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$27.4 billion to R$568.3 billion as of December 31, 2022, compared to R$540.9 billion as of December 31, 2021. Our impaired assets increased by approximately R$12.3 billion in the same period, from R$26.9 billion to R$39.2 billion. The default rate increased by 1.9 p.p. in 2022 in comparison to 2021, as a result of a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings as well as the growth of impaired assets due to the macroeconomic deterioration.
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,

2022
2021
2020
(in millions of R$, except percentages)
Loans and advances to customers, gross 524,655 493,355 417,822
Impaired assets 39,224 26,923 23,176
Provisions for impairment losses 35,212 29,723 25,640
Credit risk exposure Non-GAAP – customers (1) 568,338 540,873 466,104
Ratios
Impaired assets to credit risk exposure 6.9% 5.0% 5.0%
Coverage ratio (2) 89.8% 110.4% 110.6%
Impairment losses (24,829) (17,113) (17,450)
Losses on other financial instruments not measured at fair value (3) — — —
Impairment losses on financial assets (net) (4) (24,829) (17,113) (17,450)
(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the ~~second half~~sum of ~~2017. Goodwill is tested~~the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$568,338 million as of December 31, 2022 and guarantees and documentary credits amounting to R$43,682 million as of December 31, 2022. 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 atlosses as a percentage of impaired assets.
(3) Corresponds to the ~~end~~registration of ~~each reportable period or whenever there is any indication~~losses of a ~~potential impairment.~~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, 2022, 2021 and 2020, our total of impairment losses on financial instruments included R$1,174 million, R$1,191 million and R$1,577 million, respectively, relating to debt instruments.

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~~We performed~~The following chart shows our impaired assets to credit risk ratio from 2020 through 2022:
Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2022, 2021 and 2020.
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,
2022 2021 2020
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 35,212 29,723 25,640
Total loans outstanding 524,655 493,355 417,822
Credit ratio 6.71 % 6.02 % 6.14 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 39,224 26,923 23,176
Total loans outstanding 524,655 493,355 417,822
Credit ratio 7.48 % 5.46 % 5.55 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 35,212 29,723 25,640
Total nonaccrual loans outstanding 39,224 26,923 23,176
Credit ratio 89.8 % 110.4 % 110.6 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (18,340 ) (12,935 ) (15,297 )
Average amount outstanding 490,960 471,068 394,542
Credit ratio 3.7 % 2.7 % 3.9 %
Commercial and industrial:
Net charge-offs during the period (4,920 ) (5,184 ) (4,745 )
Average amount outstanding 219,950 214,286 176,750
Credit ratio 2.2 % 2.4 % 2.7 %

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Real estate:
Net charge-offs during the period (115 ) (167 ) (232 )
Average amount outstanding 56,724 51,883 42,368
Credit ratio 0.2 % 0.3 % 0.5 %
Installment loans to individuals:
Net charge-offs during the period (13,295 ) (7,576 ) (10,433 )
Average amount outstanding 211,653 202,578 173,336
Credit ratio 6.3 % 3.7 % 6.0 %
Lease financing:
Net charge-offs during the period (11 ) (8 ) (15 )
Average amount outstanding 2,647 2,321 2,089
Credit ratio 0.4 % 0.3 % 0.7 %
Allowance for credit losses to total loans outstanding
In 2022, our allowance for credit losses to total loans outstanding credit ratio increased by 69 basis points, from 6.02% as of December 31, 2021 to 6.71% as of December 31, 2022. This was primarily due to the growth in allowance for credit losses, driven by a ~~sensitivity test~~recent increase in inflation, which primarily affected loans to individuals.
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.
Nonaccrual loans to total loans outstanding
In 2022, our nonaccrual loans to total loans outstanding credit ratio increased by 202 basis points, from 5.46% as of December 31, 2021 to 7.48% as of December 31, 2022. This was primarily due to the growth in total nonaccrual loans outstanding, driven by the deterioration of the macroeconomic situation in Brazil.
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.
Allowance for credit losses to nonaccrual loans
In 2022, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20.6 p.p., from 110.4% as of December 31, 2021 to 89.8% as of December 31, 2022. This was primarily due to a single customer defaulting in our large companies portfolio.
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20 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 ~~goodwill impairment analysis considering~~allowance for credit losses.
Net charge-offs during the period to average loans outstanding
In 2022, our net charge-offs during the period to average loans outstanding credit ratio increase by 100 basis points, from 2.7% as of December 31, 2021 to 3.7% as of December 31, 2022. This was primarily due to an increase of 4.2% in average loans outstanding and an increase of 41.8% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 120 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 15.4% in net charge-offs.
Commercial and Industrial Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans increased by 20 basis points, from 2.4% as of December 31, 2021 to 2.2% as of December 31, 2022. This was primarily due to an increase of 2.6% in average loans outstanding, while the net charge-offs decreased by 5.1%.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 20 basis points, from 2.7% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.2% in average loans outstanding, which was greater than the growth in net charge-offs of 9.3%.
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Real Estate Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 10 basis points, from 0.3% as of December 31, 2021 to 0.2% as of December 31, 2022. This was primarily due to an increase of 9.3% in average loans outstanding and a decrease of 31.1% in net charge-offs.
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.
Installment Loans to Individuals
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans increased by 260 basis points, from 3.7% as of December 31, 2021 to 6.3% as of December 31, 2022. This was primarily due to an increase of 4.5% in average loans outstanding and an increase of 75.5% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 30 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.
Lease Financing Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans increased by 10 basis points, from 0.3% as of December 31, 2021 to 0.4% as of December 31, 2022. This was primarily due to an increase of 14.0% % in average loans outstanding and an increase of 37.5% in net charge-offs.
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.
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 February 24, 2023, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
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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 as of December 31, 2022:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A.
Santander Leasing S.A. Arrendamento Mercantil Leasing Brazil 100.00 %
Aymoré Crédito, Financiamento e Investimento S.A. Financial Brazil 100.00 %
Santander Brasil Administradora de Consórcio Ltda. Buying club Brazil 100.00 %
Santander Corretora de Câmbio e Valores Mobiliários S.A. Broker Brazil 99.99 %
Santander Corretora de Seguros, Investimentos e Serviços S.A. Broker Brazil 100.00 %
Sancap Investimentos e Participações S.A. Holding Brazil 100.00 %
Santander Holding Imobiliária S.A. Holding Brazil 100.00 %
F1RST Tecnologia e Inovação Ltda. Other Activities Brazil 100.00 %
Rojo Entretenimento S.A. Other Activities Brazil 94.60 %
Sanb Promotora de Vendas e Cobrança Ltda. Other Activities Brazil 100.00 %
BEN Benefícios e Serviços Instituição de Pagamentos S.A. Means of Payment Brazil 100.00 %
Esfera Fidelidade S.A. Other Activities Brazil 100.00 %
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. Technology Brazil 80.00 %
SX Negócios Ltda. Other Activities Brazil 100.00 %
SX Tools Soluções e Serviços Compartilhados Ltda. Other Activities Brazil 100.00 %
Liderança Serviços Especializados em Cobranças Ltda. Collection Management and Credit Recovery Brazil 100.00 %
Return Capital S.A. Collection Management and Credit Recovery Brazil 100.00 %
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Capitalization Brazil 100.00 %
Evidence Previdência S.A. Private Pension Brazil 100.00 %
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. (6) Bank Brazil 50.00 %
Banco Hyundai Capital Brasil S.A  (current name of BHJV Assessoria e Consultoria Empresarial Ltda.) Bank Brazil 50.00 %
Solutions 4 Fleet Consultoria Empresarial S.A. Tecnology Brazil 80.00 %
Controlled by Santander Leasing S.A Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00 %
Santander Distribuidora de Títulos e Valores Mobiliários S.A. Distributor Brazil 100.00 %
Controlled by Santander Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários S.A. Broker Brazil 63.00 %
Toro Investimentos S.A. Investments Brazil 14.78 %
Controlled by Toro Corretora de Títulos de Valores Mobiliários S.A.
Toro Investimentos S.A. Investments Brazil 76.55 %
Controlled by Sancap
Santander Auto S.A. Technology Brazil 50.00 %
Consolidated Investment Funds
Santander Fundo de Investimento Unix Multimercado Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Paraty QIF PLC (1) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (1) Investment Fund Brazil (a)
BRL V – Fundo de Investimento Imobiliário – FII Real Estate Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado Investment Fund Brazil (a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos Investment Fund Brazil (a)
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior Investment Fund Brazil (a)
Verbena FCVS – Fundo de Investimento em Direitos Creditórios Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI – Não Padronizado Investment Fund Brazil (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) 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.
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4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 338 properties for the activities of our banking network and rent 1,681 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.
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, 2022, 2021 and 2020 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 ~~could reasonably be expected~~affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to ~~possibly change,~~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, 2022, 2021 and 2020, prepared in accordance with IFRS as ~~required~~issued by the ~~IFRS. Accordingly, we applied such~~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, 2022, 2021 and 2020 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.
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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 ~~test considering~~result of the ~~discount rate and perpetuity growth rate~~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 ~~the main assumption subject~~of December 31, 2020 to ~~reasonably possible change~~R$55 billion as of December 31, 2021, and we ~~did not identify any impairment to goodwill.~~
~~Other Factors Affecting the Comparability~~stopped consolidating Getnet within our results 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,~~operations on March 31, 2021. Furthermore, on April 15, 2021, we entered into a ~~binding amendment~~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, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events” 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
Brazilian Macroeconomic Environment
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil. While Brazilian GDP increased in 2022, due in part to fiscal incentives granted by the Brazilian government and the resumption of activities that were suppressed by restrictions imposed to curb the spread of COVID-19, 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:
As of and For the Year Ended December 31,
2022 2021 2020
GDP growth(1) 3.0 % 4.6 % (4.1 )%
CDI Rate 12.4 % 4.4 % 2.1 %
TJLP 7.2 % 5.3 % 4.6 %
SELIC rate 13.75 % 9.25 % 2.00 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.22 5.58 5.20
Depreciation (appreciation) of the real against the U.S. dollar (6.5 )% 7.4 % 28.9 %
Average real to U.S. exchange rate per U.S.$1.00(2) 5.17 5.40 5.16
Inflation (IGP-M) 5.5 % 17.8 % 23.1 %
Inflation (IPCA) 5.8 % 10.6 % 4.5 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2022 is based on Santander Brasil’s internal estimates. For 2021, the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
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 also 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 ~~SPA, to acquire all~~duration and severity of the ~~Getnet shares owned~~COVID-19 pandemic and its economic effects. In 2022, the relaxation of COVID-19 restrictions and continued fiscal incentives granted by ~~minority shareholders,~~Brazilian government have supported Brazilian GDP growth, which we estimate to have been 3.0% in 2022.
However, the macroeconomic outlook for 2023 is marred by high inflation, high interest rates, a deteriorating global economic outlook, continued political uncertainty following the presidential elections held in Brazil in the last quarter of 2022, and continued uncertainty regarding the course of the COVID-19 pandemic. 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. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—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.”
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Impact of COVID-19
Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment. 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 safe-guard 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—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.”
War in Ukraine
The ongoing war between Russia and Ukraine has caused an ongoing humanitarian crisis in Europe as well as volatility in financial markets globally, heightened inflation, shortages and increases in the prices of energy, oil, gas and other commodities. In response to the Russian military action against Ukraine, several countries, including the United States, the European Union member states, the United Kingdom and other UN member states, have imposed severe sanctions on Russia and Belarus. Furthermore, the risk of cyberattacks on companies and institutions could increase as a result of the military conflict and in response to the sanctions imposed, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures. The continuance or escalation of the war, including its extension to other countries in the region, could lead to further increases in energy, oil and gas prices (particularly if supplies to Europe are interrupted) and heightened inflationary pressures, which in turn could lead to further increases in interest rates and market volatility. In addition, the war has exacerbated supply chain problems, particularly to those businesses most sensitive to rising energy prices. The war and its effects could exacerbate the current slowdown in the global economy and could negatively affect the payment capacity of some of our customers, especially those with more exposure to the Russian or Ukrainian markets.
While we do not have a physical presence in Russia and Ukraine and our direct exposure to Russian or Ukrainian markets and assets is not material, the impact of the war in Ukraine and the sanctions imposed on global markets and institutions, the impact on macroeconomic conditions generally, and other potential future geopolitical tensions and consequences arising from the war remain uncertain and may exacerbate our operational risk. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic Conditions in Brazil and Globally—The war in Ukraine could materially affect our financial position and increase our operational risk.”
Interest Rates
In 2021, the Brazilian Central Bank began a monetary tightening cycle due to rising inflation, the depreciation of the real, and a perception of the recovery of certain economic activity following the easing of restrictions which had been imposed to suppress the circulation of COVID-19. The SELIC rate increased from 2.0% as of December 31, 2020 to 9.25% as of December 31, 2021 and 13.75% as of December 31, 2022 (the highest level since the end of 2016), a level at which it remains as of the date of this annual report.
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.
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The following table presents the low, high, average and period end SELIC rate since 2018, as reported by the Brazilian Central Bank:
Low High(1) Average(2) Period-End
Year
2018 6.50 7.00 6.58 6.50
2019 4.50 7.00 6.58 6.50
2020 2.00 4.50 2.87 2.00
2021 2.00 9.25 4.57 9.25
2022 9.25 13.75 12.57 13.75
2023 (through February 27, 2023) 13.75 13.75 13.75 13.75
(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, 2022, a 100-basis point increase in the yield curve would have resulted in R$945 million decrease in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2020, outstanding credit increased 10.5% 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 4.2% in 2020, while the household debt burden decreased to 22.4% 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 5.7% 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 (in December 2021, the former climbed to 4.4% and the latter reached 26.5% of household income). In 2022, outstanding credit increased 7.7% compared to 2021, the ratio of nonperforming loans to individuals reached 5.9% and the household debt burden reached 28.2% of household income.

As of December 31,

2022
2021
2020
(in billions of R$)
Total Credit Outstanding (1) 5,326 4,944 4,677
Earmarked credit 2,151 1,991 1,977
Non-earmarked based credit 3,175 2,953 2,700
of which:
Corporate 1,404 1,351 1,267
Individuals (retail) 1,771 1,602 1,433
(1) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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 2022, we recorded foreign exchange exposure of R$83.5 million, foreign exchange exposure of R$117.4 million in 2021 and foreign exchange exposure of negative R$124.4 million in 2020. 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 ~~11.5% Getnet’s share capital,~~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, 2022, 2021 and 2020—Results of Operations—Gains (losses) on Financial Assets and Liabilities (net) and Exchange Differences (net).”
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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.$1.00. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.62 to R$5.70 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.22 per U.S.$1.00. In 2023, through the date of this annual report, the real appreciated against the U.S. dollar as a result of improvements in commodity prices and better than expected fiscal results derived from higher revenues. As of February 27, 2023, the exchange rate was R$5.20 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. In 2022, as inflation increased to levels not seen since early 2003, as a result of which the Brazilian Central Bank increased the SELIC rate to 13.75% (the highest level since the end of 2016). Depreciation of the real may also, in the context of an ~~amount~~economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of ~~R$1.431 billion. The acquisition transaction~~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 CMN’s 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 ~~approved~~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 increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Similarly to the beginning of 2018, the Brazilian Central Bank delivered a letter to the CMN explaining why it failed to meet the inflation target and what actions would be implemented to ensure that inflation would converge to target in coming years. In 2022, inflationary pressures escalated in Brazil, including as a result of the ongoing war between Ukraine and Russia, supply chain issues, the continued COVID-19 pandemic (particularly in China) and increases in energy prices. As a result, inflation peaked in 2021 at multiple-year highs of 12.1% in Brazil in April 2022 (as measured by the IPCA in year-over-year terms) and 9.1% in the U.S. in June 2022 (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. Accumulated inflation for the year ended December 31, 2022, was 5.79% in Brazil and 6.5% in the United States. This resulted in tighter monetary policy by the Brazilian Central Bank, ~~on February 18, 2019~~which increased the SELIC rate from a low of 2.0% as of the end of 2020 to 13.75% as of August 2022, a level at which it has remained as of the date of this annual report.
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The majority of our income, expenses, assets and ~~settled on February 25, 2019,~~liabilities are directly tied to interest rates. Therefore, our results of operations and ~~we became~~financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the ~~holders~~growth of ~~100%~~the Brazilian economy, our loan portfolios, our cost of ~~Getnet’s shares.~~
~~Formation of Esfera Fidelidade S.A.~~
~~Esfera Fidelidade was incorporated on August 14, 2018 as~~funding and our ~~wholly-owned subsidiary. Esfera Fidelidade was formed to develop and manage customer loyalty programs. The company started its operations~~income from credit operations. We estimate that, in ~~November 2018.~~
~~Investment in Loop Gestão de Pátios S.A.~~
~~In 2018, Webmotors S.A.,~~2022, 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 capital1.0% 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.
~~Formation of BEN Benefícios e Serviços S.A.~~
On June 11, 2018, Santander Brasil incorporated BEN Beneficios. BEN Beneficios is engaged in create, supply and administer various types of vouchers and tickets used for the provision of employee benefits (such as for meals, transportation and cultural events)or decrease in the ~~form~~base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of ~~printed electronic~~R$945 million within a one-year period. Any changes in interest rates may negatively impact our business, financial condition and ~~magnetic cards. The company began its operations~~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 ~~second quarter~~short run the risk of ~~2019.~~default by our customers.
~~Creation of PI Distribuidora de Títulos e Valores Mobiliários S.A.~~
~~On May 3, 2018, Santander Finance Arrendamento Mercantil S.A., one of~~Inflation adversely affects our ~~indirect subsidiaries, was converted into a securities brokerage~~personnel and ~~changed its corporate name~~other administrative expenses that are directly or indirectly tied to ~~SI Distribuidora de Títulos e Valores Mobiliários S.A. The conversion process was approved~~inflation indexes, such as the IPCA, and the IGP-M. For example, considering the amounts in 2022, each additional percentage point change in inflation would impact our personnel and other administrative expenses 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 for the aforementioned name change from the Brazilian Central Bank. The
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~~company begun its operations in March 2019.~~
~~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 from Produban Servicios Informáticos Generales, S.L., forapproximately 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.~~
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 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$41492 million and ~~an additional amount of up to~~ R$3581 million, ~~may be paid if certain contractual targets are met. The transaction closed on April 2, 2018.~~respectively.
~~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. As a result of this transaction, Atual currently owns 100% of the Return Entities’ issued and outstanding share capital.
~~Joined Certain Tax Payment Plans~~
In 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 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
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million was due by January 2018, both of which we have made within the prescribed time limits. As a result of 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 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 creation of a credit intelligence bureau, 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 purpose of the CIB is to develop a database that, in conformity with applicable laws, will collect, reconcile 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 in the Brazilian Financial System and to other corporate entities.
On April 14, 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 approved 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.
~~Formation 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. the authorization to operate as a banking entity. Banco Hyundai Capital Brasil S.A. began its operations in the first half of 2019. On April 30, 2019, the Brazilian Central Bank granted the authorization to the formation of the insurance brokerage company, which was incorporated on July 2, 2019. The company began its operations on November 2019.
~~Sale of Santander Securities Services Brasil Distribuidora de Títulos e Valores Mobiliários S.A., or “SSS DTVM”~~
On June 19, 2014, we executed 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 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 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 shares in SSS DTVM were formally transferred 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$751
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~~million before taxes recorded in the “Other non-financial gains/losses” line.~~
Issuance of Notes
OnIn November ~~5, 2018,~~and December 2021, Santander Brasil issued financial bills (letras financeiras), or 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 ~~aggregate~~total amount of ~~U.S.$2.5 billion, pursuant~~R$5.5 billion. These Financial Bills have a term of 10 years, and redemption and repurchase options in accordance with the applicable regulations. These Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.
Spin-Off of Getnet
On February 25, 2021, further to ~~an offering made~~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 ~~non-U.S. Persons under Regulation S~~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 ~~U.S. Securities Act~~Spin-Off, each holder of ~~1993,~~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 ~~amended,~~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 the B3, and Getnet ADSs are traded on The Nasdaq Stock Market LLC, or the ~~“Notes Offer”~~“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.”
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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. Following closing on May 26, 2022, Santander Corretora holds a 20% interest in CSD BR.
Acquisition of interest in SX Tools Soluções e Serviços Compartilhados Ltda.
On September 26, 2022, we acquired the entire issued share capital of SX Tools Soluções e Serviços Compartilhados Ltda., or “SX Tools”, becoming its sole shareholder. As part of the acquisition, we increased the share capital of SX Tools from R$1,000 to R$192 million. SX Tools will primarily provide us and our subsidiaries back-office services to improve the efficiency of our routines.
Total spin-off of Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. to Return Capital S.A. and Liderança Serviços Especializados em Cobrança Ltda.
On October 31, 2022, Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., or “Atual”, was fully spun off and its assets were absorbed by both of its direct subsidiaries, Return Capital S.A., or “Return”, and Liderança Serviços Especializados em Cobrança Ltda., or “Liderança,” in accordance with the proportions established in the transaction documents. With the implementation of the total spin-off, Return's capital was increased by R$3,991 million and Liderança’s was increased by R$267 million, with both now being held directly by us, as the sole shareholder.
Investment in Biomas – Serviços Ambientais, Restauração e Carbono S.A.
On November 9, 2022, our wholly owned subsidiary, Santander Corretora, entered into an investment agreement to acquire up to 20% of the share capital of Biomas – Serviços Ambientais, Restauração e Carbono S.A., or “Biomas”. Biomas provides biodiversity and ecosystem restoration and conversation services, which is aligned with our ESG objectives. Closing of this transaction is subject to customary closing conditions, including regulatory approval.
Sale of equity stake in Banco PSA and PSA Corretora de Seguros
On November 29, 2022, we, through our subsidiaries, sold our 50% equity interest in each of Banco PSA Finance Brasil S.A, or “Banco PSA,” and PSA Corretora de Seguros e Serviços Ltda., or “PSA Corretora,” to Banque PSA Finance, S.A. and Stellantis Services Ltd. Upon closing of the transaction, which is subject to customary conditions precedent, we will no longer be a shareholder of either of these entities.
Investment in Gestora de Informação de Crédito S.A.
On December 20, 2022, Lexisnexis Serviços de Análise de Risco Ltda., or “Lexisnexis” agreed to acquire newly-issued shares of Gestora de Informação de Crédito S.A., or “GIC,” a
company in which hold an equity interest. GIC develops a database with the objective of aggregating, reconciling and processing registration and credit information of individuals and legal entities to support credit granting, pricing and marketing activities. Upon closing of the transaction, our interest in the share capital of GIC as diluted and decreased from 20% to 15.6%.
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Change in Chief Financial Officer and Investor Relations Officer
On February 16, 2023, we announced that our current executive vice-president, who performs the roles of Chief Financial Officer and Investor Relations Officer, Mr. Angel Santodomingo Martell will be resigning from his positions at Santander Brasil effective March 20, 2023. Our board of directors will appoint Mr. Gustavo Alejo Viviani to succeed Mr. Angel Santodomingo Martell in all his positions with us. Mr. Gustavo Alejo Viviani is already an Executive Vice-president of Santander Brasil and previously worked in our risks, corporate banking and collections areas. For additional information on Mr. Gustavo Alejo Viviani, see “Item 6. Directors, Senior Management and Employees—6A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers—Gustavo Alejo Viviani.”
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally. The following is 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 in 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 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 March 2020 to October 2021, our branches operated during 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. 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. Since November 2021, we expanded our service hours at our branches from 9:00 a.m. to 4:00 p.m. from November 2021 to June 2022 and then from 9:00 a.m. to 5:00 p.m. through to the date of this annual report to enhance proximity and availability to our customers.
· From March 2020 to June 2020, we 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 these and other measures, our deferred loan portfolio reached a total of R$18.7 billion as of December 31, 2022, R$25.9 billion as of December 31, 2021 and R$40.6 billion as of December 31, 2020. 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 COVID-19 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 of government-sponsored loans reached R$8.9 billion and R$10.3 billion as of December 31, 2022 and 2021, respectively.
· 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 above-mentioned 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). In the year ended December 31, 2022, COVID-19’s impact on our result was reduced as the contagion subsided. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2022, 2021 and 2020—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, 2022, 2021 and 2020—Results of Operations—Net Fee and Commission Income.”
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· 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 of the COVID-19 pandemic and took into account both quantitative and qualitative factors. In 2021, as a response to the macroeconomic shock of the COVID-19 pandemic, we used 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, 2022, 2021 and 2020—Results of Operations—Impairment Losses on Financial Assets (Net).” However, we also experienced an improvement in our loan portfolio in 2022, in particular with respect to individuals as loans to individuals increased by 19.5% in the year ended December 31, 2022 compared to the year ended December 31, 2021. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2022, 2021 and 2020— Results of Operations—Impairment Losses on Financial Assets (Net).”
· In 2020, the 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 of 30% of adjusted net profit for the year ended December 31, 2020. This suspension on the payment of dividends was not renewed in 2021 and 2022. The CMN also published Resolution No. 4,783, which temporarily reduced 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% 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 returned to its pre-COVID level of 2.5% (at which it stands as of the date of this annual report). 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 also experienced an increase in digital business during the COVID-19 pandemic. This trend has continued in 2022 as we recorded an increase of 17% in the number of new contracts originated through digital channels in the year ended December 31, 2022 compared to the year ended December 31, 2021.
See also ~~approved~~“Item 3. Key Information—D. Risk Factors—Risks Relating to the ~~redemption~~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.”
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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 2022, 2021 and 2020, total investments in information technology were R$1,885 million, R$1,905 million and R$1,432 million, respectively.
In 2022, 2021 and 2020, we continued to improve our technology platforms by investing 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. We believe that the application of these new technologies improved our interaction with our customers and enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness and 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 and the sales 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 pursuing profitable and sustainable growth. We believe that the expansion of our customer base throughout the years stems from our ability to capture new customers and increase their loyalty. This strategy is supported by a product and service offering designed to support the needs of our customers. Furthermore, our quest for service quality, combined with increasingly integrated sales channels, has led to a higher level of satisfaction among our customers, with an individual NPS of 54 points as of December 31, 2022. We have continued to develop our business by steadily enhancing our ecosystem, broadening our presence through new services and advancing into new markets via both organic and inorganic growth, whereby we have made acquisitions and partnerships in recent years, incorporating greater expertise into the business, as well as by endeavoring to increase cross-selling and leveraging the consistent use of data and customer relationship management tools. We also endeavor to maintain sound risk management, which entails continuously improving our lending models to maintain our credit risk indicators at levels consistent with our risk management policies. Additionally, we strive to enhance our operational efficiency ratio by streamlining processes and implementing technologies.
We recorded net income of R$14,339 million, R$15,559 million and R$13,451 million in the years ended December 31, 2022, 2021 and 2020, a decrease of 7.8% in the year ended December 31, 2022 compared to the year ended December 31, 2021. In the years ended December 31, 2022, 2021 and 2020, we achieved capital adequacy ratios of 13.9%, 14.9% and 15.3%, respectively. In the years ended December 31, 2022, 2021 and 2020, we have achieved efficiency ratios of 27.4%, 27.1% and 35.5%, and adjusted efficiency ratios of 27.5%, 28.2% and 27.8%, respectively. In addition, we achieved an adjusted return on average stockholders’ equity of 14.2%, 20.2% and 18.4% in 2022, 2021 and 2020, 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 that these metrics demonstrate our track record of consistent performance and the results of our constant efforts to improve our productivity.
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:
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· In 2016, we initiated our commercial transformation by implementing new work models, streamlining processes and digitalizing our operations. In 2017, we took steps to improve service quality and we placed customer satisfaction at the core of our strategy. In 2018, we introduced an industrial cost approach into our banking business to complement our culture of service. This industrial cost approach covers three critical fronts: organization, technology and culture. In 2019, we expanded our ecosystem by launching Sim, emDia, Santander Auto, Auto Compara and Ben Visa Vale while taking steps to reposition 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 about by the COVID-19 pandemic. We sought to improve and expand our digital channels in order to deliver robust self-service banking to our customers 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 and functionalities, differentiating ourselves in the launch of the Brazilian Central Bank’s PIX instant payment solution.
· In 2021, we continued our efforts to improve customer experience and satisfaction across all channels: physical, digital, external and remote. Our strategy was to convert new customers into loyal customers (defined as those who have purchased and are using six or more of our products at the time of measurement). Moreover, we continued our efforts to improve our digital operations by expanding our offerings through this channel and continued to focus on streamlining processes, digitizing our operations and reducing paper consumption to operate more quickly and efficiently.
· In 2022, we continued to pursue our commitment to becoming a leading client oriented company in Brazil, underpinned by a culture of growth and a customer-centric strategy predicated on four strategic pillars:
(i) customer centricity: a focus on maximizing the experience and satisfaction of our customers by providing simple, comprehensive and suitable solutions for each profile, concurrently with the development of our sales channels, the enhancement of self-service capabilities and our customer support;
(ii) sales channels: building a fast and efficient sales platform, with channels that are more integrated and accessible to customers whenever and wherever they desire by: (a) continuing to capitalize on opportunities from the flow of customers in our stores in our physical sales channel; (b) receiving over 541 million monthly visits across our digital sales channels in 2022; (c) in the remote channel, leveraging customer support into a sales channel that focuses on sales and after-sales by addressing an average of 10.3 million consumer inquiries each month in 2022; and (d) in the external channel, bolstering our geographic expansion by adding 9,620 points-of-sale to a total of 15,647 points-of-sale covering 44% of the Brazilian municipalities;
(iii) innovation and profitability: we encourage innovation as we seek to fulfill the demands of our customers. We concentrate on advancing strategic businesses, expanding them into new markets and diversifying our portfolio offering, in addition to accelerating our core operations; and
(iv) culture: building a company in which all employees have both a business and a customer perspective, serving as brand influencers and promoters, with a horizontal and distinctive culture, where empowerment, meritocracy and diversity are the cornerstones. We believe that our environmental, social and governance culture is an integral part of our operations. Furthermore, our governance is reinforced by a diverse board of directors, with women accounting for 33% of its members.
Our Business
We provide our complete portfolio of products and services to our 31.8 million active customers (consisting of current account-holding customers who carried out an unprompted transaction in the 90 days preceding the relevant measurement date and customers who do not have a current account with us but have minimum balances, transaction frequency levels or active contracts) as of December 31, 2022 through the following business segments:
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· 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, composed 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
Individuals
SMEs
Consumer Finance
Corporate
Santander Corporate & Investment Banking (“SCIB”)
For the Year Ended December 31,
Net interest income Operating profit before tax
2022 2021 2020 2022 2021 2020
(in millions of R$)
Commercial Banking(1) 45,618 46,236 41,457 13,281 19,491 4,666
Global Wholesale Banking 1,885 5,082 2,985 6,294 5,260 4,998
Total 47,503 51,318 44,443 19,575 24,750 9,664

(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 effects of the hedge for investments held abroad in 2022, 2021 and 2020 amounted to a loss of R$129 million and a gain of R$2,512 billion and R$13,583 billion, respectively.
The following table shows a managerial breakdown of our loans and advances by customer type as of dates indicated:
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
(in millions of R$)
Individuals 243,399 203,678 174,042 19.5 % 17.0 %
Consumer Finance 58,824 55,441 51,637 6.1 % 7.4 %
SMEs 62,916 59,602 54,525 5.6 % 9.3 %
Corporate(1) 159,516 174,634 137,618 (8.7 )% 26.9 %
Total Credit Portfolio 524,655 493,355 417,822 6.3 % 18.1 %
(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:
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• Private Banking – responsible for customers with at least R$5.0 million in assets available for investment. Private banking offers 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 – responsible for customers with either a monthly income of R$15,000 or more, or at least R$100,000 in investments, and for any customer that chooses to pay for this service category, regardless of their income or amount of investments. Santander Select offers differentiated products and services, exclusive branches, relationship managers who serve a small number of customers and provide asset management advisory services.
· Santander Van Gogh – responsible for customers with a monthly income ranging from R$7,000 to R$14,999, and for customers that choose to pay for this service category. Within Santander Van Gogh, 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 in which they have the option of human assistance in all channels, including financial products and services that support their building of equity and investments.
· Santander Especial – responsible for customers with a monthly income of up to R$6,999 per month. Santander Especial offers simple and efficient solutions with an attractive cost benefit to the customer, primarily through electronic channels.
We launched the following products or functionalities for retail customers in 2022:
· Gamefication of credit limits – Customers who comply with established behaviors in a game are able to increase their credit limits.
· Chat Van Gogh – Improvement of the Van Gogh customer experience by providing contracting and other services via chat through our app.
· Contracting Simplification – We simplified the process for customers to contract service packages regardless of income, for all individual customers.
Retail – 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 and current affiliate Getnet. Through this arrangement, our customers receive benefits for using the Getnet solution to process their credit card sales, with receipts being deposited into a Santander Brasil checking account.
• 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, or “Gent&”, the artificial intelligence solution for service and sales.
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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 other brands.
The following table sets forth auto loans portfolio market share for auto loans (a subset of our consumer finance business) as of the dates indicated:
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Individual auto loans portfolio market share (1) (%) 22.3 % 23.8 % 25.1 % (1.5) p.p. (1.3) 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 customers. The product offering ranges from simple cash accounts to mergers and acquisitions advisory services. We leverage our strength in consumer finance, asset and wealth management, payments and markets to serve our customers and their shareholders, employees, customers and suppliers. We serve companies with annual gross revenues in excess of R$200 million located across Brazil through physical and digital channels. Our corporate banking business has been constantly evolving as a business line relying on a disciplined analytical toolkit, consistent communication and workforce upskilling.
Global Wholesale Banking
Santander Corporate & Investment Banking, or 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 the 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 integrated services.
Our Portfolio of Products and Services
Payments
Credit and Debit Cards
We operate in the credit and debit card market by issuing cards to our customers (including both account and non-account holders), with most customers being individuals. Our strategy is to always offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
In 2022, we sought to revisit the value proposition of our high-income cards (Unique and Unlimited) to offer our customers more attractive benefits, as well as easier ways to receive fee exemptions and to improve the products’ standing in the market. Moreover, we implemented a loyalty points program in our co-branded “American Airlines” card, which we believe contributed to an increase in issuances of co-branded American Airlines cards by 140% in the year ended December 31, 2022 compared to the year ended December 31, 2021 We have also been marketing the exclusive Santander American Express Centurion card to our private banking customers, including by hosting a special event for 200 prospective and current holders of this card.
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To attract new customers, we launched several campaigns with different competitive offers, such as: (i) one-day campaigns to generate a sense of urgency regarding our service offerings; (ii) specific campaigns for the sale of co-branded American Airlines and Smiles cards; and (iii) a campaign that allowed some customers to try out a card at no cost for a specified period, with accelerated benefits.
Given that Brazilian customers have, in general, more than two cards with different banks, we bet on monetization promotions to encourage our customers to concentrate their expenses on Santander Brasil cards, including: (i) three editions of the “Bateu Ganhou” campaign, which set monthly spending goals for customers and rewarded them with bonus points, miles, or cashback; (ii) the “Desafio Santander” campaign, which set five challenges for customers to retain and increase profitability (e.g., signing onto additional cards, online card purchases, upgrades and open finance measures) in exchange for cashback rewards; (iii) the thematic “Sorte de Craque” campaign in connection with the 2022 World Cup held in Qatar, in which for every R$100 in purchases on a credit card, the customer entered a lottery for a trip to Qatar; and (iv) an edition of the “Sua Casa tá ON” campaign, which encouraged recurring payments using virtual cards with a dynamic security code to improve safety.
Regarding our ESG efforts, we issued over six million recycled PVC cards in the year ended December 31, 2022, contributing to our goal of attaining net zero greenhouse gas emissions by 2050.
In the SME segment, we believe it is essential for businesses to have greater autonomy and flexibility in handling issues that can affect their daily operations, such as cash flow management. Accordingly, we continued to develop our digital platform to provide: (i) autonomy to companies in managing their credit lines and contracts; and (ii) the ability for customers to leave their branch with a card immediately after signing up. We have also integrated additional card-related information, including available limits, bar codes, invoice amounts, and optimal purchase dates, on our AI-powered virtual assistant, Gent&.
With a focus on enhancing the customer experience, we enabled direct registration of Santander Brasil apps on Samsung Pay in March 2022 and on Apple Pay in November 2022. Our customers can now register their Santander Brasil cards on these digital wallets and easily conduct transactions via NFC (near field communication) technology using their mobile devices, providing a convenient and seamless experience.
The following table sets forth certain key financial and operating data regarding our credit card business as of the dates and for the periods indicated.
As of and For the Year Ended December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Credit card portfolio market share (1) 10.5 % 12.4 % 13.4 % (1.9 p.p.) �� (1.0 p.p.)
Credit card portfolio (R$ billion) 50.5 48 37.8 5.2 27.0
Total card turnover (R$ billion) 338.1 306.0 242.0 10.5 26.4
Credit card turnover (R$ billion) 226.5 203 158.7 11.6 27.9
Total card transactions (in millions) 4,362.5 3,555.3 2,570.8 22.7 38.3
Credit card transactions (in millions) 2,344.5 1,859.1 1,300.0 26.1 43.0
Participation of credit card in the household consumption (only debit) – Market overview (2) (%) 16.2 % 17.5 % 17.4 % (1.3 p.p.) 0.1 p.p.
Participation of credit card in the household consumption (only credit) – Market overview (2) (%) 34.1 % 30.6 % 25.2 % 3.5 p.p. 5.4 p.p.
Participation of credit card in the household consumption (total: debit, credit and pre-paid) – Market overview (2) (%) 53.8 % 50.3 % 43.5 % 3.5 p.p. 6.8 p.p.
(1) Source: Brazilian Central Bank, as of September 30, 2022. Data for the year ended December 31, 2022 was not available as of the date of this annual report.
(2) Source ABECS – “Monitor bandeiras.” as of September 30, 2022. Data for the year ended December 31, 2022 was not available as of the date of this annual report.
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Santander Way
Santander Way is an app designed for our cardholders, which allows them to manage their Santander Brasil cards from anywhere, at any time. The card management experience, provided by this platform includes the ability to make payments, transfer funds, add cards to digital wallets, and participate in campaigns, among other features. We seek to update the app regularly with new features. In 2022, we introduced notable enhancements, such as: (i) the "Credit Limit Game," which enables customers to increase their credit limits in a simple and easy way through day-to-day actions; and (ii) digital wallet integration, allowing customers to add their Santander cards to Samsung Pay or Apple Pay via push provisioning.
Esfera
Our loyalty program, Esfera, is accessible through its own website and mobile app. This platform, which is open for enrollment to any person in Brazil, provides customers with the opportunity to earn, purchase and redeem reward points for a variety of products, services, and travel benefits, including exclusive deals and discounts with Brazilian retailers and other select partners. As of the date of this annual report, Esfera also operated a marketplace that featured cashback rewards on product purchases from over 60 participating partners.
Ben
Ben is a corporate benefits company that works to enhance the flexibility, purchasing power, and quality of life of its users by designing, supplying, and managing multiple types of employee benefit vouchers (e.g., meal, food, and transportation vouchers) in the form of magnetic cards. These benefits are offered via an integrated digital platform.
Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.
Ben is currently working on the development of new products, such as fuel cards and other benefit options to expand its portfolio.
Furthermore, Ben recently added Ben Único to its portfolio. This solution offers two types of benefits on a single card, thus lowering card issuance and logistics costs, while contributing to our ESG efforts by reducing the number of cards in circulation. In line with its new product development plan, Ben applied to the Brazilian Central Bank for a license to operate as a payment institution (instituição de pagamento), which was granted in December 2021.
The following table sets forth certain key financial and operating data regarding Ben’s business as of the dates and for the periods indicated.
As of and For the Year Ended December 31,
2022 2021 2020
(in R$ millions, except as otherwise indicated)
Revenue from card sales 2,456 1,484 946
Number of Cards (in thousands) 831 565 217
Number of Transactions (in thousands) 30,442 20,477 12,192
Merchant accredited (in thousands) 399 365 338
For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
Payroll Loans
We offer payroll loans to both account and non-account holders. Repayment installments are deducted on a monthly basis directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, thereby significantly reducing our credit risk compared to other types of loans. These payroll loans are accessible to our customers via our mobile banking platform and 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 Banco Olé. For further information on relevant events relating to Banco Olé, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Market share in origination (1) 17.09 % 15.33 % 16.68 % 1.76 p.p. (1.35) p.p.
Payroll loan portfolio (R$ billion) 59.4 53.2 47.9 11.7 % 11.1 %
(1)       Source: Brazilian Central Bank, as of December 31, 2022, 2021 and 2020, as applicable.
Sim
SIM is a digital lending platform accessible to the general public, where customers can apply and receive approval for loans online. After operating for three years, SIM and +Vezes, a goods and services financing platform for retailers, merged to reinforce their value proposition and offer two business lines: (i) Sim-CP, which provides personal loans with or without collateral, and (ii) Sim-Consumer, which operates in direct consumer financing.
On a combined basis, these two Sim platforms have a total loan portfolio of approximately R$6 billion, more than nine million registered users and a high level of customer satisfaction, with an NPS of 84 points as of December 31, 2022 . Sim also benefits from a specialized sales force with a commercial team of approximately 500 people across Brazil and significant capillarity across to offer its products, with more than 30,000 points of sale offering Sim’s products as of December 31, 2022.
In March 2022, we launched “Pioneer,” a new financing software that enables better customization, flexibility and management of the sales process. As of December 31, 2022, nearly 80% of stores using our consumer finance software had taken advantage of the tool’s functionalities.
We also launched three projects focusing on collateralized loans: (i) offering car equity loans directly at the point of sale, in partnership with Santander Financiamentos, making Sim’s car equity loan available at more than 20,000 car dealers across Brazil as of December 31, 2022; (ii) FGTS Annual Withdrawal Advance (Antecipação do Saque Aniversário FGTS), which advances funds owed to customers as part of their annual, scheduled FGTS payouts, and (iii) finally, at the end of 2022, we released Energia+, an e-commerce platform that allows customers to simulate and apply for residential or commercial solar energy projects using a fully digital process that streamlines the purchase process.
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. In 2022, emDia joined forces with Liderança, a collections call center that we acquired in the second half of 2021, to become a full-service collections solution for its customers, with both call center and digital solutions. In the year ended December 31, 2022, emDia and Liderança had combined revenues of R$211 million.
Return Capital
Return is a specialized written-off collections master servicing company. It provides IT platform, data science, legal and financial advisory, marketing intelligence and back-office services to its customers, which are mostly credit rights investment funds (fundos de investimento em direitos creditórios), or “FIDCs,” such as FIDC Ipanema (a wholly owned Santander fund specialized in buying written-off portfolios).
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Mortgages
We provide long-term financing to our customers for real estate purchases, with the real estate serving as collateral for the loan. We view mortgages as a strategic product due to their lower risk (since the acquired property serves as collateral) and potential to foster customer loyalty (since we offer customers more attractive rates if they choose to bank with us). Our primary customers, as well as those of our competitors, are predominantly individuals.
We only provide mortgage loans that adhere to prime lending regulatory standards for this type of loan. This means that: (i) we limit the financing to a maximum of 90% of the value of the property to be purchased, (ii) the borrower’s monthly income must meet certain minimum requirements, as evidenced by recent payroll information and tax returns confirming their employment status or other revenue sources, thereby allowing us to assess their credit risk profile, and (iii) any other debt added to the financing cannot exceed 35% of the borrower’s monthly gross income.
To simplify the mortgage lending process for our customers, we have developed a digital platform for real estate financing. We were the first bank in Brazil to offer customers the ability to obtain mortgages online, except for the signing and registration of the agreement, which must be done in person. We have established a partnership with the largest real estate platform in Brazil to expand our sales network and bolster our digital presence in this market.
The following table sets forth certain key financial and operating data regarding our mortgage business as of the dates indicated:
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
(in billions of R$, except as otherwise indicated)
Mortgage loan portfolio 58.3 54.8 45.8 6.4 % 19.7 %
Individual sector mortgage loans 56.3 53.0 44.0 6.2 % 20.5 %
Loan to value(1) – Production (% quarterly average) 60.8 % 65.5 % 64.9 % (4.7) p.p. 0.60 p.p.
Loan to value – Portfolio (%) 50.1 % 52.5 % 52.2 % (2.4) p.p. 0.30 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. We are the main private bank for this type of loan in Brazil, with a market share of 22.4% as of December 31, 2022, according to the Brazilian Association of Real Estate Credit and Savings Entities (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança). Our portfolio was R$3.9 billion as of December 31, 2022, an increase of 20% compared to our portfolio as of December 31, 2021. In the year ended December 31, 2022, we remained focused on improving the customer journey and experience, and achieved a 40% reduction in lead time to grant home equity loans (from 24 working days to 14 working days).
We do not offer home equity loans that do not meet the applicable 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.
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Tailored Products and Services
As stated above, our customers have access to a full range of services and products. Thus, our portfolio encompasses offerings from basic to tailor-made and highly intricate solutions across the following areas:
· Global Transaction Banking – responsible for the sale and management of local transactional banking products, which include local loans, commercial financing options such as confirming, transfers with funds from development banks, local loan structuring, and cash management solutions (cash management).
· Global Transactional Services – responsible for the sale of global transactional products, financing for export and import (trade finance), guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
· Global Debt Financing – responsible for providing financing and financial advisory services for infrastructure projects, origination, and distribution of fixed income instruments in capital markets (local and international debt capital markets), financing for acquisitions, and syndicated loans in both local and foreign currency.
· Investment Banking – advisory services for mergers and acquisitions, as well as equity transactions in capital markets.
· Equities – this area operates brokerage services for corporate, institutional and individual investors in stocks and listed derivatives, and also offers research services.
· Treasury Customers (Sales) – responsible for structuring and offering foreign exchange products, derivatives and investments to customers across our various segments, including institutional investors, corporate customers and individuals.
· Market Making – responsible for pricing operations (foreign exchange and derivatives) for customers originated from the sales efforts of our corporate, institutional, private banking and retail areas. This area is also responsible for managing our proprietary books.
· Energy Trading – performs transactions with both qualified and end customers, in addition to acting as a hedge and market making provider in energy markets
We are a leading bank in capital markets and financial advisory services, both in Brazil and abroad, as evidenced by the numerous awards we have received. A few of our most notable accolades are listed in the table below.
Company
Acknowledgments
Dealogic
Full Year 2022
#7 Latin America M&A Revenue by Advisor
#7 Brazil M&A Revenue by Advisor
#3 Latin America & Caribbean DCM Volume by Bookrunner
#4 Latin America & Caribbean International DCM Volume by Bookrunner
#3 Latin America Domestic DCM Volume by Bookrunner
#7 Latin America and Caribbean Loans Volume by Bookrunner
#7 Latin America and Caribbean IB Revenue by Bank
#8 Brazil IB Revenue by Bank
Global Finance Best New Measures to Support Trade Finance Customers during Pandemic 2021
Best Supply Chain Finance Bank Global 2021
Best Post-Shipment Financing Solution 2021
Best Bank for Payments & Collections Award 2022
Best Provider of Short-Term Investments Money 2021
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Institutional Investors
Full Year 2022
#1 Best Analyst in the ESG Research LatAm
#3 Best ESG Team Research LatAm
# Top 3 in Brazil II for Sales, Trading and Corporate Access
FX Markets
Best Bank for USD/BRL (2nd consecutive year)
Best Bank for LatAm (4th consecutive year)
Latin Finance
Bank of the Year: Southern Cone 2021
Brazilian Central Bank
#1 Total FX September 2022
The Banker Best Transaction Bank for Latam 2021
Global Capital #1 Most Impressive Local Bank for Latin America Bonds 2022
Infralogic 2022
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#2 Latin America Bond Arrangers by value
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#1 Latin America Loan Arrangers by value
#1 Latin America Financial Advisors by deal count – Project Finance
#1 Latin America Loan Providers by value – Project Finance
#2 Latin America Bond Arrangers by value  – Project Finance
#3 Latin America Financial Advisors by deal count – M&A
#1 Latin America Financial Advisory by deal count – DCM
#2 Latin America Loan Providers by value – DCM
#2 Latin America Loan Arrangers by value – DCM
#3 Latin America Bond Arrangers by value – DCM
#1 Latin America Financial Advisors by deal count – Project Finance
#2 Latin America Loan Providers by value – Project Finance
#3 Latin America Bond Arrangers by value – Project Finance
#9 Latin America Loan Arrangers by value – M&A
#2 Latin America Financial Advisors by deal count – M&A
Customer Solutions
Agribusiness
Agribusiness remains one of our main levers of growth, and we are focused on developing our agribusiness solutions, both by covering geographical areas where we did not previously operate, and by investing in technology and people.
As of December 31, 2022, our agribusiness portfolio (including credit, securities and other products) amounted to R$37.5 billion. Since 2015 our portfolio has risen by an average of 30% per year. As a result of this strategy, our portfolio in the agribusiness sector increased significantly so that by 2020 we believe we had already established ourselves as a leading bank in the agribusiness sector. In addition, in 2021, we launched a new commercial strategy in the agribusiness sector whereby we aimed to offer our agribusiness products across all of the regions of Brazil. As a result, since we were able to grow our agribusiness portfolio by 84% from December 31, 2020 to December 31, 2022.
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We plan to continue to build our agribusiness portfolio with a wide array of solutions along the entire agribusiness supply chain, from support in financing equipment to extending credit to agricultural producers. In addition, our ecosystem is complemented by Gira, which is specialized in the management of agribusiness receivables.
The following table sets forth certain key financial and operating data regarding our agribusiness as of the dates indicated.

As of
December 31,
Change between 2021 and 2022
Change between 2020 and 2021

2022
2021
2020
(in billions of R$, except percentages)
Agribusiness portfolio (1) 37.5 27.3 20.4 37.4% 33.8%
(1)       Including credit, securities and other products.
Microfinance
We believe Prospera Santander Microfinance is a leading microcredit-oriented operation among private-sector banks in Brazil based on market share and portfolio value. Prospera Santander Microfinance’s mission is to offer credit alternatives, alongside financial guidance to micro and small entrepreneurs through a fully digitalized process, enabling them to grow their businesses. In doing so, we not only support these entrepreneurs, but also endeavor to contribute to the development of local communities and to job creation. In addition to providing microcredit solutions, we offer basic banking services, notably to our unbanked clients, such as current accounts, debit cards, savings accounts, and point-of-sale terminals, for those who require other payment options. The following table sets forth certain key financial and operating data regarding our microfinance business as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Number of Prospera Microfinance stores 142 119 99 19.3 % (20.0 %)
Microfinance loan portfolio (R$ billion) 2.7 1.9 1.3 38.3 % 49.2 %
Santander Insurance Ecosystem
We offer our insurance products through Santander Corretora de Seguros, helpS, Auto Compara and Santander Auto. Our insurance business as a whole generated premiums of R$10.8 billion in the year ended December 31, 2022.
Insurance
Santander Corretora de Seguros is one of the largest insurance brokers in the Brazilian market, according to SUSEP’s report for the year ended December 31, 2022, offering a full range of products, particularly in the retail segment. Our goal is to build a comprehensive insurance ecosystem for our customers, providing them with all-encompassing solutions to support their daily activities. Our insurance portfolio includes a broad range of life and personal accident insurance, vehicle and property insurance, credit insurance, and travel insurance products. These insurance products are sold through our website, mobile app, branches, call center, ATMs, and bank correspondents.
We totaled R$9.5 billion in earned premiums for the year ended December 31, 2022, representing increases of 1% from the year ended December 31, 2021 and 33% relative to the year ended December 31, 2020. According to SUSEP’s report for the year ended December 31, 2022, we are one of the market leaders in personal insurance (which includes life, personal accident, and credit insurance), with a 13% share of premiums in 2022. 64% of credit originations eligible for insurance in the year ended December 31, 2022.
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Our main objective in this area is to continuously innovate and tailor our insurance solutions to address the needs of our customers, ensuring a seamless experience from purchase to renewal, and especially in the usage of insurance when needed. Furthermore, we are increasingly focused on utilizing data to offer personalized experiences and simplify our value proposition, with optimized customer support across our various service channels. We believe this makes our insurance policies more appealing to potential customers.
helpS
helpS is a personal assistance service that offers solutions for different types of 24/7 emergencies in the home, automobile, pets, tech, game and bicycle segments. It is available to all Santander Brasil customers as an optional monthly subscription starting at R$19.90 per month. Officially launched in May 2022, Santander helpS sold thereabout 40,000 subscriptions exclusively through the Santander app by the end of 2022. In 2023 Santander helpS plans to expand its offering across our entire branch network.
Auto Compara
Auto Compara is our digital auto insurance marketplace in Brazil, and we believe it is the first to provide Brazilian customers with the ability to quote and purchase insurance coverage through an entirely online process. We believe this platform allowed us to expand our customer base by attracting non-Santander Brasil customers, resulting in over R$924 million in new insurance premiums for the year ended December 31, 2022. We currently offer products from seven insurance companies.
Santander Auto
Launched in 2019, Santander Auto is a fully digital auto insurance solution that uses big data analytics to determine pricing and utilizes a one-click buy approach, integrated with car financing options.
The Brazilian insurance market is characterized by: (i) low insurance penetration relative to its GDP; (ii) lagging technological advancement and dominated by companies with low innovation rates that prioritize financial results (due to a history of high interest rates); and (iii) retail brokers serving as the primary distribution channel. As a result, the purchasing process still generally requires customers to fill out a lengthy questionnaire (approximately 40 questions). Consequently, only approximately 20% of Brazilian vehicles were insured as of December 31, 2022.
Using actuarial techniques and behavioral models, Santander Auto can provide insurance quotes without requesting extra information from customers. This is made possible by utilizing data that is already available to us. In its inaugural year of operation in 2019, nearly 110 thousand policies were sold, representing a product penetration rate of 16% (i.e., the total number of insurance contracts sold as a proportion of all loan contracts signed by Santander Financiamentos).
In 2020 and 2021, we focused on strengthening our insurance offerings by making sure they were available for all customer types and types of vehicles. We sought to grow the business by leveraging our ecosystem and reaching more of our customer base. This strategy helped us increase our product penetration rate, which reached 20% in the year ended December 31, 2021, along with a 80% increase in the number of policies sold compared to the year ended December 31, 2020. In the year ended December 31, 2022, Santander Auto started offering insurance to non-financed vehicles and achieved a product penetration rate of 30% in the year ended December 31, 2022, recording a 16.3% increase in the number of policies sold compared to the prior year.
Webmotors
Webmotors is a Brazilian technology company specializing in car buying and selling solutions for dealers, original equipment manufacturers, as well as private sellers. Moreover, it is the largest automotive ecosystem platform in Brazil, according SimilarWeb.
According to Adobe Analytics, Webmotors received an average of more than 30 million visits each month in 2022. It also recorded 7.9 million unique visitors in 2022, as reported by ComScore. Through Cockpit, a platform that integrates offerings for the entire network outlined above, we provide the following solutions: business management/performance, buyer profile (CRM), data intelligence, predictive pricing models, and market data (Auto Insights).
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Webmotors aims to be a platform that accompanies individual and business customers throughout the lifecycle of their vehicles, from purchase to use and sale. To achieve this goal, Webmotors recently restructured its subsidiary, Loop, which was a traditional auctioning business, into an omni-channel dealer, which we believe has the potential to deliver a higher sales value for demobilized fleets in both its digital and physical stores. Additionally, Webmotors introduced "Agenda Fácil," a product that allows customers to schedule services via WhatsApp.
Solution4Fleet
In 2021, we acquired Solution4Fleet, a consultancy company that offers solutions for car rental companies. Solution4Fleet offers solutions for the entire ecosystem of a (light or heavy) vehicle rental company, including green and yellow lines (i.e. trucks, buses and agricultural machinery), including services such as pricing and sales management, fleet management, telemetry, purchase and sale of vehicles, financial services for rental companies, as well as its own vehicle management system for rental companies, among other services.
We believe that Solution4Fleet offers the most complete ecosystem for fleet management and leasing operations in the Brazilian market. In the year ended December 31, 2022, the vehicle fleet managed using Solution4Fleet’s products increased by 83% compared to the year ended December 31, 2021, while the average ticket per vehicle grew by 88.2%.
Solution4Fleet has focused on diversification by prospecting smaller car rental companies and special projects for large automakers. In addition, Solution4Fleet continues to invest in technology to improve user experience.
+Negócios | 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 2022, +Negócios went through a technological transformation with the “Pioneer” project and became “+Negócios Turbo.” The main goals of this project are the improvement and modernization of the systems architecture to simplify user experience (with the reuse of internal data), the tailoring of offers with a new price platform and greater security through facial biometrics.
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.
In 2022, +Fidelidade was also updated and improved to become “+Fidelidade Turbo,” a loyalty program with the objective of offering incentives to banking correspondents in their relationship with our ecosystem. The improvements were launched to simplify, facilitate and ensure greater timeliness in dealing with these agents. The “turbo” version has technological resources that bring the gaming aspect of the program to the platform.
We also offer “+Fidelidade Vendedor,” a program which grants rewards and bonuses accordingly to the seller’s level of adhesion to our products, (i.e., based on the percentage of sellers’ revenue generated by our products and services). In 2021, this program was launched for the automotive store segment, then to dealerships, and then to goods and services segments. In 2022, it was extended to the motorcycle store segment. It had an average of 35,000 registered sellers during 2022.
The former “+Vezes” program, a goods and services financing platform, was upgraded to “+Vezes Turbo” by introducing changes to the user experience geared towards simplification of use, data reutilization, hyper-segmentation of offers and improved security patterns with facial biometrics processes. “+Vezes Turbo” is operational and was deployed to over 10,000 partner retailers during the second semester of 2022.
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As part of our consumer finance strategy, our goods and services financing business (i.e., “ +Vezes”) was integrated with SIM, a fintech created in 2019 that offers personal loans to the open market on a digital lending platform. See “—Our Portfolio of Products and Services—SIM.” With this integration, SIM became a full-service consumer financing business which we believe has bolstered the value proposition of both businesses.
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 customers pay and receive 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, in 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, ~~issued~~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 offering 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, and 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 applicable 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.
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· Follow-up – Our advisory team performs a thorough and frequent review of our customers’ 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.
AAA
In June 2022 we launched AAA, a new investment advisory services model that had enrolled 592 advisors across 41 Brazilian cities as of December 31, 2022. AAA offers a comprehensive product portfolio, coupled with an advanced digital experience and specialized guidance to bolster our investment advisory services offering. AAA provides an exclusive investment advisory service to high-income clients. In order to incentivize our AAA investment advisors, their compensation includes a significant variable component reflecting the results they produce for our clients.
Toro
Toro is an investment platform licensed to operate in Brazil that offers what we believe to be a leading user experience, highly qualified advisors, and an integrated journey from education to execution. We believe that Toro was the first fintech in Brazil to open a full-service broker with proprietary technology, which allowed it to achieve a new level of customer experience and infrastructure for real end-to-end agile development. Toro’s current product offering includes an open platform of equities, real estate investment trusts, exchange-traded funds, global stocks (offered through Brazilian depositary receipts), fixed income notes, bonds, mutual funds, and derivatives. Toro also offers an ecosystem of financial apps, including a budgeting and financial consolidation app and a marketplace for related financial products.
SX Integra
SX Integra is our new supply chain finance digital platform. This channel was launched in September 2022 to provide financial services for companies based on their receivables. Both the supplier (i.e. the company supplying goods to other companies) and the buyer (i.e. the company receiving the goods and delivering payment) are customers of SX Integra. The supplier advances the receivables at no risk and does not have to be an accountholder of ours. Buyers, which are primarily large corporations that must be accountholders of ours, incur the risks of the transaction and are responsible for paying invoices.
The following table sets forth certain key financial and operating data regarding SX as of the dates indicated
As of
December 31, 2022(1)
Main SX Integra indicators:
Number of active buyers (2) 1,014
Number of active suppliers (3) 6,619
(1) SX Integra began operating on September 1, 2022. The figures presented refer to December 31, 2022.
(2) We define an active buyer as a company that has signed an agreement with us and has a credit limit that enables it to incur the risk of the advance as of December 31, 2022.
(3) We define active suppliers as suppliers that performed at least one anticipation of receivables with SX Integra in the 60 days preceding December 31, 2022.
Programa Avançar
We also have a nonfinancial 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.
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In addition, we offer a digital account solution where corporate and 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) remote channels, such as call centers; (iii) external channels, consisting of bank correspondents and other third parties who sell our products and services; and (iv)digital channels, such as internet banking and mobile banking.
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,
2022 2021 2020
(%)
Internet banking 21.7 27.7 37.8
ATMs 2.4 3.6 5.9
Mobile (1) 73.6 62.3 46.9
Branch 0.6 1.1 2.2
IVR (2) 0.8 4.6 6.4
Call Center 0.9 0.7 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.
Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network, all of which is located in Brazil, as of the dates indicated.
As of December 31,
2022 2021 2020
Branches 1,701 1,987 2,153
Mini-branches 1,266 1,384 1,411
Own ATMs 11,527 12,561 12,949
Shared ATMs 24,374 24,255 23,798
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,
2022 2021 2020
Northeast 9.99 % 9.74 % 9 %
North and Midwest 8.94 % 8.42 % 7 %
Southeast 66.20 % 67.31 % 70 %
South 14.87 % 14.53 % 14 %
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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.
ATMs
We operate an extensive network of 11,527 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 24,374 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, and online messaging apps available to all our customers. In the year ended December 31, 2022, we received 10.3 million inquiries per month with 50% of these being outside regular business hours.
We also improved our efficiency and increased our first call resolution from 81% as of January 31, 2021 to 95% as of December 31, 2022. In the last two years, we have sought to transform the channel by focusing on solving customer needs and seizing these contacts as opportunities to offer additional products and services to our customers. In the year ended December 31, 2022, we made an average of 700,000 sales and services per month on this channel.
External Channel
Our external channel consists of third-party salespersons and banking correspondents that market our products and services beyond our branches and ATMs. In the year ended December 31, 2022, we increased the footprint of our external channel in the Brazilian market by adding an additional 9,620 points-of-sale to our portfolio for a total number of 15,647 points-of-sale covering 44% of all municipalities in Brazil as of December 31, 2022, and by extending more than R$18 billion in credit in the year ended December 31, 2022. In addition, in 2022, we launched our new store model, “Santander Perto”, to put us closer and improve our visibility and availability to our customers. We also launched our external sales force website in the second half of 2022, which has generated 50,000 business deals per month since its inception.
Digital Channels
We have sought to develop our digital solutions to meet the needs of our consumers and, in 2022, we were able to achieve milestones, offering personalized insights, improve our artificial intelligence, or “AI,” services and transform our digital experience. Our digital platforms, such as mobile and internet banking, reached over 71% of our customers as of December 31, 2022, which makes them our primary channel to connect with our customers. We note the following with respect to our progress in this channel in the year ended December 31, 2022:
· We improved our digitization by 11% compared to the year ended December 31, 2021 in terms of customers reached and began selling new products over our digital channel, such as transaction insurance, personal insurance (personal injury, life and property), consortium plans, HelpS services, Divide PIX (personal loans for instant transactions), and FGTS Personal Credit (Crédito Pessoal FGTS), or “CP FGTS,” which advances personal loans on severance payouts customers may be owed as part of the FGTS program.
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· In the month of December 2022, our main mobile app for individual accounts reached a total of 462 million accesses, a 34% increase compared to the month of December 2021, while our website reached over 68 million accesses, a 21% increase also compared to the previous year. We also launched an embedded blog with specialized consumer content that reached over 3.3 million views in 2022 (without relying on paid marketing activities specifically for this purpose) and which we believe will be a new tool for lead generation and financial education.
· Despite a difficult year from a macroeconomic perspective and with greater restrictions on credit, we closed approximately 45 million contracts through our digital platforms during the year ended December 31, 2022, a 17% increase compared with the year ended December 31,2021, which growth was driven by an assertive product and service promotion strategy and improvement in the sales of our main products.
· We launched our “Investment Portal” in August 2022, which reached approximately 2.9 million users in the month of September 2022. Through our Investment Portal, our investor client has access, in addition to their consolidated investment position, to guidance and recommendations with video and podcast tools embedded in the app.
· We recorded a 16% increase in digital-only accounts for individuals as of December 31, 2022 compared to December 31, 2021. We also had a 46% decrease in cost per acquisition of lead, or “CPA,” in the year ended December 31, 2022 compared to the year ended December 31, 2021. We believe that this improvement is linked to a better customer experience in the account opening process, automated anti-fraud processes and our efforts to improve customer experience.
· In the year ended December 31, 2022, we opened over 282,000 new corporate accounts, a 75% increase compared to the year ended December 31, 2021 and a 33% reduction in the CPA. We also recorded an increase of 10 p.p. in the number of new corporate accounts approved in the year ended December 31, 2022 compared to the year ended December 31, 2021, which was primarily due to an optimized accounts opening process for existing individual account holders, an automated approval engine for SMEs and processes permitting multiple corporate accounts for multiple partners. We believe that this final improvement accounted for approximately 50% of all of our new corporate accounts and ensured that 100% of SME accounts were opened through this channel in the year ended December 31, 2022.
· 61% of Santander Brasil’s credit card sales were completed through our digital channels in the month of December 2022. We have taken actions to improve our acquisition numbers by implementing new forms of authentication and prioritizing seasonal commercial campaigns to attract new customers, which resulted in a growth of 9 p.p. increase in the mobile app conversion rate (i.e., the rate of customers who accessed the first screen of the credit card contracting flow in the mobile app and actually signed up for the credit card through the app) in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent& is our AI solution for individuals and businesses in digital platforms, such as our mobile app, internet banking and through WhatsApp.
· We began 2022 with 54 services, which were deployed between 2020 and 2021, and offered a total of 153 services through Gent& by December 31, 2022. We recorded a 43% decrease in customer service calls relating to these services in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent&’s NPS was twelve points above that of our other channels in the year ended December 31, 2022. We offer through Gent& transactional services such as personal loan offerings, debt renegotiation, and credit limit increases and decreases (which is offered exclusively on Gent&). We also offer advisory services that include credit card holds, reissues and delivery tracking.
The following table provides certain key operating information regarding our digital channels as of the dates indicated:

For the Year Ended December 31,

2022
2021
2020
(in millions)
Number of digital customers (1) 20.4 18.3 15.6
Number of digital transactions (2) 9,813 7,482 5,262

(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 prior to the end of the applicable year.
(2) Refers to transactions carried out through internet banking, mobile banking and other digital platforms. Data refer to the year ended December 31.
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Technology and Infrastructure
In 2022, we sought to ensure greater integration between our business and technology, and to use the latter as a strategic lever to support the expansion of digital and personalized products and services through available, secure and integrated sales channels. Our objective was to significantly improve our customers’ experience by streamlining and enhancing self-service and customer service channels. Moreover, as part of our digital acceleration strategy as a result of the COVID-19 pandemic, we sought to make technology a key factor in leveraging multichannel distribution and business growth by using data to make strategic decisions at the executive leadership level.
To facilitate this role, our IT department focused on the transformation of its operating model through four strategies:
· Improved Alignment between Business and Technology: development of technology solutions guided by a business mindset, placing the customer at the center of the strategy and ensuring that more business representatives are involved in development teams activities.
· Innovative Architecture and Robust Engineering: investment in new technologies (open banking, digital assets, smart contracts, AI, digital currencies), data framework transformation, an increase in cloud development and the reuse of architectural components to ensure greater efficiency and speed combined with cost reduction.
· Improved Infrastructure and Production: significant advances in the hybrid public/private cloud model (with 91% of total operations processed in the cloud in the year ended December 31, 2022), the growth of automation in production (AIOps) and deployment pipeline (DevSecOps), investments in reliability engineering (telemetry) and the reduction of technological obsolescence.
· Improved Delivery: expansion and maturation of our agile software delivery model through an increase in the number of development teams (with over 460 agile squads), in addition to refinements in productivity metrics facilitating more efficient and transparent management processes.
· These efforts in the technology domain were necessary to ensure the standards of, security in and the growth of our operations in light of our increased digital customer base as we reached 20.4 million digital customers as of December 31, 2022 (an 11% increase as compared to December 31, 2021), and of increased demand for digital products and services as we recorded an average of 541 million monthly accesses in our digital channels in the year ended December 31, 2022. Additional initiatives carried out in 2022 include the following:
· Investments: We launched a new investments portal that can be accessed by mobile or internet banking. This new portal offers our current investment products and services. Our customers are granted access to market analysis content in various formats (e.g., videos, articles, podcasts) in order to make better investment decisions. In addition, they receive portfolio allocation recommendations based on the macroeconomic context, their risk appetite and liquidity. Furthermore, significant improvements in the user interface allow our customers to manage their investments, obtain market information, find solutions for their needs and monitor their investments more intuitively, therefore offering a better digital experience.
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· Individual Bank Account (Mobile): We have improved the digital experience we offer to our customers with several improvements to existing journeys, together with the inclusion of new functions. We have sought to simplify the digital interface for several products and services, including by improving the registration of facial biometrics, access to our virtual AI assistant (Gent&), personal information updates and digital tools relating to investments in funds managed or offered by Santander Brasil. We have also simplified the customer experience for loans by reducing the number of steps required for contracting. In addition, we have provided more flexibility for payments by introducing a new option to break the total value of instant payments (PIX) into up to 24 installments.
· Corporate Bank Account (Mobile): We have added new features to our mobile application, allowing our corporate customers to manage their businesses with more agility and strategy. We have extended the statement checking period up to 365 days and also included a new option on Santander On to update the company’s annual billing, in order to enable better credit solutions for our customers. Moreover, we have sought to improve the user interface by simplifying the visualization of the functionalities in the menu, ensuring a better experience for browsing and using the application, along with the addition of facial biometrics.
· Credit Cards: We further expanded our digital services in order to provide more efficiency and transparency in the management of card expenses for our customers. In our mobile application for cards, we have added a new option to check payments history for past invoices, along with a tool to check and manage active credit card installments. In addition, a new feature was included allowing our customers to view disputed purchases for fraud or trade disagreement. Regarding card loss or theft, we have provided our customers a new option to choose a location to pick up the reissued card. Finally, we increased flexibility by enabling the use of instant payment (PIX) to settle credit card invoices and now permit users to register their Visa/Mastercard cards on Apple and Samsung digital wallets.
· Customer Service: Through our “Bank to Go” initiative, we have sought to transform customer service in our branches. We provided tablets to account managers so they can assist customers with account openings and product sales, which ensures a faster, more dynamic, and personalized banking service. The system running in the tablets is integrated with our external portals (e.g., credit cards and insurance) and also ensures more flexibility in capturing and serving customers due to the greater mobility granted to account managers by the use of tablets.
· Insurance and Customer Assistance: We have upgraded our digital processes in the sale of insurance through a revamped product screen in our mobile application for individual customers, where all coverage types are presented with their respective initial values. We have also included a new feature in the offering of our 24-hour assistance service, helpS, which offers solutions for day-to-day customer needs such as car repairs or maintenance services. Our customers can easily choose service packages for automotive, motorcycle, bicycle, pet, and technology services.
· Data Transformation: Investments were made to improve our use of data in modern technologies to generate business value from customer data. These include investments in: (i) the development of a new machine learning model, which uses market and our proprietary data (from our Financing and SIM platforms) to identify new customers prone to credit offer and improve our revenue; and (ii) new solutions to assess a customer’s transactional behavior and identify the most opportune moment to offer credit card limit increases and improve customer spending.
· Business Agility: We have sought to improve our organizational model in the delivery of technological solutions to ensure we meet the needs of the modern consumer through faster decisions, increased interaction with customers and greater value delivery. Our new Business Domains model promotes the integration between our business units, platforms and the technology department for the design of products that offer an improved end-to-end experience for our customers. These areas work together in the activities related to customer journey, software development, implementation, operations and product governance. This work model, developed from benchmarks and proven market frameworks, is supported by lead executives in our investment, data, technology and information security departments to embed the technical skills from these vertical structures directly into the Business Domains structures, improving the operational flow of these teams.
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· Security: Given that Santander ID is our main security device in the authorization of customer transactions on digital channels, we must ensure its activation process is safe and reliable. With the “Frictionless” initiative, we have implemented several models that analyze customer behavior information, ensuring that the customer is the one who is actually activating the security device. As a result, customers no longer need to go to an ATM to complete the activation of their Santander ID, which we believe provides a simpler experience.
Communications and Marketing
We use a variety of tools to communicate with our employees and customers effectively. This includes not only traditional media, such as television, newspapers and print magazines, but also digital and innovative communication to make a difference in the lives of all those who are related, in some way, to Santander Brasil. In 2022, we launched a major debt renegotiation campaign called “Desendivida,” which provided better terms for customers to honor their commitments with us. This initiative featured influencers from the popular reality TV show Big Brother Brasil and, during an entire month, we dedicated time to this matter in our stores (two extra hours a day), in addition to a task force on a Saturday. We also introduced large-scale campaigns for “consórcios” (a product that offers credit at lower costs for customers than conventional financing). Internally, we debuted the monthly live event “Together with Mario Leão,” in which Mario Leão, our chief executive officer, interacts with over 40,000 employees via the Santander NOW app. The first edition took place in Salvador, State of Bahia, and was followed by editions in Inhumas (State of Goiás), Novo Hamburgo (State of Rio Grande do Sul), Rio de Janeiro (State of Rio de Janeiro), Campinas (State of São Paulo), Curitiba (State of Paraná), Mirassol (State of São Paulo), São Paulo (State of São Paulo), Juazeiro do Norte (State of Ceará), Manaus (State of Manaus), Ouro Preto (State of Minas Gerais) and again in São Paulo (State of São Paulo).
In 2022, we also produced 472 videos to instruct our teams on how to better serve our customers and offer our products and services, exploring a wide range of topics such as the “Investment is Santander” campaign and on themes that reinforce our culture, such as diversity, ESG, corporate behavior, development, feedback, health and well-being, training and qualification, and others. Externally, we ran 14 video ads on TV and social media. In 2022, our communication campaigns resulted in over 11,000 mentions in the Brazilian national media (e.g., websites, newspapers and magazines), as well as nearly 8,000 reports published in local media. On social networks, we had more than 2,000 publications, with 1.5 billion impressions in 2022. We also strengthened our operations, both internally and externally, using new formats such as Telegram, TikTok, WhatsApp and podcasts. We held over 20 internal and external livestreams and events, which featured our leadership, experts and authorities discussing a broad array of subjects, including ESG, the current economic environment, social investment, business, female leadership, entrepreneurship and culture. The “Legacy” event, organized in collaboration with Movimento Bem Maior and several of Brazil’s largest companies, on the role of philanthropy, was a highlight, as was the fifth edition of “Global Citizen,” held in partnership with the newspaper Valor Econômico, with an ESG-focused debate with participants such as Sanda Ojiambo, chief executive officer and secretary general of the UN Global Compact, and Jeremy Oppenheim, co-founder of SYSTEMIQ.
Sustainability and ESG Initiatives
The purpose of our sustainability and ESG initiatives is to contribute to the progress of people and businesses, while also supporting the development of a fairer and more sustainable Brazil. We have sought to develop a clear strategy for our environmental aspirations (seeking to become a benchmark company in sustainable business), social aspirations(working to ensure everyone has opportunities) and governance aspirations (having leading ESG management practices).
Our broad commercial activity enables us to advise and support our customers and their projects. In the year ended December 31, 2022, we helped approximately 430,000 people through financial inclusion products and financial education guidance. For example, we offer access to banking services, products and nonfinancial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the Prospera Microfinance, “Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include financial management as a topic in customer relationships, using tools such as Santander On. As an example, Prospera Microfinance has supported microentrepreneurs in their businesses since 2002, and as of December 31, 2022 it had a portfolio of R$2.7 billion (a 38% growth as compared to December 31, 2021) and 885,000 active customers (a 25% growth as compared to December 31, 2021).
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The following is a description of some of the social activities and programs that we have held or continued in the year ended December 31, 2022:
· In 2022, we held the 20th edition of the Amigo de Valor program. Since 2002, it has benefited more than 1.6 million children and teenagers in 293 municipalities in Brazil, mobilizing more than R$180 million from our customers and employees.
· In 2022, we helped about 220,000 people through blood donation and volunteering programs.
· Through Santander Universities, we granted 103,000 scholarships in 2022.
· We became founding members of the Alliance for Productive Inclusion (Aliança pela Inclusão Produtiva), or Aipê, in partnership with industry leaders, whose objective is to promote, through training, the inclusion of the lower-income population in the labor market.
· We increasingly invest in the structuring of endowments—equity or philanthropic funds—to support the long-term financial sustainability of institutions and nonprofit organizations, such as universities and hospitals. In 2022, these investments amounted to R$51 million.
· In April 2022, we held the Legado event, which addressed philanthropy in Brazil and the role of the individual in building a more inclusive society. This event was attended by over 600 participants.
· In 2022, we transformed 70,000 plastic bags into 12,000 eco-friendly bags in partnership with Sewing Dreams, an NGO from Paraisópolis in the State of São Paulo.
· We support social projects which foster professional training and fostering entrepreneurship. In 2022, we selected 31 projects for support through our “Chama Indica” and “Prepara Futuro” initiative.
· We continued to promote female representation in leadership positions at Santander Brasil. In 2022, the percentage of women among our leadership (defined as senior managers and officers of Banco Santander (Brasil) S.A., Aymoré Crédito, Financiamento e Investimento S.A. and Santander Corretora de Seguros, Investimento e Serviços S.A.) increased by 1.9 p.p. compared to 2021 and reached 33%.
We also developed actions to increase the representation of black people at Santander Brasil. As of December 31, 2022, 30% of our employees identified as black, which represents a growth of 2.7 p.p. compared to December 31, 2021.
· In the year ended December 31, 2022, we believe that we helped facilitate approximately R$32.2 billion in sustainable business (including disbursements for renewable energy, sanitation, sustainable agribusiness, ESG-linked loans, Prospera Santander Microfinance, other businesses (accessibility and mobility, other financial operations), as well as project finance advisory and disbursements (renewable energy and sanitation), in addition to green bonds) through the following initiatives:
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· We were guarantors in a BNDES financing for the construction of a subway line in the city of São Paulo that we expect will bring socioeconomic development to the regions along its tracks.
· We maintained a leading role in the Brazilian market for decarbonization credits (CBIO) market, which we first helped create in 2020 and in which, in the year ended December 31, 2022, we held a 54.4% market share according to B3.
· We disbursed R$394 million in our sustainable agribusiness credit lines, which promote low-carbon agriculture and solar energy.
· Since 2021, we created the Sustainable Finance Forum, a forum responsible for analyzing sustainable operations and ensuring alignment with the Sustainable the Finance Classification System (SFCs) - the Santander Group framework and market standards.
· In June 2022, we hosted the Zero Carbon Emission livestream, which promoted a debate on zero carbon emission and our next steps in this journey.
· In November 2022, in partnership with other Brazilian corporations, we launched Biomas, a joint venture whose objective is to restore, conserve and preserve four million hectares of forest in the Amazon, Caatinga, Mata Atlântica and Cerrado biomes in Brazil. This alliance plans to remove approximately 900 million tons of carbon equivalent substances from the atmosphere over a two-decade period. Each partner will initially commit R$20 million to support the early years of Biomas activities.
· We participated in the launch of the Bioeconomy Business Innovation Platform in the Amazon, led by the CERTI Foundation, with the objective of training 3,000 people and creating 200 startups in three years.
· We have progressed towards our commitment of achieving zero illegal deforestation in the Amazon across our customers involved in meat production by 2025.
The following is a description of some of the environmental activities that we have held or continued in 2022:
· In February 2022, we launched a solar power plant at two of our administrative buildings, the largest urban power plant installed in the State of São Paulo and one of the largest in Latin America.
· As of December 31, 2022, 100% of our domestic electricity consumption derive from renewable sources, a milestone that we had originally targeted to reach in 2025. In addition, we have been carbon neutral since 2010 and have significantly cut down on our use of single-use plastic within our organization.
· By the end of 2022, 100% of the new SX- and Elite-branded cards were made from recycled plastic. We expect that this will reduce the use of common plastic in the cards we issue.
· Climate change was the agenda of our continuing education program (programa de educação continuada), or “PEC,” which is aimed at independent members of our governance bodies. The PEC seeks to promote integration and deeper knowledge about the financial industry and a better understanding of our internal dynamics. We also held an inaugural class for a select group of executives to discuss decarbonization in partnership with the Santander Academy—the first in a series of meetings that will continue to take place in 2023 to develop knowledge on the subject and share good practices, challenges and solutions for the mitigation and removal of greenhouse gases. The engagement of companies is part of our Net Zero commitment, which aims to eliminate indirect issues of carbon in our credit portfolio by 2050.
· We co-drafted “An Introductory Guide for Net Zero Target Setting for Farm-Based Agricultural Emissions,” which was led by the Banking for Impact on Climate in Agriculture initiative of the World Business Council for Sustainable Development. The study aims to address the challenges of net zero for the sector, where data and methodologies on measuring financed emissions is lacking.
· In July 2022, we published our social, environmental and climate responsibility policy, or the “PRSAC,” in accordance with CMN Resolution No. 4,945, which improves socio-environmental risk management rules, including climate change-related rules. PRSAC focuses on a positive agenda, such as pacts, commitments, relationships with stakeholders and socio-environmental impacts and opportunities.
• In December, 2022 we sponsored the fifth edition of the Global Citizen Forum to discuss ESG matters, which was attended by our chief executive officer and the general secretary of the United Nations Global Compact, Sanda Ojiambo, the economist and co-founder of SYSTEMIQ, Jeremy Oppenheim and Paul Polman, a climate and equality activist. The event was attended by approximately 612participants.
• Our sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through our board of directors, executive committee and executive sustainability superintendents. Our sustainability committee is responsible for providing clarification and recommendations to the board of directors relating to the development of sustainability-related guidelines. Our governance seeks to include ESG in our culture and in our day-to-day through internal training and the inclusion of ESG criteria in the compensation of executives, who are responsible for addressing issues of diversity, financial empowerment and green financing. Independent members account for 44.44% of our board of directors and women for 33.33%, while women also account for 20.41% of our executive committee. For more information, see “Item 6. Directors, Senior Management and Employees.”
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As a result of our efforts, we were recognized by Revista Exame as the best ESG company in the financial services category in 2022, and we also received a Euromoney award in the ESG category. Moreover, our equity securities form part of the B3’s Corporate Sustainability Index (Indice de Sustentabilidade Empresarial) and Efficient Carbon Index (Índice de Carbono Eficiente – ICO2).
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial services industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal. Together, these financial institutions accounted for 70.8% of the credit and 70.7% of the deposits available in Brazil as of September 30, 2022, according to the Brazilian Central Bank and the interim financial statements of the aforementioned banks.
The following table shows the total loans and deposits of the five leading financial institutions in Brazil as of September 30, 2022:
Santander Brasil Bradesco Itaú
Unibanco Banco
do Brasil Caixa Econômica Federal Financial System
(in billions of R$)
Total loans (1) 484.3 644.7 685.6 861.5 976.8 5,161.4
Total deposits (1) 410.7 588.0 813.2 539.4 433.6 3,940.8
(1) According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 30, 2022). Data as of December 31, 2022 was not available as of the date of this annual report.
Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. Substantially 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 cybercrimes.
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.
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As of the date of this annual report, we own or have a license to use 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 regard 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 (Associação Brasileira das Companhias Abertas – 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 administration of third-party funds and microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:
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· 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 segment one, or “S1” (i.e., banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity), as is our case, cannot lend more than 25% of its Tier 1 ~~and Tier 2~~ 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, 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;
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· 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 ~~board~~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 that 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
In 2010, the Basel Committee issued its Basel III framework, which was revised and republished in 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 of 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 capital 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.
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There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debts 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.
In accordance with the Basel III standards, the Brazilian Central Bank created the additional core capital buffer (adicional de capital principal), which is composed of 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 buildup 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 CMN 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 increased gradually until April 2022, when it reached 2.5%. Resolution No. 4,783 was subsequently replaced by Resolution No. 4,955 of October 21, 2021, which maintained the risk weighted asset percentage at 2.5%.
The chart below shows the evolution of our core capital:
Timeline

Description automatically generated with medium confidence
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Financial Institutions in Brazil are subject to the capital rules set by CMN Resolutions No. 4,955/2021 and No. 4,958/2021. 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. S1 financial institutions, as is our case, or segment 2, or “S2,” for purposes of the application of prudential rules, are required to maintain a minimum Leverage Ratio (Razão de Alavancagem or “RA”) of 3% as from January 1, 2018.
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 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 current regulatory minimum is 100%.
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 S1, S2 or segment three, or “S3” financial institutions 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.
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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.
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 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 ~~January 14, 2014.~~proportional application of the prudential regulation. The ~~redemption were~~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 financial institutions 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.
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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 requirement.
· 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.
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 July 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 Tier 1 regulatory capital. 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.
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Resolution No. 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.
Resolution No. 264/22 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. Resolution No. 264/22 came into effect on December 1, 2022.
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 Custódia), 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 March 3, 2022, the Brazilian Central Bank issued Resolution No. 195/22, which regulates the SPI. Resolution 195/22 also approved the regulation with which the direct and indirect participants in the SPI must comply. Brazilian Central Bank Normative Ruling No. 243/22 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 291/22, in turn, establishes the procedures for the adherence to 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 clearinghouses 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. Resolution 195/22 came into effect on April 1, 2022.
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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 clearinghouses, 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.
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 customers 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 ~~raised~~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 ~~Notes Offer.~~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 means 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 should have implemented, 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 entity’s audit and risk committees (if in place), internal audit unit, executive board and board of directors (if in place).
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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 Finance Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open finance. Open finance 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.
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 or S2 segments, as is our case, are required to participate in open finance.
Open finance has a four stage implementation plan, as follows:
· Phase 1 (launched 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.
· Phase 2 (launched on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
· Phase 3 (launched on October 30, 2021): start of PIX transactions offered by payment transaction initiators through the Open Finance channel, without the need to access the specific channels of the institutions with whom the client maintains a relationship. The possibility of using other payment methods (other than PIX) and of accepting credit transaction proposals through Open Finance is expected to be gradually implemented in the future.
· Phase 4 (launched on December 15, 2021): sharing of customer transactional data related to additional products, including: (i) insurance, open-end private pension and capitalization products; (ii) merchant acquiring services; (iii) foreign exchange transactions; and (iv) time deposit accounts and other investment products. Phase 4 is still currently under implementation and the Brazilian Central Bank’s expectation is that it should be completed by the end of 2023.
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 Finance 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 Finance, 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 Finance; (iv) services to be rendered by the Open Finance 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 Finance and its implementation; and (v) minimal security standards and certifications.
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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 Finance, to be further detailed by the Open Finance 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.
Finally, the data referring to insurance products and pension plans will follow the scope defined by the National Council of Private Insurance (Conselho Nacional de Seguros Privados), or “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.
Phase 4 of Open Finance 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 to 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 lasted for one year and was extended for a second year through November 2023. As of the date of this annual report, a second cycle still has not commenced.
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.
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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.
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.
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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.
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.
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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.
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, or “KYC” 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.
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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 KYC procedures. The CVM also issued CVM Resolution No. 50 on 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.
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.
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The governments of Brazil and the United States executed an agreement in 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
Brazil
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 brought 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 data subjects 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, among others, 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 has 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.
The ANPD has been assured technical independence, although it is subordinated to the Brazilian Ministry of Justice and Public Safety. It is composed of five commissioners, 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.
Other
In addition, we are subject to Regulation (EU) 2016/279 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”). 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 2% of annual worldwide turnover or €10 million (whichever is highest) for other specific infringements. Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the U.K. General Data Protection Regulation (“U.K. GDPR”) (i.e., a version of the GDPR as implemented into U.K. law). While the U.K. GDPR currently imposes substantially the same obligations as the GDPR, the U.K. GDPR will not automatically incorporate changes to the GDPR going forward (which would need to be specifically incorporated by the United Kingdom government). Moreover, the United Kingdom government has publicly announced plans to reform the U.K. GDPR in ways that, if formalized, are likely to deviate from the GDPR, all of which creates a risk of divergent parallel regimes and related uncertainty, along with the potential for increased compliance costs and risks for affected businesses.
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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, from 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
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· errors that result in major incorrectness in the financial statements of the audited entity.
The executive officers of the financial institution must notify the independent auditor and the audit committee if any of the above situations occur.
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,” which we have created. For more information on our 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.
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). 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) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
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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 the “PRSA.” The new rule provides for the inclusion of a climate aspect to the PRSA, which we refer to as the 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 Climáticas, or the “GRSAC Report”) by financial institutions classified in S1 (such as us), S2, S3 or 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 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 us), S2, S3, or segment four, 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 climate 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 general provisions of CMN Resolution No. 4,945/21 came into effect on July 1, 2022, CMN Resolution No. 4,944/21, article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) and Central Bank Resolution No. 139/21 came into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 came 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. 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.
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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.
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, as further detailed under “—Auditing Requirements” above.
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 the 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:
· 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.
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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.
On July 27, 2022, the Brazilian federal government adopted Decree No. 11,150/22, or Decree No. 11,150, which seeks to prevent and foster the repayment and settlement of consumer over-indebtedness. The rule grants consumers certain basic rights, including the right to responsible credit practices, financial education and relief from over-indebtedness situations through debt review and renegotiation. To preserve a consumer’s “existential minimum,” Decree No. 11,150 creates an “existential minimum income” threshold for consumers, which is fixed at R$303.00, or one-quarter of the federal minimum wage that was in effect at the time the decree was adopted. However, the annual adjustment of the minimum wage will not lead to this amount being updated.
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 customers 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.
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 came into effect on March 1, 2022, and Central Bank Resolution No. 155 came 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:
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· 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); 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.
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).
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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 came into effect on December 30, 2022.
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.
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 revoked 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 be 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.
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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 customers.
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.
On January 3, 2023, the Brazilian Central Bank published Normative Ruling No. 342, which amended Normative Ruling No. 299/22 and provides procedures, documents, terms and necessary information for requests related to the participation of financial institutions, such as us, on other companies’ corporate capital; and establishment of branches abroad. This new rule came into force on its publication date.
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.
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.
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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, 2022, CI$1 was equivalent to R$6.2480 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 April 5, 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 June 26, 2013 on prudential requirements for credit institutions and investment firms apply to it.
U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States Congress and U.S. bank regulatory agencies. In addition to 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.
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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.
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.
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U.S. Sanctions
“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, the Office of Foreign Assets Control, or “OFAC”), the UN Security Council, the European Union or His Majesty’s Treasury. 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 imposed various sanctions that prevent non-U.S. persons, including non-U.S. financial institutions from engaging in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”). If a non-U.S. financial institution were determined to have engaged in activities targeted by certain U.S. secondary 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.
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.
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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:
· 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.
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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.
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.
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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.
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.
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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
Law No. 13,986/2020, 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.
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 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.
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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.
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 and Social Contribution Tax
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% for banks, 15.0% for other financial institutions except banks and 9.0% for most other Brazilian legal entities, after adjustments determined by the tax legislation. CSLL rate for banks was revised to 21.0% from August 1 to December 31, 2022.
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.
IRPJ and CSLL on Foreign Exchange Variation of Hedges for Investments Held Abroad
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, as of 2022, 100% of the exchange rate variation will be considered as taxable.
Tax on Services
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.
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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.
Nonfinancial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to noncumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Tax on Financial Transactions
The IOF tax is a tax levied on credit, currency exchange, insurance and securities transactions. It is imposed on the following transactions and at the following rates.
Transaction (1)
Maximum
Legal Rate
Current Rate
Credit extended by financial institutions and nonfinancial entities 1.5% or 3% 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.
Transactions relating to securities (2) 1.5% per day 0.5% per day for certain investment funds.
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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).
5.38% on credit card transactions as from January 2, 2023.
5.38% on withdrawals abroad using credit or debit cards as from January 2, 2023.
5.38% on purchase of traveler’s checks or loading of international prepaid card as from January 2, 2023.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
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 equal or less than 180 days.
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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.
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Pursuant to Decree No. 10,997/2022, the Brazilian government will gradually reduce, each year, the IOF, levied on exchange operations, rates with the reduction to zero for all currency exchange operations form 01.01.2029. In addition, external loan and financing operations, including through the issuance of titles, had the rate reduced to zero, as of March 31, 2022, regardless of the term of the operation.
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.
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 Cooperation 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. 1,571, 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.
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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.
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, 2022 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 United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by the Belgian branch on these accounts in the year ended December 31, 2022.
(c) Santander Brasil holds three blocked accounts for three customers with domicile in Brazil designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander Brasil on these accounts in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(d) Santander Consumer Finance, S.A. also held through its branch in Greece an auto finance loan for a client designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship was terminated before the year end. Revenues or profits generated by the branch in Greece on this position in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(e) The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the United States 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, 2022 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.
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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. 4,820 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: (i) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (ii) 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 regarding amounts related to results for the year ended December 31, 2020, as amended by 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 and 2022.
Reduction of Capital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduced 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% remained in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the capital conservation buffer requirement was gradually restored to 2.5%. 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.
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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 and 2022.
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. CMN Resolution No. 4,805/2020 increased the cap to R$400 million cap for DPGEs held by other financial institutions affiliated with the FGC, while maintaining the R$40 million cap for other non-affiliated entities.
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 contemplated~~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 ~~Notes Offer~~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 ~~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.
Flexibility 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 ~~completed~~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 ~~January~~April 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.
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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 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, were permitted to, 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%. However, as of the revocation of CMN Resolution No. 4,788/20 by CMN Resolution No. 5,007, issued on March 24, 2022, the repurchase ceiling returned to the previous percentage 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 COVID-19 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.
SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes 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, 2022, 2021, and 2020 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.”
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For the Year Ended December 31,

2022
2021
2020

Average Balance
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
(in millions of R$, except percentages)
Assets and Interest
Income
Cash and balances with the Brazilian Central Bank 109,977 10,202 9.3% 58,494 2,581 4.4% 54,531 1,552 2.8%
Loans and amounts due from credit institutions 71,836 2,722 3.8% 95,513 1,116 5.4% 104,759 1,519 1.4%
Of which:
  Reverse repurchase
agreements 49,357 7,197 14.6% 45,458 2,154 4.7% — — —
Loans and advances to customers 503,548 73,596 14.6% 461,141 55,775 10.7% 384,389 44,104 11.5%
Debt instruments 213,647 22,002 10.3% 224,890 16,958 8.5% 203,578 13,556 6.7%
Other interest – earning assets — 6,703 — — 1,557 – – 2,044 –
Total interest – earning assets 899,008 115,225 12.8% 840,038 77,987 9.3% 747,257 62,775 8.4%
Equity instruments 2,807 38 1.4% 2,279 90 3.9% 1,730 34 2.0%
Investments in associates 1,593 — — 952 — — 1,098 — —
Total earning assets 903,408 115,263 12.8% 843,269 78,077 9.3% 750,085 62,809 8.4%
Cash and balances with the Brazilian Central Bank 4,371 — — 4,633 — — 4,800 — —
Loans and amounts due from credit institutions (6,136) — — 441 — — 6,668 — —
Impairment losses (31,665) — — (26,908) — — (23,936) — —
Other assets 78,869 — — 81,669 — — 76,642 — —
Property, plant and equipment 8,346 — — 8,823 — — 9,587 — —
Intangible assets 31,084 — — 30,250 — — 30,769 — —
Total average assets 988,277 115,263 11.7% 942,177 78,077 8.3% 854,615 62,809 7.3%

Liabilities and Interest Expense

Deposits from the Brazilian Central Bank and Deposits from credit institutions 120,512 6,737 5.7% 149,111 4,712 3.2% 111,684 4,327 3.9%
Of which:
Repurchase agreements 87,567 11,197 12.8% 103,809 4,567 4.4% — — —
Customer deposits 438,846 38,509 8.7% 420,185 13,188 3.1% 380,058 7,504 2.0%
Of which:
   Repurchase agreements 4,974 — — 58,264 — — — — —
Marketable debt securities 94,612 6,952 7.3% 63,906 4,537 7.1% 68,585 2,786 4.1%
Subordinated debts 19,086 863 4.5% 14,550 902 6.6% 13,102 909 6.9%
Other interest-bearing liabilities — 14,661 — — 3,329
—
—
2,805 —
Total interest-bearing liabilities 673,056 67,722 10.1% 647,752 26,669 4.2% 573,429 18,332 3.2%
Noninterest bearing demand deposits 34,524 — — 33,893 — — 28,581 — —
Other liabilities 151,417 — — 155,133 — — 150,759 — —
Non-controlling interests 431 — — 329 — — 315 — —
Stockholders’ Equity 128,849 — — 105,070 — — 101,531 — —
Total average liabilities and equity 988,277 67,722 6.9% 942,177 26,669 2.8% 854,615 18,332 2.1%
(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 year ended December 31, 2020 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.
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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, 2022, compared to the year ended December 31, 2021, and for the year ended December 31, 2021 compared to the year ended December 31, 2020. 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 2022/2021
For the Years Ended 2021/2020
Increase (decrease) due to changes in
Volume
Rate
Net change
Volume
Rate
Net change
(in millions of R$)
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank   3,383   4,238 7,621 120 909 1,029
Loans and amounts due from credit institutions (338) 1,944 1,606 (126) (277) (403)
Loans and advances to customers 5,456 12,365 17,821 9,181 2.492 11,671
Debt instruments (885) 5,929 5,044 1,502 1.900 3,402
Other interest-earning assets 5,146 —   5,146 (487) — (487)
Total interest-earning assets 12,762 24,476 37,238 10,190 5.024 15,214
Equity Instruments   17 (69) (52) 13 43 56
Total earning assets 12,779 24,407 37,186 10,203 5.067 15,268
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions (1,042) 3,067 2,025 1,278 (893) 385
Customer deposits 611 24,710 25,321 857 4,827 5,684
Marketable debt securities 2,251 164 2,415 (454) 2,205 1,751
Subordinated liabilities 240 (279) (39) 46 (53) (7)
Other interest-bearing liabilities 11,332 — 11,332 523 — 524
Total interest-bearing liabilities 13,392 27,662 41,053 2,250 6,086 8,337
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Assets
Earning Assets – Yield Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2022 2021 2020
(in millions of R$, except percentages)
Average earning assets 899,008 840,038 747,257
Interest and dividends on equity securities(1) 115,263 78,077 62,809
Average Net interest income 47,541 51,408 44,480
Gross yield(2)(*) 12.8 % 9.3 % 8.4 %
Net yield(3)(*) 5.3 % 6.1 % 6.0 %
Yield spread(4)(*) 2.7 % 5.1 % 5.2 %
(*) 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.
For the Year Ended December 31,
2022 2021 2020
ROA: Return on average total assets 1.5 % 1.7 % 1.6 %
ROE: Return on average stockholders’ equity 11.1 % 14.8 % 13.3 %
ROE (adjusted) (1) 14.2 % 20.2 % 18.5 %
Average stockholders’ equity as a percentage of average total assets 13.0 % 11.2 % 11.9 %
Payout(2) 56.5 % 62.0 % 24.7 %
(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, 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 share divided by net income per share).
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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,
2022 2021 2020
Cash and balances with the Brazilian Central Bank 12.2 % 7.0 % 7.3 %
Loans and amounts due from credit institutions 8.0 % 11.4 % 14.1 %
Loans and advances to customers 56.0 % 54.9 % 51.4 %
Debt instruments 23.8 % 26.8 % 27.2 %
Total interest-earning assets 100.0 % 100.0 % 100.0 %
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, 2022 and 2021, the book value of investment securities was R$206 billion and R$228 billion, respectively (representing 20.9% and 24.5%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$143 billion, or 69.4%, and R$171 billion, or 75.3% of our investment securities as of December 31, 2022 and 2021, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:
As of December 31,
2022 2021 2020
(in millions of R$)
Debt securities
Government securities—Brazil 142,749 171,437 191,896
Debentures and promissory notes 28,251 19,882 17,072
Other debt securities 31,913 33,894 21,134
Total domestic/debt securities 202,913 225,212 230,102

Equity securities
Shares of Brazilian companies 1,459 1,870 1,953
Shares of foreign companies 60 49 14
Investment fund units and shares 1,120 609 363
Total equity securities 2,639 2,528 2,329
Total investment securities 205,551 227,740 232,432
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As of December 31, 2022 and 2021, 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 129.0% and 151.5%, respectively, of our stockholders’ equity. As of December 31, 2022 and 2021, the total value of our debt securities was approximately 185.7% and 212.5%, 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, 2022. 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 millions of R$)
Debt securities
Government securities—Brazil (1) —   14,997 —   1,100 16,097
Other debt securities (2) 21,936 34,511 6,310 2,475 65,232
Total debt investment securities 21,936 49,508 6,310 3,575 81,329
(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 12.96%.

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, 2022. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2022. 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 millions of R$, except percentages)
Weighted-average yields % % % %
Domestic:
Brazilian Government         17,315 11.37    58,456 13.39      2,910 6.70    10,593 6.46
Other fixed-income securities         16,563 12.77    27,258 14.40      4,298 8.90         884 9.20
Impaired financial assets 160 12.77         213 14.40         214 8.90         553 6.80
Impairment losses (287) 12.77       (691) 14.40       (227) 8.90 (593) —
Total domestic        33,751 12.07 85,236 13.90     7,195 7.80 11,437 6.70
International:
Foreign government           4,999 9.80 — — — — — —
Other fixed-income securities           1,055 10.40      3,189 10.40 — — — —
Impaired financial assets                 2 10.40 — — — — — —
Impairment losses — 10.40 — — — — — —
Total international          6,056 10.10     3,189 10.40 — — — —
Total weighted-average yields 11.46 8.00 6.60 6.70
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Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.
As of December 31,
2022 2021 2020
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank 11,346 10,657 5,806 10,851 4,532 15,617
Debt instruments 185,814 17,098 208,132 17,080 226,787 3,315
Loans and amounts due from credit institutions 19,784 929 22,689 3,797 50,553 3,520
Loans and advances to customers 416,127 74,503 398,335 66,509 372,946 20,822
Equity Instruments 2,582 57 2,483 45 2,329 —
Total assets 635,653 103,244 637,445 98,282 657,147 43,274
Liabilities
Financial Liabilities at amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 59,366 56,713 62,332 58,674 86,564 45,093
Customer deposits 457,188 32,765 468,961 —   445,814 —
Marketable debt securities 92,638 14,483 66,028 13,009 47,477 9,399
Debt instruments eligible to compose capital 19,538 —   —   19,641 —   13,120
Other financial liabilities 71,371 143 68,496 413 66,708 153
Total liabilities 700,101 104,104 665,817 91,737 646,563 67,765
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Loan Portfolio
As of December 31, 2022, our loans and advances to customers totaled R$524 billion (53.2% of our total assets). Net impairment losses, loans and advances to customers totaled R$491 billion as of December 31, 2022 (49.8% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$158.7 billion, R$146.0 billion, R$131.7 billion as of December 31, 2022, 2021, 2020, 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.
Our loan portfolio does not have any specific concentration exceeding 10% of our total loans, As of December 31, 2022, 1.0% of our loan portfolio is allocated to our largest debtor and 4.5% 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, 2022.

As of December 31, 2022
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 126,508 46.89% 83,448 47.02% 13,366 24.50%

—
—
223,322 42.57%
Real estate 4,298 1.59% 10,905 6.14% 20,655 37.80% 22,385   98.46% 58,243 11.09%
Installment loans to individuals 137,581 51.00% 81,680 46.02% 20,616 37.72% 351 1.54% 240,227 45.79%
Lease financing
1,398
0.52%
1,455
0.82%
11

—

—

—
2,863
0.55%
Loans and advances to customers, gross
269,784
100.00%
177,488
100.00%
54,648
100.00%
22,735
100.00%
524,655
100.00%
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, 2022.
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$, except percentages)
Fixed rate
Commercial and industrial 81,757 38,976 3,581 — 42,558 124,315
Real estate 23 74 72 41 187 209
Installment loans to individuals 127,538 80,132 19,823 351 100,306 227,843
Lease financing 406 607 — — 607 1,013
Total Fixed rate 209,723 119,790 23,476 391 143,658 353,381
Variable rate
Commercial and industrial 44,751 44,471 9,785 — 54,256 99,007
Real estate 4,275 10,832 20,582 22,344 53,758 58,034
Installment loans to individuals 10,043 1,548 793 — 2,341 12,384
Lease financing 992 847 11 — 858 1,850
Total Variable rate 60,061 57,698 31,171 22,344 111,213 171,275
Total 269,784 177,488 54,648 22,735 254,871 524,655
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Cross-Border Outstandings
The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.
As of December 31,
2022 2021 2020
Balance % of Total Assets Balance % of Total Assets Balance % of Total
Assets
(in millions of R$, except percentages)

OECD countries(1)
Spain 189 —   108 —   437 —
United States 2,489 0.3 835 0.1 12,674 1.4
Netherlands 73 —   —   —   80 —
United Kingdom 277 —   20 —   29 —
Luxembourg 710 0.1 13,058 1.4 —   —
Other OECD countries(2) 1,599 0.2 1,958 0.2 3,534 0.4
Total OECD 5337 0.6 15,979 1.7 16,754 1.8
Non-OECD countries
Latin American countries(2) 529 0.1 560 0.1 1,204 0.1
Cayman Islands 1,573 0.2 1,679 0.2 2,917 0.3
Other(2) 32 —   282 —   1,189 0.1
Total non-OECD 2,134 0.3 2,521 0.3 5,310 0.5
Total 7,471 0.9 18,500 2.0 22,064 2.3
(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.
The following table presents the amounts of our cross-border outstandings as of December 31, 2022, 2021 and 2020 by type of borrower where outstandings in the borrower’s country exceeded 1.4% of our total assets.
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Government
Banks and Other Financial Institutions
Commercial and Industrial
Other Loans
Total
(in millions of R$)
2020
United States — 12,653 9 12 12,674
Netherlands — — 80 — 80
Austria — — — 444 444
United Kingdom — 28 — 1 29
Cayman Islands — 1,341 (1) 1,577 2,917
Total — 14,022 88 2,034 16,144
2021 —
United States — 3,943 1 12 3,956
Netherlands — — 3 — 3
Austria — — — 595 595
United Kingdom — 28 — — 28
Cayman Islands — 2,815 — 1,290 4,105
Total — 6,786 4 1,897 8,687
2022 —
United States — 2,259 198 32 —
Netherlands — — 73 — 73
Austria — 57 — — 57
United Kingdom — 234 39 3 276
Cayman Islands — 180 1,354 38 1,572
Total — 2,730 1,664 73 4,467
Non-current assets held for sale
For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.
Liabilities
Deposits
The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.
For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the maturity of time deposits (excluding inter-bank deposits) at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.”
As of December 31, 2022
Domestic
International
(in millions of R$)
Under 3 months 359,142 —
3 to 6 months 33,019 —
6 to 12 months 66,039 —
Over 12 months 147,832 —
Total 606,032 —
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The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2022.
Maturing
As of
December 31, 2022 Three Months or Less Over Three Months Through Six Months Over Six Months Through
12 Months Over 12 months
(in millions of R$)
Total uninsured deposits(1)
281,066 264,349 24 48 16,645
(1)           We define uninsured deposits as securities from credit institutions and customers that do not have collateral attached to them.
Short-Term Borrowings
The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.
As of December 31,
2022 2021 2020
Amount Average Rate Amount Average Rate Amount Average Rate
(in millions of R$, except percentages)
Securities sold under agreements to repurchase
As of December 31 109,760 1.26 % 115,964 1.76 % 112,477 1.90 %
Average during the period (1) 105,233 1.85 % 114,484 2.58 % 112,096 2.71 %
Maximum month-end balance 114,056 155,484 155,174
Total short-term borrowings at year end 109,760 115,964 112,477
(1) The average annual balance sheet data has been calculated based upon the average of the monthly balances at 12 dates: for each of the month-end balances of the applicable year.
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, 2022, 2021 and 2020—Results of Operations—Impairment Losses on Financial Assets (Net).”
As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 29,723 25,640 22,626
Initial adoption of IFRS 9 —   —   —
Balance adjusted 29,723 25,640 22,626
Impairment losses charged to income for the year 23,801 16,987 18,311
Write-off of impaired balances against recorded impairment allowance (18,340 ) (12,935 ) (15,297 )
Exchange variation 28 31 127
Balance at end of year 35,212 29,723 25,640
Of which:
Loans and advances to customers 34,025 28,511 24,054
Loans and amounts due from credit institutions 13 22 9
Debt Instruments 1,174 1,191 1,577
Recoveries of loans previously written off(1) 983 1,536 861
(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.
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As of December 31, 2022, our allowance for impairment losses for the periods indicated amounted to R$35,212 million, an increase of R$5,489 million, or 18.5%, compared to R$29,723 million as of December 31, 2021, which primarily resulted from a greater number of nonperforming loans among individual customers and a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, the latter of which resulted in: (i) an increase in our impaired assets in the commercial and industrial loans portfolio as of December 31, 2022 of 23.7%, from R$11.4 billion to R$14.2 billion, as compared to December 31, 2021; (ii) an increase in our default rate as of December 31, 2022 by 1.9 p.p., from 5.0% to 6.9%, as compared to December 31, 2021; and (iii) an increase in our coverage ratio (i.e., our provisions for impairment losses as a percentage of impaired assets) as of December 31, 2022 by 20.6 p.p., from 110.4% to 89.8%, as compared to December 31, 2021.
As of December 31, 2021, our allowance for impairment losses for the periods indicated amounted to R$29,723 million, an increase of R$4,083 million, or 15.9%, compared to R$25,640 million as of December 31, 2020, which primarily resulted from higher volumes and our product mix.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations.”
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,

2022
2021
2020
(in millions of R$)
Recoveries of loans previously charged off(1) 983      1,536         861
Commercial and industrial 597         463         422
Real estate – construction 36           64           56
Installment loans to individuals 346      1,002         370
Lease finance 4             7           13
Impairment losses charged to income for the year(1) 23,800 16,987 18,311
Commercial and industrial 8,854      3,340      6,919
Real estate – construction 244         116           81
Installment loans to individuals 14,686    13,532    11,309
Lease finance   16            (1)             3
Write-off of impaired balances against recorded impairment allowance (18,340)   (12,935)   (15,297)
Commercial and industrial (4,920)     (5,184)     (4,745)
Real estate – construction (115)        (167)        (232)
Installment loans to individuals (13,295)     (7,576)   (10,433)
Lease finance (11)            (8)          (15)
(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.
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As of December 31,

2022
% of Total Loans
2021
% of Total Loans
2020
%of Total Loans
(in millions of R$, except percentages)
Borrowers
Commercial and industrial 12,259 34.8 8,325 28.0 9,757 38.1
Real estate 284 0.8 154 0.5 194 0.8
Installment loans to individuals 22,659 64.4 21,240 71.5 15,676 61.1
Lease financing 10 0.0 4 — 14 0.1
Total 35,212 100.0 29,723 100.0 25,640 100.0
Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:

As of December 31,

2022
2021
2020
(in millions of R$)
Internal Risk Rating
Low 392,397 374,505 347,315
Medium-low 77,993 79,217 24,277
Medium 18,647 14,590 26,232
Medium-high 13,574 9,413 3,896
High 22,044 15,630 16,101
Loans and advances to customers, gross 524,655 493,355 417,822
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, 2022 amounted to R$34.4 billion, compared to R$21.7 billion for the same period in 2021, an increase of R$12.7 million or 58.5%. This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
The renegotiation portfolio was covered by allowances for impairment losses of 46.3% as of December 31, 2022 and 44.7% as of December 31, 2021. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
As of December 31,
2022 2021 2020
(in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 7,638 5,322 5,862
Installment loans to individuals 26,722 16,356 14,623
Financial leasing 2 5 5
Total 34,363 21,683 20,490
Allowances for impairment losses 15,9 9,698 9,019
Coverage ratio 46.3 % 44.7 % 44.0 %
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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 a 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,
2022 2021 2020
(in millions of R$, except percentages)
Impaired assets
Past due and other impaired assets(1) 39,224 26,923 23,176
Impaired assets as a percentage of total loans 7.5 % 5.5 % 5.5 %
Net loan charge-offs as a percentage of total loans 3.5 % 2.6 % 3.7 %
Net loan charge-offs as a percentage of average total loans 3.7 % 2.8 % 3.8 %
(1) Includes as of December 31, 2022, R$5,814 million of doubtful loans (R$2,528 million in 2021 and R$2,028 million in 2020) that were not past-due.
Evolution of Impaired Assets
Our impaired assets increased by 45.7% or R$12,301 million, to R$39,224 million as of December 31, 2022, compared to R$26,923 million as of December 31, 2021. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 18.5%, or R$5,488 million, to R$35,212 million as of December 31, 2022, compared to R$29,723 million as of December 31, 2021. Offsetting these effects were recoveries of R$983 million on loans previously written off as of December 31, 2022 and R$1,536 million as of December 31, 2021.
We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2022.
The following table shows the changes in our impaired assets at the dates indicated:
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As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 26,923 23,176 23,426
Initial Adoption of IFRS9 ⁽¹⁾ —   —   —
Adjusted Balance 26,923 23,176 23,426
Net additions 31,921 18,429 14,758
Write-offs (19,620 ) (14,681 ) (15,008 )
Balance at end of year 39,224 26,923 23,176
(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 2022, 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,
2022 2021
(in millions of R$)
Commercial and industrial 14,156 11,440
Real estate 1,058 470
Installment loans to individuals 23,999 14,996
Lease financing 10 17
Total 39,224 26,923
Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$14,156 million as of December 31, 2022, an increase of R$2,717 million, or 23.7% compared to R$11,440 million as of December 31, 2021. This increase was due to a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$1,058 million on December 31, 2022, an increase of R$588 million, or 125% compared to R$470 million as of December 31, 2021. The increase in impaired assets in this portfolio was primarily due to the impact on our customers of the deteriorating macroeconomic conditions in Brazil.
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$23,999 million as of December 31, 2022, with an increase of R$9,003 million, or 60.0%, compared to 2021. The increase in impaired assets in this portfolio was primarily a result of the effect of deteriorating macroeconomic conditions on our customers.
Lease Financing
Impaired assets in the lease financing lending portfolio totaled R$10 million on December 31, 2022, a decrease of 40.4% or R$7 million, as of December 31, 2021, primarily due to a decrease in the non-performing loans from R$17 million to R$11 million.
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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 is 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 mitigating factors 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:
As of December 31,
2022 % of total 2021 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,941 21.4 4,892 20.7
Mortgage loans 4,063 17.6 3,606 15.2
Installment loans to individuals 14,036 60.9 15,150 64.0
Lease financing 12 0.1 11 0.1
Total (*) 23,052 100.0 23,659 100.0
(*) Refers only to loans past due between 1 and 90 days.
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Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$27.4 billion to R$568.3 billion as of December 31, 2022, compared to R$540.9 billion as of December 31, 2021. Our impaired assets increased by approximately R$12.3 billion in the same period, from R$26.9 billion to R$39.2 billion. The default rate increased by 1.9 p.p. in 2022 in comparison to 2021, as a result of a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings as well as the growth of impaired assets due to the macroeconomic deterioration.
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,

2022
2021
2020
(in millions of R$, except percentages)
Loans and advances to customers, gross 524,655 493,355 417,822
Impaired assets 39,224 26,923 23,176
Provisions for impairment losses 35,212 29,723 25,640
Credit risk exposure Non-GAAP – customers (1) 568,338 540,873 466,104
Ratios
Impaired assets to credit risk exposure 6.9% 5.0% 5.0%
Coverage ratio (2) 89.8% 110.4% 110.6%
Impairment losses (24,829) (17,113) (17,450)
Losses on other financial instruments not measured at fair value (3) — — —
Impairment losses on financial assets (net) (4) (24,829) (17,113) (17,450)
(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$568,338 million as of December 31, 2022 and guarantees and documentary credits amounting to R$43,682 million as of December 31, 2022. 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, 2022, 2021 and 2020, our total of impairment losses on financial instruments included R$1,174 million, R$1,191 million and R$1,577 million, respectively, relating to debt instruments.
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The following chart shows our impaired assets to credit risk ratio from 2020 through 2022:
Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2022, 2021 and 2020.
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,
2022 2021 2020
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 35,212 29,723 25,640
Total loans outstanding 524,655 493,355 417,822
Credit ratio 6.71 % 6.02 % 6.14 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 39,224 26,923 23,176
Total loans outstanding 524,655 493,355 417,822
Credit ratio 7.48 % 5.46 % 5.55 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 35,212 29,723 25,640
Total nonaccrual loans outstanding 39,224 26,923 23,176
Credit ratio 89.8 % 110.4 % 110.6 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (18,340 ) (12,935 ) (15,297 )
Average amount outstanding 490,960 471,068 394,542
Credit ratio 3.7 % 2.7 % 3.9 %
Commercial and industrial:
Net charge-offs during the period (4,920 ) (5,184 ) (4,745 )
Average amount outstanding 219,950 214,286 176,750
Credit ratio 2.2 % 2.4 % 2.7 %

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Real estate:
Net charge-offs during the period (115 ) (167 ) (232 )
Average amount outstanding 56,724 51,883 42,368
Credit ratio 0.2 % 0.3 % 0.5 %
Installment loans to individuals:
Net charge-offs during the period (13,295 ) (7,576 ) (10,433 )
Average amount outstanding 211,653 202,578 173,336
Credit ratio 6.3 % 3.7 % 6.0 %
Lease financing:
Net charge-offs during the period (11 ) (8 ) (15 )
Average amount outstanding 2,647 2,321 2,089
Credit ratio 0.4 % 0.3 % 0.7 %
Allowance for credit losses to total loans outstanding
In 2022, our allowance for credit losses to total loans outstanding credit ratio increased by 69 basis points, from 6.02% as of December 31, 2021 to 6.71% as of December 31, 2022. This was primarily due to the growth in allowance for credit losses, driven by a recent increase in inflation, which primarily affected loans to individuals.
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.
Nonaccrual loans to total loans outstanding
In 2022, our nonaccrual loans to total loans outstanding credit ratio increased by 202 basis points, from 5.46% as of December 31, 2021 to 7.48% as of December 31, 2022. This was primarily due to the growth in total nonaccrual loans outstanding, driven by the deterioration of the macroeconomic situation in Brazil.
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.
Allowance for credit losses to nonaccrual loans
In 2022, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20.6 p.p., from 110.4% as of December 31, 2021 to 89.8% as of December 31, 2022. This was primarily due to a single customer defaulting in our large companies portfolio.
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20 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.
Net charge-offs during the period to average loans outstanding
In 2022, our net charge-offs during the period to average loans outstanding credit ratio increase by 100 basis points, from 2.7% as of December 31, 2021 to 3.7% as of December 31, 2022. This was primarily due to an increase of 4.2% in average loans outstanding and an increase of 41.8% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 120 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 15.4% in net charge-offs.
Commercial and Industrial Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans increased by 20 basis points, from 2.4% as of December 31, 2021 to 2.2% as of December 31, 2022. This was primarily due to an increase of 2.6% in average loans outstanding, while the net charge-offs decreased by 5.1%.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 20 basis points, from 2.7% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.2% in average loans outstanding, which was greater than the growth in net charge-offs of 9.3%.
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Real Estate Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 10 basis points, from 0.3% as of December 31, 2021 to 0.2% as of December 31, 2022. This was primarily due to an increase of 9.3% in average loans outstanding and a decrease of 31.1% in net charge-offs.
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.
Installment Loans to Individuals
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans increased by 260 basis points, from 3.7% as of December 31, 2021 to 6.3% as of December 31, 2022. This was primarily due to an increase of 4.5% in average loans outstanding and an increase of 75.5% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 30 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.
Lease Financing Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans increased by 10 basis points, from 0.3% as of December 31, 2021 to 0.4% as of December 31, 2022. This was primarily due to an increase of 14.0% % in average loans outstanding and an increase of 37.5% in net charge-offs.
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.
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 February 24, 2023, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
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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 as of December 31, 2022:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A.
Santander Leasing S.A. Arrendamento Mercantil Leasing Brazil 100.00 %
Aymoré Crédito, Financiamento e Investimento S.A. Financial Brazil 100.00 %
Santander Brasil Administradora de Consórcio Ltda. Buying club Brazil 100.00 %
Santander Corretora de Câmbio e Valores Mobiliários S.A. Broker Brazil 99.99 %
Santander Corretora de Seguros, Investimentos e Serviços S.A. Broker Brazil 100.00 %
Sancap Investimentos e Participações S.A. Holding Brazil 100.00 %
Santander Holding Imobiliária S.A. Holding Brazil 100.00 %
F1RST Tecnologia e Inovação Ltda. Other Activities Brazil 100.00 %
Rojo Entretenimento S.A. Other Activities Brazil 94.60 %
Sanb Promotora de Vendas e Cobrança Ltda. Other Activities Brazil 100.00 %
BEN Benefícios e Serviços Instituição de Pagamentos S.A. Means of Payment Brazil 100.00 %
Esfera Fidelidade S.A. Other Activities Brazil 100.00 %
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. Technology Brazil 80.00 %
SX Negócios Ltda. Other Activities Brazil 100.00 %
SX Tools Soluções e Serviços Compartilhados Ltda. Other Activities Brazil 100.00 %
Liderança Serviços Especializados em Cobranças Ltda. Collection Management and Credit Recovery Brazil 100.00 %
Return Capital S.A. Collection Management and Credit Recovery Brazil 100.00 %
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Capitalization Brazil 100.00 %
Evidence Previdência S.A. Private Pension Brazil 100.00 %
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. (6) Bank Brazil 50.00 %
Banco Hyundai Capital Brasil S.A  (current name of BHJV Assessoria e Consultoria Empresarial Ltda.) Bank Brazil 50.00 %
Solutions 4 Fleet Consultoria Empresarial S.A. Tecnology Brazil 80.00 %
Controlled by Santander Leasing S.A Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00 %
Santander Distribuidora de Títulos e Valores Mobiliários S.A. Distributor Brazil 100.00 %
Controlled by Santander Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários S.A. Broker Brazil 63.00 %
Toro Investimentos S.A. Investments Brazil 14.78 %
Controlled by Toro Corretora de Títulos de Valores Mobiliários S.A.
Toro Investimentos S.A. Investments Brazil 76.55 %
Controlled by Sancap
Santander Auto S.A. Technology Brazil 50.00 %
Consolidated Investment Funds
Santander Fundo de Investimento Unix Multimercado Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Paraty QIF PLC (1) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (1) Investment Fund Brazil (a)
BRL V – Fundo de Investimento Imobiliário – FII Real Estate Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado Investment Fund Brazil (a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos Investment Fund Brazil (a)
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior Investment Fund Brazil (a)
Verbena FCVS – Fundo de Investimento em Direitos Creditórios Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI – Não Padronizado Investment Fund Brazil (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) 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.
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4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 338 properties for the activities of our banking network and rent 1,681 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.
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, 2022, 2021 and 2020 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, 2022, 2021 and 2020, 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, 2022, 2021 and 2020 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.
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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$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off. For additional information, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Brazilian Macroeconomic Environment
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil. While Brazilian GDP increased in 2022, due in part to fiscal incentives granted by the Brazilian government and the resumption of activities that were suppressed by restrictions imposed to curb the spread of COVID-19, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
As of and For the Year Ended December 31,
2022 2021 2020
GDP growth(1) 3.0 % 4.6 % (4.1 )%
CDI Rate 12.4 % 4.4 % 2.1 %
TJLP 7.2 % 5.3 % 4.6 %
SELIC rate 13.75 % 9.25 % 2.00 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.22 5.58 5.20
Depreciation (appreciation) of the real against the U.S. dollar (6.5 )% 7.4 % 28.9 %
Average real to U.S. exchange rate per U.S.$1.00(2) 5.17 5.40 5.16
Inflation (IGP-M) 5.5 % 17.8 % 23.1 %
Inflation (IPCA) 5.8 % 10.6 % 4.5 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2022 is based on Santander Brasil’s internal estimates. For 2021, the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
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 also 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. In 2022, the relaxation of COVID-19 restrictions and continued fiscal incentives granted by Brazilian government have supported Brazilian GDP growth, which we estimate to have been 3.0% in 2022.
However, the macroeconomic outlook for 2023 is marred by high inflation, high interest rates, a deteriorating global economic outlook, continued political uncertainty following the presidential elections held in Brazil in the last quarter of 2022, and continued uncertainty regarding the course of the COVID-19 pandemic. 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. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—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.”
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Impact of COVID-19
Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment. 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 safe-guard 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—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.”
War in Ukraine
The ongoing war between Russia and Ukraine has caused an ongoing humanitarian crisis in Europe as well as volatility in financial markets globally, heightened inflation, shortages and increases in the prices of energy, oil, gas and other commodities. In response to the Russian military action against Ukraine, several countries, including the United States, the European Union member states, the United Kingdom and other UN member states, have imposed severe sanctions on Russia and Belarus. Furthermore, the risk of cyberattacks on companies and institutions could increase as a result of the military conflict and in response to the sanctions imposed, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures. The continuance or escalation of the war, including its extension to other countries in the region, could lead to further increases in energy, oil and gas prices (particularly if supplies to Europe are interrupted) and heightened inflationary pressures, which in turn could lead to further increases in interest rates and market volatility. In addition, the war has exacerbated supply chain problems, particularly to those businesses most sensitive to rising energy prices. The war and its effects could exacerbate the current slowdown in the global economy and could negatively affect the payment capacity of some of our customers, especially those with more exposure to the Russian or Ukrainian markets.
While we do not have a physical presence in Russia and Ukraine and our direct exposure to Russian or Ukrainian markets and assets is not material, the impact of the war in Ukraine and the sanctions imposed on global markets and institutions, the impact on macroeconomic conditions generally, and other potential future geopolitical tensions and consequences arising from the war remain uncertain and may exacerbate our operational risk. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic Conditions in Brazil and Globally—The war in Ukraine could materially affect our financial position and increase our operational risk.”
Interest Rates
In 2021, the Brazilian Central Bank began a monetary tightening cycle due to rising inflation, the depreciation of the real, and a perception of the recovery of certain economic activity following the easing of restrictions which had been imposed to suppress the circulation of COVID-19. The SELIC rate increased from 2.0% as of December 31, 2020 to 9.25% as of December 31, 2021 and 13.75% as of December 31, 2022 (the highest level since the end of 2016), a level at which it remains as of the date of this annual report.
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.
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The following table presents the low, high, average and period end SELIC rate since 2018, as reported by the Brazilian Central Bank:
Low High(1) Average(2) Period-End
Year
2018 6.50 7.00 6.58 6.50
2019 4.50 7.00 6.58 6.50
2020 2.00 4.50 2.87 2.00
2021 2.00 9.25 4.57 9.25
2022 9.25 13.75 12.57 13.75
2023 (through February 27, 2023) 13.75 13.75 13.75 13.75
(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, 2022, a 100-basis point increase in the yield curve would have resulted in R$945 million decrease in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2020, outstanding credit increased 10.5% 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 4.2% in 2020, while the household debt burden decreased to 22.4% 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 5.7% 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 (in December 2021, the former climbed to 4.4% and the latter reached 26.5% of household income). In 2022, outstanding credit increased 7.7% compared to 2021, the ratio of nonperforming loans to individuals reached 5.9% and the household debt burden reached 28.2% of household income.

As of December 31,

2022
2021
2020
(in billions of R$)
Total Credit Outstanding (1) 5,326 4,944 4,677
Earmarked credit 2,151 1,991 1,977
Non-earmarked based credit 3,175 2,953 2,700
of which:
Corporate 1,404 1,351 1,267
Individuals (retail) 1,771 1,602 1,433
(1) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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 2022, we recorded foreign exchange exposure of R$83.5 million, foreign exchange exposure of R$117.4 million in 2021 and foreign exchange exposure of negative R$124.4 million in 2020. 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, 2022, 2021 and 2020—Results of Operations—Gains (losses) on Financial Assets and Liabilities (net) and Exchange Differences (net).”
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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.$1.00. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.62 to R$5.70 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.22 per U.S.$1.00. In 2023, through the date of this annual report, the real appreciated against the U.S. dollar as a result of improvements in commodity prices and better than expected fiscal results derived from higher revenues. As of February 27, 2023, the exchange rate was R$5.20 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. In 2022, as inflation increased to levels not seen since early 2003, as a result of which the Brazilian Central Bank increased the SELIC rate to 13.75% (the highest level since the end of 2016). 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 CMN’s 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 increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Similarly to the beginning of 2018, the Brazilian Central Bank delivered a letter to the CMN explaining why it failed to meet the inflation target and what actions would be implemented to ensure that inflation would converge to target in coming years. In 2022, inflationary pressures escalated in Brazil, including as a result of the ongoing war between Ukraine and Russia, supply chain issues, the continued COVID-19 pandemic (particularly in China) and increases in energy prices. As a result, inflation peaked in 2021 at multiple-year highs of 12.1% in Brazil in April 2022 (as measured by the IPCA in year-over-year terms) and 9.1% in the U.S. in June 2022 (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. Accumulated inflation for the year ended December 31, 2022, was 5.79% in Brazil and 6.5% in the United States. This resulted in tighter monetary policy by the Brazilian Central Bank, which increased the SELIC rate from a low of 2.0% as of the end of 2020 to 13.75% as of August 2022, a level at which it has remained as of the date of this annual report.
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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 2022, 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$945 million within a one-year period. 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 the IGP-M. For example, considering the amounts in 2022, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$92 million and R$81 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, 2022 As of December 31, 2021 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 26.50 % 25.00 % Loans Cap rate: 12.0% 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) 50.50 % 52.00 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.y.
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 %

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Time deposits
Reserve requirements(3) 20.00 % 20.00 % 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 % 80.00 %
(1) Rural credits are credits granted to farmers in the amount of R$16.2 billion and R$13.6 billion as of December 31, 2022 and 2021, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of R$2.7 billion as of December 31, 2022 and R$1.9 billion December 31, 2021, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the possibility of any deduction on its website (rule numbers 189, 188 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.
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 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 2022, 2021 and 2020, 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.
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As of December 31,

2022
2021
2020
(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) 5.1% 4.8% 4.3%
Discount rate(3) 12.9% 12.3% 12.4%
(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 2022.
(3) The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 20.10% in 2022, 18.77% in 2021 and 19.56% in 2020.
(*) A quantitative goodwill impairment test is performed annually. At the end of each exercise, an analysis is carried out on the existence of appearances of disability. For the years 2022, 2021 and 2020 there was no evidence of impairment. In the goodwill impairment test, carried out considering the December 2022 scenario, and whose discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows, it was found that these continue to indicate the absence of 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
In addition, our results of operations have been influenced and will continue to be influenced by the other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events,” including the Spin-Off of Getnet.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the ~~IASB and the principal~~IASB.
General
Our main accounting policies are described in ~~Note~~note 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 judgment~~exercise 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 ~~involve~~apply such estimates for different durations a ~~higher degree~~material impact on our financial condition and results of ~~complexity~~operations 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.”
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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 - Derivative~~We use derivative financial instruments for both trading and ~~Short positions”; “9 - Loans~~nontrading 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 - Fair~~swaps; 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 ~~assets~~markets 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.
· 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 nonlinear 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.
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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 of~~for 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 nonperforming 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 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 during~~all 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 - Loans~~We 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 ~~due~~and calculation of amounts necessary to cover the related credit risk.
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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 - Derivative~~risk. 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 ~~instruments~~situation; 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 - Loans~~contingencies and ~~advances~~credit 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.
· 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.
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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.
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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 was identified in 2022, 2021 and 2020. 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 ~~further~~debt securities, such information ~~see~~includes 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 2022, 2021 and 2020 (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).
Post-employment Benefit Plan
The post-employment ~~benefits plans include~~benefit 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.
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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 - Provisions~~this 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 ~~pensions~~and 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.
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$2,623.1 million as of December 31, 2020. These deductions had a corresponding impact on our total assets and liabilities as of December 31, 2020 as on “Financial assets measured at fair value in profit or loss held for trading” and “Financial liabilities measured at fair value in Income Held for Trading” in the statement of cash flows for the year ended December 31, 2020. There was no change in the balance of stockholders’ equity or income. The financial information as of and for the year ended December 31, 2020 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.
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New Accounting ~~Pronouncements~~
Standards
The new ~~accounting~~IFRS standards ~~which will come into force~~effective after ~~December 31, 2019~~January 1, 2023, are mentioned in our audited consolidated financial statements included in this annual report. For further information, see note ~~“1 - Introduction, basis of presentation of the consolidated financial statements and other information”~~1 to our audited consolidated financial ~~statements.~~
statements included elsewhere in this annual report.
All accounting policies and measurement bases with a material effect on the consolidated financial statements for ~~2019~~2022 were applied in the preparation of such financial statements.
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Results of Operations for the Years Ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017~~2020
Executive Summary – Santander Brasil Results at a glance
~~Executive Summary – Santander Brasil Results at a glance~~
Total Incomeamounted to R$~~58,769~~66,475 million in ~~2019,~~2022, an increase of ~~18.7%~~4.0%, or R$2,548 million in comparison with the year ended December 31, ~~2018, reflecting the good performance of our business lines. Excluding the effects of the hedge for investment abroad, our total income would have amounted to R$60,033 million in the year,~~2021, driven by an increase of 8.4% compared to the same period of the previous year. 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”.
~~Consolidated Profit for 2019~~ totaled R$16.6 million, in the year ended December 31, 2019, 29.9% increase over the year ended December 31, 2018, as a result of an increase in net interest income and net fees and commissions as well as lower losses in gains/lossesgains on financial assets and liabilities (net) and exchange differences (net)., offset by a decrease on net interest income due to the impact of interest rate increases on the cost of funding.
Consolidated Net Income totaled R$14,339 million, in the year ended December 31, 2022, a decrease of 7.8% compared to the year ended December 31, 2021, mainly due to: (i) an increase of 4.0% in total income as described above, (ii) the increase in impairment losses on financial assets of 45.1% in 2022 driven by the individual loans portfolio and a specific case of large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, (iii) a 5.3% increase in administrative expenses in 2022 due to the increase in inflation in the period (with inflation reaching 5.8% in 2022), and (iv) reduction in tax rates from 37.1% to 26.7%. For further information, see note “c.1) Lawsuits and Administrative Proceedings – related to Tax and Social Security “in our audited consolidated financial statements included elsewhere in this annual report
Loan Portfolio to customers amounted to R$~~347~~524 billion as of December ~~2019,~~31, 2022, an increase of ~~7.9%~~6.3% compared to December 31, ~~2018,~~2021, mainly due to ~~an increase~~the increases in the portfolio of loans to individuals, especially payroll mortgage, credit cards and ~~consumer finance portfolio.~~personal credit.
Credit Qualityremains at reasonable levels and ~~support~~supports our growth.Impaired assets to credit risk ratio was ~~6.0%~~6.9% for the year ended December 31, ~~2019,~~2022, a ~~0.1~~1.9 p.p. ~~decrease~~increase as compared to the previous year.Coverage ratio was ~~96.6%~~89.8% in the year ended December 31, ~~2019,~~2022, a ~~5.8~~20.6 p.p. decrease ~~to 102.4%~~from 110.4% the year ended December 31, ~~2018.~~2021. Our Basel Capital adequacy ratio was ~~15.04%~~13.9% in the year ended December 31, ~~2019,~~2022, a decrease of ~~0.02%~~1.0 p.p. compared to the year ended December 31, ~~2018.~~ 2021.

Deposits from the Brazilian Central Bank and deposits from credit institutions plus customer deposits increased by ~~8.1% to~~2.7% reaching R$~~436~~606 billion in ~~2019.~~
2022.

Results of Operations
The following table presents our consolidated results of operations for the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017:~~2020:
For the Year Ended December 31,
% Change % Change
2019 2018 2017
2019/2018 2018/2017
(in millions of R$, except percentages)
Net interest income 44,321 41,921 34,946 5.7 20.0
Income from equity instruments 19 33 83 (42.0 ) (60.8 )
Income from companies accounted for by the equity method 149 66 72 126.6 (8.4 )
Net fee and commission income 15,713 14,132 12,722 11.2 11.1
Gains/losses on financial assets and liabilities (net) and exchange differences (net) (326 ) (5,589 ) 1,574 (94.2 ) (455.1 )
Other operating income (expenses) (1,108 ) (1,056 ) (672 ) 4.9 57.1
Total income 58,769 49,507 48,725 18.7 1.6
Administrative expenses (16,942 ) (16,792 ) (16,121 ) 0.9 4.2
Depreciation and amortization (2,392 ) (1,740 ) (1,662 ) 37.5 4.7
Provisions (net) (3,682 ) (2,000 ) (3,309 ) 84.1 (39.6 )
Impairment losses on financial assets (net) (13,370 ) (12,713 ) (12,338 ) 5.2 3.0
Impairment losses on other assets (net) (131 ) (508 ) (457 ) (74.1 ) 11.3
Other nonfinancial gain (losses) 20 156 (324 ) (86.9 ) (148.2 )
Operating profit before tax 22,273 15,910 14,514 40.0 9.6
Income tax (5,642 ) (3,110 ) (5,376 ) 81.4 (42.2 )
Consolidated profit for the year 16,631 12,800 9,138 29.9 40.1
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For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Net interest income 47,503 51,318 44,443 (7.4 ) 15.5
Income from equity instruments 38 90 34 (57.7 ) 166.8
Income from companies accounted for by the equity method 199 144 112 38.1 28.6
Net fee and commission income (expense) 14,876 15,274 16,228 (2.6 ) (5.9 )
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) 4,699 (1,781 ) (11,703 ) (363.9 ) (84.8 )
Other operating income (expenses) (net) (841 ) (1,120 ) (873 ) (24.9 ) 28.3
Total income 66,475 63,926 48,242 4.0 32.5
Administrative expenses (18,240 ) (17,316 ) (17,115 ) 5.3 1.2
Depreciation and amortization (2,586 ) (2,434 ) (2,579 ) 6.2 (5.6 )
Provisions (net) (1,215 ) (2,179 ) (1,657 ) (44.2 ) 31.6
Impairment losses on financial assets (net) (24,829 ) (17,113 ) (17,450 ) 45.1 (1.9 )
Impairment losses on other assets (net) (161 ) (166 ) (85 ) (2.6 ) 95.3
Other nonfinancial gains (losses) 131 33 308 304.4 (89.5 )
Operating income before tax 19,575 24,750 9,664 (20.9 ) 156.1
Income tax (5,235 ) (9,191 ) 3,787 (43.0 ) (342.7 )
Consolidated net income for the year 14,339 15,559 13,451 (7.8 ) 15.7

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Our consolidated ~~profit~~net income for the year ended December 31, ~~2019~~2022, was R$~~16,631~~14,339 million, ~~an increase~~a decrease of R$~~3,832~~1,220 million, or ~~29.9%~~7.8%, as compared to our consolidated ~~profit~~net income of R$~~12,800~~15,559 million for the year ended December 31, ~~2018~~2021, primarily due to an increase in impairment losses on financial assets of R$7,716 million, or 45.1%, to R$24,829 million in the year ended December 31, 2022 from R$17,113 million in the year December 31, 2021 driven by the deterioration of the credit portfolio which was impacted by a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, and a decrease in net interest income of R$3,815 million, or 7.4%, to R$47,503 million in the year ended December 31, 2022 from R$51,318 million in the year December 31, 2021 mainly due to an increase in prevailing interest rates in Brazil 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$138 million in revenues from current account services. These increases were explained for the expansion of our customer base, greater loyalty and higher transactionality.
of the Brazilian Central Bank’s increases in the SELIC rate to suppress inflation and a decrease in income and fees received from customers as a result of more selective credit and services policies and an increase in the cost of our liabilities as a result of higher interest rates.
Our consolidated ~~profit~~net income for the year ended December 31, ~~2018~~2021, was R$~~12,800~~15,559 million, an increase of R$~~3,662~~2,109 million, or ~~40.1%~~15.7%, as compared to our consolidated ~~profit~~net income of R$~~9,138~~13,451 million for the year ended December 31, ~~2017~~2020, as a result ~~of:~~
~~(i)~~of an increase ~~of R$6,975 million~~ in net interest income ~~mostly driven by growth~~of R$6,876 million, or 15.5%, to R$51,318 million in ~~our loan portfolio~~the year ended December 31, 2021 from R$44,443 million in the year December 31, 2020 to driven by our ~~commercial banking segment;~~credit portfolio.
Net Interest Income
~~(ii)~~Net interest income for the year ended December 31, 2022, was R$47,503 million, a 7.4% or R$3,815 million decrease from R$51,318 million for the year ended December 31, 2021. This decrease was mainly due to the increase in interest rates, which increased the pressure on our margins, as partially offset by 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/losses on financial assets and liabilities (net) and exchange differences (net)~~, both of which include the effects of the hedge for investment held abroad.~~
~~Net Interest Income~~
Net interest income for the year ended December 31, 2019 was R$44,321 million, a 5.7% or R$2,400 million increase from R$41,921 million for the year ended December 31, 2018. This increase was mainly explained by a 7.9% increase in the volume of our credit portfolio, driven by individuals and consumer finance.
.
Average total earning assets in ~~2019~~2022 were R$~~655.2~~903.4 billion, a ~~7.8%~~7.13% or R$~~47.1~~60.1 billion increase from R$~~608.0~~843.3 billion in ~~2018.~~2021. The principal drivers of this increase were an increase of R$~~45.9~~42.4 billion, or ~~81.8%~~9.2%, in the ~~average of loans and amounts due from credit institutions, a R$18.5 billion increase in~~ average of loans and advance to customers and aan R$~~14.7 billion increase in average of debit instruments, which were partially offset by a R$32.3~~11.2 billion decrease in average of ~~cash on balances with the Brazilian Central Bank.~~ debt instruments.
Net yield ~~(the net~~(net interest income divided by average earning assets) in 2022 was 5.3% and 6.1% in 2021. Net yield (net interest income divided by average earning assets) was ~~6.8%~~6.1% in ~~2019~~2021 compared to ~~6.9%~~6.0% in ~~2018, an decrease of 0.1 p.p.~~2020.
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Average total interest-bearing liabilities in ~~2019~~2022 were R$~~491.2~~673.0 billion, a ~~6.0%~~3.9% or R$~~27.8~~25.3 billion increase from R$~~463.4~~647.8 billion in ~~2018.~~2021. The main ~~drivers~~driver of this growth ~~were~~was an increase of R$~~18.0~~18.6 billion in ~~customer~~customers deposits ~~an increase~~as a result of ~~R$5.3 billion~~a change in ~~deposits from the Brazilian Central Bank and deposits from credit institutions and an increase of R$4.7 billion in marketable debt securities.~~
consumer preferences towards interest bearing assets.
Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was ~~5.3%~~2.7% in ~~2019 as compared to 5.4% in 2018,~~2022, mainly due to ~~a decrease~~the increase in ~~the cost of funding, associated with the overall reduction~~interest rates in ~~Brazil’s interest rate from 6.50%~~Brazil in ~~2018 to 4.5% in 2019.~~
2022, which put pressure on our margins.
Net interest income for the year ended December 31, ~~2018~~2021, was R$~~41,921~~51,318 million, a ~~20.0%~~15.5% or
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R$~~6,975~~6,876 million increase from R$~~34,946~~44,443 million for the year ended December 31, ~~2017.~~2020. This increase was mainly due to ~~an 11.6%~~a 15.7% increase in ~~the volume of~~ our credit portfolio ~~which was primarily concentrated in~~driven by our commercial 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.
Commercial Banking unit.
Average total earning assets in ~~2018~~2021 were R$~~608.0~~843.2 billion, a ~~9.3%~~12.4% or R$~~51.8~~93.2 billion increase from R$~~556.2~~750.1 billion in ~~2017.~~2020. The principal drivers were an increase of R$~~32.6 billion increase in the average of loans and amounts due to credit institutions, a R$26.8~~76.8 billion, or ~~9.7%~~20.0%, in the average of loans and ~~advances~~advance to customers aand an R$~~17.3~~21.3 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~~(net interest income divided by average earning assets) was ~~6.9%~~5.86% in ~~2018~~2021 compared to ~~6.4%~~5.93% in ~~2017, an increase~~2020, a decrease of ~~0.5~~0.07 p.p.
Average total interest-bearing liabilities in ~~2018~~2021 were R$~~463.4~~647.7 billion, ~~an 11.2%~~a 13.0% or R$~~46.6~~74.3 billion increase from R$~~416.8~~573.4 billion in ~~2017.~~2020. The main ~~drivers~~driver of this growth ~~were~~was an increase of R$~~41.3~~40.1 billion in ~~customer~~customers deposits ~~an increase of~~and R$~~13.4~~37.4 billion in deposits from the Brazilian Central Bank and deposits from credit institutions, ~~and an increase~~as a result of ~~R$2.4 billion~~a shift in ~~subordinated debts, which were offset by a decrease of R$10.5 billion 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 ~~5.4%~~4.8% in ~~2018, as compared to 4.1% in 2017,~~2021, mainly due ~~our Commercial Banking segment accounting for a greater share of in our total results and a decrease~~to the increase in the ~~cost~~SELIC rate during the year ended December 31, 2021, from 2.0% as of ~~funding, associated with the overall reduction in Brazil’s interest rate.~~December 31, 2020 to 9.25% as of December 31, 2021.
Income from Equity Instruments
Income from equity instruments for the year ended December 31, ~~2019~~2022, totaled R$1938 million, a R$1452 million decrease from R$3390 million for the year ended December 31, ~~2018,~~2021, mainly due to ~~lower~~higher dividends ~~received~~gains from an investment fund, Santander Fundo de Investimento ~~Guarujá~~Amazonas Multimercado ~~Crédito~~Credito Privado de Investimento no ~~Exterior.~~
Exterior, in 2021 as compared to 2022.
Income from equity instruments ~~in 2018,~~for the year ended December 31, 2021, totaled R$3390 million, a R$5056 million ~~decrease~~increase from R$8334 million for the year ended December 31, ~~2017. This decrease was primarily~~2020, mainly due to higher dividend gains from an investment fund, Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior, as a ~~receipt~~result of ~~dividends of Rio Alto Gestão de Creditos e Participações S.A. that did not occur~~gains in ~~2018.~~the equities positions towards derivatives hedge, R$84.8 million.
Income from Companies Accounted for by the Equity Method
Income from companies accounted for by the equity method for the year ended December 31, ~~2019~~2022 was R$~~149~~199 million, ana R$8455 million increase from R$66144 million for the year ended ~~2018,~~December 31, 2021, mainly due to an increase of R$~~59 million in the result of operations of Banco RCI Brasil S., a jointly-controlled company, an increase of R$19~~50.6 million in the results of operations of ~~Tecban (Tecnologia Bancária S.A.), a jointly-controlled company and an increase of R$12 million~~Mobills, which we acquired in the results of operations of Webmotors S.A., a 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.
2021.
Income from companies accounted for by the equity method for the year ended December 31, ~~2018~~2021 was R$66144 million, a R$632 million ~~decrease~~increase from R$72112 million for the year ended December 31, ~~2017. This increase was~~2020, mainly due to an increase of R$23.5 million in the ~~positive~~ results of operations of ~~Banco RCI Brasil~~Tecban (Tecnologia Bancária S.A.), ~~a jointly-controlled company, which were partially offset by negative~~and an increase of R$7.0 million in the results of operations of Webmotors S.A., aboth jointly-controlled ~~company.~~companies.
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Net Fee and Commission Income
Net fee and commission income for the year ended December 31, ~~2019 reached~~2022, was R$~~15,713~~14,876 million, ~~an increase of 11.2%~~a 2.6% or R$~~1,581~~397 million decrease compared to R$~~14,132~~15,273 million for the year ended December 31, ~~2018.~~2021. This ~~increase~~ was ~~mainly due~~primarily attributable to ~~an increase of R$722 million~~(i) a decrease in ~~revenues from~~ credit and debit cards ~~R$417 million~~issuances as a result of a more selective credit approval policy, (ii) the Spin-Off of Getnet (in the first quarter of 2021), (iii) a decrease in ~~revenues from sale of insurance and premium bonds, R$295 million in revenues from capital markets and R$138 million from revenues~~fees from current and account ~~services.~~services (as a result of annual fee exemption campaigns and the increasing use of PIX by customers as an alternative to traditional banking services). This was partially offset by an increase in collection and payment services and asset management and pension funds.
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Net ~~fees~~fee and ~~commissions~~commission income for the year ended December 31, ~~2018~~2021, reached R$~~14,132~~15,273 million, a ~~11.1%,~~5.9% or R$~~1,410~~955 million ~~increase from~~decrease compared to R$~~12,722~~16,228 million for the year ended December 31, ~~2017.~~2020, impacted mainly due to decrease of credit and debit cards, due 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 pension funds.
Net fees and commissions from trade finance totaled R$1,825 million for the year ended December 31, 2022, an increase of 3.8% compared to the year ended December 31, 2021.
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 insurance and capitalization totaled R$4,357 million for the year ended December 31, 2022, an increase of 1.1% compared to the year ended December 31, 2021. This increase was mainly ~~due to~~a result of an increase in our life insurance portfolio.
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 million~~12.5% compared to the year ended December 31, 2020. This increase was mainly a result of an increase in ~~revenues from~~our credit ~~and debit cards, R$370 million in revenues from current account services, R$354 million in revenues from~~life insurance ~~and premium bonds.~~
portfolio.
Net fees and commissions from credit and debit cards totaled R$~~4,986~~3,151 million for the year ended December 31, ~~2019, an increase~~2022, a decrease of ~~16.9%~~14.1% compared to the year ended December 31, ~~2018.~~2021. This ~~increase~~decrease was mainly a result of (i) a decrease in credit and debit cards issuances as a result of a ~~higher turnover (R$236.4 billion in~~more selective credit approval policy (ii) the ~~fiscal year ended December 31, 2019 as compared to R$201.6 billion~~Spin-Off of Getnet (in the ~~fiscal year ended December 31, 2018.~~
first quarter of 2021).
Net fees and commissions from credit and debit cards totaled R$~~4,264~~3,666 million for the year ended December 31, ~~2018, an increase~~2021, a decrease of ~~15.5%~~28.8% compared to the year ended December 31, ~~2017.~~2020. This ~~increase~~decrease was ~~primarily due to~~mainly a ~~higher transaction volume (2,338.2 million in the year ended December 31, 2018 as compared to 1,987.6 million the year ended December 31, 2017).~~
Net fees and commissions from insurance and premium bonds totaled R$3,586 million for 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 evolutionresult 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~~Spin-Off 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$3,913 million for the year ended December 31, 2018, an increase of 10.4% compared to the year ended December 31, 2017 explained by the growth of digital transactions and the increase of active current account holders.
Getnet.
The following table reflects the breakdown of net fee and commission income for the ~~year~~years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017:~~2020:
For the Year Ended December 31
2019 2018 2017 % Change 2019/2018 Change% 2018/2017
(in millions of R$, 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
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For the Year Ended December 31
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Current account services 3,267 3,549 3,716 (8.0 ) (4.5 )
Collection and payment services 1,790 1,626 1,459 10.1 11.4
Insurance and capitalization 4,357 4,311 3,831 1.1 12.5
Asset Management and pension funds 1,600 1,418 1,114 12.8 27.3
Credit and debit cards 3,151 3,666 5,151 (14.1 ) (28.8 )
Capital markets 1,211 916 873 32.2 4.9 1,112 1,053 858 5.5 22.8
Trade finance 1,317 1,228 956 7.2 28.5 1,825 1,758 1,740 3.8 1.0
Tax on services (622 ) (671 ) (526 ) (7.3 ) 27.6 (687 ) (712 ) (678 ) (3.6 ) 5.1
Others (1,562 ) (1,266 ) (608 ) 23.4 108.2 (1,538 ) (1,396 ) (964 ) 10.2 44.8
Total 15,713 14,133 12,722 11.2 11.1 14,876 15,273 16,229 (2.6 ) (5.9 )

Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net)
Gains on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2022, amounted to R$4,699 million, an increase of R$6,480 million compared to losses of R$1,781 million for the year ended December 31, 2021. This variation is mainly due to (i) gains of R$3,985 million related to net gains or losses from hedge accounting and (ii) gains of R$426 million related to financial instruments not measured at fair value through profit or loss. For further information, see notes 36 and 37 to our audited consolidated financial statements – included elsewhere in this annual report.
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Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, ~~2019 were~~2021, amounted to losses of R$~~326~~1,781 million, a ~~reduction~~gain of R$~~5,263~~9,922 million inover the losses ~~from~~of R$~~5,589~~11,703 million for the year ended December 31, ~~2018.~~2020. This variation is mainly due to ~~gains~~greater exposure to operations in Cayman and Luxembourg and unfavorable exchange rate variation in 2020. In 2021, there was a combination of ~~R$5,156 million related~~lower exchange rate variation and the end of overhedge operations due to ~~financial assets measure at fair value through profit or loss held and gains of R$ 17.9 million related to exchange differences (net).~~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~~amounted to gains of R$~~938~~731 million for the year ended December 31, ~~2019,~~2021, a R$~~660~~1,149 million, increase from gains of R$~~278~~1,880 million compared to the year ended December 31, ~~2018~~2020, mainly due to the positive results in our derivative positions. 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.”.position.
~~Gains/~~The following table presents our 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$2,384 million compared to the year ended December 31, 2017, primarily due to positive results in our derivative positions as a result of market volatility which occurred in the fiscal year ended December 31, 2017 did not occur in the fiscal year ended December 31, 2018. Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”.
~~The following table presents our gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net) for the~~ periods indicated.
For the Year Ended December 31
2019 2018 2017 % Change 2019/2018 Change% 2018/2017
(in millions of R$, 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
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) 4,699 (1,781 ) (11,703 ) n.m. (84.8 )
Effects of the hedge for investments held abroad (129 ) 2,512 13,583 n.m. (81.5 )
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) excluding effects of the hedge for investments held abroad(1) 4,570 731 1,880 524.8 (61.1 )
(1) ~~Gains/losses~~Gains (losses) on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge ~~investment~~for investments 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.”

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Other Operating Income/Expenses
Other operating ~~income/~~expenses for the year ended December 31, ~~2019 were expenses~~2022 amounted to R$841 million, a decrease of R$~~1,108 million, an increase of R$52~~279 million compared to expenses of R$~~1,056~~1,120 million for the year ended December 31, ~~2018. Other operating income/~~2021, mainly due to lower expenses ~~for~~with the Benefit Guarantor Fund — FGB (Fundo Garantidor de Benefícios) pension plan and greater expenses with FGC pension plans given the increase in the balance of deposits from R$436 million to R$478 million, which was primarily due to the increase in consumption of products covered by the FGC. For the year ended December 31, ~~2018,~~2021, other operating income/expenses were expenses of R$~~1,056 million, an increase of R$384~~1,120 million, compared to expenses of R$~~672~~873 million for the year ended December 31, ~~2017, mainly due to assets we received as guarantees from our customers.~~2020.
Administrative Expenses
Administrative expenses for the year ended December 31, ~~2019~~2022, were R$~~16,942~~18,240 million, a R$~~149~~924 million increase compared to expenses of R$~~16,792~~17,316 million for the year ended December 31, ~~2018.~~ 2021, mainly due to the increase in expenses with wages and salaries, technology/systems and technical services, resulting from the increase in inflation in the period.
For the year ended December 31, ~~2018,~~2021, our administrative expenses of R$~~16,792~~17,316 million reflected a R$~~672~~202 million ~~increase~~increases compared to ~~administrative~~ expenses of R$~~16,121~~17,115 million for the year ended December 31, ~~2017. The performance in both periods is primarily attributed~~2020, mainly due personal expenses and technology/systems expenses, due to the ~~increase in: (i) personnel expenses, which are in line, with our meritocratic culture and~~growth of the ~~performance of our business; and (ii) data processing expenses line in order to support the increase in the volume of our customer transactions.~~business.
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Personnel expenses increased R$~~122~~871 million for the year ended December 31, ~~2019, as a consequence of the increase in the benefits line and~~2022, mainly due to higher employee wages and salaries ~~with a result of the renegotiation of~~deriving from our collective bargaining ~~agreement.~~ with employees in 2021, which impacted the first eight months of 2022, and our 2022 collective bargaining agreement, which impacted the final four months of the year.
In the year ended December 31, ~~2018,~~2021, our personnel expenses increased R$~~269~~154 million, ~~compared to the same period in 2017. This performance can be attributed to the increase in~~primarily resulting from higher employee wages and salaries, ~~and social security costs and benefits, which are in line with our meritocratic culture and~~deriving from the ~~performance of our business.~~
collective bargaining agreement applied to the Company’s salary base from September 2021.
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 2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(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 6,311 5,905 5,730 6.9 3.1
Social security costs 1,277 1,405 1,381 (9.1 ) 1.7 1,431 1,153 1,222 24.1 (5.6 )
Benefits 1,492 1,387 1,309 7.5 6.0 1,603 1,435 1,390 11.7 3.2
Training 66 63 58 4.8 8.6 60 55 49 9.4 12.0
Other personnel expenses 617 538 475 14.7 13.3 492 478 480 2.9 (0.4 )
Total 9,328 9,206 8,937 1.3 3.0 9,896 9,026 8,871 9.6 1.7

Other administrative expenses increased R$2852 million to R$~~7,614~~8,343 million for the year ended December 31, ~~2019~~2022, from R$~~7,586~~8,291 million for the year ended December 31, ~~2018,~~2021, mainly due to a R$272 million increase in technology and systems, a R$91 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 greater expenses with property, fixtures and supplies and technology and systems, resulting from the ~~adoption of IFRS 16.~~inflationary pressures, which was partially offset by the decrease in expenses for advertising.

~~In the year ended December 31, 2018 other~~Other administrative expenses increased R$~~403~~47 million to R$~~7,586~~8,291 million for the year ended December 31, ~~2018~~2021, from R$~~7,183~~8,243 million for the year ended December 31, ~~2017,~~2020, mainly ~~due to: (i)~~as a ~~R$422 million increase in~~result of greater expenses with property, fixtures and supplies and technology and systems, ~~associated with greater transactionality and~~resulting from the expansion of our ~~customer base, (ii) an R$189 million increase in specialized and technical services especially technology services. This growth in expenses~~business, which was partially offset by ~~R$136 million~~the decrease in ~~communications-related expenses.~~
expenses for communications.
The following table sets forth our other administrative expenses for each of the periods indicated:
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Specialized and technical services 2,229 2,184 2,171 2.1 0.6
Property, fixtures and supplies 896 889 744 0.8 19.5
Technology and systems 2,577 2,474 2,355 4.1 5.1
Advertising 541 621 654 (12.9 ) (5.0 )
Communications 422 353 649 19.5 (45.6 )
Per diems and travel expenses 73 72 69 1.6 2.6
Taxes other than income tax 149 202 280 (26.4 ) (27.7 )
Surveillance and cash courier services 549 598 595 (8.2 ) 0.5
Insurance premiums 22 22 17 (1.7 ) 31.6
Other administrative expenses 887 874 710 1.3 23.3
Total 8,343 8,291 8,243 0.7 0.6

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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~~The efficiency ratio, which we calculate as total administrative expenses divided by total income, increased to 27.4% in the year ended December 31, ~~2019, includes mainly Data Processing Expenses~~2022, as compared to 27.1% for the year ended December 31, 2021. This increase of 0.35 p.p. in the ~~balance of R$2.4 million (2018 – R$67.7 million and 2017 - R$73.7 million), Service Expenses~~ratio is primarily due to an increase in administrative expenses, resulting from the increase in inflation in the ~~balance~~period, and the effect 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~~a more selecting credit approval policy, which put pressure 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$89.4 million).~~our revenue.
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The efficiency ratio, which we calculate as total administrative expenses divided by total income, decreased to ~~28.8%~~27.1% in the year ended December 31, ~~2019,~~2021, as compared to ~~33.9%~~35.5% for the year ended December 31, ~~2018 For~~2020. This decrease of 8.4 p.p. in the ~~year ended December 31, 2017 it was 33.1%. Our adjusted efficiency~~ ratio ~~which excludes~~is primarily due to the ~~effect~~effects of the hedge for investment held abroad ~~(see “—Hedging~~and the growth in ~~Foreign Investments” and “Selected Financial Data—Selected Consolidated Ratios, Including Non-GAAP Ratios”), was 28.2%, 30.3% and 32.5%~~net interest income driven by the increase in ~~2019, 2018 and 2017, respectively.~~the volume of the credit portfolio.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, ~~2019~~2022, was R$~~2,392~~2,586 million, a 6.2% or R$~~652~~152 million increase from R$~~1,740~~2,434 million for the year ended December 31, ~~2018,~~2021, primarily due to greater expenses with the ~~change in accounting practices~~amortization of hardware and software items, resulting from the adoption 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 includedinvestments made in ~~“item 18.Financial Statements of~~ this ~~annual report.~~ period.
For the year ended December 31, ~~2018,~~2021, depreciation and amortization ~~amounted to~~was R$~~1,740~~2,434 million, a 5.6%, or R$78145 million, ~~increase~~decrease from R$~~1,662~~2,579 million for the year ended December 31, ~~2017, mainly~~2020, primarily due to ~~higher depreciation~~the decrease in expenses ~~related~~with the amortization of hardware and software, which was primarily due to ~~technology items~~the volume of assets not deployed or under development and ~~higher amortization expenses in relation to third party real estate and facilities.~~
the effect of write-offs.
Provisions (Net)
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$~~3,682~~1,215 million for the year ended December 31, ~~2019, an increase of~~2022, a 44.2%, or R$~~1,682~~964 million, decrease compared to R$~~2,000~~2,179 million for the year ended December 31, ~~2018, mainly~~2021. This was primarily due to ~~an increase of R$700 million related to the creation of an efficiency and productivity fund, an increase~~a decrease in civil and labor proceedings due to a revision of ~~the~~our operational model and ~~a constitution~~the creation of provisions related to ~~the~~ legal ~~proceeding~~proceedings brought by the ~~association~~Association of ~~retired employees of~~Retired Banespa Employees (Associação dos Funcionários Aposentados do Banco do Estado de São Paulo), or AFABESP, ~~an association of former employees of Banespa~~ in which the classification of the ~~chance~~risk of loss was ~~revised to~~maintained as probable in December ~~2019 (for further information see note 23 to our audited consolidated financial statements included in the ”Item 18. Financial Statements” of this annual report).~~
2022.
In the year ended December 31, ~~2018,~~2021, provisions (net) totaled R$~~2,000 million, a increase of R$1,310 million compared to R$3,309~~2,179 million for the year ended December 31, ~~2017, mainly due~~2021, a 31.6%, or R$522 million increase, compared to ~~a decrease of~~ R$~~816~~1,657 million ~~related~~for the year ended December 31, 2020, driven by the fact that the amounts provisioned are indexed to the ~~past service cost~~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 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” of in this annual report) and lower gains related to foreclosed assets.
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year ended December 31, 2021.
Impairment Losses on Financial Assets (Net)

Impairment losses on financial assets (net) for the year ended December 31, ~~2019~~2022 were R$~~13,370~~24,829 million, an R$~~657~~7,716 million increase compared to R$~~12,713~~17,113 million for the year ended. December 31, 2021, driven by the deterioration of macroeconomic conditions in Brazil and a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
Impairment losses on financial assets (net) for the year ended December 31, 2021 were R$17,113 million, an R$337 million decrease compared to R$17,450 million for the year ended December 31, ~~2018. This increase was principally due to Installment Loans to Individuals,~~2020, primarily due to the ~~recurrent growth~~resumption of economic activity in Brazil following the easing of the ~~credit portfolio~~COVID-19 pandemic in ~~this segment.~~
~~For~~the second half of 2021 and the use of the overlay provision constituted in the year ended December 31, ~~2018, impairment losses on financial assets (net) were R$12,713 million, an R$375 million increase compared~~2020, in response 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 resultpotential effects of the ~~adoption of IFRS 9 criteria.~~COVID-19 pandemic.

Our credit risk exposure portfolio increased by R$~~25.3~~27.5 billion to R$~~347.3~~568.3 billion as of December 31, ~~2019~~2022 compared to R$~~321.9~~540.8 billion as of December 31, ~~2018.~~2021. Furthermore, our impaired assets increased R$112.3 billion from R$~~23.4~~26.9 billion as of December 31, ~~2018~~2021 to R$~~22.4~~39.2 billion for the year ended December 31, ~~2019. The default rate decreased~~2022.
Our credit risk exposure portfolio increased by ~~20 base points in 2019 in comparison with 2018.~~
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, Furthermore, our impaired assets increased R$3.7 billion from R$23.2 billion as of December 31, 2020 to R$26.9 billion for the year ended December 31, 2021.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio as of December 31, ~~2019~~2022 and December 31, ~~2018~~2021 and ~~2017.~~2020.
As of December 31,
2019 2018 2017 % Change 2019/2018 % Change 2018/2017
(in millions of R$ 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
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As of December 31,
2022 2021 2020
(in millions of R$, except percentages)
Loans and advances to customers, gross 524,655 493,355 417,822
Impaired assets 39,224 26,923 23,176
Provisions for impairment losses 35,212 29,723 25,640
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 568,338 540,873 466,104
Ratios
Impaired assets to credit risk exposure 6.9 % 5.0 % 5.0 %
Coverage ratio ⁽²⁾ 89.8 % 110.4 % 110.6 %
Impairment losses (24,829 ) (17,113 ) (17,450 )
Losses on other financial instruments not measured at fair value ⁽³⁾ —   —   —
Impairment losses on financial assets (net) ⁽⁴⁾ (24,829 ) (17,113 ) (17,450 )

(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$~~391.6~~568,338 million as of December 31, 2022 and guarantees and documentary credits amounting to R$~~44 billion.~~43,682 million as of December 31, 2022. We ~~present the~~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 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, 2018~~2022, 2021 and ~~2017,~~2020, our total of impairment losses on financial instruments included R$~~2,055~~1,173 million, R$~~2,714~~1,191 million and R$~~2,784~~1,577 million, respectively, relating to debt instruments.
The following chart shows our impaired assets to credit risk ratio from ~~2014~~2020 through ~~2019:~~2022:

~~141~~
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~~Impaired~~Global Wholesale Banking
Santander Corporate & Investment Banking, or 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 the 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 integrated services.
Our Portfolio of Products and Services
Payments
Credit and Debit Cards
We operate in the credit and debit card market by issuing cards to our customers (including both account and non-account holders), with most customers being individuals. Our strategy is to always offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
In 2022, we sought to revisit the value proposition of our high-income cards (Unique and Unlimited) to offer our customers more attractive benefits, as well as easier ways to receive fee exemptions and to improve the products’ standing in the market. Moreover, we implemented a loyalty points program in our co-branded “American Airlines” card, which we believe contributed to an increase in issuances of co-branded American Airlines cards by 140% in the year ended December 31, 2022 compared to the year ended December 31, 2021 We have also been marketing the exclusive Santander American Express Centurion card to our private banking customers, including by hosting a special event for 200 prospective and current holders of this card.
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To attract new customers, we launched several campaigns with different competitive offers, such as: (i) one-day campaigns to generate a sense of urgency regarding our service offerings; (ii) specific campaigns for the sale of co-branded American Airlines and Smiles cards; and (iii) a campaign that allowed some customers to try out a card at no cost for a specified period, with accelerated benefits.
Given that Brazilian customers have, in general, more than two cards with different banks, we bet on monetization promotions to encourage our customers to concentrate their expenses on Santander Brasil cards, including: (i) three editions of the “Bateu Ganhou” campaign, which set monthly spending goals for customers and rewarded them with bonus points, miles, or cashback; (ii) the “Desafio Santander” campaign, which set five challenges for customers to retain and increase profitability (e.g., signing onto additional cards, online card purchases, upgrades and open finance measures) in exchange for cashback rewards; (iii) the thematic “Sorte de Craque” campaign in connection with the 2022 World Cup held in Qatar, in which for every R$100 in purchases on a credit card, the customer entered a lottery for a trip to Qatar; and (iv) an edition of the “Sua Casa tá ON” campaign, which encouraged recurring payments using virtual cards with a dynamic security code to improve safety.
Regarding our ESG efforts, we issued over six million recycled PVC cards in the year ended December 31, 2022, contributing to our goal of attaining net zero greenhouse gas emissions by 2050.
In the SME segment, we believe it is essential for businesses to have greater autonomy and flexibility in handling issues that can affect their daily operations, such as cash flow management. Accordingly, we continued to develop our digital platform to provide: (i) autonomy to companies in managing their credit lines and contracts; and (ii) the ability for customers to leave their branch with a card immediately after signing up. We have also integrated additional card-related information, including available limits, bar codes, invoice amounts, and optimal purchase dates, on our AI-powered virtual assistant, Gent&.
With a focus on enhancing the customer experience, we enabled direct registration of Santander Brasil apps on Samsung Pay in March 2022 and on Apple Pay in November 2022. Our customers can now register their Santander Brasil cards on these digital wallets and easily conduct transactions via NFC (near field communication) technology using their mobile devices, providing a convenient and seamless experience.
The following table sets forth certain key financial and operating data regarding our credit card business as of the dates and for the periods indicated.
As of and For the Year Ended December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Credit card portfolio market share (1) 10.5 % 12.4 % 13.4 % (1.9 p.p.) �� (1.0 p.p.)
Credit card portfolio (R$ billion) 50.5 48 37.8 5.2 27.0
Total card turnover (R$ billion) 338.1 306.0 242.0 10.5 26.4
Credit card turnover (R$ billion) 226.5 203 158.7 11.6 27.9
Total card transactions (in millions) 4,362.5 3,555.3 2,570.8 22.7 38.3
Credit card transactions (in millions) 2,344.5 1,859.1 1,300.0 26.1 43.0
Participation of credit card in the household consumption (only debit) – Market overview (2) (%) 16.2 % 17.5 % 17.4 % (1.3 p.p.) 0.1 p.p.
Participation of credit card in the household consumption (only credit) – Market overview (2) (%) 34.1 % 30.6 % 25.2 % 3.5 p.p. 5.4 p.p.
Participation of credit card in the household consumption (total: debit, credit and pre-paid) – Market overview (2) (%) 53.8 % 50.3 % 43.5 % 3.5 p.p. 6.8 p.p.
(1) Source: Brazilian Central Bank, as of September 30, 2022. Data for the year ended December 31, 2022 was not available as of the date of this annual report.
(2) Source ABECS – “Monitor bandeiras.” as of September 30, 2022. Data for the year ended December 31, 2022 was not available as of the date of this annual report.
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Santander Way
Santander Way is an app designed for our cardholders, which allows them to manage their Santander Brasil cards from anywhere, at any time. The card management experience, provided by this platform includes the ability to make payments, transfer funds, add cards to digital wallets, and participate in campaigns, among other features. We seek to update the app regularly with new features. In 2022, we introduced notable enhancements, such as: (i) the "Credit Limit Game," which enables customers to increase their credit limits in a simple and easy way through day-to-day actions; and (ii) digital wallet integration, allowing customers to add their Santander cards to Samsung Pay or Apple Pay via push provisioning.
Esfera
Our loyalty program, Esfera, is accessible through its own website and mobile app. This platform, which is open for enrollment to any person in Brazil, provides customers with the opportunity to earn, purchase and redeem reward points for a variety of products, services, and travel benefits, including exclusive deals and discounts with Brazilian retailers and other select partners. As of the date of this annual report, Esfera also operated a marketplace that featured cashback rewards on product purchases from over 60 participating partners.
Ben
Ben is a corporate benefits company that works to enhance the flexibility, purchasing power, and quality of life of its users by designing, supplying, and managing multiple types of employee benefit vouchers (e.g., meal, food, and transportation vouchers) in the form of magnetic cards. These benefits are offered via an integrated digital platform.
Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.
Ben is currently working on the development of new products, such as fuel cards and other benefit options to expand its portfolio.
Furthermore, Ben recently added Ben Único to its portfolio. This solution offers two types of benefits on a single card, thus lowering card issuance and logistics costs, while contributing to our ESG efforts by reducing the number of cards in circulation. In line with its new product development plan, Ben applied to the Brazilian Central Bank for a license to operate as a payment institution (instituição de pagamento), which was granted in December 2021.
The following table sets forth certain key financial and operating data regarding Ben’s business as of the dates and for the periods indicated.
As of and For the Year Ended December 31,
2022 2021 2020
(in R$ millions, except as otherwise indicated)
Revenue from card sales 2,456 1,484 946
Number of Cards (in thousands) 831 565 217
Number of Transactions (in thousands) 30,442 20,477 12,192
Merchant accredited (in thousands) 399 365 338
For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
Payroll Loans
We offer payroll loans to both account and non-account holders. Repayment installments are deducted on a monthly basis directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, thereby significantly reducing our credit risk compared to other types of loans. These payroll loans are accessible to our customers via our mobile banking platform and 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 Banco Olé. For further information on relevant events relating to Banco Olé, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Market share in origination (1) 17.09 % 15.33 % 16.68 % 1.76 p.p. (1.35) p.p.
Payroll loan portfolio (R$ billion) 59.4 53.2 47.9 11.7 % 11.1 %
(1)       Source: Brazilian Central Bank, as of December 31, 2022, 2021 and 2020, as applicable.
Sim
SIM is a digital lending platform accessible to the general public, where customers can apply and receive approval for loans online. After operating for three years, SIM and +Vezes, a goods and services financing platform for retailers, merged to reinforce their value proposition and offer two business lines: (i) Sim-CP, which provides personal loans with or without collateral, and (ii) Sim-Consumer, which operates in direct consumer financing.
On a combined basis, these two Sim platforms have a total loan portfolio of approximately R$6 billion, more than nine million registered users and a high level of customer satisfaction, with an NPS of 84 points as of December 31, 2022 . Sim also benefits from a specialized sales force with a commercial team of approximately 500 people across Brazil and significant capillarity across to offer its products, with more than 30,000 points of sale offering Sim’s products as of December 31, 2022.
In March 2022, we launched “Pioneer,” a new financing software that enables better customization, flexibility and management of the sales process. As of December 31, 2022, nearly 80% of stores using our consumer finance software had taken advantage of the tool’s functionalities.
We also launched three projects focusing on collateralized loans: (i) offering car equity loans directly at the point of sale, in partnership with Santander Financiamentos, making Sim’s car equity loan available at more than 20,000 car dealers across Brazil as of December 31, 2022; (ii) FGTS Annual Withdrawal Advance (Antecipação do Saque Aniversário FGTS), which advances funds owed to customers as part of their annual, scheduled FGTS payouts, and (iii) finally, at the end of 2022, we released Energia+, an e-commerce platform that allows customers to simulate and apply for residential or commercial solar energy projects using a fully digital process that streamlines the purchase process.
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. In 2022, emDia joined forces with Liderança, a collections call center that we acquired in the second half of 2021, to become a full-service collections solution for its customers, with both call center and digital solutions. In the year ended December 31, 2022, emDia and Liderança had combined revenues of R$211 million.
Return Capital
Return is a specialized written-off collections master servicing company. It provides IT platform, data science, legal and financial advisory, marketing intelligence and back-office services to its customers, which are mostly credit rights investment funds (fundos de investimento em direitos creditórios), or “FIDCs,” such as FIDC Ipanema (a wholly owned Santander fund specialized in buying written-off portfolios).
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Mortgages
We provide long-term financing to our customers for real estate purchases, with the real estate serving as collateral for the loan. We view mortgages as a strategic product due to their lower risk (since the acquired property serves as collateral) and potential to foster customer loyalty (since we offer customers more attractive rates if they choose to bank with us). Our primary customers, as well as those of our competitors, are predominantly individuals.
We only provide mortgage loans that adhere to prime lending regulatory standards for this type of loan. This means that: (i) we limit the financing to a maximum of 90% of the value of the property to be purchased, (ii) the borrower’s monthly income must meet certain minimum requirements, as evidenced by recent payroll information and tax returns confirming their employment status or other revenue sources, thereby allowing us to assess their credit risk profile, and (iii) any other debt added to the financing cannot exceed 35% of the borrower’s monthly gross income.
To simplify the mortgage lending process for our customers, we have developed a digital platform for real estate financing. We were the first bank in Brazil to offer customers the ability to obtain mortgages online, except for the signing and registration of the agreement, which must be done in person. We have established a partnership with the largest real estate platform in Brazil to expand our sales network and bolster our digital presence in this market.
The following table sets forth certain key financial and operating data regarding our mortgage business as of the dates indicated:
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
(in billions of R$, except as otherwise indicated)
Mortgage loan portfolio 58.3 54.8 45.8 6.4 % 19.7 %
Individual sector mortgage loans 56.3 53.0 44.0 6.2 % 20.5 %
Loan to value(1) – Production (% quarterly average) 60.8 % 65.5 % 64.9 % (4.7) p.p. 0.60 p.p.
Loan to value – Portfolio (%) 50.1 % 52.5 % 52.2 % (2.4) p.p. 0.30 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. We are the main private bank for this type of loan in Brazil, with a market share of 22.4% as of December 31, 2022, according to the Brazilian Association of Real Estate Credit and Savings Entities (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança). Our portfolio was R$3.9 billion as of December 31, 2022, an increase of 20% compared to our portfolio as of December 31, 2021. In the year ended December 31, 2022, we remained focused on improving the customer journey and experience, and achieved a 40% reduction in lead time to grant home equity loans (from 24 working days to 14 working days).
We do not offer home equity loans that do not meet the applicable 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.
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Tailored Products and Services
As stated above, our customers have access to a full range of services and products. Thus, our portfolio encompasses offerings from basic to tailor-made and highly intricate solutions across the following areas:
· Global Transaction Banking – responsible for the sale and management of local transactional banking products, which include local loans, commercial financing options such as confirming, transfers with funds from development banks, local loan structuring, and cash management solutions (cash management).
· Global Transactional Services – responsible for the sale of global transactional products, financing for export and import (trade finance), guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
· Global Debt Financing – responsible for providing financing and financial advisory services for infrastructure projects, origination, and distribution of fixed income instruments in capital markets (local and international debt capital markets), financing for acquisitions, and syndicated loans in both local and foreign currency.
· Investment Banking – advisory services for mergers and acquisitions, as well as equity transactions in capital markets.
· Equities – this area operates brokerage services for corporate, institutional and individual investors in stocks and listed derivatives, and also offers research services.
· Treasury Customers (Sales) – responsible for structuring and offering foreign exchange products, derivatives and investments to customers across our various segments, including institutional investors, corporate customers and individuals.
· Market Making – responsible for pricing operations (foreign exchange and derivatives) for customers originated from the sales efforts of our corporate, institutional, private banking and retail areas. This area is also responsible for managing our proprietary books.
· Energy Trading – performs transactions with both qualified and end customers, in addition to acting as a hedge and market making provider in energy markets
We are a leading bank in capital markets and financial advisory services, both in Brazil and abroad, as evidenced by the numerous awards we have received. A few of our most notable accolades are listed in the table below.
Company
Acknowledgments
Dealogic
Full Year 2022
#7 Latin America M&A Revenue by Advisor
#7 Brazil M&A Revenue by Advisor
#3 Latin America & Caribbean DCM Volume by Bookrunner
#4 Latin America & Caribbean International DCM Volume by Bookrunner
#3 Latin America Domestic DCM Volume by Bookrunner
#7 Latin America and Caribbean Loans Volume by Bookrunner
#7 Latin America and Caribbean IB Revenue by Bank
#8 Brazil IB Revenue by Bank
Global Finance Best New Measures to Support Trade Finance Customers during Pandemic 2021
Best Supply Chain Finance Bank Global 2021
Best Post-Shipment Financing Solution 2021
Best Bank for Payments & Collections Award 2022
Best Provider of Short-Term Investments Money 2021
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Institutional Investors
Full Year 2022
#1 Best Analyst in the ESG Research LatAm
#3 Best ESG Team Research LatAm
# Top 3 in Brazil II for Sales, Trading and Corporate Access
FX Markets
Best Bank for USD/BRL (2nd consecutive year)
Best Bank for LatAm (4th consecutive year)
Latin Finance
Bank of the Year: Southern Cone 2021
Brazilian Central Bank
#1 Total FX September 2022
The Banker Best Transaction Bank for Latam 2021
Global Capital #1 Most Impressive Local Bank for Latin America Bonds 2022
Infralogic 2022
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#2 Latin America Bond Arrangers by value
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#1 Latin America Loan Arrangers by value
#1 Latin America Financial Advisors by deal count – Project Finance
#1 Latin America Loan Providers by value – Project Finance
#2 Latin America Bond Arrangers by value  – Project Finance
#3 Latin America Financial Advisors by deal count – M&A
#1 Latin America Financial Advisory by deal count – DCM
#2 Latin America Loan Providers by value – DCM
#2 Latin America Loan Arrangers by value – DCM
#3 Latin America Bond Arrangers by value – DCM
#1 Latin America Financial Advisors by deal count – Project Finance
#2 Latin America Loan Providers by value – Project Finance
#3 Latin America Bond Arrangers by value – Project Finance
#9 Latin America Loan Arrangers by value – M&A
#2 Latin America Financial Advisors by deal count – M&A
Customer Solutions
Agribusiness
Agribusiness remains one of our main levers of growth, and we are focused on developing our agribusiness solutions, both by covering geographical areas where we did not previously operate, and by investing in technology and people.
As of December 31, 2022, our agribusiness portfolio (including credit, securities and other products) amounted to R$37.5 billion. Since 2015 our portfolio has risen by an average of 30% per year. As a result of this strategy, our portfolio in the agribusiness sector increased significantly so that by 2020 we believe we had already established ourselves as a leading bank in the agribusiness sector. In addition, in 2021, we launched a new commercial strategy in the agribusiness sector whereby we aimed to offer our agribusiness products across all of the regions of Brazil. As a result, since we were able to grow our agribusiness portfolio by 84% from December 31, 2020 to December 31, 2022.
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We plan to continue to build our agribusiness portfolio with a wide array of solutions along the entire agribusiness supply chain, from support in financing equipment to extending credit to agricultural producers. In addition, our ecosystem is complemented by Gira, which is specialized in the management of agribusiness receivables.
The following table sets forth certain key financial and operating data regarding our agribusiness as of the dates indicated.

As of
December 31,
Change between 2021 and 2022
Change between 2020 and 2021

2022
2021
2020
(in billions of R$, except percentages)
Agribusiness portfolio (1) 37.5 27.3 20.4 37.4% 33.8%
(1)       Including credit, securities and other products.
Microfinance
We believe Prospera Santander Microfinance is a leading microcredit-oriented operation among private-sector banks in Brazil based on market share and portfolio value. Prospera Santander Microfinance’s mission is to offer credit alternatives, alongside financial guidance to micro and small entrepreneurs through a fully digitalized process, enabling them to grow their businesses. In doing so, we not only support these entrepreneurs, but also endeavor to contribute to the development of local communities and to job creation. In addition to providing microcredit solutions, we offer basic banking services, notably to our unbanked clients, such as current accounts, debit cards, savings accounts, and point-of-sale terminals, for those who require other payment options. The following table sets forth certain key financial and operating data regarding our microfinance business as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Number of Prospera Microfinance stores 142 119 99 19.3 % (20.0 %)
Microfinance loan portfolio (R$ billion) 2.7 1.9 1.3 38.3 % 49.2 %
Santander Insurance Ecosystem
We offer our insurance products through Santander Corretora de Seguros, helpS, Auto Compara and Santander Auto. Our insurance business as a whole generated premiums of R$10.8 billion in the year ended December 31, 2022.
Insurance
Santander Corretora de Seguros is one of the largest insurance brokers in the Brazilian market, according to SUSEP’s report for the year ended December 31, 2022, offering a full range of products, particularly in the retail segment. Our goal is to build a comprehensive insurance ecosystem for our customers, providing them with all-encompassing solutions to support their daily activities. Our insurance portfolio includes a broad range of life and personal accident insurance, vehicle and property insurance, credit insurance, and travel insurance products. These insurance products are sold through our website, mobile app, branches, call center, ATMs, and bank correspondents.
We totaled R$9.5 billion in earned premiums for the year ended December 31, 2022, representing increases of 1% from the year ended December 31, 2021 and 33% relative to the year ended December 31, 2020. According to SUSEP’s report for the year ended December 31, 2022, we are one of the market leaders in personal insurance (which includes life, personal accident, and credit insurance), with a 13% share of premiums in 2022. 64% of credit originations eligible for insurance in the year ended December 31, 2022.
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Our main objective in this area is to continuously innovate and tailor our insurance solutions to address the needs of our customers, ensuring a seamless experience from purchase to renewal, and especially in the usage of insurance when needed. Furthermore, we are increasingly focused on utilizing data to offer personalized experiences and simplify our value proposition, with optimized customer support across our various service channels. We believe this makes our insurance policies more appealing to potential customers.
helpS
helpS is a personal assistance service that offers solutions for different types of 24/7 emergencies in the home, automobile, pets, tech, game and bicycle segments. It is available to all Santander Brasil customers as an optional monthly subscription starting at R$19.90 per month. Officially launched in May 2022, Santander helpS sold thereabout 40,000 subscriptions exclusively through the Santander app by the end of 2022. In 2023 Santander helpS plans to expand its offering across our entire branch network.
Auto Compara
Auto Compara is our digital auto insurance marketplace in Brazil, and we believe it is the first to provide Brazilian customers with the ability to quote and purchase insurance coverage through an entirely online process. We believe this platform allowed us to expand our customer base by attracting non-Santander Brasil customers, resulting in over R$924 million in new insurance premiums for the year ended December 31, 2022. We currently offer products from seven insurance companies.
Santander Auto
Launched in 2019, Santander Auto is a fully digital auto insurance solution that uses big data analytics to determine pricing and utilizes a one-click buy approach, integrated with car financing options.
The Brazilian insurance market is characterized by: (i) low insurance penetration relative to its GDP; (ii) lagging technological advancement and dominated by companies with low innovation rates that prioritize financial results (due to a history of high interest rates); and (iii) retail brokers serving as the primary distribution channel. As a result, the purchasing process still generally requires customers to fill out a lengthy questionnaire (approximately 40 questions). Consequently, only approximately 20% of Brazilian vehicles were insured as of December 31, 2022.
Using actuarial techniques and behavioral models, Santander Auto can provide insurance quotes without requesting extra information from customers. This is made possible by utilizing data that is already available to us. In its inaugural year of operation in 2019, nearly 110 thousand policies were sold, representing a product penetration rate of 16% (i.e., the total number of insurance contracts sold as a proportion of all loan contracts signed by Santander Financiamentos).
In 2020 and 2021, we focused on strengthening our insurance offerings by making sure they were available for all customer types and types of vehicles. We sought to grow the business by leveraging our ecosystem and reaching more of our customer base. This strategy helped us increase our product penetration rate, which reached 20% in the year ended December 31, 2021, along with a 80% increase in the number of policies sold compared to the year ended December 31, 2020. In the year ended December 31, 2022, Santander Auto started offering insurance to non-financed vehicles and achieved a product penetration rate of 30% in the year ended December 31, 2022, recording a 16.3% increase in the number of policies sold compared to the prior year.
Webmotors
Webmotors is a Brazilian technology company specializing in car buying and selling solutions for dealers, original equipment manufacturers, as well as private sellers. Moreover, it is the largest automotive ecosystem platform in Brazil, according SimilarWeb.
According to Adobe Analytics, Webmotors received an average of more than 30 million visits each month in 2022. It also recorded 7.9 million unique visitors in 2022, as reported by ComScore. Through Cockpit, a platform that integrates offerings for the entire network outlined above, we provide the following solutions: business management/performance, buyer profile (CRM), data intelligence, predictive pricing models, and market data (Auto Insights).
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Webmotors aims to be a platform that accompanies individual and business customers throughout the lifecycle of their vehicles, from purchase to use and sale. To achieve this goal, Webmotors recently restructured its subsidiary, Loop, which was a traditional auctioning business, into an omni-channel dealer, which we believe has the potential to deliver a higher sales value for demobilized fleets in both its digital and physical stores. Additionally, Webmotors introduced "Agenda Fácil," a product that allows customers to schedule services via WhatsApp.
Solution4Fleet
In 2021, we acquired Solution4Fleet, a consultancy company that offers solutions for car rental companies. Solution4Fleet offers solutions for the entire ecosystem of a (light or heavy) vehicle rental company, including green and yellow lines (i.e. trucks, buses and agricultural machinery), including services such as pricing and sales management, fleet management, telemetry, purchase and sale of vehicles, financial services for rental companies, as well as its own vehicle management system for rental companies, among other services.
We believe that Solution4Fleet offers the most complete ecosystem for fleet management and leasing operations in the Brazilian market. In the year ended December 31, 2022, the vehicle fleet managed using Solution4Fleet’s products increased by 83% compared to the year ended December 31, 2021, while the average ticket per vehicle grew by 88.2%.
Solution4Fleet has focused on diversification by prospecting smaller car rental companies and special projects for large automakers. In addition, Solution4Fleet continues to invest in technology to improve user experience.
+Negócios | 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 2022, +Negócios went through a technological transformation with the “Pioneer” project and became “+Negócios Turbo.” The main goals of this project are the improvement and modernization of the systems architecture to simplify user experience (with the reuse of internal data), the tailoring of offers with a new price platform and greater security through facial biometrics.
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.
In 2022, +Fidelidade was also updated and improved to become “+Fidelidade Turbo,” a loyalty program with the objective of offering incentives to banking correspondents in their relationship with our ecosystem. The improvements were launched to simplify, facilitate and ensure greater timeliness in dealing with these agents. The “turbo” version has technological resources that bring the gaming aspect of the program to the platform.
We also offer “+Fidelidade Vendedor,” a program which grants rewards and bonuses accordingly to the seller’s level of adhesion to our products, (i.e., based on the percentage of sellers’ revenue generated by our products and services). In 2021, this program was launched for the automotive store segment, then to dealerships, and then to goods and services segments. In 2022, it was extended to the motorcycle store segment. It had an average of 35,000 registered sellers during 2022.
The former “+Vezes” program, a goods and services financing platform, was upgraded to “+Vezes Turbo” by introducing changes to the user experience geared towards simplification of use, data reutilization, hyper-segmentation of offers and improved security patterns with facial biometrics processes. “+Vezes Turbo” is operational and was deployed to over 10,000 partner retailers during the second semester of 2022.
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As part of our consumer finance strategy, our goods and services financing business (i.e., “ +Vezes”) was integrated with SIM, a fintech created in 2019 that offers personal loans to the open market on a digital lending platform. See “—Our Portfolio of Products and Services—SIM.” With this integration, SIM became a full-service consumer financing business which we believe has bolstered the value proposition of both businesses.
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 customers pay and receive 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, in 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 offering 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, and 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 applicable 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.
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· Follow-up – Our advisory team performs a thorough and frequent review of our customers’ 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.
AAA
In June 2022 we launched AAA, a new investment advisory services model that had enrolled 592 advisors across 41 Brazilian cities as of December 31, 2022. AAA offers a comprehensive product portfolio, coupled with an advanced digital experience and specialized guidance to bolster our investment advisory services offering. AAA provides an exclusive investment advisory service to high-income clients. In order to incentivize our AAA investment advisors, their compensation includes a significant variable component reflecting the results they produce for our clients.
Toro
Toro is an investment platform licensed to operate in Brazil that offers what we believe to be a leading user experience, highly qualified advisors, and an integrated journey from education to execution. We believe that Toro was the first fintech in Brazil to open a full-service broker with proprietary technology, which allowed it to achieve a new level of customer experience and infrastructure for real end-to-end agile development. Toro’s current product offering includes an open platform of equities, real estate investment trusts, exchange-traded funds, global stocks (offered through Brazilian depositary receipts), fixed income notes, bonds, mutual funds, and derivatives. Toro also offers an ecosystem of financial apps, including a budgeting and financial consolidation app and a marketplace for related financial products.
SX Integra
SX Integra is our new supply chain finance digital platform. This channel was launched in September 2022 to provide financial services for companies based on their receivables. Both the supplier (i.e. the company supplying goods to other companies) and the buyer (i.e. the company receiving the goods and delivering payment) are customers of SX Integra. The supplier advances the receivables at no risk and does not have to be an accountholder of ours. Buyers, which are primarily large corporations that must be accountholders of ours, incur the risks of the transaction and are responsible for paying invoices.
The following table sets forth certain key financial and operating data regarding SX as of the dates indicated
As of
December 31, 2022(1)
Main SX Integra indicators:
Number of active buyers (2) 1,014
Number of active suppliers (3) 6,619
(1) SX Integra began operating on September 1, 2022. The figures presented refer to December 31, 2022.
(2) We define an active buyer as a company that has signed an agreement with us and has a credit limit that enables it to incur the risk of the advance as of December 31, 2022.
(3) We define active suppliers as suppliers that performed at least one anticipation of receivables with SX Integra in the 60 days preceding December 31, 2022.
Programa Avançar
We also have a nonfinancial 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.
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In addition, we offer a digital account solution where corporate and 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) remote channels, such as call centers; (iii) external channels, consisting of bank correspondents and other third parties who sell our products and services; and (iv)digital channels, such as internet banking and mobile banking.
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,
2022 2021 2020
(%)
Internet banking 21.7 27.7 37.8
ATMs 2.4 3.6 5.9
Mobile (1) 73.6 62.3 46.9
Branch 0.6 1.1 2.2
IVR (2) 0.8 4.6 6.4
Call Center 0.9 0.7 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.
Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network, all of which is located in Brazil, as of the dates indicated.
As of December 31,
2022 2021 2020
Branches 1,701 1,987 2,153
Mini-branches 1,266 1,384 1,411
Own ATMs 11,527 12,561 12,949
Shared ATMs 24,374 24,255 23,798
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,
2022 2021 2020
Northeast 9.99 % 9.74 % 9 %
North and Midwest 8.94 % 8.42 % 7 %
Southeast 66.20 % 67.31 % 70 %
South 14.87 % 14.53 % 14 %
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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.
ATMs
We operate an extensive network of 11,527 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 24,374 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, and online messaging apps available to all our customers. In the year ended December 31, 2022, we received 10.3 million inquiries per month with 50% of these being outside regular business hours.
We also improved our efficiency and increased our first call resolution from 81% as of January 31, 2021 to 95% as of December 31, 2022. In the last two years, we have sought to transform the channel by focusing on solving customer needs and seizing these contacts as opportunities to offer additional products and services to our customers. In the year ended December 31, 2022, we made an average of 700,000 sales and services per month on this channel.
External Channel
Our external channel consists of third-party salespersons and banking correspondents that market our products and services beyond our branches and ATMs. In the year ended December 31, 2022, we increased the footprint of our external channel in the Brazilian market by adding an additional 9,620 points-of-sale to our portfolio for a total number of 15,647 points-of-sale covering 44% of all municipalities in Brazil as of December 31, 2022, and by extending more than R$18 billion in credit in the year ended December 31, 2022. In addition, in 2022, we launched our new store model, “Santander Perto”, to put us closer and improve our visibility and availability to our customers. We also launched our external sales force website in the second half of 2022, which has generated 50,000 business deals per month since its inception.
Digital Channels
We have sought to develop our digital solutions to meet the needs of our consumers and, in 2022, we were able to achieve milestones, offering personalized insights, improve our artificial intelligence, or “AI,” services and transform our digital experience. Our digital platforms, such as mobile and internet banking, reached over 71% of our customers as of December 31, 2022, which makes them our primary channel to connect with our customers. We note the following with respect to our progress in this channel in the year ended December 31, 2022:
· We improved our digitization by 11% compared to the year ended December 31, 2021 in terms of customers reached and began selling new products over our digital channel, such as transaction insurance, personal insurance (personal injury, life and property), consortium plans, HelpS services, Divide PIX (personal loans for instant transactions), and FGTS Personal Credit (Crédito Pessoal FGTS), or “CP FGTS,” which advances personal loans on severance payouts customers may be owed as part of the FGTS program.
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· In the month of December 2022, our main mobile app for individual accounts reached a total of 462 million accesses, a 34% increase compared to the month of December 2021, while our website reached over 68 million accesses, a 21% increase also compared to the previous year. We also launched an embedded blog with specialized consumer content that reached over 3.3 million views in 2022 (without relying on paid marketing activities specifically for this purpose) and which we believe will be a new tool for lead generation and financial education.
· Despite a difficult year from a macroeconomic perspective and with greater restrictions on credit, we closed approximately 45 million contracts through our digital platforms during the year ended December 31, 2022, a 17% increase compared with the year ended December 31,2021, which growth was driven by an assertive product and service promotion strategy and improvement in the sales of our main products.
· We launched our “Investment Portal” in August 2022, which reached approximately 2.9 million users in the month of September 2022. Through our Investment Portal, our investor client has access, in addition to their consolidated investment position, to guidance and recommendations with video and podcast tools embedded in the app.
· We recorded a 16% increase in digital-only accounts for individuals as of December 31, 2022 compared to December 31, 2021. We also had a 46% decrease in cost per acquisition of lead, or “CPA,” in the year ended December 31, 2022 compared to the year ended December 31, 2021. We believe that this improvement is linked to a better customer experience in the account opening process, automated anti-fraud processes and our efforts to improve customer experience.
· In the year ended December 31, 2022, we opened over 282,000 new corporate accounts, a 75% increase compared to the year ended December 31, 2021 and a 33% reduction in the CPA. We also recorded an increase of 10 p.p. in the number of new corporate accounts approved in the year ended December 31, 2022 compared to the year ended December 31, 2021, which was primarily due to an optimized accounts opening process for existing individual account holders, an automated approval engine for SMEs and processes permitting multiple corporate accounts for multiple partners. We believe that this final improvement accounted for approximately 50% of all of our new corporate accounts and ensured that 100% of SME accounts were opened through this channel in the year ended December 31, 2022.
· 61% of Santander Brasil’s credit card sales were completed through our digital channels in the month of December 2022. We have taken actions to improve our acquisition numbers by implementing new forms of authentication and prioritizing seasonal commercial campaigns to attract new customers, which resulted in a growth of 9 p.p. increase in the mobile app conversion rate (i.e., the rate of customers who accessed the first screen of the credit card contracting flow in the mobile app and actually signed up for the credit card through the app) in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent& is our AI solution for individuals and businesses in digital platforms, such as our mobile app, internet banking and through WhatsApp.
· We began 2022 with 54 services, which were deployed between 2020 and 2021, and offered a total of 153 services through Gent& by December 31, 2022. We recorded a 43% decrease in customer service calls relating to these services in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent&’s NPS was twelve points above that of our other channels in the year ended December 31, 2022. We offer through Gent& transactional services such as personal loan offerings, debt renegotiation, and credit limit increases and decreases (which is offered exclusively on Gent&). We also offer advisory services that include credit card holds, reissues and delivery tracking.
The following table provides certain key operating information regarding our digital channels as of the dates indicated:

For the Year Ended December 31,

2022
2021
2020
(in millions)
Number of digital customers (1) 20.4 18.3 15.6
Number of digital transactions (2) 9,813 7,482 5,262

(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 prior to the end of the applicable year.
(2) Refers to transactions carried out through internet banking, mobile banking and other digital platforms. Data refer to the year ended December 31.
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Technology and Infrastructure
In 2022, we sought to ensure greater integration between our business and technology, and to use the latter as a strategic lever to support the expansion of digital and personalized products and services through available, secure and integrated sales channels. Our objective was to significantly improve our customers’ experience by streamlining and enhancing self-service and customer service channels. Moreover, as part of our digital acceleration strategy as a result of the COVID-19 pandemic, we sought to make technology a key factor in leveraging multichannel distribution and business growth by using data to make strategic decisions at the executive leadership level.
To facilitate this role, our IT department focused on the transformation of its operating model through four strategies:
· Improved Alignment between Business and Technology: development of technology solutions guided by a business mindset, placing the customer at the center of the strategy and ensuring that more business representatives are involved in development teams activities.
· Innovative Architecture and Robust Engineering: investment in new technologies (open banking, digital assets, smart contracts, AI, digital currencies), data framework transformation, an increase in cloud development and the reuse of architectural components to ensure greater efficiency and speed combined with cost reduction.
· Improved Infrastructure and Production: significant advances in the hybrid public/private cloud model (with 91% of total operations processed in the cloud in the year ended December 31, 2022), the growth of automation in production (AIOps) and deployment pipeline (DevSecOps), investments in reliability engineering (telemetry) and the reduction of technological obsolescence.
· Improved Delivery: expansion and maturation of our agile software delivery model through an increase in the number of development teams (with over 460 agile squads), in addition to refinements in productivity metrics facilitating more efficient and transparent management processes.
· These efforts in the technology domain were necessary to ensure the standards of, security in and the growth of our operations in light of our increased digital customer base as we reached 20.4 million digital customers as of December 31, 2022 (an 11% increase as compared to December 31, 2021), and of increased demand for digital products and services as we recorded an average of 541 million monthly accesses in our digital channels in the year ended December 31, 2022. Additional initiatives carried out in 2022 include the following:
· Investments: We launched a new investments portal that can be accessed by mobile or internet banking. This new portal offers our current investment products and services. Our customers are granted access to market analysis content in various formats (e.g., videos, articles, podcasts) in order to make better investment decisions. In addition, they receive portfolio allocation recommendations based on the macroeconomic context, their risk appetite and liquidity. Furthermore, significant improvements in the user interface allow our customers to manage their investments, obtain market information, find solutions for their needs and monitor their investments more intuitively, therefore offering a better digital experience.
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· Individual Bank Account (Mobile): We have improved the digital experience we offer to our customers with several improvements to existing journeys, together with the inclusion of new functions. We have sought to simplify the digital interface for several products and services, including by improving the registration of facial biometrics, access to our virtual AI assistant (Gent&), personal information updates and digital tools relating to investments in funds managed or offered by Santander Brasil. We have also simplified the customer experience for loans by reducing the number of steps required for contracting. In addition, we have provided more flexibility for payments by introducing a new option to break the total value of instant payments (PIX) into up to 24 installments.
· Corporate Bank Account (Mobile): We have added new features to our mobile application, allowing our corporate customers to manage their businesses with more agility and strategy. We have extended the statement checking period up to 365 days and also included a new option on Santander On to update the company’s annual billing, in order to enable better credit solutions for our customers. Moreover, we have sought to improve the user interface by simplifying the visualization of the functionalities in the menu, ensuring a better experience for browsing and using the application, along with the addition of facial biometrics.
· Credit Cards: We further expanded our digital services in order to provide more efficiency and transparency in the management of card expenses for our customers. In our mobile application for cards, we have added a new option to check payments history for past invoices, along with a tool to check and manage active credit card installments. In addition, a new feature was included allowing our customers to view disputed purchases for fraud or trade disagreement. Regarding card loss or theft, we have provided our customers a new option to choose a location to pick up the reissued card. Finally, we increased flexibility by enabling the use of instant payment (PIX) to settle credit card invoices and now permit users to register their Visa/Mastercard cards on Apple and Samsung digital wallets.
· Customer Service: Through our “Bank to Go” initiative, we have sought to transform customer service in our branches. We provided tablets to account managers so they can assist customers with account openings and product sales, which ensures a faster, more dynamic, and personalized banking service. The system running in the tablets is integrated with our external portals (e.g., credit cards and insurance) and also ensures more flexibility in capturing and serving customers due to the greater mobility granted to account managers by the use of tablets.
· Insurance and Customer Assistance: We have upgraded our digital processes in the sale of insurance through a revamped product screen in our mobile application for individual customers, where all coverage types are presented with their respective initial values. We have also included a new feature in the offering of our 24-hour assistance service, helpS, which offers solutions for day-to-day customer needs such as car repairs or maintenance services. Our customers can easily choose service packages for automotive, motorcycle, bicycle, pet, and technology services.
· Data Transformation: Investments were made to improve our use of data in modern technologies to generate business value from customer data. These include investments in: (i) the development of a new machine learning model, which uses market and our proprietary data (from our Financing and SIM platforms) to identify new customers prone to credit offer and improve our revenue; and (ii) new solutions to assess a customer’s transactional behavior and identify the most opportune moment to offer credit card limit increases and improve customer spending.
· Business Agility: We have sought to improve our organizational model in the delivery of technological solutions to ensure we meet the needs of the modern consumer through faster decisions, increased interaction with customers and greater value delivery. Our new Business Domains model promotes the integration between our business units, platforms and the technology department for the design of products that offer an improved end-to-end experience for our customers. These areas work together in the activities related to customer journey, software development, implementation, operations and product governance. This work model, developed from benchmarks and proven market frameworks, is supported by lead executives in our investment, data, technology and information security departments to embed the technical skills from these vertical structures directly into the Business Domains structures, improving the operational flow of these teams.
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· Security: Given that Santander ID is our main security device in the authorization of customer transactions on digital channels, we must ensure its activation process is safe and reliable. With the “Frictionless” initiative, we have implemented several models that analyze customer behavior information, ensuring that the customer is the one who is actually activating the security device. As a result, customers no longer need to go to an ATM to complete the activation of their Santander ID, which we believe provides a simpler experience.
Communications and Marketing
We use a variety of tools to communicate with our employees and customers effectively. This includes not only traditional media, such as television, newspapers and print magazines, but also digital and innovative communication to make a difference in the lives of all those who are related, in some way, to Santander Brasil. In 2022, we launched a major debt renegotiation campaign called “Desendivida,” which provided better terms for customers to honor their commitments with us. This initiative featured influencers from the popular reality TV show Big Brother Brasil and, during an entire month, we dedicated time to this matter in our stores (two extra hours a day), in addition to a task force on a Saturday. We also introduced large-scale campaigns for “consórcios” (a product that offers credit at lower costs for customers than conventional financing). Internally, we debuted the monthly live event “Together with Mario Leão,” in which Mario Leão, our chief executive officer, interacts with over 40,000 employees via the Santander NOW app. The first edition took place in Salvador, State of Bahia, and was followed by editions in Inhumas (State of Goiás), Novo Hamburgo (State of Rio Grande do Sul), Rio de Janeiro (State of Rio de Janeiro), Campinas (State of São Paulo), Curitiba (State of Paraná), Mirassol (State of São Paulo), São Paulo (State of São Paulo), Juazeiro do Norte (State of Ceará), Manaus (State of Manaus), Ouro Preto (State of Minas Gerais) and again in São Paulo (State of São Paulo).
In 2022, we also produced 472 videos to instruct our teams on how to better serve our customers and offer our products and services, exploring a wide range of topics such as the “Investment is Santander” campaign and on themes that reinforce our culture, such as diversity, ESG, corporate behavior, development, feedback, health and well-being, training and qualification, and others. Externally, we ran 14 video ads on TV and social media. In 2022, our communication campaigns resulted in over 11,000 mentions in the Brazilian national media (e.g., websites, newspapers and magazines), as well as nearly 8,000 reports published in local media. On social networks, we had more than 2,000 publications, with 1.5 billion impressions in 2022. We also strengthened our operations, both internally and externally, using new formats such as Telegram, TikTok, WhatsApp and podcasts. We held over 20 internal and external livestreams and events, which featured our leadership, experts and authorities discussing a broad array of subjects, including ESG, the current economic environment, social investment, business, female leadership, entrepreneurship and culture. The “Legacy” event, organized in collaboration with Movimento Bem Maior and several of Brazil’s largest companies, on the role of philanthropy, was a highlight, as was the fifth edition of “Global Citizen,” held in partnership with the newspaper Valor Econômico, with an ESG-focused debate with participants such as Sanda Ojiambo, chief executive officer and secretary general of the UN Global Compact, and Jeremy Oppenheim, co-founder of SYSTEMIQ.
Sustainability and ESG Initiatives
The purpose of our sustainability and ESG initiatives is to contribute to the progress of people and businesses, while also supporting the development of a fairer and more sustainable Brazil. We have sought to develop a clear strategy for our environmental aspirations (seeking to become a benchmark company in sustainable business), social aspirations(working to ensure everyone has opportunities) and governance aspirations (having leading ESG management practices).
Our broad commercial activity enables us to advise and support our customers and their projects. In the year ended December 31, 2022, we helped approximately 430,000 people through financial inclusion products and financial education guidance. For example, we offer access to banking services, products and nonfinancial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the Prospera Microfinance, “Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include financial management as a topic in customer relationships, using tools such as Santander On. As an example, Prospera Microfinance has supported microentrepreneurs in their businesses since 2002, and as of December 31, 2022 it had a portfolio of R$2.7 billion (a 38% growth as compared to December 31, 2021) and 885,000 active customers (a 25% growth as compared to December 31, 2021).
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The following is a description of some of the social activities and programs that we have held or continued in the year ended December 31, 2022:
· In 2022, we held the 20th edition of the Amigo de Valor program. Since 2002, it has benefited more than 1.6 million children and teenagers in 293 municipalities in Brazil, mobilizing more than R$180 million from our customers and employees.
· In 2022, we helped about 220,000 people through blood donation and volunteering programs.
· Through Santander Universities, we granted 103,000 scholarships in 2022.
· We became founding members of the Alliance for Productive Inclusion (Aliança pela Inclusão Produtiva), or Aipê, in partnership with industry leaders, whose objective is to promote, through training, the inclusion of the lower-income population in the labor market.
· We increasingly invest in the structuring of endowments—equity or philanthropic funds—to support the long-term financial sustainability of institutions and nonprofit organizations, such as universities and hospitals. In 2022, these investments amounted to R$51 million.
· In April 2022, we held the Legado event, which addressed philanthropy in Brazil and the role of the individual in building a more inclusive society. This event was attended by over 600 participants.
· In 2022, we transformed 70,000 plastic bags into 12,000 eco-friendly bags in partnership with Sewing Dreams, an NGO from Paraisópolis in the State of São Paulo.
· We support social projects which foster professional training and fostering entrepreneurship. In 2022, we selected 31 projects for support through our “Chama Indica” and “Prepara Futuro” initiative.
· We continued to promote female representation in leadership positions at Santander Brasil. In 2022, the percentage of women among our leadership (defined as senior managers and officers of Banco Santander (Brasil) S.A., Aymoré Crédito, Financiamento e Investimento S.A. and Santander Corretora de Seguros, Investimento e Serviços S.A.) increased by 1.9 p.p. compared to 2021 and reached 33%.
We also developed actions to increase the representation of black people at Santander Brasil. As of December 31, 2022, 30% of our employees identified as black, which represents a growth of 2.7 p.p. compared to December 31, 2021.
· In the year ended December 31, 2022, we believe that we helped facilitate approximately R$32.2 billion in sustainable business (including disbursements for renewable energy, sanitation, sustainable agribusiness, ESG-linked loans, Prospera Santander Microfinance, other businesses (accessibility and mobility, other financial operations), as well as project finance advisory and disbursements (renewable energy and sanitation), in addition to green bonds) through the following initiatives:
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· We were guarantors in a BNDES financing for the construction of a subway line in the city of São Paulo that we expect will bring socioeconomic development to the regions along its tracks.
· We maintained a leading role in the Brazilian market for decarbonization credits (CBIO) market, which we first helped create in 2020 and in which, in the year ended December 31, 2022, we held a 54.4% market share according to B3.
· We disbursed R$394 million in our sustainable agribusiness credit lines, which promote low-carbon agriculture and solar energy.
· Since 2021, we created the Sustainable Finance Forum, a forum responsible for analyzing sustainable operations and ensuring alignment with the Sustainable the Finance Classification System (SFCs) - the Santander Group framework and market standards.
· In June 2022, we hosted the Zero Carbon Emission livestream, which promoted a debate on zero carbon emission and our next steps in this journey.
· In November 2022, in partnership with other Brazilian corporations, we launched Biomas, a joint venture whose objective is to restore, conserve and preserve four million hectares of forest in the Amazon, Caatinga, Mata Atlântica and Cerrado biomes in Brazil. This alliance plans to remove approximately 900 million tons of carbon equivalent substances from the atmosphere over a two-decade period. Each partner will initially commit R$20 million to support the early years of Biomas activities.
· We participated in the launch of the Bioeconomy Business Innovation Platform in the Amazon, led by the CERTI Foundation, with the objective of training 3,000 people and creating 200 startups in three years.
· We have progressed towards our commitment of achieving zero illegal deforestation in the Amazon across our customers involved in meat production by 2025.
The following is a description of some of the environmental activities that we have held or continued in 2022:
· In February 2022, we launched a solar power plant at two of our administrative buildings, the largest urban power plant installed in the State of São Paulo and one of the largest in Latin America.
· As of December 31, 2022, 100% of our domestic electricity consumption derive from renewable sources, a milestone that we had originally targeted to reach in 2025. In addition, we have been carbon neutral since 2010 and have significantly cut down on our use of single-use plastic within our organization.
· By the end of 2022, 100% of the new SX- and Elite-branded cards were made from recycled plastic. We expect that this will reduce the use of common plastic in the cards we issue.
· Climate change was the agenda of our continuing education program (programa de educação continuada), or “PEC,” which is aimed at independent members of our governance bodies. The PEC seeks to promote integration and deeper knowledge about the financial industry and a better understanding of our internal dynamics. We also held an inaugural class for a select group of executives to discuss decarbonization in partnership with the Santander Academy—the first in a series of meetings that will continue to take place in 2023 to develop knowledge on the subject and share good practices, challenges and solutions for the mitigation and removal of greenhouse gases. The engagement of companies is part of our Net Zero commitment, which aims to eliminate indirect issues of carbon in our credit portfolio by 2050.
· We co-drafted “An Introductory Guide for Net Zero Target Setting for Farm-Based Agricultural Emissions,” which was led by the Banking for Impact on Climate in Agriculture initiative of the World Business Council for Sustainable Development. The study aims to address the challenges of net zero for the sector, where data and methodologies on measuring financed emissions is lacking.
· In July 2022, we published our social, environmental and climate responsibility policy, or the “PRSAC,” in accordance with CMN Resolution No. 4,945, which improves socio-environmental risk management rules, including climate change-related rules. PRSAC focuses on a positive agenda, such as pacts, commitments, relationships with stakeholders and socio-environmental impacts and opportunities.
• In December, 2022 we sponsored the fifth edition of the Global Citizen Forum to discuss ESG matters, which was attended by our chief executive officer and the general secretary of the United Nations Global Compact, Sanda Ojiambo, the economist and co-founder of SYSTEMIQ, Jeremy Oppenheim and Paul Polman, a climate and equality activist. The event was attended by approximately 612participants.
• Our sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through our board of directors, executive committee and executive sustainability superintendents. Our sustainability committee is responsible for providing clarification and recommendations to the board of directors relating to the development of sustainability-related guidelines. Our governance seeks to include ESG in our culture and in our day-to-day through internal training and the inclusion of ESG criteria in the compensation of executives, who are responsible for addressing issues of diversity, financial empowerment and green financing. Independent members account for 44.44% of our board of directors and women for 33.33%, while women also account for 20.41% of our executive committee. For more information, see “Item 6. Directors, Senior Management and Employees.”
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As a result of our efforts, we were recognized by Revista Exame as the best ESG company in the financial services category in 2022, and we also received a Euromoney award in the ESG category. Moreover, our equity securities form part of the B3’s Corporate Sustainability Index (Indice de Sustentabilidade Empresarial) and Efficient Carbon Index (Índice de Carbono Eficiente – ICO2).
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial services industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal. Together, these financial institutions accounted for 70.8% of the credit and 70.7% of the deposits available in Brazil as of September 30, 2022, according to the Brazilian Central Bank and the interim financial statements of the aforementioned banks.
The following table shows the total loans and deposits of the five leading financial institutions in Brazil as of September 30, 2022:
Santander Brasil Bradesco Itaú
Unibanco Banco
do Brasil Caixa Econômica Federal Financial System
(in billions of R$)
Total loans (1) 484.3 644.7 685.6 861.5 976.8 5,161.4
Total deposits (1) 410.7 588.0 813.2 539.4 433.6 3,940.8
(1) According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 30, 2022). Data as of December 31, 2022 was not available as of the date of this annual report.
Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. Substantially 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 cybercrimes.
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.
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As of the date of this annual report, we own or have a license to use 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 regard 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 (Associação Brasileira das Companhias Abertas – 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 administration of third-party funds and microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:
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· 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 segment one, or “S1” (i.e., banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity), as is our case, 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, 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;
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· 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 that 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
In 2010, the Basel Committee issued its Basel III framework, which was revised and republished in 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 of 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 capital 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.
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There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debts 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.
In accordance with the Basel III standards, the Brazilian Central Bank created the additional core capital buffer (adicional de capital principal), which is composed of 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 buildup 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 CMN 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 increased gradually until April 2022, when it reached 2.5%. Resolution No. 4,783 was subsequently replaced by Resolution No. 4,955 of October 21, 2021, which maintained the risk weighted asset percentage at 2.5%.
The chart below shows the evolution of our core capital:
Timeline

Description automatically generated with medium confidence
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Financial Institutions in Brazil are subject to the capital rules set by CMN Resolutions No. 4,955/2021 and No. 4,958/2021. 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. S1 financial institutions, as is our case, or segment 2, or “S2,” for purposes of the application of prudential rules, are required to maintain a minimum Leverage Ratio (Razão de Alavancagem or “RA”) of 3% as from January 1, 2018.
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 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 current regulatory minimum is 100%.
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 S1, S2 or segment three, or “S3” financial institutions 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.
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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.
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 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 financial institutions 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.
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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 requirement.
· 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.
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 July 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 Tier 1 regulatory capital. 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.
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Resolution No. 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.
Resolution No. 264/22 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. Resolution No. 264/22 came into effect on December 1, 2022.
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 Custódia), 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 March 3, 2022, the Brazilian Central Bank issued Resolution No. 195/22, which regulates the SPI. Resolution 195/22 also approved the regulation with which the direct and indirect participants in the SPI must comply. Brazilian Central Bank Normative Ruling No. 243/22 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 291/22, in turn, establishes the procedures for the adherence to 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 clearinghouses 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. Resolution 195/22 came into effect on April 1, 2022.
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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 clearinghouses, 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.
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 customers 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 means 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 should have implemented, 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 entity’s audit and risk committees (if in place), internal audit unit, executive board and board of directors (if in place).
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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 Finance Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open finance. Open finance 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.
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 or S2 segments, as is our case, are required to participate in open finance.
Open finance has a four stage implementation plan, as follows:
· Phase 1 (launched 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.
· Phase 2 (launched on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
· Phase 3 (launched on October 30, 2021): start of PIX transactions offered by payment transaction initiators through the Open Finance channel, without the need to access the specific channels of the institutions with whom the client maintains a relationship. The possibility of using other payment methods (other than PIX) and of accepting credit transaction proposals through Open Finance is expected to be gradually implemented in the future.
· Phase 4 (launched on December 15, 2021): sharing of customer transactional data related to additional products, including: (i) insurance, open-end private pension and capitalization products; (ii) merchant acquiring services; (iii) foreign exchange transactions; and (iv) time deposit accounts and other investment products. Phase 4 is still currently under implementation and the Brazilian Central Bank’s expectation is that it should be completed by the end of 2023.
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 Finance 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 Finance, 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 Finance; (iv) services to be rendered by the Open Finance 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 Finance and its implementation; and (v) minimal security standards and certifications.
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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 Finance, to be further detailed by the Open Finance 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.
Finally, the data referring to insurance products and pension plans will follow the scope defined by the National Council of Private Insurance (Conselho Nacional de Seguros Privados), or “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.
Phase 4 of Open Finance 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 to 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 lasted for one year and was extended for a second year through November 2023. As of the date of this annual report, a second cycle still has not commenced.
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.
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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.
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.
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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.
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.
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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.
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, or “KYC” 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.
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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 KYC procedures. The CVM also issued CVM Resolution No. 50 on 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.
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.
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The governments of Brazil and the United States executed an agreement in 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
Brazil
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 brought 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 data subjects 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, among others, 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 has 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.
The ANPD has been assured technical independence, although it is subordinated to the Brazilian Ministry of Justice and Public Safety. It is composed of five commissioners, 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.
Other
In addition, we are subject to Regulation (EU) 2016/279 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”). 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 2% of annual worldwide turnover or €10 million (whichever is highest) for other specific infringements. Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the U.K. General Data Protection Regulation (“U.K. GDPR”) (i.e., a version of the GDPR as implemented into U.K. law). While the U.K. GDPR currently imposes substantially the same obligations as the GDPR, the U.K. GDPR will not automatically incorporate changes to the GDPR going forward (which would need to be specifically incorporated by the United Kingdom government). Moreover, the United Kingdom government has publicly announced plans to reform the U.K. GDPR in ways that, if formalized, are likely to deviate from the GDPR, all of which creates a risk of divergent parallel regimes and related uncertainty, along with the potential for increased compliance costs and risks for affected businesses.
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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, from 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
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· errors that result in major incorrectness in the financial statements of the audited entity.
The executive officers of the financial institution must notify the independent auditor and the audit committee if any of the above situations occur.
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,” which we have created. For more information on our 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.
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). 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) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
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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 the “PRSA.” The new rule provides for the inclusion of a climate aspect to the PRSA, which we refer to as the 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 Climáticas, or the “GRSAC Report”) by financial institutions classified in S1 (such as us), S2, S3 or 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 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 us), S2, S3, or segment four, 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 climate 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 general provisions of CMN Resolution No. 4,945/21 came into effect on July 1, 2022, CMN Resolution No. 4,944/21, article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) and Central Bank Resolution No. 139/21 came into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 came 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. 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.
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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.
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, as further detailed under “—Auditing Requirements” above.
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 the 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:
· 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.
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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.
On July 27, 2022, the Brazilian federal government adopted Decree No. 11,150/22, or Decree No. 11,150, which seeks to prevent and foster the repayment and settlement of consumer over-indebtedness. The rule grants consumers certain basic rights, including the right to responsible credit practices, financial education and relief from over-indebtedness situations through debt review and renegotiation. To preserve a consumer’s “existential minimum,” Decree No. 11,150 creates an “existential minimum income” threshold for consumers, which is fixed at R$303.00, or one-quarter of the federal minimum wage that was in effect at the time the decree was adopted. However, the annual adjustment of the minimum wage will not lead to this amount being updated.
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 customers 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.
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 came into effect on March 1, 2022, and Central Bank Resolution No. 155 came 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:
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· 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); 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.
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).
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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 came into effect on December 30, 2022.
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.
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 revoked 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 be 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.
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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 customers.
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.
On January 3, 2023, the Brazilian Central Bank published Normative Ruling No. 342, which amended Normative Ruling No. 299/22 and provides procedures, documents, terms and necessary information for requests related to the participation of financial institutions, such as us, on other companies’ corporate capital; and establishment of branches abroad. This new rule came into force on its publication date.
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.
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.
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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, 2022, CI$1 was equivalent to R$6.2480 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 April 5, 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 June 26, 2013 on prudential requirements for credit institutions and investment firms apply to it.
U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States Congress and U.S. bank regulatory agencies. In addition to 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.
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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.
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.
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U.S. Sanctions
“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, the Office of Foreign Assets Control, or “OFAC”), the UN Security Council, the European Union or His Majesty’s Treasury. 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 imposed various sanctions that prevent non-U.S. persons, including non-U.S. financial institutions from engaging in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”). If a non-U.S. financial institution were determined to have engaged in activities targeted by certain U.S. secondary 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.
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.
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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:
· 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.
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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.
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.
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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.
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.
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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
Law No. 13,986/2020, 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.
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 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.
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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.
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 and Social Contribution Tax
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% for banks, 15.0% for other financial institutions except banks and 9.0% for most other Brazilian legal entities, after adjustments determined by the tax legislation. CSLL rate for banks was revised to 21.0% from August 1 to December 31, 2022.
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.
IRPJ and CSLL on Foreign Exchange Variation of Hedges for Investments Held Abroad
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, as of 2022, 100% of the exchange rate variation will be considered as taxable.
Tax on Services
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.
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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.
Nonfinancial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to noncumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Tax on Financial Transactions
The IOF tax is a tax levied on credit, currency exchange, insurance and securities transactions. It is imposed on the following transactions and at the following rates.
Transaction (1)
Maximum
Legal Rate
Current Rate
Credit extended by financial institutions and nonfinancial entities 1.5% or 3% 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.
Transactions relating to securities (2) 1.5% per day 0.5% per day for certain investment funds.
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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).
5.38% on credit card transactions as from January 2, 2023.
5.38% on withdrawals abroad using credit or debit cards as from January 2, 2023.
5.38% on purchase of traveler’s checks or loading of international prepaid card as from January 2, 2023.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
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 equal or less than 180 days.
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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.
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Pursuant to Decree No. 10,997/2022, the Brazilian government will gradually reduce, each year, the IOF, levied on exchange operations, rates with the reduction to zero for all currency exchange operations form 01.01.2029. In addition, external loan and financing operations, including through the issuance of titles, had the rate reduced to zero, as of March 31, 2022, regardless of the term of the operation.
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.
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 Cooperation 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. 1,571, 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.
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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.
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, 2022 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 United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by the Belgian branch on these accounts in the year ended December 31, 2022.
(c) Santander Brasil holds three blocked accounts for three customers with domicile in Brazil designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander Brasil on these accounts in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(d) Santander Consumer Finance, S.A. also held through its branch in Greece an auto finance loan for a client designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship was terminated before the year end. Revenues or profits generated by the branch in Greece on this position in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(e) The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the United States 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, 2022 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.
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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. 4,820 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: (i) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (ii) 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 regarding amounts related to results for the year ended December 31, 2020, as amended by 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 and 2022.
Reduction of Capital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduced 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% remained in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the capital conservation buffer requirement was gradually restored to 2.5%. 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.
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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 and 2022.
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. CMN Resolution No. 4,805/2020 increased the cap to R$400 million cap for DPGEs held by other financial institutions affiliated with the FGC, while maintaining the R$40 million cap for other non-affiliated entities.
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.
Flexibility 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.
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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 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, were permitted to, 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%. However, as of the revocation of CMN Resolution No. 4,788/20 by CMN Resolution No. 5,007, issued on March 24, 2022, the repurchase ceiling returned to the previous percentage 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 COVID-19 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.
SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes 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, 2022, 2021, and 2020 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.”
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For the Year Ended December 31,

2022
2021
2020

Average Balance
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
(in millions of R$, except percentages)
Assets and Interest
Income
Cash and balances with the Brazilian Central Bank 109,977 10,202 9.3% 58,494 2,581 4.4% 54,531 1,552 2.8%
Loans and amounts due from credit institutions 71,836 2,722 3.8% 95,513 1,116 5.4% 104,759 1,519 1.4%
Of which:
  Reverse repurchase
agreements 49,357 7,197 14.6% 45,458 2,154 4.7% — — —
Loans and advances to customers 503,548 73,596 14.6% 461,141 55,775 10.7% 384,389 44,104 11.5%
Debt instruments 213,647 22,002 10.3% 224,890 16,958 8.5% 203,578 13,556 6.7%
Other interest – earning assets — 6,703 — — 1,557 – – 2,044 –
Total interest – earning assets 899,008 115,225 12.8% 840,038 77,987 9.3% 747,257 62,775 8.4%
Equity instruments 2,807 38 1.4% 2,279 90 3.9% 1,730 34 2.0%
Investments in associates 1,593 — — 952 — — 1,098 — —
Total earning assets 903,408 115,263 12.8% 843,269 78,077 9.3% 750,085 62,809 8.4%
Cash and balances with the Brazilian Central Bank 4,371 — — 4,633 — — 4,800 — —
Loans and amounts due from credit institutions (6,136) — — 441 — — 6,668 — —
Impairment losses (31,665) — — (26,908) — — (23,936) — —
Other assets 78,869 — — 81,669 — — 76,642 — —
Property, plant and equipment 8,346 — — 8,823 — — 9,587 — —
Intangible assets 31,084 — — 30,250 — — 30,769 — —
Total average assets 988,277 115,263 11.7% 942,177 78,077 8.3% 854,615 62,809 7.3%

Liabilities and Interest Expense

Deposits from the Brazilian Central Bank and Deposits from credit institutions 120,512 6,737 5.7% 149,111 4,712 3.2% 111,684 4,327 3.9%
Of which:
Repurchase agreements 87,567 11,197 12.8% 103,809 4,567 4.4% — — —
Customer deposits 438,846 38,509 8.7% 420,185 13,188 3.1% 380,058 7,504 2.0%
Of which:
   Repurchase agreements 4,974 — — 58,264 — — — — —
Marketable debt securities 94,612 6,952 7.3% 63,906 4,537 7.1% 68,585 2,786 4.1%
Subordinated debts 19,086 863 4.5% 14,550 902 6.6% 13,102 909 6.9%
Other interest-bearing liabilities — 14,661 — — 3,329
—
—
2,805 —
Total interest-bearing liabilities 673,056 67,722 10.1% 647,752 26,669 4.2% 573,429 18,332 3.2%
Noninterest bearing demand deposits 34,524 — — 33,893 — — 28,581 — —
Other liabilities 151,417 — — 155,133 — — 150,759 — —
Non-controlling interests 431 — — 329 — — 315 — —
Stockholders’ Equity 128,849 — — 105,070 — — 101,531 — —
Total average liabilities and equity 988,277 67,722 6.9% 942,177 26,669 2.8% 854,615 18,332 2.1%
(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 year ended December 31, 2020 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.
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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, 2022, compared to the year ended December 31, 2021, and for the year ended December 31, 2021 compared to the year ended December 31, 2020. 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 2022/2021
For the Years Ended 2021/2020
Increase (decrease) due to changes in
Volume
Rate
Net change
Volume
Rate
Net change
(in millions of R$)
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank   3,383   4,238 7,621 120 909 1,029
Loans and amounts due from credit institutions (338) 1,944 1,606 (126) (277) (403)
Loans and advances to customers 5,456 12,365 17,821 9,181 2.492 11,671
Debt instruments (885) 5,929 5,044 1,502 1.900 3,402
Other interest-earning assets 5,146 —   5,146 (487) — (487)
Total interest-earning assets 12,762 24,476 37,238 10,190 5.024 15,214
Equity Instruments   17 (69) (52) 13 43 56
Total earning assets 12,779 24,407 37,186 10,203 5.067 15,268
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions (1,042) 3,067 2,025 1,278 (893) 385
Customer deposits 611 24,710 25,321 857 4,827 5,684
Marketable debt securities 2,251 164 2,415 (454) 2,205 1,751
Subordinated liabilities 240 (279) (39) 46 (53) (7)
Other interest-bearing liabilities 11,332 — 11,332 523 — 524
Total interest-bearing liabilities 13,392 27,662 41,053 2,250 6,086 8,337
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Assets
Earning Assets – Yield Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2022 2021 2020
(in millions of R$, except percentages)
Average earning assets 899,008 840,038 747,257
Interest and dividends on equity securities(1) 115,263 78,077 62,809
Average Net interest income 47,541 51,408 44,480
Gross yield(2)(*) 12.8 % 9.3 % 8.4 %
Net yield(3)(*) 5.3 % 6.1 % 6.0 %
Yield spread(4)(*) 2.7 % 5.1 % 5.2 %
(*) 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.
For the Year Ended December 31,
2022 2021 2020
ROA: Return on average total assets 1.5 % 1.7 % 1.6 %
ROE: Return on average stockholders’ equity 11.1 % 14.8 % 13.3 %
ROE (adjusted) (1) 14.2 % 20.2 % 18.5 %
Average stockholders’ equity as a percentage of average total assets 13.0 % 11.2 % 11.9 %
Payout(2) 56.5 % 62.0 % 24.7 %
(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, 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 share divided by net income per share).
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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,
2022 2021 2020
Cash and balances with the Brazilian Central Bank 12.2 % 7.0 % 7.3 %
Loans and amounts due from credit institutions 8.0 % 11.4 % 14.1 %
Loans and advances to customers 56.0 % 54.9 % 51.4 %
Debt instruments 23.8 % 26.8 % 27.2 %
Total interest-earning assets 100.0 % 100.0 % 100.0 %
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, 2022 and 2021, the book value of investment securities was R$206 billion and R$228 billion, respectively (representing 20.9% and 24.5%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$143 billion, or 69.4%, and R$171 billion, or 75.3% of our investment securities as of December 31, 2022 and 2021, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:
As of December 31,
2022 2021 2020
(in millions of R$)
Debt securities
Government securities—Brazil 142,749 171,437 191,896
Debentures and promissory notes 28,251 19,882 17,072
Other debt securities 31,913 33,894 21,134
Total domestic/debt securities 202,913 225,212 230,102

Equity securities
Shares of Brazilian companies 1,459 1,870 1,953
Shares of foreign companies 60 49 14
Investment fund units and shares 1,120 609 363
Total equity securities 2,639 2,528 2,329
Total investment securities 205,551 227,740 232,432
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As of December 31, 2022 and 2021, 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 129.0% and 151.5%, respectively, of our stockholders’ equity. As of December 31, 2022 and 2021, the total value of our debt securities was approximately 185.7% and 212.5%, 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, 2022. 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 millions of R$)
Debt securities
Government securities—Brazil (1) —   14,997 —   1,100 16,097
Other debt securities (2) 21,936 34,511 6,310 2,475 65,232
Total debt investment securities 21,936 49,508 6,310 3,575 81,329
(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 12.96%.
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, 2022. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2022. 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 millions of R$, except percentages)
Weighted-average yields % % % %
Domestic:
Brazilian Government         17,315 11.37    58,456 13.39      2,910 6.70    10,593 6.46
Other fixed-income securities         16,563 12.77    27,258 14.40      4,298 8.90         884 9.20
Impaired financial assets 160 12.77         213 14.40         214 8.90         553 6.80
Impairment losses (287) 12.77       (691) 14.40       (227) 8.90 (593) —
Total domestic        33,751 12.07 85,236 13.90     7,195 7.80 11,437 6.70
International:
Foreign government           4,999 9.80 — — — — — —
Other fixed-income securities           1,055 10.40      3,189 10.40 — — — —
Impaired financial assets                 2 10.40 — — — — — —
Impairment losses — 10.40 — — — — — —
Total international          6,056 10.10     3,189 10.40 — — — —
Total weighted-average yields 11.46 8.00 6.60 6.70
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Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.
As of December 31,
2022 2021 2020
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank 11,346 10,657 5,806 10,851 4,532 15,617
Debt instruments 185,814 17,098 208,132 17,080 226,787 3,315
Loans and amounts due from credit institutions 19,784 929 22,689 3,797 50,553 3,520
Loans and advances to customers 416,127 74,503 398,335 66,509 372,946 20,822
Equity Instruments 2,582 57 2,483 45 2,329 —
Total assets 635,653 103,244 637,445 98,282 657,147 43,274
Liabilities
Financial Liabilities at amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 59,366 56,713 62,332 58,674 86,564 45,093
Customer deposits 457,188 32,765 468,961 —   445,814 —
Marketable debt securities 92,638 14,483 66,028 13,009 47,477 9,399
Debt instruments eligible to compose capital 19,538 —   —   19,641 —   13,120
Other financial liabilities 71,371 143 68,496 413 66,708 153
Total liabilities 700,101 104,104 665,817 91,737 646,563 67,765
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Loan Portfolio
As of December 31, 2022, our loans and advances to customers totaled R$524 billion (53.2% of our total assets). Net impairment losses, loans and advances to customers totaled R$491 billion as of December 31, 2022 (49.8% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$158.7 billion, R$146.0 billion, R$131.7 billion as of December 31, 2022, 2021, 2020, respectively.
Types of Loans by Type of ~~Loan~~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.
Our loan portfolio does not have any specific concentration exceeding 10% of our total loans, As of December 31, 2022, 1.0% of our loan portfolio is allocated to our largest debtor and 4.5% 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, 2022.

As of December 31, 2022
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 126,508 46.89% 83,448 47.02% 13,366 24.50%

—
—
223,322 42.57%
Real estate 4,298 1.59% 10,905 6.14% 20,655 37.80% 22,385   98.46% 58,243 11.09%
Installment loans to individuals 137,581 51.00% 81,680 46.02% 20,616 37.72% 351 1.54% 240,227 45.79%
Lease financing
1,398
0.52%
1,455
0.82%
11

—

—

—
2,863
0.55%
Loans and advances to customers, gross
269,784
100.00%
177,488
100.00%
54,648
100.00%
22,735
100.00%
524,655
100.00%
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, 2022.
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$, except percentages)
Fixed rate
Commercial and industrial 81,757 38,976 3,581 — 42,558 124,315
Real estate 23 74 72 41 187 209
Installment loans to individuals 127,538 80,132 19,823 351 100,306 227,843
Lease financing 406 607 — — 607 1,013
Total Fixed rate 209,723 119,790 23,476 391 143,658 353,381
Variable rate
Commercial and industrial 44,751 44,471 9,785 — 54,256 99,007
Real estate 4,275 10,832 20,582 22,344 53,758 58,034
Installment loans to individuals 10,043 1,548 793 — 2,341 12,384
Lease financing 992 847 11 — 858 1,850
Total Variable rate 60,061 57,698 31,171 22,344 111,213 171,275
Total 269,784 177,488 54,648 22,735 254,871 524,655
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Cross-Border Outstandings
The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.
As of December 31,
2022 2021 2020
Balance % of Total Assets Balance % of Total Assets Balance % of Total
Assets
(in millions of R$, except percentages)

OECD countries(1)
Spain 189 —   108 —   437 —
United States 2,489 0.3 835 0.1 12,674 1.4
Netherlands 73 —   —   —   80 —
United Kingdom 277 —   20 —   29 —
Luxembourg 710 0.1 13,058 1.4 —   —
Other OECD countries(2) 1,599 0.2 1,958 0.2 3,534 0.4
Total OECD 5337 0.6 15,979 1.7 16,754 1.8
Non-OECD countries
Latin American countries(2) 529 0.1 560 0.1 1,204 0.1
Cayman Islands 1,573 0.2 1,679 0.2 2,917 0.3
Other(2) 32 —   282 —   1,189 0.1
Total non-OECD 2,134 0.3 2,521 0.3 5,310 0.5
Total 7,471 0.9 18,500 2.0 22,064 2.3
(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.
The following table presents the amounts of our cross-border outstandings as of December 31, 2022, 2021 and 2020 by type of borrower where outstandings in the borrower’s country exceeded 1.4% of our total assets.
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Government
Banks and Other Financial Institutions
Commercial and Industrial
Other Loans
Total
(in millions of R$)
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 88 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
2022 —
United States — 2,259 198 32 —
Netherlands — — 73 — 73
Austria — 57 — — 57
United Kingdom — 234 39 3 276
Cayman Islands — 180 1,354 38 1,572
Total — 2,730 1,664 73 4,467

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) 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, 2022
Domestic
International
(in millions of R$)
Under 3 months 359,142 —
3 to 6 months 33,019 —
6 to 12 months 66,039 —
Over 12 months 147,832 —
Total 606,032 —
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The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2022.
Maturing
As of
December 31, 2022 Three Months or Less Over Three Months Through Six Months Over Six Months Through
12 Months Over 12 months
(in millions of R$)
Total uninsured deposits(1)
281,066 264,349 24 48 16,645
(1)           We define uninsured deposits as securities from credit institutions and customers that do not have collateral attached to them.
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,
2022 2021 2020
Amount Average Rate Amount Average Rate Amount Average Rate
(in millions of R$, except percentages)
Securities sold under agreements to repurchase
As of December 31 109,760 1.26 % 115,964 1.76 % 112,477 1.90 %
Average during the period (1) 105,233 1.85 % 114,484 2.58 % 112,096 2.71 %
Maximum month-end balance 114,056 155,484 155,174
Total short-term borrowings at year end 109,760 115,964 112,477
(1) The average annual balance sheet data has been calculated based upon the average of the monthly balances at 12 dates: for each of the month-end balances of the applicable year.
Allowance for Loan Losses
Changes in Allowances for Impairment Losses on the Balances of “Loans and receivables”
The following tables analyze changes in our allowances for impairment losses for the periods indicated. For further information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2022, 2021 and 2020—Results of Operations—Impairment Losses on Financial Assets (Net).”
As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 29,723 25,640 22,626
Initial adoption of IFRS 9 —   —   —
Balance adjusted 29,723 25,640 22,626
Impairment losses charged to income for the year 23,801 16,987 18,311
Write-off of impaired balances against recorded impairment allowance (18,340 ) (12,935 ) (15,297 )
Exchange variation 28 31 127
Balance at end of year 35,212 29,723 25,640
Of which:
Loans and advances to customers 34,025 28,511 24,054
Loans and amounts due from credit institutions 13 22 9
Debt Instruments 1,174 1,191 1,577
Recoveries of loans previously written off(1) 983 1,536 861
(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.
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As of December 31, 2022, our allowance for impairment losses for the periods indicated amounted to R$35,212 million, an increase of R$5,489 million, or 18.5%, compared to R$29,723 million as of December 31, 2021, which primarily resulted from a greater number of nonperforming loans among individual customers and a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, the latter of which resulted in: (i) an increase in our impaired assets in the commercial and industrial loans portfolio as of December 31, 2022 of 23.7%, from R$11.4 billion to R$14.2 billion, as compared to December 31, 2021; (ii) an increase in our default rate as of December 31, 2022 by 1.9 p.p., from 5.0% to 6.9%, as compared to December 31, 2021; and (iii) an increase in our coverage ratio (i.e., our provisions for impairment losses as a percentage of impaired assets) as of December 31, 2022 by 20.6 p.p., from 110.4% to 89.8%, as compared to December 31, 2021.
As of December 31, 2021, our allowance for impairment losses for the periods indicated amounted to R$29,723 million, an increase of R$4,083 million, or 15.9%, compared to R$25,640 million as of December 31, 2020, which primarily resulted from higher volumes and our product mix.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations.”
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,

2022
2021
2020
(in millions of R$)
Recoveries of loans previously charged off(1) 983      1,536         861
Commercial and industrial 597         463         422
Real estate – construction 36           64           56
Installment loans to individuals 346      1,002         370
Lease finance 4             7           13
Impairment losses charged to income for the year(1) 23,800 16,987 18,311
Commercial and industrial 8,854      3,340      6,919
Real estate – construction 244         116           81
Installment loans to individuals 14,686    13,532    11,309
Lease finance   16            (1)             3
Write-off of impaired balances against recorded impairment allowance (18,340)   (12,935)   (15,297)
Commercial and industrial (4,920)     (5,184)     (4,745)
Real estate – construction (115)        (167)        (232)
Installment loans to individuals (13,295)     (7,576)   (10,433)
Lease finance (11)            (8)          (15)
(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.
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As of December 31,

2022
% of Total Loans
2021
% of Total Loans
2020
%of Total Loans
(in millions of R$, except percentages)
Borrowers
Commercial and industrial 12,259 34.8 8,325 28.0 9,757 38.1
Real estate 284 0.8 154 0.5 194 0.8
Installment loans to individuals 22,659 64.4 21,240 71.5 15,676 61.1
Lease financing 10 0.0 4 — 14 0.1
Total 35,212 100.0 29,723 100.0 25,640 100.0
Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:

As of December 31,

2022
2021
2020
(in millions of R$)
Internal Risk Rating
Low 392,397 374,505 347,315
Medium-low 77,993 79,217 24,277
Medium 18,647 14,590 26,232
Medium-high 13,574 9,413 3,896
High 22,044 15,630 16,101
Loans and advances to customers, gross 524,655 493,355 417,822
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, 2022 amounted to R$34.4 billion, compared to R$21.7 billion for the same period in 2021, an increase of R$12.7 million or 58.5%. This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
The renegotiation portfolio was covered by allowances for impairment losses of 46.3% as of December 31, 2022 and 44.7% as of December 31, 2021. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
As of December 31,
2022 2021 2020
(in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 7,638 5,322 5,862
Installment loans to individuals 26,722 16,356 14,623
Financial leasing 2 5 5
Total 34,363 21,683 20,490
Allowances for impairment losses 15,9 9,698 9,019
Coverage ratio 46.3 % 44.7 % 44.0 %
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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 a 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,
2022 2021 2020
(in millions of R$, except percentages)
Impaired assets
Past due and other impaired assets(1) 39,224 26,923 23,176
Impaired assets as a percentage of total loans 7.5 % 5.5 % 5.5 %
Net loan charge-offs as a percentage of total loans 3.5 % 2.6 % 3.7 %
Net loan charge-offs as a percentage of average total loans 3.7 % 2.8 % 3.8 %
(1) Includes as of December 31, 2022, R$5,814 million of doubtful loans (R$2,528 million in 2021 and R$2,028 million in 2020) that were not past-due.
Evolution of Impaired Assets
Our impaired assets increased by ~~type of loan~~45.7% or R$12,301 million, to R$39,224 million as of December 31, ~~2019, 2018~~2022, compared to R$26,923 million as of December 31, 2021. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 18.5%, or R$5,488 million, to R$35,212 million as of December 31, 2022, compared to R$29,723 million as of December 31, 2021. Offsetting these effects were recoveries of R$983 million on loans previously written off as of December 31, 2022 and ~~2017.~~R$1,536 million as of December 31, 2021.
We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2022.
The following table shows the changes in our impaired assets at the dates indicated:
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As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 26,923 23,176 23,426
Initial Adoption of IFRS9 ⁽¹⁾ —   —   —
Adjusted Balance 26,923 23,176 23,426
Net additions 31,921 18,429 14,758
Write-offs (19,620 ) (14,681 ) (15,008 )
Balance at end of year 39,224 26,923 23,176
(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 2022, 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,
2022 2021
(in millions of R$)
Commercial and industrial 14,156 11,440
Real estate 1,058 470
Installment loans to individuals 23,999 14,996
Lease financing 10 17
Total 39,224 26,923
Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$14,156 million as of December 31, 2022, an increase of R$2,717 million, or 23.7% compared to R$11,440 million as of December 31, 2021. This increase was due to a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$1,058 million on December 31, 2022, an increase of R$588 million, or 125% compared to R$470 million as of December 31, 2021. The increase in impaired assets in this portfolio was primarily due to the impact on our customers of the deteriorating macroeconomic conditions in Brazil.
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$23,999 million as of December 31, 2022, with an increase of R$9,003 million, or 60.0%, compared to 2021. The increase in impaired assets in this portfolio was primarily a result of the effect of deteriorating macroeconomic conditions on our customers.
Lease Financing
Impaired assets in the lease financing lending portfolio totaled R$10 million on December 31, 2022, a decrease of 40.4% or R$7 million, as of December 31, 2021, primarily due to a decrease in the non-performing loans from R$17 million to R$11 million.
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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 is 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 mitigating factors 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:
As of December 31,
2022 % of total 2021 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,941 21.4 4,892 20.7
Mortgage loans 4,063 17.6 3,606 15.2
Installment loans to individuals 14,036 60.9 15,150 64.0
Lease financing 12 0.1 11 0.1
Total (*) 23,052 100.0 23,659 100.0
(*) Refers only to loans past due between 1 and 90 days.
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Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$27.4 billion to R$568.3 billion as of December 31, 2022, compared to R$540.9 billion as of December 31, 2021. Our impaired assets increased by approximately R$12.3 billion in the same period, from R$26.9 billion to R$39.2 billion. The default rate increased by 1.9 p.p. in 2022 in comparison to 2021, as a result of a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings as well as the growth of impaired assets due to the macroeconomic deterioration.
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,

2022
2021
2020
(in millions of R$, except percentages)
Loans and advances to customers, gross 524,655 493,355 417,822
Impaired assets 39,224 26,923 23,176
Provisions for impairment losses 35,212 29,723 25,640
Credit risk exposure Non-GAAP – customers (1) 568,338 540,873 466,104
Ratios
Impaired assets to credit risk exposure 6.9% 5.0% 5.0%
Coverage ratio (2) 89.8% 110.4% 110.6%
Impairment losses (24,829) (17,113) (17,450)
Losses on other financial instruments not measured at fair value (3) — — —
Impairment losses on financial assets (net) (4) (24,829) (17,113) (17,450)
(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$568,338 million as of December 31, 2022 and guarantees and documentary credits amounting to R$43,682 million as of December 31, 2022. 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, 2022, 2021 and 2020, our total of impairment losses on financial instruments included R$1,174 million, R$1,191 million and R$1,577 million, respectively, relating to debt instruments.
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The following chart shows our impaired assets to credit risk ratio from 2020 through 2022:

For the Year Ended December 31,
2019 2018 2017 % Change 2019/2018 Change% 2018/2017
(in millions of R$, except percentages)
Commercial and industrial 10,073 11,832 11,994 (14.9 ) (1.3 )
Real estate – construction 827 1,035 782 (20.1 ) 32.4
Installment loans to individuals 12,497 9,499 6,304 31.6 50.7
Lease financing 29 59 65 (50.8 ) (9.3 )
Total 23,426 22,426 19,145 4.5 17.1

Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2022, 2021 and 2020.
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,
2022 2021 2020
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 35,212 29,723 25,640
Total loans outstanding 524,655 493,355 417,822
Credit ratio 6.71 % 6.02 % 6.14 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 39,224 26,923 23,176
Total loans outstanding 524,655 493,355 417,822
Credit ratio 7.48 % 5.46 % 5.55 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 35,212 29,723 25,640
Total nonaccrual loans outstanding 39,224 26,923 23,176
Credit ratio 89.8 % 110.4 % 110.6 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (18,340 ) (12,935 ) (15,297 )
Average amount outstanding 490,960 471,068 394,542
Credit ratio 3.7 % 2.7 % 3.9 %
Commercial and industrial:
Net charge-offs during the period (4,920 ) (5,184 ) (4,745 )
Average amount outstanding 219,950 214,286 176,750
Credit ratio 2.2 % 2.4 % 2.7 %

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Real estate:
Net charge-offs during the period (115 ) (167 ) (232 )
Average amount outstanding 56,724 51,883 42,368
Credit ratio 0.2 % 0.3 % 0.5 %
Installment loans to individuals:
Net charge-offs during the period (13,295 ) (7,576 ) (10,433 )
Average amount outstanding 211,653 202,578 173,336
Credit ratio 6.3 % 3.7 % 6.0 %
Lease financing:
Net charge-offs during the period (11 ) (8 ) (15 )
Average amount outstanding 2,647 2,321 2,089
Credit ratio 0.4 % 0.3 % 0.7 %
Allowance for credit losses to total loans outstanding
In 2022, our allowance for credit losses to total loans outstanding credit ratio increased by 69 basis points, from 6.02% as of December 31, 2021 to 6.71% as of December 31, 2022. This was primarily due to the growth in allowance for credit losses, driven by a recent increase in inflation, which primarily affected loans to individuals.
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.
Nonaccrual loans to total loans outstanding
In 2022, our nonaccrual loans to total loans outstanding credit ratio increased by 202 basis points, from 5.46% as of December 31, 2021 to 7.48% as of December 31, 2022. This was primarily due to the growth in total nonaccrual loans outstanding, driven by the deterioration of the macroeconomic situation in Brazil.
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.
Allowance for credit losses to nonaccrual loans
In 2022, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20.6 p.p., from 110.4% as of December 31, 2021 to 89.8% as of December 31, 2022. This was primarily due to a single customer defaulting in our large companies portfolio.
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20 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.
Net charge-offs during the period to average loans outstanding
In 2022, our net charge-offs during the period to average loans outstanding credit ratio increase by 100 basis points, from 2.7% as of December 31, 2021 to 3.7% as of December 31, 2022. This was primarily due to an increase of 4.2% in average loans outstanding and an increase of 41.8% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 120 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 15.4% in net charge-offs.
Commercial and Industrial Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans increased by 20 basis points, from 2.4% as of December 31, 2021 to 2.2% as of December 31, 2022. This was primarily due to an increase of 2.6% in average loans outstanding, while the net charge-offs decreased by 5.1%.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 20 basis points, from 2.7% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.2% in average loans outstanding, which was greater than the growth in net charge-offs of 9.3%.
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Real Estate Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 10 basis points, from 0.3% as of December 31, 2021 to 0.2% as of December 31, 2022. This was primarily due to an increase of 9.3% in average loans outstanding and a decrease of 31.1% in net charge-offs.
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.
Installment Loans to Individuals
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans increased by 260 basis points, from 3.7% as of December 31, 2021 to 6.3% as of December 31, 2022. This was primarily due to an increase of 4.5% in average loans outstanding and an increase of 75.5% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 30 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.
Lease Financing Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans increased by 10 basis points, from 0.3% as of December 31, 2021 to 0.4% as of December 31, 2022. This was primarily due to an increase of 14.0% % in average loans outstanding and an increase of 37.5% in net charge-offs.
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.
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 February 24, 2023, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
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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 as of December 31, 2022:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A.
Santander Leasing S.A. Arrendamento Mercantil Leasing Brazil 100.00 %
Aymoré Crédito, Financiamento e Investimento S.A. Financial Brazil 100.00 %
Santander Brasil Administradora de Consórcio Ltda. Buying club Brazil 100.00 %
Santander Corretora de Câmbio e Valores Mobiliários S.A. Broker Brazil 99.99 %
Santander Corretora de Seguros, Investimentos e Serviços S.A. Broker Brazil 100.00 %
Sancap Investimentos e Participações S.A. Holding Brazil 100.00 %
Santander Holding Imobiliária S.A. Holding Brazil 100.00 %
F1RST Tecnologia e Inovação Ltda. Other Activities Brazil 100.00 %
Rojo Entretenimento S.A. Other Activities Brazil 94.60 %
Sanb Promotora de Vendas e Cobrança Ltda. Other Activities Brazil 100.00 %
BEN Benefícios e Serviços Instituição de Pagamentos S.A. Means of Payment Brazil 100.00 %
Esfera Fidelidade S.A. Other Activities Brazil 100.00 %
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. Technology Brazil 80.00 %
SX Negócios Ltda. Other Activities Brazil 100.00 %
SX Tools Soluções e Serviços Compartilhados Ltda. Other Activities Brazil 100.00 %
Liderança Serviços Especializados em Cobranças Ltda. Collection Management and Credit Recovery Brazil 100.00 %
Return Capital S.A. Collection Management and Credit Recovery Brazil 100.00 %
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Capitalization Brazil 100.00 %
Evidence Previdência S.A. Private Pension Brazil 100.00 %
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. (6) Bank Brazil 50.00 %
Banco Hyundai Capital Brasil S.A  (current name of BHJV Assessoria e Consultoria Empresarial Ltda.) Bank Brazil 50.00 %
Solutions 4 Fleet Consultoria Empresarial S.A. Tecnology Brazil 80.00 %
Controlled by Santander Leasing S.A Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00 %
Santander Distribuidora de Títulos e Valores Mobiliários S.A. Distributor Brazil 100.00 %
Controlled by Santander Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários S.A. Broker Brazil 63.00 %
Toro Investimentos S.A. Investments Brazil 14.78 %
Controlled by Toro Corretora de Títulos de Valores Mobiliários S.A.
Toro Investimentos S.A. Investments Brazil 76.55 %
Controlled by Sancap
Santander Auto S.A. Technology Brazil 50.00 %
Consolidated Investment Funds
Santander Fundo de Investimento Unix Multimercado Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Paraty QIF PLC (1) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (1) Investment Fund Brazil (a)
BRL V – Fundo de Investimento Imobiliário – FII Real Estate Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado Investment Fund Brazil (a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos Investment Fund Brazil (a)
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior Investment Fund Brazil (a)
Verbena FCVS – Fundo de Investimento em Direitos Creditórios Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI – Não Padronizado Investment Fund Brazil (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) 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.
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4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 338 properties for the activities of our banking network and rent 1,681 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 afurther 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.
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 ~~evolution~~years ended December 31, 2022, 2021 and 2020 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 ~~impairment~~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 ~~lending portfolios~~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, 2022, 2021 and 2020, prepared in accordance with IFRS as issued by the IASB and the report of our ~~methodology~~independent registered public accounting firm are included in “Item 18. Financial Statements.”
Financial Presentation
We have prepared our consolidated financial statements for ~~loan loss allowances~~the years ended December 31, 2022, 2021 and 2020 in accordance with ~~respect~~IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.
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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$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following ~~lending portfolios,~~the Spin-Off. For additional information, see “Item 4. Information on the Company—~~B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology~~A. History and Development of the Company—Important Events” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Brazilian Macroeconomic Environment
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil. While Brazilian GDP increased in 2022, due in part to fiscal incentives granted by the Brazilian government and the resumption of activities that were suppressed by restrictions imposed to curb the spread of COVID-19, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for ~~Impairment Losses.” See~~the periods indicated:
As of and For the Year Ended December 31,
2022 2021 2020
GDP growth(1) 3.0 % 4.6 % (4.1 )%
CDI Rate 12.4 % 4.4 % 2.1 %
TJLP 7.2 % 5.3 % 4.6 %
SELIC rate 13.75 % 9.25 % 2.00 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.22 5.58 5.20
Depreciation (appreciation) of the real against the U.S. dollar (6.5 )% 7.4 % 28.9 %
Average real to U.S. exchange rate per U.S.$1.00(2) 5.17 5.40 5.16
Inflation (IGP-M) 5.5 % 17.8 % 23.1 %
Inflation (IPCA) 5.8 % 10.6 % 4.5 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2022 is based on Santander Brasil’s internal estimates. For 2021, the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
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 also 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. In 2022, the relaxation of COVID-19 restrictions and continued fiscal incentives granted by Brazilian government have supported Brazilian GDP growth, which we estimate to have been 3.0% in 2022.
However, the macroeconomic outlook for 2023 is marred by high inflation, high interest rates, a deteriorating global economic outlook, continued political uncertainty following the presidential elections held in Brazil in the last quarter of 2022, and continued uncertainty regarding the course of the COVID-19 pandemic. 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. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—~~Ongoing investigations relating~~Inflation, government efforts to ~~corruption~~control inflation, 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~~changes in interest rates may ~~adversely affect~~hinder the growth of the Brazilian economy and could have ~~a material~~an adverse effect on ~~us”~~us.”
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Impact of COVID-19
Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment. 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 safe-guard 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—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.”
War in Ukraine
The ongoing war between Russia and Ukraine has caused an ongoing humanitarian crisis in Europe as well as volatility in financial markets globally, heightened inflation, shortages and increases in the prices of energy, oil, gas and other commodities. In response to the Russian military action against Ukraine, several countries, including the United States, the European Union member states, the United Kingdom and other UN member states, have imposed severe sanctions on Russia and Belarus. Furthermore, the risk of cyberattacks on companies and institutions could increase as a result of the military conflict and in response to the sanctions imposed, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures. The continuance or escalation of the war, including its extension to other countries in the region, could lead to further increases in energy, oil and gas prices (particularly if supplies to Europe are interrupted) and heightened inflationary pressures, which in turn could lead to further increases in interest rates and market volatility. In addition, the war has exacerbated supply chain problems, particularly to those businesses most sensitive to rising energy prices. The war and its effects could exacerbate the current slowdown in the global economy and could negatively affect the payment capacity of some of our customers, especially those with more exposure to the Russian or Ukrainian markets.
While we do not have a physical presence in Russia and Ukraine and our direct exposure to Russian or Ukrainian markets and assets is not material, the impact of the war in Ukraine and the sanctions imposed on global markets and institutions, the impact on macroeconomic conditions generally, and other potential future geopolitical tensions and consequences arising from the war remain uncertain and may exacerbate our operational risk. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic ~~and Political~~ Conditions in Brazil and Globally—The war in Ukraine could materially affect our financial ~~problems faced~~position and increase our operational risk.”
Interest Rates
In 2021, the Brazilian Central Bank began a monetary tightening cycle due to rising inflation, the depreciation of the real, and a perception of the recovery of certain economic activity following the easing of restrictions which had been imposed to suppress the circulation of COVID-19. The SELIC rate increased from 2.0% as of December 31, 2020 to 9.25% as of December 31, 2021 and 13.75% as of December 31, 2022 (the highest level since the end of 2016), a level at which it remains as of the date of this annual report.
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 could adversely affect us.”~~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.
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The following table presents the low, high, average and period end SELIC rate since 2018, as reported by the Brazilian Central Bank:
Low High(1) Average(2) Period-End
Year
2018 6.50 7.00 6.58 6.50
2019 4.50 7.00 6.58 6.50
2020 2.00 4.50 2.87 2.00
2021 2.00 9.25 4.57 9.25
2022 9.25 13.75 12.57 13.75
2023 (through February 27, 2023) 13.75 13.75 13.75 13.75
(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, 2022, a 100-basis point increase in the yield curve would have resulted in R$945 million decrease in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2020, outstanding credit increased 10.5% 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 4.2% in 2020, while the household debt burden decreased to 22.4% 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 5.7% 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 (in December 2021, the former climbed to 4.4% and the latter reached 26.5% of household income). In 2022, outstanding credit increased 7.7% compared to 2021, the ratio of nonperforming loans to individuals reached 5.9% and the household debt burden reached 28.2% of household income.

As of December 31,

2022
2021
2020
(in billions of R$)
Total Credit Outstanding (1) 5,326 4,944 4,677
Earmarked credit 2,151 1,991 1,977
Non-earmarked based credit 3,175 2,953 2,700
of which:
Corporate 1,404 1,351 1,267
Individuals (retail) 1,771 1,602 1,433
(1) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.

~~Commercial~~Foreign Exchange Rates
Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and ~~Industrial~~
~~Impaired~~liabilities as closely as possible, including through the use of derivative instruments. In 2022, we recorded foreign exchange exposure of R$83.5 million, foreign exchange exposure of R$117.4 million in 2021 and foreign exchange exposure of negative R$124.4 million in 2020. 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 ~~portfolio~~Years Ended December 31, 2022, 2021 and 2020—Results of ~~commercial~~Operations—Gains (losses) on Financial Assets and ~~industrial loans amounted~~Liabilities (net) and Exchange Differences (net).”
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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.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a small depreciation of 1.5% to R$~~10,073 million~~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.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, ~~a decrease of~~it was at R$~~1,759 million, or 14.9%, compared~~4.03 per U.S.$1.00. In 2020, the real continued to ~~R$11,832 million~~depreciate, and as of December 31, ~~2018. The decrease~~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.$1.00. In 2022, there was significant volatility in ~~impaired assets~~the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.62 to R$5.70 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.22 per U.S.$1.00. In 2023, through the date of this annual report, the real appreciated against the U.S. dollar as a result of improvements in ~~this portfolio~~commodity prices and better than expected fiscal results derived from higher revenues. As of February 27, 2023, the exchange rate was R$5.20 per U.S.$1.00.
Depreciation 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. In 2022, as inflation increased to levels not seen since early 2003, as a result of which the Brazilian Central Bank increased the SELIC rate to 13.75% (the highest level since the end of 2016). 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 CMN’s 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 ~~measures~~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 ~~Santander Brasil put~~it expected that the monetary easing undertaken in ~~place~~2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to ~~manage~~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 increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Similarly to the beginning of 2018, the Brazilian Central Bank delivered a letter to the CMN explaining why it failed to meet the inflation target and what actions would be implemented to ensure that inflation would converge to target in coming years. In 2022, inflationary pressures escalated in Brazil, including ~~collection practices with respect to our borrowers whereby we offered certain customers~~as a result of the ~~chance to negotiate~~ongoing war between Ukraine and Russia, supply chain issues, the continued COVID-19 pandemic (particularly in China) and increases in energy prices. As a ~~restructuring~~result, inflation peaked in 2021 at multiple-year highs of ~~their debts or asset disposal.~~
~~Impaired assets~~12.1% in Brazil in April 2022 (as measured by the IPCA in year-over-year terms) and 9.1% in the ~~portfolio~~U.S. in June 2022 (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. Accumulated inflation for the year ended December 31, 2022, was 5.79% in Brazil and 6.5% in the United States. This resulted in tighter monetary policy by the Brazilian Central Bank, which increased the SELIC rate from a low of ~~commercial and industrial loans amounted to R$11,832 million~~2.0% as of ~~December 31, 2018, a decrease~~the end of ~~R$162 million, or 1.3%, compared~~2020 to ~~R$11,994 million~~13.75% as of ~~December 31, 2017. This decrease in impaired~~August 2022, a level at which it has remained as of the date of this annual report.
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The majority of our income, expenses, assets ~~in this portfolio was mainly caused~~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 ~~slowdown in~~growth of the Brazilian economy, ~~between 2014~~our loan portfolios, our cost of funding and ~~2017, affecting~~ our income from credit operations. We estimate that, in 2022, 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$945 million within a one-year period. 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 the IGP-M. For example, considering the amounts in 2022, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$92 million and R$81 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 ~~industrial~~credit to which we are subject for each financing category:
Product As of December 31, 2022 As of December 31, 2021 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 26.50 % 25.00 % Loans Cap rate: 12.0% 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) 50.50 % 52.00 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.y.
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 %

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Time deposits
Reserve requirements(3) 20.00 % 20.00 % 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 % 80.00 %
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~~portfolio.~~
(1) Rural credits are credits granted to farmers in the amount of R$16.2 billion and R$13.6 billion as of December 31, 2022 and 2021, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of R$2.7 billion as of December 31, 2022 and R$1.9 billion December 31, 2021, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the possibility of any deduction on its website (rule numbers 189, 188 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.

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 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, ~~please~~ 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 2022, 2021 and 2020, 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.
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As of December 31,

2022
2021
2020
(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) 5.1% 4.8% 4.3%
Discount rate(3) 12.9% 12.3% 12.4%
(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 2022.
(3) The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 20.10% in 2022, 18.77% in 2021 and 19.56% in 2020.
(*) A quantitative goodwill impairment test is performed annually. At the end of each exercise, an analysis is carried out on the existence of appearances of disability. For the years 2022, 2021 and 2020 there was no evidence of impairment. In the goodwill impairment test, carried out considering the December 2022 scenario, and whose discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows, it was found that these continue to indicate the absence of 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
In addition, our results of operations have been influenced and will continue to be influenced by the other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events,” including the Spin-Off of Getnet.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
General
Our main accounting policies are described in note 2 to our audited consolidated financial statements. The following discussion describes areas that require use of certain critical accounting estimates and the exercise 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 apply such estimates for different durations a material impact on our financial condition and results of operations 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 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 ~~Statistical Information—Assets—Impaired Assets—~~Financial Data—Balance Sheet Data.”
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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 between market participants, in a transaction on the 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.
We use derivative financial instruments for both trading and nontrading activities. The main types of derivatives used are interest rate swaps, options and future rate agreements; foreign exchange forwards, futures, options, and swaps; 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 markets 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.
· 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 nonlinear 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 estimates and a sensitivity analysis for the valuation of financial instruments to those changes in 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.
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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);
· for equity instruments, 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 nonperforming 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 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:
· all amounts that are expected to be obtained over the 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).
We 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 and calculation of amounts necessary to cover the related credit risk.
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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.”~~Losses
We evaluate all loans in respect of the provision for impairment losses from credit risk. 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.
~~Real Estate~~To measure the impairment loss on loans individually evaluated for impairment, we consider borrower conditions, 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; and contingencies and credit 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 credit risk, or 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.
~~Impaired~~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.
· 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.
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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. 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 ~~real estate lending portfolio totaled R$827 million~~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 was identified in 2022, 2021 and 2020. 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 debt securities, such information includes 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 2022, 2021 and 2020 (see notes 14, 13 and 12, respectively, to our audited consolidated financial statements included elsewhere in this annual report).
Post-employment Benefit Plan
The post-employment benefit 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.
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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 this 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 and 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 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.
Revised Accounting Treatment of Certain Energy Contracts
In the year ended December 31, ~~2019, a decrease~~2021, we revisited the accounting treatment of ~~R$209 million, or 20.2%, compared~~electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts.
To improve comparability, the amounts of principal of energy trading transactions recorded in equity accounts were deducted from “Derivatives—Forward and Other Contracts” in amounts of R$~~1,036~~2,623.1 million as of December 31, ~~2018. The decrease was primarily due to changes~~2020. These deductions had a corresponding impact on ~~monetary policy that lead to reduction on the interest rates on real estate portfolio in Brazil.~~
~~Impaired~~our total 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~~and liabilities as of December 31, ~~2017.~~
~~For further information, please see “Item 4. Information~~2020 as on ~~the Company—B. Business Overview—Selected Statistical Information—Assets—Impaired Assets—Methodology~~“Financial assets measured at fair value in profit or loss held for ~~Impairment Losses.”~~
~~Installment Loans to Individuals~~
~~Impaired assets~~trading” and “Financial liabilities measured at fair value in Income Held for Trading” in the ~~installment loans to individuals lending portfolio totaled R$12,497 million as~~statement of December 31, 2019, with an increase of R$ 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)~~cash flows for the year ended December 31, ~~2019 amounted to losses~~2020. There was no change in the balance of ~~R$131 million, a decrease~~stockholders’ equity or income. The financial information as of ~~R$377 million as compared to~~and for the year ended December 31, ~~2018, mainly due~~2020 presented in this annual report already reflects the aforementioned adjustments. See note 8 to ~~impairment loss of assets~~our audited consolidated financial statements included elsewhere in ~~the acquisition and development of software that was recorded due to obsolescence function and disruption of these systems~~this annual report.
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New Accounting Standards
The new IFRS standards effective after January 1, 2023, are mentioned in 2018 that did not occur in 2019. For the year ended December 31, 2018, impairment losses on other assets (net) amounted to losses of R$508 million, an increase of R$52 million as compared to 2017, mainly due to higher loss provision of non onlending payroll loans.
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~~Other Nonfinancial Gains/Losses~~
Other nonfinancial gains/losses were 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 of 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 that occurred in 2018 that did not occur in 2019.
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. For further information, see note 1 to our audited consolidated financial statements included elsewhere in this annual report.
All accounting policies and measurement bases with a material effect on the consolidated financial statements for 2022 were applied in the preparation of such financial statements.
Results of Operations for the Years Ended December 31, 2022, 2021 and 2020
Executive Summary – Santander Brasil Results at a glance
Total Income amounted to R$66,475 million in 2022, an increase of 4.0%, or R$2,548 million in comparison with the year ended December 31, 2021, driven by an increase of gains on financial assets and liabilities (net) and exchange differences (net), offset by a decrease on net interest income due to the impact of interest rate increases on the cost of funding.
Consolidated Net Income totaled R$14,339 million, in the year ended December 31, 2022, a decrease of 7.8% compared to the year ended December 31, 2021, mainly due to: (i) an increase of 4.0% in total income as described above, (ii) the increase in impairment losses on financial assets of 45.1% in 2022 driven by the individual loans portfolio and a specific case of large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, (iii) a 5.3% increase in administrative expenses in 2022 due to the increase in inflation in the period (with inflation reaching 5.8% in 2022), and (iv) reduction in tax rates from 37.1% to 26.7%. For further information, see note “c.1) Lawsuits and Administrative Proceedings – related to Tax and Social Security “in our audited consolidated financial statements included elsewhere in this annual report
Loan Portfolio to customers amounted to R$524 billion as of December 31, 2022, an increase of 6.3% compared to December 31, 2021, mainly due to the increases in the portfolio of loans to individuals, especially payroll mortgage, credit cards and personal credit.
Credit Quality remains at reasonable levels and supports our growth. Impaired assets to credit risk ratio was 6.9% for the year ended December 31, 2022, a 1.9 p.p. increase as compared to the previous year. Coverage ratio was 89.8% in the year ended December 31, 2022, a 20.6 p.p. decrease from 110.4% the year ended December 31, 2021. Our Basel Capital adequacy ratio was 13.9% in the year ended December 31, 2022, a decrease of 1.0 p.p. compared to the year ended December 31, 2021.
Deposits from the Brazilian Central Bank and deposits from credit institutions plus customer deposits increased by 2.7% reaching R$606 billion in 2022.
Results of Operations
The following table presents our consolidated results of operations for the years ended December 31, 2022, 2021 and 2020:
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For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Net interest income 47,503 51,318 44,443 (7.4 ) 15.5
Income from equity instruments 38 90 34 (57.7 ) 166.8
Income from companies accounted for by the equity method 199 144 112 38.1 28.6
Net fee and commission income (expense) 14,876 15,274 16,228 (2.6 ) (5.9 )
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) 4,699 (1,781 ) (11,703 ) (363.9 ) (84.8 )
Other operating income (expenses) (net) (841 ) (1,120 ) (873 ) (24.9 ) 28.3
Total income 66,475 63,926 48,242 4.0 32.5
Administrative expenses (18,240 ) (17,316 ) (17,115 ) 5.3 1.2
Depreciation and amortization (2,586 ) (2,434 ) (2,579 ) 6.2 (5.6 )
Provisions (net) (1,215 ) (2,179 ) (1,657 ) (44.2 ) 31.6
Impairment losses on financial assets (net) (24,829 ) (17,113 ) (17,450 ) 45.1 (1.9 )
Impairment losses on other assets (net) (161 ) (166 ) (85 ) (2.6 ) 95.3
Other nonfinancial gains (losses) 131 33 308 304.4 (89.5 )
Operating income before tax 19,575 24,750 9,664 (20.9 ) 156.1
Income tax (5,235 ) (9,191 ) 3,787 (43.0 ) (342.7 )
Consolidated net income for the year 14,339 15,559 13,451 (7.8 ) 15.7

~~Operating Profit Before Tax~~Consolidated Net Income for the Year
~~Operating profit before tax~~Our consolidated net income for the year ended December 31, ~~2019~~2022, was R$~~22,273~~14,339 million, ~~an increase~~a decrease of R$~~6,363~~1,220 million, or ~~40.0%~~7.8%, as compared to our consolidated net income of R$~~15,910~~15,559 million for the year ended December 31, ~~2018. In~~2021, primarily due to an increase in impairment losses on financial assets of R$7,716 million, or 45.1%, to R$24,829 million in the year ended December 31, ~~2017,~~2022 from R$17,113 million in the year December 31, 2021 driven by the deterioration of the credit portfolio which was impacted by a specific case of a large customer in our ~~operating profit before tax~~wholesale segment that entered judicial recovery (recuperação judicial) proceedings, and a decrease in net interest income of R$3,815 million, or 7.4%, to R$47,503 million in the year ended December 31, 2022 from R$51,318 million in the year December 31, 2021 mainly due to an increase in prevailing interest rates in Brazil as a result of the Brazilian Central Bank’s increases in the SELIC rate to suppress inflation and a decrease in income and fees received from customers as a result of more selective credit and services policies and an increase in the cost of our liabilities as a result of higher interest rates.
Our consolidated net income for the year ended December 31, 2021, was R$~~14,514 million.~~
~~Excluding the effects~~15,559 million, an increase of ~~the hedge for investment held abroad operating profit before tax amounted~~R$2,109 million, or 15.7%, as compared to our consolidated net income of R$~~23,537~~13,451 million for the year ended December 31, ~~2019,~~2020, as a result of an ~~8.1%~~increase in net interest income of R$6,876 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.
Net Interest Income
Net interest income for the year ended December 31, 2022, was R$47,503 million, a 7.4% or R$3,815 million decrease from R$51,318 million for the year ended December 31, 2021. This decrease was mainly due to the increase in interest rates, which increased the pressure on our margins, as partially offset by an increase in gains/losses on financial assets and liabilities (net) and exchange differences (net).
Average total earning assets in 2022 were R$903.4 billion, a 7.13% or R$60.1 billion increase from R$~~21,777~~843.3 billion in 2021. The principal drivers of this increase were an increase of R$42.4 billion, or 9.2%, in the average of loans and advance to customers and an R$11.2 billion decrease in average of debt instruments.
Net yield (net interest income divided by average earning assets) in 2022 was 5.3% and 6.1% in 2021. Net yield (net interest income divided by average earning assets) was 6.1% in 2021 compared to 6.0% in 2020.
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Average total interest-bearing liabilities in 2022 were R$673.0 billion, a 3.9% or R$25.3 billion increase from R$647.8 billion in 2021. The main driver of this growth was an increase of R$18.6 billion in customers deposits as a result of a change in consumer preferences towards interest bearing assets.
Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was 2.7% in 2022, mainly due to the increase in interest rates in Brazil in 2022, which put pressure on our margins.
Net interest income for the year ended December 31, 2021, was R$51,318 million, a 15.5% or R$6,876 million increase from R$44,443 million for the year ended December 31, 2020. This increase was mainly due to a 15.7% increase in our credit portfolio driven by our Commercial Banking unit.
Average total earning assets in 2021 were R$843.2 billion, a 12.4% or R$93.2 billion increase from R$750.1 billion in 2020. The principal drivers were an increase of R$76.8 billion, or 20.0%, in the average of loans and advance to customers and an R$21.3 billion increase in average of debt instruments. Net yield (net interest income divided by average earning assets) was 5.86% in 2021 compared to 5.93% in 2020, a decrease of 0.07 p.p.
Average total interest-bearing liabilities in 2021 were R$647.7 billion, a 13.0% or R$74.3 billion increase from R$573.4 billion in 2020. The main driver of this growth was an increase of R$40.1 billion in customers deposits and R$37.4 billion in deposits from the Brazilian Central Bank and deposits from credit institutions, as a result of a shift in 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 4.8% in 2021, mainly due to the increase in the SELIC rate during the year ended December 31, 2021, from 2.0% as of December 31, 2020 to 9.25% as of December 31, 2021.
Income from Equity Instruments
Income from equity instruments for the year ended December 31, 2022, totaled R$38 million, a R$52 million decrease from R$90 million for the year ended December 31, 2021, mainly due to higher dividends gains from an investment fund, Santander Fundo de Investimento Amazonas Multimercado Credito Privado de Investimento no Exterior, in 2021 as compared to 2022.
Income from equity instruments for the year ended December 31, 2021, totaled R$90 million, a R$56 million increase from R$34 million for the year ended December 31, 2020, mainly due to higher dividend gains from an investment fund, Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior, as a result of gains in the equities positions towards derivatives hedge, R$84.8 million.
Income from Companies Accounted for by the Equity Method
Income from companies accounted for by the equity method for the year ended December 31, 2022 was R$199 million, a R$55 million increase from R$144 million for the year ended December 31, 2021, mainly due to an increase of R$50.6 million in the results of operations of Mobills, which we acquired in 2021.
Income from companies accounted for by the equity method for the year ended December 31, 2021 was R$144 million, a R$32 million increase from R$112 million for the year ended December 31, 2020, mainly due to an increase of R$23.5 million in the results of operations of Tecban (Tecnologia Bancária S.A.), and an increase of R$7.0 million in the results of operations of Webmotors S.A., both jointly-controlled companies.
Net Fee and Commission Income
Net fee and commission income for the year ended December 31, 2022, was R$14,876 million, a 2.6% or R$397 million decrease compared to R$15,273 million for the year ended December 31, 2021. This was primarily attributable to (i) a decrease in credit and debit cards issuances as a result of a more selective credit approval policy, (ii) the Spin-Off of Getnet (in the first quarter of 2021), (iii) a decrease in fees from current and account services (as a result of annual fee exemption campaigns and the increasing use of PIX by customers as an alternative to traditional banking services). This was partially offset by an increase in collection and payment services and asset management and pension funds.
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Net fee and commission income for the year ended December 31, 2021, reached R$15,273 million, a 5.9% or R$955 million decrease compared to R$16,228 million for the year ended December 31, 2020, impacted mainly due to decrease of credit and debit cards, due 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 pension funds.
Net fees and commissions from trade finance totaled R$1,825 million for the year ended December 31, 2022, an increase of 3.8% compared to the year ended December 31, 2021.
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 insurance and capitalization totaled R$4,357 million for the year ended December 31, 2022, an increase of 1.1% compared to the year ended December 31, 2021. This increase was mainly a result of an increase in our life insurance portfolio.
Net fees and commissions from insurance and capitalization totaled R$4,311 million for the year ended December 31, 2021, an increase of 12.5% compared to the year ended December 31, 2020. This increase was mainly a result of an increase in our credit life insurance portfolio.
Net fees and commissions from credit and debit cards totaled R$3,151 million for the year ended December 31, 2022, a decrease of 14.1% compared to the year ended December 31, 2021. This decrease was mainly a result of (i) a decrease in credit and debit cards issuances as a result of a more selective credit approval policy (ii) the Spin-Off of Getnet (in the first quarter of 2021).
Net fees and commissions from credit and debit cards totaled R$3,666 million for the year ended December 31, 2021, a decrease of 28.8% compared to the year ended December 31, 2020. This decrease was mainly a result of the Spin-Off of Getnet.
The following table reflects the breakdown of net fee and commission income for the years ended December 31, 2022, 2021 and 2020:
For the Year Ended December 31
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Current account services 3,267 3,549 3,716 (8.0 ) (4.5 )
Collection and payment services 1,790 1,626 1,459 10.1 11.4
Insurance and capitalization 4,357 4,311 3,831 1.1 12.5
Asset Management and pension funds 1,600 1,418 1,114 12.8 27.3
Credit and debit cards 3,151 3,666 5,151 (14.1 ) (28.8 )
Capital markets 1,112 1,053 858 5.5 22.8
Trade finance 1,825 1,758 1,740 3.8 1.0
Tax on services (687 ) (712 ) (678 ) (3.6 ) 5.1
Others (1,538 ) (1,396 ) (964 ) 10.2 44.8
Total 14,876 15,273 16,229 (2.6 ) (5.9 )
Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net)
Gains on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2022, amounted to R$4,699 million, an increase of R$6,480 million compared to losses of R$1,781 million for the year ended December 31, 2021. This variation is mainly due to (i) gains of R$3,985 million related to net gains or losses from hedge accounting and (ii) gains of R$426 million related to financial instruments not measured at fair value through profit or loss. For further information, see notes 36 and 37 to our audited consolidated financial statements – included elsewhere in this annual report.
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Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2021, amounted to losses of R$1,781 million, a gain of R$9,922 million over the losses of R$11,703 million for the year ended December 31, 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) amounted to 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, ~~2018. In~~2020, mainly due to the year ended December 31, 2017 operating profit before tax was R$14,514 million. Operating profit before tax excluding the effects of the hedge for investment held abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
positive results in our derivative position.
The following table ~~below~~ presents our ~~operating profit before tax~~gains/losses on financial assets and ~~our operating profit before tax excluding the effects of the hedge for investment held abroad~~liabilities (net) and exchange differences (net) for the periods ~~presented.~~indicated.
For the Year Ended December 31,
2019 2018 2017 % Change 2019/2018 Change% 2018/2017
(in millions of R$, 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
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) 4,699 (1,781 ) (11,703 ) n.m. (84.8 )
Effects of the hedge for investments held abroad (129 ) 2,512 13,583 n.m. (81.5 )
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) excluding effects of the hedge for investments held abroad(1) 4,570 731 1,880 524.8 (61.1 )

(1) ~~Adjusted operating profit~~Gains (losses) on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge for investments 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.”

~~Income Taxes~~Other Operating Income/Expenses
~~Income taxes expense includes income tax, social contribution, PIS and COFINS. Income taxes~~Other operating expenses for the year ended December 31, 2022 amounted to R$841 million, a decrease of R$279 million compared to expenses of R$~~5,642~~1,120 million for the year ended December 31, ~~2019, a~~2021, mainly due to lower expenses with the Benefit Guarantor Fund — FGB (Fundo Garantidor de Benefícios) pension plan and greater expenses with FGC pension plans given the increase in the balance of deposits from R$~~2,532~~436 million to R$478 million, which was primarily due to the increase ~~from~~in consumption of products covered by the FGC. For the year ended December 31, 2021, other operating income/expenses were expenses of R$~~3,110~~1,120 million, compared to expenses of R$873 million for the year ended December 31, ~~2018. This~~2020.
Administrative Expenses
Administrative expenses for the year ended December 31, 2022, were R$18,240 million, a R$924 million increase ~~was~~compared to expenses of R$17,316 million for the year ended December 31, 2021, mainly ~~attributable~~due to ~~the following events: (i) foreign exchange losses of R$1,512 million as a result of the effects of exchange rate variations on investments abroad and losses on~~
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~~hedge instruments, affecting the line “Gains (losses) on financial assets and liabilities (net)” line; (ii)~~ the increase in ~~Operating Income before taxation arising~~expenses with wages and salaries, technology/systems and technical services, resulting from the ~~result of~~increase in inflation in the entities' operations, and (iii) the recognition of certain deferred tax credits in December 2019 as a result of the adjustment of CSLL tax credits derived from the tax rate increase to 20% for banks (Constitutional amendment nº103/2019). For further information, see note 24 from our audited consolidated financial statements included in this annual report.
period.
For the year ended December 31, ~~2018, income taxes amounted~~2021, our administrative expenses of R$17,316 million reflected a R$202 million increases compared to expenses of R$~~3,110 million for the year of 2018, a R$2,266 million decrease from expenses of R$5,376~~17,115 million for the year ended December 31, ~~2017. This decrease was~~2020, mainly ~~attributable~~due personal expenses and technology/systems expenses, due to the ~~foreign exchange gains of R$5,057 million as a consequence~~growth of the ~~effects~~business.
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Personnel expenses increased R$871 million for the year ended December 31, 2022, mainly due to higher employee wages and salaries deriving from our collective bargaining with employees in 2021, which impacted the first eight months of ~~foreign exchange rate variations in investments abroad for~~2022, and our ~~foreign branches~~2022 collective bargaining agreement, which impacted the final four months of the year.
In the year ended December 31, 2021, our personnel expenses increased R$154 million, primarily resulting from higher employee wages and ~~subsidiary, and~~salaries, deriving from the ~~associated hedging instruments, affecting~~collective bargaining agreement applied to the ~~“Gains (losses) on financial assets and liabilities (net)” line.~~
Company’s salary base from September 2021.
The following table ~~shows~~sets forth our personnel expenses for each of the periods indicated:
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Wages and salaries 6,311 5,905 5,730 6.9 3.1
Social security costs 1,431 1,153 1,222 24.1 (5.6 )
Benefits 1,603 1,435 1,390 11.7 3.2
Training 60 55 49 9.4 12.0
Other personnel expenses 492 478 480 2.9 (0.4 )
Total 9,896 9,026 8,871 9.6 1.7
Other administrative expenses increased R$52 million to R$8,343 million for the year ended December 31, 2022, from R$8,291 million for the year ended December 31, 2021, mainly as a result of greater expenses with property, fixtures and supplies and technology and systems, resulting from the inflationary pressures, which was partially offset by the decrease in expenses for advertising.
Other administrative expenses increased R$47 million to R$8,291 million for the year ended December 31, 2021, from R$8,243 million for the year ended December 31, 2020, mainly as a result of greater expenses with property, fixtures and supplies and technology and systems, resulting from the expansion of our business, which was partially offset by the decrease in expenses for communications.
The following table sets forth our other administrative expenses for each of the periods indicated:
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Specialized and technical services 2,229 2,184 2,171 2.1 0.6
Property, fixtures and supplies 896 889 744 0.8 19.5
Technology and systems 2,577 2,474 2,355 4.1 5.1
Advertising 541 621 654 (12.9 ) (5.0 )
Communications 422 353 649 19.5 (45.6 )
Per diems and travel expenses 73 72 69 1.6 2.6
Taxes other than income tax 149 202 280 (26.4 ) (27.7 )
Surveillance and cash courier services 549 598 595 (8.2 ) 0.5
Insurance premiums 22 22 17 (1.7 ) 31.6
Other administrative expenses 887 874 710 1.3 23.3
Total 8,343 8,291 8,243 0.7 0.6
The efficiency ratio, which we calculate as total administrative expenses divided by total income, ~~taxes~~increased to 27.4% in the year ended December 31, 2022, as compared to 27.1% for the year ended December 31, 2021. This increase of 0.35 p.p. in the ratio is primarily due to an increase in administrative expenses, resulting from the increase in inflation in the period, and the effect of a more selecting credit approval policy, which put pressure on our revenue.
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The efficiency ratio, which we calculate as total administrative expenses divided by total income, ~~taxes excluding~~decreased to 27.1% in the year ended December 31, 2021, as compared to 35.5% for the year ended December 31, 2020. This decrease of 8.4 p.p. in the ratio is primarily due to the effects of the hedge for investment held abroad and the growth in net interest income driven by the increase in the volume of the credit portfolio.
Depreciation and Amortization
Depreciation and amortization for the ~~periods indicated.~~year ended December 31, 2022, was R$2,586 million, a 6.2% or R$152 million increase from R$2,434 million for the year ended December 31, 2021, primarily due to greater expenses with the amortization of hardware and software items, resulting from investments made in this period.
For the year ended December 31, 2021, depreciation and amortization was R$2,434 million, a 5.6%, or R$145 million, decrease from R$2,579 million for the year ended December 31, 2020, primarily due to the decrease in expenses with the amortization of hardware and software, which was primarily due to the volume of assets not deployed or under development and the effect of write-offs.
Provisions (Net)
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$1,215 million for the year ended December 31, 2022, a 44.2%, or R$964 million, decrease compared to R$2,179 million for the year ended December 31, 2021. This was primarily due to a decrease in civil and labor proceedings due to a revision of our operational model and the creation of provisions related to legal proceedings brought by the Association of Retired Banespa Employees (Associação dos Funcionários Aposentados do Banco do Estado de São Paulo), or AFABESP, in which the classification of the risk of loss was maintained as probable in December 2022.
In the year ended December 31, 2021, provisions (net) totaled R$2,179 million for the year ended December 31, 2021, a 31.6%, or R$522 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.
Impairment Losses on Financial Assets (Net)
Impairment losses on financial assets (net) for the year ended December 31, 2022 were R$24,829 million, an R$7,716 million increase compared to R$17,113 million for the year ended. December 31, 2021, driven by the deterioration of macroeconomic conditions in Brazil and a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
Impairment losses on financial assets (net) for the year ended December 31, 2021 were R$17,113 million, an R$337 million decrease compared to R$17,450 million for the year ended December 31, 2020, primarily due to the 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 the potential effects of the COVID-19 pandemic.

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
Our credit risk exposure portfolio increased by R$27.5 billion to R$568.3 billion as of December 31, 2022 compared to R$540.8 billion as of December 31, 2021. Furthermore, our impaired assets increased R$12.3 billion from R$26.9 billion as of December 31, 2021 to R$39.2 billion for the year ended December 31, 2022.
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, Furthermore, our impaired assets increased R$3.7 billion from R$23.2 billion as of December 31, 2020 to R$26.9 billion for the year ended December 31, 2021.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio as of December 31, 2022 and December 31, 2021 and 2020.
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As of December 31,
2022 2021 2020
(in millions of R$, except percentages)
Loans and advances to customers, gross 524,655 493,355 417,822
Impaired assets 39,224 26,923 23,176
Provisions for impairment losses 35,212 29,723 25,640
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 568,338 540,873 466,104
Ratios
Impaired assets to credit risk exposure 6.9 % 5.0 % 5.0 %
Coverage ratio ⁽²⁾ 89.8 % 110.4 % 110.6 %
Impairment losses (24,829 ) (17,113 ) (17,450 )
Losses on other financial instruments not measured at fair value ⁽³⁾ —   —   —
Impairment losses on financial assets (net) ⁽⁴⁾ (24,829 ) (17,113 ) (17,450 )

*(1) ~~Income taxes excluding effects of the hedge for investment held abroad~~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$568,338 million as of December 31, 2022 and guarantees and documentary credits amounting to R$43,682 million as of December 31, 2022. 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.”
~~Results of Operations by Segment for the Years Ended December 31, 2019, 2018 and 2017~~
(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, 2022, 2021 and 2020, our total of impairment losses on financial instruments included R$1,173 million, R$1,191 million and R$1,577 million, respectively, relating to debt instruments.
The following ~~tables show~~chart shows our ~~results of operations for the years ended December 31, 2019, 2018 and 2017, for each of our operating segments.~~impaired assets to credit risk ratio from 2020 through 2022:

~~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
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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
~~2019 and 2018~~
Operating profit before tax attributed to the Commercial Banking segment for the year ended December 31, 2019 was R$18.4 billion, a 48.2% or R$6.0 billion increase from R$12.4 billion for the year ended December 31, 2018. This variation was mainly due to:
• an increase 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 million in net fee and commission income for the year ended December 31, 2019, compared to the year ended December 31, 2018, mainly due to (i) an increase in revenues from credit and debit cards, (ii) an increase in revenues from sale 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 being~~lower in the fiscal year ended December 31, 2018 than in the fiscal year ended December 31, 2017; and~~
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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 profit before taxes would have been R$19.6 billion, 7.5% 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$12.0 billion. Operating profit before taxes excluding the hedge of investments held abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
Global Wholesale Banking
Santander Corporate & Investment Banking, or SCIB, is the global business unit that serves customers who, due to their size and complexity, require tailored services or high-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customer portfolio comprises a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness, and financial institutions. Our customers in the SCIB segment benefit from the Santander Group’s global structure of services, which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and integrated services.
For the Year Ended December 31,
2019 2018 2017 % Change 2019/2018
%
Change 2018/2017
(in millions of R$, 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
Our Portfolio of Products and Services
Payments
Credit and Debit Cards
We operate in the credit and debit card market by issuing cards to our customers (including both account and non-account holders), with most customers being individuals. Our strategy is to always offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
In 2022, we sought to revisit the value proposition of our high-income cards (Unique and Unlimited) to offer our customers more attractive benefits, as well as easier ways to receive fee exemptions and to improve the products’ standing in the market. Moreover, we implemented a loyalty points program in our co-branded “American Airlines” card, which we believe contributed to an increase in issuances of co-branded American Airlines cards by 140% in the year ended December 31, 2022 compared to the year ended December 31, 2021 We have also been marketing the exclusive Santander American Express Centurion card to our private banking customers, including by hosting a special event for 200 prospective and current holders of this card.
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To attract new customers, we launched several campaigns with different competitive offers, such as: (i) one-day campaigns to generate a sense of urgency regarding our service offerings; (ii) specific campaigns for the sale of co-branded American Airlines and Smiles cards; and (iii) a campaign that allowed some customers to try out a card at no cost for a specified period, with accelerated benefits.
Given that Brazilian customers have, in general, more than two cards with different banks, we bet on monetization promotions to encourage our customers to concentrate their expenses on Santander Brasil cards, including: (i) three editions of the “Bateu Ganhou” campaign, which set monthly spending goals for customers and rewarded them with bonus points, miles, or cashback; (ii) the “Desafio Santander” campaign, which set five challenges for customers to retain and increase profitability (e.g., signing onto additional cards, online card purchases, upgrades and open finance measures) in exchange for cashback rewards; (iii) the thematic “Sorte de Craque” campaign in connection with the 2022 World Cup held in Qatar, in which for every R$100 in purchases on a credit card, the customer entered a lottery for a trip to Qatar; and (iv) an edition of the “Sua Casa tá ON” campaign, which encouraged recurring payments using virtual cards with a dynamic security code to improve safety.
Regarding our ESG efforts, we issued over six million recycled PVC cards in the year ended December 31, 2022, contributing to our goal of attaining net zero greenhouse gas emissions by 2050.
In the SME segment, we believe it is essential for businesses to have greater autonomy and flexibility in handling issues that can affect their daily operations, such as cash flow management. Accordingly, we continued to develop our digital platform to provide: (i) autonomy to companies in managing their credit lines and contracts; and (ii) the ability for customers to leave their branch with a card immediately after signing up. We have also integrated additional card-related information, including available limits, bar codes, invoice amounts, and optimal purchase dates, on our AI-powered virtual assistant, Gent&.
With a focus on enhancing the customer experience, we enabled direct registration of Santander Brasil apps on Samsung Pay in March 2022 and on Apple Pay in November 2022. Our customers can now register their Santander Brasil cards on these digital wallets and easily conduct transactions via NFC (near field communication) technology using their mobile devices, providing a convenient and seamless experience.
The following table sets forth certain key financial and operating data regarding our credit card business as of the dates and for the periods indicated.
As of and For the Year Ended December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Credit card portfolio market share (1) 10.5 % 12.4 % 13.4 % (1.9 p.p.) �� (1.0 p.p.)
Credit card portfolio (R$ billion) 50.5 48 37.8 5.2 27.0
Total card turnover (R$ billion) 338.1 306.0 242.0 10.5 26.4
Credit card turnover (R$ billion) 226.5 203 158.7 11.6 27.9
Total card transactions (in millions) 4,362.5 3,555.3 2,570.8 22.7 38.3
Credit card transactions (in millions) 2,344.5 1,859.1 1,300.0 26.1 43.0
Participation of credit card in the household consumption (only debit) – Market overview (2) (%) 16.2 % 17.5 % 17.4 % (1.3 p.p.) 0.1 p.p.
Participation of credit card in the household consumption (only credit) – Market overview (2) (%) 34.1 % 30.6 % 25.2 % 3.5 p.p. 5.4 p.p.
Participation of credit card in the household consumption (total: debit, credit and pre-paid) – Market overview (2) (%) 53.8 % 50.3 % 43.5 % 3.5 p.p. 6.8 p.p.
(1) Source: Brazilian Central Bank, as of September 30, 2022. Data for the year ended December 31, 2022 was not available as of the date of this annual report.
(2) Source ABECS – “Monitor bandeiras.” as of September 30, 2022. Data for the year ended December 31, 2022 was not available as of the date of this annual report.

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Santander Way
Santander Way is an app designed for our cardholders, which allows them to manage their Santander Brasil cards from anywhere, at any time. The card management experience, provided by this platform includes the ability to make payments, transfer funds, add cards to digital wallets, and participate in campaigns, among other features. We seek to update the app regularly with new features. In 2022, we introduced notable enhancements, such as: (i) the "Credit Limit Game," which enables customers to increase their credit limits in a simple and easy way through day-to-day actions; and (ii) digital wallet integration, allowing customers to add their Santander cards to Samsung Pay or Apple Pay via push provisioning.
Esfera
Our loyalty program, Esfera, is accessible through its own website and mobile app. This platform, which is open for enrollment to any person in Brazil, provides customers with the opportunity to earn, purchase and redeem reward points for a variety of ~~Contents~~products, services, and travel benefits, including exclusive deals and discounts with Brazilian retailers and other select partners. As of the date of this annual report, Esfera also operated a marketplace that featured cashback rewards on product purchases from over 60 participating partners.
Ben
Ben is a corporate benefits company that works to enhance the flexibility, purchasing power, and quality of life of its users by designing, supplying, and managing multiple types of employee benefit vouchers (e.g., meal, food, and transportation vouchers) in the form of magnetic cards. These benefits are offered via an integrated digital platform.
Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.
Ben is currently working on the development of new products, such as fuel cards and other benefit options to expand its portfolio.
Furthermore, Ben recently added Ben Único to its portfolio. This solution offers two types of benefits on a single card, thus lowering card issuance and logistics costs, while contributing to our ESG efforts by reducing the number of cards in circulation. In line with its new product development plan, Ben applied to the Brazilian Central Bank for a license to operate as a payment institution (instituição de pagamento), which was granted in December 2021.
The following table sets forth certain key financial and operating data regarding Ben’s business as of the dates and for the periods indicated.
As of and For the Year Ended December 31,
2022 2021 2020
(in R$ millions, except as otherwise indicated)
Revenue from card sales 2,456 1,484 946
Number of Cards (in thousands) 831 565 217
Number of Transactions (in thousands) 30,442 20,477 12,192
Merchant accredited (in thousands) 399 365 338
For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
Payroll Loans
We offer payroll loans to both account and non-account holders. Repayment installments are deducted on a monthly basis directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, thereby significantly reducing our credit risk compared to other types of loans. These payroll loans are accessible to our customers via our mobile banking platform and 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 Banco Olé. For further information on relevant events relating to Banco Olé, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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~~2019~~
The following table sets forth certain key financial and ~~2018~~operating data regarding our payroll loans as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Market share in origination (1) 17.09 % 15.33 % 16.68 % 1.76 p.p. (1.35) p.p.
Payroll loan portfolio (R$ billion) 59.4 53.2 47.9 11.7 % 11.1 %
(1)       Source: Brazilian Central Bank, as of December 31, 2022, 2021 and 2020, as applicable.

Sim
SIM is a digital lending platform accessible to the general public, where customers can apply and receive approval for loans online. After operating for three years, SIM and +Vezes, a goods and services financing platform for retailers, merged to reinforce their value proposition and offer two business lines: (i) Sim-CP, which provides personal loans with or without collateral, and (ii) Sim-Consumer, which operates in direct consumer financing.
On a combined basis, these two Sim platforms have a total loan portfolio of approximately R$6 billion, more than nine million registered users and a high level of customer satisfaction, with an NPS of 84 points as of December 31, 2022 . Sim also benefits from a specialized sales force with a commercial team of approximately 500 people across Brazil and significant capillarity across to offer its products, with more than 30,000 points of sale offering Sim’s products as of December 31, 2022.
In March 2022, we launched “Pioneer,” a new financing software that enables better customization, flexibility and management of the sales process. As of December 31, 2022, nearly 80% of stores using our consumer finance software had taken advantage of the tool’s functionalities.
We also launched three projects focusing on collateralized loans: (i) offering car equity loans directly at the point of sale, in partnership with Santander Financiamentos, making Sim’s car equity loan available at more than 20,000 car dealers across Brazil as of December 31, 2022; (ii) FGTS Annual Withdrawal Advance (Antecipação do Saque Aniversário FGTS), which advances funds owed to customers as part of their annual, scheduled FGTS payouts, and (iii) finally, at the end of 2022, we released Energia+, an e-commerce platform that allows customers to simulate and apply for residential or commercial solar energy projects using a fully digital process that streamlines the purchase process.
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. In 2022, emDia joined forces with Liderança, a collections call center that we acquired in the second half of 2021, to become a full-service collections solution for its customers, with both call center and digital solutions. In the year ended December 31, 2022, emDia and Liderança had combined revenues of R$211 million.
Return Capital
Return is a specialized written-off collections master servicing company. It provides IT platform, data science, legal and financial advisory, marketing intelligence and back-office services to its customers, which are mostly credit rights investment funds (fundos de investimento em direitos creditórios), or “FIDCs,” such as FIDC Ipanema (a wholly owned Santander fund specialized in buying written-off portfolios).
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Mortgages
We provide long-term financing to our customers for real estate purchases, with the real estate serving as collateral for the loan. We view mortgages as a strategic product due to their lower risk (since the acquired property serves as collateral) and potential to foster customer loyalty (since we offer customers more attractive rates if they choose to bank with us). Our primary customers, as well as those of our competitors, are predominantly individuals.
We only provide mortgage loans that adhere to prime lending regulatory standards for this type of loan. This means that: (i) we limit the financing to a maximum of 90% of the value of the property to be purchased, (ii) the borrower’s monthly income must meet certain minimum requirements, as evidenced by recent payroll information and tax returns confirming their employment status or other revenue sources, thereby allowing us to assess their credit risk profile, and (iii) any other debt added to the financing cannot exceed 35% of the borrower’s monthly gross income.
To simplify the mortgage lending process for our customers, we have developed a digital platform for real estate financing. We were the first bank in Brazil to offer customers the ability to obtain mortgages online, except for the signing and registration of the agreement, which must be done in person. We have established a partnership with the largest real estate platform in Brazil to expand our sales network and bolster our digital presence in this market.
The following table sets forth certain key financial and operating data regarding our mortgage business as of the dates indicated:
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
(in billions of R$, except as otherwise indicated)
Mortgage loan portfolio 58.3 54.8 45.8 6.4 % 19.7 %
Individual sector mortgage loans 56.3 53.0 44.0 6.2 % 20.5 %
Loan to value(1) – Production (% quarterly average) 60.8 % 65.5 % 64.9 % (4.7) p.p. 0.60 p.p.
Loan to value – Portfolio (%) 50.1 % 52.5 % 52.2 % (2.4) p.p. 0.30 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. We are the main private bank for this type of loan in Brazil, with a market share of 22.4% as of December 31, 2022, according to the Brazilian Association of Real Estate Credit and Savings Entities (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança). Our portfolio was R$3.9 billion as of December 31, 2022, an increase of 20% compared to our portfolio as of December 31, 2021. In the year ended December 31, 2022, we remained focused on improving the customer journey and experience, and achieved a 40% reduction in lead time to grant home equity loans (from 24 working days to 14 working days).
We do not offer home equity loans that do not meet the applicable 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.
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Tailored Products and Services
As stated above, our customers have access to a full range of services and products. Thus, our portfolio encompasses offerings from basic to tailor-made and highly intricate solutions across the following areas:
· Global Transaction Banking – responsible for the sale and management of local transactional banking products, which include local loans, commercial financing options such as confirming, transfers with funds from development banks, local loan structuring, and cash management solutions (cash management).
· Global Transactional Services – responsible for the sale of global transactional products, financing for export and import (trade finance), guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
· Global Debt Financing – responsible for providing financing and financial advisory services for infrastructure projects, origination, and distribution of fixed income instruments in capital markets (local and international debt capital markets), financing for acquisitions, and syndicated loans in both local and foreign currency.
· Investment Banking – advisory services for mergers and acquisitions, as well as equity transactions in capital markets.
· Equities – this area operates brokerage services for corporate, institutional and individual investors in stocks and listed derivatives, and also offers research services.
· Treasury Customers (Sales) – responsible for structuring and offering foreign exchange products, derivatives and investments to customers across our various segments, including institutional investors, corporate customers and individuals.
· Market Making – responsible for pricing operations (foreign exchange and derivatives) for customers originated from the sales efforts of our corporate, institutional, private banking and retail areas. This area is also responsible for managing our proprietary books.
· Energy Trading – performs transactions with both qualified and end customers, in addition to acting as a hedge and market making provider in energy markets
We are a leading bank in capital markets and financial advisory services, both in Brazil and abroad, as evidenced by the numerous awards we have received. A few of our most notable accolades are listed in the table below.
Company
Acknowledgments
Dealogic
Full Year 2022
#7 Latin America M&A Revenue by Advisor
#7 Brazil M&A Revenue by Advisor
#3 Latin America & Caribbean DCM Volume by Bookrunner
#4 Latin America & Caribbean International DCM Volume by Bookrunner
#3 Latin America Domestic DCM Volume by Bookrunner
#7 Latin America and Caribbean Loans Volume by Bookrunner
#7 Latin America and Caribbean IB Revenue by Bank
#8 Brazil IB Revenue by Bank
Global Finance Best New Measures to Support Trade Finance Customers during Pandemic 2021
Best Supply Chain Finance Bank Global 2021
Best Post-Shipment Financing Solution 2021
Best Bank for Payments & Collections Award 2022
Best Provider of Short-Term Investments Money 2021
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Institutional Investors
Full Year 2022
#1 Best Analyst in the ESG Research LatAm
#3 Best ESG Team Research LatAm
# Top 3 in Brazil II for Sales, Trading and Corporate Access
FX Markets
Best Bank for USD/BRL (2nd consecutive year)
Best Bank for LatAm (4th consecutive year)
Latin Finance
Bank of the Year: Southern Cone 2021
Brazilian Central Bank
#1 Total FX September 2022
The Banker Best Transaction Bank for Latam 2021
Global Capital #1 Most Impressive Local Bank for Latin America Bonds 2022
Infralogic 2022
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#2 Latin America Bond Arrangers by value
#1 Latin America Financial Advisors by deal count
#1 Latin America Loan Providers by value
#1 Latin America Loan Arrangers by value
#1 Latin America Financial Advisors by deal count – Project Finance
#1 Latin America Loan Providers by value – Project Finance
#2 Latin America Bond Arrangers by value  – Project Finance
#3 Latin America Financial Advisors by deal count – M&A
#1 Latin America Financial Advisory by deal count – DCM
#2 Latin America Loan Providers by value – DCM
#2 Latin America Loan Arrangers by value – DCM
#3 Latin America Bond Arrangers by value – DCM
#1 Latin America Financial Advisors by deal count – Project Finance
#2 Latin America Loan Providers by value – Project Finance
#3 Latin America Bond Arrangers by value – Project Finance
#9 Latin America Loan Arrangers by value – M&A
#2 Latin America Financial Advisors by deal count – M&A
Customer Solutions
Agribusiness
Agribusiness remains one of our main levers of growth, and we are focused on developing our agribusiness solutions, both by covering geographical areas where we did not previously operate, and by investing in technology and people.
As of December 31, 2022, our agribusiness portfolio (including credit, securities and other products) amounted to R$37.5 billion. Since 2015 our portfolio has risen by an average of 30% per year. As a result of this strategy, our portfolio in the agribusiness sector increased significantly so that by 2020 we believe we had already established ourselves as a leading bank in the agribusiness sector. In addition, in 2021, we launched a new commercial strategy in the agribusiness sector whereby we aimed to offer our agribusiness products across all of the regions of Brazil. As a result, since we were able to grow our agribusiness portfolio by 84% from December 31, 2020 to December 31, 2022.
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We plan to continue to build our agribusiness portfolio with a wide array of solutions along the entire agribusiness supply chain, from support in financing equipment to extending credit to agricultural producers. In addition, our ecosystem is complemented by Gira, which is specialized in the management of agribusiness receivables.
The following table sets forth certain key financial and operating data regarding our agribusiness as of the dates indicated.

As of
December 31,
Change between 2021 and 2022
Change between 2020 and 2021

2022
2021
2020
(in billions of R$, except percentages)
Agribusiness portfolio (1) 37.5 27.3 20.4 37.4% 33.8%
(1)       Including credit, securities and other products.
Microfinance
We believe Prospera Santander Microfinance is a leading microcredit-oriented operation among private-sector banks in Brazil based on market share and portfolio value. Prospera Santander Microfinance’s mission is to offer credit alternatives, alongside financial guidance to micro and small entrepreneurs through a fully digitalized process, enabling them to grow their businesses. In doing so, we not only support these entrepreneurs, but also endeavor to contribute to the development of local communities and to job creation. In addition to providing microcredit solutions, we offer basic banking services, notably to our unbanked clients, such as current accounts, debit cards, savings accounts, and point-of-sale terminals, for those who require other payment options. The following table sets forth certain key financial and operating data regarding our microfinance business as of the dates indicated.
As of December 31,
2022 2021 2020 Change between 2021 and 2022 Change between 2020 and 2021
Number of Prospera Microfinance stores 142 119 99 19.3 % (20.0 %)
Microfinance loan portfolio (R$ billion) 2.7 1.9 1.3 38.3 % 49.2 %
Santander Insurance Ecosystem
We offer our insurance products through Santander Corretora de Seguros, helpS, Auto Compara and Santander Auto. Our insurance business as a whole generated premiums of R$10.8 billion in the year ended December 31, 2022.
Insurance
Santander Corretora de Seguros is one of the largest insurance brokers in the Brazilian market, according to SUSEP’s report for the year ended December 31, 2022, offering a full range of products, particularly in the retail segment. Our goal is to build a comprehensive insurance ecosystem for our customers, providing them with all-encompassing solutions to support their daily activities. Our insurance portfolio includes a broad range of life and personal accident insurance, vehicle and property insurance, credit insurance, and travel insurance products. These insurance products are sold through our website, mobile app, branches, call center, ATMs, and bank correspondents.
We totaled R$9.5 billion in earned premiums for the year ended December 31, 2022, representing increases of 1% from the year ended December 31, 2021 and 33% relative to the year ended December 31, 2020. According to SUSEP’s report for the year ended December 31, 2022, we are one of the market leaders in personal insurance (which includes life, personal accident, and credit insurance), with a 13% share of premiums in 2022. 64% of credit originations eligible for insurance in the year ended December 31, 2022.
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Our main objective in this area is to continuously innovate and tailor our insurance solutions to address the needs of our customers, ensuring a seamless experience from purchase to renewal, and especially in the usage of insurance when needed. Furthermore, we are increasingly focused on utilizing data to offer personalized experiences and simplify our value proposition, with optimized customer support across our various service channels. We believe this makes our insurance policies more appealing to potential customers.
helpS
helpS is a personal assistance service that offers solutions for different types of 24/7 emergencies in the home, automobile, pets, tech, game and bicycle segments. It is available to all Santander Brasil customers as an optional monthly subscription starting at R$19.90 per month. Officially launched in May 2022, Santander helpS sold thereabout 40,000 subscriptions exclusively through the Santander app by the end of 2022. In 2023 Santander helpS plans to expand its offering across our entire branch network.
Auto Compara
Auto Compara is our digital auto insurance marketplace in Brazil, and we believe it is the first to provide Brazilian customers with the ability to quote and purchase insurance coverage through an entirely online process. We believe this platform allowed us to expand our customer base by attracting non-Santander Brasil customers, resulting in over R$924 million in new insurance premiums for the year ended December 31, 2022. We currently offer products from seven insurance companies.
Santander Auto
Launched in 2019, Santander Auto is a fully digital auto insurance solution that uses big data analytics to determine pricing and utilizes a one-click buy approach, integrated with car financing options.
The Brazilian insurance market is characterized by: (i) low insurance penetration relative to its GDP; (ii) lagging technological advancement and dominated by companies with low innovation rates that prioritize financial results (due to a history of high interest rates); and (iii) retail brokers serving as the primary distribution channel. As a result, the purchasing process still generally requires customers to fill out a lengthy questionnaire (approximately 40 questions). Consequently, only approximately 20% of Brazilian vehicles were insured as of December 31, 2022.
Using actuarial techniques and behavioral models, Santander Auto can provide insurance quotes without requesting extra information from customers. This is made possible by utilizing data that is already available to us. In its inaugural year of operation in 2019, nearly 110 thousand policies were sold, representing a product penetration rate of 16% (i.e., the total number of insurance contracts sold as a proportion of all loan contracts signed by Santander Financiamentos).
In 2020 and 2021, we focused on strengthening our insurance offerings by making sure they were available for all customer types and types of vehicles. We sought to grow the business by leveraging our ecosystem and reaching more of our customer base. This strategy helped us increase our product penetration rate, which reached 20% in the year ended December 31, 2021, along with a 80% increase in the number of policies sold compared to the year ended December 31, 2020. In the year ended December 31, 2022, Santander Auto started offering insurance to non-financed vehicles and achieved a product penetration rate of 30% in the year ended December 31, 2022, recording a 16.3% increase in the number of policies sold compared to the prior year.
Webmotors
Webmotors is a Brazilian technology company specializing in car buying and selling solutions for dealers, original equipment manufacturers, as well as private sellers. Moreover, it is the largest automotive ecosystem platform in Brazil, according SimilarWeb.
According to Adobe Analytics, Webmotors received an average of more than 30 million visits each month in 2022. It also recorded 7.9 million unique visitors in 2022, as reported by ComScore. Through Cockpit, a platform that integrates offerings for the entire network outlined above, we provide the following solutions: business management/performance, buyer profile (CRM), data intelligence, predictive pricing models, and market data (Auto Insights).
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Webmotors aims to be a platform that accompanies individual and business customers throughout the lifecycle of their vehicles, from purchase to use and sale. To achieve this goal, Webmotors recently restructured its subsidiary, Loop, which was a traditional auctioning business, into an omni-channel dealer, which we believe has the potential to deliver a higher sales value for demobilized fleets in both its digital and physical stores. Additionally, Webmotors introduced "Agenda Fácil," a product that allows customers to schedule services via WhatsApp.
Solution4Fleet
In 2021, we acquired Solution4Fleet, a consultancy company that offers solutions for car rental companies. Solution4Fleet offers solutions for the entire ecosystem of a (light or heavy) vehicle rental company, including green and yellow lines (i.e. trucks, buses and agricultural machinery), including services such as pricing and sales management, fleet management, telemetry, purchase and sale of vehicles, financial services for rental companies, as well as its own vehicle management system for rental companies, among other services.
We believe that Solution4Fleet offers the most complete ecosystem for fleet management and leasing operations in the Brazilian market. In the year ended December 31, 2022, the vehicle fleet managed using Solution4Fleet’s products increased by 83% compared to the year ended December 31, 2021, while the average ticket per vehicle grew by 88.2%.
Solution4Fleet has focused on diversification by prospecting smaller car rental companies and special projects for large automakers. In addition, Solution4Fleet continues to invest in technology to improve user experience.
+Negócios | 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 2022, +Negócios went through a technological transformation with the “Pioneer” project and became “+Negócios Turbo.” The main goals of this project are the improvement and modernization of the systems architecture to simplify user experience (with the reuse of internal data), the tailoring of offers with a new price platform and greater security through facial biometrics.
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.
In 2022, +Fidelidade was also updated and improved to become “+Fidelidade Turbo,” a loyalty program with the objective of offering incentives to banking correspondents in their relationship with our ecosystem. The improvements were launched to simplify, facilitate and ensure greater timeliness in dealing with these agents. The “turbo” version has technological resources that bring the gaming aspect of the program to the platform.
We also offer “+Fidelidade Vendedor,” a program which grants rewards and bonuses accordingly to the seller’s level of adhesion to our products, (i.e., based on the percentage of sellers’ revenue generated by our products and services). In 2021, this program was launched for the automotive store segment, then to dealerships, and then to goods and services segments. In 2022, it was extended to the motorcycle store segment. It had an average of 35,000 registered sellers during 2022.
The former “+Vezes” program, a goods and services financing platform, was upgraded to “+Vezes Turbo” by introducing changes to the user experience geared towards simplification of use, data reutilization, hyper-segmentation of offers and improved security patterns with facial biometrics processes. “+Vezes Turbo” is operational and was deployed to over 10,000 partner retailers during the second semester of 2022.
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As part of our consumer finance strategy, our goods and services financing business (i.e., “ +Vezes”) was integrated with SIM, a fintech created in 2019 that offers personal loans to the open market on a digital lending platform. See “—Our Portfolio of Products and Services—SIM.” With this integration, SIM became a full-service consumer financing business which we believe has bolstered the value proposition of both businesses.
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 customers pay and receive 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, in 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 offering 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, and 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 applicable 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.
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· Follow-up – Our advisory team performs a thorough and frequent review of our customers’ 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.
AAA
In June 2022 we launched AAA, a new investment advisory services model that had enrolled 592 advisors across 41 Brazilian cities as of December 31, 2022. AAA offers a comprehensive product portfolio, coupled with an advanced digital experience and specialized guidance to bolster our investment advisory services offering. AAA provides an exclusive investment advisory service to high-income clients. In order to incentivize our AAA investment advisors, their compensation includes a significant variable component reflecting the results they produce for our clients.
Toro
Toro is an investment platform licensed to operate in Brazil that offers what we believe to be a leading user experience, highly qualified advisors, and an integrated journey from education to execution. We believe that Toro was the first fintech in Brazil to open a full-service broker with proprietary technology, which allowed it to achieve a new level of customer experience and infrastructure for real end-to-end agile development. Toro’s current product offering includes an open platform of equities, real estate investment trusts, exchange-traded funds, global stocks (offered through Brazilian depositary receipts), fixed income notes, bonds, mutual funds, and derivatives. Toro also offers an ecosystem of financial apps, including a budgeting and financial consolidation app and a marketplace for related financial products.
SX Integra
SX Integra is our new supply chain finance digital platform. This channel was launched in September 2022 to provide financial services for companies based on their receivables. Both the supplier (i.e. the company supplying goods to other companies) and the buyer (i.e. the company receiving the goods and delivering payment) are customers of SX Integra. The supplier advances the receivables at no risk and does not have to be an accountholder of ours. Buyers, which are primarily large corporations that must be accountholders of ours, incur the risks of the transaction and are responsible for paying invoices.
The following table sets forth certain key financial and operating data regarding SX as of the dates indicated
As of
December 31, 2022(1)
Main SX Integra indicators:
Number of active buyers (2) 1,014
Number of active suppliers (3) 6,619
(1) SX Integra began operating on September 1, 2022. The figures presented refer to December 31, 2022.
(2) We define an active buyer as a company that has signed an agreement with us and has a credit limit that enables it to incur the risk of the advance as of December 31, 2022.
(3) We define active suppliers as suppliers that performed at least one anticipation of receivables with SX Integra in the 60 days preceding December 31, 2022.
Programa Avançar
We also have a nonfinancial 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.
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In addition, we offer a digital account solution where corporate and 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) remote channels, such as call centers; (iii) external channels, consisting of bank correspondents and other third parties who sell our products and services; and (iv)digital channels, such as internet banking and mobile banking.
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,
2022 2021 2020
(%)
Internet banking 21.7 27.7 37.8
ATMs 2.4 3.6 5.9
Mobile (1) 73.6 62.3 46.9
Branch 0.6 1.1 2.2
IVR (2) 0.8 4.6 6.4
Call Center 0.9 0.7 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.
Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network, all of which is located in Brazil, as of the dates indicated.
As of December 31,
2022 2021 2020
Branches 1,701 1,987 2,153
Mini-branches 1,266 1,384 1,411
Own ATMs 11,527 12,561 12,949
Shared ATMs 24,374 24,255 23,798
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,
2022 2021 2020
Northeast 9.99 % 9.74 % 9 %
North and Midwest 8.94 % 8.42 % 7 %
Southeast 66.20 % 67.31 % 70 %
South 14.87 % 14.53 % 14 %
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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.
ATMs
We operate an extensive network of 11,527 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 24,374 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, and online messaging apps available to all our customers. In the year ended December 31, 2022, we received 10.3 million inquiries per month with 50% of these being outside regular business hours.
We also improved our efficiency and increased our first call resolution from 81% as of January 31, 2021 to 95% as of December 31, 2022. In the last two years, we have sought to transform the channel by focusing on solving customer needs and seizing these contacts as opportunities to offer additional products and services to our customers. In the year ended December 31, 2022, we made an average of 700,000 sales and services per month on this channel.
External Channel
Our external channel consists of third-party salespersons and banking correspondents that market our products and services beyond our branches and ATMs. In the year ended December 31, 2022, we increased the footprint of our external channel in the Brazilian market by adding an additional 9,620 points-of-sale to our portfolio for a total number of 15,647 points-of-sale covering 44% of all municipalities in Brazil as of December 31, 2022, and by extending more than R$18 billion in credit in the year ended December 31, 2022. In addition, in 2022, we launched our new store model, “Santander Perto”, to put us closer and improve our visibility and availability to our customers. We also launched our external sales force website in the second half of 2022, which has generated 50,000 business deals per month since its inception.
Digital Channels
We have sought to develop our digital solutions to meet the needs of our consumers and, in 2022, we were able to achieve milestones, offering personalized insights, improve our artificial intelligence, or “AI,” services and transform our digital experience. Our digital platforms, such as mobile and internet banking, reached over 71% of our customers as of December 31, 2022, which makes them our primary channel to connect with our customers. We note the following with respect to our progress in this channel in the year ended December 31, 2022:
· We improved our digitization by 11% compared to the year ended December 31, 2021 in terms of customers reached and began selling new products over our digital channel, such as transaction insurance, personal insurance (personal injury, life and property), consortium plans, HelpS services, Divide PIX (personal loans for instant transactions), and FGTS Personal Credit (Crédito Pessoal FGTS), or “CP FGTS,” which advances personal loans on severance payouts customers may be owed as part of the FGTS program.
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· In the month of December 2022, our main mobile app for individual accounts reached a total of 462 million accesses, a 34% increase compared to the month of December 2021, while our website reached over 68 million accesses, a 21% increase also compared to the previous year. We also launched an embedded blog with specialized consumer content that reached over 3.3 million views in 2022 (without relying on paid marketing activities specifically for this purpose) and which we believe will be a new tool for lead generation and financial education.
· Despite a difficult year from a macroeconomic perspective and with greater restrictions on credit, we closed approximately 45 million contracts through our digital platforms during the year ended December 31, 2022, a 17% increase compared with the year ended December 31,2021, which growth was driven by an assertive product and service promotion strategy and improvement in the sales of our main products.
· We launched our “Investment Portal” in August 2022, which reached approximately 2.9 million users in the month of September 2022. Through our Investment Portal, our investor client has access, in addition to their consolidated investment position, to guidance and recommendations with video and podcast tools embedded in the app.
· We recorded a 16% increase in digital-only accounts for individuals as of December 31, 2022 compared to December 31, 2021. We also had a 46% decrease in cost per acquisition of lead, or “CPA,” in the year ended December 31, 2022 compared to the year ended December 31, 2021. We believe that this improvement is linked to a better customer experience in the account opening process, automated anti-fraud processes and our efforts to improve customer experience.
· In the year ended December 31, 2022, we opened over 282,000 new corporate accounts, a 75% increase compared to the year ended December 31, 2021 and a 33% reduction in the CPA. We also recorded an increase of 10 p.p. in the number of new corporate accounts approved in the year ended December 31, 2022 compared to the year ended December 31, 2021, which was primarily due to an optimized accounts opening process for existing individual account holders, an automated approval engine for SMEs and processes permitting multiple corporate accounts for multiple partners. We believe that this final improvement accounted for approximately 50% of all of our new corporate accounts and ensured that 100% of SME accounts were opened through this channel in the year ended December 31, 2022.
· 61% of Santander Brasil’s credit card sales were completed through our digital channels in the month of December 2022. We have taken actions to improve our acquisition numbers by implementing new forms of authentication and prioritizing seasonal commercial campaigns to attract new customers, which resulted in a growth of 9 p.p. increase in the mobile app conversion rate (i.e., the rate of customers who accessed the first screen of the credit card contracting flow in the mobile app and actually signed up for the credit card through the app) in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent& is our AI solution for individuals and businesses in digital platforms, such as our mobile app, internet banking and through WhatsApp.
· We began 2022 with 54 services, which were deployed between 2020 and 2021, and offered a total of 153 services through Gent& by December 31, 2022. We recorded a 43% decrease in customer service calls relating to these services in the year ended December 31, 2022 compared to the year ended December 31, 2021. Gent&’s NPS was twelve points above that of our other channels in the year ended December 31, 2022. We offer through Gent& transactional services such as personal loan offerings, debt renegotiation, and credit limit increases and decreases (which is offered exclusively on Gent&). We also offer advisory services that include credit card holds, reissues and delivery tracking.
The following table provides certain key operating information regarding our digital channels as of the dates indicated:

For the Year Ended December 31,

2022
2021
2020
(in millions)
Number of digital customers (1) 20.4 18.3 15.6
Number of digital transactions (2) 9,813 7,482 5,262

(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 prior to the end of the applicable year.
(2) Refers to transactions carried out through internet banking, mobile banking and other digital platforms. Data refer to the year ended December 31.
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Technology and Infrastructure
In 2022, we sought to ensure greater integration between our business and technology, and to use the latter as a strategic lever to support the expansion of digital and personalized products and services through available, secure and integrated sales channels. Our objective was to significantly improve our customers’ experience by streamlining and enhancing self-service and customer service channels. Moreover, as part of our digital acceleration strategy as a result of the COVID-19 pandemic, we sought to make technology a key factor in leveraging multichannel distribution and business growth by using data to make strategic decisions at the executive leadership level.
To facilitate this role, our IT department focused on the transformation of its operating model through four strategies:
· Improved Alignment between Business and Technology: development of technology solutions guided by a business mindset, placing the customer at the center of the strategy and ensuring that more business representatives are involved in development teams activities.
· Innovative Architecture and Robust Engineering: investment in new technologies (open banking, digital assets, smart contracts, AI, digital currencies), data framework transformation, an increase in cloud development and the reuse of architectural components to ensure greater efficiency and speed combined with cost reduction.
· Improved Infrastructure and Production: significant advances in the hybrid public/private cloud model (with 91% of total operations processed in the cloud in the year ended December 31, 2022), the growth of automation in production (AIOps) and deployment pipeline (DevSecOps), investments in reliability engineering (telemetry) and the reduction of technological obsolescence.
· Improved Delivery: expansion and maturation of our agile software delivery model through an increase in the number of development teams (with over 460 agile squads), in addition to refinements in productivity metrics facilitating more efficient and transparent management processes.
· These efforts in the technology domain were necessary to ensure the standards of, security in and the growth of our operations in light of our increased digital customer base as we reached 20.4 million digital customers as of December 31, 2022 (an 11% increase as compared to December 31, 2021), and of increased demand for digital products and services as we recorded an average of 541 million monthly accesses in our digital channels in the year ended December 31, 2022. Additional initiatives carried out in 2022 include the following:
· Investments: We launched a new investments portal that can be accessed by mobile or internet banking. This new portal offers our current investment products and services. Our customers are granted access to market analysis content in various formats (e.g., videos, articles, podcasts) in order to make better investment decisions. In addition, they receive portfolio allocation recommendations based on the macroeconomic context, their risk appetite and liquidity. Furthermore, significant improvements in the user interface allow our customers to manage their investments, obtain market information, find solutions for their needs and monitor their investments more intuitively, therefore offering a better digital experience.
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· Individual Bank Account (Mobile): We have improved the digital experience we offer to our customers with several improvements to existing journeys, together with the inclusion of new functions. We have sought to simplify the digital interface for several products and services, including by improving the registration of facial biometrics, access to our virtual AI assistant (Gent&), personal information updates and digital tools relating to investments in funds managed or offered by Santander Brasil. We have also simplified the customer experience for loans by reducing the number of steps required for contracting. In addition, we have provided more flexibility for payments by introducing a new option to break the total value of instant payments (PIX) into up to 24 installments.
· Corporate Bank Account (Mobile): We have added new features to our mobile application, allowing our corporate customers to manage their businesses with more agility and strategy. We have extended the statement checking period up to 365 days and also included a new option on Santander On to update the company’s annual billing, in order to enable better credit solutions for our customers. Moreover, we have sought to improve the user interface by simplifying the visualization of the functionalities in the menu, ensuring a better experience for browsing and using the application, along with the addition of facial biometrics.
· Credit Cards: We further expanded our digital services in order to provide more efficiency and transparency in the management of card expenses for our customers. In our mobile application for cards, we have added a new option to check payments history for past invoices, along with a tool to check and manage active credit card installments. In addition, a new feature was included allowing our customers to view disputed purchases for fraud or trade disagreement. Regarding card loss or theft, we have provided our customers a new option to choose a location to pick up the reissued card. Finally, we increased flexibility by enabling the use of instant payment (PIX) to settle credit card invoices and now permit users to register their Visa/Mastercard cards on Apple and Samsung digital wallets.
· Customer Service: Through our “Bank to Go” initiative, we have sought to transform customer service in our branches. We provided tablets to account managers so they can assist customers with account openings and product sales, which ensures a faster, more dynamic, and personalized banking service. The system running in the tablets is integrated with our external portals (e.g., credit cards and insurance) and also ensures more flexibility in capturing and serving customers due to the greater mobility granted to account managers by the use of tablets.
· Insurance and Customer Assistance: We have upgraded our digital processes in the sale of insurance through a revamped product screen in our mobile application for individual customers, where all coverage types are presented with their respective initial values. We have also included a new feature in the offering of our 24-hour assistance service, helpS, which offers solutions for day-to-day customer needs such as car repairs or maintenance services. Our customers can easily choose service packages for automotive, motorcycle, bicycle, pet, and technology services.
· Data Transformation: Investments were made to improve our use of data in modern technologies to generate business value from customer data. These include investments in: (i) the development of a new machine learning model, which uses market and our proprietary data (from our Financing and SIM platforms) to identify new customers prone to credit offer and improve our revenue; and (ii) new solutions to assess a customer’s transactional behavior and identify the most opportune moment to offer credit card limit increases and improve customer spending.
· Business Agility: We have sought to improve our organizational model in the delivery of technological solutions to ensure we meet the needs of the modern consumer through faster decisions, increased interaction with customers and greater value delivery. Our new Business Domains model promotes the integration between our business units, platforms and the technology department for the design of products that offer an improved end-to-end experience for our customers. These areas work together in the activities related to customer journey, software development, implementation, operations and product governance. This work model, developed from benchmarks and proven market frameworks, is supported by lead executives in our investment, data, technology and information security departments to embed the technical skills from these vertical structures directly into the Business Domains structures, improving the operational flow of these teams.
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· Security: Given that Santander ID is our main security device in the authorization of customer transactions on digital channels, we must ensure its activation process is safe and reliable. With the “Frictionless” initiative, we have implemented several models that analyze customer behavior information, ensuring that the customer is the one who is actually activating the security device. As a result, customers no longer need to go to an ATM to complete the activation of their Santander ID, which we believe provides a simpler experience.
Communications and Marketing
We use a variety of tools to communicate with our employees and customers effectively. This includes not only traditional media, such as television, newspapers and print magazines, but also digital and innovative communication to make a difference in the lives of all those who are related, in some way, to Santander Brasil. In 2022, we launched a major debt renegotiation campaign called “Desendivida,” which provided better terms for customers to honor their commitments with us. This initiative featured influencers from the popular reality TV show Big Brother Brasil and, during an entire month, we dedicated time to this matter in our stores (two extra hours a day), in addition to a task force on a Saturday. We also introduced large-scale campaigns for “consórcios” (a product that offers credit at lower costs for customers than conventional financing). Internally, we debuted the monthly live event “Together with Mario Leão,” in which Mario Leão, our chief executive officer, interacts with over 40,000 employees via the Santander NOW app. The first edition took place in Salvador, State of Bahia, and was followed by editions in Inhumas (State of Goiás), Novo Hamburgo (State of Rio Grande do Sul), Rio de Janeiro (State of Rio de Janeiro), Campinas (State of São Paulo), Curitiba (State of Paraná), Mirassol (State of São Paulo), São Paulo (State of São Paulo), Juazeiro do Norte (State of Ceará), Manaus (State of Manaus), Ouro Preto (State of Minas Gerais) and again in São Paulo (State of São Paulo).
In 2022, we also produced 472 videos to instruct our teams on how to better serve our customers and offer our products and services, exploring a wide range of topics such as the “Investment is Santander” campaign and on themes that reinforce our culture, such as diversity, ESG, corporate behavior, development, feedback, health and well-being, training and qualification, and others. Externally, we ran 14 video ads on TV and social media. In 2022, our communication campaigns resulted in over 11,000 mentions in the Brazilian national media (e.g., websites, newspapers and magazines), as well as nearly 8,000 reports published in local media. On social networks, we had more than 2,000 publications, with 1.5 billion impressions in 2022. We also strengthened our operations, both internally and externally, using new formats such as Telegram, TikTok, WhatsApp and podcasts. We held over 20 internal and external livestreams and events, which featured our leadership, experts and authorities discussing a broad array of subjects, including ESG, the current economic environment, social investment, business, female leadership, entrepreneurship and culture. The “Legacy” event, organized in collaboration with Movimento Bem Maior and several of Brazil’s largest companies, on the role of philanthropy, was a highlight, as was the fifth edition of “Global Citizen,” held in partnership with the newspaper Valor Econômico, with an ESG-focused debate with participants such as Sanda Ojiambo, chief executive officer and secretary general of the UN Global Compact, and Jeremy Oppenheim, co-founder of SYSTEMIQ.
Sustainability and ESG Initiatives
The purpose of our sustainability and ESG initiatives is to contribute to the progress of people and businesses, while also supporting the development of a fairer and more sustainable Brazil. We have sought to develop a clear strategy for our environmental aspirations (seeking to become a benchmark company in sustainable business), social aspirations(working to ensure everyone has opportunities) and governance aspirations (having leading ESG management practices).
Our broad commercial activity enables us to advise and support our customers and their projects. In the year ended December 31, 2022, we helped approximately 430,000 people through financial inclusion products and financial education guidance. For example, we offer access to banking services, products and nonfinancial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the Prospera Microfinance, “Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include financial management as a topic in customer relationships, using tools such as Santander On. As an example, Prospera Microfinance has supported microentrepreneurs in their businesses since 2002, and as of December 31, 2022 it had a portfolio of R$2.7 billion (a 38% growth as compared to December 31, 2021) and 885,000 active customers (a 25% growth as compared to December 31, 2021).
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The following is a description of some of the social activities and programs that we have held or continued in the year ended December 31, 2022:
· In 2022, we held the 20th edition of the Amigo de Valor program. Since 2002, it has benefited more than 1.6 million children and teenagers in 293 municipalities in Brazil, mobilizing more than R$180 million from our customers and employees.
· In 2022, we helped about 220,000 people through blood donation and volunteering programs.
· Through Santander Universities, we granted 103,000 scholarships in 2022.
· We became founding members of the Alliance for Productive Inclusion (Aliança pela Inclusão Produtiva), or Aipê, in partnership with industry leaders, whose objective is to promote, through training, the inclusion of the lower-income population in the labor market.
· We increasingly invest in the structuring of endowments—equity or philanthropic funds—to support the long-term financial sustainability of institutions and nonprofit organizations, such as universities and hospitals. In 2022, these investments amounted to R$51 million.
· In April 2022, we held the Legado event, which addressed philanthropy in Brazil and the role of the individual in building a more inclusive society. This event was attended by over 600 participants.
· In 2022, we transformed 70,000 plastic bags into 12,000 eco-friendly bags in partnership with Sewing Dreams, an NGO from Paraisópolis in the State of São Paulo.
· We support social projects which foster professional training and fostering entrepreneurship. In 2022, we selected 31 projects for support through our “Chama Indica” and “Prepara Futuro” initiative.
· We continued to promote female representation in leadership positions at Santander Brasil. In 2022, the percentage of women among our leadership (defined as senior managers and officers of Banco Santander (Brasil) S.A., Aymoré Crédito, Financiamento e Investimento S.A. and Santander Corretora de Seguros, Investimento e Serviços S.A.) increased by 1.9 p.p. compared to 2021 and reached 33%.
We also developed actions to increase the representation of black people at Santander Brasil. As of December 31, 2022, 30% of our employees identified as black, which represents a growth of 2.7 p.p. compared to December 31, 2021.
· In the year ended December 31, 2022, we believe that we helped facilitate approximately R$32.2 billion in sustainable business (including disbursements for renewable energy, sanitation, sustainable agribusiness, ESG-linked loans, Prospera Santander Microfinance, other businesses (accessibility and mobility, other financial operations), as well as project finance advisory and disbursements (renewable energy and sanitation), in addition to green bonds) through the following initiatives:
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· We were guarantors in a BNDES financing for the construction of a subway line in the city of São Paulo that we expect will bring socioeconomic development to the regions along its tracks.
· We maintained a leading role in the Brazilian market for decarbonization credits (CBIO) market, which we first helped create in 2020 and in which, in the year ended December 31, 2022, we held a 54.4% market share according to B3.
· We disbursed R$394 million in our sustainable agribusiness credit lines, which promote low-carbon agriculture and solar energy.
· Since 2021, we created the Sustainable Finance Forum, a forum responsible for analyzing sustainable operations and ensuring alignment with the Sustainable the Finance Classification System (SFCs) - the Santander Group framework and market standards.
· In June 2022, we hosted the Zero Carbon Emission livestream, which promoted a debate on zero carbon emission and our next steps in this journey.
· In November 2022, in partnership with other Brazilian corporations, we launched Biomas, a joint venture whose objective is to restore, conserve and preserve four million hectares of forest in the Amazon, Caatinga, Mata Atlântica and Cerrado biomes in Brazil. This alliance plans to remove approximately 900 million tons of carbon equivalent substances from the atmosphere over a two-decade period. Each partner will initially commit R$20 million to support the early years of Biomas activities.
· We participated in the launch of the Bioeconomy Business Innovation Platform in the Amazon, led by the CERTI Foundation, with the objective of training 3,000 people and creating 200 startups in three years.
· We have progressed towards our commitment of achieving zero illegal deforestation in the Amazon across our customers involved in meat production by 2025.
The following is a description of some of the environmental activities that we have held or continued in 2022:
· In February 2022, we launched a solar power plant at two of our administrative buildings, the largest urban power plant installed in the State of São Paulo and one of the largest in Latin America.
· As of December 31, 2022, 100% of our domestic electricity consumption derive from renewable sources, a milestone that we had originally targeted to reach in 2025. In addition, we have been carbon neutral since 2010 and have significantly cut down on our use of single-use plastic within our organization.
· By the end of 2022, 100% of the new SX- and Elite-branded cards were made from recycled plastic. We expect that this will reduce the use of common plastic in the cards we issue.
· Climate change was the agenda of our continuing education program (programa de educação continuada), or “PEC,” which is aimed at independent members of our governance bodies. The PEC seeks to promote integration and deeper knowledge about the financial industry and a better understanding of our internal dynamics. We also held an inaugural class for a select group of executives to discuss decarbonization in partnership with the Santander Academy—the first in a series of meetings that will continue to take place in 2023 to develop knowledge on the subject and share good practices, challenges and solutions for the mitigation and removal of greenhouse gases. The engagement of companies is part of our Net Zero commitment, which aims to eliminate indirect issues of carbon in our credit portfolio by 2050.
· We co-drafted “An Introductory Guide for Net Zero Target Setting for Farm-Based Agricultural Emissions,” which was led by the Banking for Impact on Climate in Agriculture initiative of the World Business Council for Sustainable Development. The study aims to address the challenges of net zero for the sector, where data and methodologies on measuring financed emissions is lacking.
· In July 2022, we published our social, environmental and climate responsibility policy, or the “PRSAC,” in accordance with CMN Resolution No. 4,945, which improves socio-environmental risk management rules, including climate change-related rules. PRSAC focuses on a positive agenda, such as pacts, commitments, relationships with stakeholders and socio-environmental impacts and opportunities.
• In December, 2022 we sponsored the fifth edition of the Global Citizen Forum to discuss ESG matters, which was attended by our chief executive officer and the general secretary of the United Nations Global Compact, Sanda Ojiambo, the economist and co-founder of SYSTEMIQ, Jeremy Oppenheim and Paul Polman, a climate and equality activist. The event was attended by approximately 612participants.
• Our sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through our board of directors, executive committee and executive sustainability superintendents. Our sustainability committee is responsible for providing clarification and recommendations to the board of directors relating to the development of sustainability-related guidelines. Our governance seeks to include ESG in our culture and in our day-to-day through internal training and the inclusion of ESG criteria in the compensation of executives, who are responsible for addressing issues of diversity, financial empowerment and green financing. Independent members account for 44.44% of our board of directors and women for 33.33%, while women also account for 20.41% of our executive committee. For more information, see “Item 6. Directors, Senior Management and Employees.”
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As a result of our efforts, we were recognized by Revista Exame as the best ESG company in the financial services category in 2022, and we also received a Euromoney award in the ESG category. Moreover, our equity securities form part of the B3’s Corporate Sustainability Index (Indice de Sustentabilidade Empresarial) and Efficient Carbon Index (Índice de Carbono Eficiente – ICO2).
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial services industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal. Together, these financial institutions accounted for 70.8% of the credit and 70.7% of the deposits available in Brazil as of September 30, 2022, according to the Brazilian Central Bank and the interim financial statements of the aforementioned banks.
The following table shows the total loans and deposits of the five leading financial institutions in Brazil as of September 30, 2022:
Santander Brasil Bradesco Itaú
Unibanco Banco
do Brasil Caixa Econômica Federal Financial System
(in billions of R$)
Total loans (1) 484.3 644.7 685.6 861.5 976.8 5,161.4
Total deposits (1) 410.7 588.0 813.2 539.4 433.6 3,940.8
(1) According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 30, 2022). Data as of December 31, 2022 was not available as of the date of this annual report.
Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. Substantially 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 cybercrimes.
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.
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As of the date of this annual report, we own or have a license to use 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 regard 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 (Associação Brasileira das Companhias Abertas – 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 administration of third-party funds and microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:
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· 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 segment one, or “S1” (i.e., banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity), as is our case, 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, 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;
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· 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 that 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
In 2010, the Basel Committee issued its Basel III framework, which was revised and republished in 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 of 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 capital 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.
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There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debts 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.
In accordance with the Basel III standards, the Brazilian Central Bank created the additional core capital buffer (adicional de capital principal), which is composed of 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 buildup 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 CMN 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 increased gradually until April 2022, when it reached 2.5%. Resolution No. 4,783 was subsequently replaced by Resolution No. 4,955 of October 21, 2021, which maintained the risk weighted asset percentage at 2.5%.
The chart below shows the evolution of our core capital:
Timeline

Description automatically generated with medium confidence
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Financial Institutions in Brazil are subject to the capital rules set by CMN Resolutions No. 4,955/2021 and No. 4,958/2021. 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. S1 financial institutions, as is our case, or segment 2, or “S2,” for purposes of the application of prudential rules, are required to maintain a minimum Leverage Ratio (Razão de Alavancagem or “RA”) of 3% as from January 1, 2018.
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 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 current regulatory minimum is 100%.
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 S1, S2 or segment three, or “S3” financial institutions 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.
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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.
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 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 financial institutions 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.
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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 requirement.
· 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.
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 July 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 Tier 1 regulatory capital. 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.
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Resolution No. 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.
Resolution No. 264/22 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. Resolution No. 264/22 came into effect on December 1, 2022.
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 Custódia), 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 March 3, 2022, the Brazilian Central Bank issued Resolution No. 195/22, which regulates the SPI. Resolution 195/22 also approved the regulation with which the direct and indirect participants in the SPI must comply. Brazilian Central Bank Normative Ruling No. 243/22 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 291/22, in turn, establishes the procedures for the adherence to 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 clearinghouses 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. Resolution 195/22 came into effect on April 1, 2022.
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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 clearinghouses, 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.
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 customers 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 means 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 should have implemented, 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 entity’s audit and risk committees (if in place), internal audit unit, executive board and board of directors (if in place).
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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 Finance Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open finance. Open finance 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.
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 or S2 segments, as is our case, are required to participate in open finance.
Open finance has a four stage implementation plan, as follows:
· Phase 1 (launched 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.
· Phase 2 (launched on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
· Phase 3 (launched on October 30, 2021): start of PIX transactions offered by payment transaction initiators through the Open Finance channel, without the need to access the specific channels of the institutions with whom the client maintains a relationship. The possibility of using other payment methods (other than PIX) and of accepting credit transaction proposals through Open Finance is expected to be gradually implemented in the future.
· Phase 4 (launched on December 15, 2021): sharing of customer transactional data related to additional products, including: (i) insurance, open-end private pension and capitalization products; (ii) merchant acquiring services; (iii) foreign exchange transactions; and (iv) time deposit accounts and other investment products. Phase 4 is still currently under implementation and the Brazilian Central Bank’s expectation is that it should be completed by the end of 2023.
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 Finance 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 Finance, 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 Finance; (iv) services to be rendered by the Open Finance 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 Finance and its implementation; and (v) minimal security standards and certifications.
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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 Finance, to be further detailed by the Open Finance 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.
Finally, the data referring to insurance products and pension plans will follow the scope defined by the National Council of Private Insurance (Conselho Nacional de Seguros Privados), or “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.
Phase 4 of Open Finance 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 to 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 lasted for one year and was extended for a second year through November 2023. As of the date of this annual report, a second cycle still has not commenced.
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.
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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.
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.
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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.
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.
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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.
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, or “KYC” 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.
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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 KYC procedures. The CVM also issued CVM Resolution No. 50 on 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.
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.
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The governments of Brazil and the United States executed an agreement in 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
Brazil
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 brought 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 data subjects 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, among others, 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 has 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.
The ANPD has been assured technical independence, although it is subordinated to the Brazilian Ministry of Justice and Public Safety. It is composed of five commissioners, 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.
Other
In addition, we are subject to Regulation (EU) 2016/279 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”). 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 2% of annual worldwide turnover or €10 million (whichever is highest) for other specific infringements. Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the U.K. General Data Protection Regulation (“U.K. GDPR”) (i.e., a version of the GDPR as implemented into U.K. law). While the U.K. GDPR currently imposes substantially the same obligations as the GDPR, the U.K. GDPR will not automatically incorporate changes to the GDPR going forward (which would need to be specifically incorporated by the United Kingdom government). Moreover, the United Kingdom government has publicly announced plans to reform the U.K. GDPR in ways that, if formalized, are likely to deviate from the GDPR, all of which creates a risk of divergent parallel regimes and related uncertainty, along with the potential for increased compliance costs and risks for affected businesses.
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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, from 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
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· errors that result in major incorrectness in the financial statements of the audited entity.
The executive officers of the financial institution must notify the independent auditor and the audit committee if any of the above situations occur.
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,” which we have created. For more information on our 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.
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). 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) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
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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 the “PRSA.” The new rule provides for the inclusion of a climate aspect to the PRSA, which we refer to as the 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 Climáticas, or the “GRSAC Report”) by financial institutions classified in S1 (such as us), S2, S3 or 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 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 us), S2, S3, or segment four, 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 climate 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 general provisions of CMN Resolution No. 4,945/21 came into effect on July 1, 2022, CMN Resolution No. 4,944/21, article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) and Central Bank Resolution No. 139/21 came into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 came 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. 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.
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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.
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, as further detailed under “—Auditing Requirements” above.
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 the 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:
· 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.
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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.
On July 27, 2022, the Brazilian federal government adopted Decree No. 11,150/22, or Decree No. 11,150, which seeks to prevent and foster the repayment and settlement of consumer over-indebtedness. The rule grants consumers certain basic rights, including the right to responsible credit practices, financial education and relief from over-indebtedness situations through debt review and renegotiation. To preserve a consumer’s “existential minimum,” Decree No. 11,150 creates an “existential minimum income” threshold for consumers, which is fixed at R$303.00, or one-quarter of the federal minimum wage that was in effect at the time the decree was adopted. However, the annual adjustment of the minimum wage will not lead to this amount being updated.
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 customers 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.
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 came into effect on March 1, 2022, and Central Bank Resolution No. 155 came 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:
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· 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); 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.
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).
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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 came into effect on December 30, 2022.
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.
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 revoked 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 be 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.
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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 customers.
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.
On January 3, 2023, the Brazilian Central Bank published Normative Ruling No. 342, which amended Normative Ruling No. 299/22 and provides procedures, documents, terms and necessary information for requests related to the participation of financial institutions, such as us, on other companies’ corporate capital; and establishment of branches abroad. This new rule came into force on its publication date.
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.
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.
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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, 2022, CI$1 was equivalent to R$6.2480 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 April 5, 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 June 26, 2013 on prudential requirements for credit institutions and investment firms apply to it.
U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States Congress and U.S. bank regulatory agencies. In addition to 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.
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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.
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.
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U.S. Sanctions
“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, the Office of Foreign Assets Control, or “OFAC”), the UN Security Council, the European Union or His Majesty’s Treasury. 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 imposed various sanctions that prevent non-U.S. persons, including non-U.S. financial institutions from engaging in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”). If a non-U.S. financial institution were determined to have engaged in activities targeted by certain U.S. secondary 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.
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.
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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:
· 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.
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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.
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.
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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.
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.
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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
Law No. 13,986/2020, 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.
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 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.
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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.
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 and Social Contribution Tax
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% for banks, 15.0% for other financial institutions except banks and 9.0% for most other Brazilian legal entities, after adjustments determined by the tax legislation. CSLL rate for banks was revised to 21.0% from August 1 to December 31, 2022.
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.
IRPJ and CSLL on Foreign Exchange Variation of Hedges for Investments Held Abroad
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, as of 2022, 100% of the exchange rate variation will be considered as taxable.
Tax on Services
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.
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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.
Nonfinancial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to noncumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Tax on Financial Transactions
The IOF tax is a tax levied on credit, currency exchange, insurance and securities transactions. It is imposed on the following transactions and at the following rates.
Transaction (1)
Maximum
Legal Rate
Current Rate
Credit extended by financial institutions and nonfinancial entities 1.5% or 3% 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.
Transactions relating to securities (2) 1.5% per day 0.5% per day for certain investment funds.
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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).
5.38% on credit card transactions as from January 2, 2023.
5.38% on withdrawals abroad using credit or debit cards as from January 2, 2023.
5.38% on purchase of traveler’s checks or loading of international prepaid card as from January 2, 2023.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
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 equal or less than 180 days.
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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.
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Pursuant to Decree No. 10,997/2022, the Brazilian government will gradually reduce, each year, the IOF, levied on exchange operations, rates with the reduction to zero for all currency exchange operations form 01.01.2029. In addition, external loan and financing operations, including through the issuance of titles, had the rate reduced to zero, as of March 31, 2022, regardless of the term of the operation.
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.
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 Cooperation 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. 1,571, 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.
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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.
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, 2022 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 United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by the Belgian branch on these accounts in the year ended December 31, 2022.
(c) Santander Brasil holds three blocked accounts for three customers with domicile in Brazil designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander Brasil on these accounts in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(d) Santander Consumer Finance, S.A. also held through its branch in Greece an auto finance loan for a client designated by the United States under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship was terminated before the year end. Revenues or profits generated by the branch in Greece on this position in the year ended December 31, 2022 were negligible relative to the overall profits of Banco Santander S.A.
(e) The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the United States 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, 2022 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.
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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. 4,820 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: (i) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (ii) 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 regarding amounts related to results for the year ended December 31, 2020, as amended by 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 and 2022.
Reduction of Capital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduced 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% remained in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the capital conservation buffer requirement was gradually restored to 2.5%. 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.
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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 and 2022.
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. CMN Resolution No. 4,805/2020 increased the cap to R$400 million cap for DPGEs held by other financial institutions affiliated with the FGC, while maintaining the R$40 million cap for other non-affiliated entities.
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.
Flexibility 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.
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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 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, were permitted to, 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%. However, as of the revocation of CMN Resolution No. 4,788/20 by CMN Resolution No. 5,007, issued on March 24, 2022, the repurchase ceiling returned to the previous percentage 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 COVID-19 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.
SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes 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, 2022, 2021, and 2020 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.”
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For the Year Ended December 31,

2022
2021
2020

Average Balance
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
Average Balance(1)
Interest
Average Rate
(in millions of R$, except percentages)
Assets and Interest
Income
Cash and balances with the Brazilian Central Bank 109,977 10,202 9.3% 58,494 2,581 4.4% 54,531 1,552 2.8%
Loans and amounts due from credit institutions 71,836 2,722 3.8% 95,513 1,116 5.4% 104,759 1,519 1.4%
Of which:
  Reverse repurchase
agreements 49,357 7,197 14.6% 45,458 2,154 4.7% — — —
Loans and advances to customers 503,548 73,596 14.6% 461,141 55,775 10.7% 384,389 44,104 11.5%
Debt instruments 213,647 22,002 10.3% 224,890 16,958 8.5% 203,578 13,556 6.7%
Other interest – earning assets — 6,703 — — 1,557 – – 2,044 –
Total interest – earning assets 899,008 115,225 12.8% 840,038 77,987 9.3% 747,257 62,775 8.4%
Equity instruments 2,807 38 1.4% 2,279 90 3.9% 1,730 34 2.0%
Investments in associates 1,593 — — 952 — — 1,098 — —
Total earning assets 903,408 115,263 12.8% 843,269 78,077 9.3% 750,085 62,809 8.4%
Cash and balances with the Brazilian Central Bank 4,371 — — 4,633 — — 4,800 — —
Loans and amounts due from credit institutions (6,136) — — 441 — — 6,668 — —
Impairment losses (31,665) — — (26,908) — — (23,936) — —
Other assets 78,869 — — 81,669 — — 76,642 — —
Property, plant and equipment 8,346 — — 8,823 — — 9,587 — —
Intangible assets 31,084 — — 30,250 — — 30,769 — —
Total average assets 988,277 115,263 11.7% 942,177 78,077 8.3% 854,615 62,809 7.3%

Liabilities and Interest Expense

Deposits from the Brazilian Central Bank and Deposits from credit institutions 120,512 6,737 5.7% 149,111 4,712 3.2% 111,684 4,327 3.9%
Of which:
Repurchase agreements 87,567 11,197 12.8% 103,809 4,567 4.4% — — —
Customer deposits 438,846 38,509 8.7% 420,185 13,188 3.1% 380,058 7,504 2.0%
Of which:
   Repurchase agreements 4,974 — — 58,264 — — — — —
Marketable debt securities 94,612 6,952 7.3% 63,906 4,537 7.1% 68,585 2,786 4.1%
Subordinated debts 19,086 863 4.5% 14,550 902 6.6% 13,102 909 6.9%
Other interest-bearing liabilities — 14,661 — — 3,329
—
—
2,805 —
Total interest-bearing liabilities 673,056 67,722 10.1% 647,752 26,669 4.2% 573,429 18,332 3.2%
Noninterest bearing demand deposits 34,524 — — 33,893 — — 28,581 — —
Other liabilities 151,417 — — 155,133 — — 150,759 — —
Non-controlling interests 431 — — 329 — — 315 — —
Stockholders’ Equity 128,849 — — 105,070 — — 101,531 — —
Total average liabilities and equity 988,277 67,722 6.9% 942,177 26,669 2.8% 854,615 18,332 2.1%
(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 year ended December 31, 2020 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.
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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, 2022, compared to the year ended December 31, 2021, and for the year ended December 31, 2021 compared to the year ended December 31, 2020. 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 2022/2021
For the Years Ended 2021/2020
Increase (decrease) due to changes in
Volume
Rate
Net change
Volume
Rate
Net change
(in millions of R$)
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank   3,383   4,238 7,621 120 909 1,029
Loans and amounts due from credit institutions (338) 1,944 1,606 (126) (277) (403)
Loans and advances to customers 5,456 12,365 17,821 9,181 2.492 11,671
Debt instruments (885) 5,929 5,044 1,502 1.900 3,402
Other interest-earning assets 5,146 —   5,146 (487) — (487)
Total interest-earning assets 12,762 24,476 37,238 10,190 5.024 15,214
Equity Instruments   17 (69) (52) 13 43 56
Total earning assets 12,779 24,407 37,186 10,203 5.067 15,268
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions (1,042) 3,067 2,025 1,278 (893) 385
Customer deposits 611 24,710 25,321 857 4,827 5,684
Marketable debt securities 2,251 164 2,415 (454) 2,205 1,751
Subordinated liabilities 240 (279) (39) 46 (53) (7)
Other interest-bearing liabilities 11,332 — 11,332 523 — 524
Total interest-bearing liabilities 13,392 27,662 41,053 2,250 6,086 8,337
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Assets
Earning Assets – Yield Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2022 2021 2020
(in millions of R$, except percentages)
Average earning assets 899,008 840,038 747,257
Interest and dividends on equity securities(1) 115,263 78,077 62,809
Average Net interest income 47,541 51,408 44,480
Gross yield(2)(*) 12.8 % 9.3 % 8.4 %
Net yield(3)(*) 5.3 % 6.1 % 6.0 %
Yield spread(4)(*) 2.7 % 5.1 % 5.2 %
(*) 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.
For the Year Ended December 31,
2022 2021 2020
ROA: Return on average total assets 1.5 % 1.7 % 1.6 %
ROE: Return on average stockholders’ equity 11.1 % 14.8 % 13.3 %
ROE (adjusted) (1) 14.2 % 20.2 % 18.5 %
Average stockholders’ equity as a percentage of average total assets 13.0 % 11.2 % 11.9 %
Payout(2) 56.5 % 62.0 % 24.7 %
(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, 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 share divided by net income per share).
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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,
2022 2021 2020
Cash and balances with the Brazilian Central Bank 12.2 % 7.0 % 7.3 %
Loans and amounts due from credit institutions 8.0 % 11.4 % 14.1 %
Loans and advances to customers 56.0 % 54.9 % 51.4 %
Debt instruments 23.8 % 26.8 % 27.2 %
Total interest-earning assets 100.0 % 100.0 % 100.0 %
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, 2022 and 2021, the book value of investment securities was R$206 billion and R$228 billion, respectively (representing 20.9% and 24.5%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$143 billion, or 69.4%, and R$171 billion, or 75.3% of our investment securities as of December 31, 2022 and 2021, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:
As of December 31,
2022 2021 2020
(in millions of R$)
Debt securities
Government securities—Brazil 142,749 171,437 191,896
Debentures and promissory notes 28,251 19,882 17,072
Other debt securities 31,913 33,894 21,134
Total domestic/debt securities 202,913 225,212 230,102

Equity securities
Shares of Brazilian companies 1,459 1,870 1,953
Shares of foreign companies 60 49 14
Investment fund units and shares 1,120 609 363
Total equity securities 2,639 2,528 2,329
Total investment securities 205,551 227,740 232,432
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As of December 31, 2022 and 2021, 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 129.0% and 151.5%, respectively, of our stockholders’ equity. As of December 31, 2022 and 2021, the total value of our debt securities was approximately 185.7% and 212.5%, 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, 2022. 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 millions of R$)
Debt securities
Government securities—Brazil (1) —   14,997 —   1,100 16,097
Other debt securities (2) 21,936 34,511 6,310 2,475 65,232
Total debt investment securities 21,936 49,508 6,310 3,575 81,329
(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 12.96%.
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, 2022. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2022. 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 millions of R$, except percentages)
Weighted-average yields % % % %
Domestic:
Brazilian Government         17,315 11.37    58,456 13.39      2,910 6.70    10,593 6.46
Other fixed-income securities         16,563 12.77    27,258 14.40      4,298 8.90         884 9.20
Impaired financial assets 160 12.77         213 14.40         214 8.90         553 6.80
Impairment losses (287) 12.77       (691) 14.40       (227) 8.90 (593) —
Total domestic        33,751 12.07 85,236 13.90     7,195 7.80 11,437 6.70
International:
Foreign government           4,999 9.80 — — — — — —
Other fixed-income securities           1,055 10.40      3,189 10.40 — — — —
Impaired financial assets                 2 10.40 — — — — — —
Impairment losses — 10.40 — — — — — —
Total international          6,056 10.10     3,189 10.40 — — — —
Total weighted-average yields 11.46 8.00 6.60 6.70
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Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.
As of December 31,
2022 2021 2020
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank 11,346 10,657 5,806 10,851 4,532 15,617
Debt instruments 185,814 17,098 208,132 17,080 226,787 3,315
Loans and amounts due from credit institutions 19,784 929 22,689 3,797 50,553 3,520
Loans and advances to customers 416,127 74,503 398,335 66,509 372,946 20,822
Equity Instruments 2,582 57 2,483 45 2,329 —
Total assets 635,653 103,244 637,445 98,282 657,147 43,274
Liabilities
Financial Liabilities at amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 59,366 56,713 62,332 58,674 86,564 45,093
Customer deposits 457,188 32,765 468,961 —   445,814 —
Marketable debt securities 92,638 14,483 66,028 13,009 47,477 9,399
Debt instruments eligible to compose capital 19,538 —   —   19,641 —   13,120
Other financial liabilities 71,371 143 68,496 413 66,708 153
Total liabilities 700,101 104,104 665,817 91,737 646,563 67,765
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Loan Portfolio
As of December 31, 2022, our loans and advances to customers totaled R$524 billion (53.2% of our total assets). Net impairment losses, loans and advances to customers totaled R$491 billion as of December 31, 2022 (49.8% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$158.7 billion, R$146.0 billion, R$131.7 billion as of December 31, 2022, 2021, 2020, 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.
Our loan portfolio does not have any specific concentration exceeding 10% of our total loans, As of December 31, 2022, 1.0% of our loan portfolio is allocated to our largest debtor and 4.5% 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, 2022.

As of December 31, 2022
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 126,508 46.89% 83,448 47.02% 13,366 24.50%

—
—
223,322 42.57%
Real estate 4,298 1.59% 10,905 6.14% 20,655 37.80% 22,385   98.46% 58,243 11.09%
Installment loans to individuals 137,581 51.00% 81,680 46.02% 20,616 37.72% 351 1.54% 240,227 45.79%
Lease financing
1,398
0.52%
1,455
0.82%
11

—

—

—
2,863
0.55%
Loans and advances to customers, gross
269,784
100.00%
177,488
100.00%
54,648
100.00%
22,735
100.00%
524,655
100.00%
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, 2022.
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$, except percentages)
Fixed rate
Commercial and industrial 81,757 38,976 3,581 — 42,558 124,315
Real estate 23 74 72 41 187 209
Installment loans to individuals 127,538 80,132 19,823 351 100,306 227,843
Lease financing 406 607 — — 607 1,013
Total Fixed rate 209,723 119,790 23,476 391 143,658 353,381
Variable rate
Commercial and industrial 44,751 44,471 9,785 — 54,256 99,007
Real estate 4,275 10,832 20,582 22,344 53,758 58,034
Installment loans to individuals 10,043 1,548 793 — 2,341 12,384
Lease financing 992 847 11 — 858 1,850
Total Variable rate 60,061 57,698 31,171 22,344 111,213 171,275
Total 269,784 177,488 54,648 22,735 254,871 524,655
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Cross-Border Outstandings
The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.
As of December 31,
2022 2021 2020
Balance % of Total Assets Balance % of Total Assets Balance % of Total
Assets
(in millions of R$, except percentages)

OECD countries(1)
Spain 189 —   108 —   437 —
United States 2,489 0.3 835 0.1 12,674 1.4
Netherlands 73 —   —   —   80 —
United Kingdom 277 —   20 —   29 —
Luxembourg 710 0.1 13,058 1.4 —   —
Other OECD countries(2) 1,599 0.2 1,958 0.2 3,534 0.4
Total OECD 5337 0.6 15,979 1.7 16,754 1.8
Non-OECD countries
Latin American countries(2) 529 0.1 560 0.1 1,204 0.1
Cayman Islands 1,573 0.2 1,679 0.2 2,917 0.3
Other(2) 32 —   282 —   1,189 0.1
Total non-OECD 2,134 0.3 2,521 0.3 5,310 0.5
Total 7,471 0.9 18,500 2.0 22,064 2.3
(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.
The following table presents the amounts of our cross-border outstandings as of December 31, 2022, 2021 and 2020 by type of borrower where outstandings in the borrower’s country exceeded 1.4% of our total assets.
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Government
Banks and Other Financial Institutions
Commercial and Industrial
Other Loans
Total
(in millions of R$)
2020
United States — 12,653 9 12 12,674
Netherlands — — 80 — 80
Austria — — — 444 444
United Kingdom — 28 — 1 29
Cayman Islands — 1,341 (1) 1,577 2,917
Total — 14,022 88 2,034 16,144
2021 —
United States — 3,943 1 12 3,956
Netherlands — — 3 — 3
Austria — — — 595 595
United Kingdom — 28 — — 28
Cayman Islands — 2,815 — 1,290 4,105
Total — 6,786 4 1,897 8,687
2022 —
United States — 2,259 198 32 —
Netherlands — — 73 — 73
Austria — 57 — — 57
United Kingdom — 234 39 3 276
Cayman Islands — 180 1,354 38 1,572
Total — 2,730 1,664 73 4,467
Non-current assets held for sale
For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.
Liabilities
Deposits
The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.
For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the maturity of time deposits (excluding inter-bank deposits) at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.”
As of December 31, 2022
Domestic
International
(in millions of R$)
Under 3 months 359,142 —
3 to 6 months 33,019 —
6 to 12 months 66,039 —
Over 12 months 147,832 —
Total 606,032 —
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The following table presents the total amount of uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2022.
Maturing
As of
December 31, 2022 Three Months or Less Over Three Months Through Six Months Over Six Months Through
12 Months Over 12 months
(in millions of R$)
Total uninsured deposits(1)
281,066 264,349 24 48 16,645
(1)           We define uninsured deposits as securities from credit institutions and customers that do not have collateral attached to them.
Short-Term Borrowings
The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.
As of December 31,
2022 2021 2020
Amount Average Rate Amount Average Rate Amount Average Rate
(in millions of R$, except percentages)
Securities sold under agreements to repurchase
As of December 31 109,760 1.26 % 115,964 1.76 % 112,477 1.90 %
Average during the period (1) 105,233 1.85 % 114,484 2.58 % 112,096 2.71 %
Maximum month-end balance 114,056 155,484 155,174
Total short-term borrowings at year end 109,760 115,964 112,477
(1) The average annual balance sheet data has been calculated based upon the average of the monthly balances at 12 dates: for each of the month-end balances of the applicable year.
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, 2022, 2021 and 2020—Results of Operations—Impairment Losses on Financial Assets (Net).”
As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 29,723 25,640 22,626
Initial adoption of IFRS 9 —   —   —
Balance adjusted 29,723 25,640 22,626
Impairment losses charged to income for the year 23,801 16,987 18,311
Write-off of impaired balances against recorded impairment allowance (18,340 ) (12,935 ) (15,297 )
Exchange variation 28 31 127
Balance at end of year 35,212 29,723 25,640
Of which:
Loans and advances to customers 34,025 28,511 24,054
Loans and amounts due from credit institutions 13 22 9
Debt Instruments 1,174 1,191 1,577
Recoveries of loans previously written off(1) 983 1,536 861
(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.
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As of December 31, 2022, our allowance for impairment losses for the periods indicated amounted to R$35,212 million, an increase of R$5,489 million, or 18.5%, compared to R$29,723 million as of December 31, 2021, which primarily resulted from a greater number of nonperforming loans among individual customers and a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, the latter of which resulted in: (i) an increase in our impaired assets in the commercial and industrial loans portfolio as of December 31, 2022 of 23.7%, from R$11.4 billion to R$14.2 billion, as compared to December 31, 2021; (ii) an increase in our default rate as of December 31, 2022 by 1.9 p.p., from 5.0% to 6.9%, as compared to December 31, 2021; and (iii) an increase in our coverage ratio (i.e., our provisions for impairment losses as a percentage of impaired assets) as of December 31, 2022 by 20.6 p.p., from 110.4% to 89.8%, as compared to December 31, 2021.
As of December 31, 2021, our allowance for impairment losses for the periods indicated amounted to R$29,723 million, an increase of R$4,083 million, or 15.9%, compared to R$25,640 million as of December 31, 2020, which primarily resulted from higher volumes and our product mix.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations.”
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,

2022
2021
2020
(in millions of R$)
Recoveries of loans previously charged off(1) 983      1,536         861
Commercial and industrial 597         463         422
Real estate – construction 36           64           56
Installment loans to individuals 346      1,002         370
Lease finance 4             7           13
Impairment losses charged to income for the year(1) 23,800 16,987 18,311
Commercial and industrial 8,854      3,340      6,919
Real estate – construction 244         116           81
Installment loans to individuals 14,686    13,532    11,309
Lease finance   16            (1)             3
Write-off of impaired balances against recorded impairment allowance (18,340)   (12,935)   (15,297)
Commercial and industrial (4,920)     (5,184)     (4,745)
Real estate – construction (115)        (167)        (232)
Installment loans to individuals (13,295)     (7,576)   (10,433)
Lease finance (11)            (8)          (15)
(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.
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As of December 31,

2022
% of Total Loans
2021
% of Total Loans
2020
%of Total Loans
(in millions of R$, except percentages)
Borrowers
Commercial and industrial 12,259 34.8 8,325 28.0 9,757 38.1
Real estate 284 0.8 154 0.5 194 0.8
Installment loans to individuals 22,659 64.4 21,240 71.5 15,676 61.1
Lease financing 10 0.0 4 — 14 0.1
Total 35,212 100.0 29,723 100.0 25,640 100.0
Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:

As of December 31,

2022
2021
2020
(in millions of R$)
Internal Risk Rating
Low 392,397 374,505 347,315
Medium-low 77,993 79,217 24,277
Medium 18,647 14,590 26,232
Medium-high 13,574 9,413 3,896
High 22,044 15,630 16,101
Loans and advances to customers, gross 524,655 493,355 417,822
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, 2022 amounted to R$34.4 billion, compared to R$21.7 billion for the same period in 2021, an increase of R$12.7 million or 58.5%. This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
The renegotiation portfolio was covered by allowances for impairment losses of 46.3% as of December 31, 2022 and 44.7% as of December 31, 2021. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
As of December 31,
2022 2021 2020
(in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 7,638 5,322 5,862
Installment loans to individuals 26,722 16,356 14,623
Financial leasing 2 5 5
Total 34,363 21,683 20,490
Allowances for impairment losses 15,9 9,698 9,019
Coverage ratio 46.3 % 44.7 % 44.0 %
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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 a 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,
2022 2021 2020
(in millions of R$, except percentages)
Impaired assets
Past due and other impaired assets(1) 39,224 26,923 23,176
Impaired assets as a percentage of total loans 7.5 % 5.5 % 5.5 %
Net loan charge-offs as a percentage of total loans 3.5 % 2.6 % 3.7 %
Net loan charge-offs as a percentage of average total loans 3.7 % 2.8 % 3.8 %
(1) Includes as of December 31, 2022, R$5,814 million of doubtful loans (R$2,528 million in 2021 and R$2,028 million in 2020) that were not past-due.
Evolution of Impaired Assets
Our impaired assets increased by 45.7% or R$12,301 million, to R$39,224 million as of December 31, 2022, compared to R$26,923 million as of December 31, 2021. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 18.5%, or R$5,488 million, to R$35,212 million as of December 31, 2022, compared to R$29,723 million as of December 31, 2021. Offsetting these effects were recoveries of R$983 million on loans previously written off as of December 31, 2022 and R$1,536 million as of December 31, 2021.
We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2022.
The following table shows the changes in our impaired assets at the dates indicated:
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As of December 31,
2022 2021 2020
(in millions of R$)
Balance at beginning of year 26,923 23,176 23,426
Initial Adoption of IFRS9 ⁽¹⁾ —   —   —
Adjusted Balance 26,923 23,176 23,426
Net additions 31,921 18,429 14,758
Write-offs (19,620 ) (14,681 ) (15,008 )
Balance at end of year 39,224 26,923 23,176
(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 2022, 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,
2022 2021
(in millions of R$)
Commercial and industrial 14,156 11,440
Real estate 1,058 470
Installment loans to individuals 23,999 14,996
Lease financing 10 17
Total 39,224 26,923
Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$14,156 million as of December 31, 2022, an increase of R$2,717 million, or 23.7% compared to R$11,440 million as of December 31, 2021. This increase was due to a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$1,058 million on December 31, 2022, an increase of R$588 million, or 125% compared to R$470 million as of December 31, 2021. The increase in impaired assets in this portfolio was primarily due to the impact on our customers of the deteriorating macroeconomic conditions in Brazil.
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$23,999 million as of December 31, 2022, with an increase of R$9,003 million, or 60.0%, compared to 2021. The increase in impaired assets in this portfolio was primarily a result of the effect of deteriorating macroeconomic conditions on our customers.
Lease Financing
Impaired assets in the lease financing lending portfolio totaled R$10 million on December 31, 2022, a decrease of 40.4% or R$7 million, as of December 31, 2021, primarily due to a decrease in the non-performing loans from R$17 million to R$11 million.
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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 is 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 mitigating factors 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:
As of December 31,
2022 % of total 2021 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,941 21.4 4,892 20.7
Mortgage loans 4,063 17.6 3,606 15.2
Installment loans to individuals 14,036 60.9 15,150 64.0
Lease financing 12 0.1 11 0.1
Total (*) 23,052 100.0 23,659 100.0
(*) Refers only to loans past due between 1 and 90 days.
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Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$27.4 billion to R$568.3 billion as of December 31, 2022, compared to R$540.9 billion as of December 31, 2021. Our impaired assets increased by approximately R$12.3 billion in the same period, from R$26.9 billion to R$39.2 billion. The default rate increased by 1.9 p.p. in 2022 in comparison to 2021, as a result of a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings as well as the growth of impaired assets due to the macroeconomic deterioration.
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,

2022
2021
2020
(in millions of R$, except percentages)
Loans and advances to customers, gross 524,655 493,355 417,822
Impaired assets 39,224 26,923 23,176
Provisions for impairment losses 35,212 29,723 25,640
Credit risk exposure Non-GAAP – customers (1) 568,338 540,873 466,104
Ratios
Impaired assets to credit risk exposure 6.9% 5.0% 5.0%
Coverage ratio (2) 89.8% 110.4% 110.6%
Impairment losses (24,829) (17,113) (17,450)
Losses on other financial instruments not measured at fair value (3) — — —
Impairment losses on financial assets (net) (4) (24,829) (17,113) (17,450)
(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$568,338 million as of December 31, 2022 and guarantees and documentary credits amounting to R$43,682 million as of December 31, 2022. 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, 2022, 2021 and 2020, our total of impairment losses on financial instruments included R$1,174 million, R$1,191 million and R$1,577 million, respectively, relating to debt instruments.
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The following chart shows our impaired assets to credit risk ratio from 2020 through 2022:
Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2022, 2021 and 2020.
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,
2022 2021 2020
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 35,212 29,723 25,640
Total loans outstanding 524,655 493,355 417,822
Credit ratio 6.71 % 6.02 % 6.14 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 39,224 26,923 23,176
Total loans outstanding 524,655 493,355 417,822
Credit ratio 7.48 % 5.46 % 5.55 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 35,212 29,723 25,640
Total nonaccrual loans outstanding 39,224 26,923 23,176
Credit ratio 89.8 % 110.4 % 110.6 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (18,340 ) (12,935 ) (15,297 )
Average amount outstanding 490,960 471,068 394,542
Credit ratio 3.7 % 2.7 % 3.9 %
Commercial and industrial:
Net charge-offs during the period (4,920 ) (5,184 ) (4,745 )
Average amount outstanding 219,950 214,286 176,750
Credit ratio 2.2 % 2.4 % 2.7 %

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Real estate:
Net charge-offs during the period (115 ) (167 ) (232 )
Average amount outstanding 56,724 51,883 42,368
Credit ratio 0.2 % 0.3 % 0.5 %
Installment loans to individuals:
Net charge-offs during the period (13,295 ) (7,576 ) (10,433 )
Average amount outstanding 211,653 202,578 173,336
Credit ratio 6.3 % 3.7 % 6.0 %
Lease financing:
Net charge-offs during the period (11 ) (8 ) (15 )
Average amount outstanding 2,647 2,321 2,089
Credit ratio 0.4 % 0.3 % 0.7 %
Allowance for credit losses to total loans outstanding
In 2022, our allowance for credit losses to total loans outstanding credit ratio increased by 69 basis points, from 6.02% as of December 31, 2021 to 6.71% as of December 31, 2022. This was primarily due to the growth in allowance for credit losses, driven by a recent increase in inflation, which primarily affected loans to individuals.
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.
Nonaccrual loans to total loans outstanding
In 2022, our nonaccrual loans to total loans outstanding credit ratio increased by 202 basis points, from 5.46% as of December 31, 2021 to 7.48% as of December 31, 2022. This was primarily due to the growth in total nonaccrual loans outstanding, driven by the deterioration of the macroeconomic situation in Brazil.
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.
Allowance for credit losses to nonaccrual loans
In 2022, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20.6 p.p., from 110.4% as of December 31, 2021 to 89.8% as of December 31, 2022. This was primarily due to a single customer defaulting in our large companies portfolio.
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 20 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.
Net charge-offs during the period to average loans outstanding
In 2022, our net charge-offs during the period to average loans outstanding credit ratio increase by 100 basis points, from 2.7% as of December 31, 2021 to 3.7% as of December 31, 2022. This was primarily due to an increase of 4.2% in average loans outstanding and an increase of 41.8% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 120 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 15.4% in net charge-offs.
Commercial and Industrial Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans increased by 20 basis points, from 2.4% as of December 31, 2021 to 2.2% as of December 31, 2022. This was primarily due to an increase of 2.6% in average loans outstanding, while the net charge-offs decreased by 5.1%.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 20 basis points, from 2.7% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.2% in average loans outstanding, which was greater than the growth in net charge-offs of 9.3%.
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Real Estate Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 10 basis points, from 0.3% as of December 31, 2021 to 0.2% as of December 31, 2022. This was primarily due to an increase of 9.3% in average loans outstanding and a decrease of 31.1% in net charge-offs.
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.
Installment Loans to Individuals
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans increased by 260 basis points, from 3.7% as of December 31, 2021 to 6.3% as of December 31, 2022. This was primarily due to an increase of 4.5% in average loans outstanding and an increase of 75.5% in net charge-offs.
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 30 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.
Lease Financing Loans
In 2022, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans increased by 10 basis points, from 0.3% as of December 31, 2021 to 0.4% as of December 31, 2022. This was primarily due to an increase of 14.0% % in average loans outstanding and an increase of 37.5% in net charge-offs.
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.
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 February 24, 2023, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
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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 as of December 31, 2022:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A.
Santander Leasing S.A. Arrendamento Mercantil Leasing Brazil 100.00 %
Aymoré Crédito, Financiamento e Investimento S.A. Financial Brazil 100.00 %
Santander Brasil Administradora de Consórcio Ltda. Buying club Brazil 100.00 %
Santander Corretora de Câmbio e Valores Mobiliários S.A. Broker Brazil 99.99 %
Santander Corretora de Seguros, Investimentos e Serviços S.A. Broker Brazil 100.00 %
Sancap Investimentos e Participações S.A. Holding Brazil 100.00 %
Santander Holding Imobiliária S.A. Holding Brazil 100.00 %
F1RST Tecnologia e Inovação Ltda. Other Activities Brazil 100.00 %
Rojo Entretenimento S.A. Other Activities Brazil 94.60 %
Sanb Promotora de Vendas e Cobrança Ltda. Other Activities Brazil 100.00 %
BEN Benefícios e Serviços Instituição de Pagamentos S.A. Means of Payment Brazil 100.00 %
Esfera Fidelidade S.A. Other Activities Brazil 100.00 %
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. Technology Brazil 80.00 %
SX Negócios Ltda. Other Activities Brazil 100.00 %
SX Tools Soluções e Serviços Compartilhados Ltda. Other Activities Brazil 100.00 %
Liderança Serviços Especializados em Cobranças Ltda. Collection Management and Credit Recovery Brazil 100.00 %
Return Capital S.A. Collection Management and Credit Recovery Brazil 100.00 %
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Capitalization Brazil 100.00 %
Evidence Previdência S.A. Private Pension Brazil 100.00 %
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. (6) Bank Brazil 50.00 %
Banco Hyundai Capital Brasil S.A  (current name of BHJV Assessoria e Consultoria Empresarial Ltda.) Bank Brazil 50.00 %
Solutions 4 Fleet Consultoria Empresarial S.A. Tecnology Brazil 80.00 %
Controlled by Santander Leasing S.A Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00 %
Santander Distribuidora de Títulos e Valores Mobiliários S.A. Distributor Brazil 100.00 %
Controlled by Santander Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários S.A. Broker Brazil 63.00 %
Toro Investimentos S.A. Investments Brazil 14.78 %
Controlled by Toro Corretora de Títulos de Valores Mobiliários S.A.
Toro Investimentos S.A. Investments Brazil 76.55 %
Controlled by Sancap
Santander Auto S.A. Technology Brazil 50.00 %
Consolidated Investment Funds
Santander Fundo de Investimento Unix Multimercado Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado Investment Fund Brazil (a)
Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior Investment Fund Brazil (a)
Santander Paraty QIF PLC (1) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (1) Investment Fund Brazil (a)
BRL V – Fundo de Investimento Imobiliário – FII Real Estate Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado Investment Fund Brazil (a)
Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos Investment Fund Brazil (a)
Atual – Fundo de Investimento Multimercado Credito Privado Investimento no Exterior Investment Fund Brazil (a)
Verbena FCVS – Fundo de Investimento em Direitos Creditórios Investment Fund Brazil (a)
Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI – Não Padronizado Investment Fund Brazil (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) 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.
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4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 338 properties for the activities of our banking network and rent 1,681 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.
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, 2022, 2021 and 2020 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, 2022, 2021 and 2020, 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, 2022, 2021 and 2020 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.
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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$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off. For additional information, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Brazilian Macroeconomic Environment
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil. While Brazilian GDP increased in 2022, due in part to fiscal incentives granted by the Brazilian government and the resumption of activities that were suppressed by restrictions imposed to curb the spread of COVID-19, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
As of and For the Year Ended December 31,
2022 2021 2020
GDP growth(1) 3.0 % 4.6 % (4.1 )%
CDI Rate 12.4 % 4.4 % 2.1 %
TJLP 7.2 % 5.3 % 4.6 %
SELIC rate 13.75 % 9.25 % 2.00 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.22 5.58 5.20
Depreciation (appreciation) of the real against the U.S. dollar (6.5 )% 7.4 % 28.9 %
Average real to U.S. exchange rate per U.S.$1.00(2) 5.17 5.40 5.16
Inflation (IGP-M) 5.5 % 17.8 % 23.1 %
Inflation (IPCA) 5.8 % 10.6 % 4.5 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2022 is based on Santander Brasil’s internal estimates. For 2021, the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
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 also 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. In 2022, the relaxation of COVID-19 restrictions and continued fiscal incentives granted by Brazilian government have supported Brazilian GDP growth, which we estimate to have been 3.0% in 2022.
However, the macroeconomic outlook for 2023 is marred by high inflation, high interest rates, a deteriorating global economic outlook, continued political uncertainty following the presidential elections held in Brazil in the last quarter of 2022, and continued uncertainty regarding the course of the COVID-19 pandemic. 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. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—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.”
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Impact of COVID-19
Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment. 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 safe-guard 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—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.”
War in Ukraine
The ongoing war between Russia and Ukraine has caused an ongoing humanitarian crisis in Europe as well as volatility in financial markets globally, heightened inflation, shortages and increases in the prices of energy, oil, gas and other commodities. In response to the Russian military action against Ukraine, several countries, including the United States, the European Union member states, the United Kingdom and other UN member states, have imposed severe sanctions on Russia and Belarus. Furthermore, the risk of cyberattacks on companies and institutions could increase as a result of the military conflict and in response to the sanctions imposed, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures. The continuance or escalation of the war, including its extension to other countries in the region, could lead to further increases in energy, oil and gas prices (particularly if supplies to Europe are interrupted) and heightened inflationary pressures, which in turn could lead to further increases in interest rates and market volatility. In addition, the war has exacerbated supply chain problems, particularly to those businesses most sensitive to rising energy prices. The war and its effects could exacerbate the current slowdown in the global economy and could negatively affect the payment capacity of some of our customers, especially those with more exposure to the Russian or Ukrainian markets.
While we do not have a physical presence in Russia and Ukraine and our direct exposure to Russian or Ukrainian markets and assets is not material, the impact of the war in Ukraine and the sanctions imposed on global markets and institutions, the impact on macroeconomic conditions generally, and other potential future geopolitical tensions and consequences arising from the war remain uncertain and may exacerbate our operational risk. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic Conditions in Brazil and Globally—The war in Ukraine could materially affect our financial position and increase our operational risk.”
Interest Rates
In 2021, the Brazilian Central Bank began a monetary tightening cycle due to rising inflation, the depreciation of the real, and a perception of the recovery of certain economic activity following the easing of restrictions which had been imposed to suppress the circulation of COVID-19. The SELIC rate increased from 2.0% as of December 31, 2020 to 9.25% as of December 31, 2021 and 13.75% as of December 31, 2022 (the highest level since the end of 2016), a level at which it remains as of the date of this annual report.
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.
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The following table presents the low, high, average and period end SELIC rate since 2018, as reported by the Brazilian Central Bank:
Low High(1) Average(2) Period-End
Year
2018 6.50 7.00 6.58 6.50
2019 4.50 7.00 6.58 6.50
2020 2.00 4.50 2.87 2.00
2021 2.00 9.25 4.57 9.25
2022 9.25 13.75 12.57 13.75
2023 (through February 27, 2023) 13.75 13.75 13.75 13.75
(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, 2022, a 100-basis point increase in the yield curve would have resulted in R$945 million decrease in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2020, outstanding credit increased 10.5% 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 4.2% in 2020, while the household debt burden decreased to 22.4% 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 5.7% 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 (in December 2021, the former climbed to 4.4% and the latter reached 26.5% of household income). In 2022, outstanding credit increased 7.7% compared to 2021, the ratio of nonperforming loans to individuals reached 5.9% and the household debt burden reached 28.2% of household income.

As of December 31,

2022
2021
2020
(in billions of R$)
Total Credit Outstanding (1) 5,326 4,944 4,677
Earmarked credit 2,151 1,991 1,977
Non-earmarked based credit 3,175 2,953 2,700
of which:
Corporate 1,404 1,351 1,267
Individuals (retail) 1,771 1,602 1,433
(1) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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 2022, we recorded foreign exchange exposure of R$83.5 million, foreign exchange exposure of R$117.4 million in 2021 and foreign exchange exposure of negative R$124.4 million in 2020. 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, 2022, 2021 and 2020—Results of Operations—Gains (losses) on Financial Assets and Liabilities (net) and Exchange Differences (net).”
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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.$1.00. In 2022, there was significant volatility in the R$/U.S.$ exchange rate, which fluctuated within a wide band that ranged from R$4.62 to R$5.70 per U.S.$1.00 as a result of ongoing economic and political certainty both globally and within Brazil. As of December 31, 2022 the exchange rate was R$5.22 per U.S.$1.00. In 2023, through the date of this annual report, the real appreciated against the U.S. dollar as a result of improvements in commodity prices and better than expected fiscal results derived from higher revenues. As of February 27, 2023, the exchange rate was R$5.20 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. In 2022, as inflation increased to levels not seen since early 2003, as a result of which the Brazilian Central Bank increased the SELIC rate to 13.75% (the highest level since the end of 2016). 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 CMN’s 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 increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Similarly to the beginning of 2018, the Brazilian Central Bank delivered a letter to the CMN explaining why it failed to meet the inflation target and what actions would be implemented to ensure that inflation would converge to target in coming years. In 2022, inflationary pressures escalated in Brazil, including as a result of the ongoing war between Ukraine and Russia, supply chain issues, the continued COVID-19 pandemic (particularly in China) and increases in energy prices. As a result, inflation peaked in 2021 at multiple-year highs of 12.1% in Brazil in April 2022 (as measured by the IPCA in year-over-year terms) and 9.1% in the U.S. in June 2022 (as measured by the Consumer Price Index), the highest levels since 2003 in Brazil and 1981 in the United States. Accumulated inflation for the year ended December 31, 2022, was 5.79% in Brazil and 6.5% in the United States. This resulted in tighter monetary policy by the Brazilian Central Bank, which increased the SELIC rate from a low of 2.0% as of the end of 2020 to 13.75% as of August 2022, a level at which it has remained as of the date of this annual report.
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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 2022, 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$945 million within a one-year period. 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 the IGP-M. For example, considering the amounts in 2022, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$92 million and R$81 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, 2022 As of December 31, 2021 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 26.50 % 25.00 % Loans Cap rate: 12.0% 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) 50.50 % 52.00 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.y.
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 %

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Time deposits
Reserve requirements(3) 20.00 % 20.00 % 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 % 80.00 %
(1) Rural credits are credits granted to farmers in the amount of R$16.2 billion and R$13.6 billion as of December 31, 2022 and 2021, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of R$2.7 billion as of December 31, 2022 and R$1.9 billion December 31, 2021, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the possibility of any deduction on its website (rule numbers 189, 188 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.
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 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 2022, 2021 and 2020, 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.
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As of December 31,

2022
2021
2020
(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) 5.1% 4.8% 4.3%
Discount rate(3) 12.9% 12.3% 12.4%
(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 2022.
(3) The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 20.10% in 2022, 18.77% in 2021 and 19.56% in 2020.
(*) A quantitative goodwill impairment test is performed annually. At the end of each exercise, an analysis is carried out on the existence of appearances of disability. For the years 2022, 2021 and 2020 there was no evidence of impairment. In the goodwill impairment test, carried out considering the December 2022 scenario, and whose discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows, it was found that these continue to indicate the absence of 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
In addition, our results of operations have been influenced and will continue to be influenced by the other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events,” including the Spin-Off of Getnet.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
General
Our main accounting policies are described in note 2 to our audited consolidated financial statements. The following discussion describes areas that require use of certain critical accounting estimates and the exercise 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 apply such estimates for different durations a material impact on our financial condition and results of operations 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 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.”
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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 between market participants, in a transaction on the 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.
We use derivative financial instruments for both trading and nontrading activities. The main types of derivatives used are interest rate swaps, options and future rate agreements; foreign exchange forwards, futures, options, and swaps; 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 markets 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.
· 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 nonlinear 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 estimates and a sensitivity analysis for the valuation of financial instruments to those changes in 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.
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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);
· for equity instruments, 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 nonperforming 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 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:
· all amounts that are expected to be obtained over the 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).
We 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 and calculation of amounts necessary to cover the related credit risk.
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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 risk. 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 situation; level of indebtedness; ability to generate income; cash flow; management; corporate governance and quality of internal controls; payment history; industry expertise; and contingencies and credit 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 credit risk, or 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.
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.
· 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.
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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. 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 was identified in 2022, 2021 and 2020. 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 debt securities, such information includes 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 2022, 2021 and 2020 (see notes 14, 13 and 12, respectively, to our audited consolidated financial statements included elsewhere in this annual report).
Post-employment Benefit Plan
The post-employment benefit 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.
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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 this 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 and 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 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.
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 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 as of December 31, 2020. These deductions had a corresponding impact on our total assets and liabilities as of December 31, 2020 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 year ended December 31, 2020. There was no change in the balance of stockholders’ equity or income. The financial information as of and for the year ended December 31, 2020 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.
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New Accounting Standards
The new IFRS standards effective after January 1, 2023, are mentioned in our audited consolidated financial statements included in this annual report. For further information, see note 1 to our audited consolidated financial statements included elsewhere in this annual report.
All accounting policies and measurement bases with a material effect on the consolidated financial statements for 2022 were applied in the preparation of such financial statements.
Results of Operations for the Years Ended December 31, 2022, 2021 and 2020
Executive Summary – Santander Brasil Results at a glance
Total Income amounted to R$66,475 million in 2022, an increase of 4.0%, or R$2,548 million in comparison with the year ended December 31, 2021, driven by an increase of gains on financial assets and liabilities (net) and exchange differences (net), offset by a decrease on net interest income due to the impact of interest rate increases on the cost of funding.
Consolidated Net Income totaled R$14,339 million, in the year ended December 31, 2022, a decrease of 7.8% compared to the year ended December 31, 2021, mainly due to: (i) an increase of 4.0% in total income as described above, (ii) the increase in impairment losses on financial assets of 45.1% in 2022 driven by the individual loans portfolio and a specific case of large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, (iii) a 5.3% increase in administrative expenses in 2022 due to the increase in inflation in the period (with inflation reaching 5.8% in 2022), and (iv) reduction in tax rates from 37.1% to 26.7%. For further information, see note “c.1) Lawsuits and Administrative Proceedings – related to Tax and Social Security “in our audited consolidated financial statements included elsewhere in this annual report
Loan Portfolio to customers amounted to R$524 billion as of December 31, 2022, an increase of 6.3% compared to December 31, 2021, mainly due to the increases in the portfolio of loans to individuals, especially payroll mortgage, credit cards and personal credit.
Credit Quality remains at reasonable levels and supports our growth. Impaired assets to credit risk ratio was 6.9% for the year ended December 31, 2022, a 1.9 p.p. increase as compared to the previous year. Coverage ratio was 89.8% in the year ended December 31, 2022, a 20.6 p.p. decrease from 110.4% the year ended December 31, 2021. Our Basel Capital adequacy ratio was 13.9% in the year ended December 31, 2022, a decrease of 1.0 p.p. compared to the year ended December 31, 2021.
Deposits from the Brazilian Central Bank and deposits from credit institutions plus customer deposits increased by 2.7% reaching R$606 billion in 2022.
Results of Operations
The following table presents our consolidated results of operations for the years ended December 31, 2022, 2021 and 2020:
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For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Net interest income 47,503 51,318 44,443 (7.4 ) 15.5
Income from equity instruments 38 90 34 (57.7 ) 166.8
Income from companies accounted for by the equity method 199 144 112 38.1 28.6
Net fee and commission income (expense) 14,876 15,274 16,228 (2.6 ) (5.9 )
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) 4,699 (1,781 ) (11,703 ) (363.9 ) (84.8 )
Other operating income (expenses) (net) (841 ) (1,120 ) (873 ) (24.9 ) 28.3
Total income 66,475 63,926 48,242 4.0 32.5
Administrative expenses (18,240 ) (17,316 ) (17,115 ) 5.3 1.2
Depreciation and amortization (2,586 ) (2,434 ) (2,579 ) 6.2 (5.6 )
Provisions (net) (1,215 ) (2,179 ) (1,657 ) (44.2 ) 31.6
Impairment losses on financial assets (net) (24,829 ) (17,113 ) (17,450 ) 45.1 (1.9 )
Impairment losses on other assets (net) (161 ) (166 ) (85 ) (2.6 ) 95.3
Other nonfinancial gains (losses) 131 33 308 304.4 (89.5 )
Operating income before tax 19,575 24,750 9,664 (20.9 ) 156.1
Income tax (5,235 ) (9,191 ) 3,787 (43.0 ) (342.7 )
Consolidated net income for the year 14,339 15,559 13,451 (7.8 ) 15.7
Consolidated Net Income for the Year
Our consolidated net income for the year ended December 31, 2022, was R$14,339 million, a decrease of R$1,220 million, or 7.8%, as compared to our consolidated net income of R$15,559 million for the year ended December 31, 2021, primarily due to an increase in impairment losses on financial assets of R$7,716 million, or 45.1%, to R$24,829 million in the year ended December 31, 2022 from R$17,113 million in the year December 31, 2021 driven by the deterioration of the credit portfolio which was impacted by a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings, and a decrease in net interest income of R$3,815 million, or 7.4%, to R$47,503 million in the year ended December 31, 2022 from R$51,318 million in the year December 31, 2021 mainly due to an increase in prevailing interest rates in Brazil as a result of the Brazilian Central Bank’s increases in the SELIC rate to suppress inflation and a decrease in income and fees received from customers as a result of more selective credit and services policies and an increase in the cost of our liabilities as a result of higher interest rates.
Our consolidated net income for the year ended December 31, 2021, was R$15,559 million, an increase of R$2,109 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$6,876 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.
Net Interest Income
Net interest income for the year ended December 31, 2022, was R$47,503 million, a 7.4% or R$3,815 million decrease from R$51,318 million for the year ended December 31, 2021. This decrease was mainly due to the increase in interest rates, which increased the pressure on our margins, as partially offset by an increase in gains/losses on financial assets and liabilities (net) and exchange differences (net).
Average total earning assets in 2022 were R$903.4 billion, a 7.13% or R$60.1 billion increase from R$843.3 billion in 2021. The principal drivers of this increase were an increase of R$42.4 billion, or 9.2%, in the average of loans and advance to customers and an R$11.2 billion decrease in average of debt instruments.
Net yield (net interest income divided by average earning assets) in 2022 was 5.3% and 6.1% in 2021. Net yield (net interest income divided by average earning assets) was 6.1% in 2021 compared to 6.0% in 2020.
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Average total interest-bearing liabilities in 2022 were R$673.0 billion, a 3.9% or R$25.3 billion increase from R$647.8 billion in 2021. The main driver of this growth was an increase of R$18.6 billion in customers deposits as a result of a change in consumer preferences towards interest bearing assets.
Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was 2.7% in 2022, mainly due to the increase in interest rates in Brazil in 2022, which put pressure on our margins.
Net interest income for the year ended December 31, 2021, was R$51,318 million, a 15.5% or R$6,876 million increase from R$44,443 million for the year ended December 31, 2020. This increase was mainly due to a 15.7% increase in our credit portfolio driven by our Commercial Banking unit.
Average total earning assets in 2021 were R$843.2 billion, a 12.4% or R$93.2 billion increase from R$750.1 billion in 2020. The principal drivers were an increase of R$76.8 billion, or 20.0%, in the average of loans and advance to customers and an R$21.3 billion increase in average of debt instruments. Net yield (net interest income divided by average earning assets) was 5.86% in 2021 compared to 5.93% in 2020, a decrease of 0.07 p.p.
Average total interest-bearing liabilities in 2021 were R$647.7 billion, a 13.0% or R$74.3 billion increase from R$573.4 billion in 2020. The main driver of this growth was an increase of R$40.1 billion in customers deposits and R$37.4 billion in deposits from the Brazilian Central Bank and deposits from credit institutions, as a result of a shift in 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 4.8% in 2021, mainly due to the increase in the SELIC rate during the year ended December 31, 2021, from 2.0% as of December 31, 2020 to 9.25% as of December 31, 2021.
Income from Equity Instruments
Income from equity instruments for the year ended December 31, 2022, totaled R$38 million, a R$52 million decrease from R$90 million for the year ended December 31, 2021, mainly due to higher dividends gains from an investment fund, Santander Fundo de Investimento Amazonas Multimercado Credito Privado de Investimento no Exterior, in 2021 as compared to 2022.
Income from equity instruments for the year ended December 31, 2021, totaled R$90 million, a R$56 million increase from R$34 million for the year ended December 31, 2020, mainly due to higher dividend gains from an investment fund, Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior, as a result of gains in the equities positions towards derivatives hedge, R$84.8 million.
Income from Companies Accounted for by the Equity Method
Income from companies accounted for by the equity method for the year ended December 31, 2022 was R$199 million, a R$55 million increase from R$144 million for the year ended December 31, 2021, mainly due to an increase of R$50.6 million in the results of operations of Mobills, which we acquired in 2021.
Income from companies accounted for by the equity method for the year ended December 31, 2021 was R$144 million, a R$32 million increase from R$112 million for the year ended December 31, 2020, mainly due to an increase of R$23.5 million in the results of operations of Tecban (Tecnologia Bancária S.A.), and an increase of R$7.0 million in the results of operations of Webmotors S.A., both jointly-controlled companies.
Net Fee and Commission Income
Net fee and commission income for the year ended December 31, 2022, was R$14,876 million, a 2.6% or R$397 million decrease compared to R$15,273 million for the year ended December 31, 2021. This was primarily attributable to (i) a decrease in credit and debit cards issuances as a result of a more selective credit approval policy, (ii) the Spin-Off of Getnet (in the first quarter of 2021), (iii) a decrease in fees from current and account services (as a result of annual fee exemption campaigns and the increasing use of PIX by customers as an alternative to traditional banking services). This was partially offset by an increase in collection and payment services and asset management and pension funds.
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Net fee and commission income for the year ended December 31, 2021, reached R$15,273 million, a 5.9% or R$955 million decrease compared to R$16,228 million for the year ended December 31, 2020, impacted mainly due to decrease of credit and debit cards, due 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 pension funds.
Net fees and commissions from trade finance totaled R$1,825 million for the year ended December 31, 2022, an increase of 3.8% compared to the year ended December 31, 2021.
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 insurance and capitalization totaled R$4,357 million for the year ended December 31, 2022, an increase of 1.1% compared to the year ended December 31, 2021. This increase was mainly a result of an increase in our life insurance portfolio.
Net fees and commissions from insurance and capitalization totaled R$4,311 million for the year ended December 31, 2021, an increase of 12.5% compared to the year ended December 31, 2020. This increase was mainly a result of an increase in our credit life insurance portfolio.
Net fees and commissions from credit and debit cards totaled R$3,151 million for the year ended December 31, 2022, a decrease of 14.1% compared to the year ended December 31, 2021. This decrease was mainly a result of (i) a decrease in credit and debit cards issuances as a result of a more selective credit approval policy (ii) the Spin-Off of Getnet (in the first quarter of 2021).
Net fees and commissions from credit and debit cards totaled R$3,666 million for the year ended December 31, 2021, a decrease of 28.8% compared to the year ended December 31, 2020. This decrease was mainly a result of the Spin-Off of Getnet.
The following table reflects the breakdown of net fee and commission income for the years ended December 31, 2022, 2021 and 2020:
For the Year Ended December 31
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Current account services 3,267 3,549 3,716 (8.0 ) (4.5 )
Collection and payment services 1,790 1,626 1,459 10.1 11.4
Insurance and capitalization 4,357 4,311 3,831 1.1 12.5
Asset Management and pension funds 1,600 1,418 1,114 12.8 27.3
Credit and debit cards 3,151 3,666 5,151 (14.1 ) (28.8 )
Capital markets 1,112 1,053 858 5.5 22.8
Trade finance 1,825 1,758 1,740 3.8 1.0
Tax on services (687 ) (712 ) (678 ) (3.6 ) 5.1
Others (1,538 ) (1,396 ) (964 ) 10.2 44.8
Total 14,876 15,273 16,229 (2.6 ) (5.9 )
Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net)
Gains on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2022, amounted to R$4,699 million, an increase of R$6,480 million compared to losses of R$1,781 million for the year ended December 31, 2021. This variation is mainly due to (i) gains of R$3,985 million related to net gains or losses from hedge accounting and (ii) gains of R$426 million related to financial instruments not measured at fair value through profit or loss. For further information, see notes 36 and 37 to our audited consolidated financial statements – included elsewhere in this annual report.
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Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2021, amounted to losses of R$1,781 million, a gain of R$9,922 million over the losses of R$11,703 million for the year ended December 31, 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) amounted to gains of R$731 million for the year ended December 31, 2021, a R$1,149 million, increase from gains of R$1,880 million compared to the year ended December 31, 2020, mainly due to the positive results in our derivative position.
The following table presents our gains/losses on financial assets and liabilities (net) and exchange differences (net) for the periods indicated.
For the Year Ended December 31
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) 4,699 (1,781 ) (11,703 ) n.m. (84.8 )
Effects of the hedge for investments held abroad (129 ) 2,512 13,583 n.m. (81.5 )
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) excluding effects of the hedge for investments held abroad(1) 4,570 731 1,880 524.8 (61.1 )
(1) Gains (losses) on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge for investments 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.”
Other Operating Income/Expenses
Other operating expenses for the year ended December 31, 2022 amounted to R$841 million, a decrease of R$279 million compared to expenses of R$1,120 million for the year ended December 31, 2021, mainly due to lower expenses with the Benefit Guarantor Fund — FGB (Fundo Garantidor de Benefícios) pension plan and greater expenses with FGC pension plans 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, 2021, other operating income/expenses were expenses of R$1,120 million, compared to expenses of R$873 million for the year ended December 31, 2020.
Administrative Expenses
Administrative expenses for the year ended December 31, 2022, were R$18,240 million, a R$924 million increase compared to expenses of R$17,316 million for the year ended December 31, 2021, mainly due to the increase in expenses with wages and salaries, technology/systems and technical services, resulting from the increase in inflation in the period.
For the year ended December 31, 2021, our administrative expenses of R$17,316 million reflected a R$202 million increases compared to expenses of R$17,115 million for the year ended December 31, 2020, mainly due personal expenses and technology/systems expenses, due to the growth of the business.
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Personnel expenses increased R$871 million for the year ended December 31, 2022, mainly due to higher employee wages and salaries deriving from our collective bargaining with employees in 2021, which impacted the first eight months of 2022, and our 2022 collective bargaining agreement, which impacted the final four months of the year.
In the year ended December 31, 2021, our personnel expenses increased R$154 million, primarily resulting from higher employee wages and salaries, deriving from the collective bargaining agreement applied to the Company’s salary base from September 2021.
The following table sets forth our personnel expenses for each of the periods indicated:
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Wages and salaries 6,311 5,905 5,730 6.9 3.1
Social security costs 1,431 1,153 1,222 24.1 (5.6 )
Benefits 1,603 1,435 1,390 11.7 3.2
Training 60 55 49 9.4 12.0
Other personnel expenses 492 478 480 2.9 (0.4 )
Total 9,896 9,026 8,871 9.6 1.7
Other administrative expenses increased R$52 million to R$8,343 million for the year ended December 31, 2022, from R$8,291 million for the year ended December 31, 2021, mainly as a result of greater expenses with property, fixtures and supplies and technology and systems, resulting from the inflationary pressures, which was partially offset by the decrease in expenses for advertising.
Other administrative expenses increased R$47 million to R$8,291 million for the year ended December 31, 2021, from R$8,243 million for the year ended December 31, 2020, mainly as a result of greater expenses with property, fixtures and supplies and technology and systems, resulting from the expansion of our business, which was partially offset by the decrease in expenses for communications.
The following table sets forth our other administrative expenses for each of the periods indicated:
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Specialized and technical services 2,229 2,184 2,171 2.1 0.6
Property, fixtures and supplies 896 889 744 0.8 19.5
Technology and systems 2,577 2,474 2,355 4.1 5.1
Advertising 541 621 654 (12.9 ) (5.0 )
Communications 422 353 649 19.5 (45.6 )
Per diems and travel expenses 73 72 69 1.6 2.6
Taxes other than income tax 149 202 280 (26.4 ) (27.7 )
Surveillance and cash courier services 549 598 595 (8.2 ) 0.5
Insurance premiums 22 22 17 (1.7 ) 31.6
Other administrative expenses 887 874 710 1.3 23.3
Total 8,343 8,291 8,243 0.7 0.6
The efficiency ratio, which we calculate as total administrative expenses divided by total income, increased to 27.4% in the year ended December 31, 2022, as compared to 27.1% for the year ended December 31, 2021. This increase of 0.35 p.p. in the ratio is primarily due to an increase in administrative expenses, resulting from the increase in inflation in the period, and the effect of a more selecting credit approval policy, which put pressure on our revenue.
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The efficiency ratio, which we calculate as total administrative expenses divided by total income, decreased to 27.1% in the year ended December 31, 2021, as compared to 35.5% for the year ended December 31, 2020. This decrease of 8.4 p.p. in the ratio is primarily due to the effects of the hedge for investment held abroad and the growth in net interest income driven by the increase in the volume of the credit portfolio.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2022, was R$2,586 million, a 6.2% or R$152 million increase from R$2,434 million for the year ended December 31, 2021, primarily due to greater expenses with the amortization of hardware and software items, resulting from investments made in this period.
For the year ended December 31, 2021, depreciation and amortization was R$2,434 million, a 5.6%, or R$145 million, decrease from R$2,579 million for the year ended December 31, 2020, primarily due to the decrease in expenses with the amortization of hardware and software, which was primarily due to the volume of assets not deployed or under development and the effect of write-offs.
Provisions (Net)
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$1,215 million for the year ended December 31, 2022, a 44.2%, or R$964 million, decrease compared to R$2,179 million for the year ended December 31, 2021. This was primarily due to a decrease in civil and labor proceedings due to a revision of our operational model and the creation of provisions related to legal proceedings brought by the Association of Retired Banespa Employees (Associação dos Funcionários Aposentados do Banco do Estado de São Paulo), or AFABESP, in which the classification of the risk of loss was maintained as probable in December 2022.
In the year ended December 31, 2021, provisions (net) totaled R$2,179 million for the year ended December 31, 2021, a 31.6%, or R$522 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.
Impairment Losses on Financial Assets (Net)
Impairment losses on financial assets (net) for the year ended December 31, 2022 were R$24,829 million, an R$7,716 million increase compared to R$17,113 million for the year ended. December 31, 2021, driven by the deterioration of macroeconomic conditions in Brazil and a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
Impairment losses on financial assets (net) for the year ended December 31, 2021 were R$17,113 million, an R$337 million decrease compared to R$17,450 million for the year ended December 31, 2020, primarily due to the 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 the potential effects of the COVID-19 pandemic.
Our credit risk exposure portfolio increased by R$27.5 billion to R$568.3 billion as of December 31, 2022 compared to R$540.8 billion as of December 31, 2021. Furthermore, our impaired assets increased R$12.3 billion from R$26.9 billion as of December 31, 2021 to R$39.2 billion for the year ended December 31, 2022.
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, Furthermore, our impaired assets increased R$3.7 billion from R$23.2 billion as of December 31, 2020 to R$26.9 billion for the year ended December 31, 2021.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio as of December 31, 2022 and December 31, 2021 and 2020.
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As of December 31,
2022 2021 2020
(in millions of R$, except percentages)
Loans and advances to customers, gross 524,655 493,355 417,822
Impaired assets 39,224 26,923 23,176
Provisions for impairment losses 35,212 29,723 25,640
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 568,338 540,873 466,104
Ratios
Impaired assets to credit risk exposure 6.9 % 5.0 % 5.0 %
Coverage ratio ⁽²⁾ 89.8 % 110.4 % 110.6 %
Impairment losses (24,829 ) (17,113 ) (17,450 )
Losses on other financial instruments not measured at fair value ⁽³⁾ —   —   —
Impairment losses on financial assets (net) ⁽⁴⁾ (24,829 ) (17,113 ) (17,450 )
(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$568,338 million as of December 31, 2022 and guarantees and documentary credits amounting to R$43,682 million as of December 31, 2022. 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 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, 2022, 2021 and 2020, our total of impairment losses on financial instruments included R$1,173 million, R$1,191 million and R$1,577 million, respectively, relating to debt instruments.
The following chart shows our impaired assets to credit risk ratio from 2020 through 2022:
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Impaired Assets by Type of Loan
The following table shows our impaired assets by type of loan as of December 31, 2022, 2021 and 2020.
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Commercial and industrial 14,156 11,440 10,558 23.7 8.3
Real estate 1,058 470 456 124.9 3.1
Installment loans to individuals 23,999 14,996 12,144 60.0 23.5
Lease financing 10 17 17 (41.2 ) (0.6 )
Total 39,224 26,923 23,176 45.7 16.2
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—Allowance for Loan Losses—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 or future investigations relating to corruption, diversion of public funds, money laundering fraud and other matters 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$14,156 million as of December 31, 2022, an increase of R$2,716 million, or 23.7%, compared to R$11,440 million as of December 31, 2021. This increase was due to a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings. Impaired assets in the commercial and industrial loans 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.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Allowance for Loan Losses—Methodology for Impairment Losses.”
Real Estate
Impaired assets in the real estate lending portfolio totaled R$1,058 million on December 31, 2022, an increase of R$588 million, or 125% compared to R$470 million as of December 31, 2021. The increase in impaired assets in this portfolio was primarily due to the impact on our customers of the deteriorating macroeconomic conditions in Brazil.
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. The increase in impaired assets in this portfolio was due to the effect of deteriorating macroeconomic conditions on our customers. For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Allowance for Loan Losses—Methodology for Impairment Losses.”
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Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$23,999 million as of December 31, 2022, with an increase of R$9,003 million, or 60.0% compared to R$14,996 million as of December 31, 2021. The increase in impaired assets in this portfolio was due to the impact on our customers of the deterioration of macroeconomic conditions in Brazil.
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 is mainly due to the growth of the credit portfolio and the deterioration of the macroeconomic situation in Brazil.
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.”
Lease Financing
Impaired assets in the lease financing lending portfolio totaled R$10 million on December 31, 2022, a decrease of R$7 million compared to R$17 million as of December 31, 2021 mainly due to a decrease in nonperforming loans.
Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2021, remaining similar to December 31, 2020 mainly due to a stable amount of non-performing loans.
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.”
Impairment Losses on Other Assets (Net)
Impairment losses on other assets (net) for the year ended December 31, 2022, amounted to losses of R$161 million, a decrease of R$4 million as compared to R$166 million for the year ended December 31, 2021, mainly due to impairment losses on intangible assets.
Impairment losses on other assets (net) for the year ended December 31, 2021, amounted to losses of R$166 million, an increase of R$81 million as compared to R$85 million for the year ended December 31, 2020, mainly due to more intangible asset impairment losses, which was primarily due to the obsolescence of some of our information technology equipment.
Other Nonfinancial Gains / Losses
Other nonfinancial gains amounted to R$131 million during the year ended December 31, 2022, an increase of R$99 million compared to gains of R$33 million during the year ended December 31, 2021, mainly due to nonrecurring gains from real estate gains in the year ended December 31, 2022.
During the year ended December 31, 2021, other nonfinancial gains amounted to R$33 million, a decrease of R$275 million compared to R$308 million during the year ended December 31, 2020, mainly due to positive extraordinary effects in 2020, in particular a R$169 million gain on the sale of Superdigital in the first quarter of 2020.
Operating Income Before Tax
Operating income before tax for the year ended December 31, 2022, was R$19,575 million, a decrease of R$5,175 million, or 20.9%, as compared to R$24,750 million for the year ended December 31, 2021. In the year ended December 31, 2020 our operating income before tax was R$9,664 million.
Excluding the effects of the hedge for investments held abroad operating income before tax amounted to R$19,446 million for the year ended December 31, 2022, a 28.7% decrease from R$27,262 million for the year ended December 31, 2021. In the year ended December 31, 2020, operating income before tax was R$23,247 million. Operating income before tax excluding the effects of the hedge for investment held abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
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The table below presents our operating income before tax and our operating income before tax excluding the effects of the hedge for investment held abroad for the periods presented.
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Operating income before tax 19,575 24,750 9,664 (20.9 ) 156.1
Effects of the hedge for investments held abroad (129 ) 2,512 13,583 (105.1 ) (81.5 )
Adjusted operating income before tax (1) 19,446 27,262 23,247 (28.7 ) 17.3
(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.”
Income Taxes
Income taxes expenses include income tax, social contribution, PIS and COFINS (which are social contributions due on certain income net of certain expenses). Total income taxes amounted to R$5,235 million in the year ended December 31, 2022, a decrease of 43%, or R$3,956 million, in relation to the income tax income balance of R$9,191 million in the year ended December 31, 2021. This expense decrease was mainly attributed to the following: (i) foreign exchange rate losses of R$129 million as a result of the effects of exchange rate variations on investment abroad in our subsidiary and for hedging instruments, affecting “our gains (losses) on financial assets and liabilities (net),”: and (ii) a 20.9 % or R$5,176 million decrease in operating income before tax arising from the entities' results of operations to R$19,575 million in the year ended December 31, 2022, from R$24,750 million in the year ended December 31, 2021, which was primarily due a decrease in net interest income of R$3,815 million, or 7.4 %, to R$47,503 million in the year ended December 31, 2022 from R$51,318 million in the year December 31, 2021 driven by our credit portfolio.
In the period from August 1, 2022, to December 31, 2022, as a result of Law No. 14,446/2022, there was an increase in the rate of CSLL for banks and other financial institutions, with no effects on our audited consolidated financial statements, due to the strategies we adopted to cover this increase. For more information, see note 23 to our audited consolidated financial statements included in this annual report.
Total income taxes were R$9,191 million in the year ended December 31, 2021, an increase of 342.7%, or R$12,978 million, in relation to the income tax income balance of R$3,787 million in the year ended December 31, 2020. This expense increase was mainly attributed to the following events: (i) foreign exchange rate losses of R$2,512 million as a result of the effects of exchange rate variations on investment abroad in our subsidiary and for hedging instruments, affecting our gains (losses) on financial assets and liabilities (net); (ii) a 156.1% or R$15,086 million, increase in Operating income before tax arising from the entities' results of operations to R$24,750 million in the 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$1,237 million, increase in the rate of CSLL for banks and other financial institutions for the period from July 1, 2021, to December 31, 2021, as a result of Law No. 14,183/2021. For more information, see note 24 to our audited consolidated financial statements included in this annual report.
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The following table shows our income taxes and income taxes excluding the effects of the hedge for investments held abroad for the periods indicated.
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Income taxes (5,235 ) (9,191 ) 3,787 (43.0 ) (342.7 )
Effects of the hedge for investments held abroad 129 (2,512 ) (13,583 ) (105.1 ) (81.5 )
Income taxes excluding effects of the hedge for investments held abroad (*) (5,106 ) (11,703 ) (9,796 ) (56.4 ) 19.5
(*) Income taxes excluding effects of the hedge for investments 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, 2022, 2021 and 2020
The following tables show our results of operations for the years ended December 31, 2022, 2021 and 2020, for each of our operating segments.
Commercial Banking
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Net interest income 45,618 46,236 41,457 (1.3 ) 11.5
Income from equity instruments 11 10 4 10.0 182.4
Income from companies accounted for by the equity method 148 105 84 40.1 25.4
Net fee and commission income 12,539 13,285 14,405 (5.6 ) (7.8 )
Gains/losses on financial assets and liabilities (net) and exchange differences (net) (360 ) (1,433 ) (13,515 ) (74.9 ) (89.4 )
Other operating income (expenses) (718 ) (974 ) (767 ) (26.3 ) 27.0
Total income 57,237 57,229 41,668 —   37.3
Personnel expenses (8,986 ) (8,221 ) (8,140 ) 9.3 1.0
Other administrative expenses (7,571 ) (7,697 ) (7,635 ) (1.6 ) 0.8
Administrative expenses (16,557 ) (15,918 ) (15,775 ) 4.0 0.9
Depreciation and amortization (2,480 ) (2,343 ) (2,489 ) 5.8 (5.9 )
Provisions (net) (1,208 ) (2,177 ) (1,639 ) (44.5 ) 32.8
Impairment losses on financial assets (net) (23,683 ) (17,170 ) (17,380 ) 37.9 (1.2 )
Impairment losses on other assets (net) (160 ) (164 ) (28 ) (2.1 ) 485.7
Other nonfinancial gain (losses) 131 33 308 304.4 (89.5 )
Operating income before tax 13,281 19,491 4,666 (31.9 ) 317.7
For the Year Ended December 31,
2022 2021 2020 %Change 2022/2021 %Change 2021/2020
(in millions of R$, except percentages)
Operating Income Before Tax 13,281 19,491 4,666 (31.9 ) 317.7
Effects of the hedge for investment held abroad (129 ) 2,512 13,583 (105.1 ) (81.5 )
Adjusted Operating Income Before tax (1) 13,151 22,003 18,249 (40.2 ) 20.6
(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."
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2022 and 2021
Operating income before tax attributed to the Commercial Banking segment for the year ended December 31, 2022, was R$13.3 billion, a R$6.2 billion decrease from R$19.5 billion for the year ended December 31, 2021.
·This variation was mainly due to:
· an increase of R$6.5 billion in impairment losses on financial assets (net), representing a 37.9% increase compared to the year ended December 31, 2021, mainly due to (i) an increase in the credit portfolio driven by the individual customers portfolio, despite a more selective credit approval policy, and (ii) the deterioration of the credit portfolio driven in particular by the increase in the cost of credit as a result of higher interest rates in 2022 than in 2021.
· a decrease of R$746 million in net fee and commission income due to (i) a more selective credit approval policy, and (ii) decreased fees from current and account services (as a result of annual fee exemption campaigns and as a result of the increasing use of PIX by customers as an alternative to traditional banking services).
Excluding the effects of the hedge for investments held abroad on our revenues, our operating income before taxes would have been R$13.2 billion, 40.2% lower than in the fiscal year ended December 31, 2021. 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.”
2021 and 2020
Operating income before tax attributed to the Commercial Banking segment for the year ended December 31, 2021, was R$19.5 billion, a R$14.8 billion increase from R$4.7 billion for the year ended December 31, 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$1.1 billion in net fee and commission income for the year ended December 31, 2021, compared to the year ended December 31, 2020, mainly due to the Spin-Off of Getnet.
Excluding the effects of the hedge for investments held abroad on our revenues, our operating income before taxes would have been R$22.0 billion, 20.6% higher than in the fiscal year ended December 31, 2020. Operating income excluding the effects of the hedge for investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
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Global Wholesale Banking
For the Year Ended December 31,
2022 2021 2020 % Change 2022/2021 % Change 2021/2020
(in millions of R$, except percentages)
Net interest income 1,885 5,082 2,985 (62.9 ) 70.2
Income from equity instruments 27 80 30 (66.4 ) 164.9
Income from companies accounted for by the equity method 52 39 28 33.3 37.5
Net fee and commission income 2,337 1,988 1,823 17.5 9.1
Gains/losses on financial assets and liabilities (net) and exchange differences (net) 5,060 (347 ) 1,812 n.m. (119.1 )
Other operating income (expenses) (123 ) (145 ) (105 ) (15.5 ) 37.5
Total income 9,238 6,697 6,574 37.9 1.9
Administrative expenses (1,683 ) (1,399 ) (1,340 ) 20.3 4.3
Personnel expenses (911 ) (805 ) (732 ) 13.2 10.0
Other administrative expenses (772 ) (593 ) (609 ) 30.1 (2.5 )
Depreciation and amortization (106 ) (91 ) (91 ) 16.5 0.7
Provisions (net) (8 ) (3 ) (18 ) 166.7 (85.1 )
Impairment losses on financial assets (net) (1,146 ) 57 (71 ) n.m. (180.6 )
Impairment losses on other assets (net) (1 ) (2 ) (57 ) (50.0 ) (96.7 )
Operating income before tax 6,294 5,260 4,998 19.7 5.2
n.m. = not meaningful
2022 and 2021
Operating income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, ~~2019~~2022, was R$~~3.9~~6.3 billion, a ~~11.0%,~~19.7% or R$~~385~~1,035 million increase ~~compared to~~from R$5.3 billion for the year ended December 31, ~~2018.~~
~~This variation~~2021, which was primarily due to an increase in (i) net fee income mainly due ~~to:~~
· ~~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.
~~These~~to capital markets and trade finance and (ii) gain on financial assets and liabilities and exchange difference driven by gains in financial assets measure at fair value through profit or loss held for trading. This results ~~were~~ partially offset ~~by:~~the increased in impairment losses on financial assets mainly driven by a specific case of a large customer in our wholesale segment that entered judicial recovery (recuperação judicial) proceedings.
· ~~a decrease of R$253 million in net interest income mainly lower volume in the corporate portfolio.~~
2021 and 2020
~~2018 and 2017~~
~~Profit~~Operating income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, ~~2018~~2021, was R$~~3.5~~5.3 billion, a ~~6.7%,~~5.2% or R$~~220~~262 million ~~a decrease~~increase from R$~~3.3~~5.0 billion for the year ended December 31, ~~2017.~~
~~This variation~~2020, 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.
· ~~an increase of R$812 million in impairment losses on financial assets (net) principally as a result of our risk management strategy and recovery campaigns for our customers.~~
~~These results were partially offset by:~~
· a decrease of R$437 million in gains/losses on financial assets and liabilities (net) and exchange differences (net), mainly explained by a decrease in gains from derivatives and market positions and a decrease in gains from proprietary trading.
~~5B.~~ 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 to~~must 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.
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Most of our liquidity is raised in the local market and we maintain a portfolio of ~~high quality~~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.
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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.
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 Bank~~notes 16, 17, 18, 19 and ~~Deposits from credit institutions, 17. Client deposits, 18. Marketable debt securities, 19. Subordinated liabilities and 20. Debt Instruments Eligible~~20 to ~~Compose Capital from Item 18. Financial Statements of~~our 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,
2022 2021 2020
(in millions of R$)
Customer deposits 489,953 468,961 445,814
Current accounts 26,607 41,742 35,550
Savings accounts 60,171 65,249 62,210
Time deposits 339,943 280,955 269,929
Repurchase agreements 63,232 81,014 78,124
Backed operations with Private Securities(1) 17,309 20,103 14,944
Backed operations with Public Securities 45,923 60,911 63,180
Deposits from the Brazilian Central Bank and credit institutions 116,079 121,006 131,657
Demand deposits 3,521 126 296
Time deposits(2) 87,824 75,755 76,489
Repurchase agreements 24,734 45,125 54,872
Backed operations with Private Securities(1) 70 13,478 13,844
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As of December 31,
2019 2018 2017
(in millions of R$)
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
Backed operations with Public Securities 24,664 31,647 41,028
Total deposits 606,033 589,967 577,470
Marketable debt securities 107,121 79,037 56,876
Agribusiness Credit Notes 24,045 16,989 14,747
Treasury Bills 33,713 25,074 12,750
Real Estate Credit Notes 34,854 24,021 19,979
Bonds and other securities 14,508 12,952 9,399
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital 19,538 19,641 13,120
Total Funding 732,691 688,645 647,466

(1) Refers primarily to repurchase agreements backed by ~~debentures of own issue.~~debentures.
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(2) This includes transactions with credit institutions in connection with export and import financing lines, BNDES and FINAME ~~onlending~~on-lending and abroad on other credit lines abroad.

Deposits
Customer Deposits
Our balance of customer deposits was R$~~336.5~~489.9 billion on December 31, ~~2019,~~2022, R$~~304.2~~468.9 billion on December 31, ~~2018,~~2021 and R$~~276.0~~445.8 billion on December 31, ~~2017,~~2020, representing ~~64.8%~~66.9%, ~~61.1%~~68.1% and ~~63.5%~~68.9% of our total funding, respectively.
Current Accounts
Our balance of current accounts was R$~~29.5~~26.6 billion on December 31, ~~2019,~~2022, R$~~18.9~~41.7 billion on December 31, ~~2018~~2021 and R$~~17.6~~35.6 billion on December 31, ~~2017,~~2020, representing ~~6.8%~~4.4%, ~~4.7%,~~7.1% and ~~4.9%~~6.2% of total deposits, respectively.
~~Customer~~ Savings ~~Deposits~~
Accounts
Our balance of ~~customer~~ savings ~~deposits~~accounts was R$~~49.0~~60.2 billion on December 31, ~~2019,~~2022, R$~~46.1~~65.2 billion on December 31, ~~2018~~2021 and R$~~40.6~~62.2 billion on December 31, ~~2017,~~2020, representing ~~11.3%~~9.9%, ~~11.4%~~11.1% and ~~11.4%~~10.8% of total deposits, respectively.
Customer Time Deposits
Our balance of customer time deposits was R$~~176.0~~339.9 billion on December 31, ~~2019,~~2022, R$~~191.0~~281.0 billion on December 31, ~~2018~~2021 and R$~~146.8~~269.9 billion on December 31, ~~2017,~~2020, representing ~~40.4%~~56.1%, ~~47.4%~~47.6% and ~~41.3%~~46.7% 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~~decreased to R$~~82.0~~63.2 billion on December 31, ~~2019~~2022 from R$~~48.3~~81.0 billion on December 31, ~~2018~~2021 and R$~~71.1~~78.1 billion on December 31, ~~2017,~~2020, representing ~~18.8%~~10.4%, ~~12.0%~~13.7% and ~~20.0%~~13.5% of total deposits, respectively.
Deposits from the Brazilian Central Bank and Credit Institutions
Our balance of deposits from the Brazilian Central Bank and credit institutions was R$~~99.3~~116.1 billion on December 31, ~~2019,~~2022, R$~~99.0~~121.0 billion on December 31, ~~2018~~2021 and R$~~79.4~~131.7 billion on December 31, ~~2017,~~2020, representing ~~22.8%~~19.2%, ~~24.6%~~20.5% and ~~22.3%~~22.8% of total deposits, respectively.
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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 ~~onlend~~lend 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.
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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$~~73.7~~107.1 billion on December 31, ~~2019,~~2022, R$~~74.6~~79.0 billion on December 31, ~~2018~~2021 and R$~~70.2~~56.9 billion on December 31, ~~2017,~~2020, representing ~~14.2%~~14.6%, ~~15.0%~~11.5% and ~~16.2%~~8.8% of our total funding, respectively.
Agribusiness credit notes (Letra de Crédito do Agronegócio), which are credit notes that are freely negotiable and represent an unconditional promise of payment in cash, are issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain and the exchange ~~acceptances. The balance for these instruments~~acceptances, reached R$~~14.8~~24.0 billion on December 31, ~~2019,~~2022, R$~~11.9~~17.0 billion on December 31, ~~2018,~~2021 and R$~~8.9~~14.7 billion on December 31, ~~2017.~~2020.
Treasury ~~bill instruments~~bills (Letras ~~financeiras~~Financeiras) are a funding alternative available to banks that can be characterized as senior or eligible to compose the ~~Regulatory Capital.~~regulatory capital, Pursuant to CMN Resolution ~~4,123~~No. 5,007, of ~~August 23, 2012,~~March 24, 2022, its minimum term must be 24 months and it must be issued for a minimum amount of R$300,000 for subordinated transactions and R$~~150,000~~50,000 for senior transactions. Our balance of treasury bills ~~instruments~~ totaled R$~~27.6~~33.7 billion ~~as of~~on December 31, ~~2019,~~2022, a ~~10.2% decrease~~34.5% increase from December ~~2018.~~31, 2021.
Real estate credit notes (Letras de Crédito Imobiliário) ~~decreased 21.7%~~increased 45.1%, from R$~~27.2~~24.0 billion on December 31, ~~2018~~2021 to R$~~21.3~~34.9 billion on December 31, ~~2019.~~
2022.
We undertake issuances of securities, including under our ~~U.S.$10,000,000,000~~ Global Medium Term Notes Program. Our balance of bonds and other securities was R$~~10.1~~14.5 billion on December 31, ~~2019~~2022 and R$~~4.8~~13.0 billion on December 31, ~~2018.~~2021. This change was principally due to the ~~non Replacement~~fact that in 2022 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 have~~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.” Our Notes Offering was structured as follows: (i) U.S.$1.25 billion indexed 7.25% per year with no maturity (perpetual) and interest paid semiannually; and (ii) U.S.$1.25 billion indexed 6.125% per year maturing in November 2028 and interest paid semiannually. These issuances were made through our Cayman Islands branch and as a result they do not generate liability for income tax at source. In addition, our board of directors also approved the redemption of debt instruments issued ~~U.S. dollar-denominated Notes that constitute~~to form part of our Tier 1 and Tier 2 regulatory capital, as ~~part~~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.
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In November and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our ~~plan to optimize~~Tier 2 regulatory capital, in the total amount of R$5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our ~~capital structure.~~ Tier 2 regulatory capital.
As of December 31, ~~2019~~2022, the balance for both Tier 1 and Tier 2 debt instruments was R$~~10.2~~19.5 billion compared to R$~~9.8~~19.6 billion as of December 31, ~~2018.~~2021. This ~~variation~~decrease of 0.5% was ~~caused by:~~
a) ~~new issuances on November 2018~~due to the non-replacement of certain debt instruments reaching maturity. The amount remained virtually stable when compared to 2021 as ~~of:~~
~~i.  R$1.25 billion bearing interest at 7.25% per year with~~ no ~~maturity (perpetual) and interest paid semiannually, as of May 8, 2019; and~~
~~ii.  R$1.25 billion bearing interest at 6.125% per year maturing~~notes were issued or matured 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.~~
~~Subordinated Liabilities~~
~~Our subordinated liabilities as of December 31, 2018 were repurchased on January 2019, with the approval issued by the Brazilian Central Bank on December 18, 2018. For further information, see note~~
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~~“19 - Subordinated liabilities” in “Item 18. Financial Statements”.~~
2022.
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. ~~The~~For 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 capital~~level 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
2015 2016 2017 2018 2019 2020
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 implemented~~see “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.”
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 III~~Company—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 contains~~43 to our audited consolidated financial statements ~~prepared~~included elsewhere in ~~accordance with IFRS as issued~~this 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.
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Contractual Obligations
Our contractual obligations as of December 31, 2022 are summarized as follows:
As of December 31, 2022
Total Less than 1 year 1-3 years 3-5 years More than 5 years
(in millions of R$)
Contractual Obligations
Customer deposits 489,953 361,815 85,233 42,787 119
Marketable debt securities 107,121 47,107 44,723 10,150 5,140
Debt Instruments Eligible to Compose Capital(1) 19,538 7,662 1,359 1,527 8,990
Deposits from the Brazilian Central Bank and credit institutions(2) 116,079 96,385 14,469 2,902 2,323
Total 732,691 512,969 145,784 57,366 16,572

~~5C.~~(1) ~~Research~~The table above excludes the notional and ~~Development, Patents~~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 ~~Licenses, etc.~~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, 2022 reflected assets of R$3,276 million, compared to liabilities of R$3,479 million as of December 31, 2021.
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, 2022 was R$1,554 million. From this total, R$285 million matures in up to one year, R$1,045 million matures from one year to up to five years and R$225 million matures after five years. Additionally, we have contracts with indeterminate maturities totaling R$0.7 million for the year ended December 31, 2022.
5C. Research and Development, Patents and Licenses, etc.
We do not have any ~~significant policies~~policy or ~~projects relating to~~significate 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.~~ 5D. Trend Information
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 crisis in Brazil 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;
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;
· ~~Potential inflation increases~~economic 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, 2023, 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 ~~cause an increase in interest rates~~decrease and ~~lower growth in lending activities;~~our provisions for loan losses increase;
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· ~~Continued~~a global economic downturn as a result of pandemics, epidemics or outbreaks of infectious diseases, or instability or conflicts (including the ongoing war between Russia and Ukraine), can have an adverse effect on the global market and economy, including Brazil. 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 2023, 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 or~~extensive regulation by the Brazilian government ~~intervention in~~and the ~~banking business,~~Brazilian Central Bank, among others, which could affect our margins and/or growth in lending activities;
· ~~Regulatory~~regulatory capital changes toward more restrictive rules as a response to any potential financial crisis or general macroeconomic conditions;
· ~~Decreased~~decreased liquidity in domestic capital markets;
· ~~Tax policies~~changes in taxes or other fiscal assessments that could decrease our profitability;
· ~~Currency fluctuation~~exchange rate volatility and exchange rate controls that could have an adverse impact on international investors;
· ~~Failure~~our ability to ~~adequately~~ protect ourselves against ~~risks relating to cyber-security;~~cybersecurity risks;
· ~~Our~~the effects of the ongoing war between Russia and the Ukraine or COVID-19 on the general economic and business conditions in Brazil, Latin America and globally; and
· our dependence on the proper functioning of information technology ~~systems; and~~systems.
· ~~In contrast to all the points mentioned above, a recovery in the Brazilian economy, with new reforms underway (such as~~Conversely, 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 course~~financial statements, see “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of ~~business, into several types of off-balance sheet arrangements, including lines~~Operations—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 instruments~~2 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 by~~for the ~~IASB.~~
~~5F.~~ ~~Contractual Obligations~~
~~Our contractual obligations as of~~fiscal years ended December 31, ~~2019 are summarized as follows:~~2022, 2021 and 2020, included elsewhere in this annual report.
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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.
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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.
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:
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Members of the Board of Directors:

Name
Position
Date of Birth
~~Álvaro Antonio Cardoso de Souza~~Deborah Stern Vieitas (1) ~~Chairman~~Independent Vice Chairwoman (Acting Chairwoman) ~~September 5, 1948~~August 21, 1957
~~Sergio Agapito Lires Rial~~Mario Roberto Opice Leão ~~Vice-Chairman~~Member July ~~28, 1960~~21, 1975
José Antonio Álvarez Álvarez Member January 6, 1960
José de Paiva Ferreira Member March 1, 1959
José ~~Maria Nus Badí~~García Cantera Member ~~December 9, 1950~~May 26, 1966
~~Celso Clemente Giacometti~~Angel Santodomingo Martell ~~Independent~~ Member ~~October 13, 1943~~November 16, 1965
Pedro Augusto de Melo Independent Member November 4, 1961
Deborah Patricia Wright Independent Member September 4, 1957
~~Deborah Stern Vieitas~~ ~~Independent Member~~ ~~August 21, 1957~~
Marília Artimonte Rocca Independent Member January 31, 1973
(1) On January 20, 2023, Ms. Deborah Stern Vieitas, an independent member of our Board of Directors, was designated vice chairwoman by Mr. Sérgio Agapito Lires Rial, the then chairman of the board of directors. Effective on the same day, Mr. Sérgio Agapito Lires Rial resigned from his roles as chairman of our Board of Directors, coordinator of the Nomination and Governance Committee, member of our Remuneration Committee and member of our Risk and Compliance Committee, and Ms. Vieitas took over the position of acting chairwoman until the next general shareholders’ meeting, which is scheduled to be held on April 28, 2023.
Members of the Board of Executive Officers:
Name
Position
Date of Birth
~~Sergio Agapito Lires Rial~~Mario Roberto Opice Leão Chief Executive Officer July ~~28, 1960~~21, 1975
~~Alberto Monteiro de Queiroz Netto~~ ~~Vice President Executive Officer~~ ~~November 30, 1967~~
Angel Santodomingo Martell Vice President Executive Officer and Investor Relations Officer November 16, 1965
Alessandro Tomao Vice President Executive Officer March 8, 1977
Antonio Pardo de Santayana Montes Vice President Executive Officer November 5, 1971
~~Carlos Rey~~Andrea Marques de ~~Vicente~~Almeida Vice President Executive Officer ~~February 20, 1974~~January 13, 1971
~~Ede Ilson Viani ………………….~~Carlos José da Costa André Vice President Executive Officer ~~September 5, 1967~~August 09, 1963
~~Jean Pierre Dupui~~Ede Ilson Viani Vice President Executive Officer September ~~23, 1968~~5, 1967
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Elita Vechin Pastorelo Ariaz Vice President Executive Officer ~~December 17, 1964~~March 28, 1970
~~Mário Roberto Opice Leão~~Gilberto Duarte de Abreu Filho Vice President Executive Officer ~~July 21, 1975~~August 7, 1973
~~Patricia Souto Audi~~Jean Pierre Dupui Vice President Executive Officer ~~May 15,~~September 23, 1968
Maria Teresa Mauricio da Rocha Pereira Leite Vice President Executive Officer June 21, 1967
Renato Ejnisman Vice President Executive Officer February 12, 1970
Vanessa de Souza Lobato Barbosa Vice President Executive Officer December 24, 1968
~~José Roberto Machado Filho~~Adriana Marques Lourenço de Almeida ~~Executive~~ Officer ~~August 25, 1968~~October 4, 1972
~~Amancio Acúrcio Gouveia~~Alexandre Guimarães Soares Officer ~~March 31, 1963~~August 27, 1969
Ana Paula Neves Granieri Domenici (*) Officer October 6, 1971
Ana Paula Vitali Janes ~~Vescovi….~~Vescovi Officer April ~~08,~~8, 1969
André de Carvalho Novaes Officer April 14, 1969
André Juaçaba de Almeida Officer September 27, 1974
Carlos Aguiar Neto Officer March 5, 1971
~~Cassio Schmitt~~Celso Mateus de Queiroz Officer ~~April 23, 1971~~September 19, 1974
Claudenice Lopes Duarte Officer July 25, 1972
Daniel ~~Fantossi Assa……………………………~~Mendonça Pareto (*) Officer ~~December~~July 4, 1978
Flávia Davoli (*) Officer September 12, 1975
~~Elita Vechin Pastorelo Ariaz……………………~~Francisco Soares da Silva Junior Officer ~~March 28,~~January 23, 1970
Franco Luigi Fasoli Officer September 18, 1975
Geraldo José Rodrigues Alckmin ~~Neto(*)...........~~Neto Officer September 8, 1981
Germanuela de Almeida de Abreu Officer December 6, 1975
Gustavo Alejo Viviani Officer August 26, 1975
Gustavo de Souza Fosse Officer May 14, 1972
Igor Mario Puga Officer November 10, 1981
Jean Paulo ~~Kambourakis...............~~Kambourakis Officer May ~~09,~~9, 1980
~~José Teixeira~~Luciana de ~~Vasconcelos Neto~~Aguiar Barros Officer ~~March 8, 1975~~January 3, 1980
Luis Guilherme Mattos de Oliem Bittencourt Officer December 4, 1973
Luiz Masagão Ribeiro Filho Officer September 1, 1976
~~Marino Alexandre Calheiros Aguiar~~Marilize Ferrazza Santinoni Officer ~~May, 14, 1971~~November 20, 1965
~~Rafael Bello Noya~~Murilo Setti Riedel Officer ~~October 19, 1977~~May 17, 1963
Paulo Fernando Alves Lima (*) Officer April 5, 1976
Paulo César Ferreira de Lima Alves Officer October 18, 1968
Paulo Sérgio Duailibi Officer September 28, 1966
Ramón Sanchez Díez Officer October 29, 1968
Ramon Sanchez ~~Santiago………………………~~Santiago Officer May 25, 1969
Reginaldo Antonio Ribeiro Officer May 19, 1969
Ricardo Olivare de Magalhães Officer January 26, 1979
Richard Flavio Da Silva (*) Officer June 3, 1976
Roberto Alexandre Borges ~~Fischetti………...~~Fischetti Officer August 28, 1975
Robson de Souza Rezende Officer January 24, 1967
Rogério Magno Panca Officer December 30, 1970
Sandro Kohler ~~Marcondes(*)...............................~~Marcondes Officer April 16, 1964
Sandro Mazerino Sobral Officer February 24, 1975
Sandro Rogério da Silva ~~Gamba(*)~~Gamba Officer August ~~31,1975~~31, 1975
~~Thomas Gregor Ilg~~Thomaz Antonio Licarião Rocha Officer ~~September 12, 1968~~March 2, 1977
~~Vitor Ohtsuki(*)...................................................~~Tiago Celso Abate Officer June ~~05,~~12, 1980
Vítor Ohtsuki Officer June 5, 1977
(*) Pending approval by the Brazilian Central ~~Bank~~Bank.

Below are the biographies of the members of our ~~board~~(i) Board of ~~directors~~Directors, 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 ~~board~~December 17, 2021 (election of ~~officers.~~Mario Roberto Opice Leão, Angel Santodomingo Martell); and (ii) our Board of Executive Officers, as elected at the Board Meetings held on May 3, 2021 (election of all members but Renato Ejnisman, Carlos José da Costa André, Murilo Setti Riedel, Gustavo de Souza Fosse, Sandro Mazerino Sobral, Rogério Magno Panca, Maria Teresa Mauricio da Rocha Pereira Leite, Gilberto Duarte de Abreu Filho Andrea Marques de Almeida, Ana Paula Neves Granieri Domenici, Daniel Mendonça Pareto, Flávia Davoli, Paulo Fernando Alves Lima and Richard Flavio Da Silva); 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 and Elita Vechin Pastorelo Ariaz 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, Celso Mateus de Queiroz, Luciana de Aguiar Barros, Paulo César Ferreira de Lima Alves, Paulo Sérgio Duailibi, Thomaz Antonio Licarião Rocha and Tiago Celso Abate); January 20, 2022 (election of Murilo Setti Riedel); April 29, 2022 (change of position of Gilberto Duarte de Abreu Filho from Officer to the position of Vice President Executive Officer); September 08, 2022 (change of position of Maria Teresa Mauricio da Rocha Pereira Leite from Officer to the position of Vice President Executive Officer); November 16, 2022 (election of Renato Ejnisman and Carlos José da Costa André) and January 2, 2023 (election of Ana Paula Neves Granieri Domenici, Daniel Mendonça Pareto, Flávia Davoli, Paulo Fernando Alves Lima and Richard Flavio Da Silva.
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Members of the Board of Directors:
~~Álvaro Antonio Cardoso de Souza~~Deborah Stern Vieitas. ~~Mr. Souza~~Ms. Vieitas is ~~Portuguese~~Brazilian and was born on ~~September 5, 1948.~~
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HeAugust 21, 1957. She holds ~~degrees~~a degree in ~~Economics~~public administration from FGV-SP and ~~Business Administration~~a degree in journalism from the ~~Pontifícia Universidade Católica~~School of Communications and Arts (Escola 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~~Comunicações e Artes) of the University of ~~Pennsylvania. He~~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 ~~Managing Director~~Chief Executive Officer 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)~~Brazil (Amcham Brazil). HeFrom 2015 to 2017, she was ~~also a board~~an independent member of ~~WWF International, WWF Brazil~~the board of AXA Seguros S.A. From 2008 to 2014, she was CEO 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 chairmanBoard Member of the ~~Group Board Risk Committee~~
Banco Caixa Geral – Brasil. From 2000 to 2008, as 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. On January 20, 2023, Ms. Vieitas was designated vice chairwoman by Mr. Sérgio Agapito Lires Rial, the then chairman of the board, and effective on the same day, took over the position of acting chairwoman until the next general shareholders’ meeting, which is scheduled to be held on April 28, 2023, following Mr. Rial’s resignation from his position.
Mario Roberto Opice Leão. Mr. ~~Rial~~Leão is Brazilian and was born on July ~~28, 1960.~~21, 1975. He ~~has~~holds a degree in ~~Law~~Production Engineering from the Escola Politécnica of the Universidade ~~Federal do Rio~~ de ~~Janeiro and in Economics from Universidade Gama Filho, and also holds an MBA from IBMEC in~~ São ~~Paulo,~~Paulo. He joined Santander Brasil in October 2015 as ~~well as specialization degrees from Harvard Business School, the Wharton School~~an Executive Director in Corporate and Investment Banking. In July 2017 he became Executive Vice President of ~~Business at the University~~Corporate and SMEs and a member of ~~Pennsylvania and INSEAD, in France. His professional career includes serving~~our Executive Committee. Since January 2022 he has acted as Chief Executive Officer of ~~Marfrig Global Foods S.A, Vice-President Executive Officer and World Chief Financial Officer of Cargill. He was also a member of the board of directors of Cargill for nine years. He~~Santander Brasil. Before joining Santander Brasil, he was a Managing Director ~~of Bear Stearns & Co.,~~ in ~~New York, Officer of ABN AMRO Bank~~Capital Markets at Morgan Stanley from 2008 to 2015, worked for Goldman Sachs from 2006 to 2008 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.for Citibank from 1996 to 2006.
José Antonio Álvarez ~~Álvarez~~. Mr. Álvarez is Spanish and was born on January 6, 1960. He holds a ~~bachelor’s~~Bachelor’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 ~~President~~Chairman on January 15, 2019. ~~Earlier, from 2004~~Prior to ~~2015,~~this, he ~~was~~served 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 at~~joining 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 also~~Previously, 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 ~~was~~served 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.A~~S.A., among others, and served on the supervisory boards of Santander ~~Group's~~Group’s independent subsidiaries, ~~such as~~including in 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 and~~has 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~~eBusiness Officer for Latin America, ~~for~~in the American Division of Santander Central Hispano. At the end of 2001, he ~~came back~~returned to Brazil ~~in order~~ to work ~~at Banco Banespa~~ as Vice President Executive Officer of Banco Banespa, where he was responsible for ~~the Operational~~Human 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
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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 ~~Director~~a member of Santander Brasil’s Board of Directors, and joined the ~~board business group~~Mitsubishi 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~~Risk and ~~compliance~~Compliance committee.
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José ~~Maria Nus Badí~~García Cantera. Mr. ~~Badí~~José 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. ~~Badí~~García 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.
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, has held 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 globally responsible for the Santander Group Investor Relations area. Prior to this, he was the head of Grupo Fortis in Spain and an officer and board member at Banesto Bolsa. He also worked at Usera y Morenés S.V.B. — Sociedade de Valores y Bolsa and Arthur Andersen (Deloitte). From 1996 to 2008, he acted as founding member of the nonprofit organization CFA Society in Spain, also occupying different positions including President; and from 2009 to 2014 he was Vice President of AERI’s (Asociación Española de Relaciones con Inversores) Board of Directors. He was Chairman of the Board of Directors of Webmotors S.A. from 2018 to 2021. Currently, he is Chief Executive Officer of Santander ~~Group~~Leasing S.A. Arrendamento Mercantil, Santander Corretora de Seguros, Investimentos e Serviços S.A., a member of the Advisory Board of Fundo Garantidor de Créditos (FGC) 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. and HDI Seguros Brasil. On December 17, 2021, he was elected a member of the Board of Directors of Santander Brasil.
~~Celso Clemente Giacometti~~Pedro Augusto de Melo. Mr. ~~Giacometti~~de Melo is Brazilian and was born on ~~October 13, 1943.~~November 4, 1961. He ~~holds~~has a degree in ~~Business Administration~~accounting sciences and a postgraduate degree in accounting and financial administration from the ~~Faculdade de Economia~~ São ~~Luís and graduated with an~~Judas Tadeu University of Accounting Sciences ~~degree from~~(São Paulo). Since March 2, 2020 he has occupied the ~~Faculdade de Ciências Econômicas de Ribeirão Preto.~~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 ~~started~~developed his career in ~~1960 as trainee~~the Deloitte and ~~reviewer at Citibank.~~KPMG audit areas. From ~~1963~~2008 to ~~2001~~2017, he ~~worked at Arthur Andersen, becoming a partner in 1974 and acting as~~was CEO of ~~Brazilian operations~~KPMG Brazil, in addition to being the CEO for KPMG South America from ~~1985~~2015 to ~~2000.~~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 ~~served on~~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 IBRACON – Brazilian Institute of Independent Auditors between 2009 and ~~audit committees of Lojas Marisa S.A., Tarpon Investments, TIM Participações, Sabó Autopeças and Votorantim Indústrias.~~2010. He was also a member of the ~~Fiscal Council~~Governance Committee of ~~CTEEP/ISA - Transmissão Paulista. He was also the CEO of Souto Vidigal, a holding company~~Amcham Brasil 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 Presidentexecutive of the ~~Fiscal Council and member~~Union 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.Accounting Companies – SESCON. Currently, he is an independent member of ~~our~~the Board of Directors ~~as well as a member~~and the coordinator of ~~our Compensation~~the Risk and Compliance Committee ~~and Chairman~~ of ~~our Nomination and Governance Committee.~~the Banco Santander (Brasil) S.A.
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Deborah Patricia Wright. ~~Mrs.~~Ms. 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, ~~becoming~~and 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 member~~Board Member since 2001. From 2001 to 2005, she ~~was a member~~served on the board of ~~the Escola Americana de~~Graded – The American School of São ~~Paulo’s board (Graded School).~~Paulo. From 2005 to 2006 she was a ~~member of the superior~~ board Member of CONAR ~~(National~~(Brazilian National Self-Regulatory Board of ~~Advertising Self-Regulation)~~Advertising). From 2008 to ~~2014,~~2009 she was member of Lojas Renner’s board, as well as Chairwoman of the Sustainability Committee from 2012 to 2014. She was a member of the consultative council of Eurofarma from 2013 to 2016. Currently, she is associated with: WCD Brazilian Group (Women Corporate Directors); Strategy and Innovation Committee of the IBGC (Brazilian Institute of Corporate Governance); and of the Group Gender Diversity – Women in Boards. She is also an independent member of our board of directors, a member of our nomination and~~governance committee and a chairwoman of our compensation committee.~~
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~~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 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. From 2008 to 2014, she was CEO and Board Member of the Banco Caixa Geral – Brasil. From 2000 to 2008, she was an Executive Vice President of Banco BNP Paribas Brasil, 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.
~~Marília Artimonte Rocca.~~Ms. Rocca is Brazilian and was born on January 31, 1973. She holds a degree in Business Administration from the Fundação Getúlio Vargas of São Paulo and an MBA in Business Administration from Columbia Business School, New York. She attended the Executive – Family in Business Program at Harvard Business School in Boston. Ms. Rocca began her career in the Operations Department of Walmart Brazil, and worked at the company until 1998. She had managed nonprofit organizations for six years and co-founded and was General Director of Endeavor Brazil, NGO leader in high-impact entrepreneurship, and Brava Foundation, an organization dedicated to promoting public management. She inaugurated and still develops part of the Family Office of the Lemann, Sicupira and Telles families. She also was Vice President of TOTVS and partner of Mãe Terra. Ms. Rocca was a member of the Boards of Directors of TOTVS from 2001 to 2012 and of Endeavor Brasil from 2005 to 2012. She was also a member of the Board of Directors of the ~~IBMEC Group~~Samaritano Hospital in São Paulo. From 2008 to 2014 she was a board member for Lojas Renner, a Brazilian publicly traded company, specializing in apparel retail, as well as Chairwoman of their Sustainability Committee from ~~2004~~2012 to ~~2008 and~~2014. From 2013 to 2016, she was ~~appointed to the position of~~a member of the ~~External Evaluation Committee~~Advisory Board for Eurofarma, the fourth largest Brazilian pharmaceutical company, still privately owned and not listed on the stock exchange. Currently she is associated with the following entities: Brazilian subsidiary of ~~Insper. From 2012 to 2016, Ms. Rocca served as~~WCD Group (Women Corporate Directors), 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 (American Chamber of Commerce); Amcham’s Strategic Corporate Governance Forum; and she is an ambassador of the 30% Club and WOB (Women on Boards) and has been involved in advocacy for gender diversity for over a decade. Besides that, she is an independent member of the Board of Directors, a member of the nominations and governance committee and a chairwoman of the Compensation Committee of Banco Santander ~~Brasil and from August 2016 to June 2018,~~(Brasil) S.A.
Marília Artimonte Rocca. Ms. 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 ~~Executive Director of Ticket. Currently~~vice president at TOTVS, the sixth largest software company worldwide, based in São Paulo. From 2008 to 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 ~~is CEO~~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 ~~Hinode Group~~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 ~~member of our~~ Board ~~of Directors~~Member and coordinator of the Sustainability ~~Committee.~~Committee of Banco Santander (Brasil) S.A.
Members of the Board of Executive Officers:
~~Sérgio Agapito Lires Rial~~Mario Roberto Opice Leão. 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 graduate degree in Banking at Universidade de São Paulo and an MBA in corporate finance at Fundação Getúlio Vargas do Rio de Janeiro. From 2009 to 2011, he served as Chief Financial Officer and Investor Relations Officer at CSN – Companhia Siderúrgica Nacional. Between 2011 and 2014, he was also Chief Financial Officer and Investor Relations Officer of Suzano Papel e Celulose SA. Between 2014 and 2016, he held the position of Executive Vice President at Graninvestimentos S.A. responsible for finance. In 2017, Mr. Monteiro served as Executive Vice President at Banco do Brasil S.A. in charge of the Finance, Investor Relations and M&A Departments. Currently Mr. Monteiro is the Vice President Executive Officer and Head of the Private Banking Segment of Santander Brasil. He is also a member of the Advisory Board of Santander Brasil Gestão de Recursos Ltda.
Angel Santodomingo Martell. 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
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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 ~~Law~~law 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 was the ~~Head~~head of the ~~Legal Litigation, Legal Consulting~~legal litigation, legal consulting in Labor and Pension Funds ~~Departments~~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 permanent~~Executive Director of FEBRABAN. He is also member of the ~~legal counsel~~Board of ~~FEBRABAN, where he acted from 2011 to 2015~~Directors 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.
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Antonio Pardo de Santayana Montes. Mr. Pardo de Santayana is Spanish and was born on November 5, 1971. He holds a degree in Economics and Law from the ICADE ~~School~~school 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 Analyst~~senior risk analyst for Santander Central Hispano/Santander Investment from 1998 to 2000 and senior manager of Monitor Company from 2000 to ~~2005. He~~2005, 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 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~~Andrea Marques de ~~Vicente~~Almeida. ~~Mr. Rey~~Ms. de Almeida is ~~Spanish~~Brazilian and was born on ~~February 20, 1974. He graduated~~January 13, 1971. She has a degree in ~~Law~~production engineering from the ~~Universidad Complutense~~Federal University of Rio de ~~Madrid,~~Janeiro, an MBA in Finance from IBMEC – Rio de Janeiro and ~~he became a member~~an 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 started~~areas 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. Rey~~she is our ~~Vice President~~ Executive Officer responsible for the Finance and Strategy departments.
Carlos Jose da Costa André. Mr. Carlos Jose da Costa André is Brazilian and ~~Quality department.~~was born on August 9, 1963. He ~~is also~~holds a ~~member~~degree in production engineering from the Federal University of ~~the Boards of Directors of Santander Leasing S.A. Arrendamento Mercantil, Super Pagamentos e Administração~~Rio de ~~Meios Eletrônicos S.A., Santander Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A., Zurich~~Janeiro and an MBA in finance from IBMEC/RJ. Before joining Santander Brasil ~~Seguros e Previdência S.A., Zurich Santander~~in 2021, Mr. da Costa André held positions in the management area at Banco do Brasil, ~~Seguros S.A. and Santander Brasil Establecimiento Financeiro de Crédito S.A., Administrative Officer~~occupying the position of ~~Norchem Participações e Consultoria S.A. and~~ Vice President ~~Officer~~ of ~~Santander Cultural. He is also a member~~Finance and Investor Relations at Banco do Brasil S.A. between 2020 and 2021. As one of our ~~Sustainability Committee.~~Executive Vice Presidents, Mr. da Costa André is responsible for the Wealth Management area.
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~~S.A. for 16 years as a Senior Auditor, ~~the~~ Credit Risk Management Superintendent, ~~the local~~Head of Local Currency Loans and Head ~~Officer~~
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~~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 banking~~Small & 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 ~~was~~acted as the Director responsible for ~~our retail banking branches until~~Small & 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 ~~position~~University of ~~Vice President Executive Officer, responsible for~~São 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. He~~Corporate Finance Special Program at New York University. She is ~~also~~ a member of the ~~Board~~Brazilian 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 ~~Directors~~Cameron & Hornbostel LLP in Washington, DC; between 1998 and 2001, she worked as an associate at the law firm of ~~Super Pagamentos~~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 the Human Resources area.
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 an 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 currently our Vice-President Executive Officer, in addition to being also the chief executive officer of Sancap Investimentos e ~~Administração de Meios Eletrônicos~~Participações S.A. and an executive officer of Banco Bandepe S.A.
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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 Banking~~the Vice Presidency of Subsidiaries 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 ~~Department~~department 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. and~~a member of ~~the Board of Directors of~~Curator 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 ~~Board~~boards 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 Bandepe~~S3 Caceis Brasil DTVM S.A.
~~Mário Roberto Opice Leão~~Maria Teresa Mauricio da Rocha Pereira Leite. ~~Mr. Leão~~Ms. Pereira Leite is Brazilian and was born on ~~July~~June 21, ~~1975. He~~1967. She holds a degree in ~~Production Engineering~~finance from ~~the Escola Politecnica~~Fundação Armando Alvares Penteado. Prior to joining Santander Brasil, Ms. Pereira Leite held management positions at ABN AMRO Bank N.V., Royal Bank of ~~the Universidade de São Paulo. He began his career in 1996 as an associate~~Scotland Business and Deutsche Bank. She was also CEO & Head of Corporate Banking at ~~Citigroup, in the financial control area, being the Financial Analyst of all wholesale products from Citigroup Brazil, including global markets, financing, and~~Deutsche Bank responsible for corporate banking ~~accounts. In 2006, he served as Global Markets Manager,~~products and had an active role in the development and innovation of derivatives in Brazil. From 2006 to 2008, he worked at Goldman Sachs as Fixed Income, Currencies and Commodities Manager, and, between 2008 to 2015, as Global Capital Markets Executive Superintendent of Morgan Stanley. Since October 2015, he has been part of the executive team of Santander Brasil, being responsible for wholesale banking, leading a team of 70 people servicing more than 700 large national and international companies in Brazil. This position also covers foreign exchange loans and treasury products. As one of our Vice President Executive Officers, he is also a member of our Sustainability Committee.relationships with multinational subsidiaries.
~~Patricia Souto Audi.~~Renato Ejnisman~~Ms. Audi~~. Mr. Ejnisman is Brazilian and was born on ~~May 15, 1968. She~~February 12, 1970. He holds a ~~bachelor’s~~ degree in ~~Business Administration~~physics from the University of São Paulo and ~~she is an expert~~a master’s degree and PhD in ~~public policies~~physics from the University of São Paulo and ~~government management. Between 2015 and 2018, she served as~~ the ~~secretary~~University of Transparency and Prevention of Corruption at the Brazilian Ministry of Transparency; director of Benefits at INSS (National Institute of Social Security); coordinator at ILO (International Labor Organization) in Brazil; secretary of Management at the Ministry of Planning, Budget and Management of the Federal government and secretary of the
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~~Social Development Council at Civil House, a governmental body directly connected to the Presidency of the Republic of Brazil. She joined~~Rochester, respectively. Before joining Santander Brasil, ~~in August 2018 as Executive Superintendent Head~~Mr. Ejnisman held management positions at Banco Bradesco, reaching the position of ~~the Institutional Relations Department. Since January 2019, she is~~CEO at Next. As one of our Executive Vice ~~President Executive Officers,~~Presidents, Mr. Ejnisman is responsible for the ~~Communication, Marketing, Institutional Relations~~Corporate 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.Investment Banking area.
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 ~~1992~~1990 to 1995, she served as Marketing Local Manager at Banco Nacional, with responsibility for the sponsorship budget and ~~micromarketing~~micro 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 ~~its~~their 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 ~~was~~became an Executive Superintendent of our branch network, with responsibility for one of our ~~branch networks, with responsibility for~~retail 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. As~~Americana, totaling 258 branches in 94 cities. From 2013 to 2020, she served, as one of our Executive Vice Presidents, the Vice President ~~Executive Officers, she~~of 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 member~~has 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 of~~automotive sector. Since 2019, she has 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 Filho~~Alexandre Guimarães Soares. Mr. ~~Machado~~Soares is Brazilian and was born on August ~~25, 1968.~~27, 1969. He ~~holds~~has a degree in ~~Electrical Engineering~~engineering from the Escola Mauá de Engenharia and has an extension in economics from the Faculdade de ~~Engenharia Industrial in Sã~~Economia e Administração ~~Paulo~~/ USP and ~~has~~ a ~~master’s~~postgraduate degree in ~~Business, Economics and Finance~~marketing from the ~~Universidade~~Escola Superior de ~~São Paulo. He was an engineer for Keumkang Limited from 1990~~Propaganda e Marketing. Prior to ~~1991, a foreign Exchange Manager from 1992 to 1995~~joining 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 Brasil~~Real S.A. He ~~was also~~is 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 ~~boards~~deliberative councils of ~~directors~~the 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 Gouveia~~Ana Paula Neves Granieri Domenici.~~. Mr. Gouveia~~ Mrs. Domenici is Brazilian and was born on ~~March 31, 1963. He~~October 6, 1971. She holds a degree in ~~Accounting~~economics 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 StatesUniversity of São Paulo, ~~Paraná, Mato Grosso, Mato Grosso do Sul, Acre, Amazonas, Pará, Amapá, Rondônia~~a master's degree in applied mathematics and ~~Roraima. He has professional experience as a teacher: at ABEU—Faculdades Integradasm as Professor III, between March 1991~~finance 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,an MBA in the ~~year 1990, where he taught as part~~financial sector both from the University of São Paulo. At Santander Brasil since 2019, she was Executive Superintendent of the ~~Training Programs of Accounting~~Market Risk Management area and more recently at Planning and Performance areas. Ms. Domenici’s role as our officer responsible for ~~Non-Accountants.~~wealth management is subject to approval by the Brazilian Central Bank.
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Ana Paula Vitali Janes ~~Vescovi.~~Vescovi ~~Mrs.~~. Ms. Vescovi is Brazilian and was born on April 8, 1969. She ~~graduated~~has 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, she~~She served as Chairman of the ~~board~~Board of ~~directors~~Directors 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.
André de Carvalho ~~Novaes~~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~~the financing segment of the Company and reports directly to the CFO. He is also Executive Officer of Aymoré CFI ~~Vice~~and Santander Consórcio, 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~~, Banco RCI Brasil S.A, Santander Auto S.A., Car10 Tecnologia e Informação S.A. and Loop Gestão de Pátios S.A.
André Juaçaba de Almeida. Mr. Juaçaba de Almeida is Brazilian and was born on September 27, 1974. He holds a ~~member~~degree in economic sciences from Universidade Cândido Mendes. Prior to joining Santander Brasil, Mr. Juaçaba de Almeida held positions in structured transactions 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 ~~Board of Directors~~relationship with large corporations, Banking, and ~~Institutional Relations Officer of Banco RCI Brasil S.A.~~our Investment Banking.
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~~Celso Mateus de Queiroz. Mr. ~~Schmitt~~de Queiroz is Brazilian and was born on ~~April 23, 1971.~~September 19, 1974. He holds a degree in ~~Economics~~Business Administration from ~~the~~UNIB – Universidade ~~Federal do Rio Grande do Sul,~~Ibirapuera and a ~~master’s~~postgraduate degree in ~~Corporate Economics~~marketing administration from Fundação Armando Alvares Penteado, an MBA in business management from Fundação Getúlio Vargas and an MBA in Business Management from ~~the Sloan School~~INSPER. Prior to joining Santander Brasil, de Queiroz held management positions at Banco Real S.A. As one of ~~Business, Massachusetts Institute of Technology. He was the Economist of Banco~~our officers, Mr. de Crédito Nacional S.A. from 1995 to 1996, and Senior Economist at UNIBANCO – União de Bancos Brasileiros S.A. from 1996 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 Superintendent of UNIBANCO Representative Office in New York from 2003 to 2004. He becameQueiroz is responsible for the project finance team of Santander Brasil in 2004 and for the areas of acquisition finance and syndicated lending in 2010. From 2011 to 2012, he was the Director responsible for the GCB Clients Risk Department, from 2013 to 2014 he was responsible for Global Transaction Banking and from 2015 to 2018 he was the officer responsible for the Credit Recovery Business and Personal and Real Estate Loans. Currently, Mr. Schmitt serves as our officer in charge of the Companies Business, Government and Institutional Retail sector.Rede SP Capital.
Claudenice Lopes Duarte. ~~Mrs.~~Ms. 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
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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.
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Daniel ~~Fantoni Assa.~~Mendonça Pareto. Mr. ~~Assa~~Pareto is Brazilian and was born on ~~December 12, 1975.~~July 4, 1978. He ~~holds a degree~~graduated in ~~Business Administration~~law from ~~Fundação Alberto Alvares Penteado and an MBA from Instituto Brasileiro~~the Federal University of Rio de ~~Mercado de Capitais. He started his career at Banco Real working at Corporate and Investment Bank and was responsible for structuring the areas of the commercial bank and investment bank.~~Janeiro. At Santander Brasil ~~between 2008 and 2011,~~since 2015, he was Executive Superintendent of Corporate ~~& Investment Banking; between 2011~~Legal and ~~2014,~~Governance until 2022 and in 2021 he was ~~Executive Superintendent~~elected Chairman of ~~Credit Recovery; between 2015 and 2016, he was Executive Superintendent~~the Board of ~~Corporate; and between 2016 and 2019, he was Executive Superintendent~~Directors of ~~Wholesale Risk. As one of~~Toro Corretora de Títulos e Valores Mobiliários S.A.. Mr. Pareto’s role as our ~~officers, he is~~officer responsible for the Corporate ~~Risks area.~~Legal and Company Governance is subject to approval by the Brazilian Central Bank.
~~Elita Vechin Pastorelo Ariaz.~~Flávia Davoli. Ms. ~~Vechin~~Davoli is Brazilian and was born on ~~March 28,~~September 12, 1975. She graduated in Computer Science from Universidade Estadual Paulista and has a postgraduate degree in finance from FIA and in Information Technology from UTS in Sydney, Australia, in addition to an MBA in Finance from INSPER. At Santander Brasil since 2016, she was Executive Superintendent of the Technology area, responsible for managing the demand and project portfolio and budget management. Ms. Davoli’s role as our officer responsible for IT system developments is subject to approval by the Brazilian Central Bank.
Francisco Soares da Silva Júnior. Mr. Soares is Brazilian and was born on January 23, 1970. ~~She~~He holds a degree in ~~Law~~accounting from ~~Universidade de Sã~~the Centro Universitário do Maranhão ~~Paulo, Master~~and 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, where ~~she now serves~~he served until 2020. Currently, as one of our ~~officers.~~Executive Officers, he is responsible at the Subsidiaries department of Santander Brasil for the monitoring of our subsidiaries.
Franco Luigi Fasoli.Mr. Fasoli is Brazilian and was born on September 18, 1975. He holds a degree in Business Administration from Fundação ~~Alberto~~Armando 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 Products~~He worked for 13 years in Argentina, Italy and ~~Marketing. After returning to Santander Brasil in 2001,~~Spain, where he was ~~Head of~~responsible 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 Middle~~been 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 ~~Insurances~~Insurance 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 customers and Santander Capitalização S.A.
Germanuela de Almeida de Abreu. ~~Mrs.~~Ms. 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. ~~Since~~At Banco Santander (Brasil) S.A., she served as Executive Superintendent between 2013 to 2018, where she ~~has been our officer~~was responsible for the strategy ~~related to performance management, career development, compensation, benefits~~of Performance Management, Career, Compensation, Benefits and ~~budget~~Budget and ~~spending management.~~Expenditure Management for the Bank, and in 2018 she was elected an Officer in our Human Resources area.
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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-Berkeley~~California, 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 officer~~Division 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.
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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 member~~was the youngest ever winner of the ~~Board~~Caboré Award, and nowadays, in addition of ~~Directors~~being 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~~Luciana de ~~Vasconcelos Neto~~Aguiar Barros. ~~Mr. Neto~~ Ms. de Aguiar Barros is Brazilian, and was born on ~~March 8, 1975. He~~January 3, 1980. She holds a degree in ~~Business Administration~~statistics from the Universidade de ~~Pernambuco - FCAP and~~Campinas, a postgraduate degree in ~~Economic Sciences from the Universidade Católica de Pernambuco. He completed specialization courses in Finance from FCAP-University of Pernambuco, an MBA in Marketing~~business administration from Fundação Getúlio Vargas and an MBA in ~~Retail (GVPEC)~~credit risk management from ~~Fundação Getúlio Vargas. He was General Manager~~INSPER. She has been a member of the Banco Citibank S.A. from 2000 to 2003. He served as Commercial Superintendent and Executive Superintendent at Banco Citibank S.A. - Consumer Finance Unit (Citi Financial) from 2003 to 2007. He was Regional Superintendent at Santander ~~Brasil from August 2007 to July 2010. From August~~Group since 2010, ~~to September 2015, Mr. Neto served as the Executive Superintendent of the Network~~having several roles in ~~Banco HSBC Brasil. He served as~~our credit area. As one of ~~the~~our officers, Ms. de Aguiar Barros is currently responsible for ~~our Branch network since 2015, and since January 2019, he has been responsible for the Direct network.~~Consigned Credit area.
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.~~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
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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.
~~Marino Alexandre Calheiros Aguiar~~Marilize Ferrazza Santinoni. ~~Mr. Aguiar~~Ms. Santinoni is ~~Portuguese~~Brazilian and was born on ~~May 14, 1971. He graduated with~~November 20, 1965. She holds a degree in Business Administration from the ~~Technical University of Lisbon~~Universidade 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 Technology~~Management and ~~Internet. Mr. Aguiar started his career in 1994~~Regional Superintendence. Since 2016, she has been acting as ~~a Systems Analyst at Accenture in Portugal, responsible for Functional Design~~Executive 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, ~~and~~she is responsible for ~~our Technology area in~~ the ~~Vice Presidency~~banking network of ~~Proceedings, Technology~~Paraná and ~~Operations unit. He is also Superintendent Executive Officer~~the northern region of Santa Catarina for Banco Santander ~~Brasil Tecnologia~~(Brasil) S.A.
~~Rafael Bello Noya~~Murilo Setti Riedel. Mr. ~~Noya~~Riedel is Brazilian and was born on ~~October 19, 1977.~~May 17, 1963. He holds a degree in ~~Business Administration~~business administration from ~~Universidade de~~the University of São Paulo – FEA, and ~~completed several courses, including Building~~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 Sustaining Competitive Advantage at Harvard Business School, and Leadership in Talent Management and Development at IMD International. He also completed the LEAD Program at the IE Business School and Corporate Leadership Program at IESE Business School. He began his career at Citibank, whereChief Executive Officer. From 2019 to 2022, he ~~worked from 1996 to 2007 across several divisions. He also served as a member~~was chairman of the ~~Citibank Credit Committee.~~Board of Directors of Santander Auto S.A.
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Paulo Fernando Alves Lima. Mr. Lima is Brazilian and was born on April 5, 1976. He ~~joined~~holds a degree in management from Fundação Getúlio Vargas in São Paulo. At Santander Brasil in 2007, where he became responsible for clients coverage in the Corporate Investment Banking Department. From June 2015 to August 2017, Mr. Noya was the Head of the Credit Markets Unit at Santander Brasil, wheresince 2006, he was responsible for ~~a team of 70 specialists on the origination and execution of operations in~~ the areas of ~~Capital Markets (both domestic~~operations with the infrastructure sector and ~~international), Syndicated Loans, Project Financing, Acquisitions~~more recently as responsible for the recovery area of corporate portfolios. Mr. Lima’s role as our officer responsible for Wholesale risk management is subject to approval by the Brazilian Central Bank.
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 Fortaleza – UNIFOR and ~~Asset~~a postgraduate degree in Financial Management and ~~Capital Structuring. During this period,~~Controllership from the Fundação Getúlio Vargas. Prior to joining Santander Brasil, Mr. de Lima Alves held management positions at Banco ABN AMRO Real S.A. As one of our officers, he is currently responsible for Northern Network Banking. Mr. de Lima Alves’ role as our officer is subject to approval by the Brazilian Central Bank.
Paulo Sérgio Duailibi. Mr. Duailibi is Brazilian, born on September 28, 1966. He holds a degree in business administration from the Universidade Federal de Minas Gerais and a master’s degree in business administration from the Fundação Getúlio Vargas. Prior to joining Santander Brasil, Mr. Duailibi held management positions at Banco Safra S.A. and BankBoston Banco Múltiplo S.A. He was ~~also the Chairman~~Vice-Chairman of the Board of Directors and ~~a member~~Effective Member of the ~~Human Resources Executive Committee at BW Guirapa I S.A. Since August 2017, Mr. Noya~~Deliberative 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.
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Ramon Sanchez ~~Santiago.~~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 the accounting department of the Company, and also tax ~~procedures,~~ planning, ~~strategies~~accounting rules 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 Imobiliária~~Global Cards & Digital Solutions Brasil S.A., and as Vice President Officer of Santander Corretora de Seguros, Investimentos e Serviços S.A.
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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 Officer~~Director of ~~Norchem Participações~~Analytical 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 ~~Consultoria~~Investimento S.A. He currently holds a position as Statutory Director of Aymore Crédito, Financiamento e Investimento S.A. and Webmotors S.A.
Richard Flavio da Silva. Mr. da Silva is Brazilian and was born on June 3, 1976. He holds a degree in computer science from USP and a postgraduate degree in business administration from Fundação Getúlio Vargas in São Paulo and a master's degree in information security from USP. At Santander Brasil since 2016, he was Executive Superintendent of the Technology area responsible for the strategy and transformation of IT and the Company's Cyber Security operation. Mr. da Silva’s role as our officer responsible for Company’s Cyber Security is subject to approval by the Brazilian Central Bank.
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 ~~Deustche~~Deutsche 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~~has been 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 and was born on 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 the University of São Paulo. 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 has been 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.
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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.
Sandro Rogério da Silva ~~Gamba. –~~Gamba. Mr. Gamba is Brazilian and was born on August 31, 1975. He ~~graduated~~holds a degree in Civil Engineering from Universidade Mackenzie, ~~post graduated~~a postgraduate degree in Production Engineering from Universidade de São Paulo ~~–USP~~– USP and Real ~~State~~Estate 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, he 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.
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~~Thomas Gregor Ilg~~Thomaz Antonio Licarião Rocha. Mr. ~~Ilg~~Licarião Rocha is Brazilian and was born on ~~September~~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.
Tiago Celso Abate. Mr. Abate is Brazilian and was born on June 12, ~~1968.~~1980. He holds a degree in ~~Agricultural Engineering~~economics from the ~~Universidade Estadual de Campinas,~~Pontifical Catholic University and a postgraduate ~~diploma~~degree in finance from INSPER and an MBA in Retail Management and Digital Business ~~Administration~~ from ~~the Fundação Getúlio Vargas.~~FIA and FIAP, respectively. He has ~~been engaged in~~worked for the ~~financial markets for almost 30 years, including almost 20 years with~~ Santander ~~Brasil and 10 years with The First National Bank~~Group since 2005, having several roles related to the retail area of ~~Boston, where~~the Bank. As one of our officers, he ~~first joined as a trainee in the Risks and Business areas. At Santander Brasil, he was~~is currently responsible for the ~~Corporate Banking Business until the beginning~~structure of ~~2007 when he joined our Treasury Division to develop an area designed to distribute derivatives to the Middle Market, Private Banking~~Consumers and ~~Retail Business~~High Income 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. He is also a member of the Board of Directors of Banco RCI Brasil S.A.Retail.
Vitor Ohtsuki. Mr. Ohtsuki is Brazilian and was born on June 5, 1977. He ~~graduated~~holds a degree in Production Engineering from Universidade de São ~~Paulo. He completed the~~Paulo, 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 has served as Private Banking Head, Executive Superintendent of Wealth Management, Private Banking Superintendent, Executive Manager and General Manager. ~~Also, he~~Mr. 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:
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Board of Directors
~~Fixed~~All 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 ~~Malus~~malus and/or ~~Clawback clause~~clawback 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
~~Fixed~~Our 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 ~~observe~~observing the ~~Malus~~malus and/or ~~Clawback clause~~clawback clauses with the possibility of reducing and/or returning up to 100% of the value of the variable compensation in the assumptions.
Audit Committee
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~~Audit Committee~~
~~Fixed~~our audit committee are entitled to fixed compensation consisting of monthly fees, as established by the Board of Directors. ~~In cases where~~However, 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 the~~audit 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~~
~~Fixed~~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.~~Shareholders’ Meeting, the last of which was held on April 29, 2022.
~~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,~~29, 2022, the compensation limit was set up to R$~~400~~504.6 million for our Directors and Executive Officers and R$4.0 million for our Audit Committee for the 12-month period starting on January 1, ~~2019,~~2022, as proposed by the Board of Directors at the meeting held on March ~~27, 2019.~~25, 2022. As for the Fiscal Council, the general shareholders’ meeting approved a monthly compensation of R$11.99 thousand for each of the members, provided that the alternate members shall only receive such compensation in the event they replace the effective members. For the ~~abovementioned twelve-month~~above-mentioned 12-month period, members of our Board of Directors and Executive Officers received a total of approximately R$~~277~~320.6 million, ~~and~~ members of our ~~Audit Committee~~audit committee received a total of approximately R$3.2 ~~million.~~million and members of our Fiscal Council received a total of approximately R$431.4 thousand. The total amount of contributions for pension plans of our Board of Directors and Executive Officers in ~~2019~~2022 was R$3847 million.
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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 find~~stating their names. The table below presents the information for the years ~~of 2017, 2018~~ended 2022, 2021 and ~~2019:~~2020:
Board of Executive Officers Board of Directors Fiscal Council
12/31/2019 12/31/2018 12/31/2017 12/31/2019 12/31/2018 12/31/2017 12/31/2019 12/31/2018 12/31/2017
Nº of members 41.70 42.20 44.00 9.90 10.00 10.00 2.50 - -
Nº of paid members 40.90 40.80 40.50 4.80 5.00 4.17 1.30 - -
Value of highest compensation (Reais) 45,325,345.00 43,068,683.26 29,985,549.15 1,752,022.72 1,563,056.44 1,444,916.60 55,370.00 - -
Value of lowest compensation (Reais) 1,843,405.07 2,026,240.06 1,795,457.14 769,131.80 700,542.46 544,316.60 - - -
Average value of compensation (Reais) 6,647,842.60 6,884,079.47 5,675,740.27 1,012,232.27 772,680.82 752,412.19 132,888.00 - -
Board of Executive Officers Board of Directors Fiscal Council
As of and For the Year Ended December 31,
2022 2021 2020 2022 2021 2020 2022 2021 2020
Nº of members 50.00 50.00 45.00 10,0 12.00 9.00 6.00 6.00 6.00
Nº of paid members 50.25 45.16 39.00 5,0 5.58 4.75 3.00 3.00 3.00
Value of highest compensation (reais) 21,122,291.48 59,029,586.25 46,953,181.92 11,559,693.20 2,129,585.07 1,802,918.40 143,820.00 142,710.00 139,600.00
Value of lowest compensation (reais)(1) 2,407,487.32 2,098,466.40 1,791,418.04 805,000.00 762,000.00 762,000.00 143,820.00 142,710.00 139,600.00
Average value of compensation (reais) 6,080,294.50 7,674,778.20 6,495,886.87 3,014,657.47 1,064,162.32 1,037,445.25 143,820.00 149,901.00 139,600.00

(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 from~~are indemnified in relation to claims arising during ~~the~~their 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 granted~~disclosed to the members of the ~~Audit~~audit 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.
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~~Long Term Incentive Programs~~
We have four programs for long-term compensation: (i) the Deferral Program; (ii) Long Term Incentive Plan - Private Ultra High; (iii) the Second Long-Term Incentive Global Plan CRDIV – Grant 2015 and (iv) LTIP Technology.
Executive Officers and Executives in key positions are eligible to participate in these plans, which last three years, and promote 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 3three years. These rules ~~are~~became effective as from January 1, 2012.
The following table summarizes the rules of payment toof variable compensation taking as an example the exercise ended ofon December 31, ~~2019.~~2022.
2023
2024
2025
2026
At the time of the award
Deferred
30% in cash Remaining 20% in cash
Payment calculated on ⅓ cash awarded Payment calculated on ⅓ cash awarded Payment calculated on ⅓ cash awarded

30% in share-based instruments
(with one year lockup) Remaining 20% in share-based instruments (with one year lockup)
Payment calculated on ⅓ instruments awarded Payment calculated on ⅓ instruments awarded Payment calculated on ⅓ instruments awarded
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2020
2021
2022
2023
At the time of the award
Deferred
30% in cash Remaining 20% in cash
Payment calculated on ⅓ cash awarded Payment calculated on ⅓ cash awarded Payment calculated on ⅓ cash awarded
30% in units
(with one year lockup) Remaining 20% in units
Payment calculated on ⅓ units awarded Payment calculated on ⅓ units awarded Payment calculated on ⅓ units awarded
IfThe deferral percentage will also depend on the ~~amount~~level 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 and~~year, 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$8 million, the deferral is 60%, which shall be paid in up to five tranches, 30% of which is paid in cash, and the other 30% paid in units with a one-year lock-up. above-mentioned criteria applied as minimum.
In ~~the case of the Chief Executive Officer, the deferral in this program is at least 50%, with at least 25% paid in accordance with above.~~
~~Still~~addition, pursuant to Brazilian law, ~~payments made under the~~all deferral ~~program~~plans are subject to ~~total or partial cancellation, or claw back, in cases of: (i)~~the application of malus/clawback, which means that our unsatisfactory financial performance (financial results audited lower than as defined in our business plan or loss in the period); (ii) failure to comply with internal policies, especially policies for risk management (with the need for reclassification of operations or revision of provisions); (iii) substantial change in our financial condition, unless arising from changes in accounting standards (damages, financial loss); or (iv) significant changes in our share capital or risk profile. If the board of directors, ~~deems it necessary, it may also take into account any change in~~upon the ~~capital base~~recommendation of the ~~Santander Group.~~Compensation Committee and after the evaluation of the Malus/Clawback Committee (which is responsible for advising our compensation committee on the application of the malus/clawback to compensation, among other matters), may reduce in up to 100% the amount due to each participant in certain cases previously approved by our internal governance bodies.
We renew and update our deferral program every year. As of December 31, ~~2019,~~2022, we had ~~five~~six plans outstanding: one for each fiscal year: ~~2015, 2016,~~ 2017, 2018, 2019, 2020 and ~~2019.~~2021. As of December 31, ~~2019,~~2022, werecorded total expenses of R$~~203~~182 million in connection with our Deferral Program compared to total expenses of R$~~126~~212 million in ~~2018.~~2021.
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2017 and 2018 Deferral ~~Program –2015, 2016, 2017 2018 and 2019~~
Programs
Our ~~2015 to 2019~~2017 and 2018 deferral programs are divided ininto two programs:
· Collective Identified~~. Statutory~~: Applicable to statutory officers and executives who ~~take~~oversee 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 Rate, and 50% in ~~Units.~~units SANB11.
· 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.~~CDI Rate.
2019-2021 Deferral Programs
~~From~~Since the ~~financial~~ year ended December 31, 2019, the rule for the Collective Unidentified was changed ~~to:~~
~~• Superintendents:Employees. Superintendent-level~~to “Other Employees,” which includes superintendents and other employees with variable compensation above a minimum established value, and they are also eligible ~~for this program.~~to receive a specific deferral model, applicable according to the function and the level of the variable compensation. Deferred compensation iswill be paid 50% in cash, and 50% in ~~units.~~units (ticker: SANB11).
2022 Deferral Program
~~• Other: Employees.~~Beginning in the year ended December 31, 2022, our deferral programs were revised as follows:
· Collective Identified: Applicable to statutory officers and executives who oversee 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 Rate, 50% in units SANB11.
· Other Employees: Individuals with variable compensation above a minimum established value are eligible to receive such compensation according to a specific deferral model, to be paid 50% in cash, indexed to 100% of the CDI Rate, and 50% in units SANB11.
Long Term Incentive Programs
Our long-term incentive plans are established in line with ~~variable remuneration above~~our business strategy. Each plan has a ~~minimum stipulated amount~~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. Deferred compensation is paid 50%~~eligible to participate in ~~cash,~~these plans, which last three years, and ~~50% in units.~~
~~Long-Term Incentive Plan - Private Ultra High~~
~~Released in 2017, its objective is~~foster our executive officers and executives’ commitment to ~~align the interests of Banco Santander and the participant aiming, on the one hand, to the growth and profitability~~our long-term results. Members of the ~~Private business~~Board of Directors can only participate if they are Executive Officers.
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Our long-term programs are divided into local and onglobal plans. Each plan has specific performance indicators and conditions to best maintain 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.~~
~~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 a retention plan for key positions launched in July 2019 where the participant must remain in~~participant’s employment relationship until the payment date in order to be entitled to ~~receive it.~~
~~Each executive had a~~the receipt. Payments are calculated based on the percentage of achievement of the indicators applied on the reference value ~~defined~~(target).
Local Long-Term Incentive Program
We have 11 retention plans for key positions, which were launched between 2019 and 2022. Payments in ~~Reais, which was converted into shares of Santander Brasil (SANB11) at a price of R$44.66, which will be delivered~~these plans are made in ~~July 2022, with a 1-year restriction.~~
~~Payment is~~units (ticker: SANB11), and are subject to the application of the ~~Malus / Clawback~~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 units (ticker: SANB11), 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~~noncompliance with internal rules and exposure to excessive risks.
For the year ended December 31, 2022, we incurred expenses of R$35.0 million, with respect to our local long-term incentive program, compared to total expenses of R$26 million in the year ended December 31, 2021.
~~Global Long-Term Incentive Program~~Fiscal 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 included~~non-permanent body. Members of our fiscal council are entitled to fixed compensation composed of monthly fees in the ~~Identified Collective (CRDIV Global Plan).~~ amount approved at our General Shareholders’ Meeting, the last of which was held on April 29, 2022.
Advisory Committees
The ~~indicators that will be used~~members of advisory committees are also entitled to ~~measure~~fixed compensation composed of monthly fees. Only those members who do not occupy a position on the ~~attainment~~Board of Executive Officers are entitled to this compensation.
Compensation Plan Overview
At the general shareholders meeting held on April 29, 2022, the compensation limit was set up to R$504.6 million for our Directors and Executive Officers and R$4.0 million for our Audit Committee for the 12-month period starting on January 1, 2022, as proposed by the Board of Directors at the meeting held on March 25, 2022. As for the Fiscal Council, the general shareholders’ meeting approved a monthly compensation of R$11.99 thousand for each of the ~~targets are presented below~~members, provided that the alternate members shall only receive such compensation in the event they replace the effective members. For the above-mentioned 12-month period, members of our Board of Directors and ~~will be used at two different stages: (i) to calculate the maximum target~~Executive Officers received a total of ~~each participant (2015-2016);~~approximately R$320.6 million, members of our audit committee received a total of approximately R$3.2 million and ~~(ii) to calculate the~~members of our Fiscal Council received a total of approximately R$431.4 thousand. The total amount of ~~shares to be paid (2016, 2017~~contributions for pension plans of our Board of Directors and ~~2018).~~
Executive Officers in 2022 was R$47 million.
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~~1.       TSR vs. Competitor~~
~~RTA in 2015~~ ~~“Coefficient RTA 2015”~~
~~(% on the RTA 2015 budgeted)~~
~~≥ 90%~~ 200
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~~> 75% to < 90%~~
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 2022, 2021 and 2020:
Board of Executive Officers Board of Directors Fiscal Council
As of and For the Year Ended December 31,
2022 2021 2020 2022 2021 2020 2022 2021 2020
Nº of members 50.00 50.00 45.00 10,0 12.00 9.00 6.00 6.00 6.00
Nº of paid members 50.25 45.16 39.00 5,0 5.58 4.75 3.00 3.00 3.00
Value of highest compensation (reais) 21,122,291.48 59,029,586.25 46,953,181.92 11,559,693.20 2,129,585.07 1,802,918.40 143,820.00 142,710.00 139,600.00
Value of lowest compensation (reais)(1) 2,407,487.32 2,098,466.40 1,791,418.04 805,000.00 762,000.00 762,000.00 143,820.00 142,710.00 139,600.00
Average value of compensation (reais) 6,080,294.50 7,674,778.20 6,495,886.87 3,014,657.47 1,064,162.32 1,037,445.25 143,820.00 149,901.00 139,600.00

(1) ~~0.75 – 1 (*)~~
~~≤ 75%~~ 0The 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.
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 three years. These rules became effective as from January 1, 2012. The following table summarizes the rules of payment of variable compensation taking as an example the exercise ended on December 31, 2022.
2023
2024
2025
2026
At the time of the award
Deferred
30% in cash Remaining 20% in cash
Payment calculated on ⅓ cash awarded Payment calculated on ⅓ cash awarded Payment calculated on ⅓ cash awarded

30% in share-based instruments
(with one year lockup) Remaining 20% in share-based instruments (with one year lockup)
Payment calculated on ⅓ instruments awarded Payment calculated on ⅓ instruments awarded Payment calculated on ⅓ instruments awarded
~~(*)~~ ~~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%~~ 201
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~~> 75%~~
The deferral percentage will also depend on the level of variable compensation received in the year, with the above-mentioned criteria applied as minimum.
In addition, pursuant to Brazilian law, all deferral plans are subject to the application of malus/clawback, which means that our board of directors, upon the recommendation of the Compensation Committee and after the evaluation of the Malus/Clawback Committee (which is responsible for advising our compensation committee on the application of the malus/clawback to compensation, among other matters), may reduce in up to 100% the amount due to each participant in certain cases previously approved by our internal governance bodies.
We renew and update our deferral program every year. As of December 31, 2022, we had six plans outstanding: one for each fiscal year: 2017, 2018, 2019, 2020 and 2021. As of December 31, 2022, we recorded total expenses of R$182 million in connection with our Deferral Program compared to total expenses of R$212 million in 2021.
2017 and 2018 Deferral Programs
Our 2017 and 2018 deferral programs are divided into two programs:
· Collective Identified: Applicable to ~~< 90%~~statutory officers and executives who oversee 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 Rate, and 50% in units SANB11.
· ~~0.75 – 1 (*)~~
~~≤ 75%~~ 0Collective Unidentified: 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 Rate.
2019-2021 Deferral Programs
Since the year ended December 31, 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 (ticker: SANB11).
2022 Deferral Program
Beginning in the year ended December 31, 2022, our deferral programs were revised as follows:
~~(*)~~· ~~Linear increment~~Collective Identified: Applicable to statutory officers and executives who oversee significant risks in Santander Brasil and are in charge of the ~~ROTE 2015 coefficient~~control areas. Deferred compensation will be paid 50% in ~~function~~cash, indexed to 100% of the ~~concrete percentage that~~CDI Rate, 50% in units SANB11.
· Other Employees: Individuals with variable compensation above a minimum established value are eligible to receive such compensation according to a specific deferral model, to be paid 50% in cash, indexed to 100% of the ~~ROTE 2015 represents on the budget of this scale line.~~CDI Rate, and 50% in units SANB11.
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.
~~3.       Employees Satisfaction~~
~~Position among the best banks to work in 2017~~ ~~“Coefficient Employees”~~
~~1st to 3rd~~ 1
~~4th or subsequent~~ 0
~~4.       Client satisfaction~~
~~Position among the best banks according to client satisfaction index in 2017~~ ~~“Coefficient Clients”~~
~~1st to 3rd~~ 1
~~4th or subsequent~~ ~~0.5 – 1 (*)~~
~~5.       Business bindings vs Budgeted~~
~~Clients companies 1 and 2 linked~~ ~~“Coefficient Companies”~~
~~(% on budget for the corresponding market)~~
~~≥ 100%~~ 202
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~~> 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.
Our long-term programs are divided into local and global plans. Each ~~executive had a target~~plan has specific performance indicators and conditions to best maintain the participant’s employment relationship until the payment date in~~reais, which has been converted into Santander Group shares for a price of R$17.473 which was delivered in 2019, with a lockup of one year after each delivery.~~
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~~Due~~ order to be entitled to the ~~Group's capital increase (2017)~~receipt. Payments are calculated based on the percentage of achievement of the indicators applied on the reference value (target).
Local Long-Term Incentive Program
We have 11 retention plans for key positions, which were launched between 2019 and 2022. Payments in these plans are made in units (ticker: SANB11), and are subject to the application of the malus/clawback clauses, which may result in a reduction or full cancellation in the number of ~~target~~ shares ~~was increased by approximately 1.5%.~~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 units (ticker: SANB11), usually at the average price of the last 15 trading sessions immediately prior to the payment of the plan, At the end of the ~~benchmarking~~vesting period, the ~~achievement of Phase 1 was 91.5%~~resulting shares are delivered with a one-year restriction, and ~~Phase 2 was 73.09%, resulting in~~this payment is still subject to the ~~plan's final achievement of 66.88%.~~
~~Payment for the SAN shares resulting from the final achievement~~application of the ~~plan was made~~malus/clawback clauses, which may reduce or cancel the shares to be delivered in ~~cash in March / 2019 based on the quotation~~cases of ~~R $ 45.49,~~noncompliance with internal rules and exposure 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.~~excessive risks.
InFor the year ended December 31, ~~2019, there were no “pro rata”~~2022, we incurred expenses ~~recorded relating~~of R$35.0 million, with respect to ~~costs on the respective dates~~our local long-term incentive program, compared to total expenses 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 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~~ R$26 2019, to serve until the ordinary shareholders’ meeting to be held in 2021. The current Executive Officers were elected at Board of Directors meetings held on May 3, 2019, July 2, 2019 and February 3, 2020 for terms of office until the first Board of Directors meeting occurs after the ordinary shareholders’ meeting, which is to be held in 2021. The Board of Directors usually meets eight 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 August 31, 2017, our Board of Directors approved its regulations, which can be accessed by shareholders on the website www.santander.com.br/ri,~~million 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.year ended December 31, 2021.
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 29, 2022.
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 29, 2022, the compensation limit was set up to R$504.6 million for our Directors and Executive Officers and R$4.0 million for our Audit Committee for the 12-month period starting on January 1, 2022, as proposed by the Board of Directors at the meeting held on March 25, 2022. As for the Fiscal Council, the general shareholders’ meeting approved a monthly compensation of R$11.99 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 above-mentioned 12-month period, members of our Board of Directors and Executive Officers received a total of approximately R$320.6 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$431.4 thousand. The total amount of contributions for pension plans of our Board of Directors and Executive Officers in 2022 was R$47 million.
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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 2022, 2021 and 2020:
Board of Executive Officers Board of Directors Fiscal Council
As of and For the Year Ended December 31,
2022 2021 2020 2022 2021 2020 2022 2021 2020
Nº of members 50.00 50.00 45.00 10,0 12.00 9.00 6.00 6.00 6.00
Nº of paid members 50.25 45.16 39.00 5,0 5.58 4.75 3.00 3.00 3.00
Value of highest compensation (reais) 21,122,291.48 59,029,586.25 46,953,181.92 11,559,693.20 2,129,585.07 1,802,918.40 143,820.00 142,710.00 139,600.00
Value of lowest compensation (reais)(1) 2,407,487.32 2,098,466.40 1,791,418.04 805,000.00 762,000.00 762,000.00 143,820.00 142,710.00 139,600.00
Average value of compensation (reais) 6,080,294.50 7,674,778.20 6,495,886.87 3,014,657.47 1,064,162.32 1,037,445.25 143,820.00 149,901.00 139,600.00

(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.
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 three years. These rules became effective as from January 1, 2012. The following table summarizes the rules of payment of variable compensation taking as an example the exercise ended on December 31, 2022.
2023
2024
2025
2026
At the time of the award
Deferred
30% in cash Remaining 20% in cash
Payment calculated on ⅓ cash awarded Payment calculated on ⅓ cash awarded Payment calculated on ⅓ cash awarded

30% in share-based instruments
(with one year lockup) Remaining 20% in share-based instruments (with one year lockup)
Payment calculated on ⅓ instruments awarded Payment calculated on ⅓ instruments awarded Payment calculated on ⅓ instruments awarded
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The deferral percentage will also depend on the level of variable compensation received in the year, with the above-mentioned criteria applied as minimum.
In addition, pursuant to Brazilian law, all deferral plans are subject to the application of malus/clawback, which means that our board of directors, upon the recommendation of the Compensation Committee and after the evaluation of the Malus/Clawback Committee (which is responsible for advising our compensation committee on the application of the malus/clawback to compensation, among other matters), may reduce in up to 100% the amount due to each participant in certain cases previously approved by our internal governance bodies.
We renew and update our deferral program every year. As of December 31, 2022, we had six plans outstanding: one for each fiscal year: 2017, 2018, 2019, 2020 and 2021. As of December 31, 2022, we recorded total expenses of R$182 million in connection with our Deferral Program compared to total expenses of R$212 million in 2021.
2017 and 2018 Deferral Programs
Our 2017 and 2018 deferral programs are divided into two programs:
· Collective Identified: Applicable to statutory officers and executives who oversee 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 Rate, and 50% in units SANB11.
· Collective Unidentified: 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 Rate.
2019-2021 Deferral Programs
Since the year ended December 31, 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 (ticker: SANB11).
2022 Deferral Program
Beginning in the year ended December 31, 2022, our deferral programs were revised as follows:
· Collective Identified: Applicable to statutory officers and executives who oversee 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 Rate, 50% in units SANB11.
· Other Employees: Individuals with variable compensation above a minimum established value are eligible to receive such compensation according to a specific deferral model, to be paid 50% in cash, indexed to 100% of the CDI Rate, and 50% in units SANB11.
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.
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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. Payments are calculated based on the percentage of achievement of the indicators applied on the reference value (target).
Local Long-Term Incentive Program
We have 11 retention plans for key positions, which were launched between 2019 and 2022. Payments in these plans are made in units (ticker: SANB11), 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 units (ticker: SANB11), 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 noncompliance with internal rules and exposure to excessive risks.
For the year ended December 31, 2022, we incurred expenses of R$35.0 million, with respect to our local long-term incentive program, compared to total expenses of R$26 million in the year ended December 31, 2021.
Global Long-Term Incentive Program
We currently have three global plans launched in 2019, 2020 and 2021. Eligible executives have an incentive target set in reais. Payments according to the achievement of performance indicators are made in shares and options of Santander Spain after a deferral period of three years, with equivalent settlement in reais.
For the year ended December 31, 2022, we incurred expenses of R$3.5 million in connection with our global long-term incentive program, compared to total expenses of R$4.3 million in 2021.
Contract Termination
Employment contracts are entered into for an undefined term. The termination of the employment relationship for nonfulfillment 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, SBPrev, 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, November 1, 2021, December 1, 2021, December 17, 2021, January 3, 2022, January 20, 2022, April 29, 2022, September 8, 2022, November 16, 2022 and January 2, 2023 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.
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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. 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. All~~29, 2022. The current members of our fiscal council were elected at the ordinary shareholders’ meeting held on April ~~26, 2019~~29, 2022 to serve until the ordinary shareholders’ meeting to be held in ~~2020.~~2023.
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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 Baldisera~~José Roberto Machado Filho Member ~~January 26, 1952~~
~~João Guilherme de Andrade So Consiglio~~ ~~Member~~ ~~December 7,~~August 25, 1968
Louise Barsi Member September 7, 1994
Manoel Marcos Madureira Deputy Member December 30, 1951
Luciano Faleiros Paolucci Deputy Member December 12, 1977
Valmir Pedro Rossi Deputy Member June 10, 1961

Below are the biographies of the members of our fiscal ~~council.~~council,
~~Antonio Melchiades Baldisera.~~José Roberto Machado Filho. Mr. ~~Baldisera~~Machado is Brazilian, ~~and was~~ born on ~~January 26, 1952.~~August 25, 1968. He ~~graduated with~~holds a bachelor’s degree in ~~Accounting,~~Electrical Engineering from the Faculty of Industrial Engineering (FEI) of São Paulo and a ~~postgraduate~~Master’s degree in ~~Accounting Management~~Business Administration, Economics and Finance from the ~~Fundaçã~~University of São ~~Getúlio Vargas~~Paulo. Mr. Machado was an engineer at Keumkang Limited from 1990 to 1991, foreign exchange manager from 1992 to 1995 and ~~with an MBA in Controlling, Audit and Tax Management~~manager of trading desk for emerging markets from ~~Fundação Getúlio Vargas. He served as General Accounting Manager~~1992 to 1996 at Banco ~~Noroeste~~CCF Brasil S.A. ~~until 1997. At Santander~~He was also an executive director of Banco Rabobank Internacional Brasil ~~he served as General Manager and Deputy Officer of the Accounting Department~~SA from 1998 to ~~2000. He~~2003 and was ~~General Audit Manager~~executive director of Banco ~~Sudameris do Brasil S.A.~~Real from ~~2000~~2003 to ~~2003.~~2009. He was also ~~representative at FEBRABAN at~~a member of 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~~management of Banco Santander ~~Brasil between 2003 and 2018, working in the Internal, External and Electronic Fraud Management area.~~(Brasil) S.A. until April 2020. 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 in the financial market and as an economist for more than 25 years. He was Executive Vice President of Santander Brasil and member of the Executive Committee of the Bank in Brazil for seven years, responsible for business with large corporate clients (Corporate). He was also Product Officer of ABN AMRO/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 boardsboard of directors ~~such as Banco RCI Brasil S.A, CIP (Interbank Chamber of Payments)~~at Heluz, Can TeraMed | OnixCann and ~~Cia. Brasileira de Soluções e Serviços, among others. He is currently a board member of Unipar Carbocloro S.A.~~Bright Cities.
Louise ~~Barsi.~~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 she~~She holds a ~~post-graduate~~postgraduate 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 ~~and~~from 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 2018~~December 2017, where she also coordinates the Audit and ~~has been~~Finance Committee, a ~~substitute member~~Deputy Member of the board of directors at Unipar ~~Carbocloro~~Carboclo 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 Member~~effective 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 nonvoting preferred shares attending the ordinary shareholders’ meeting held in April, 2021.
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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 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 subsidiary~~Santander Brasil and President of ~~Enel).~~the Brazilian – Spain Chamber of Commerce.
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~~Table~~Luciano 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 ~~Contents~~Sussex (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 between June 2019 and January 2020, and since April 2019, has been 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. and Banco da Amazônia S.A., as well as 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 to~~Under 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.
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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.”
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, 2019~~April 29, 2022 to serve for a one-year term.
Set forth below are the biographies of the members of our audit committee:
Deborah Stern Vieitas, See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Maria Elena Cardoso ~~Figueira.~~Figueira. Ms. Figueira is Brazilian, was born on November 29, 1965 and graduated in Economics from the ~~Pontifical Catholic University of Rio de Janeiro (Pontifí~~Pontifícia Universidade Católica do Rio de ~~Janeiro).~~Janeiro. Ms. Figueira is a board of directors, Supervisory Board and Audit Committee member certified ~~member of~~by 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 Committees~~audit committees and advisory Boards of: (i) Santander Brasil, acting as an independent member of the ~~Audit Committee~~audit committee since May 2018; (ii) HSBC Brasil ~~S.A . -~~S.A. – Banco de Investimentos
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~~(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, from October 2014 to June 2016, as chairman and member of the Advisory Board and the Audit and Risk Committee; (iv) Lojas Americanas S.A., from May 2020 to December 2021, independent audit committee member; and ~~(iv)~~(v) 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 ~~member~~coordinator of the Women Corporate Directors - WCD, - Brazil ~~chapter and, since~~chapter. Since 2017, she ishas been an associate member and participant of the Strategic Governance Committee of ~~American Chamber~~Amcham Brasil. Since 2020, she has been a member of ~~Commerce~~the Supervisory Board of Camil Alimentos S.A. Since 2021 she has been a member of the Audit Committee of Hospital Sírio Libanês and member of the Supervisory Board of B3 S.A. Since 2022 she has been a member of the Audit Committee of Br Properties S.A.
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Vania Maria Borgerth. Ms. Borgerth holds a degree in Accounting from Universidade Santa Úrsula, an MBA in Finance from 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 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. She has served as Representative of Brazil ~~(Amcham Brasil)~~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, and 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 ~~Carlos Nannini~~Grande. Mr. ~~Nannini~~Grande is Brazilian and was born on ~~January 2, 1960.~~April 19, 1953. He holds a degree in ~~Accounting Sciences, with several~~Economics from Pontificia Universidade Católica de São Paulo, and a specialization ~~courses~~degree in ~~Brazil~~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 ~~abroad, including a leadership course at Harvard. He has more than 30 years of experience~~worked in the ~~conduct~~Supervision and Inspection Department of ~~independent audit services, including:~~ the ~~preparation of financial statements~~National Financial System. During his career 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,Central Bank he served as ~~Audit Partner at Ernst & Young Brazil. From 2001~~an Analyst from 1975 to ~~2007, he held the positions of CEO and Chairman~~1978; Technical Assistant from 1978 to 1989; Inspection Supervisor from 1989 to 1999; Head 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~~Banking Supervisory and ~~Chairman~~Technical Department from 1999 to 2003; and Deputy Head of the ~~Board~~Banking Supervisory and Financial Conglomerates Department from 2003 to 2011. Before working with the Brazilian Central Bank, he occupied the position of ~~EY South America~~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 ~~Fiscal Council of USIMINAS, Santa Catarina Power Plants~~Risks and ~~BRADESPAR. He has also served as a member of the Board of Directors~~Compliance Committee between January 2018 and ~~coordinator~~June 2020, and is currently an independent member of the Audit Committee of the credit card manager AVISTA S.A. Currently, Cardozo is the Managing Partner of Júlio Sergio Cardozo & Associados Consultoria em Negócios Ltda.; member of the Board of Directors of Saraiva S.A. Livreiros e Editores; member of the Fiscal Council of Centrais Elétricas do Ceará and professor of the MBA Program in Finance of Fundação Getúlio Vargas.Committee.
~~Deborah Stern Vieitas~~~~. See “—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.
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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;
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· 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
· 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, ~~(who~~who acts as ~~coordinator), Álvaro Antonio Cardoso~~coordinator, Pedro Augusto de ~~Souza, Celso Clemente Giacometti~~Melo and Luiz Fernando Sanzogo Giorgi. The current members of the compensation committee were appointed on May 3, ~~2019~~2021 December 17, 2021 and March 24, 2022, 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~~Pedro Augusto de ~~Souza~~Melo. 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 ~~Board~~board of ~~Directors~~directors 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 ~~Board~~board of ~~Directors~~directors 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.
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Risk and Compliance Committee
The Risk and Compliance Committee is a consultative body, which ~~has the responsibility of~~is 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.
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The ~~risk~~Risk and ~~compliance committee~~Compliance 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 Parnes~~Pedro Augusto de Melo (who acts as coordinator), ~~Álvaro Antônio Cardoso de Souza,~~ José de Paiva Ferreira and ~~René Luiz Grande.~~Jaime Leôncio Singer. The current members of the risk and compliance committee were appointed on May 3, ~~2019,~~2021 December 17, 2021 and September 15, 2022, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in ~~2021.~~2023.
~~Bernardo Parnes~~~~. Mr. Parnes is Brazilian and was born on March 4, 1960. He holds a degree in Business Administration with a focus on finance from Fundação Armando Álvares Penteado, SP, and Law from Faculdade~~Pedro Augusto de Direito da Universidade de São Paulo, focused in Business Law. He also has a postgraduate in Economics and Finance from Fundação Getúlio Vargas. Mr. Bernardo was CEO of Deutsche Bank Latin America and Chief Country Officer of Deutsche Bank Brazil. At Deutsche Bank, he was also a member of the Americas’ Executive Committee, the Regional Management Executive Committee 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 currently a member of the board of directors of Albert Einstein Hospital, MASP (São Paulo Art Museum) and Coordinator of our Risk and Compliance Committee.
~~Álvaro Antônio Cardoso de Souza~~Melo. See “—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.”
~~René Luiz Grande~~Jaime Leôncio Singer.. Mr. ~~Grande is~~Jaime Singer, Brazilian, ~~and~~ was born on ~~April 19, 1953.~~January 3, 1966. He ~~holds~~has a Master’s degree in ~~Economics~~Business Administration from ~~Pontificia Universidade Católica de São Paulo,~~Harvard Business School and a ~~specialization~~Bachelor’s degree in ~~National Financial System~~Economic Sciences from ~~Fundação Instituto~~the Federal University of Rio de ~~Administração.~~Janeiro. 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 a member of ~~our Risk~~the Boards of Directors (Certified Board of Directors by IBGC – Brazilian Institute of Corporate Governance) and ~~Compliance Committee,~~Advisory boards, as well as advisory committees to Councils. Certified as ANBIMA Manager – Brazilian Association of Financial and Capital Markets Entities (CGA). Independent Consultant with more than 26 years of experience in advising customers in the areas of corporate finance (M&A, capital market operations (Debt and Equity– IPOs and Follow-ons), restructuring of financial liabilities and commercial partners), strategic planning and corporate development/new business in Brazil and in internationalization projects. He has had a long career in Brazilian and international financial institutions, having been responsible in Brazil for the investment banking area of a European financial conglomerate. More recently, he has held “C-level” positions in publicly traded companies. He has Sector knowledge in the ~~position~~industries of ~~Coordinator~~(i) Transport/Urban Mobility, (ii) Infrastructure, Logistics and Distribution of ~~our Audit Committee from 2012 to 2017.~~oil and gas, (iii) Transmission of electricity, (iv) agribusiness in general (highlight for animal protein, fertilizers and retail of agricultural products), (v) banks/financial market, (vi) Data Analytics/Big Data and (vii) payments/acquiring.
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 members~~which 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.
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The current members of the nomination and governance committee are ~~Celso Clemente Giacometti (who acts as coordinator), Álvaro Antonio Cardoso de Souza,~~ Deborah Patricia Wright, ~~and~~ Luiz Fernando Sanzogo ~~Giorgi.~~Giorgi and Pedro Augusto de Melo. The current members of the ~~nomination~~Nomination and ~~governance committee~~Governance Committee were appointed on May 3, ~~2019~~2021, December 17, 2021 and March 24, 2022, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in ~~2021.~~2023.
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~~Celso Clemente Giacometti~~~~. See “—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.”
Pedro Augusto de Melo. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
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 Rey~~Álvaro Antônio Cardoso de ~~Vicente,~~Souza, Andrea Marques de Almeida, Carlos Aguiar Neto, ~~Mário Roberto Opice Leã~~Luiz 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, 2019~~2021 to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in ~~2021.~~2023.
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 Rey~~Andrea Marques de ~~Vicente~~Almeida. 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 Leã~~Luiz Masagão Ribeiro Filho. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Executive Officers.”
~~Tarcila Reis Corrêa Ursini~~Tasso Rezende de Azevedo. ~~Ms. Corrêa Ursini~~Mr. Azevedo is Brazilian and was born ~~on May 9, 1974. She holds~~in 1972. He has a degree in ~~Economics~~forestry 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 from~~socio-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 degree~~platform that maps and monitors changes in ~~Development~~land cover and ~~Law from Kings College, London. Ms. Corrêa Ursini began her career~~use in Brazil, the Amazon Basin and other regions through multi-institutional collaboration. He also serves as a ~~lawyer, with work experiences in Brazil, Spain~~visiting scholar at Princeton University and ~~England. She was an associated lawyer at Machado, Meyer, Sendancz~~as a board member for several organizations including Rainforest Alliance, NEPCon, Imaflora and ~~Opice from 1997 to 2000 in~~ the ~~Corporate~~Institute 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 independent~~also 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.
Banco Santander (Brasil) S.A.
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Executive Committee
~~The~~Our Executive Committee is made up of our Chief Executive Officer, Senior Vice President Executive Officers and Vice President Executive ~~Officers make up the~~Officers. The Executive Committee ~~which examines~~is responsible for examining policies ~~for~~relating to business management, operational support, human resources and capital allocation. ItThe Executive Committee also ~~deliberates on the main~~reviews our primary technological, infrastructure and services projects.
Contract Termination
~~Contract termination~~
~~Employment contracts have~~Our employment agreements with members of our management are entered into for an ~~undefined~~unspecified term. The ~~voluntary~~ termination of ~~the~~these employment ~~relationship~~agreements voluntarily by members of our management, or ~~termination for non-fulfillment~~as a result of their failure to comply with their obligations thereunder, does not entitle ~~executives~~our managers to any financial compensation.
~~6D.~~ 6D. Employees
OnAs of December 31, ~~2019,~~2022, we had ~~47,819~~52,603 full-time, permanent employees. The following table presents the breakdown of our full-time, permanent employees (in accordance with local criteria) at the ~~date~~dates indicated.
As of December 31,
2022 2021 2020
Administrative employees 11,130 17,630 12,722
Commercial areas employees 41,473 31,204 31,877
Total 52,603 48,834 44,599

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
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,
2022 2021 2020
Region
Midwest 1,526 1,047 1,430
Northeast 4,880 4,547 4,066
North 857 774 674
Southeast 29,076 30,545 30,595
South 3,392 10,839 3,596
Other 12,872 1,082 4,238
Total 52,603 48,834 44,599

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 ~~main~~largest 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, 38,379~~2022, 28,495 participants were enrolled in SantanderPrevi plan, and the total assets under management under the plan was approximately R$~~4,082~~4.47 billion. As of December 31, ~~2019,~~2022, we had 5,661 registered participants in the SBPrev plan, ~~we had 3,770 registered participants,~~ with total amount under management of R$~~195,188~~494,784 million. For additional information on our pension plans, see note 2321 to our audited consolidated financial ~~statements.~~statements included elsewhere in this annual report.
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The Brazilian Banking Employees’ Union represents most of our ~~employees. In~~employees 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, ~~generally~~usually 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 ~~pertaining~~related to wages and salaries for the period ~~2018-2020~~2022-2024 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.
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~~6E.~~ 6E. Share Ownership
The following table provides the names of our directors and executive officers as well as members of our ~~fiscal council~~Fiscal Council who owned shares of Santander Brasil as of ~~March 6, 2020.~~February 24, 2023.
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 56,821 (1) 56,821 (1) (1)
Alessandro Tomao 136,746 (1) 136,746 (1) (1)
Alexandre Guimarães Soares 18,488 (1) 18,488 (1) (1)
Ana Paula Neves Granieri Domenici 9,507 (1) 9,507 (1) (1)
Ana Paula Vitali Janes Vescovi 30,589 (1) 30,589 (1) (1)
André de Carvalho Novaes 47,218 (1) 47,218 (1) (1)
André Juaçaba de Almeida 24,252 (1) 24,252 (1) (1)
Andrea Marques de Almeida 3,478 (1) 3,478 (1) (1)
Angel Santodomingo Martell 252,394 (1) 252,394 (1) (1)
Antonio Pardo de Santayana Montes 57,079 (1) 57,079 (1) (1)
Carlos Aguiar Neto 31,471 (1) 31,471 (1) (1)
Carlos José da Costa André 42,599 (1) 42,599 (1) (1)
Celso Mateus De Queiroz 25,264 (1) 25,264 (1) (1)
Claudenice Lopes Duarte 14,612 (1) 14,612 (1) (1)
Daniel Mendonça Pareto 9,775 (1) 9,775 (1) (1)
Deborah Patricia Wright — (1) — (1) (1)
Deborah Stern Vieitas — (1) — (1) (1)
Ede Ilson Viani 89,540 (1) 89,540 (1) (1)
Elita Vechin Pastorelo Ariaz 49,624 (1) 49,624 (1) (1)
Flávia Davoli 46,013 (1) 46,013 (1) (1)
Francisco Soares da Silva Junior 74,386 (1) 74,386 (1) (1)
Franco Luigi Fasoli 46,379 (1) 46,379 (1) (1)
Geraldo José Rodrigues Alckmin Neto 41,132 (1) 41,132 (1) (1)
Germanuela de Almeida de Abreu 18,600 (1) 18,600 (1) (1)
Gilberto Duarte de Abreu Filho 79,787 (1) 79,787 (1) (1)
Gustavo Alejo Viviani 219,867 (1) 219,867 (1) (1)
Gustavo de Souza Fosse 28,161 (1) 28,161 (1) (1)
Igor Mario Puga 15,578 (1) 15,578 (1) (1)
Jean Paulo Kambourakis 42,414 (1) 42,414 (1) (1)
Jean Pierre Dupui 286,511 (1) 286,511 (1) (1)
José Antonio Álvarez Álvarez 1 (1) — (1) (1)
José de Paiva Ferreira 498,188 (1) 498,187 (1) (1)
Luciana de Aguiar Barros 47,749 (1) 47,750 (1) (1)
Luis Guilherme Mattos de Oliem Bittencourt 27,784 (1) 27,784 (1) (1)
Luiz Masagão Ribeiro Filho 123,459 (1) 123,459 (1) (1)
Maria Teresa Mauricio da Rocha Pereira Leite 14,609 (1) 14,609 (1) (1)
Marília Artimonte Rocca — (1) — (1) (1)
Marilize Ferrazza Santinoni 34,590 (1) 34,590 (1) (1)
Mario Roberto Opice Leão 285,487 (1) 285,487 (1) (1)
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Principal Shareholders
Common Shares
Percentage of Outstanding Common Shares
Preferred Shares
Percentage of Outstanding Preferred Shares
Percentage of Total Share Capital
Murilo Setti Riedel 16,381 (1) 16,381 (1) (1)
Paulo César Ferreira de Lima Alves 26,385 (1) 26,385 (1) (1)
Paulo Fernando Alves Lima 24,010 (1) 24,010 (1) (1)
Paulo Sérgio Duailibi 32,120 (1) 32,120 (1) (1)
Pedro Augusto de Melo — (1) — (1) (1)
Ramón Sanchez Díez 31,677 (1) 31,677 (1) (1)
Ramon Sanchez Santiago 20,445 (1) 20,445 (1) (1)
Reginaldo Antonio Ribeiro 88,699 (1) 88,699 (1) (1)
Renato Ejnisman — (1) — (1) (1)
Ricardo Olivare de Magalhães 19,603 (1) 19,603 (1) (1)
Richard Flavio Da Silva 43,642 (1) 43,642 (1) (1)
Roberto Alexandre Borges Fischetti 173,664 (1) 173,664 (1) (1)
Robson de Souza Rezende 24,934 (1) 24,934 (1) (1)
Rogério Magno Panca 23,837 (1) 23,837 (1) (1)
Sandro Kohler Marcondes 47,228 (1) 47,228 (1) (1)
Sandro Mazerino Sobral 61,699 (1) 61,699 (1) (1)
Sandro Rogério da Silva Gamba 62,113 (1) 62,113 (1) (1)
Thomaz Antonio Licarião Rocha 85,135 (1) 85,135 (1) (1)
Tiago Celso Abate 40,833 (1) 40,833 (1) (1)
Vanessa de Souza Lobato Barbosa 148,182 (1) 148,182 (1) (1)
Vítor Ohtsuki 20,722 (1) 20,722 (1) (1)
Total
3,860,825

3,860,824


Shareholders Common Shares Percentage of Outstanding Common Shares Preferred Shares Percentage of Outstanding Preferred Shares Percentage 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)
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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

(1) Owns less than 0.01%.

~~(2)~~ ~~No longer an officer.~~
Shares held by members of our ~~board~~Board of ~~directors,~~Directors, our officers and members of our ~~fiscal council~~Fiscal 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.”
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~~Table~~6F. Disclosure of ~~Contents~~a Registrant’s Action to Recover Erroneously Awarded Compensation
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
~~7A.~~ 7A. Major Shareholders
As of ~~March 6, 2020,~~February 24, 2023, 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.
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The following table presents the beneficial ownership of our common and preferred shares as of February ~~28, 2020.~~24, 2023.
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 47.387 1,733,643,596 47.112 3,543,226,926 47.252
Grupo Empresarial Santander SL (1) 1,627,891,019 42.630 1,539,863,493 41.846 3,167,754,512 42.245
Banco Santander, S.A. 2,696,163 0.071 —   —   2,696,163 0.036
Administrators/Executives (2) 3,860,825 0.101 3,860,824 0.105 7,721,649 0.103
Treasury Shares 31,138,524 0.825 31,138,524 0.846 62,277,048 0.831
Other minority shareholders 343,525,170 8.996 371,329,583 10.091 714,854,753 9.533
Total 3,818,695,031 100.000 3,679,836,020 100.000 7,498,531,051 100.000
(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 ~~Statements~~Statements” of this ~~form~~annual report on Form 20-F, in notes ~~28 -~~27 – Shareholders’ equity (letter a) and ~~46 -~~45 – Related party transactions (letter c).
~~Regarding the~~The total ~~number~~ of ADRs held by U.S. investors as of ~~December 31, 2019, is 161,153,083.~~February 24, 2023 was 144,027,769. The total number of Units held by U.S. investors as of ~~December 31, 2019,~~February 24, 2023, is ~~58,273,917~~51,863,487 (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, ofDecember 22, 2020, (i) Santander ~~Brasil. Furthermore, the Selling Shareholder granted the international underwriters the option~~Spain transferred to ~~purchase up to 12,000,000 additional ADSs of~~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 ~~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,~~Santander Group there was no change in 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.
ultimate indirect control.
On December 31, ~~2018,~~2020, we held ~~26,633,004~~37,657,924 shares in treasury, of which ~~13,316,502~~18,828,962 were common shares and ~~13,316,502~~18,828,962 were preferred shares.
On December 31, ~~2019,~~2021, we held ~~34,466,574~~31,510,410 shares in treasury, of which ~~17,233,287~~15,755,205 were common shares and ~~17,233,287~~15,755,205 were preferred shares.
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On ~~February 20, 2020,~~December 31, 2022, we held ~~35,356,574~~62,323,214 shares in treasury, of which ~~17,678,287~~31,161,607 were common shares and ~~17,678,287 were~~31,161,607 preferred shares.
On February 24, 2023, we held 62,277,048 shares in treasury, of which 31,138,524 were common shares and 31,138,524 preferred shares.
Voting Rights of Principal Shareholders
Our principal shareholders do not have voting rights distinct from those of our other 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~~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.
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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,~~2022, borrowings and deposits from the Santander Group represented approximately 1%5.3% 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 consulting, 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 and Operation S.L., in October 2021 Santander Brasil Tecnologia ~~S.A (Brazil)~~S.A. and Santander Tecnologia e Inovação Ltda became F1rst Tecnologia e Inovação Ltda, Santander Global Technology Brasil ~~Ltda.~~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 ~~2019~~the years ended December 31, 2021 and ~~2018,~~2022, Santander Group affiliates received approximately R$~~859 million~~1.3 billion and R$~~586 million,~~1.5 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., or “Aquanima,” an affiliate ofwithin the Santander Group, which provides procurement services ~~with~~to Santander Brasil and its affiliates. We ~~contract~~procure solutions in ~~Trade~~trade negotiations, ~~Tactical~~tactical and ~~Strategic Purchasing, Online Procurement, Supplier Management, Outsourcing~~strategic purchasing, online procurement, supplier management, outsourcing, consulting, and ~~Consulting. Among~~vendor risk assessment from Aquanima. Our relationship with Aquanima include the ~~strategies used, we highlight possible~~ joint purchases of
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materials and services between different customers and other economic groups, which we believe allow for greater efficiency in price negotiations and rationalization of ~~services.~~services, as well as the engagement of real estate management services in 2021. We paid Aquanima R$45 million in 2022 and R$47 million in 2021 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—Important Events—Spin-Off of Getnet.”
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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. ~~approximately R$29 million~~(third-party provider) and Santander Brasil. Getnet pays certain amounts provided for in ~~2019~~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 ~~R$27 million~~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 ~~2018.~~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 customers, Santander Brasil has agreed to reimburse Getnet for the full amount of the discounts granted to such customers.
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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.”
On December 8, 2020, we entered into a quota purchase agreement with Getnet whereby we sold to Getnet the entirety of the issued share capital of Paytec. For further information regarding this sale, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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For further information, see note ~~“46 - Related party transactions (letter d)” in “Item 18. Financial Statements,” which contains~~45 to our audited consolidated financial statements ~~prepared~~included elsewhere in ~~accordance with IFRS as issued by the IASB.~~this annual report.
~~7C.~~ 7C. Interests of Experts and Counsel
Not applicable.
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 respect~~relation 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.
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As of December 31, ~~2019,~~2022, our judicial and administrative proceedings classified as probable loss risk (tax, labor and civil) and legal obligation amounted to approximately R$~~9.2 billion~~13,824.5 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. Our judicial and administrative proceedings classified as possible loss risk (tax, labor and civil) amounted to approximately R$~~27.6 billion.~~35,869.3 million.
Tax Litigation
We are a party to several tax-related lawsuits and judicial and administrative proceedings.
~~The main lawsuits related~~ Our primary legal and administrative proceedings relating to ~~tax legal obligations~~ fully recognized tax liabilities are as ~~obligations are:~~follows:
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· PIS/COFINS Litigation.: We and our subsidiaries filed lawsuits seeking to invalidate the provisions of Law 9,718/~~98, pursuant~~1998, according to which PIS and COFINS ~~taxes~~ must be levied on all revenues of legal entities. Prior to the ~~enactment of such provisions,~~said rule being in force, which ~~have~~had already been overruled in numerous recent decisions by ~~recent~~the Brazilian Federal Supreme Court ~~decisions for~~(Supremo Tribunal Federal), or the “STF,” in relation to non-financial ~~institutions,~~corporations, PIS and COFINS were levied only on revenues ~~from services and~~related to the sale of goods. On April 23, 2015, the ~~Supreme Court~~STF issued a decision applicable ~~solely~~only to Santander Brasil, accepting jurisdiction over the appeal ~~regarding~~relating to PIS and rejecting jurisdiction over the appeal ~~related~~relating to COFINS. The tax authorities appealed the decision of the ~~Supreme Court related to~~STF regarding COFINS, ~~and their appeal~~which was ~~denied~~rejected on August 19, 2015. ~~In respect of~~Regarding COFINS, the case is ~~finished~~closed, with a decision in favor of Santander Brasil. In December 2022, the appeal related to the PIS started to be judged with a favorable ~~decision applicable~~vote of the rapporteur. Thus, after evaluating the forecasts and also considering procedural aspects, there was an improvement in the classification of the chances of success by our lawyers, so that the risk of loss is now considered possible, with an outflow of resources representing economic benefits to ~~Santander Brasil.~~settle the PIS obligation not being probable. The ~~appeal related to PIS, as well as the~~ appeals ~~submitted~~filed by other companies in the group are ~~pending.~~awaiting judgment. As of December 31, ~~2019,~~2022, such claims amounted to R$~~3,756~~4,234 million and ~~are~~R$2,436 million is fully provisioned.
As of December 31, ~~2019,~~2022, our tax proceedings with a probable ~~loss~~ risk ~~for tax litigation~~of loss amounted to approximately R$~~6,277~~4,483 million, which was fully provisioned, and our tax proceedings with a possible ~~loss~~ risk ~~for tax litigation~~of loss amounted to approximately R$~~24,708~~33,069 million.
~~The main judicial~~Our primary legal and administrative proceedings ~~to which~~classified with a probable loss risk assessment ~~relates are:~~
are as follows:
· ~~Tax on services for financial institutions~~ISS Litigation.: Certain municipalities levy ~~Service Tax~~~~(Imposto Sobre Serviços –~~ ISS) on certain revenues derived from transactions not usually classified as the rendering of services. ~~In such cases, we~~We have ~~argued in administrative and judicial proceedings~~filed suit against the payment of ~~ISS.~~such taxes. As of December 31, ~~2019, amounts related to~~2022, the total amount involved in these proceedings totaled R$~~225~~319 million, which ~~are~~was fully provisioned.
· Social ~~security contribution~~Security Litigation.: We are involved in administrative and judicial proceedings ~~regarding~~relating 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,~~2022, amounts related to these proceedings totaled R$~~282~~134 million, which are fully provisioned.
· ~~Taxes on banking transactions~~Banking Transactions Tax Litigation.: 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~~the compulsory contribution over financial transaction (Contribuição Provisória sobre Movimentação Financeira) ~~tax~~, or the “CPMF,” 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 liable~~The 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 Informática S.A. (current~~F1rst Tecnologia e Inovação Ltda. (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, including to the Brazilian 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, 2022 totaled R$1,807 million. Based on the assessment of legal counsel, a provision of R$1,016 million was made to cover the probable risk of loss in these proceedings.
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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$743 million was made to cover the probable risk of loss in these proceedings.
Contingent liabilities classified as having a possible risk of loss refer to judicial and administrative proceedings involving tax matters ~~assessed~~which were deemed by ~~the~~our management, ~~taking in account~~based on the advice of our legal ~~counsels,~~counsel, as having a possible ~~losses, which~~risk of loss, and were not recognized as liabilities. ~~The~~Such main lawsuits include:
· Losses on loans.: We have challenged ~~the~~ tax assessments issued by the Brazilian Federal Revenue Service claiming that our deduction of losses on loans from ~~our corporate income tax (~~~~Imposto de Renda das Pessoas Jurídicas –~~ IRPJ) and CSLL (~~Contribuição Social sobre o Lucro Líquido~~) bases ~~have~~did not ~~met~~meet the relevant requirements under applicable law. As of December 31, ~~2019~~2022, the amount related to this challenge was approximately R$~~1,517~~1,670 million.
· Social Security Contribution – Profit Sharing Payments (~~Participaç~~ (Participação nos Lucros e ~~Resultados,~~Resultados), or “PLR”).: We are involved in administrative and judicial proceedings arising from a 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, since~~assessments, as we consider ~~the~~our tax treatment to be appropriate based on the applicable law and the nature of the payments. As of December 31, ~~2019~~2022, amounts related to these ~~infraction notices~~proceedings totaled approximately R$~~6,587~~8,329 million.
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· IRPJ and CSLL –on Capital ~~Gain~~Gains Litigation.: The Brazilian Federal Revenue Service issued a tax assessment against Santander Seguros S.A. ~~(legal~~(the legal successor of ABN AMRO Brasil Dois Participações S.A. ~~(AAB~~, or “AAB Dois ~~Par)~~Par”) charging income tax and social contribution related to the 2005 fiscal year. The Brazilian Federal Revenue Service claims that the capital gain on the sale of Real Seguros S.A. and Real Vida e Previdência S.A. by AAB Dois Par should be paid at a 34.0% tax rate instead of 15.0%. The assessment was appealed at the administrative level based on our understanding that the tax treatment adopted in the transaction was in compliance with the ~~current~~applicable tax ~~law~~laws and the capital gain was properly taxed. The administrative discussion ended unfavorably. We ~~are awaiting~~filed a ~~decision by~~lawsuit requesting the ~~CARF.~~cancellation of tax assessments. We are responsible for any adverse outcome in this ~~process~~proceedings as athe former controlling shareholder of Zurich Santander Brasil Seguros e Previdência S.A. As of December 31, ~~2019~~2022, the amount related to this proceeding was approximately R$~~400~~522 million.
· Goodwill amortization of the acquisition of Banco Real.: In October 2014, the Brazilian Federal Revenue Service issued a tax assessment against Santander Brasil in the amount of R$1,063 ~~billion,~~million, claiming income tax and social contribution relating to the 2009 tax year. The argument of the Brazilian Federal Revenue Service is that the amortization of goodwill arising ~~before~~from our merger with Banco Real cannot be deducted. We are awaiting a decision by the ~~CARF.~~Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais), or “CARF.” As of December 31, ~~2019~~2022, the amounts related to this proceeding totaled approximately R$~~1,416~~1,548 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 Sudameris.: In November 2014, we received a tax assessment of R$196 million related to the deduction of goodwill amortization ~~relating~~in relation to the acquisition of Banco Sudameris. In December 2012, we received a similar tax assessment in the amount of R$239 million relating to the fiscal years encompassing August 2007 to April 2009. We have appealed in both cases to the CARF. We consider our risk of loss in this case as possible. As of December 31, ~~2019~~2022, the amount related to this proceeding was approximately R$~~634~~699 million.
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· Unrecognized ~~Compensation.~~Compensation Litigation: We are currently engaged in legal and administrative proceedings with the Brazilian ~~federal revenue service~~Federal 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, ~~2019~~2022, the amount related to these proceedings was approximately R$~~4,182~~5,320 million. The risk of loss is classified as possible.
· ~~Tax~~ISS on ~~Services (ISS) -~~ Financial Institutions Litigation -: We are currently party to proceedings relating to the payment of ISS to various municipalities with respect to various revenues arising from operations that are usually not classified as services. On December 31, ~~2019~~2022, the amounts related to these proceedings totaled approximately R$~~3,032~~4,716 million.
~~Joined Certain Tax Repayment Programs~~
· ~~In August 2017 we joined the PERT. The program allows for certain tax debts~~Use 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~~~~) created~~assessments issued by the ~~cities~~Brazilian Federal Revenue Service in 2009. These proceedings relate to the alleged undue compensation of ~~Rio de Janeiro~~tax loss carryforwards and ~~São Paulo. The programs allow for certain~~negative basis of CSLL, because of tax ~~debts to be repaid~~assessments 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 and~~previous 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$293 million as~~level. As of December 31, ~~2017. As we had made provisions for~~2022, the amount related to these ~~losses, we registered income of~~assessments was R$~~435 million as a result of the reversal of certain provisions, net of tax effects, in an amount of R$96~~1,157 million.
IRRF on International Shipping Litigation: The company filed an appropriate judicial measure to avoid the taxation of Income Tax (IRRF) on income derived from the provision of services performed by a company abroad because they do not involve the transfer of technology, avoiding Double Taxation, due to the existence of International Treaties. After the favorable decision, we are awaiting decision in Court with an appeal by the Attorney Federal. The risk of loss is classified as possible. As of December 31, 2022, the amount related to these assessments was R$692 million.
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Labor Litigation
Similar to many other Brazilian banks, we are party to lawsuits brought by labor unions, associations and individual employees seeking, in general, compensation for overtime work, lost wages and retiree complaints about pension benefits and other labor rights. We believe we have either paid for or adequately provisioned ~~for~~ all such potential liabilities. In addition, we are the defendants in labor lawsuits filed by third-party employees that rendered or render services to us through service providers. The Brazilian ~~courts understand~~Superior Labor Court has issued a binding judicial precedent determining that if a third-party service provider fails to pay its employee, the employee has the right to demand payment directly from the company to which it rendered ~~its services.~~their services (secondary liability). If this happens, the service taker’s liability will be limited to the services that were rendered by each individual. As of December 31, ~~2019,~~2022, our labor proceedings with a probable ~~loss~~ risk of ~~labor-related litigation~~loss amounted to R$~~3.3 billion,~~1,623.7 million, which ~~amount~~ has been provisioned. Our labor proceedings with a possible ~~loss~~ risk of ~~labor-related litigation~~loss amounted to R$~~220.2~~315.1 million.
Former ~~employees~~Employees 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) 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 eliminatedA claim was filed in 1998 by the association of retired Banespa employees, the “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 was approved by the board of directors of Banespa. 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 of Banespa. The relevant clause in the bylaws was repealed in 2001. The 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
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~~certain steps~~ of the 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. The rescission action was dismissed in 2020 and, as of the date of this annual report, the deadline to file an extraordinary appeal to the STF has not yet lapsed. A decision of the Regional Labor Court in July, 2021 determined that the execution ~~any acts~~should be individualized and in the corresponding courts of ~~seizure of assets or freezing of funds are prohibited until~~ the ~~judgment present is delivered in ongoing rescission action. Our legal advisors have classified the risk of loss as probable.~~residence each person represented by AFABESP. 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 in the individual enforcement proceedings is issued, which is not the case yet). Our legal advisors have classified the risk of loss as probable.
IGP-DI Litigation
In 2002, AFABESP filed a lawsuit in the Federal Court of Brazil on behalf of its associates, requesting the readjustment of certain social security supplements to which people admitted to the respective retirement plan before May 22, 1975 were entitled, according to the Index General Price Index for Internal Availability in Brazil (General Price Index – Internal Availability), or the IGP-DI, inflation index. The lower court decision was favorable to the plaintiffs and determined that the ~~enforcement process~~readjustment should be made, but only for periods of time when no other form of readjustment was applied. Santander Brasil and Banesprev appealed against this decision, but both appeals were denied. We are currently awaiting judgment of the Special and Extraordinary Appeals filed by Santander Brasil and BANESPREV. At the same time, AFABESP requested provisional compliance with the judgment at first instance and, in response, we filed a petition for some members of AFABESP to be excluded from the list of beneficiaries of this decision, since these members were already plaintiffs in other lawsuits related to these questions. The court has ~~begun).~~not ruled definitively on our action, so 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 was recorded.
~~IGPDI~~
· A claim was filed in 2002 in Federal Court by AFABESP on behalf 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.
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 employees~~the 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 ~~workloads~~workload 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, and~~humiliation. 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.
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The ~~Federal Public Prosecutor’s Office’s claim~~MPT’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 ~~below~~less than R$460 million, and that we be prohibited from contracting with the government for 10 years. The ~~Federal Public Prosecutor’s Office~~MPT is also demanding that a fine of R$~~500 thousand~~500,000 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 ~~subject~~subjected 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$274.4 million, in addition to the imposition of certain daily fines. Finally, the ruling determined that we are required to implement a new experimental target program under the terms provided for in the decision ~~from~~dated January 1, 2020. We appealed that decision. However, we were unsuccessful in our appeal, and the judgment reinstated the lower court judgment with respect to compliance with the targets. We filed a review appeal, and a stay was granted by the appeals court such that we will only have to comply with the lower court judgment once it becomes final and unappealable. We estimate the risk of loss as ~~remote.~~possible.
Civil Litigation
We are a party to civil lawsuits claiming damages and other civil remedies. These disputes normally fall within one of the following categories: (i) actions requesting the review of contractual terms and conditions or seeking monetary adjustments, including the alleged effects of implementation of certain
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economic government plans (as described below); (ii) actions arising from loan agreements; (iii) execution actions; and (iv) actions seeking damages. As of December 31, ~~2019,~~2022, our probable loss risk in connection with civil ~~litigation liabilities~~proceedings amounted to R$~~2.5 billion,~~2,772.1 million, which has been fully provisioned, ~~in full~~ and our possible loss risk in connection with civil ~~litigation liabilities~~proceedings amounted to R$~~1,5 billion.~~2,488.2 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.
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 Court~~STJ 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 ~~twenty~~20 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~~where it is expected tothat they will 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~~~~) have~~FEBRABAN 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 ~~value~~amount of the payments will depend on the number of persons adhering, as well as on the number of ~~savers~~persons 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 ~~“Cartilha~~on “Cartilha Planos Econô~~micos”~~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.
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In November 2018, the STF handed down a decision recognizing the leading ~~court~~case 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.
~~Insilene Indústria de Silenciosos do Nordeste Ltda.~~
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”. According Following ratification of the amendment to the ~~complaint, Bandepe never provided~~settlement agreement in 2020, the ~~loan foreseen in the agreement, as a result of which Insilene went into bankruptcy. In this judicial process, the judge ruled in favor of Insilene and such decision may no longer be appealable. The~~
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~~proceeding is in its liquidation phase, and there is disagreement between Bandepe and Insilene regarding the value to be paid. The Court of Justice~~STF determined an additional stay of the ~~State of Pernambuco approved the amount indicated in the expert’s report and denied the calculation criteria sustained by Bandepe. Bandepe filed an appeal~~proceedings related 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.matter for five years.
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 Justice~~On 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.
Similar proceedings have been brought by the Federal General Accounting Office (Tribunal de Contas de Uniã~~o- 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 and~~Complementar. Only damages to Postalis are under discussion in the TCU ~~proceeding only~~proceeding. The status of these and other legal proceedings in which losses incurred by the ~~liability for losses caused to POSTALIS pension fund is under discussion.. In both proceedings, we have presented our defense.~~Fund are being discussed are as follows:
· TCU Proceedings: in 2021, the TCU handed down a favorable decision to Santander Brasil, which, however, was the subject of an appeal. There is a favorable opinion for maintaining the decision, but the appeal has not yet been judged.
· CVM Proceedings: Santander Brasil presented its defense, but in May 2022, Santander Brasil was ordered to pay R$450,000, which was the subject of an appeal in August 2022 and which is still pending.
· Misconduct Proceedings: initially, a single misconduct proceeding was filed against Santander Brasil and its former manager. The proceeding was dismembered with respect to each party and, as of the date of this annual report, both parties presented their defense and the proceedings are pending.
· Popular Action Proceedings (Ação Popular): Santander Brasil presented its defense, and the proceedings are now pending.
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 Renováveis), 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 ~~which~~that 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. AsEven though IBAMA failed to present any new evidence with respect to this matter within the three-year limitations period, it has decided to maintain the fine, as a ~~consequence~~result of ~~the filing of~~which the administrative ~~defense, the enforceability of the fine is suspended. Although~~proceedings have concluded. In January 2023, we ~~believe we have presented valid arguments, we~~filed a judicial complaint against IBAMA to annul these administrative proceedings. We believe that the ~~chance~~risk of loss in ~~the administrative~~these judicial proceedings is ~~possible. If we were to lose the administrative proceedings, we may seek a review of the administrative finding by a court.~~
remote.
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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, which~~counsel 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, ~~that~~this favorable decision was ~~reformed~~modified 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 not yet been a decision by the trial court, but an injunction has been granted to suspend the enforceability of the debt. In parallel to the administrative proceedings, a class action (Ação Popular was filed seeking a new judgment in the CARF. The decision was favorable to the plaintiff, but the Federal Regional Court, in a judgment issued in September 2022, repealed the initial decision and dismissed the claim. As the plaintiff appealed only with regard to the attorney's fees, the case was decided unfavorably for the plaintiff and the decision of the CARF prevails. 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.
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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
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acquisition cost of the shares delivered in the exchange. WeA new appeal was filed ~~an appeal against the infraction notice before~~with the CARF, which is awaiting judgment. This appeal was ~~dismissed in March 2019. This decision will be subject to clarification action~~partially allowed and ~~further appeal at~~we 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, we believe that 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 ~~recognized~~made any provisions in connection with these proceedings.
On December 8, 2016, the ~~General Superintendent~~general 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 to~~for 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.
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.
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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
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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 ~~recommend~~recommends 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, ~~and~~regulatory provisions .and such other factors as we may deem relevant at the time.
Payment of Dividends
Any ~~holder~~shareholder as of the record ~~of shares at the time~~date 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 ~~Santander~~S3 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 the~~for 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, 2018~~2022, 2021 and ~~2017.~~2020:
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

For the Year Ended December 31,

2022
2021
2020
(in millions of R$)
Net Income under Brazilian GAAP 12,358 14,996 14,056
(-) Legal Reserve 618 750 703
(=) Amounts Available for distribution 11,740 14,246 13,353
Mandatory Dividends – 25.0% 2,935 3,561 3,338
Interest on Shareholder’s Equity 5,280 3,649 3,325
Dividends 2,820 6,000 512
Total (Interest on Shareholder’s Equity and Dividends) 8,100 9,649 3,837
Dividends distributed in excess of the Mandatory Dividend 5,165 6,088 499
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History of Payment of Dividends and Interest Attributable to Shareholders’ Equity
In ~~2019,~~the year ended December 31, 2022, we declared dividends and interest on shareholders’ equity in the gross amount of R$~~10,800~~8,100 million, of which R$~~1,000~~3,000 million was paid on ~~April 29, 2019,~~March 4, 2022, R$~~1,000~~1,700 million on ~~July 31, 2019,~~May 16, 2022, R$~~1,000~~1,700 million on ~~October 30, 2019~~September 6, 2022 and R$~~7,800~~1,700 million on ~~February 21, 2020.~~
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November 22, 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,

2022
2021
2020
(in millions of R$, except per share figures)
Dividends 2,820 6,000 512
Interest attributable to shareholders’ equity 5,280 3,649 3,325
Total 8,100 9,649 3,837
Dividends and interest on capital per 1,000 shares
Common shares 1,035.69 1,231.79 489.83
Preferred shares 1,139.27 1,354.98 538.82

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~~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~~units in Brazil on the over-the-counter market, in accordance with CVM Instruction 400 of December 29, 2003, as amended, and (ii) ~~Units~~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~~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~~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.
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The price of our units and ADSs may experience volatility, which could negatively impact holders of our units and ADSs.
The following table shows our outstanding publicly traded common shares and preferred shares as of February ~~28, 2020:~~24, 2023:
Free Float B3 NYSE
Common shares 199,497,401 144,027,769
Preferred shares 227,301,814 144,027,769
Total 426,799,215 288,055,538

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
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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
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
2022 Annual 17.43 12.02 13.30
1st Quarter 17.85 13.98 17.44
2nd Quarter 17.93 13.80 13.85
3rd Quarter 15.02 12.73 14.27
4th Quarter 15.33 12.02 13.30
2023 Annual(*) 14.94 12.47 13.44
1st Quarter* 14.94 12.47 13.44

~~(1)~~ With the purpose 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.
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
* Through February 24, 2023.

The table below sets forth the high, low and last daily sales prices in reais for our units on the B3 for the periods indicated.
Reais per share – SANB4 (Preferred Shares)
High Low Last
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
2022 Annual 18.86 13.55 14.94
1st Quarter 19.39 15.42 18.85
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2nd Quarter 19.40 15.01 15.14
3rd Quarter 16.67 13.92 16.05
4th Quarter 17.35 13.55 14.94
2023 Annual(*) 16.59 14.39 15.50
1st Quarter (*) 16.59 14.39 15.50

* Through February 24, 2023.
The table below sets forth the high, low and last daily sales prices in reais for our units on the B3 for the periods indicated.
~~(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.
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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
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
2022 Annual 36.32 25.52 28.19
1st Quarter 37.36 29.26 36.25
2nd Quarter 37.36 28.71 28.81
3rd Quarter 31.73 26.56 30.14
4th Quarter 32.52 25.52 28.19
2023 Annual (*) 31.59 26.62 29.01
1st Quarter(*) 31.59 26.62 29.01

* Through February 24, 2023.
~~(1)~~ On June 2, 2014, 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. Bonus Shares and Reverse Share Split (Inplit).

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~~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.
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NYSE
ADR – BSBR
High Low Last
U.S.$ per ADR
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
2022 Annual 7.98 4.80 5.39
1st Quarter 7.85 5.33 7.70
2nd Quarter 7.98 5.42 5.49
3rd Quarter 6.21 4.87 5.61
4th Quarter 6.29 4.80 5.39
2023 Annual(*) 6.11 5.03 5.66
1st Quarter (*) 6.11 5.03 5.66

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
* Through February 24, 2023.

~~9B.~~
9B. Plan of Distribution
Not applicable.
~~9C.~~ 9C. Markets
Our ~~Units,~~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 Brazilian Law ~~6,385 of December 7, 1976, or the “Brazilian Securities Market Law,”~~No. 6,385/76, as amended, 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) or privately held (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
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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.
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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.
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.~~
18, 2022.
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~~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~~units were delisted from the Level 2 Segment and are now traded at the basic listing segment of the B3.
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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 regards~~with 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. These changes were incorporated to CVM Resolution No. 80, issued on March 29, 2022, which repealed CVM Normative Ruling No. 586.
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The ~~new~~ rules initially established by ~~this ruling~~Normative Ruling No. 586 and incorporated to Resolution No. 80 apply to companies (i) which are registered as category “A” issuers with the CVM, (ii) ~~whose~~which have securities ~~have been traded on~~admitted for trading in the ~~B3 since January 1, 2018,~~stock market by an authorized stock exchange (entidade administradora de mercado organizado), and (iii) which onhas issued and outstanding shares or units not held by controlling shareholder, any affiliates of the ~~publication date of CVM Instruction 586~~,~~had at least one of their securities included in~~controlling shareholder or by the ~~Brazil Index 100 – IBrX-100 (~~~~Índice Brasil 100~~)relevant company´s directors or ~~within the Bovespa Index – IBOVESPA (~~~~Índice Bovespa~~).officers. We fulfill all three of these criteria and are therefore subject to ~~the new CVM~~these 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 the New Foreign Exchange 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.
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~~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 the New Foreign Exchange 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.”
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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,~~units, the holder will be entitled to (i) sell the ~~Units~~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,~~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.~~the New Foreign Exchange Law. 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~~units in Brazil.
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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 the New Foreign Exchange 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.~~
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 the New Foreign Exchange Law, ~~4,131/62,~~ the conversion will be ~~effected~~carried 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~~units to be converted into shares.
If a foreign direct investor under the New Foreign Exchange Law ~~4,131/62~~ wishes to deposit its ~~Units~~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 ~~effected~~carried 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~~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~~units or ADRs as a result of this decree. In addition, foreign investors may acquire publicly traded ~~non-voting~~nonvoting shares of Brazilian financial institutions traded on a stock exchange or depositary receipts offered abroad representing ~~non-voting~~nonvoting 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.”
~~9D.~~ 9D. Selling Shareholders
Not applicable.
~~9E.~~ 9E. Dilution
Not applicable.
~~9F.~~ 9F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
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~~10A.~~ 10A. Share Capital
Not applicable.
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~~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.
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~~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 established~~limitations set forth by the Banking Reform Law, as amended, by Law ~~13,506 of November 13, 2017, or “Law~~No. 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.
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
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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 to~~Regarding 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.
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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~~Resolution No. 70 of ~~June 26, 1998,~~March 22, 2022, 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.
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
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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.
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Description of Units
The ~~Units~~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~~units shall be registered in a trust account linked to the ~~Units,~~units, and their ownership can only be transferred by means of transfer of the corresponding ~~Units,~~units, upon written instructions from the holder. Earnings from the ~~Units~~units and the amount received in the case of redemption or repayment shall only be paid to the holder of the ~~Units~~units registered in the books of the custodian.
None of the shares underlying the ~~Units,~~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,~~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~~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~~unit account and crediting the buyer’s ~~Unit~~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~~unit holders. The pledge, usufruct, right of succession, fiduciary transfer in guarantee and any other conditions, onus or encumbrances on the ~~Units~~units must be registered in the custodian’s records, as well as noted in the corresponding statement of account of ~~Units.~~
units.
The custodian shall provide ~~Unit~~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~~unit account, an indication that it is a statement of ~~Unit~~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~~unit account or to the holder’s order in writing, our charge for the deposit, if any, and the addresses where ~~Unit~~unit holders may obtain assistance.
Upon a written order issued by the holder of the ~~Unit~~unit account to a broker authorized by the stock exchange where the ~~Units~~units are traded, the custodian shall block the corresponding ~~Units~~units and transfer them to the buyer upon receipt of a confirmation of the sale from the stock exchange.
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The ~~Unit~~unit holder shall have the right, at any time, to instruct a broker to cancel ~~Units~~units and transfer the underlying shares. The broker must request to us, as the agent, to transfer the ~~Units~~units to the share deposit accounts held by the custodian in the holder’s name. The ~~Unit~~unit holder shall bear any transfer and cancellation costs involved. Similarly, the holder may instruct a broker to assemble ~~Units~~units by transferring the number of shares that jointly represent a ~~Unit,~~unit, which shall be registered by the custodian in a trust account linked to the ~~Units.~~
units.
The right to cancel ~~Units~~units may be suspended in the event of a public offering for distribution of ~~Units,~~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:~~
units:
· Dividends and share redemption or repayment amounts delivered to us, as depository of the shares, shall be paid by us to the ~~Unit~~unit holder;
· Only the ~~Unit~~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;~~units;
· In the event of a stock split, cancellation or reverse stock split or new issuances of shares by us while the ~~Units~~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
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(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;
(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~~units, unit holders may exercise the ~~preemption~~preemptive rights belonging to the shares represented by their ~~Units.~~units. We shall create new ~~Units~~units in the register of book-entry ~~Units~~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~~unit shall be delivered to the shareholders as shares, rather than ~~Units.~~units. There shall be no automatic credit of ~~Units~~units in the event of the exercise of ~~preemption~~preemptive 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.
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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~~shares 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 ~~2/3~~two-thirds of the voting shares and, at the second call, any number of holders of voting shares.
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 half~~one-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.
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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.
Call Notice of ~~our~~Our Shareholders’ General Meetings
The Brazilian Corporate Law requires all general meetings to be called by a minimum of three entries in ~~the Official Gazette~~a periodical 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, Bloco~~2041, 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.
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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 ~~fail~~fails 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.
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.
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Policy on Trading in Our Own Securities
The objective of our Policy on Trading in Our Own Securities, prepared in accordance with CVM ~~Instruction 358~~Resolution 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:
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(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;~~re-organization; 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.
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 owned subsidiary; or (ix) the acquisition of control of another company at a price exceeding the legal limits.
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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
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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.
~~Preemption~~Preemptive 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.
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.
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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
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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~~unit repurchase program to cover the acquisition of up to 37,256,072 ~~Units~~units or ADRs, representing 37,256,072 common shares and 37,256,072 preferred shares by us or our branch in the Cayman Islands, corresponding to approximately 1% of the totality of our corporate capital. The repurchase program ended 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 the Cayman Islands, 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 ended on August 2, 2022.
On August 2, 2022, our Board of Directors approved the unit repurchase program to cover the acquisition, by us or our branch in the Cayman Islands, of up to 36,986,424 units or ADRs, representing 36,986,424 common shares and 36,986,424 preferred shares, corresponding to approximately 1% of the totality of our corporate capital. The repurchase program ends on ~~November 4, 2020.~~
February 5, 2024.
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.
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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.
The disposal of control will also be subject to the prior authorization of the Brazilian Central Bank, pursuant to the terms and conditions of Central Bank Resolution No. 4,970/22. For additional information, please refer to “Item 4. Information on the Company—4B. Business Overview—Regulation and Supervision.”
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).
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According to CVM ~~Instruction 480,~~Resolution No. 80, of ~~December 7, 2009,~~March 29, 2022, as amended, the reference form (~~formulário de referência~~) 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 referê~~ncia~~)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,~~Resolution No. 155, of July ~~13, 2007,~~23, 2022, as amended, or “CVM ~~Instruction 457,~~Resolution 155,” 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~~Resolution 155 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 ~~About~~about 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~~required to send such information to CVM and B3 under CVM Resolution 44 within ~~ten~~10 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~~We are also ~~became mandatory~~required 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.
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Disclosure of Information ~~About~~about 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 ~~ruling~~resolution 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)~~(Cadastro de Pessoas Físicas), or “CPF,” or in the National Register of Legal Entities ~~(CNPJ)~~(Cadastro Nacional de Pessoas Jurídicas), or “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)~~CPF or ~~the National Register of Legal Entities (CNPJ)~~CNPJ of its agent or legal representative in Brazil for the purposes of article 119 of the Brazilian Corporate Law.
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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 358~~Resolution 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. Exchange Controls
~~10D.~~ ~~Exchange Controls~~
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Foreign Investment in Brazil
Foreign Direct Investment
Foreign direct investment in Brazil is regulated by ~~Law 4,131 and Law 4,390, enacted on September 3, 1962 and August 29, 1964, respectively, as amended.~~the New Foreign Exchange Law. A foreign direct investor under the New Foreign Exchange Law ~~4,131/62~~ must:
· ~~register~~report his/her condition 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 in amounts (per transaction) exceeding R$100 thousand must be ~~registered with~~reported to the Brazilian Central Bank through the ~~Electronic Registration~~Foreign Capital Information Reporting System – Foreign Direct Investment, or the “~~Registro Declaratório Eletrônico~~Sistema de Prestação de Informações de Capital Estrangeiro – Investimento ~~Externo~~Estrangeiro Direto,” within 30 days of the flow of funds into Brazil in accordance with ~~Law 4,131.~~the New Foreign Exchange Law. The ~~registration~~reporting of foreign capital (in amounts per transaction exceeding R$100 thousand) is required for the remittance of profits abroad, the repatriation
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of capital and the ~~registration~~formalization of reinvestments. Investments will always be ~~registered~~reported 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.
On December 28, 2006, Law 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 in~~reais~~ 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,~~reporting obligations, 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 ~~are~~have 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:
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· 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;
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· 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.
CVM ~~Instruction~~Resolution No. ~~560,~~13, of ~~March 27, 2015, as amended, introduced in Brazilian securities regulation~~November 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.~~ ~~Taxation~~
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 account~~consider 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.
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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.
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
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· If the Non-Resident Holder is located in a Tax Haven, the tax rate will be 25%.
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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 (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.
(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.
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Gains on the ~~exchange~~Exchange 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 ~~exchange~~Exchange of ~~units~~Units 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 ~~4373~~4,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and remain taxed to a tax rate of 25%.
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~~IOF 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;~~
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~~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~~zero. The Brazilian government may increase any of these rates at any time, up to 25%. However, any increase in rates ~~may~~would only apply to future transactions.
Tax on Transactions Involving Bonds and Securities and Derivatives
Brazilian law imposes ~~a Tax~~IOF tax on Transactions Involving Bonds and Securities, ~~known as~~or “IOF/~~Bonds Tax.~~Bonds.”
Currently, the IOF Bonds ~~Tax~~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~~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.
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The IOF Derivatives Tax, or the “IOF/Derivatives” tax, was established by Decree 7,563 ofdated 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 country~~Brazil 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 (Imposto sobre Transmissão Causa Mortis e Doação de Quaisquer Bens ou Direitos), 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 ~~residents~~resident 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 minimum rate of 2% and 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;
i. ~~certain financial institutions;~~
ii.       insurance companies;
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~~ii.~~ ~~insurance companies;~~
iv.       persons holding ADRs or units as part of a hedge, “straddle,” conversion transaction or integrated transaction;
~~iii.~~ ~~dealers and traders in securities that use a mark-to-market method of tax accounting;~~
v.       holders whose “functional currency” is not the U.S. dollar;
~~iv.~~ ~~persons holding ADRs or units as part of a hedge, “straddle,” conversion transaction or integrated transaction;~~
vi.       holders liable for the alternative minimum tax;
v. ~~holders whose “functional currency” is not the U.S. dollar;~~
vii.       tax exempt entities, including “individual retirement accounts” and “Roth IRAs”;
~~vi.~~ ~~holders liable for the alternative minimum tax;~~
viii.       partnerships or other entities classified as partnerships for U.S. federal income tax purposes;
~~vii.~~ ~~tax exempt entities, including “individual retirement accounts” and “Roth IRAs”;~~
ix.       holders that own or are deemed to own 10% or more of our shares by vote or value;
~~viii.~~ ~~partnerships or other entities classified as partnerships for U.S. federal income tax purposes;~~
x.       persons holding ADRs or units in connection with a trade or business conducted outside the United States; and
~~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.~~ 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.
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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;
~~(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;
~~(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
~~(3)~~ ~~an estate the income of which is subject to U.S. federal income taxation regardless of its source; or~~
~~(4)~~ (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.
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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.
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.
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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~~might be entitled to a credit against its U.S. federal income tax liability for Brazilian income taxes withheld from dividends on ADRs or units. On December 28, 2021, new Treasury Regulations pertaining to foreign tax credits (the “Final Treasury Regulations”) were released that impose significant new limitations on the non-U.S. taxes (including withholding taxes) for which a foreign tax credit can be claimed. Corrections with respect to the Final Treasury Regulations were published on July 27, 2022. We have not determined whether these limitations will prevent a U.S. Holder from claiming a foreign tax credit with respect to any withholding tax imposed on dividends on ADRs or units. U.S. Holders should therefore consult their tax advisors as to the availability of foreign tax credits for any amounts withheld with respect to 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~~In addition, the Final Treasury Regulations generally will preclude U.S. Holders from claiming a foreign tax credit with respect to any tax imposed on gains from the disposition of shares by a jurisdiction, such as Brazil, that does not have an applicable income tax treaty with the United States, although such taxes may be applied to reduce the amount realized by the U.S. Holder on the disposition. Consequently, a U.S. ~~Holder’s~~Holder currently is not expected to be able to claim a foreign tax credit for any Brazilian tax imposed on any 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,units. However, 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 (and on which taxpayers may currently rely pending finalization), we believe we were not a passive foreign investment company (a “PFIC”) for our taxable year ended December 31, ~~2019.~~2022. 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.
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.
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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.
~~10F.~~ 10F. Dividends and Paying Agents
Not applicable.
~~10G.~~ 10G. Statement by Experts
Not applicable.
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~~10H.~~
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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 ~~Internet~~internet 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 ~~Internet~~internet 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.~~www.b3.com.br.

~~10I.~~

10I. Subsidiary Information

Not applicable.

10J. Annual Report to Security Holders

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:

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;

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iv.

e-mail;


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video and teleconferences with Santander Spain; and

vi.

risk committees, including the executive risk committee for Brazil and the ~~Risk~~risk control committee.

Information is prepared with the goal of improving risk management and is classified into two groups:

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:

liquidity and market risk: includes data on treasury limits (VaR, positions, sensitivity of linear and ~~non-linear~~nonlinear econometric models) and the principal changes in the treasury portfolio. Also includes ~~LCR~~short-term liquidity and liquidity buffer calculation.

Weekly information:

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.

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Monthly information:

liquidity and market risk: ~~facilitates~~facilitate 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.


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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 with~~culture, aligning the ~~objectives~~Santander Brasil’s strategy, predisposition and risk tolerance level (“Main Guide”) to the mission and objective of ~~the~~its 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


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·Approve predefined internal risk regulations ~~as well as changes in risk policies with impact on revenue, margin or provision~~and monitor the Strategic Business Plan main indicators;

·Vice President Executive Officer of Private Banking and Wealth

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	~~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;
	·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~~our board of directors and to ~~the executive committee~~our 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.~~

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~~Committee~~	~~Responsibilities~~	~~Members~~	~~Meeting Frequency~~
	management,
Risk Control Committee	·Oversee the Risk Identification and Assessment (RIA) exercise;	·Chief Financial Officer	Biweekly
	·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

·Vice President Executive Officer of Finance and Strategy


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	·Conduct an independent and periodic control report on risk management activities, which includes:	·Executive ~~Superintendents~~Superintendent of Enterprise Risk ~~Architecture and Risk Control~~Management
	·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
	·Monitor the observance of appetite and risk policies, advising ~~the board risk committee~~our Risk and Compliance 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	·Chief Compliance Officer ·Vice President Executive Officer of ~~Finance~~Legal and ~~Strategy.~~Corporate Affairs ·Chief Data Officer · ~~Chief Compliance~~Vice President Executive Officer of Audit ·Executive Superintendent of Operational Risk
	·Support and assist the board in carrying out stress tests, in particular ~~valuing~~by evaluating the scenarios and assumptions to be used ~~and~~in these tests, valuing the results ~~of these tests~~ and analyzing the measures proposed by the risk function as a consequence of the results;


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	·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;


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·Provide the board of directors, through ~~the board risk committee,~~our Risk and ~~the executive committee~~Compliance Committee, and our 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;~~Committee; 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.

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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 ~~have~~has 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.

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

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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 ~~grant~~evaluate 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 an~~and 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 account~~considering each customer’s risk profile.


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Credit ~~authorizations~~authorization limits are established ~~through policies which define rules~~ and ~~responsibilities of each member of~~these are automatically applied to all credit requests. When an automatic credit decision results in the ~~committee. We have established procedures and authorized certain organizational bodies~~customer’s needs, the commercial area has the authority to ~~approve credit requests in amounts greater than those delegated to individual branches (both~~submit a request for ~~individuals and SMEs).~~manual approval. Such approvals are ~~made~~subjected to review by analysts or committees, depending on the ~~relevant authorized organizational body through applying~~value 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 Required	Amount
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)

Members of risk decision-making centers include superintendents and other representatives of the risk area.

(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.

~~(1) For individuals,~~There is also a more robust model called Rating Plus which is addressed to mid-size companies a few other retail customers. This model combines the ~~maximum value~~customers’ internal and external financial behavior, information obtained from their balance sheets and a questionnaire that is ~~R$200,000. For SMEs~~adapted in accordance with the ~~maximum is R$500,000.~~companies’ individualities.

~~(2) Members of~~The evaluation made by Rating Plus seeks to attribute an internal classification for the costumers defining their risk ~~decision-making centers include superintendents and other representatives of~~level in comparison with their creditworthiness. The classification as well as the ~~risk area.~~

(3) 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.

credit analyses for these customers are usually made manually through specific proposals or limits.

Wholesale Lending

In ~~Wholesale~~wholesale banking, each customer is analyzed on an individual ~~basis.~~basis, Commercial and risk areas analyze the ~~client's~~client’s needs and indicators, ~~checking~~analyzing profitability, creditworthiness and adequacy into the risk ~~appetite~~ metrics of Santander Group RAS – Risk Appetite Statement, in order to determine and ~~take the proposed limit~~submit 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 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 Committee	Up to R$50 million
Superior and High Risk Committee	Up to R$~~170~~250 million
Wholesale Committee	Up to R$~~340~~500 million
Executive Risk Committee	Up to R$1 billion

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Credit Monitoring

Credit lines to retail banking SME customers are reviewed weekly, whereas individual ~~clients~~customers are systematically reviewed daily, based on the client’s credit rating. This process allows ~~for~~ improvements in credit exposure ~~for~~to customers who present good credit quality. ~~Further~~Additional 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.


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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
Low	~~Smaller~~Lower than 2.1%
Medium-low	~~Bigger~~Greater than 2.1% and ~~Smaller~~Lower than 4.1%
Medium	~~Bigger~~Greater than 4.1% and ~~Smaller~~Lower than 6.3%
Medium-high	~~Bigger~~Greater than 6.3% and ~~Smaller~~Lower than 10.0%
High	~~Bigger~~Greater 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 —Internal~~Information—Allowance for Loan Losses—Internal Risk Rating.”

Recovery

Our business recovery area is responsible for all nonperforming portfolios. This area uses statistical tools to study the behavior of ~~clients~~customers 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 ~~clients~~customers 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:

Internal teams specialized in restructuring and debt recovery work directly with defaulting ~~clients~~customers with loans of higher values and/or are overdue more than 60 days.

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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.


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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.

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Our exposure to this risk is ~~not significant and is~~mostly concentrated in derivative operations involving commodities for ~~clients.~~

customers.

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~~equity 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:


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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. 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~~

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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:

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.~~used and credit spreads.


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Non-trading book (banking/structural)

The non-trading book consists of market risks inherent in the balance sheet, excluding the trading portfolio. These include:

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~~Our Risk and Compliance 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:

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

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Consolidation of ~~information.~~information,

In turn, our market risk management is guided by the following basic principles:

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;

Homogeneous aggregated metrics;

vi.

Homogeneous and documented methodologies;

vii.

Measuring risk;

viii.

Information consolidation; and


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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:

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;

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~~our Risk and Compliance 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.

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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

limits aimed at reducing the volume of effective losses or protecting results already generated during the period:

loss trigger; and

stop loss.


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Structural limits

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.

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.

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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 ~~250~~260 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.


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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.

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 ~~Brazil~~Brazilian 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.

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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 ~~particular~~specific 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.

Quantitative ~~Analysis~~

analysis

Trading ~~Activity~~activity

Quantitative ~~Analysis~~analysis of ~~Daily~~daily VaR in ~~2019~~

2022

Our risk performance with regard to trading activity in financial markets between ~~2017~~2020 and ~~2019,~~2022, measured by daily VaR (measured at a 99% of confidence level, over a one day time frame), is shown in the following graph.


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During ~~2019,~~2022, VaR ~~presented a low volatility, fluctuating~~fluctuated between R$~~20.8~~40 million and R$~~85.4~~50 million, ~~(on March 21 2019, when it was announced the arrest of Michel Temer),~~ with an average of R$~~41.9~~40.9 million. The histogram below shows the distribution of average risk in terms of VaR in ~~2019~~2022 where the accumulation of days with VaR levels between R$30 million and R$6050 million can be observed in ~~88.9%~~86.9 % of the distribution.

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VaR by Risk Factor

The minimum, maximum, average and year-end ~~2019~~2022 VaR values by risk factor were as follows:

2018 2019
Period End Low Average High Period End
(in millions of R$)
Trading VaR 46.5 20.8 41.9 85.4 20.9
Diversification Effect (23.8 ) 1.7 (11.4 ) (32.8 ) (10.7 )
Interest Rate VaR 33.9 14.7 31.0 66.0 16.7
Equity VaR 11.6 2.0 8.6 29.2 7.4
Foreign Exchange VaR 24.6 1.6 13.8 31.3 7.5
Commodities VaR 0.2 0.0 0.0 0.4 0.0


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	2021	2022
	Period End	Low	Average	High	Period End
	(in millions of R$)
Trading VaR	34.4	22.1	40.9	95.5	33.8
Diversification Effect	(12.8)	(3.6)	(27.2)	(71.1)	(21.3)
Interest Rate VaR	34.9	19.7	33.4	72.2	20.7
Equity VaR	6.4	3.7	9.3	24.4	9.9
Foreign Exchange VaR	5.9	4.8	22.2	65.5	23.2
Commodity VaR	0.1	—	3.3	9.5	1.4

The average VaR for ~~2019~~2022 was R$~~41.9~~40.9 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 ~~three~~four main risk factors, interest rates, equity prices, ~~and~~ exchange rates and commodities were R$~~31.0~~33.4 million, R$~~8.6~~9.3 million, R$22.2 million and R$~~13.8~~3.3 million respectively, with a negative average diversification effect of R$~~11.4~~27.2 million. The chart below shows the evolution of the VaR interest rates (IR), VaR exchange rates (FX) ~~and~~, VaR equity prices (EQ) ~~(at~~and Commodities (CM), at a 99% confidence level, over a day time frame and a ~~15 day~~15-day moving ~~average).~~average.

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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.

The chart below shows the VaR Vega performance of our structured derivatives business in ~~2019, 2018~~2022, 2021 and ~~2017.~~2020. In the most recent year, this figure fluctuated around an average of R$~~4.5~~8.9 million. In general, the periods with higher VaR Vega levels are related to episodes of significant increases in market volatility.


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Scenario analysis

Different stress test scenarios were analyzed during ~~2019.~~2022, A correlation break scenario generated the results presented below.

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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,~~2022, 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	)	(7.7)		(29.0	)		(11.7	)		(48.4	)

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$~~168.8~~48.4 million.

Non-trading Activity

Quantitative Analysis of Interest Rate Risk in ~~2019~~

2022

Convertible Currencies

At the end of ~~2019,~~2022, the sensitivity of NIM at one year, to a parallel rise of 100 basis points in the local yield curve was R$~~334~~945 million.

In addition, at the end of ~~2019,~~2022, the sensitivity of ~~net worth~~MVE to parallel rises of 100 basis points in the yield curves was R$~~2,063~~2,154 million in the local currency yield curve.

Structural Gap

The following table shows the managerial gaps between the re-pricing dates of our assets and liabilities as of December 31, ~~2019~~2022 in millions ofreais.


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Gap	Total		0-1 Month			1-3 Months			3-6 Months			6-12 Months			1-3 Years			3-5 Years			> 5 Years			Not Sensitive
Money Market		161,265		70,403			409			862			1,862			1,594			1,360			5,187			79,590
Bonds		146,517		38,576			2,053			1,563			4,891			17,111			18,140			9,116			55,067
Loans		498,411		146,122			65,117			58,729			60,644			68,732			60,507			49,760			(11,200	)
Permanent		20,471		—			—			—			—			—			—			—			20,471
Other		256,733		46,416			—			—			—			—			—			—			210,318
Total Assets		1,083,397		301,516			67,579			61,154			67,397			87,437			80,007			64,063			354,245
Money Market		161,265		69,270			611			129			710			85			11			—			90,450
Deposits		447,438		275,360			9,454			11,623			9,722			13,033			16,881			92,095			19,270
Loans Liability		61,090		12,771			14,882			19,850			12,491			1,229			941			—			(1,073	)
Issues		153,989		94,413			5,247			4,595			19,051			5,957			16,698			8,028			—
Equity and Other		259,614		49,753			—			—			—			—			3,367			2,088			204,407
Total Liabilities		1,083,397		501,566			30,194			36,197			41,973			20,304			37,898			102,210			313,054
Balance Gap		—		(200,050	)		37,385			24,956			25,424			67,133			42,109			(38,148	)		41,191
Off-Balance Gap		22,333		(46,018	)		22,559			(80	)		(420	)		10,526			8,864			6,511			20,391
Total Structural GAP		22,333		(246,068	)		59,945			24,876			25,003			77,659			50,972			(31,636	)		61,582
Accumulated Gap		22,333		(246,068	)		(186,123	)		(161,247	)		(136,244	)		(58,585	)		(7,613	)		(39,249	)		22,333

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

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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$~~135~~398 million during ~~2019,~~2022, reaching a maximum of R$~~334~~945 million in ~~December.~~December, The sensitivity of the market value ~~decreased~~increased R$~~202~~481 million during ~~2019,~~2022, reaching a maximum of R$~~2,342~~2,154 million in ~~October.~~December, The main factors in ~~2019~~2022 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.~~2022.

Gr?fico, Gr?fico de barras

Descri??o gerada automaticamente

Interest Rate Risk Profile as of December 31, ~~2019~~2022

The currency gap tables below show the managerial distribution of risk by maturity and currency in Brazil as of December 31, ~~2019~~2022 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
Gaps in
Local
currency

Money Market
243,106 82,104 646 1,023 10,980 21,542 12,671 30,916 83,223
Loans 285,391 61,762 30,786 32,699 43,599 58,580 20,151 23,682 14,132
Permanent 16,782 -   -   -   -   -   -   -   16,782
Others 103,613 24,461 -   -   -   -   -   -   79,153
Total
Assets
648,892 168,326 31,432 33,722 54,579 80,122 32,823 54,598 193,289
Money   Market (104,130 ) (72,943 ) (609 ) (1,126 ) (2,662 ) (3,583 ) (2,187 ) (7,456 ) (13,564 )
Deposits (385,544 ) (194,698 ) (3,876 ) (4,431 ) (8,136 ) (21,281 ) (11,499 ) (26,695 ) (114,927 )
Equity and Other
(177,481 ) (27,448 ) -   -   -   -   -   309 (150,342 )
Total
Liabilities
(667,155 ) (295,089 ) (4,486 ) (5,557 ) (10,799 ) (24,864 ) (13,686 ) (33,842 ) (278,832 )
Off-Balance Gap
(56,847 ) 57,544 8,092 1,330 (4,276 ) (14,620 ) (485 ) (10,361 ) (62,310 )
Gap (75,111 ) (69,218 ) 35,039 29,496 39,504 40,638 18,652 10,396 (147,854 )


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	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$)
Local Currency Gap
Money Market		142,985			62,295			409			862			1,862			1,594			1,360			5,187			69,417
Bonds		117,496			36,777			120			137			1,407			10,484			9,246			7,658			51,667
Loans		410,042			103,428			49,076			45,260			51,889			66,051			59,421			47,121			(12,204	)
Permanent		20,449			—			—			—			—			—			—			—			20,449
Other		157,973			24,604			—			—			—			—			—			—			133,369
Total Assets		848,944			227,104			49,605			46,259			55,157			78,129			70,027			59,966			262,698
Money Market		161,265			69,270			611			129			710			85			11			—			90,450
Deposits		402,728			259,254			3,926			5,032			7,780			10,250			13,672			88,723			14,091
Loan Liabilities		(1,075	)		—			—			—			—			—			—			—			(1,075	)
Issues		127,226			92,807			3,114			3,286			5,111			5,025			12,944			4,938			—
Equity and Other		145,040			18,255			—			—			—			—			—			2,088			124,697
Total Liabilities		835,183			439,586			7,651			8,447			13,601			15,360			26,627			95,748			228,163
– Balance Gap		13,761			(212,482	)		41,953			37,812			41,556			62,769			43,399			(35,782	)		34,535
Off-Balance Gap		(10,393	)		(48,332	)		(7,108	)		(114	)		(1,144	)		10,312			9,964			5,638			20,391
Total Structural Gap		3,368			(260,814	)		34,846			37,698			40,412			73,081			53,363			(30,144	)		54,926
Accumulated Gap		3,368			(260,814	)		(225,969	)		(188,271	)		(147,859	)		(74,778	)		(21,414	)		(51,558	)		3,368

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	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 foreign currency
																												(in millions of R$)
Foreign Currency Gap
Money Market		29,206			1,513			50			185			418			2,404			6,388			6,965			11,283			18,280			8,108		—			—			—			—		—			—			10,173
Bonds																													29,021			1,799		1,933			1,426			3,484			6,628		8,894			1,457			3,399
Loans		52,248			18,469			13,178			8,651			5,175			787			2,256			1,371			2,360			88,369			42,694		16,041			13,469			8,756			2,680		1,086			2,639			1,004
Permanent		1			-			-			-			-			-			-			-			1			23			—		—			—			—			—		—			—			23
Others		128,000			26,500			259			129			36			-			-			-			101,077
Other																													98,760			21,812		—			—			—			—		—			—			76,948
Total Assets		209,454			46,482			13,487			8,965			5,629			3,191			8,644			8,336			114,720			234,453			74,413		17,975			14,894			12,240			9,308		9,980			4,096			91,547
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	)		44,711			16,106		5,528			6,591			1,942			2,783		3,209			3,372			5,179
Loan Liabilities																													62,165			12,771		14,882			19,850			12,491			1,229		941			—			2
Issues																													26,763			1,606		2,133			1,309			13,940			932		3,754			3,090			—
Equity and Other		(153,675	)		(27,340	)		(11,339	)		(6,784	)		(7,361	)		(722	)		(599	)		(2,799	)		(96,732	)		114,574			31,497		—			—			—			—		3,367			—			79,710
Total Liabilities		(191,191	)		(34,518	)		(14,148	)		(10,694	)		(9,357	)		(4,709	)		(13,961	)		(5,100	)		(98,705	)		248,214			61,980		22,543			27,750			28,372			4,944		11,271			6,462			84,891
– Balance Gap																													(13,761	)		12,432		(4,568	)		(12,856	)		(16,132	)		4,364		(1,291	)		(2,366	)		6,656
Off-Balance Gap		56,847			1,366			(15,354	)		(4,527	)		(9,613	)		(5,216	)		(1,893	)		(1,064	)		93,149			32,726			2,314		29,667			34			724			214		(1,100	)		873			—
Gap		75,110			13,329			(16,015	)		(6,256	)		(13,342	)		(6,733	)		(7,209	)		2,172			109,165
Total Structural Gap																													18,965			14,747		25,099			(12,822	)		(15,409	)		4,578		(2,391	)		(1,492	)		6,656
Accumulated Gap																													18,965			14,747		39,846			27,024			11,615			16,193		13,802			12,309			18,965

Market Risk: VaR Consolidated Analysis

Our total daily VaR as of December 31, ~~2018~~2022 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


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	2022								2021
	Low		Average		High		Period End		Period End
	(in millions of R$)
Trading		22.1		40.9		95.7		33.8		34.4
Non-trading		—		—		—		—		—
Diversification effect		—		—		—		—		—
Total		22.1		40.9		95.7		33.8		34.4

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:

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~~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

	2022								2021
	Low		Average		High		Period End		Period End
	(in millions of R$)
Interest rate risk
Trading		19.7		33.4		72.2		20.7		34.9
Non-trading		—		—		—		—		—
Diversification effect		—		—		—		—		—
Total		19.7		33.4		72.2		20.7		34.9

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

	2022								2021
	Low		Average		High		Period End		Period End
	(in millions of R$)
Exchange rate risk
Trading		4.8		22.2		65.2		23.2		5.9
Non–trading		—		—		—		—		—
Diversification effect		—		—		—		—		—
Total		4.8		22.2		65.2		23.2		5.9

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

	2022								2021
	Low		Average		High		Period End		Period End
	(in millions of R$)
Equity price risk
Trading		3.7		9.3		24.4		9.9		6.4
Non–trading		—		—		—		—		—
Diversification effect		—		—		—		—		—
Total		3.7		9.3		24.4		9.9		6.4

Note:

VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.

~~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 - - - - -

~~Total~~

~~0.0~~

~~0.4~~

~~0.0~~

~~0.2~~273

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~~Table of Contents~~Commodity Price Risk

	At December 31,
	2022				2021
	Low	Average	High	Period End	Period End
	(in millions of R$)
Commodity price risk
Trading	—	3.3	9.5	1.4	0.1
Non-trading	—	–	–	–	–
Diversification effect	—	–	–	–	–
Total	—	3.3	9.5	1.4	0.1

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

	2022				2021
	Low	Average	High	Period End	Period End
	(in millions of R$)
Trading
Interest rate risk	19.7	33.4	72.2	20.7	34.9
Exchange rate risk	4.8	22.2	65.2	23.2	5.9
Equity price risk	3.7	9.3	24.4	9.9	6.4
Commodity price risk	—	3.3	9.5	1.4	0.1
Total Trading	22.1	40.9	95.7	33.8	34.4
Non-trading
Interest rate risk	3,844.9	4,505.4	5,128.8	5,064.2	4,418.9
Exchange rate risk	—	—	—	—	—
Equity price risk	—	—	—	—	—
Commodity price risk	—	—	—	—	—
Total Non-Trading	3,844.9	4,505.4	5,128.8	5,064.2	4,418.9
Total (Trading + Non-Trading)	3,867.0	4,546.3	5,224.5	5,098.0	4,453.3
Interest rate risk	—	—	—	—	—
Exchange rate risk	4.8	22.2	65.2	23.2	5.9
Equity price risk	3.7	9.3	24.4	9.9	6.4
Commodity price risk	—	3.3	9.5	1.4	0.1

Note:

VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.

Non-trading VAR is calculated using a 21-day timing gap instead of on a daily basis.

Operational Risk

We have adopted the definition of the Basel Committee and Brazilian Central Bank for operational risk, which ~~is defined~~defines 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 may~~events might result in financial losses, ~~adversely affecting~~adverse effects on the continuity of our business, and ~~also negatively affect our~~negative 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 of~~aimed at continuously improving and developing our management and control of operational risks. The three lines of defense ~~are as follows:~~are:


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First line of defense: all business and support areas within Santander Brasil are responsible for identifying, managing, mitigating and reporting operational ~~risk~~risks related to its ~~activities;~~activities.

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Second line of defense: the operational ~~risks~~risk and internal control departments ~~are~~is responsible for monitoring and ensuring control over operational and technological risk management practices throughout the organization. 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.

Third line of defense: the Internal Audit ~~Department~~department is responsible for undertaking independent reviews of the risk management ~~undertaken~~activities carried out by the first and second lines of defense, and for promoting continuous improvements in both lines.

The objectives of ~~our~~the 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 ~~reputational~~nonfinancial 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 are~~Santander Brasil is exposed and to exercise independent control on the risk management activities;

~~Integrated~~Senior Forum of Internal Control and Operational Risk ~~Operational Committee~~ (~~Comitê Integrado~~Fórum Sênior de ~~Riscos Operacionais~~Controle Interno e Risco Operacional): ~~A committee which aims to ensure~~a senior forum aimed at ensuring and ~~foster~~fostering the adequate monitoring, control and mitigation of operational risks; ~~and~~

Operational Risk ~~Forum~~Meeting (~~Fórum~~Reunião 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 ~~reducing~~seeking to reduce operational risk exposure and losses. It is compliant with the applicable regulatory requirements.

Cybersecurity Risk

We are exposed to cybersecurity risk as part of our day-to-day operations. We rely on our technological infrastructure, detection tools, protection, event containment measures, technical team training programs, employee training and awareness initiatives, and alignment of our processes with recognized business continuity management practices to manage cybersecurity risk.

We have security measures in place to mitigate the risk of cybersecurity 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 cybersecurity threats and related controls, including periodic penetration tests performed by independent third parties.


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We also invest in security and technology solutions to improve training and awareness initiatives for our employees, customers and society more generally (such as through Cyber Defenders, a biannual awareness activity for our executives). Moreover, we provide mandatory security training to all employees, in addition to our leadership, to promote cyber awareness throughout our organization. Higher risk business areas, such as SWIFT payment operators, IT developers, IT asset owners, receive enhanced training.

Further, we conduct security campaigns for our customers and society with influencers on social media and rolling out increased customer information protection products, such as facial and digital biometrics, the Santander ID system, online cards and online security awareness courses to small business, such as “Programa Avançar” and Cyber Heroes. Furthermore, we cooperate and exchange information and experience relating to cybersecurity 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.

Our business continuity management model takes into consideration both local and international guidelines (e.g., European Central Bank guidelines) for cybersecurity risks and includes plans to deal with severe events. We review the impact these events may have on day-to-day operations and endeavor to mitigate such threats. Our crisis governance mechanisms include our senior management, where committees are formed by previously defined and approved members. We also have mechanisms to trigger business continuity plans in case of cyber, operational and financial crises which involve departments necessary to act and support our operations in the preparation of strategies to contain these types of crises.

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.”

Social and Environmental Risk

Since 2002, we have remained at the forefront of social and environmental risk analysis in Brazil, which has become part of our culture. We consider social and environmental risk when deciding whether to maintain or extend credit. Our Social and Environmental Responsibility Policy, ~~(PRSA), which~~or “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 in~~applicable to business and stakeholder ~~relations.~~relations, such as relations with suppliers. These practices ~~including~~include social and environmental risk ~~management, impacts and opportunities related themes, such as, adequacy~~assessment in ~~the concession~~granting or ~~use of credit, supplier management and analysis of the social and environmental risk which~~using credit. This is carried out through the analysis of the socio-environmental practices of wholesale and ~~Empresas Nucleo (Core Companies) SMES~~core companies (empresas núcleo) SME customers, ~~that~~which have limits or credit risk greater than R$5 million and ~~are included in~~belong to one of ~~the~~ 14 ~~sectors of~~ social and environmental ~~attention,~~priorities sectors, based on their risk level.

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 two main regulations are the CMN Resolution No. 4,945/2021, which revoked Resolution 4,327/2014 and instituted new guidelines applicable to the PRSA, and CMN Resolution No. 4,943/2021, which came into effect in ~~order~~July 2022. See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—ESG Requirements Applicable to Financial Institutions.”

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 consider 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 and most recently we have considered the concept of resilience for our customers with respect to physical and transition risks. 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 changes in legislation or consumer preferences. Furthermore, Santander Brasil has recently announced a plan to promote sustainable development in the Amazon, in collaboration with the two other largest private-sector banks in Brazil. Part of this plan, called Plano Amazônia, aims to eliminate deforestation in the supply chain of cattle for beef processors in the Amazon biome and is being implemented by Santander Brasil. Looking ahead we will expect beef processing customers in the Amazon to have a fully traceable supply chain that is deforestation-free by 2025, including indirect suppliers of cattle, as a requirement for granting credit.


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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,~~2022, we screened ~~1,340~~803 wholesale corporate customers, ~~and 697~~815 Empresas ~~Nucleo~~Núcleo (Core Companies) customers, ~~as well as 49~~and 46 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, social and ~~social~~climate related concerns by the new ~~customers´~~customer acceptance ~~area,~~department when

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~~initiating~~ they begin their commercial relationship with us. ~~Since 2009, we are a signatory of~~See “Item 3. Key Information—D. Risk Factors—Risks Relating to the ~~Equator Principles, whose standards are applied in order to mitigate social~~Brazilian Financial Services Industry and Our Business—Social and environmental risks ~~when financing large projects.~~may have a material adverse effect on us.”

Other Information

~~Cyber Security~~Volatile market conditions arising from the COVID-19 pandemic, global supply chain bottlenecks, the ongoing war between Russia and Ukraine and high inflation globally 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

~~We have extensive security measures in place~~ Factors—Risks Relating to ~~mitigate~~ the risk of cyber-security 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-security 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-security with local and international security communities, such as local telecommunications companies and other financial institutions, and as a member of theBrazilian Financial Services ~~- Information Sharing~~Industry and ~~Analysis Center community.~~Our Business” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally.”

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

~~12A.~~

12A. Debt Securities

Not applicable.

~~12B.~~

12B. Warrants and Rights

Not applicable.

~~12C.~~

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~~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;

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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)~~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~~units generally on the registrar’s unit register and applicable to transfers of ~~Units~~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~~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.

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,~~2022, such reimbursements amounted to U.S.$~~3,2~~ 3.4 million.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

No matters to ~~report.~~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. Disclosure Controls and Procedures

	~~15A.~~	~~Disclosure Controls and Procedures~~
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As of December 31, ~~2019,~~2022, 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 this~~as required by the Brazilian Central Bank through CMN Resolution 4,968/21 and ~~in accordance with the applicable legal requirements (Resolutions 2,554/98 and~~Brazilian Central Bank Circular ~~3,467/09), we are in process of preparing~~130/21, the report onrelated to the ~~evaluation~~quality and adequacy of the ~~Bank's~~ internal ~~control environment. This report~~controls will be issued within 45 days after the ~~determined period of 45 (forty-five) days~~expected date of publication of the ~~our~~ Brazilian GAAP financial statements, which is scheduled to be March ~~13, 2020~~17, 2023 (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

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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.


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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,~~2022, based on the framework set by the COSO Integrated Framework 2013.

Based on this assessment, which was carried out through ~~March 6, 2020,~~February 27, 2023, our management concluded that as of December 31, ~~2019,~~2022, its internal control over financial reporting was effective based on those criteria.

PricewaterhouseCoopers Auditores Independentes Ltda. which has audited ~~the~~our consolidated financial statements ~~of Santander Brasil~~ for the year ended December 31, ~~December 2019,~~2022, has also audited the effectiveness ~~of Santander Brasil’s~~our internal ~~control~~controls 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. Financial Statements.”

~~15C.~~

~~Audit~~15C. Attestation Report of the Registered Public Accounting Firm

For the report, dated ~~March 6, 2020~~February 27, 2023, 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,~~2022, 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 Nannini~~Ms. 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.

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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~~

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.


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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, 2018~~2022, 2021 and ~~December 31, 2017,~~2020, as follows:

	For the year ended December 31,						For the year ended December 31,
	2019		2018		2017		2022		2021		2020
	(in R$ millions)						(in millions of R$)
Audit of the annual financial statements of the companies audited (constant scope of consolidation)		25.2		19.9		17.5		28.9		26.3		24.0
Audit related		0.1		0.5		3.9		0.3		0.2		0.4
Tax		-		-		-
All other		0.3		0.1		1.3		0.3		0.4		—
Total		25.6		20.5		22.7		29.5		26.9		24.4

The approximate value of withholding taxes in respect of the audit fees for the year ended December 31, ~~2019~~2022 according to applicable law totaled R$~~3.6~~4,194 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.

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~~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 Committee~~audit 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 Committee~~audit committee of the Board of Directors of an American company, which we refer to as our “Audit Committee.”

Our Audit Committee ~~observes~~complies 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 in~~Under 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 to~~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 ~~power reserved exclusively to the Board of Directors~~result, 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 replacement~~Exchange Act, our board of ~~independent auditors, and our Board of Directors acts~~directors functions as our audit committee for the ~~purposes~~purpose of ~~nominating~~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 ~~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 Committee~~audit committee performs the functions of the ~~board~~audit committees of U.S. companies.


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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,~~units, including ~~in the form of~~units represented by ADRs, by us or our affiliates in ~~2019.~~2022.

~~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 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 -

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November 2019 199,000 10.6889 199,000 -
December 2019 -
Total 8,722,600 115 8,722,600 37,753,760

Calendar Months	Total Number of Units Purchased(1)	Average Price Paid per Unit in R$	Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (2)(3)	Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (2)(3)(4)
January 2022	—	—	—	—
February 2022	3,499,300	31.8216	3,499,300	—
March 2022	4,893,300	33.2650	4,893,300	—
April 2022	3,256,200	31.9854	3,256,200	—
May 2022	2,997,500	32.8617	2,997,500	—
June 2022	1,962,700	31.3232	1,962,700	—
July 2022	543,700	28.5397	543,700	—
August 2022	—	—	—	—
September 2022	—	—	—	—
October 2022	3,144,600	28.6235	3,144,600	—
November 2022	—	—	—	—
December 2022	—	—	—	—
Total	20,297,300	31.71788	20,297,300	36,986,424

(1)

~~The buyback~~In the year ended December 31, 2022, no units, including units represented by ADRs, were purchased other than through a publicly announced plan or program ~~as approved~~ by us.

(2)

On February 2, 2021, our board of directors approved, in continuity with the buyback program that expired on November ~~3, 2016 for the period from November~~ 4, ~~2016 to November 3, 2018, and on November 1, 2018 for the period from November 6, 2018 to November 5, 2019. A~~2020, a new buyback program of our units and ADRs. Our units and ADRs were acquired either directly or through our branch in the Cayman Islands, to be held in treasury or subsequently sold. The buyback program covered the acquisition of up to 36,956,402 units or ADRs, representing a combination of 36,956,402 common and 36,956,402 preferred shares, corresponding to approximately 1% of our share capital. The term of the buyback program was ~~approved by~~up to 18 months beginning on February 3, 2021 and expiring on August 2, 2022.

(3)

On August 2, 2022, our board of directors approved, as a replacement for our previous buyback program, which expired on ~~November 1, 2019 for~~ the ~~twelve (12)-month period starting~~same date, a new buyback program of our units and ADRs. Our units and ADRs will be acquired either directly or through our branch in the Cayman Islands, to be held in treasury or subsequently sold. The buyback program covers the acquisition of up to 36,986,424 units or ADRs, representing a combination of 36,986,424 common and 36,986,424 preferred shares, corresponding to approximately 1% of our share capital. The term of the buyback program is up to 18 months beginning on ~~November 6, 2019.~~August 3, 2022 and expiring on February 5, 2024.

~~(2)~~(4)

The number entered in the “Total” row of the column “Maximum Number (or Approximate Dollar Value) of ~~Units~~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~~periods as approved by our board of directors. ~~The number~~


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Table 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.~~Contents

~~(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)~~

~~The repurchase plans define an annual maximum of Units to be repurchased but without a monthly limit.~~

~~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~~

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.

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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 ~~practice~~practices 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.


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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, ~~five~~four 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~~independent 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 third~~one-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

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member of our Board of Directors. There is no requirement that our ~~non-management~~independent directors meet regularly without management. As a result, ~~the non-management~~our independent directors on our board do not typically meet in executive session.

Committees

NYSE rules require that listed companies have a ~~Nominating/Corporate Governance Committee~~nominating/corporate governance committee and a ~~Remuneration Committee~~compensation committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. AsBecause we are a controlled 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~~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,~~compensation committee, in turn, include, among other things, reviewing corporate goals relevant to the ~~Chief Executive Officer’s~~chief executive officer’s compensation, evaluating the ~~Chief Executive Officer’s~~chief executive officer’s performance, approving the ~~Chief Executive Officer’s~~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.

In addition, CMN rules require us to have a ~~compensation committee~~Compensation Committee composed of at least three members. We have created the ~~compensation committee~~Compensation 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.


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Audit Committee and Audit Committee Additional Requirements

NYSE rules require that listed companies have an ~~Audit Committee~~audit 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 Committees~~audit 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.

CMN rules require us to have an ~~Audit Committee~~audit committee of at least three independent members. The ~~Audit Committee~~audit 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 Committee~~audit 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.

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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.

Issuances of Shares

NYSE rules require shareholder approval prior to the issuance of shares, or securities convertible into or exercisable for shares, if (1) the shares have, or will have upon issuance, equal or an excess of 20% of the voting power outstanding before the issuance of such shares; or (2) the number of shares to be issued is, or will be upon issuance be equal to or in excess of 20% of the number of shares outstanding before the transaction.

Pursuant to the Brazilian Corporate Law, the by-laws of companies may permit increases in capital stock without amendments to the by-laws. Such a permission may specify (i) the limit of the capital increase in terms of total amount or number of shares, the type and classes of the shares that may be issued; (ii) whether the issuance of new shares is to be approved by the general shareholders’ meeting or the board of directors; (iii) any conditions to which the issuance of new shares may be subject; and (iv) the circumstances under which shareholders are to benefit from preemptive rights to subscribe for shares. Pursuant to our By-Laws, our board of directors is authorized to approve capital increases involving the issuance of up to 9,090,909,090 shares. Any capital increase is subject to the applicable disclosure requirements set forth in the regulations issued by the CVM regulation, including but not limited to the disclosure of a material fact disclosing the capital increase and the publication of the minutes of the relevant corporate body’s meeting which approved the matter.

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.


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Internal Audit Function

NYSE rules require that listed companies maintain an internal audit function to provide management and the ~~Audit Committee~~audit committee with ongoing assessments of the company’s risk management processes and system of internal controls.

~~Our~~CMN 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 website 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~~

16H. Mine Safety Disclosure

Not applicable.

16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

~~255~~


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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 Independentes~~(PCAOB ID: 1351)	F-2
Consolidated Balance Sheets as of December 31, 2022, 2021 and 2020	F-4
Consolidated Statement of Income for the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017~~2020	~~F-7~~F-6
Consolidated ~~Income Statements for the years ended December 31, 2019, 2018 and 2017~~	~~F-9~~
~~Consolidated Statements~~Statement of Comprehensive Income for the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017~~2020	~~F-10~~F-7
Consolidated ~~Statements~~Statement of Changes in Stockholders’ Equity for the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017~~2020	~~F-11~~F-8
Consolidated Statement of Cash ~~Flow Statements~~Flows for the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017~~2020	~~F-13~~F-11
Notes to the Consolidated Financial Statements for the years ended December 31, ~~2019, 2018~~2022, 2021 and ~~2017~~2020	~~F-14~~
	F-12

(b) List of Exhibits.

We are filing the following documents as part of this annual report on Form 20-F:

Exhibit Number	Description
1.1	English translation of the By-laws of Santander Brasil, amended and restated on ~~April 26, 2019~~March 31, 2021 (incorporated by reference to our Form 6-K (file no. 001-34476) filed with the SEC on April ~~29, 2019)~~1, 2021).
2.1	Form 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).
2.2	Subordinated 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).
2.3	First 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).
2.4	Second 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).
2.5	Description of ~~Securities~~Securities.

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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.

Title of each class	Trading ~~Symbol~~ Symbols	Name of each exchange on which registered
Units, each composed of 1one common share, no par value, and 1one preferred share, no par value	SANB11	New York Stock Exchange*
Common Shares, no par value	SANB3	New York Stock Exchange*
Preferred Shares, no par value	SANB4	New 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

Title of Class	Number of Shares Outstanding
Common shares	~~3,818,695,031~~3,787,533,424
Preferred shares	~~3,679,836,020~~3,648,674,413

~~ITEM 16B. SANTANDER BRASIL’S CODE OF ETHICAL CONDUCT~~	~~250~~280
~~ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES~~16B. Santander Brasil’s Code of Ethical Conduct	~~250~~280
~~ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES~~16C. Principal Accountant Fees and Services	~~251~~281
~~ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS~~16D. Exemptions from the Listing Standards for Audit Committees	~~251~~281
~~ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT~~16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	~~252~~282
~~ITEM 16G. CORPORATE GOVERNANCE~~16F. Change in Registrant’s Certifying Accountant	~~252~~283
~~ITEM 16H. MINE SAFETY DISCLOSURE~~16G. Corporate Governance	283
~~255~~16H. Mine Safety Disclosure	286
16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	286
PART III	~~256~~287
ITEM 17. FINANCIAL STATEMENTS	~~256~~287
ITEM 18. FINANCIAL STATEMENTS	~~256~~287
ITEM 19. EXHIBITS	~~256~~287

	For the Year Ended December 31,
	2022		2021		2020
Basic and Diluted Earnings per 1,000 shares
From continuing and discontinued operations (1)
Basic Earnings per shares (reais)
Common Shares		1,831.43		1,981.65		1,713.45
Preferred Shares		2,014.57		2,179.82		1,884.80
Diluted Earnings per shares (reais)
Common Shares		1,831.43		1,981.65		1,713.45
Preferred Shares		2,014.57		2,179.82		1,884.80
Basic Earnings per shares (U.S. dollars) (2)
Common Shares		351.00		355.10		329.72
Preferred Shares		386.10		390.61		362.69
Diluted Earnings per shares (U.S. dollars) (2)
Common Shares		351.00		355.10		329.72
Preferred Shares		386.10		390.61		362.69
From continuing operations
Basic Earnings per shares (reais)
Common Shares		1,831.43		1,981.65		1,713.45
Preferred Shares		2,014.57		2,179.82		1,884.80
Diluted Earnings per shares (reais)
Common Shares		1,831.43		1,981.65		1,713.45
Preferred Shares		2,014.57		2,179.82		1,884.80
Basic Earnings per shares (U.S. dollars) (2)
Common Shares		351.00		355.10		329.72
Preferred Shares		386.10		390.61		362.69
Diluted Earnings per shares (U.S. dollars) (2)
Common Shares		351.00		355.10		329.72
Preferred Shares		386.10		390.61		362.69

Dividends and interest on capital per 1,000 shares (undiluted)
Common Shares (reais)		1,035.69		1,231.79		1,693.28
Preferred Shares (reais)		1,139.27		1,354.97		1,631.71
Common Shares (U.S. dollars)(2)		198.50		220.73		325.84
Preferred Shares (U.S. dollars)(2)		218.35		242.80		313.99
Weighted average share outstanding (in thousands) – basic

	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)

~~PRESENTATION OF FINANCIAL AND OTHER INFORMATION~~Presentation of Financial and Other Information	71
~~FORWARD-LOOKING STATEMENTS~~Forward-Looking Statements	95
PART I	117
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	117
1A.	Directors and Senior Management	117
1B.	Advisers	117
1C.	Auditors	117
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	117
2A.	Offer Statistics	117
2B.	Method and Expected Timetable	117
ITEM 3. KEY INFORMATION	117
3A.	Selected Financial Data	117
3B.	Capitalization and Indebtedness	1915
3C.	Reasons for the Offer and Use of Proceeds	1915
3D.	Risk Factors	1915
ITEM 4. INFORMATION ON THE COMPANY	5160
4A.	History and Development of the Company	5160
4B.	Business Overview	5569
4C.	Organizational Structure	~~121~~152
4D.	Property, Plant and Equipment	~~123~~154
ITEM 4A. UNRESOLVED STAFF COMMENTS	~~124~~154
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	~~124~~154
5A.	Operating Results	~~124~~154
5B.	Liquidity and Capital Resources	~~148~~180
5C.	Research and Development, Patents and Licenses, etc.	~~152~~185
5D.	Trend Information	~~152~~185
5E. Critical Accounting Estimates	~~Off-Balance Sheet Arrangements~~	~~153~~
~~5F.~~	~~Contractual Obligations~~	~~153~~
~~5G.~~	~~Safe Harbor~~	~~154~~186
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	~~154~~186
6A	6A. Board of Directors and Board of Executive Officers	~~154~~186
6B.	Compensation	~~167~~199
6C.	Board Practices	~~172~~ 203
6D.	Employees	~~179~~211
6E.	Share Ownership	212
~~180~~6F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation	213
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	~~182~~213
7A.	Major Shareholders	~~182~~213

7B.	Related Party Transactions	~~183~~214
7C.	Interests of Experts and Counsel	~~184~~218
ITEM 8. FINANCIAL INFORMATION	~~184~~218
8A.	Consolidated Statements and Other Financial Information	~~184~~218
8B.	Significant Changes	~~194~~227
ITEM 9. THE OFFER AND LISTING	~~194~~227
9A.	Offering and Listing Details	~~194~~227
9B.	Plan of Distribution	~~197~~230
9C.	Markets	~~197~~230
9D.	Selling Shareholders	~~200~~233
9E.	Dilution	~~200~~233
9F.	Expenses of the Issue	~~200~~233
ITEM 10. ADDITIONAL INFORMATION	~~200~~233
10A.	Share Capital	~~201~~233
10B.	By-Laws	~~202~~233
10C.	Material Contracts	~~212~~243
10D.	Exchange Controls	~~212~~243
10E.	Taxation	~~214~~245

10F.	Dividends and Paying Agents	~~222~~252
10G.	Statement by Experts	~~222~~252
10H.	Documents on Display	~~223~~253
10I.	Subsidiary Information	253
~~223~~10J. Annual Report to Security Holders	253
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	~~223~~253
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	~~246~~277
12A.	Debt Securities	~~246~~277
12B.	Warrants and Rights	~~246~~277
12C.	Other Securities	~~246~~277
12D.	American Depositary Receipts	~~246~~277
PART II	~~248~~278
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	~~248~~278
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	~~248~~278
ITEM 15. CONTROLS AND PROCEDURES	~~248~~278
15A.	Disclosure Controls and Procedures	~~248~~278
15B.	Management’s Annual Report on Internal Control over Financial Reporting	~~248~~279
15C.	~~Audit~~Attestation Report of the Registered Public Accounting Firm	~~249~~280
15D.	Changes in Internal Control over Financial Reporting	~~249~~280
ITEM 16. [RESERVED]	~~249~~280
~~ITEM~~ 16A. ~~AUDIT COMMITTEE FINANCIAL EXPERT~~Audit Committee Financial Expert	~~249~~

Other operating income (expenses) net	(161	)	(841	)	(1,119	)	(873	)
Total income	12,740		66,475		63,926		48,242
Administrative expenses	(3,496	)	(18,240	)	(17,316	)	(17,115	)
Depreciation and amortization	(496	)	(2,586	)	(2,434	)	(2,579	)
Provisions (net)(2)	(233	)	(1,215	)	(2,179	)	(1,657	)
Impairment losses on financial assets (net)(3)	(4,759	)	(24,829	)	(17,113	)	(17,450	)
Impairment losses on other assets (net)	(31	)	(161	)	(166	)	(85	)
Gains (losses) on disposal of assets not classified as non-current assets held for sale	4		22		(15	)	231
Gains (losses) on non-current assets held for sale not classified as discontinued operations	21		109		48		77
Operating income before tax	3,752		19,575		24,750		9,664
Income taxes	(1,003	)	(5,235	)	(9,191	)	3,787
Consolidated net income for the period	2,748		14,339		15,559		13,451

Exchange differences (net)	(692	)	(2,789	)	(2,806	)	605		4,575		10,084
Other operating income (expenses)	(275	)	(1,108	)	(1,056	)	(672	)	(625	)	(347	)
Total income	14,580		58,769		49,507		48,725		48,837		30,814
Administrative expenses	(4,203	)	(16,942	)	(16,792	)	(16,121	)	(14,920	)	(14,515	)
Depreciation and amortization	(593	)	(2,392	)	(1,740	)	(1,662	)	(1,483	)	(1,490	)
Provisions (net)(2)	(913	)	(3,682	)	(2,000	)	(3,309	)	(2,725	)	(4,001	)
Impairment losses on financial assets (net)(3)	(3,317	)	(13,370	)	(12,713	)	(12,338	)	(13,301	)	(13,634	)
Impairment losses on other assets (net)	(33	)	(131	)	(508	)	(457	)	(114	)	(1,221	)
Gains (losses) on disposal of assets not classified as non-current assets held for sale	3		11		(25	)	(64	)	4		781
Gains (losses) on non-current assets held for sale not classified as discontinued operations	2		10		182		(260	)	87		50
Operating profit before tax	5,526		22,273		15,910		14,514		16,384		(3,216	)
Income taxes	(1,400	)	(5,642	)	(3,110	)	(5,376	)	(8,919	)	13,050
Consolidated Profit for the Year	4,126		16,631		12,800		9,138		7,465		9,834

Common Shares	3,787,533	3,802,851	3,800,140
Preferred Shares	3,648,674	3,666,423	3,664,666
Weighted average shares outstanding (in thousands) – diluted
Common Shares	3,787,533	3,802,851	3,800,140
Preferred Shares	3,648,674	3,666,423	3,664,666

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

	As of December 31,
	2022		2022		2021		2020
	(in millions of U.S.$) (1)		(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank		4,217		22,003		16,657		20,149
Financial assets held for trading		—		—		—		—
Financial Assets Measured At Fair Value Through Profit Or Loss		11,221		58,547		18,859		60,900
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading		16,259		84,834		70,571		95,843
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss		409		2,134		870		500
Financial Assets Measured At Fair Value Through Other Comprehensive Income		10,623		55,426		101,242		109,740
Financial Assets Measured At Amortized Cost		127,225		663,824		633,241		554,925
Hedging derivatives		334		1,741		342		743
Non-current assets held for sale		134		699		816		1,093
Investments in associates and joint ventures		331		1,728		1,233		1,095
Tax assets		8,902		46,446		41,757		41,064
Other assets		1,586		8,275		6,049		7,222
Property, plant and equipment		1,570		8,191		8,784		9,537
Intangible assets		6,057		31,603		30,787		30,766
Total assets		188,867		985,451		931,208		933,578
Average total assets*		189,409		988,277		942,177		854,615
Liabilities
Financial liabilities held for trading (2)		7,809		40,747		36,953		75,020
Financial Liabilities Measured At Fair Value Through Profit Or Loss		1,710		8,922		7,460		7,038
Financial liabilities at amortized cost		152,420		795,284		750,094		707,289
Deposits from the Brazilian Central Bank and deposits from credit institutions		22,247		116,079		121,006		131,657
Customer deposits		93,902		489,953		468,961		445,814
Marketable debt securities		20,530		107,121		79,037		56,876
Debt Instruments Eligible to Compose Capital		3,744		19,538		19,641		13,120
Other financial liabilities		11,996		62,593		61,449		59,823
Hedging derivatives		—		—		447		145
Provisions (3)		1,747		9,115		11,604		13,815
Tax liabilities		1,497		7,811		8,175		10,130
Other liabilities		2,471		12,892		10,501		14,051

Total liabilities	167,654		874,771		825,234		827,488
Stockholders’ equity	21,977		114,669		109,047		106,205
Other Comprehensive Income	(860	)	(4,486	)	(3,406	)	(428	)
Non-controlling interests	95		497		334		313
Total stockholders’ equity	21,212		110,680		105,974		106,090
Total liabilities and stockholders’ equity	188,867		985,451		931,208		933,578
Average interest-bearing liabilities*	128,995		673,056		647,752		573,429
Average total stockholders’ equity*	24,696		128,849		105,070		101,531

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

	As of and for the Year Ended December 31,
	2022		2021		2020
	(%)
Profitability and performance
Return on average total assets		1.5		1.7		1.6
Asset quality
Impaired assets as a percentage of loans and advances to customers (gross) (1)		7.5		5.5		5.5
Impaired assets as a percentage of total assets (1)		4.0		2.9		2.5
Impairment losses to customers as a percentage of impaired assets(1) (2)		86.7		105.9		103.8
Impairment losses to customers as a percentage of loans and advances to customers (gross) (3)		6.5		5.8		5.8
Derecognized assets as a percentage of loans and advances to customers (gross)		3.7		3.0		3.7
Impaired assets as a percentage of stockholders’ equity (1)		35.6		25.5		21.8
Capital adequacy
Basel capital adequacy ratio (4)		13.9		14.9		15.3
Efficiency
Efficiency ratio (5)		27.4		27.1		35.5

Impaired assets as a percentage of credit risk exposure:
Loans and advances to customers, gross	524,655		493,355		417,822
Guarantees	57,379		53,420		48,282
Credit risk exposure	582,034		546,755		466,115
Impaired assets	39,244		26,923		23,176
Impaired assets as a percentage of credit risk exposure	6.7	%	4.9	%	5.0	%
Loans and advances to customers, net as a percentage of total funding:
Loans and advances to customers, gross	524,655		493,355		417,822
Impairment losses(1)	34,025		28,511		24,054
Total funding(2)	732,691		688,645		647,465
Loans and advances to customers, net as a percentage of total funding(2)	67.0	%	67.5	%	60.8	%

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	%

	Period-end	Average(1)	Low	High
	(per U.S. dollar)
Year:
2015	3.90	3.34	2.57	4.19
2016	3.26	3.48	3.12	4.16
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
Month Ended:
August 2019	4.15	4.03	3.84	4.17
September 2019	4.16	4.12	4.06	4.19
October 2019	4.02	4.09	3.99	4.18
November 2019	4.24	4.16	3.99	4.26
December 2019	4.03	4.11	4.02	4.22
January 2020	4.28	4.15	4.02	4.28
February 2020	4.50	4.34	4.24	4.50
March 2020 (through March 5, 2020)	4.62	4.53	4.49	4.62

Commercial Banking	Global Wholesale Banking
1. Retail Banking Individuals SMEs Consumer Finance Corporate	1. Santander Corporate & Investment Banking (“SCIB”)
~~Individuals~~	~~2. Proprietary Trading~~
~~SMEs~~
~~2. Consumer Finance~~
~~3. Corporate~~

	For the Year Ended December 31,
	Net interest income						Operating profit before tax
	2022		2021		2020		2022		2021		2020
	(in millions of R$)
Commercial Banking(1)		45,618		46,236		41,457		13,281		19,491		4,666
Global Wholesale Banking		1,885		5,082		2,985		6,294		5,260		4,998
Total		47,503		51,318		44,443		19,575		24,750		9,664

	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 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

	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

	~~(1)~~	~~Ratio between loans and the value of the collateral, excluding home equity.~~
	77

	~~(2)~~	AsTable 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.Contents

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

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		-

November 2019	199,000	10.6889	199,000	-
December 2019				-
Total	8,722,600	115	8,722,600	37,753,760

Exhibit Number	Description
4.1	Option Plan to Purchase Share ~~deposit~~Deposit Certificate of Santander Brasil (incorporated by reference to Attachment I to our Form 6-K/A filed with the SEC on January 6, 2010).
4.2	~~Long-term~~Long-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).
4.3	Deferred 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).
4.4	Deferred 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).
4.5	~~Long-term~~Long-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).
4.6	Deferred 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).
4.7	Deferred 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).
4.8	Deferred 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).
4.9	Partnership Agreement between Santander Brasil and Getnet, executed on April 16, 2021 (English translation) (incorporated by reference to Exhibit 4.9 of our Annual Report on Form 20-F (file no. 001-34476) filed with the SEC on February 28, 2022)).*
8.1	List of Subsidiaries (incorporated by reference to Note 3 to our Audited Consolidated Financial Statements filed with this Annual Report on Form 20-F)..
11.1	English 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).
12.1	Section 302 Certification by the principal executive officer.
12.2	Section 302 Certification by the principal financial officer.
13.1	Section 906 Certification by the ~~Chief Executive Officer.~~principal executive officer.
13.2	Section 906 Certification by the ~~Chief Financial Officer.~~
~~15.1~~	~~Consent Letter of PricewaterhouseCoopers~~principal financial officer.

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


	By:	/s/ ~~Sergio Agapito Lires Rial~~Mario Roberto Opice Leão
		Name: ~~Sergio Agapito Lires Rial~~Mario Roberto Opice Leão
		Title: Chief Executive Officer

BANCO SANTANDER (BRASIL) S.A.
CONSOLIDATED FINANCIAL STATEMENTS ~~AND SUPPLEMENTAL INFORMATION~~

INDEX	~~Pg.~~

Consolidated Balance ~~Sheets~~Sheet	~~F-7~~F-4
Consolidated Statement of Income ~~Statements~~	~~F-9~~F-6
Consolidated ~~Statements~~Statement of Comprehensive Income	~~F-10~~F-7
Consolidated ~~Statements~~Statement of Changes in Stockholders’ Equity	~~F-11~~F-8
Consolidated Statement of Cash ~~Flow Statements~~Flows	~~F-13~~F-11

1. Introduction, basis of presentation of the consolidated financial statements and other information	~~F-14~~F-12
2. Accounting policies and method of measurement	~~F-25~~F-15
3. Basis of consolidation	~~F-39~~F-35
4. Cash and balances with the Brazilian Central Bank	~~F-42~~F-39
5. Loans and amounts due from credit institutions	~~F-43~~F-39
6. Debt instruments	~~F-44~~F-40
7. Equity instruments	~~F-45~~F-41
8. Derivative financial instruments and Short positions	~~F-46~~F-42
9. Loans and advances to clients	~~F-54~~F-51
10. Non-current assets held for sale	~~F-59~~F-56
11. Investments in associates and joint ventures	~~F-60~~F-56
12. Tangible assets	~~F-64~~F-60
13. Intangible assets - Goodwill	~~F-65~~F-61
14. Intangible assets - Other intangible assets	~~F-66~~F-63
15. Other assets	~~F-67~~F-63
16. Deposits from the Brazilian Central Bank and Deposits from credit institutions	~~F-67~~F-64
17. Client deposits	~~F-68~~F-64
18. Marketable debt securities	~~F-69~~F-66
19. ~~Subordinated liabilities~~	~~F-70~~
~~20.~~ Debt Instruments Eligible to Compose Capital	~~F-71~~F-66
~~21.~~20. Other financial liabilities	~~F-72~~F-67
~~22.~~21. Provisions for pensions and similar obligations	~~F-72~~F-67
~~23.~~22. Provisions for judicial and administrative proceedings, commitments and other provisions	~~F-79~~F-75
~~24.~~23. Tax assets and liabilities	~~F-84~~F-81
~~25.~~24. Other liabilities	~~F-87~~F-84
~~26.~~25. Other Comprehensive Income	~~F-87~~F-84
~~27.~~26. Non-controlling interests	~~F-88~~F-85
~~28. Stockholders’~~27. Shareholders’ equity	~~F-89~~F-86
~~29.~~28. Earnings per share	~~F-92~~F-89
~~30.~~29. Fair value of financial assets and liabilities	~~F-93~~F-90
~~31.~~30. Operational Ratios	~~F-99~~F-95
~~32.~~31. Interest and similar income	~~F-100~~F-96
~~33.~~32. Interest expense and similar charges	~~F-100~~F-96
~~34.~~33. Income from equity instruments	~~F-100~~F-97
34. Fee and commission income	F-97
35. Fee and commission ~~income~~expense	~~F-101~~F-98
36. ~~Fee and commission expense~~	~~F-102~~
~~37.~~ Gains or losses on financial assets and liabilities	~~F-102~~F-98
~~38.~~37. Exchange differences (net)	~~F-102~~F-98
~~39.~~38. Other operating income and expenses	~~F-103~~F-99
~~40.~~39. Personnel expenses	~~F-103~~F-99
~~41.~~40. Other general administrative expenses	~~F-105~~F-102
~~42.~~41. Gains or losses on non financial assets and investments, net	~~F-106~~F-102
~~43.~~42. Gains (losses) on disposal and expenses of non-current assets held for sale not classified as discontinued operations	~~F-106~~F-102
~~44.~~43. Other disclosures	~~F-106~~F-103
~~45.~~44. Business segment reporting	~~F-111~~F-107
~~46.~~45. Related party transactions	~~F-115~~F-109
~~47.~~46. Risk management	~~F-118~~F-113
~~48.~~47. Subsequent Events	~~F-144~~

~~Supplemental information~~	F-137
APPENDIX I -– RECONCILIATION OF ~~STOCKHOLDERS'~~STOCKHOLDERS’ EQUITY AND NET INCOME - BRGAAP vs IFRS	~~F-146~~F-138
APPENDIX II -– STATEMENTS OF VALUE ADDED	~~F-149~~F-141